Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of ~~July 31, 2020,~~April 30, 2021, there were ~~63,422,439~~63,402,452 shares outstanding of the registrant’s common stock (no par value).

Certain statements contained in this Quarterly Report on Form 10-Q 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,” “project,” “potential,” “seek,” “continue,” “could,” “would,” “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 (SEC) 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. Furthermore, many of these risks and uncertainties are currently amplified by and may continue to be amplified by or may, in the future, be amplified by, the novel coronavirus (COVID-19) pandemic, and also by the effectiveness of varying governmental responses in ameliorating the impact of the pandemic on our customers and the economies where they operate.

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, an increase in unemployment levels and slowdowns in economic growth, our ability to manage the ~~effects~~impact of the COVID-19 pandemic on ~~the domestic~~our markets and ~~global economy,~~our customers, as well as the effectiveness of actions of federal, state and local governments and agencies (including the Board of Governors of the Federal Reserve ~~Board~~System (FRB)) to mitigate its spread and economic impact, local, state and national economic and market conditions, 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, levels of and volatility in 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 related 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, ~~particularly with respect to the COVID-19 pandemic,~~ 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, pandemics or other health crises, acts of war or terrorism, and other risks described in our filings with the SEC.

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.

Three Months Ended June 30,

Six Months Ended June 30,

2020

2019

2020

2019

Interest Income

Interest and fees on LHFS & LHFI

$
96,359

$
111,740

$
202,704

$
218,535

Interest and fees on PPP loans

5,044

—

5,044

—

Interest and fees on acquired loans (1)

—

2,010

—

3,926

Interest on securities:

Taxable

12,762

13,916

25,710

28,581

Tax exempt

249

436

610

946

Interest on federal funds sold and securities purchased under reverse
repurchase agreements

—

214

—

216

Other interest income

239

1,820

979

3,423

Total Interest Income

114,653

130,136

235,047

255,627

Interest Expense

Interest on deposits

8,730

21,500

23,687

41,070

Interest on federal funds purchased and securities sold under
repurchase agreements

42

81

667

369

Other interest expense

881

831

1,741

1,656

Total Interest Expense

9,653

22,412

26,095

43,095

Net Interest Income

105,000

107,724

208,952

212,532

Provision for credit losses (PCL) (1)

18,185

2,486

38,766

4,097

Provision for loan losses, acquired loans (1)

—

106

—

184

Net Interest Income After PCL

86,815

105,132

170,186

208,251

Noninterest Income

Service charges on deposit accounts

6,397

10,379

16,429

20,644

Bank card and other fees

7,717

8,004

13,072

15,195

Mortgage banking, net

33,745

10,295

61,228

13,737

Insurance commissions

11,868

11,089

23,418

21,960

Wealth management

7,571

7,742

16,108

15,225

Other, net

2,213

2,130

4,520

4,369

Total Noninterest Income

69,511

49,639

134,775

91,130

Noninterest Expense

Salaries and employee benefits

66,107

61,949

135,255

122,903

Services and fees

20,567

18,009

40,497

34,977

Net occupancy - premises

6,587

6,403

12,873

12,857

Equipment expense

5,620

5,958

11,236

11,882

Other real estate expense, net

271

132

1,565

1,884

Credit loss expense related to off-balance sheet credit exposures (1)

6,242

—

13,025

—

Other expense

13,265

13,650

28,018

27,619

Total Noninterest Expense

118,659

106,101

242,469

212,122

Income Before Income Taxes

37,667

48,670

62,492

87,259

Income taxes

5,517

6,530

8,124

11,780

Net Income

$
32,150

$
42,140

$
54,368

$
75,479

Earnings Per Share

Basic

$
0.51

$
0.65

$
0.86

$
1.16

Diluted

$
0.51

$
0.65

$
0.85

$
1.16

													Accumulated																		Accumulated
													Other																		Other
	Common Stock												Comprehensive						Common Stock												Comprehensive
	Shares						Capital			Retained			Income						Shares						Capital			Retained			Income
	Outstanding			Amount			Surplus			Earnings			(Loss)			Total			Outstanding			Amount			Surplus			Earnings			(Loss)			Total
Balance, January 1, 2020		64,200,111		$	13,376		$	256,400		$	1,414,526		$	(23,600	)	$	1,660,702
FASB ASU 2016-13 adoption adjustment		—			—			—			(19,949	)		—			(19,949	)
Balance, January 1, 2021																				63,424,526		$	13,215		$	233,120		$	1,495,833		$	(1,051	)	$	1,741,117
Net income per consolidated statements of income		—			—			—			22,218			—			22,218			—			—			—			51,962			—			51,962
Other comprehensive income (loss), net of tax		—			—			—			—			31,298			31,298			—			—			—			—			(15,455	)		(15,455	)
Common stock dividends paid ($0.23 per share)		—			—			—			(14,706	)		—			(14,706	)		—			—			—			(14,685	)		—			(14,685	)
Shares withheld to pay taxes, long-term incentive plan		83,759			17			(1,037	)		—			—			(1,020	)		114,977			24			(1,254	)		—			—			(1,230	)
Repurchase and retirement of common stock		(886,958	)		(184	)		(27,354	)		—			—			(27,538	)		(144,981	)		(30	)		(4,155	)		—			—			(4,185	)
Compensation expense, long-term incentive plan		—			—			1,394			—			—			1,394			—			—			2,181			—			—			2,181
Balance, March 31, 2020		63,396,912			13,209			229,403			1,402,089			7,698			1,652,399
Net income per consolidated statements of income		—			—			—			32,150			—			32,150
Other comprehensive income (loss), net of tax		—			—			—			—			2,867			2,867
Common stock dividends paid ($0.23 per share)		—			—			—			(14,687	)		—			(14,687	)
Shares withheld to pay taxes, long-term incentive plan		25,527			5			(64	)		—			—			(59	)
Compensation expense, long-term incentive plan		—			—			1,274			—			—			1,274
Balance, June 30, 2020		63,422,439		$	13,214		$	230,613		$	1,419,552		$	10,565		$	1,673,944
Balance, March 31, 2021																				63,394,522		$	13,209		$	229,892		$	1,533,110		$	(16,506	)	$	1,759,705

													Accumulated																		Accumulated
													Other																		Other
	Common Stock												Comprehensive						Common Stock												Comprehensive
	Shares						Capital			Retained			Income						Shares						Capital			Retained			Income
	Outstanding			Amount			Surplus			Earnings			(Loss)			Total			Outstanding			Amount			Surplus			Earnings			(Loss)			Total
Balance, January 1, 2019		65,834,395		$	13,717		$	309,545		$	1,323,870		$	(55,679	)	$	1,591,453
Balance, January 1, 2020																				64,200,111		$	13,376		$	256,400		$	1,414,526		$	(23,600	)	$	1,660,702
FASB ASU 2016-13 adoption adjustment																				—			—			—			(19,949	)		—			(19,949	)
Net income per consolidated statements of income		—			—			—			33,339			—			33,339			—			—			—			22,218			—			22,218
Other comprehensive income (loss), net of tax		—			—			—			—			14,764			14,764			—			—			—			—			31,298			31,298
Common stock dividends paid ($0.23 per share)		—			—			—			(15,033	)		—			(15,033	)		—			—			—			(14,706	)		—			(14,706	)
Shares withheld to pay taxes, long-term incentive plan		123,821			25			(1,629	)		—			—			(1,604	)		83,759			17			(1,037	)		—			—			(1,020	)
Repurchase and retirement of common stock		(1,168,273	)		(243	)		(36,650	)		—			—			(36,893	)		(886,958	)		(184	)		(27,354	)		—			—			(27,538	)
Compensation expense, long-term incentive plan		—			—			1,002			—			—			1,002			—			—			1,394			—			—			1,394
Balance, March 31, 2019		64,789,943			13,499			272,268			1,342,176			(40,915	)		1,587,028
Net income per consolidated statements of income		—			—			—			42,140			—			42,140
Other comprehensive income (loss), net of tax		—			—			—			—			16,099			16,099
Common stock dividends paid ($0.23 per share)		—			—			—			(14,987	)		—			(14,987	)
Shares withheld to pay taxes, long-term incentive plan		7,087			2			(3	)		—			—			(1	)
Repurchase and retirement of common stock		(398,184	)		(83	)		(12,925	)		—			—			(13,008	)
Compensation expense, long-term incentive plan		—			—			1,279			—			—			1,279
Balance, June 30, 2019		64,398,846		$	13,418		$	260,619		$	1,369,329		$	(24,816	)	$	1,618,550
Balance, March 31, 2020																				63,396,912		$	13,209		$	229,403		$	1,402,089		$	7,698		$	1,652,399

	Six Months Ended June 30,						Three Months Ended March 31,
	2020			2019			2021			2020
Operating Activities
Net income per consolidated statements of income	$	54,368		$	75,479		$	51,962		$	22,218
Adjustments to reconcile net income to net cash provided by operating activities:
Credit loss expense, net ~~(1)~~		51,791			4,281			(19,868	)		27,364
Depreciation and amortization		19,656			19,123			11,126			8,996
Net amortization of securities		4,666			3,918			5,430			1,918
Gains on sales of loans, net		(30,361	)		(9,098	)		(25,796	)		(7,085	)
Compensation expense, long-term incentive plan		2,668			2,281			2,181			1,394
Deferred income tax provision		(19,500	)		(4,400	)		9,000			(11,600	)
Proceeds from sales of loans held for sale		1,133,259			497,187			685,151			324,167
Purchases and originations of loans held for sale		(1,167,299	)		(586,444	)		(643,175	)		(416,687	)
Originations of mortgage servicing rights		(12,396	)		(6,075	)		(7,978	)		(3,649	)
Earnings on bank-owned life insurance		(2,544	)		(2,715	)		(1,216	)		(1,292	)
Net change in other assets		(45,712	)		(14,988	)		21,070			(49,822	)
Net change in other liabilities		(1,491	)		(417	)		9,096			(204	)
Other operating activities, net		28,447			18,498			(13,640	)		25,119
Net cash from operating activities		15,552			(3,370	)		83,343			(79,163	)

Investing Activities
Proceeds from maturities, prepayments and calls of securities held to maturity		79,114			85,007			44,688			34,459
Proceeds from maturities, prepayments and calls of securities available for sale		249,383			213,479			217,783			86,129
Purchases of securities available for sale		(492,067	)		(9,303	)		(590,517	)		(278,691	)
Net proceeds from bank-owned life insurance		592			2,013			1,818			280
Net change in federal funds sold and securities purchased under reverse repurchase agreements		—			(74,669	)		50			(2,000	)
Net change in member bank stock		361			(173	)		(3	)		(107	)
Net change in LHFI and PPP loans		(1,193,397	)		(266,949	)		(226,385	)		(162,097	)
Purchases of premises and equipment		(8,638	)		(8,372	)		(8,152	)		(4,154	)
Proceeds from sales of premises and equipment		3			2,373
Proceeds from sales of other real estate		10,279			4,105			909			3,671
Purchases of software		(3,179	)		(6,861	)		(818	)		(1,805	)
Investments in tax credit and other partnerships		(1,612	)		(3,426	)		(7,149	)		(141	)
Purchase of insurance book of business		(3,097	)		(81	)		0			(3,097	)
Net cash used in business acquisition		(4,834	)		—
Net cash from investing activities		(1,367,092	)		(62,857	)		(567,776	)		(327,553	)

Financing Activities
Net change in deposits		2,259,916			202,218			334,676			330,207
Net change in federal funds purchased and securities sold under repurchase agreements		(185,765	)		1,329			(3,528	)		165,801
Net change in short-term borrowings		4,062			127			(4,220	)		(127	)
Payments on long-term FHLB advances		(34	)		(34	)		(4	)		(17	)
Payments under finance lease obligations		(905	)		(1,035	)		(354	)		(459	)
Common stock dividends		(29,393	)		(30,020	)		(14,685	)		(14,706	)
Repurchase and retirement of common stock		(27,538	)		(49,901	)		(4,185	)		(27,538	)
Shares withheld to pay taxes, long-term incentive plan		(1,079	)		(1,605	)		(1,230	)		(1,020	)
Net cash from financing activities		2,019,264			121,079			306,470			452,141

Net change in cash and cash equivalents		667,724			54,852			(177,963	)		45,425
Cash and cash equivalents at beginning of period		358,916			349,561			1,952,504			358,916
Cash and cash equivalents at end of period	$	1,026,640		$	404,413		$	1,774,541		$	404,341

Note 1 – Business, Basis of Financial Statement Presentation and Principles of Consolidation

Trustmark Corporation (Trustmark) is a bank holding company headquartered in Jackson, Mississippi. Through its subsidiaries, Trustmark operates as a financial services organization providing banking and financial solutions to corporate institutions and individual customers through ~~187~~181 offices at ~~June 30, 2020~~March 31, 2021 in Alabama, Florida, Mississippi, Tennessee and Texas.

The consolidated financial statements include the accounts of Trustmark and all other entities in which Trustmark has a controlling financial interest. All significant intercompany accounts and transactions have been eliminated in consolidation. Certain reclassifications have been made to prior period amounts to conform to the current period presentation.

The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles (GAAP) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements and should be read in conjunction with the consolidated financial statements, and notes thereto, included in Trustmark’s Annual Report on Form 10-K for its fiscal year ended December 31, ~~2019 (2019~~2020 (2020 Annual Report).

Operating results for the interim periods disclosed herein are not necessarily indicative of the results that may be expected for a full year or any future period. In the opinion of Management, all adjustments (consisting of normal recurring accruals) considered necessary for the fair presentation of these consolidated financial statements have been included. The preparation of financial statements in conformity with these accounting principles requires Management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and income and expense during the reporting periods and the related disclosures. Although Management’s estimates contemplate current conditions and how they are expected to change in the future, it is reasonably possible that in ~~2020~~2021 actual conditions could vary from those anticipated, which could affect Trustmark’s financial condition and results of operations. Actual results could differ from those estimates.

On March 11, 2020, the World Health Organization declared COVID-19, the disease caused by the novel coronavirus, a pandemic as a result of the global spread of the coronavirus illness. The COVID-19 pandemic has adversely affected, and may continue to adversely affect economic activity globally, nationally and locally. In response to the ~~outbreak,~~pandemic, federal and state authorities in the United States introduced various measures to try to limit or slow the spread of the virus, including travel restrictions, nonessential business closures, stay-at-home orders, and strict social distancing. The full impact of the COVID-19 pandemic is unknown and rapidly evolving. It has caused substantial disruption in international and U.S. economies, markets, and employment. The COVID-19 pandemic may continue to have a significant adverse impact on certain industries Trustmark serves, including restaurants and food services, hotels, retail and energy.

Because of the significant uncertainties related to the ultimate duration of the COVID-19 pandemic and its potential effects on customers and prospects, and on the national and local economy as a whole, there can be no assurances as to how the crisis may ultimately affect Trustmark’s loan portfolio. It is unknown how long the adverse conditions associated with the COVID-19 pandemic will last and what the complete financial effect will be to Trustmark. It is reasonably possible that estimates made in the financial statements could be materially and adversely impacted in the near term as a result of these conditions, including expected credit losses on loans and off-balance sheet credit exposures. See Note 3 – LHFI and Allowance for Credit Losses, LHFI for information regarding the impact of COVID-19 on Trustmark’s loan portfolio.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the CARES Act), a stimulus package intended to provide relief to businesses and consumers in the United States struggling as a result of the pandemic, was signed into law. A provision in the CARES Act included aan initial $349 billion fund for the creation of the ~~Paycheck Protection Program (PPP)~~PPP through the Small Business Administration (SBA) and Treasury Department. The PPP is intended to provide loans to small businesses, sole proprietorships, independent contractors and self-employed individuals to pay their employees, rent, mortgage interest and utilities. PPP loans are forgivable, in whole or in part, if the proceeds are used for payroll and other permitted purposes in accordance with the requirements of the PPP. If not forgiven, in whole or in part, these loans carry a fixed rate of 1.00% per annum with payments deferred until the date the SBA remits the borrower’s loan forgiveness amount to the lender (or, if the borrower does not apply for loan forgiveness, ten months after the ~~first six months~~end of the ~~loan.~~borrower’s loan forgiveness covered period). Originally, the loans carried a term of two years under SBA

rules ~~implemented by~~implementing the CARES Act, but a June 5, 2020 amendment to the CARES Act provided for a five-year minimum loan term for loans made beginning as of such date, and permitted lenders and borrowers to mutually agree to amend

existing two-year loans to have terms of five ~~to ten~~ years. The loans are 100% guaranteed by the SBA. Subsequent legislation, including as noted below, has allocated additional funding to the PPP. The SBA pays the originating bank a processing fee ranging from 1.0% to 5.0%, based on the size of the loan. From April to August 2020, Trustmark accepted PPP applications and originated loans to qualified small businesses and other borrowers under this program. The SBA stopped accepting applications for PPP loans on August 8, 2020. The Consolidated Appropriations Act, 2021, enacted on December 27, 2020, extended some of the relief provisions in certain respects of the CARES Act, appropriated additional funding to the PPP and permitted certain PPP borrowers to make “second draw” loans. The American Rescue Plan Act of 2021, enacted on March 11, 2021, expanded the eligibility criteria for both first and second draw PPP loans and revised the exclusions from payroll costs for purposes of loan forgiveness. The PPP Extension Act of 2021, enacted on March 30, 2021, extended the PPP through May 31, 2021.

~~At June 30, 2020,~~In January 2021, Trustmark ~~had outstanding 9,693~~resumed submitting applications to the SBA on behalf of and originating loans to qualified small businesses and other borrowers under the CARES Act, as amended by the Consolidated Appropriations Act, 2021. During the first quarter of 2021, Trustmark originated 4,774 PPP loans totaling ~~$939.8~~$301.5 million (net of ~~$29.9~~$16.5 million of deferred fees and costs). At March 31, 2021, Trustmark had 7,456 PPP loans outstanding that totaled $679.7 million (net of $22.1 million of deferred fees and costs).

Due to the amount and nature of the PPP loans, these loans ~~were~~are not included in the LHFI portfolio and are presented separately in the accompanying consolidated balance sheet. The PPP loans are fully guaranteed by the SBA; therefore, no ACL was estimated for these loans.

Trustmark tests goodwill for impairment at least annually and, more frequently, if events or changes in circumstances indicate that it is more likely than not that there is possible impairment. Considering the significant negative impact that the ongoing COVID-19 pandemic is having on the United States economy, Trustmark has determined that the COVID-19 pandemic represented a triggering event prompting an evaluation of goodwill impairment. Based on the qualitative evaluation performed, Trustmark concluded that goodwill was not more than likely impaired at June 30, 2020. However, in light of the on-going impact of the COVID-19 pandemic, Trustmark will continue to monitor its goodwill for possible impairment.

~~Financial Accounting Standards Board (FASB) Accounting Standard Update (ASU) 2016-13, “Financial Instruments-Credit Losses (Topic 326): Measurement~~The following tables are a summary of ~~Credit Losses on Financial Instruments,” was adopted by Trustmark on January 1, 2020. ASU 2016-13 introduces~~ the ~~current expected credit losses methodology for estimating allowances for credit losses. ASU 2016-13 applies to all financial instruments carried at~~ amortized cost ~~including securities held to maturity,~~ and ~~makes targeted improvements to the accounting for credit losses on securities available for sale.~~

Under ASU 2016-13, the allowance for credit losses is an estimate measured using relevant information about past events, including historical credit loss experience on financial assets with similar risk characteristics, current conditions, and reasonable and supportable forecasts that affect the collectabilityestimated fair value of ~~the remaining cash flows over the contractual term of the financial assets.~~

In order to comply with ASU 2016-13, Trustmark conducted a review of its investment portfolio and determined that for certain classes of securities it would be appropriate to assume the expected credit loss to be 0. This zero-credit loss assumption applies to debt issuances of the U.S. Treasury and agencies and instrumentalities of the United States government. The reasons behind the adoption of the zero-credit loss assumption were as follows:

Trustmark will continuously monitor any changes in economic conditions, credit downgrades, changes to explicit or implicit guarantees granted to certain debt issuers, and any other relevant information that would indicate potential credit deterioration and prompt Trustmark to reconsider its zero-credit loss assumption.

~~At the date of adoption, Trustmark’s estimated allowance for credit losses on~~ securities available for sale and held to maturity under ASU 2016-13 was deemed immaterial due to the composition of these portfolios. Both portfolios consist primarily of U.S. government agency guaranteed mortgage-backed securities for which the risk of loss is minimal. Therefore, Trustmark did 0t recognize a cumulative effect adjustment through retained earnings related to the available for sale or held to maturity securities.at March 31, 2021 and December 31, 2020 ($ in thousands):

Securities Available for Sale

ASU 2016-13 makes targeted improvements to the accounting for credit losses on securities available for sale. The concept of other-than-temporarily impaired has been replaced with the allowance for credit losses. Unlike securities held to maturity, securities available for sale are evaluated on an individual level and pooling of securities is not allowed.

•

~~Review the extent to which the fair value is less than the amortized cost and observe the security’s lowest credit rating as reported by third-party credit ratings companies.~~

•

The securities that violate the credit loss triggers above would be subjected to additional analysis that may include, but is not limited to: changes in market interest rates, changes in securities credit ratings, security type, service area economic factors, financial performance of the issuer/or obligor of the underlying issue and third-party guarantee.

•

If Trustmark determines that a credit loss exists, the credit portion of the allowance will be measured using a discounted cash flow (DCF) analysis using the effective interest rate as of the security’s purchase date. The amount of credit loss Trustmark records will be limited to the ~~amount by which the amortized cost exceeds the fair value.~~

~~The DCF analysis utilizes contractual maturities, as well as third-party credit ratings and cumulative default rates published annually by Moody’s Investor Service (Moody’s).~~

At June 30, 2020, the results of the analysis did not identify any securities that violate the credit loss triggers; therefore, no DCF analysis was performed and no credit loss was recognized on any of the securities available for sale.

Accrued interest receivable is excluded from the estimate of credit losses for securities available for sale. At June 30, 2020, accrued interest receivable totaled $4.2 million for securities available for sale and was reported in other assets on the accompanying consolidated balance sheet.

Securities Held to Maturity

~~ASU 2016-13 requires institutions to measure expected credit losses on financial assets carried at amortized cost on a collective~~

March 31, 2021

Amortized

Cost

Gross

Unrealized

Gains

Gross

Unrealized

Losses

Estimated

Fair

Value

Amortized

Cost

Gross

Unrealized

Gains

Gross

Unrealized

Losses

Estimated

Fair

Value

U.S. Government agency obligations

17,778

(477

)

17,349

Obligations of states and political

subdivisions

5,182

616

5,798

26,554

158

)

26,703

Mortgage-backed securities

Residential mortgage pass-through

securities

Guaranteed by GNMA

51,065

1,344

)

52,406

7,268

349

7,617

Issued by FNMA and FHLMC

1,748,044

16,068

(14,968

)

1,749,144

61,855

1,941

63,796

Other residential mortgage-backed

securities

Issued or ~~pool basis when similar risks exist. Trustmark uses several levels of segmentation in order to measure expected credit losses:~~guaranteed by FNMA,

FHLMC or GNMA

		337,616		8,283		(30	)		345,869		324,360		17,162		(46	)		341,476
Commercial mortgage-backed securities
Issued or guaranteed by FNMA, FHLMC or GNMA			167,749		903		(1,542	)		167,110		73,701		2,003		0			75,704
Total		$	2,327,434	$	27,262	$	(17,020	)	$	2,337,676	$	493,738	$	21,613	$	(55	)	$	515,296


	•	~~The portfolio is segmented into agency and non-agency securities.~~

•

~~The non-agency securities are separated into municipal, mortgage, and corporate securities.~~

~~Each individual segment is categorized by third-party credit ratings.~~

As discussed above, Trustmark has determined that for certain classes of securities it would be appropriate to assume the expected credit loss to be 0, which include debt issuances of the U.S. Treasury and agencies and instrumentalities of the United States government. This assumption will be reviewed and attested to quarterly. Trustmark is using an internally built model to verify the accuracy of third-party provided calculations.

At June 30, 2020, Trustmark’s securities held to maturity totaled $660.0 million. The potential credit loss exposure was $31.5 million and consisted of municipal securities. After applying appropriate probability of default and loss given default assumptions, the total amount of current expected credit losses was deemed immaterial. Therefore, 0 reserve was recorded at June 30, 2020.

Accrued interest receivable is excluded from the estimate of credit losses for securities held to maturity. At June 30, 2020, accrued interest receivable totaled $1.4 million for securities held to maturity and was reported in other assets on the accompanying consolidated balance sheet.

At June 30, 2020, Trustmark had 0 securities held to maturity that were past due 30 days or more as to principal or interest payments. Trustmark had 0 securities held to maturity classified as nonaccrual at June 30, 2020.

Trustmark monitors the credit quality of securities held to maturity on a monthly basis through credit ratings. The following table presents the amortized cost of Trustmark’s securities held to maturity by credit rating, as determined by Moody’s, at June 30, 2020 ($ in thousands):

Securities Held to Maturity

June 30, 2020

Amortized Cost

Aaa

$
628,419

Aa1 to Aa3

26,179

Not Rated (1)

5,450

Total

$
660,048

~~(1) Not rated securities primarily consist of Mississippi municipal general obligations.~~

~~The following tables are a summary of the amortized cost and estimated fair value of securities available for sale and held to maturity at June 30, 2020 and~~ December 31, ~~2019 ($ in thousands):~~2020

U.S. Government agency obligations

18,378

144

(481

)

18,041

Obligations of states and political

subdivisions

Securities Available for Sale

Securities Held to Maturity

June 30, 2020

Amortized
Cost

Gross
Unrealized
Gains

Gross
Unrealized
Losses

Estimated
Fair
Value

Amortized
Cost

Gross
Unrealized
Gains

Gross
Unrealized
Losses

Estimated
Fair
Value

U.S. Government agency obligations

$
20,254

$
160

$
(516
)

$
19,898

$
—

$
—

$
—

$
—

Obligations of states and political
   subdivisions

10,565

611

—

11,176

31,629

461

(25
)

32,065

Mortgage-backed securities

Residential mortgage pass-through
   securities

Guaranteed by GNMA

67,439

2,199

(1
)

69,637

10,306

548

—

10,854

Issued by FNMA and FHLMC

1,096,861

24,762

(19
)

1,121,604

86,346

3,204

—

89,550

Other residential mortgage-backed
   securities

Issued or guaranteed by FNMA,
   FHLMC or GNMA

560,109

14,846

(15
)

574,940

435,333

23,148

—

458,481

Commercial mortgage-backed securities

Issued or guaranteed by FNMA,
   FHLMC or GNMA

84,350

2,558

(10
)

86,898

96,434

3,177

—

99,611

Total

$
1,839,578

$
45,136

$
(561
)

$
1,884,153

$
660,048

$
30,538

$
(25
)

$
690,561

December 31, 2019

U.S. Government agency obligations

$
22,965

$
69

$
(707
)

$
22,327

$
3,781

$
220

$
—

$
4,001

Obligations of states and political
   subdivisions

24,952

513

—

25,465

31,781

434

(53
)

32,162

Mortgage-backed securities

Residential mortgage pass-through
   securities

Guaranteed by GNMA

69,196

425

(369
)

69,252

10,820

266

(10
)

11,076

Issued by FNMA and FHLMC

714,350

2,171

(3,165
)

713,356

96,631

286

(370
)

96,547

Other residential mortgage-backed
   securities

Issued or guaranteed by FNMA,
   FHLMC or GNMA

656,162

3,777

(1,713
)

658,226

485,324

7,026

(656
)

491,694

Commercial mortgage-backed securities

Issued or guaranteed by FNMA,
   FHLMC or GNMA

113,359

625

(206
)

113,778

109,762

1,042

(82
)

110,722

Total

$
1,600,984

$
7,580

$
(6,160
)

$
1,602,404

$
738,099

$
9,274

$
(1,171
)

$
746,202

~~During 2013, Trustmark reclassified approximately $1.099 billion of~~

5,198

637

5,835

26,584

258

)

26,839

Mortgage-backed securities ~~available for sale to~~

Residential mortgage pass-through

securities ~~held to maturity. The~~

Guaranteed by GNMA

55,193

1,672

)

56,862

7,598

382

7,980

Issued by FNMA and FHLMC

1,421,861

20,768

(1,308

)

1,441,321

67,944

2,397

70,341

Other residential mortgage-backed

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

Issued or ~~accretion of the original purchase premium~~guaranteed by FNMA,

FHLMC or ~~discount on the associated security. There were no gains~~GNMA

409,883

9,600

(46

)

419,437

360,361

19,678

(55

)

379,984

Commercial mortgage-backed securities

Issued or losses recognized as a result of the transfer. At June 30, 2020, the net unamortized, unrealized loss on the transferred securities included in accumulated other comprehensive income (loss) in the accompanying balance sheet totaled approximately $10.5 million ($7.9 million, net of tax) compared to approximately $12.1 million ($9.1 million, net of tax) at December 31, 2019.

~~The tables below include securities with gross unrealized losses for which an allowance for credit losses has not been recorded and segregated~~guaranteed by ~~length of impairment at June 30, 2020 and December 31, 2019 ($ in thousands):~~FNMA,

FHLMC or GNMA

Less than 12 Months

12 Months or More

Total

June 30, 2020

Estimated
Fair Value

Gross
Unrealized
Losses

Estimated
Fair Value

Gross
Unrealized
Losses

Estimated
Fair Value

Gross
Unrealized
Losses

U.S. Government agency obligations

$
—

$
—

$
11,624

$
(516
)

$
11,624

$
(516
)
Obligations of states and political subdivisions

—

—

6,221

(25
)

6,221

(25
)
Mortgage-backed securities

Residential mortgage pass-through securities

Guaranteed by GNMA

325

(1
)

—

—

325

(1
)
Issued by FNMA and FHLMC

20,644

(7
)

8,954

(12
)

29,598

(19
)
Other residential mortgage-backed securities

Issued or guaranteed by FNMA, FHLMC or
   GNMA

2,436

(15
)

—

—

2,436

(15
)
Commercial mortgage-backed securities

Issued or guaranteed by FNMA, FHLMC or
   GNMA

—

—

668

(10
)

668

(10
)
Total

$
23,405

$
(23
)

$
27,467

$
(563
)

$
50,872

$
(586
)

December 31, 2019

U.S. Government agency obligations

$
6,585

$
(105
)

$
12,886

$
(602
)

$
19,471

$
(707
)
Obligations of states and political subdivisions

—

—

6,216

(53
)

6,216

(53
)
Mortgage-backed securities

Residential mortgage pass-through securities

Guaranteed by GNMA

23,544

(107
)

18,529

(272
)

42,073

(379
)
Issued by FNMA and FHLMC

112,879

(230
)

278,120

(3,305
)

390,999

(3,535
)
Other residential mortgage-backed securities

Issued or guaranteed by FNMA, FHLMC or
   GNMA

158,341

(738
)

151,271

(1,631
)

309,612

(2,369
)
Commercial mortgage-backed securities

Issued or guaranteed by FNMA, FHLMC or
   GNMA

51,312

(167
)

14,155

(121
)

65,467

(288
)
Total

$
352,661

$
(1,347
)

$
481,177

$
(5,984
)

$
833,838

$
(7,331
)

The unrealized losses shown above are due to increases in market rates over the yields available at the time of purchase of the underlying securities and not credit quality. Trustmark does not intend to sell these securities and it is more likely than not that Trustmark will not be required to sell the investments before recovery of their amortized cost bases, which may be maturity. Prior to the adoption of FASB ASU 2016-13, Trustmark did not consider these investments to be other-than-temporarily impaired at June 30, 2019. There were

49,260

1,068

)

50,319

75,585

2,386

0 ~~other-than-temporary impairments for the six months ended June 30, 2019.~~

~~Security Gains and Losses~~

77,971

Total

1,959,773

33,889

(1,847

)

1,991,815

538,072

25,101

(58

)

563,115

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 March 31, 2021, the net unamortized, unrealized loss on the transferred securities included in accumulated other comprehensive income (loss) in the accompanying balance sheet totaled approximately $8.2 million ($6.2 million, net of tax) compared to approximately $8.9 million ($6.7 million, net of tax) at December 31, 2020.

Quarterly, Trustmark evaluates if any security has a fair value less than its amortized cost. Once these securities are identified, in order to determine whether a decline in fair value resulted from a credit loss or other factors, Trustmark performs further analysis. If Trustmark determines that a credit loss exists, the credit portion of the allowance is measured using a discounted cash flow (DCF) analysis using the effective interest rate as of the security’s purchase date. The amount of credit loss Trustmark records will be limited to the amount by which the amortized cost exceeds the fair value. The DCF analysis utilizes contractual maturities, as well as third-party credit ratings and cumulative default rates published annually by Moody’s Investor Service (Moody’s).

At both March 31, 2021 and December 31, 2020, the results of the analysis did not identify any securities that violate the credit loss triggers; therefore, no DCF analysis was performed and 0 credit loss was recognized on any of the securities available for sale.

Accrued interest receivable is excluded from the estimate of credit losses for securities available for sale. At March 31, 2021, accrued interest receivable totaled $4.2 million for securities available for sale compared to $4.0 million at December 31, 2020 and was reported in other assets on the accompanying consolidated balance sheets.

At both March 31, 2021 and December 31, 2020, the potential credit loss exposure was $26.6 million and consisted of municipal securities. After applying appropriate probability of default and loss given default assumptions, the total amount of current expected credit losses was deemed immaterial. Therefore, 0 reserve was recorded at March 31, 2021 and December 31, 2020.

Accrued interest receivable is excluded from the estimate of credit losses for securities held to maturity. At both March 31, 2021 and December 31, 2020, accrued interest receivable totaled $1.2 million for securities held to maturity and was reported in other assets on the accompanying consolidated balance sheets.

At both March 31, 2021 and December 31, 2020, Trustmark had 0 securities held to maturity that were past due 30 days or more as to principal or interest payments. Trustmark had 0 securities held to maturity classified as nonaccrual at March 31, 2021 and December 31, 2020.

(1) Not rated securities primarily consist of Mississippi municipal general obligations.

The tables below include securities with gross unrealized losses for which an allowance for credit losses has not been recorded and segregated by length of impairment at March 31, 2021 and December 31, 2020 ($ in thousands):

	Less than 12 Months					12 Months or More					Total
March 31, 2021	Estimated Fair Value		Gross Unrealized Losses			Estimated Fair Value		Gross Unrealized Losses			Estimated Fair Value		Gross Unrealized Losses
U.S. Government agency obligations	$	1,462	$	(10	)	$	10,986	$	(467	)	$	12,448	$	(477	)
Obligations of states and political subdivisions		5,009		(6	)		667		(3	)		5,676		(9	)
Mortgage-backed securities
Residential mortgage pass-through securities
Guaranteed by GNMA		1,120		(3	)		0		0			1,120		(3	)
Issued by FNMA and FHLMC		1,128,087		(14,968	)		0		0			1,128,087		(14,968	)
Other residential mortgage-backed securities
Issued or guaranteed by FNMA, FHLMC or GNMA		21,995		(76	)		0		0			21,995		(76	)
Commercial mortgage-backed securities
Issued or guaranteed by FNMA, FHLMC or GNMA		65,692		(1,533	)		654		(9	)		66,346		(1,542	)
Total	$	1,223,365	$	(16,596	)	$	12,307	$	(479	)	$	1,235,672	$	(17,075	)


December 31, 2020
U.S. Government agency obligations	$	0	$	0		$	11,167	$	(481	)	$	11,167	$	(481	)
Obligations of states and political subdivisions		0		0			667		(3	)		667		(3	)
Mortgage-backed securities
Residential mortgage pass-through securities
Guaranteed by GNMA		1,636		(3	)		0		0			1,636		(3	)
Issued by FNMA and FHLMC		324,905		(1,308	)		0		0			324,905		(1,308	)
Other residential mortgage-backed securities
Issued or guaranteed by FNMA, FHLMC or GNMA		29,398		(101	)		0		0			29,398		(101	)
Commercial mortgage-backed securities
Issued or guaranteed by FNMA, FHLMC or GNMA		0		0			659		(9	)		659		(9	)
Total	$	355,939	$	(1,412	)	$	12,493	$	(493	)	$	368,432	$	(1,905	)

During the three months ended March 31, 2021 and ~~six months ended June 30,~~ 2020, ~~and 2019,~~ there were no gross realized gains or losses as a result of calls and dispositions of securities. Realized gains and losses are determined using the specific identification method and are included in noninterest income as security gains (losses), net.

Securities with a carrying value of ~~$1.974~~$1.859 billion and ~~$1.770~~$1.964 billion at ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, respectively, were pledged to collateralize public deposits and securities sold under repurchase agreements and for other purposes as permitted by law. At both ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, NaN of these securities were pledged under the Federal Reserve Discount Window program to provide additional contingency funding capacity.

The amortized cost and estimated fair value of securities available for sale and held to maturity at ~~June 30, 2020,~~March 31, 2021, by contractual maturity, are shown below ($ in thousands). Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

Trustmark adopted the amendments of FASB ASU 2016-13, on January 1, 2020. The amendments of ASU 2016-13 created FASB Accounting Standards Codification (ASC) Topic 326, “Financial Instruments – Credit Losses,” which, among other things, replace much of the guidance and disclosures previously provided in FASB ASC Topic 310, “Receivables.” The guidance in FASB ASC Topic 326 replaces the incurred loss methodology with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to determine credit losses. In accordance with FASB ASC Subtopic 326-20, “Financial Instruments – Credit Losses – Measured at Amortized Cost,” Trustmark has developed an allowance for credit losses (ACL) methodology effective January 1, 2020, which replaces its previous allowance for loan losses methodology. See the section captioned “Allowance for Credit Losses (ACL)” within this note for additional information regarding Trustmark’s ACL. Trustmark adopted FASB ASC Topic 326 using the modified retrospective approach prescribed by the amendments of ASU 2016-13; therefore, prior period balances are presented under legacy GAAP and may not be comparable to current period presentation.

At ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, LHFI consisted of the following ($ in thousands):

Accrued interest receivable is not included in the amortized cost basis of Trustmark’s LHFI. At ~~June 30,~~March 31, 2021 and December 31, 2020, accrued interest receivable for LHFI totaled ~~$35.6~~$32.8 million and $33.0 million, respectively, with no related ACL and was reported in other assets on the accompanying consolidated balance sheet.

Trustmark does not have any loan concentrations other than those reflected in the preceding table, which exceed 10% of total LHFI. At ~~June 30, 2020,~~March 31, 2021, Trustmark’s geographic loan distribution was concentrated primarily in its 5 key market regions: Alabama, Florida, Mississippi, Tennessee and Texas. Accordingly, the ultimate collectability of a substantial portion of these loans is susceptible to changes in market conditions in these areas.

Past due LHFI are loans contractually past due 30 days or more as to principal or interest payments. A LHFI is classified as nonaccrual, and the accrual of interest on such loan is discontinued, when the contractual payment of principal or interest becomes 90 days past due on commercial credits and 120 days past due on non-business purpose credits. In addition, a credit may be placed on nonaccrual at any other time Management has serious doubts about further collectibility of principal or interest according to the contractual terms, even though the loan is currently performing. A LHFI may remain in accrual status if it is in the process of collection and well secured. When a LHFI is placed in nonaccrual status, interest accrued but not received is reversed against interest income. Interest payments received on nonaccrual LHFI are applied against principal under the cost-recovery method, until qualifying for return to accrual status. Under the cost-recovery method, interest income is not recognized until the principal balance is reduced to zero. LHFI are restored to accrual status when the obligation is brought current or has performed in accordance with the contractual terms for a reasonable period of time and the ultimate collectibility of the total contractual principal and interest is no longer in doubt.

No material interest income was recognized in the income statement on nonaccrual LHFI for each of the periods ended ~~June 30, 2020~~March 31, 2021 and ~~2019.~~2020.

The following ~~table provides~~tables provide the amortized cost basis of loans on nonaccrual status and loans past due 90 days or more still accruing interest ~~as of June 30,~~at March 31, 2021 and December 31, 2020 ($ in thousands):

The following ~~table provides~~tables provide an aging analysis of the amortized cost basis of past due LHFI at ~~June 30,~~March 31, 2021 and December 31, 2020 ($ in thousands):

	June 30, 2020												March 31, 2021
	Past Due												Past Due
	30-59 Days		60-89 Days		90 Days or More		Total Past Due		Current Loans		Total LHFI		30-59 Days		60-89 Days		90 Days or More		Total Past Due		Current Loans		Total LHFI
Loans secured by real estate:
Construction, land development and other land	$	699	$	323	$	191	$	1,213	$	481,096	$	482,309	$	679	$	76	$	5,718	$	6,473	$	536,429	$	542,902
Other secured by 1-4 family residential properties		1,481		1,017		632		3,130		559,698		562,828		1,385		1,144		754		3,283		506,449		509,732
Secured by nonfarm, nonresidential properties		187		391		682		1,260		2,609,132		2,610,392		1,145		24		1,015		2,184		2,797,011		2,799,195
Other real estate secured		165		—		288		453		884,362		884,815		99		—		125		224		1,134,781		1,135,005
Other loans secured by real estate:
Other construction		—		—		—		—		794,968		794,968		—		—		—		—		799,186		799,186
Secured by 1-4 family residential properties		1,880		1,500		5,501		8,881		1,241,816		1,250,697		1,929		1,720		8,457		12,106		1,220,944		1,233,050
Commercial and industrial loans		594		99		2,001		2,694		1,410,561		1,413,255		1,681		3,068		1,825		6,574		1,316,703		1,323,277
Consumer loans		879		152		217		1,248		163,312		164,560		825		91		218		1,134		154,222		155,356
State and other political subdivision loans		—		—		177		177		931,359		931,536		87		—		177		264		1,036,430		1,036,694
Other commercial loans		351		16		446		813		563,633		564,446		133		68		5,311		5,512		443,795		449,307
Total	$	6,236	$	3,498	$	10,135	$	19,869	$	9,639,937	$	9,659,806	$	7,963	$	6,191	$	23,600	$	37,754	$	9,945,950	$	9,983,704

~~The following table provides an aging analysis of past due and nonaccrual LHFI by loan class at December 31, 2019 ($ in thousands):~~

Prior to the adoption of FASB ASC Topic 326, Trustmark’s individually evaluated impaired LHFI included all commercial nonaccrual relationships of $500 thousand or more, which were specifically reviewed for impairment and deemed impaired, and all LHFI classified as TDRs in accordance with FASB ASC Subtopic 310-10-50-20 “Impaired Loans.” Once a LHFI was deemed to be impaired, the full difference between book value and the most likely estimate of the collateral’s net realizable value was charged off or a specific reserve was established.

~~No material interest income was recognized in the income statement on impaired LHFI for the periods ended June 30, 2019.~~

~~At December 31, 2019, individually evaluated impaired LHFI consisted of the following ($ in thousands):~~

	December 31, 2019												December 31, 2020
	LHFI												Past Due
	Unpaid Principal Balance		With No Related Allowance Recorded		With an Allowance Recorded		Total Recorded Investment		Related Allowance		Average Recorded Investment		30-59 Days		60-89 Days		90 Days or More		Total Past Due		Current Loans		Total LHFI
Loans secured by real estate:
Construction, land development and other land	$	926	$	610	$	16	$	626	$	—	$	1,089	$	339	$	34	$	161	$	534	$	513,522	$	514,056
Secured by 1-4 family residential properties		6,513		2,104		3,360		5,464		35		4,713
Other secured by 1-4 family residential properties														1,505		523		896		2,924		521,808		524,732
Secured by nonfarm, nonresidential properties		7,295		1,462		5,255		6,717		2,355		8,096		920		—		972		1,892		2,707,134		2,709,026
Other real estate secured		69		—		68		68		—		158		103		101		107		311		1,065,653		1,065,964
Other loans secured by real estate:
Other construction														—		—		—		—		794,983		794,983
Secured by 1-4 family residential properties														3,291		1,289		5,110		9,690		1,206,710		1,216,400
Commercial and industrial loans		27,178		19,374		4,084		23,458		707		27,088		271		196		1,543		2,010		1,307,068		1,309,078
Consumer loans		22		—		21		21		—		11		926		190		240		1,356		163,030		164,386
State and other political subdivision loans		4,079		—		4,079		4,079		1,809		6,337		117		—		177		294		1,000,482		1,000,776
Other loans		1,207		—		784		784		553		1,033
Other commercial loans														2,143		2,971		346		5,460		519,663		525,123
Total	$	47,289	$	23,550	$	17,667	$	41,217	$	5,459	$	48,525	$	9,615	$	5,304	$	9,552	$	24,471	$	9,800,053	$	9,824,524

A TDR occurs when a borrower is experiencing financial difficulties, and for related economic or legal reasons, a concession is granted to the borrower that Trustmark would not otherwise consider. Whatever the form of concession that might be granted by Trustmark, Management’s objective is to enhance ~~collectibility~~collectability by obtaining more cash or other value from the borrower or by increasing the probability of receipt by granting the concession than by not granting it. Other concessions may arise from court proceedings or may be imposed by law. In addition, TDRs also include those credits that are extended or renewed to a borrower who is not able to obtain funds from sources other than Trustmark at a market interest rate for new debt with similar risk.

At ~~June 30,~~March 31, 2021 and 2020, ~~and 2019,~~ LHFI classified as TDRs totaled ~~$26.9~~$22.9 million and $~~36.3~~$26.5 million, ~~respectively,~~respectively. At March 31, 2021, TDRs were primarily comprised of credits with interest-only payments for an extended period of time and payment concessions which totaled $17.3 million. At March 31, 2020, TDRs were primarily comprised of credits with interest-only payments for an extended period of time and credits renewed at a rate that was not commensurate with that of new debt with similar risk which totaled ~~$14.6 million and $25.7~~ ~~million at June 30, 2020 and 2019, respectively.~~$18.3 million. The remaining TDRs at ~~June 30,~~March 31, 2021 and 2020 ~~and 2019~~ resulted from bankruptcies or from payment or maturity extensions. Trustmark had ~~$5.6~~0 unused commitments on TDRs at March 31, 2021 compared to $10.7 million of unused commitments on TDRs at ~~June 30, 2020 compared to $2.3~~ ~~million of unused commitments on TDRs at June 30, 2019.~~ March 31, 2020.

At ~~June 30, 2020,~~March 31, 2021, TDRs had a related ACL of ~~$2.0~~$7.5 million, compared to ~~a related allowance~~$210 thousand at March 31, 2020. Trustmark had 0 charge-offs on TDRs for ~~loan loss of $2.9 million at June 30, 2019, and resulted in charge-offs of~~the three months ended March 31, 2021, compared to $2.2 million ~~and $117 thousand~~ for the ~~six~~three months ended ~~June 30, 2020 and 2019, respectively.~~March 31, 2020.

The following table illustrates the impact of modifications classified as TDRs for the periods presented ($ in thousands):

The table below includes the balances at default for TDRs modified within the last 12 months for which there was a payment default during the periods presented ($ in thousands):

Trustmark’s TDRs have resulted primarily from allowing the borrower to pay interest-only for an extended period of time and credits renewed at a rate that was not commensurate with that of new debt with similar risk rather than from forgiveness. Accordingly, as shown above, these TDRs have a similar recorded investment for both the pre-modification and post-modification disclosure. Trustmark has utilized loans 90 days or more past due to define payment default in determining TDRs that have subsequently defaulted.

The following tables detail LHFI classified as TDRs by loan class at ~~June 30,~~March 31, 2021 and 2020 ~~and 2019~~ ($ in thousands):

~~On March 27, 2020, the~~The CARES Act, ~~a stimulus package intended to provide relief to businesses and consumers in the United States struggling~~ as ~~a result of the pandemic, was signed into law. Section 4013 of the CARES Act also addressed COVID-19- related modifications and~~amended by subsequent legislation, specified that COVID-19 related modifications executed between March 1, 2020 and the earlier of either (i) 60 days after the date of termination of the national emergency declared by the President ~~and~~or (ii) ~~December 31, 2020,~~January 1, 2022, on loans that were current as of December 31, 2019 ~~are~~were not TDRs. Additionally, under guidance from the federal banking agencies, other short-term modifications made on a good faith basis in response to COVID-19 to borrowers ~~who~~that were current prior to any relief are not TDRs under ASC Subtopic 310-40, “Troubled Debt Restructuring by Creditors.” These modifications include short-term (e.g., up to six months) modifications such as payment deferrals, fee waivers, extensions of repayment terms, or delays in payment that are insignificant. Borrowers considered current are those that are less than 30 days past due on their contractual payments at the time a modification program is implemented. ~~Trustmark modified 2,692 individual loans with aggregate principal balances totaling $1.422 billion through June 30, 2020 without treating such modifications as TDRs.~~ Commercial concessions were primarily either interest only for 90 days or full payment deferrals for 90 days. Consumer concessions were 90-day full payment deferrals. At March 31, 2021, the balance of loans remaining under some type of COVID-19 related concession totaled $28.1 million compared to $34.2 million at December 31, 2020.

The following table presents the amortized cost basis of collateral-dependent loans by class of loans and collateral type as of ~~June 30, 2020~~March 31, 2021 ($ in thousands):

	June 30, 2020												March 31, 2021
	Real Estate		Equipment and Machinery		Inventory and Receivables		Vehicles		Miscellaneous		Total		Real Estate		Equipment and Machinery		Inventory and Receivables		Vehicles		Miscellaneous		Total
Loans secured by real estate:
Construction, land development and other land	$	1,948	$	—	$	—	$	—	$	—	$	1,948	$	5,885	$	—	$	—	$	—	$	—	$	5,885
Other secured by 1-4 family residential properties		496		—		—		—		—		496		216		—		—		—		—		216
Secured by nonfarm, nonresidential properties		11,966		—		—		—		—		11,966		12,617		—		—		—		—		12,617
Other real estate secured		63		—		—		—		—		63		58		—		—		—		—		58
Other loans secured by real estate:
Other construction		—		—		—		—		—		—		—		—		—		—		—		—
Secured by 1-4 family residential properties		1,480		—		—		—		—		1,480		1,413		—		—		—		—		1,413
Commercial and industrial loans		105		840		6,439		186		8,794		16,364		44		115		2,322		101		8,401		10,983
Consumer loans		—		—		—		—		—		—		—		—		—		—		—		—
State and other political subdivision loans		4,049		—		—		—		—		4,049		3,914		—		—		—		—		3,914
Other commercial loans		623		—		2,021		—		3,120		5,764		601		—		1,958		—		3,051		5,610
Total	$	20,730	$	840	$	8,460	$	186	$	11,914	$	42,130	$	24,748	$	115	$	4,280	$	101	$	11,452	$	40,696

A loan is collateral dependent when the borrower is experiencing financial difficulty and repayment of the loan is expected to be provided substantially through the sale of the collateral. The following provides a qualitative description by class of loan of the collateral that secures Trustmark’s collateral-dependent LHFI:

Trustmark’s LHFI portfolio credit quality indicators focus on 6 key quality ratios that are compared against bank tolerances. The loan indicators are total classified outstanding, total criticized outstanding, nonperforming loans, nonperforming assets, delinquencies and net loan losses. Due to the homogenous nature of consumer loans, Trustmark does not assign a formal internal risk rating to each credit and therefore the criticized and classified measures are primarily composed of commercial loans.

In addition to monitoring portfolio credit quality indicators, Trustmark also measures how effectively the lending process is being managed and risks are being identified. As part of an ongoing monitoring process, Trustmark grades the commercial portfolio segment as it relates to credit file completion and financial statement exceptions, underwriting, collateral documentation and compliance with law as shown below:

Trustmark has established a loan grading system that consists of ten individual credit risk grades (risk ratings) that encompass a range from loans where the expectation of loss is negligible to loans where loss has been established. The model is based on the risk of default for an individual credit and establishes certain criteria to delineate the level of risk across the ten unique credit risk grades. Credit risk grade definitions are as follows:

By definition, credit risk grades special mention (RR 7), substandard (RR 8), doubtful (RR 9) and loss (RR 10) are criticized loans while substandard (RR 8), doubtful (RR 9) and loss (RR 10) are classified loans. These definitions are standardized by all bank regulatory agencies and are generally equally applied to each individual lending institution. The remaining credit risk grades are considered pass credits and are solely defined by Trustmark.

To enhance this process, Trustmark has determined that loans will be individually assessed, and a formal analysis will be performed and based upon the analysis the loan will be written down to net realizable value. Trustmark will individually assess and remove loans from the pool in the following circumstances:

Each loan officer assesses the appropriateness of the internal risk rating assigned to their credits on an ongoing basis. Trustmark’s Asset Review area conducts independent credit quality reviews of the majority of Trustmark’s commercial loan portfolio both on the underlying credit quality of each individual loan class as well as the adherence to Trustmark’s loan policy and the loan administration process.

In addition to the ongoing internal risk rate monitoring described above, Trustmark’s Credit Quality Review Committee meets monthly and performs a review of all loans of $100 thousand or more that are either delinquent thirty days or more or on nonaccrual. This review includes recommendations regarding risk ratings, accrual status, charge-offs and appropriate servicing officer as well as evaluation of problem credits for determination of TDRs. Quarterly, the Credit Quality Review Committee reviews and modifies continuous action plans for all credits risk rated seven or worse for relationships of $100 thousand or more.

In addition, periodic reviews of significant development, commercial construction, multi-family and nonowner-occupied projects are performed. These reviews assess each particular project with respect to location, project valuations, progress of completion, leasing status, current financial information, rents, operating expenses, cash flow, adherence to budget and projections and other information as applicable. Summary results are reviewed by Senior and Regional Credit Officers in addition to the Chief Credit Officer with a determination made as to the appropriateness of existing risk ratings and accrual status.

Consumer LHFI that do not meet a minimum custom credit score are reviewed quarterly by Management. The Retail Credit Review Committee reviews the volume and percentage of approvals that did not meet the minimum passing custom score ~~by region, individual location, and officer~~ to ensure that Trustmark continues to originate quality loans.

Trustmark monitors the levels and severity of past due consumer LHFI on a daily basis through its collection activities. A detailed assessment of consumer LHFI delinquencies is performed monthly at both a product and market level by delivery channel, which incorporates the perceived level of risk at time of underwriting.

The tables below present the amortized cost basis of loans by credit quality indicator and class of loans based on ~~the most recent analysis~~analyses performed at March 31, 2021 and December 31, 2020 ($ in thousands):

	Term Loans by Origination Year																Term Loans by Origination Year
	2020		2019		2018		2017		2016		Prior		Revolving Loans		Total		2021		2020		2019		2018		2017		Prior		Revolving Loans		Total
As of June 30, 2020	Commercial LHFI
As of March 31, 2021																	Commercial LHFI
Loans secured by real estate:
Construction, land development and other land:
Pass - RR 1 through RR 6	$	170,118	$	146,424	$	36,674	$	5,413	$	3,571	$	5,192	$	37,106	$	404,498	$	100,508	$	238,877	$	49,940	$	22,200	$	2,204	$	5,961	$	25,907	$	445,597
Special Mention - RR 7		—		—		—		—		—		—		—		—		—		—		—		—		—		—		—		—
Substandard - RR 8		2,417		74		495		47		680		26		—		3,739		5,151		168		4,502		1,146		12		112		—		11,091
Doubtful - RR 9		—		—		—		—		—		42		—		42		—		—		—		—		—		42		—		42
Total		172,535		146,498		37,169		5,460		4,251		5,260		37,106		408,279		105,659		239,045		54,442		23,346		2,216		6,115		25,907		456,730

Other secured by 1-4 family residential properties:
Pass - RR 1 through RR 6	$	21,491	$	28,901	$	22,057	$	11,956	$	14,141	$	8,565	$	7,010	$	114,121	$	10,814	$	32,767	$	17,563	$	13,996	$	8,222	$	11,582	$	5,982	$	100,926
Special Mention - RR 7		—		90		—		—		—		—		—		90		—		248		—		49		—		—		—		297
Substandard - RR 8		4,694		299		1,032		240		71		790		—		7,126		130		933		8		647		328		691		—		2,737
Doubtful - RR 9		33		1		—		—		—		—		—		34		—		27		—		—		—		—		—		27
Total		26,218		29,291		23,089		12,196		14,212		9,355		7,010		121,371		10,944		33,975		17,571		14,692		8,550		12,273		5,982		103,987

Secured by nonfarm, nonresidential properties:
Pass - RR 1 through RR 6	$	315,293	$	519,415	$	466,036	$	384,595	$	332,457	$	424,260	$	108,032	$	2,550,088	$	136,053	$	661,490	$	541,511	$	483,464	$	266,124	$	452,175	$	89,019	$	2,629,836
Special Mention - RR 7		—		5,655		1,083		—		350		4,894		—		11,982		10,557		12,149		1,326		1,697		4,678		24,842		—		55,249
Substandard - RR 8		8,866		10,821		1,827		3,586		9,131		12,583		921		47,735		11,691		6,688		24,079		4,503		3,145		62,512		764		113,382
Doubtful - RR 9		57		180		—		—		—		331		—		568		50		—		156		—		—		512		—		718
Total		324,216		536,071		468,946		388,181		341,938		442,068		108,953		2,610,373		158,351		680,327		567,072		489,664		273,947		540,041		89,783		2,799,185

Other real estate secured:
Pass - RR 1 through RR 6	$	67,416	$	181,243	$	295,676	$	160,526	$	130,810	$	35,183	$	10,314	$	881,168	$	94,481	$	92,208	$	436,162	$	365,387	$	33,631	$	80,300	$	12,529	$	1,114,698
Special Mention - RR 7		—		—		—		—		—		874		—		874		—		—		—		—		—		825		—		825
Substandard - RR 8		1,201		187		18		—		63		715		—		2,184		8,758		10,105		14		18		—		180		—		19,075
Doubtful - RR 9		—		—		—		—		—		—		—		—		—		—		—		—		—		—		—		—
Total		68,617		181,430		295,694		160,526		130,873		36,772		10,314		884,226		103,239		102,313		436,176		365,405		33,631		81,305		12,529		1,134,598

	Term Loans by Origination Year																Term Loans by Origination Year
	2020		2019		2018		2017		2016		Prior		Revolving Loans		Total		2021		2020		2019		2018		2017		Prior		Revolving Loans		Total
As of June 30, 2020	Commercial LHFI
As of March 31, 2021																	Commercial LHFI
Other loans secured by real estate:
Other construction
Other construction:
Pass - RR 1 through RR 6	$	63,346	$	448,004	$	235,925	$	25,957	$	1,481	$	—	$	6,858	$	781,571	$	91,578	$	305,897	$	360,277	$	28,411	$	—	$	2,851	$	9,176	$	798,190
Special Mention - RR 7		—		—		—		—		—		—		—		—		—		—		—		—		—		—		—		—
Substandard - RR 8		13,397		—		—		—		—		—		—		13,397		—		996		—		—		—		—		—		996
Doubtful - RR 9		—		—		—		—		—		—		—		—		—		—		—		—		—		—		—		—
Total		76,743		448,004		235,925		25,957		1,481		—		6,858		794,968		91,578		306,893		360,277		28,411		—		2,851		9,176		799,186

Commercial and industrial loans:
Pass - RR 1 through RR 6	$	301,484	$	281,419	$	115,890	$	95,696	$	82,537	$	56,802	$	434,958	$	1,368,786	$	185,654	$	322,347	$	146,801	$	64,024	$	64,540	$	93,115	$	376,945	$	1,253,426
Special Mention - RR 7		850		—		—		—		—		—		833		1,683		—		789		—		—		—		—		—		789
Substandard - RR 8		10,630		2,512		15,481		344		628		2,581		10,089		42,265		4,406		11,622		1,891		9,055		3,632		3,423		34,662		68,691
Doubtful - RR 9		48		402		—		—		43		4		24		521		2		146		70		118		—		35		—		371
Total		313,012		284,333		131,371		96,040		83,208		59,387		445,904		1,413,255		190,062		334,904		148,762		73,197		68,172		96,573		411,607		1,323,277

State and other political subdivision loans:
State and other political subdivision loans:
Pass - RR 1 through RR 6	$	85,513	$	109,844	$	54,240	$	119,532	$	144,165	$	408,276	$	898	$	922,468	$	66,925	$	215,718	$	84,495	$	39,564	$	112,486	$	507,878	$	1,338	$	1,028,404
Special Mention - RR 7		—		—		—		—		—		4,000		—		4,000		—		—		—		—		—		4,018		—		4,018
Substandard - RR 8		—		—		—		339		—		4,729		—		5,068		—		—		—		—		200		4,072		—		4,272
Doubtful - RR 9		—		—		—		—		—		—		—		—		—		—		—		—		—		—		—		—
Total		85,513		109,844		54,240		119,871		144,165		417,005		898		931,536		66,925		215,718		84,495		39,564		112,686		515,968		1,338		1,036,694

Other commercial loans:
Pass - RR 1 through RR 6	$	66,388	$	83,965	$	28,885	$	14,821	$	57,952	$	54,114	$	224,792	$	530,917	$	29,029	$	80,676	$	70,698	$	18,808	$	10,339	$	56,084	$	151,115	$	416,749
Special Mention - RR 7		7,917		—		—		—		—		—		11,833		19,750		—		—		—		—		—		—		—		—
Substandard - RR 8		98		2,190		686		45		1,063		1		9,670		13,753		—		7,417		2,094		663		—		504		21,856		32,534
Doubtful - RR 9		—		3		—		—		—		23		—		26		1		—		—		—		—		23		—		24
Total		74,403		86,158		29,571		14,866		59,015		54,138		246,295		564,446		29,030		88,093		72,792		19,471		10,339		56,611		172,971		449,307

Total commercial LHFI	$	1,141,257	$	1,821,629	$	1,276,005	$	823,097	$	779,143	$	1,023,985	$	863,338	$	7,728,454	$	755,788	$	2,001,268	$	1,741,587	$	1,053,750	$	509,541	$	1,311,737	$	729,293	$	8,102,964

	Term Loans by Origination Year																Term Loans by Origination Year
	2020		2019		2018		2017		2016		Prior		Revolving Loans		Total		2021		2020		2019		2018		2017		Prior		Revolving Loans		Total
As of June 30, 2020	Consumer LHFI
As of March 31, 2021																	Consumer LHFI
Loans secured by real estate:
Construction, land development and other land:
Current	$	15,175	$	39,837	$	10,387	$	2,398	$	1,784	$	3,955	$	—	$	73,536	$	7,514	$	47,747	$	17,777	$	6,904	$	1,924	$	3,677	$	—	$	85,543
Past due 30-89 days		—		—		323		—		—		45		—		368		—		351		—		19		76		86		—		532
Past due 90 days or more		—		—		—		—		—		—		—		—		—		—		—		—		—		—		—		—
Nonaccrual		—		—		—		—		19		107		—		126		—		—		—		—		—		97		—		97
Total		15,175		39,837		10,710		2,398		1,803		4,107		—		74,030		7,514		48,098		17,777		6,923		2,000		3,860		—		86,172

Other secured by 1-4 family residential properties:
Current	$	11,365	$	19,349	$	14,814	$	4,464	$	2,697	$	16,646	$	367,313	$	436,648	$	5,564	$	19,368	$	8,340	$	10,773	$	4,054	$	11,890	$	340,945	$	400,934
Past due 30-89 days		—		210		162		—		58		155		914		1,499		—		54		477		1		—		491		544		1,567
Past due 90 days or more		—		—		—		—		—		13		38		51		—		—		—		—		—		—		7		7
Nonaccrual		—		35		144		470		—		564		2,046		3,259		2		67		46		12		421		364		2,325		3,237
Total		11,365		19,594		15,120		4,934		2,755		17,378		370,311		441,457		5,566		19,489		8,863		10,786		4,475		12,745		343,821		405,745

Secured by nonfarm, nonresidential properties:
Current	$	—	$	—	$	—	$	5	$	—	$	14	$	—	$	19	$	—	$	—	$	—	$	—	$	3	$	7	$	—	$	10
Past due 30-89 days		—		—		—		—		—		—		—		—		—		—		—		—		—		—		—		—
Past due 90 days or more		—		—		—		—		—		—		—		—		—		—		—		—		—		—		—		—
Nonaccrual		—		—		—		—		—		—		—		—		—		—		—		—		—		—		—		—
Total		—		—		—		5		—		14		—		19		—		—		—		—		3		7		—		10

Other real estate secured:
Current	$	91	$	—	$	44	$	46	$	106	$	302	$	—	$	589	$	—	$	104	$	—	$	9	$	35	$	259	$	—	$	407
Past due 30-89 days		—		—		—		—		—		—		—		—		—		—		—		—		—		—		—		—
Past due 90 days or more		—		—		—		—		—		—		—		—		—		—		—		—		—		—		—		—
Nonaccrual		—		—		—		—		—		—		—		—		—		—		—		—		—		—		—		—
Total		91		—		44		46		106		302		—		589		—		104		—		9		35		259		—		407

	Term Loans by Origination Year																	Term Loans by Origination Year
	2020		2019		2018		2017		2016		Prior		Revolving Loans		Total			2021		2020		2019		2018		2017		Prior		Revolving Loans		Total
As of June 30, 2020	Consumer LHFI
As of March 31, 2021																		Consumer LHFI
Other loans secured by real estate:
Secured by 1-4 family residential properties																	Secured by 1-4 family residential properties
Current	$	137,146	$	242,961	$	218,993	$	115,354	$	130,831	$	390,425	$	—	$	1,235,710		$	131,515	$	278,826	$	186,350	$	153,008	$	82,211	$	380,460	$	—	$	1,212,370
Past due 30-89 days		73		85		77		123		79		1,497		—		1,934			—		170		42		118		163		2,785		—		3,278
Past due 90 days or more		—		—		—		139		—		390		—		529			—		354		142		380		338		1,153		—		2,367
Nonaccrual		44		713		2,507		467		558		8,235		—		12,524			—		645		1,746		2,577		1,062		9,005		—		15,035
Total		137,263		243,759		221,577		116,083		131,468		400,547		—		1,250,697			131,515		279,995		188,280		156,083		83,774		393,403		—		1,233,050

Consumer loans:
Current	$	38,008	$	42,705	$	21,144	$	7,161	$	2,069	$	864	$	51,259	$	163,210		$	20,081	$	49,428	$	19,813	$	10,330	$	3,010	$	1,219	$	50,283	$	154,164
Past due 30-89 days		219		330		129		3		—		5		326		1,012			168		302		93		43		6		10		281		903
Past due 90 days or more		28		4		11		1		—		—		174		218			22		—		8		1		—		—		188		219
Nonaccrual		6		22		69		19		3		—		1		120			—		19		4		24		12		2		9		70
Total		38,261		43,061		21,353		7,184		2,072		869		51,760		164,560			20,271		49,749		19,918		10,398		3,028		1,231		50,761		155,356

Total consumer LHFI	$	202,155	$	346,251	$	268,804	$	130,650	$	138,204	$	423,217	$	422,071	$	1,931,352		$	164,866	$	397,435	$	234,838	$	184,199	$	93,315	$	411,505	$	394,582	$	1,880,740

Total LHFI	$	1,343,412	$	2,167,880	$	1,544,809	$	953,747	$	917,347	$	1,447,202	$	1,285,409	$	9,659,806		$	920,654	$	2,398,703	$	1,976,425	$	1,237,949	$	602,856	$	1,723,242	$	1,123,875	$	9,983,704

~~The table below presents LHFI by loan class and credit quality indicator at December 31, 2019 ($ in thousands):~~

	Term Loans by Origination Year
	2020		2019		2018		2017		2016		Prior		Revolving Loans		Total
As of December 31, 2020	Commercial LHFI
Loans secured by real estate:
Construction, land development and other land:
Pass - RR 1 through RR 6	$	287,218	$	62,078	$	26,401	$	4,487	$	3,274	$	3,564	$	28,548	$	415,570
Special Mention - RR 7		—		—		—		—		—		—		—		—
Substandard - RR 8		5,419		4,363		1,226		12		494		22		101		11,637
Doubtful - RR 9		—		—		—		—		—		42		—		42
Total		292,637		66,441		27,627		4,499		3,768		3,628		28,649		427,249

Other secured by 1-4 family residential properties:
Pass - RR 1 through RR 6	$	35,139	$	19,596	$	15,399	$	9,605	$	10,273	$	4,786	$	8,486	$	103,284
Special Mention - RR 7		255		—		50		—		—		—		—		305
Substandard - RR 8		1,155		8		914		341		302		337		3,950		7,007
Doubtful - RR 9		29		—		—		—		—		—		—		29
Total		36,578		19,604		16,363		9,946		10,575		5,123		12,436		110,625

Secured by nonfarm, nonresidential properties:
Pass - RR 1 through RR 6	$	697,439	$	496,476	$	442,264	$	293,072	$	254,747	$	251,219	$	96,098	$	2,531,315
Special Mention - RR 7		13,452		6,139		2,956		4,466		4,957		20,545		—		52,515
Substandard - RR 8		19,119		20,572		4,516		12,956		38,956		25,438		2,779		124,336
Doubtful - RR 9		52		163		—		—		217		306		—		738
Total		730,062		523,350		449,736		310,494		298,877		297,508		98,877		2,708,904

Other real estate secured:
Pass - RR 1 through RR 6	$	146,803	$	376,765	$	347,472	$	48,626	$	89,824	$	23,680	$	12,116	$	1,045,286
Special Mention - RR 7		—		—		—		—		—		841		—		841
Substandard - RR 8		18,649		14		18		—		556		122		—		19,359
Doubtful - RR 9		—		—		—		—		—		—		—		—
Total		165,452		376,779		347,490		48,626		90,380		24,643		12,116		1,065,486

	Term Loans by Origination Year
	2020		2019		2018		2017		2016		Prior		Revolving Loans		Total
As of December 31, 2020	Commercial LHFI
Other loans secured by real estate:
Other construction
Pass - RR 1 through RR 6	$	262,544	$	425,936	$	81,476	$	14,074	$	2,464	$	—	$	7,735	$	794,229
Special Mention - RR 7		—		—		—		—		—		—		—		—
Substandard - RR 8		754		—		—		—		—		—		—		754
Doubtful - RR 9		—		—		—		—		—		—		—		—
Total		263,298		425,936		81,476		14,074		2,464		—		7,735		794,983

Commercial and industrial loans:
Pass - RR 1 through RR 6	$	444,304	$	165,163	$	77,611	$	77,985	$	59,131	$	43,214	$	372,486	$	1,239,894
Special Mention - RR 7		677		45		—		—		—		—		240		962
Substandard - RR 8		12,090		1,814		9,737		3,735		2,160		5,024		33,380		67,940
Doubtful - RR 9		151		95		—		—		32		4		—		282
Total		457,222		167,117		87,348		81,720		61,323		48,242		406,106		1,309,078

State and other political subdivision loans:
Pass - RR 1 through RR 6	$	250,363	$	79,595	$	41,334	$	113,817	$	132,634	$	372,831	$	1,446	$	992,020
Special Mention - RR 7		—		—		—		—		—		4,018		—		4,018
Substandard - RR 8		—		—		—		247		—		4,491		—		4,738
Doubtful - RR 9		—		—		—		—		—		—		—		—
Total		250,363		79,595		41,334		114,064		132,634		381,340		1,446		1,000,776

Other commercial loans:
Pass - RR 1 through RR 6	$	101,230	$	70,990	$	20,769	$	9,723	$	33,481	$	30,715	$	225,533	$	492,441
Special Mention - RR 7		7,500		—		—	��	—		—		—		11,333		18,833
Substandard - RR 8		381		2,099		683		6		707		—		9,948		13,824
Doubtful - RR 9		2		—		—		—		—		23		—		25
Total		109,113		73,089		21,452		9,729		34,188		30,738		246,814		525,123

Total commercial LHFI	$	2,304,725	$	1,731,911	$	1,072,826	$	593,152	$	634,209	$	791,222	$	814,179	$	7,942,224

December 31, 2019

Commercial LHFI

Pass -
Categories 1-6

Special Mention -
Category 7

Substandard -
Category 8

Doubtful -
Category 9

Subtotal

Loans secured by real estate:

Construction, land development and other
   land

$
1,075,146

$
—

$
15,726

$
42

$
1,090,914

Secured by 1-4 family residential
   properties

116,592

45

6,355

41

123,033

Secured by nonfarm, nonresidential
   properties

2,430,761

—

44,001

328

2,475,090

Other real estate secured

721,238

—

2,547

—

723,785

Commercial and industrial loans

1,407,837

909

68,262

888

1,477,896

Consumer loans

—

—

—

—

—

State and other political subdivision loans

957,948

4,650

5,346

—

967,944

Other loans

469,095

3,445

16,926

30

489,496

Total

$
7,178,617

$
9,049

$
159,163

$
1,329

$
7,348,158

	Term Loans by Origination Year
	2020		2019		2018		2017		2016		Prior		Revolving Loans		Total
As of December 31, 2020	Consumer LHFI
Loans secured by real estate:
Construction, land development and other land:
Current	$	47,336	$	24,174	$	8,496	$	2,036	$	1,447	$	2,868	$	—	$	86,357
Past due 30-89 days		—		318		20		—		1		12		—		351
Past due 90 days or more		—		—		—		—		—		—		—		—
Nonaccrual		—		—		—		—		—		99		—		99
Total		47,336		24,492		8,516		2,036		1,448		2,979		—		86,807

Other secured by 1-4 family residential properties:
Current	$	20,864	$	10,253	$	12,037	$	4,177	$	2,082	$	11,124	$	348,830	$	409,367
Past due 30-89 days		93		12		—		13		—		133		1,058		1,309
Past due 90 days or more		—		—		—		—		—		30		22		52
Nonaccrual		6		44		121		428		—		382		2,398		3,379
Total		20,963		10,309		12,158		4,618		2,082		11,669		352,308		414,107

Secured by nonfarm, nonresidential properties:
Current	$	109	$	—	$	—	$	4	$	—	$	9	$	—	$	122
Past due 30-89 days		—		—		—		—		—		—		—		—
Past due 90 days or more		—		—		—		—		—		—		—		—
Nonaccrual		—		—		—		—		—		—		—		—
Total		109		—		—		4		—		9		—		122

Other real estate secured:
Current	$	107	$	—	$	38	$	37	$	96	$	200	$	—	$	478
Past due 30-89 days		—		—		—		—		—		—		—		—
Past due 90 days or more		—		—		—		—		—		—		—		—
Nonaccrual		—		—		—		—		—		—		—		—
Total		107		—		38		37		96		200		—		478

Consumer LHFI

Current

Past Due
30-89 Days

Past Due
90 Days or More

Nonaccrual

Subtotal

Total LHFI

Loans secured by real estate:

Construction, land development and other
   land

$
71,413

$
332

$
—

$
132

$
71,877

$
1,162,791

Secured by 1-4 family residential
   properties

1,710,930

5,922

211

15,817

1,732,880

1,855,913

Secured by nonfarm, nonresidential
   properties

155

—

—

—

155

2,475,245

Other real estate secured

695

—

—

—

695

724,480

Commercial and industrial loans

—

—

—

—

—

1,477,896

Consumer loans

172,649

2,588

393

108

175,738

175,738

State and other political subdivision loans

—

—

—

—

—

967,944

Other loans

6,125

—

—

—

6,125

495,621

Total

$
1,961,967

$
8,842

$
604

$
16,057

$
1,987,470

$
9,335,628

	Term Loans by Origination Year
	2020		2019		2018		2017		2016		Prior		Revolving Loans		Total
As of December 31, 2020	Consumer LHFI
Other loans secured by real estate:
Secured by 1-4 family residential properties
Current	$	289,521	$	214,056	$	173,324	$	92,564	$	109,031	$	321,250	$	—	$	1,199,746
Past due 30-89 days		499		93		753		366		1,080		799		—		3,590
Past due 90 days or more		159		214		208		127		—		549		—		1,257
Nonaccrual		283		711		2,024		682		239		7,868		—		11,807
Total		290,462		215,074		176,309		93,739		110,350		330,466		—		1,216,400

Consumer loans:
Current	$	65,370	$	25,303	$	13,140	$	3,893	$	1,257	$	345	$	53,669	$	162,977
Past due 30-89 days		524		158		67		19		7		3		305		1,083
Past due 90 days or more		77		—		4		—		—		—		159		240
Nonaccrual		12		4		55		13		2		—		—		86
Total		65,983		25,465		13,266		3,925		1,266		348		54,133		164,386

Total consumer LHFI	$	424,960	$	275,340	$	210,287	$	104,359	$	115,242	$	345,671	$	406,441	$	1,882,300

Total LHFI	$	2,729,685	$	2,007,251	$	1,283,113	$	697,511	$	749,451	$	1,136,893	$	1,220,620	$	9,824,524

LHFS past due 90 days or more totaled ~~$56.3~~$109.6 million and ~~$41.6~~$119.4 million at ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, respectively. LHFS past due 90 days or more are serviced loans eligible for repurchase, which are fully guaranteed by the Government National Mortgage Association (GNMA). GNMA optional repurchase programs allow financial institutions to buy back individual delinquent mortgage loans that meet certain criteria from the securitized loan pool for which the institution provides servicing. At the servicer’s option and without GNMA’s prior authorization, the servicer may repurchase such a delinquent loan for an amount equal to 100% of the remaining principal balance of the loan. This buy-back option is considered a conditional option until the delinquency criteria are met, at which time the option becomes unconditional. When Trustmark is deemed to have regained effective control over these loans under the unconditional buy-back option, the loans can no longer be reported as sold and must be brought back onto the balance sheet as loans held for sale, regardless of whether Trustmark intends to exercise the buy-back option. These loans are reported as held for sale with the offsetting liability being reported as short-term borrowings.

Trustmark did not exercise its buy-back option on any delinquent loans serviced for GNMA during the first ~~six~~three months of ~~2020~~2021 or ~~2019.~~2020.

Trustmark’s ACL methodology for LHFI is based upon guidance within ~~FASB ASC~~the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Subtopic 326-20 as well as applicable regulatory ~~guidance from its primary regulator.~~guidance. The ACL is a valuation account that is deducted from the loans’ amortized cost basis to present the net amount expected to be collected on the loans. Credit quality within the LHFI portfolio is continuously monitored by Management and is reflected within the ACL for loans. The ACL is an estimate of expected losses inherent within Trustmark’s existing LHFI portfolio. The ACL for LHFI is adjusted through the ~~provision for credit losses (PCL)~~PCL and reduced by the charge off of loan amounts, net of recoveries.

The loan loss estimation process involves procedures to appropriately consider the unique characteristics of Trustmark’s LHFI portfolio segments. These segments are further disaggregated into loan classes, the level at which credit risk is monitored. When computing allowance levels, credit loss assumptions are estimated using a model that categorizes loan pools based on loss history, delinquency status and other credit trends and risk characteristics, including current conditions and reasonable and supportable forecasts about the future. Evaluations of the portfolio and individual credits are inherently subjective, as they require estimates, assumptions and judgments as to the facts and circumstances of particular situations. Determining the appropriateness of the allowance is complex and requires judgement by Management about the effect of matters that are inherently uncertain. In future periods, evaluations of the overall LHFI portfolio, in light of the factors and forecasts then prevailing, may result in significant changes in the allowance and credit loss expense.

Trustmark estimates the ACL using relevant available information, from internal and external sources, relating to past events, current conditions and reasonable and supportable forecasts including the COVID-19 pandemic effects. Trustmark uses a third-party software application to calculate the quantitative portion of the ACL using a methodology and assumptions specific to each loan pool. The qualitative portion of the allowance is based on general economic conditions and other internal and external factors affecting Trustmark as a whole as well as specific LHFI. Factors considered include the following: lending policies and procedures, economic

conditions and concentrations of credit, nature and volume of the portfolio, performance trends, and external factors. The quantitative and qualitative portions of the allowance are added together to determine the total allowance for credit losses, which reflects Management’s expectations of future conditions based on reasonable and supportable forecasts.

The methodology for estimating the amount of expected credit losses reported in the ACL has two basic components: a collective, or pooled, component for estimated expected credit losses for pools of loans that share similar risk characteristics, and an asset-specific component involving individual loans that do not share risk characteristics with other loans and the measurement of expected credit losses for such individual loans. In estimating the allowance for credit losses for the collective component, loans are segregated into loan pools based on loan product types and similar risk characteristics.

The loans secured by real estate and other loans secured by real estate portfolio segments include loans for both commercial and residential properties. The underwriting process for these loans includes analysis of the financial position and strength of both the borrower and guarantor, experience with similar projects in the past, market demand and prospects for successful completion of the proposed project within the established budget and schedule, values of underlying collateral, availability of permanent financing, maximum loan-to-value ratios, minimum equity requirements, acceptable amortization periods and minimum debt service coverage requirements, based on property type. The borrower’s financial strength and capacity to repay their obligations remain the primary focus of underwriting. Financial strength is evaluated based upon analytical tools that consider historical and projected cash flows and performance in addition to analysis of the proposed project for income-producing properties. Additional support offered by guarantors is also considered. Ultimate repayment of these loans is sensitive to interest rate changes, general economic conditions, liquidity and availability of long-term financing.

The commercial and industrial LHFI portfolio segment includes ~~commercial~~ loans within Trustmark’s geographic markets made to many types of businesses for various purposes, such as ~~short-term~~short term working capital loans that are usually secured by accounts receivable and inventory and term financing for equipment and fixed asset purchases that are secured by those ~~assets and term financing for those within Trustmark’s geographic markets.~~assets. Trustmark’s credit underwriting process for commercial and industrial loans includes analysis of historical and projected cash flows and performance, evaluation of financial strength of both borrowers and guarantors as reflected in current and detailed financial information and evaluation of underlying collateral to support the credit.

The consumer LHFI portfolio segment is comprised of loans which are underwritten after evaluating a borrower’s repayment capacity, credit and collateral. Several factors are considered when assessing a borrower’s capacity to repay the obligation, including the borrower’s employment, income, current debt ~~assets~~ and ~~level of equity in the property.~~assets. Credit is assessed using a credit report that provides credit scores and the borrower’s current and past information about their credit history. Property appraisals are obtained to assist in evaluating collateral. Loan-to-value and debt-to-income ratios, loan amount and lien position are also considered in assessing whether to originate a loan. These borrowers are particularly susceptible to downturns in economic trends such as conditions that negatively affect housing prices and demand and levels of unemployment.

The state and other political subdivision LHFI and the other commercial LHFI portfolio segments primarily consist of loans to non-depository financial institutions, such as mortgage companies, finance companies and other financial intermediaries, loans to state and political subdivisions, and loans to non-profit and charitable organizations. These loans are underwritten based on the specific nature or purpose of the loan and underlying collateral with special consideration given to the specific source of repayment for the loan.

The following table provides a description of each of Trustmark’s portfolio segments, loan classes, loan pools and the ACL methodology and loss drivers:

In general, Trustmark utilizes a DCF method to estimate the quantitative portion of the allowance for credit losses for loan pools. The DCF model consists of two key components, a loss driver analysis (LDA) and a cash flow analysis. For loan pools utilizing the DCF methodology, multiple assumptions are in place, depending on the loan pool. A reasonable and supportable forecast is utilized for each loan pool by developing a LDA for each loan class. The LDA uses charge off data from Federal Financial Institutions

Examination Council (FFIEC) reports to construct a periodic default rate (PDR). The PDR is decomposed into a probability of default (PD). Regressions are run using the data for various macroeconomic variables in order to determine which ones correlate to

Trustmark’s losses. These variables are then incorporated into the application to calculate a quarterly PD using a third-party baseline forecast. In addition to the PD, a loss given default (LGD) is derived using a method referred to as Frye Jacobs. The Frye Jacobs method is a mathematical formula that traces the relationship between LGD and PD over time and projects the LGD based on the levels of PD forecasts. This model approach is applicable to all pools within the construction, land development and other land, other secured by 1-4 family residential properties, secured by nonfarm, nonresidential properties and other real estate secured loan classes as well as the all other consumer and other loans pools.

For the commercial and industrial loans related pools, Trustmark uses its own PD and LGD data, instead of the macroeconomic variables and the Frye Jacobs method described above, to calculate the PD and LGD as there were no defensible macroeconomic variables that correlated to Trustmark’s losses. Trustmark utilizes a third-party Bond Default Study to derive the PD and LGD for the obligations of state and political subdivisions pool. Due to the lack of losses within this pool, no defensible macroeconomic factors were identified to correlate.

The PD and LGD measures are used in conjunction with prepayment data as inputs into the DCF model to calculate the cash flows at the individual loan level. Contractual cash flows based on loan terms are adjusted for PD, LGD and prepayments to derive loss cash flows. These loss cash flows are discounted by the loan’s coupon rate to arrive at the discounted cash flow based quantitative loss. The prepayment studies are updated quarterly by a third-party for each applicable pool.

An alternate method of estimating the ACL is used for certain loan pools due to specific characteristics of these loans. For the non-DCF pools, specifically, those using the weighted average remaining maturity (WARM) method, the remaining life is incorporated into the ACL quantitative calculation.

Trustmark determined that reasonable and supportable forecasts could be made for a twelve-month period for all of its loan pools. To the extent the lives of the loans in the LHFI portfolio extend beyond this forecast period, Trustmark uses a reversion period of four quarters and reverts to the historical mean on a straight-line basis over the remaining life of the loans. The econometric models currently in production ~~today~~ reflect segment or pool level sensitivities of ~~probability of default (PD)~~PD to changes in macroeconomic variables. By measuring the relationship between defaults and changes in the economy, the quantitative reserve incorporates reasonable and supportable forecasts of future conditions that will affect the value of its assets, as required by FASB ASC Topic 326. Under stable forecasts, these linear regressions will reasonably predict a pool’s PD. However, due to the COVID-19 pandemic, the macroeconomic variables used for reasonable and supportable forecasting have changed rapidly. At the current levels, it is not clear that the models currently in production will produce reasonably representative results since the models were originally estimated using data beginning in 2004 through ~~2017.~~2019. During this period, a traditional, albeit severe, economic recession occurred. Thus, econometric models are sensitive to similar future levels of PD.

~~During the second quarter of 2020, Trustmark revised its ACL methodology in~~In order to prevent the econometric models from extrapolating beyond reasonable boundaries of their input ~~variables.~~variables, Trustmark chose to establish an upper and lower limit process when applying the periodic forecasts. In this way, Management will not rely upon unobserved and untested relationships in the setting of the quantitative reserve. This approach applies to all input variables, including: ~~South Census~~Southern Unemployment, National Unemployment, National GDP, ~~South Census~~Southern Vacancy Rate and the Prime Rate.

The upper and lower limits are based on the distribution of the macroeconomic variable by selecting extreme percentiles at the upper and lower limits of the distribution, the ~~1st~~1^st and ~~99th,~~99^th percentiles, respectively. These upper and lower limits are then used to calculate the PD for the forecast time period in which the forecasted values are outside of the upper and lower limit range. For the current period, the forecast related to the macroeconomic variables used in the quantitative modeling process were ~~adversely affected~~positively impacted due to the updated forecast effects related to~~impact of~~ the COVID-19 pandemic, causing an overall ~~increase~~decrease in quantitative reserve levels.

While all these factors are incorporated into the overall methodology, only ~~two~~three are currently considered active: (i) economic conditions and concentrations of credit, (ii) performance trends and ~~performance trends.~~(iii) external factors.

Two of Trustmark’s largest loan classes are the loans secured by nonfarm, nonresidential properties and the loans secured by other real estate. Trustmark elected to create a qualitative factor specifically for these loan classes which addresses changes in the economic conditions of metropolitan areas and applies additional pool level reserves. This qualitative factor is based on third-party market data and forecast trends and is updated quarterly as information is available, by market and by loan pool.

For the performance trends factor, Trustmark uses migration analyses to allocate additional ACL to non-pass/delinquent loans within each pool. In this way, Management believes the ACL will directly reflect changes in risk, based on the performance of the loans within a pool, whether declining or improving.

The ~~ACL for individual loans that do not share risk characteristics with other loans~~external factors qualitative factor is ~~measured as the difference between the discounted value of expected future cash flows, based in the effective interest rate at origination, and the amortized cost basis of~~Management’s best judgement on the loan or pool level impact of all factors that affect the ~~net realizable value.~~portfolio that are not accounted for using any other part of the ACL methodology (e.g., natural disasters, changes in legislation, impacts due to technology and pandemics). During the third quarter of 2020, Trustmark activated the External Factor – Pandemic to ensure reserve adequacy for collectively evaluated loans most likely to be impacted by the unique economic and behavioral conditions created by the COVID-19 pandemic. Additional qualitative reserves are derived based on two principles. The ~~ACL~~first is the ~~difference~~disconnect of economic factors to Trustmark’s modeled probability of default (derived from the econometric models underpinning the quantitative pooled reserves). During the pandemic, extraordinary measures by the federal government were made available to consumers and businesses, including COVID-19 loan payment concessions, direct transfer payments to households, tax deferrals, and reduced interest rates, among others. These government interventions may have extended the lag between economic conditions and default, relative to what was captured in the ~~loan’s net realizable value~~model development data. Because Trustmark’s econometric PD models rely on the observed relationship from the economic downturn from 2007 to 2009 in both timing and ~~its amortized cost basis (net~~severity, Management does not expect the models to reflect these current conditions. For example, while the models would predict contemporaneous unemployment peaks and loan defaults, this may not occur when borrowers can request payment deferrals. Thus, for the affected population, economic conditions are not fully considered as a part of ~~previous charge-offs~~Trustmark’s quantitative reserve. The second principle is the change in risk that is identified by rating changes. As a part of Trustmark’s credit review process, loans in the affected population have been given more frequent screening to ensure accurate ratings are maintained through this dynamic period. Trustmark’s quantitative reserve does not directly address changes in ratings, thus a migration qualitative factor was designed to work in concert with the quantitative reserve. In a downturn, the qualitative factor is inactive for most pools because changes in ratings are congruent with changes in macroeconomic conditions, which directly influence the PD models in the quantitative reserve.

As discussed above, the disconnect of economic factors means that changes in rating caused by deteriorating and ~~deferred loan fees and costs), except for collateral-dependent loans. A loan is collateral dependent when the borrower is experiencing financial difficulty and repayment~~weak economic conditions as a result of the ~~loan~~pandemic are not being captured in the quantitative reserve. During the fourth quarter of 2020, due to unforeseen pandemic conditions that varied from Management’s expectations during the third quarter of 2020, additional reserves were further dimensioned in order to appropriately reflect the risk within the portfolio related to the COVID-19 pandemic. In an effort to ensure the External Factor-Pandemic qualitative factor is ~~expected~~reasonable and supportable, historical Trustmark loss data was leveraged to ~~be provided substantially through~~construct a framework that is quantitative in nature. To dimension the ~~sale~~additional reserve, Management uses the sensitivity of the ~~collateral. The expected credit loss~~quantitative commercial loan reserve to changes in macroeconomic conditions to apply to loans rated acceptable or better (RR 1-4). In addition, to account for ~~collateral-dependent loans is measured as~~ the ~~difference between the amortized cost basis~~known changes in risk, a weighted average of the commercial loan ~~and the fair value of the collateral, adjusted for the estimated cost to sell. Fair value estimates for collateral-dependent loans are~~portfolio loss rate, derived from ~~appraised values~~the performance trends qualitative factor, is used to dimension additional reserves for downgraded credits. Loans rated acceptable with risk (RR 5) or watch (RR 6) received the additional reserves based on the ~~current market value or the ‘as is’ value~~average of the ~~collateral, normally from recently~~macroeconomic conditions and weighted- average of the commercial loan portfolio loss rate while the loans rated special mention and substandard received ~~and reviewed appraisals. Current appraisals are ordered on an annual basis~~additional reserves based on the inspection date or more often if market conditions necessitate. Appraisals are obtained from state-certified appraisers and are based on certain assumptions, which may include construction or development status and the highest and best use of the property. These appraisals are reviewed by Trustmark’s Appraisal Review Department to ensure they are acceptable, and values are adjusted down for costs associated with asset disposal. If the calculated expected credit loss is determined to be permanent or not recoverable, the amount of the expected credit loss is charged off.

LHFI are charged off against the ACL, with any subsequent recoveries credited back to the ACL account. Expected recoveries may not exceed the aggregate of amounts previously charged off and expected to be charged off. Trustmark’s loan policy dictates the guidelines to be followed in determining when a loan is charged off. Commercial purpose LHFI are charged off when a determination is made that the loan is uncollectible and continuance as a bankable asset is not warranted. Consumer LHFI secured by 1-4 family residential real estate are generally charged off or written down to the fair value of the collateral less cost to sell at no later than 180 days of delinquency. Non-real estate consumer purpose LHFI, including both secured and unsecured loans, are generally charged off by 120 days of delinquency. Consumer revolving lines of credit and credit card debt are generally charged off on or prior to 180 days of delinquency.weighted-average described above.

The following ~~table disaggregates~~tables disaggregate the ACL and the amortized cost basis of the loans by the measurement methodology used at ~~June 30,~~March 31, 2021 and December 31, 2020 ($ in thousands):

	June 30, 2020												March 31, 2021
	ACL						LHFI						ACL						LHFI
	Individually Evaluated for Credit Loss		Collectively Evaluated for Credit Loss		Total ACL		Individually Evaluated for Credit Loss		Collectively Evaluated for Credit Loss		Total LHFI		Individually Evaluated for Credit Loss		Collectively Evaluated for Credit Loss		Total ACL		Individually Evaluated for Credit Loss		Collectively Evaluated for Credit Loss		Total LHFI
Loans secured by real estate:
Construction, land development and other land	$	—	$	11,940	$	11,940	$	1,948		480,361	$	482,309	$	—	$	5,058	$	5,058	$	5,885		537,017	$	542,902
Other secured by 1-4 family residential properties		—		12,716		12,716		496		562,332		562,828		—		8,667		8,667		216		509,516		509,732
Secured by nonfarm, nonresidential properties		—		36,417		36,417		11,966		2,598,426		2,610,392		—		46,438		46,438		12,617		2,786,578		2,799,195
Other real estate secured		—		7,600		7,600		63		884,752		884,815		—		5,770		5,770		58		1,134,947		1,135,005
Other loans secured by real estate:
Other construction		—		10,803		10,803		—		794,968		794,968		—		5,124		5,124		—		799,186		799,186
Secured by 1-4 family residential properties		—		10,899		10,899		1,480		1,249,217		1,250,697		—		3,753		3,753		1,413		1,231,637		1,233,050
Commercial and industrial loans		21		12,529		12,550		16,363		1,396,892		1,413,255		5,721		14,445		20,166		10,983		1,312,294		1,323,277
Consumer loans		—		6,397		6,397		—		164,560		164,560		—		4,750		4,750		—		155,356		155,356
State and other political subdivision loans		1,779		1,635		3,414		4,049		927,487		931,536		1,644		1,371		3,015		3,914		1,032,780		1,036,694
Other commercial loans		518		5,934		6,452		5,764		558,682		564,446		2,094		4,356		6,450		5,610		443,697		449,307
Total	$	2,318	$	116,870	$	119,188	$	42,129	$	9,617,677	$	9,659,806	$	9,459	$	99,732	$	109,191	$	40,696	$	9,943,008	$	9,983,704

~~The following table disaggregates the allowance for loan losses and LHFI balances by the impairment evaluation methodology used at December 31, 2019 ($ in thousands):~~

	December 31, 2019												December 31, 2020
	Allowance for Loan Losses						LHFI						ACL						LHFI
	Individually Evaluated		Collectively Evaluated		Total		Individually Evaluated		Collectively Evaluated		Total		Individually Evaluated		Collectively Evaluated		Total		Individually Evaluated		Collectively Evaluated		Total
Loans secured by real estate:
Construction, land development and other land	$	—	$	8,260	$	8,260	$	626	$	1,162,165	$	1,162,791	$	—	$	6,854	$	6,854	$	5,756	$	508,300	$	514,056
Secured by 1-4 family residential properties		35		8,897		8,932		5,464		1,850,449		1,855,913
Other secured by 1-4 family residential properties														—		9,928		9,928		454		524,278		524,732
Secured by nonfarm, nonresidential properties		2,355		23,803		26,158		6,717		2,468,528		2,475,245		—		48,523		48,523		12,037		2,696,989		2,709,026
Other real estate secured		—		4,024		4,024		68		724,412		724,480		—		7,382		7,382		60		1,065,904		1,065,964
Other loans secured by real estate:
Other construction														—		8,158		8,158		—		794,983		794,983
Secured by 1-4 family residential properties														—		5,143		5,143		1,441		1,214,959		1,216,400
Commercial and industrial loans		707		25,285		25,992		23,458		1,454,438		1,477,896		579		14,272		14,851		14,076		1,295,002		1,309,078
Consumer loans		—		3,379		3,379		21		175,717		175,738		—		5,838		5,838		—		164,386		164,386
State and other political subdivision loans		1,809		420		2,229		4,079		963,865		967,944		1,700		1,490		3,190		3,970		996,806		1,000,776
Other loans		553		4,750		5,303		784		494,837		495,621
Other commercial loans														2,100		5,339		7,439		5,615		519,508		525,123
Total	$	5,459	$	78,818	$	84,277	$	41,217	$	9,294,411	$	9,335,628	$	4,379	$	112,927	$	117,306	$	43,409	$	9,781,115	$	9,824,524

The following ~~table details~~tables detail changes in the ACL by loan class for the ~~period~~periods presented ($ in thousands):

	Three Months Ended June 30, 2020												Three Months Ended March 31, 2021
	Balance at Beginning of Period		Charge-offs			Recoveries		PCL			Balance at End of Period		Balance at Beginning of Period		Charge-offs			Recoveries		PCL			Balance at End of Period
Loans secured by real estate:
Construction, land development and other land	$	9,079	$	(7	)	$	92	$	2,776		$	11,940	$	6,854	$	—		$	766	$	(2,562	)	$	5,058
Other secured by 1-4 family residential properties		11,711		(36	)		83		958			12,716		9,928		(26	)		71		(1,306	)		8,667
Secured by nonfarm, nonresidential properties		28,127		—			445		7,845			36,417		48,523		—			30		(2,115	)		46,438
Other real estate secured		5,273		—			12		2,315			7,600		7,382		—			6		(1,618	)		5,770
Other loans secured by real estate:
Other construction		7,711		—			21		3,071			10,803		8,158		—			1		(3,035	)		5,124
Secured by 1-4 family residential properties		8,042		—			13		2,844			10,899		5,143		—			100		(1,490	)		3,753
Commercial and industrial loans		14,564		(297	)		191		(1,908	)		12,550		14,851		(23	)		1,287		4,051			20,166
Consumer loans		6,596		(671	)		468		4			6,397		5,838		(442	)		362		(1,008	)		4,750
State and other political subdivision loans		3,441		—			—		(27	)		3,414		3,190		—			—		(175	)		3,015
Other commercial loans		6,020		(859	)		984		307			6,452		7,439		(754	)		1,008		(1,243	)		6,450
Total	$	100,564	$	(1,870	)	$	2,309	$	18,185		$	119,188	$	117,306	$	(1,245	)	$	3,631	$	(10,501	)	$	109,191

The decreases in the PCL for the three months ended March 31, 2021 were primarily due to improvements in the macroeconomic forecasting variables used in the ACL modeling, such as National and Southern Unemployment, National GDP, Prime Rate and South Vacancy Rate.

The PCL for the commercial and industrial loan portfolio increased $4.1 million during the three months ended March 31, 2021 primarily due to loans being specifically reserved.

The increases in the PCL for loans and other loans secured by real estate ~~during~~and consumer loans at March 31, 2020 when compared to the ~~three months ended June 30,~~

January 1, 2020 adoption adjustments were primarily due to the negative impact of COVID-19 on the macroeconomic forecasting variables used in the ACL modeling, such as National and Southern Unemployment, National GDP, Prime Rate and South Vacancy Rate.

The PCL for the commercial and industrial loan portfolio decreased $1.9 million during the three months ended June 30, 2020 primarily due to upgrades on loans from substandard to pass, paydowns and a slight decrease in the calculated PD and LGD, which uses Trustmark’s historical data.

~~The following table details changes in the ACL by loan class for the period presented ($ in thousands):~~

The increases in the PCL for loans and other loans secured by real estate and consumer loans during the six months ended June 30, 2020 were primarily due to the negative impact of COVID-19 on the macroeconomic forecasting variables used in the ACL modeling, such as National and Southern Unemployment, National GDP, Prime Rate and South Vacancy Rate.

The PCL for the commercial and industrial loan portfolio decreased ~~$3.9~~an additional $2.0 million during the ~~six months ended June 30,~~first quarter of 2020 when compared to the January 1, 2020 adoption adjustment primarily due to loans that had been specifically reserved for being charged down ~~upgrades on loans from substandard to pass, paydowns~~ as well as a slight decrease in the calculated PD and LGD, which uses Trustmark’s historical data. The decrease in ~~the PCL for~~ state and other political subdivision loans of ~~$1.3~~$1.2 million at March 31, 2020 was primarily due to a decrease in reserves based on routine updates to the qualitative portion of the allowance calculation. ~~The PCL for other~~Other commercial loans decreased ~~$843 thousand~~$1.2 million during this same period due to a pay-off which decreased needed reserves.

~~The following table details changes in the allowance for loan losses, LHFI by loan class for the period presented ($ in thousands):~~

~~Trustmark’s loss-share agreement with the Federal Deposit Insurance Corporation (FDIC) covering the acquired covered loans secured by 1-4 family residential properties will expire in 2021.~~

Upon adoption of FASB ASC Topic 326, which was effective for Trustmark on January 1, 2020 in accordance with the amendments in FASB ASU 2016-13, Trustmark elected to account for its existing acquired loans as purchased credit deteriorated (PCD) loans included within the LHFI portfolio. Trustmark elected to maintain pools of loans that were previously accounted for under FASB ASC Subtopic 310-30, “Receivables – Loans and Debt Securities Acquired with Deteriorated Credit Quality,” and will continue to account for these pools as a unit of account. Loans are only removed from the existing loan pools if they are written off, paid off or sold. Upon adoption of FASB ASC Topic 326, the ACL was determined for each pool and added to the pool’s carrying value to establish a new amortized cost basis. The difference between the unpaid principal balance of the pool and the new amortized cost basis is the noncredit premium or discount which will be amortized into interest income over the remaining life of the pool. Changes to the allowance for credit losses after adoption of FASB ASC Topic 326 are recorded through the PCL. Consequently, acquired loans of $72.6 million, as well as the allowance for loan losses, acquired loans of $815 thousand, were transferred on January 1, 2020.

~~At December 31, 2019, acquired loans consisted of the following ($ in thousands):~~

~~The following table presents changes in the net carrying value of the acquired loans for the periods presented ($ in thousands):~~

Under FASB ASC Subtopic 310-30, the accretable yield is the excess of expected cash flows at acquisition over the initial fair value of acquired impaired loans and is recorded as interest income over the estimated life of the loans using the effective yield method if the timing and amount of the future cash flows is reasonably estimable. The following table presents changes in the accretable yield for the periods presented ($ in thousands):

~~The following table presents the components of the allowance for loan losses on acquired loans for the periods presented ($ in thousands):~~

~~The table below presents the acquired loans by loan class and credit quality indicator at December 31, 2019 ($ in thousands):~~

December 31, 2019

Commercial Loans

Pass -
Categories 1-6

Special Mention -
Category 7

Substandard -
Category 8

Doubtful -
Category 9

Subtotal

Loans secured by real estate:

Construction, land development
   and other land

$
4,022

$
—

$
192

$
—

$
4,214

Secured by 1-4 family
   residential properties

3,164

42

580

—

3,786

Secured by nonfarm,
   nonresidential properties

27,848

—

9,972

386

38,206

Other real estate secured

3,878

—

68

0

3,946

Commercial and industrial loans

3,419

—

—

1,616

5,035

Consumer loans

—

—

—

—

—

Other loans

2,591

—

7

—

2,598

Total acquired loans

$
44,922

$
42

$
10,819

$
2,002

$
57,785

Consumer Loans

Current

Past Due
30-89 Days

Past Due
90 Days or More

Nonaccrual (1)

Subtotal

Total
Acquired Loans

Loans secured by real estate:

Construction, land development
   and other land

$
463

$
94

$
—

$
—

$
557

$
4,771

Secured by 1-4 family
   residential properties

12,843

615

281

—

13,739

17,525

Secured by nonfarm,
   nonresidential properties

—

—

—

—

—

38,206

Other real estate secured

—

—

—

—

—

3,946

Commercial and industrial loans

—

—

—

—

—

5,035

Consumer loans

489

31

—

—

520

520

Other loans

—

—

—

—

—

2,598

Total acquired loans

$
13,795

$
740

$
281

$
—

$
14,816

$
72,601

~~The following table provides an aging analysis of contractually past due and nonaccrual acquired loans at December 31, 2019 ($ in thousands):~~

The activity in the mortgage servicing rights (MSR) is detailed in the table below for the periods presented ($ in thousands):

Trustmark determines the fair value of the MSR using a valuation model administered by a third party that calculates the present value of estimated future net servicing income. Trustmark considers the conditional prepayment rate (CPR), which is an estimated loan prepayment rate that uses historical prepayment rates for previous loans similar to the loans being evaluated, and the discount rate in determining the fair value of the MSR. An increase in either the CPR or discount rate assumption will result in a decrease in the fair value of the MSR, while a decrease in either assumption will result in an increase in the fair value of the MSR. At ~~June 30, 2020,~~ March 31, 2021,

the fair value of the MSR included an assumed average prepayment speed of 1711 CPR and an average discount rate of ~~9.58%~~9.54% compared to an assumed average prepayment speed of 1217 CPR and an average discount rate of ~~10.04%~~9.52% at ~~June 30, 2019.~~March 31, 2020.

During the first ~~six~~three months of ~~2020~~2021 and ~~2019,~~2020, Trustmark sold ~~$1.103 billion~~$659.4 million and ~~$488.1~~$317.1 million, respectively, of residential mortgage loans. Gains on these sales were recorded as noninterest income in mortgage banking, net and totaled ~~$48.4~~$19.5 million for the first ~~six~~three months of ~~2020~~2021 compared to ~~$12.5~~$14.3 million for the first ~~six~~three months of ~~2019.~~2020.

The table below details the mortgage loans sold and serviced for others at ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019~~2020 ($ in thousands):

Trustmark is subject to losses in its loan servicing portfolio due to loan foreclosures. Trustmark has obligations to either repurchase the outstanding principal balance of a loan or make the purchaser whole for the economic benefits of a loan if it is determined that the loan sold was in violation of representations or warranties made by Trustmark at the time of the sale, herein referred to as mortgage loan servicing putback expenses. Such representations and warranties typically include those made regarding loans that had missing or insufficient file documentation, loans that do not meet investor guidelines, loans in which the appraisal does not support the value and/or loans obtained through fraud by the borrowers or other third parties. Generally, putback requests may be made until the loan is paid in full. However, mortgage loans delivered to Federal National Mortgage Association (FNMA) and Federal Home Loan Mortgage Corporation (FHLMC) on or after January 1, 2013 are subject to the Lending and Selling Representations and Warranties Framework updated in May 2014, which provides certain instances in which FNMA and FHLMC will not exercise their remedies, including a putback request, for breaches of certain selling representations and warranties, such as payment history and quality control review.

When a putback request is received, Trustmark evaluates the request and takes appropriate actions based on the nature of the request. Trustmark is required by FNMA and FHLMC to provide a response to putback requests within 60 days of the date of receipt. The total mortgage loan servicing putback expenses are included in other expense. At ~~June 30,~~both March 31, 2021 and 2020, ~~and 2019,~~ Trustmark had a reserve for mortgage loan servicing putback expenses of $500 ~~thousand and $702 thousand, respectively.~~thousand.

There is inherent uncertainty in reasonably estimating the requirement for reserves against potential future mortgage loan servicing putback expenses. Future putback expenses are dependent on many subjective factors, including the review procedures of the purchasers and the potential refinance activity on loans sold with servicing released and the subsequent consequences under the representations and warranties. Trustmark believes that it has appropriately reserved for potential mortgage loan servicing putback requests.

At ~~June 30, 2020,~~March 31, 2021, Trustmark’s geographic other real estate distribution was concentrated primarily in its five key market regions: Alabama, Florida, Mississippi, Tennessee and Texas. The ultimate recovery of a substantial portion of the carrying amount of other real estate is susceptible to changes in market conditions in these areas.

For the periods presented, changes and gains (losses), net on other real estate were as follows ($ in thousands):

At ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, other real estate by type of property consisted of the following ($ in thousands):

At ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, other real estate by geographic location consisted of the following ($ in thousands):

At ~~June 30, 2020~~both March 31, 2021 and December 31, ~~2019,~~2020, the balance of other real estate included ~~$2.0~~$1.3 million ~~and $3.5 million, respectively,~~ of foreclosed residential real estate properties recorded as a result of obtaining physical possession of the property. At ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, the recorded investment of consumer mortgage loans secured by residential real estate properties for which formal foreclosure proceedings are in process was ~~$333~~$710 thousand and ~~$953~~$424 thousand, respectively.

The following table details the components of net lease cost for the periods presented ($ in thousands):

The following table details the cash payments included in the measurement of lease liabilities during the periods presented ($ in thousands):

The following table details balance sheet information, as well as weighted-average lease terms and discount rates, related to leases at ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019~~2020 ($ in thousands):

At ~~June 30, 2020,~~March 31, 2021, future minimum rental commitments under finance and operating leases were as follows ($ in thousands):

At ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, deposits consisted of the following ($ in thousands):

Trustmark utilizes securities sold under repurchase agreements as a source of borrowing in connection with overnight repurchase agreements offered to commercial deposit customers by using its unencumbered investment securities as collateral. Trustmark accounts for its securities sold under repurchase agreements as secured borrowings in accordance with FASB ASC Subtopic 860-30, “Transfers and Servicing – Secured Borrowing and Collateral.” Securities sold under repurchase agreements are stated at the amount of cash received in connection with the transaction. Trustmark monitors collateral levels on a continual basis and may be required to provide additional collateral based on the fair value of the underlying securities. Securities sold under repurchase agreements were secured by securities with a carrying amount of ~~$93.7~~$138.5 million and ~~$105.6~~$156.1 million at ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, respectively. Trustmark’s repurchase agreements are transacted under master repurchase agreements that give Trustmark, in the event of default by the counterparty, the right of offset with the same counterparty. As of ~~June 30, 2020,~~March 31, 2021, all repurchase agreements were short-term and consisted primarily of sweep repurchase arrangements, under which excess deposits are “swept” into overnight repurchase agreements with Trustmark. The following table presents the securities sold under repurchase agreements by collateral pledged at ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019~~2020 ($ in thousands):

Trustmark accounts for revenue from contracts with customers in accordance with FASB ASC Topic 606, “Revenue from Contracts with Customers,” which provides that revenue be recognized in a manner that depicts the transfer of goods or services to a customer in an amount that reflects the consideration Trustmark expects to be entitled to in exchange for those goods or services. Revenue from contracts with customers is recognized either over time in a manner that depicts Trustmark’s performance, or at a point in time when control of the goods or services are transferred to the customer. Trustmark’s noninterest income, excluding all of mortgage banking, net and securities gains (losses), net and portions of bank card and other fees and other income, are considered within the scope of FASB ASC Topic 606. Gains or losses on the sale of other real estate, which are included in Trustmark’s noninterest expense as other real estate expense, are also within the scope of FASB ASC Topic 606.

Trustmark records a gain or loss from the sale of other real estate when control of the property transfers to the buyer. Trustmark records the gain or loss from the sale of other real estate in noninterest expense as other real estate expense, net. Other real estate sales for the three ~~and six~~ months ended ~~June 30, 2020~~March 31, 2021 resulted in a net ~~losses~~gain of ~~$185~~$59 thousand, ~~and $255 thousand, respectively,~~ compared to a net ~~gains~~loss of ~~$124 thousand and $246~~$70 thousand for the three ~~and six~~ months ended ~~June 30, 2019, respectively.~~March 31, 2020.

The following ~~tables present~~table presents noninterest income disaggregated by reportable operating segment and revenue stream for the periods presented ($ in thousands):

	Three Months Ended June 30, 2020						Three Months Ended June 30, 2019							Three Months Ended March 31, 2021						Three Months Ended March 31, 2020
	Topic 606		Not Topic 606 (1)		Total		Topic 606		Not Topic 606 (1)			Total		Topic 606		Not Topic 606 (1)		Total		Topic 606		Not Topic 606 (1)			Total
General Banking Segment
Service charges on deposit accounts	$	6,380	$	—	$	6,380	$	10,357	$	—		$	10,357	$	7,338	$	—	$	7,338	$	10,012	$	—		$	10,012
Bank card and other fees		6,549		1,160		7,709		7,162		823			7,985		7,184		2,280		9,464		6,726		(1,377	)		5,349
Mortgage banking, net		—		33,745		33,745		—		10,295			10,295		—		20,804		20,804		—		27,483			27,483
Wealth management		79		—		79		97		—			97		18		—		18		86		—			86
Other, net		1,354		784		2,138		2,333		(259	)		2,074		1,388		640		2,028		1,764		482			2,246
Total noninterest income	$	14,362	$	35,689	$	50,051	$	19,949	$	10,859		$	30,808	$	15,928	$	23,724	$	39,652	$	18,588	$	26,588		$	45,176

Wealth Management Segment
Service charges on deposit accounts	$	17	$	—	$	17	$	22	$	—		$	22	$	18	$	—	$	18	$	20	$	—		$	20
Bank card and other fees		8		—		8		19		—			19		8		—		8		6		—			6
Wealth management		7,492		—		7,492		7,645		—			7,645		8,398		—		8,398		8,451		—			8,451
Other, net		24		9		33		25		29			54		32		7		39		26		13			39
Total noninterest income	$	7,541	$	9	$	7,550	$	7,711	$	29		$	7,740	$	8,456	$	7	$	8,463	$	8,503	$	13		$	8,516

Insurance Segment
Insurance commissions	$	11,868	$	—	$	11,868	$	11,089	$	—		$	11,089	$	12,445	$	—	$	12,445	$	11,550	$	—		$	11,550
Other, net		42		—		42		2		—			2		23		—		23		22		—			22
Total noninterest income	$	11,910	$	—	$	11,910	$	11,091	$	—		$	11,091	$	12,468	$	—	$	12,468	$	11,572	$	—		$	11,572

Consolidated
Service charges on deposit accounts	$	6,397	$	—	$	6,397	$	10,379	$	—		$	10,379	$	7,356	$	—	$	7,356	$	10,032	$	—		$	10,032
Bank card and other fees		6,557		1,160		7,717		7,181		823			8,004		7,192		2,280		9,472		6,732		(1,377	)		5,355
Mortgage banking, net		—		33,745		33,745		—		10,295			10,295		—		20,804		20,804		—		27,483			27,483
Insurance commissions		11,868		—		11,868		11,089		—			11,089		12,445		—		12,445		11,550		—			11,550
Wealth management		7,571		—		7,571		7,742		—			7,742		8,416		—		8,416		8,537		—			8,537
Other, net		1,420		793		2,213		2,360		(230	)		2,130		1,443		647		2,090		1,812		495			2,307
Total noninterest income	$	33,813	$	35,698	$	69,511	$	38,751	$	10,888		$	49,639	$	36,852	$	23,731	$	60,583	$	38,663	$	26,601		$	65,264

Six Months Ended June 30, 2020

Six Months Ended June 30, 2019

Topic 606

Not Topic
606 (1)

Total

Topic 606

Not Topic
606 (1)

Total

General Banking Segment

Service charges on deposit accounts

$
16,392

$
—

$
16,392

$
20,597

$
—

$
20,597

Bank card and other fees

13,275

(217
)

13,058

14,027

1,125

15,152

Mortgage banking, net

—

61,228

61,228

—

13,737

13,737

Wealth management

165

—

165

188

—

188

Other, net

3,118

1,266

4,384

4,577

(530
)

4,047

Total noninterest income

$
32,950

$
62,277

$
95,227

$
39,389

$
14,332

$
53,721

Wealth Management Segment

Service charges on deposit accounts

$
37

$
—

$
37

$
47

$
—

$
47

Bank card and other fees

14

—

14

43

—

43

Wealth management

15,943

—

15,943

15,037

—

15,037

Other, net

50

22

72

261

55

316

Total noninterest income

$
16,044

$
22

$
16,066

$
15,388

$
55

$
15,443

Insurance Segment

Insurance commissions

$
23,418

$
—

$
23,418

$
21,960

$
—

$
21,960

Other, net

64

—

64

6

—

6

Total noninterest income

$
23,482

$
—

$
23,482

$
21,966

$
—

$
21,966

Consolidated

Service charges on deposit accounts

$
16,429

$
—

$
16,429

$
20,644

$
—

$
20,644

Bank card and other fees

13,289

(217
)

13,072

14,070

1,125

15,195

Mortgage banking, net

—

61,228

61,228

—

13,737

13,737

Insurance commissions

23,418

—

23,418

21,960

—

21,960

Wealth management

16,108

—

16,108

15,225

—

15,225

Other, net

3,232

1,288

4,520

4,844

(475
)

4,369

Total noninterest income

$
72,476

$
62,299

$
134,775

$
76,743

$
14,387

$
91,130

Trustmark maintains a noncontributory tax-qualified defined benefit pension plan titled the Trustmark Corporation Pension Plan for Certain Employees of Acquired Financial Institutions (the Continuing Plan) to satisfy commitments made by Trustmark to associates covered through plans obtained in acquisitions.

The following table presents information regarding the net periodic benefit cost for the Continuing Plan for the periods presented ($ in thousands):

For the plan year ending December 31, ~~2020,~~2021, Trustmark’s minimum required contribution to the Continuing Plan is ~~$306~~$324 thousand; however, Management and the Board of Directors of Trustmark will monitor the Continuing Plan throughout ~~2020~~2021 to determine any additional funding requirements by the plan’s measurement date, which is December 31.

Trustmark maintains a nonqualified supplemental retirement plan covering key executive officers and senior officers as well as directors who have elected to defer fees. The plan provides for retirement and/or death benefits based on a participant’s covered salary or deferred fees. Although plan benefits may be paid from Trustmark’s general assets, Trustmark has purchased life insurance contracts on the participants covered under the plan, which may be used to fund future benefit payments under the plan. The annual measurement date for the plan is December 31. As a result of mergers prior to 2014, Trustmark became the administrator of small nonqualified supplemental retirement plans, for which the plan benefits were frozen prior to the merger date.

The following table presents information regarding the net periodic benefit cost for Trustmark’s nonqualified supplemental retirement plans for the periods presented ($ in thousands):

Trustmark has granted stock and incentive compensation awards and units subject to the provisions of the Stock and Incentive Compensation Plan (the Stock Plan). Current outstanding and future grants of stock and incentive compensation awards are subject to the provisions of the Stock Plan, which is designed to provide flexibility to Trustmark regarding its ability to motivate, attract and retain the services of key associates and directors. The Stock Plan also allows Trustmark to grant nonqualified stock options, incentive stock options, stock appreciation rights, restricted stock, restricted stock units and performance units to key associates and directors.

Trustmark’s performance awards vest over three years and are granted to Trustmark’s executive and senior management teams. Performance awards granted vest based on performance goals of return on average tangible equity and total shareholder return. Performance awards are valued utilizing a Monte Carlo simulation model to estimate fair value of the awards at the grant date. The Monte Carlo simulation was performed by an independent valuation consultant and requires the use of subjective modeling assumptions. These awards are recognized using the straight-line method over the requisite service period. These awards provide for achievement shares if performance measures exceed 100%. The restricted share agreement for these awards provides for voting rights and dividend privileges. During 2020, Trustmark began granting performance units instead of performance awards. The performance units have the same attributes as the previously granted performance awards, except for the performance units do not provide voting rights.

Trustmark’s time-vested awards vest over three years and are granted to members of Trustmark’s Board of Directors as well as Trustmark’s executive and senior management teams. Time-vested awards are valued utilizing the fair value of Trustmark’s stock at the grant date. These awards are recognized on the straight-line method over the requisite service period. During 2020, Trustmark began granting time-vested units instead of time-vested awards. The time-vested units have the same attributes as the previously granted time-vested awards, except for the time-vested units do not provide voting rights.

The following tables summarize the Stock Plan activity for the periods presented:

The following table presents information regarding compensation expense for awards and units under the Stock Plan for the periods presented ($ in thousands):

Trustmark makes commitments to extend credit and issues standby and commercial letters of credit (letters of credit) in the normal course of business in order to fulfill the financing needs of its customers. The carrying amount of commitments to extend credit and letters of credit approximates the fair value of such financial instruments.

Commitments to extend credit are agreements to lend money to customers pursuant to certain specified conditions. Commitments generally have fixed expiration dates or other termination clauses. Because many of these commitments are expected to expire without being fully drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The exposure to credit loss in the event of nonperformance by the other party to the commitments to extend credit is represented by the contract amount of those instruments. Trustmark applies the same credit policies and standards as it does in the lending process when making these commitments. The collateral obtained is based upon the nature of the transaction and the assessed creditworthiness of the borrower. At ~~June 30,~~March 31, 2021 and 2020, ~~and 2019,~~ Trustmark had unused commitments to extend credit of ~~$4.391~~$4.711 billion and ~~$4.146~~$4.219 billion, respectively.

Letters of credit are conditional commitments issued by Trustmark to insure the performance of a customer to a third-party. A financial standby letter of credit irrevocably obligates Trustmark to pay a third-party beneficiary when a customer fails to repay an outstanding loan or debt instrument. A performance standby letter of credit irrevocably obligates Trustmark to pay a third-party beneficiary when a customer fails to perform some contractual, nonfinancial obligation. When issuing letters of credit, Trustmark uses the same policies regarding credit risk and collateral, which are followed in the lending process. At ~~June 30,~~March 31, 2021 and 2020, ~~and 2019,~~ Trustmark’s maximum exposure to credit loss in the event of nonperformance by the customer for letters of credit was ~~$105.7~~$107.5 million and ~~$103.6~~$106.9 million, respectively. These amounts consist primarily of commitments with maturities of less than three years, which have an immaterial carrying value. Trustmark holds collateral to support standby letters of credit when deemed necessary. As of ~~June 30,~~March 31, 2021 and 2020, ~~and 2019,~~ the fair value of collateral held was ~~$21.8~~$21.5 million and ~~$30.3~~$25.8 million, respectively.

Trustmark adopted FASB ASC Topic 326, effective January 1, 2020, which requires Trustmark to estimate expected credit losses for off-balance sheet credit exposures which are not unconditionally cancellable. ACL on Off-Balance Sheet Credit Exposures

sheet credit exposures, including unfunded loan commitments and letters of credit, which is included on the accompanying consolidated balance sheet as of ~~June 30,~~March 31, 2021 and December 31, 2020.

Expected credit losses for off-balance sheet credit exposures are estimated by calculating a commitment usage factor over the contractual period for exposures that are not unconditionally cancellable by Trustmark. Trustmark generates a loan pool level unfunded amount for the period. Trustmark views the loan pools as either closed-ended or open-ended. Closed-ended loan pools are those that typically fund up to 100% such as other construction and nonowner-occupied. Open-ended loan pools are those that behave similar to a revolver such as the commercial and industrial and home equity line of credit loan pools. In addition to the unfunded balances, Trustmark uses a funding rate for loan pools that are considered open-ended. Trustmark calculates the funding rate of the open-ended loan pools each period. In order to mitigate volatility and incorporate historical experience in the funding rate, Trustmark uses a twelve-quarter moving average. For the closed-ended loan pools, Trustmark takes a conservative approach and uses a 100% funding rate. The funding rate is applied to the pool unfunded commitment balances to ensure that reserves will be applied to the pool as Trustmark believes the pool will reach its historical levels. In addition to the funding rate being applied to the unfunded commitment balance, the total reserve rate is applied. The total reserve rate incorporates both quantitative and qualitative aspects of the current period’s expected credit loss rate. The total reserve rate is loan pool specific and is applied to the unfunded amount to ensure loss factors, both quantitative and qualitative, are being considered on the unfunded portion of the loan pool, consistent with the methodology applied to the funded loan pools.

Changes in the ACL on off-balance sheet credit exposures were as follows for the periods presented ($ in thousands):

Adjustments to the ACL on off-balance sheet credit exposures are recorded to credit loss expense related to off-balance sheet credit exposures in noninterest expense. The ~~increase~~decrease in the ACL on off-balance sheet credit exposures for the ~~second quarter of 2020~~three months ended March 31, 2021 was primarily due to ~~net changes in the economic forecast due to the negative effects~~improvements of ~~the COVID-19 pandemic on~~ the overall economy and macroeconomic factors used into determine the ~~quantitative calculation of the ACL.~~necessary reserves for off-balance sheet credit exposures.

No credit loss estimate is reported for off-balance sheet credit exposures that are unconditionally cancellable by Trustmark or for undrawn amounts under such arrangements that may be drawn prior to the cancellation of the arrangement.

Trustmark’s wholly-owned subsidiary, TNB, has been named as a defendant in several lawsuits related to the collapse of the Stanford Financial Group.

On August 23, 2009, a purported class action complaint was filed in the District Court of Harris County, Texas, by Peggy Roif Rotstain, Guthrie Abbott, Catherine Burnell, Steven Queyrouze, Jaime Alexis Arroyo Bornstein and Juan C. Olano (collectively, Class Plaintiffs), on behalf of themselves and all others similarly situated, naming TNB and four other financial institutions and one individual, each of which are unaffiliated with Trustmark, as defendants. The complaint seeks to recover (i) alleged fraudulent transfers from each of the defendants in the amount of fees and other monies received by each defendant from entities controlled by R. Allen Stanford (collectively, the Stanford Financial Group) and (ii) damages allegedly attributable to alleged conspiracies by one or more of the defendants with the Stanford Financial Group to commit fraud and/or aid and abet fraud on the asserted grounds that defendants knew or should have known the Stanford Financial Group was conducting an illegal and fraudulent scheme. Class Plaintiffs have demanded a jury trial. Class Plaintiffs did not quantify damages.

second Intervenor Complaint that asserts claims against TNB and the remaining defendant financial institutions. The OSIC seeks to recover: (i) alleged fraudulent transfers in the amount of the fees each of the defendants allegedly received from Stanford Financial Group, the profits each of the defendants allegedly made from Stanford Financial Group deposits, and other monies each of the defendants allegedly received from Stanford Financial Group; (ii) damages attributable to alleged conspiracies by each of the defendants with the Stanford Financial Group to commit fraud and/or aid and abet fraud and conversion on the asserted grounds that the defendants knew or should have known the Stanford Financial Group was conducting an illegal and fraudulent scheme; and (iii) punitive damages. The OSIC did not quantify damages.

In July 2013, all defendants (including TNB) filed motions to dismiss the OSIC’s claims. In March 2015, the court entered an order authorizing the parties to conduct discovery regarding class certification, staying all other discovery and setting a deadline for the parties to complete briefing on class certification issues. In April 2015, the court granted in part and denied in part the defendants’ motions to dismiss the Class Plaintiffs’ claims and the OSIC’s claims. The court dismissed all of the Class Plaintiffs’ fraudulent transfer claims and dismissed certain of the OSIC’s claims. The court denied the motions by TNB and the other financial institution defendants to dismiss the OSIC’s constructive fraudulent transfer claims.

(iv) aiding, abetting and participating in conversion and (v) conspiracy. On July 14, 2015, the defendants (including TNB) filed motions to dismiss the SAC and to reconsider the court’s prior denial to dismiss the OSIC’s constructive fraudulent transfer claims against TNB and the other financial institutions that are defendants in the action. On July 27, 2016, the court denied the motion by TNB and the other financial institution defendants to dismiss the SAC and also denied the motion by TNB and the other financial institution defendants to reconsider the court’s prior denial to dismiss the OSIC’s constructive fraudulent transfer claims. On August 24, 2016, TNB filed its answer to the SAC. On October 20, 2017, the OSIC filed a motion seeking an order lifting the discovery stay and establishing a trial schedule. On November 4, 2016, the OSIC filed a First Amended Intervenor Complaint, which added claims for (i) aiding, abetting or participation in violations of the Texas Securities Act and (ii) aiding, abetting or participation in the breach of fiduciary duty. On November 7, 2017, the court denied the Class Plaintiffs’ motion seeking class certification and designation of class representatives and counsel, finding that common issues of fact did not predominate. The court granted the OSIC’s motion to lift the discovery stay that it had previously ordered.

On May 3, 2019, individual investors and entities filed motions to intervene in the action. On September 18, 2019, the court denied the motions to intervene. On October 14, 2019, certain of the proposed intervenors filed a notice of appeal. On February 3, 2021, the Fifth Circuit Court of Appeals affirmed the denial of the motions to intervene; this decision was affirmed by a panel of the Fifth Circuit on March 12, 2021.

On February 12, 2021, all defendants (including TNB) filed a motion for summary judgment with respect to OSIC claims that applied to all defendants. In addition, on the same date, TNB filed a separate motion for summary judgment with respect to aspects of OSIC claims that applied specifically to TNB. On March 19, 2021, OSIC filed notice with the court that it was abandoning as against all of the defendants (including TNB) the five claims described above. As a result, only the claims for (i) aiding, abetting and participating in breaches of fiduciary duty, (ii) aiding, abetting and participating in violations of the Texas Securities Act, and (iii) punitive damages remain as against TNB. On March 19, 2021, OSIC also filed responses to defendants’ motions for summary judgment. Briefing on the defendants’ (including TNB’s) summary judgment motions in respect of these remaining claims continues.

The parties to the action have agreed that the case is to be tried in the District Court for the Southern District of Texas, and it is Trustmark’s understanding that the judge of the District Court for the Northern District of Texas to whom the case is currently assigned has agreed to this transfer, but he has yet to formally remand the case to the Southern District of Texas. However, on March 25, 2021, the judge to whom the case is currently assigned in the District Court for the Northern District of Texas rescinded his previously-issued trial scheduling orders so that the Southern District of Texas could set scheduling for this case once the case has in fact been remanded.

On December 14, 2009, a different Stanford-related lawsuit was filed in the District Court of Ascension Parish, Louisiana, individually by Harold Jackson, Paul Blaine and Carolyn Bass Smith, Christine Nichols, and Ronald and Ramona Hebert naming TNB (misnamed as Trust National Bank) and other individuals and entities not affiliated with Trustmark as defendants. The complaint seeks to recover the money lost by these individual plaintiffs as a result of the collapse of the Stanford Financial Group (in addition to other damages) under various theories and causes of action, including negligence, breach of contract, breach of fiduciary duty, negligent misrepresentation, detrimental reliance, conspiracy, and violation of Louisiana’s uniform fiduciary, securities, and racketeering laws. The complaint does not quantify the amount of money the plaintiffs seek to recover. In January 2010, the lawsuit was removed to federal court by certain defendants and then transferred by the United States Panel on Multidistrict Litigation to federal court in the Northern District of Texas (Dallas) where multiple Stanford related matters are being consolidated for pre-trial proceedings. On March 29, 2010, the court stayed the case. TNB filed a motion to lift the stay, which was denied on February 28, 2012. In September 2012, the district court referred the case to a magistrate judge for hearing and determination of certain pretrial issues.

On April 11, 2016, Trustmark learned that a different Stanford-related lawsuit had been filed on that date in the Superior Court of Justice in Ontario, Canada, by The Toronto-Dominion Bank (“TD Bank”), naming TNB and three other financial institutions not affiliated with Trustmark as defendants. The complaint seeks a declaration specifying the degree to which each of TNB and the other defendants are liable in respect of any loss and damage for which TD Bank is found to be liable in a litigation commenced against TD Bank brought by the Joint Liquidators of Stanford International Bank Limited in the Superior Court of Justice, Commercial List in Ontario, Canada (the “Joint Liquidators’ Action”), as well as contribution and indemnity in respect of any judgment, interest and costs TD Bank is ordered to pay in the Joint Liquidators’ Action. Trustmark understands that trial has commenced in this matter in the Ontario court. To date, TNB has not been served in connection with this action, nor has it made any appearance in this action.

On November 1, 2019, TNB was named as a defendant in a complaint filed by Paul Blaine Smith, Carolyn Bass Smith and other plaintiffs identified therein (the Smith Complaint). The Smith Complaint was filed in ~~District~~Texas state court (District Court, Harris County, ~~Texas~~Texas) and named TNB and four other financial institutions and one individual, each of which are unaffiliated with Trustmark, as defendants. The Smith Complaint relates to the collapse of the Stanford Financial Group, as does the other pending litigation relating to Stanford summarized above. Plaintiffs in the Smith Complaint have demanded a jury trial.

On January 15, 2020, the court granted Stanford Financial Group receiver’s motion to stay the Texas state court action. On February 26, 2020, the lawsuit was removed to federal court in the Southern District of Texas by TNB. Trustmark and its counsel are carefully evaluating the Smith Complaint in the form that is publicly available, and will update the foregoing description to the extent that additional material facts are ascertained.

TNB’s relationship with the Stanford Financial Group began as a result of Trustmark’s acquisition of a Houston-based bank in August 2006, and consisted of correspondent banking and other traditional banking services in the ordinary course of business. All Stanford-related lawsuits are in pre-trial stages.

On December 30, 2019, a complaint was filed in the United States District Court for the Southern District of Mississippi, Northern Division (the Court) by Alysson Mills in her capacity as Court-appointed Receiver (the Receiver) for Arthur Lamar Adams (Adams) and Madison Timber Properties, LLC (Madison Timber), naming TNB, two other Mississippi-based financial institutions both of which are unaffiliated with Trustmark and two individuals, one of who was employed by TNB at all times relevant to the complaint and the other was employed either by TNB or one of the other defendant financial institutions, as defendants. The complaint seeks to recover from the defendants, for the benefit of the receivership estate and also for certain investors who were allegedly defrauded by Adams and Madison Timber, damages (including punitive damages) and related costs allegedly attributable to actions of the defendants that allegedly enabled illegal and fraudulent activities engaged in by Adams and Madison Timber. The Receiver did not quantify damages.

TNB’s relationship with Adams and Madison Timber consisted of traditional banking services in the ordinary course of business.

Trustmark and its subsidiaries are also parties to other lawsuits and other claims that arise in the ordinary course of business. Some of the lawsuits assert claims related to the lending, collection, servicing, investment, trust and other business activities, and some of the lawsuits allege substantial claims for damages.

All pending legal proceedings described above are being vigorously contested. In accordance with FASB ASC Subtopic 450-20, “Loss Contingencies,” Trustmark will establish an accrued liability for litigation matters when those matters present loss contingencies that are both probable and reasonably estimable. At the present time, Trustmark believes, based on its evaluation and the advice of legal counsel, that a loss in any such proceeding is not probable and a reasonable estimate cannot reasonably be made.

The following table reflects weighted-average shares used to calculate basic and diluted EPS for the periods presented (in thousands):

Weighted-average antidilutive stock awards were excluded in determining diluted EPS. The following table reflects weighted-average antidilutive stock awards for the periods presented (in thousands):

The following table reflects specific transaction amounts for the periods presented ($ in thousands):

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~~2020 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 ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019.~~2020. 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 (through December 31, 2024) 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 ~~June 30, 2020,~~March 31, 2021, Trustmark and TNB exceeded all applicable minimum capital standards. In addition, Trustmark and TNB met applicable regulatory guidelines to be considered well-capitalized at ~~June 30, 2020.~~March 31, 2021. 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 ~~June 30, 2020,~~March 31, 2021, 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 ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019~~2020 ($ in thousands):

	Actual											Actual
	Regulatory Capital					Minimum			To Be Well			Regulatory Capital					Minimum			To Be Well
	Amount		Ratio			Requirement			Capitalized			Amount		Ratio			Requirement			Capitalized
At June 30, 2020:
At March 31, 2021:
Common Equity Tier 1 Capital (to Risk Weighted Assets)
Trustmark Corporation	$	1,317,378		11.42	%		7.00	%	n/a			$	1,427,077		11.71	%		7.00	%	n/a
Trustmark National Bank		1,353,727		11.73	%		7.00	%		6.50	%		1,446,395		11.87	%		7.00	%		6.50	%

Tier 1 Capital (to Risk Weighted Assets)
Trustmark Corporation	$	1,377,378		11.94	%		8.50	%	n/a			$	1,487,077		12.20	%		8.50	%	n/a
Trustmark National Bank		1,353,727		11.73	%		8.50	%		8.00	%		1,446,395		11.87	%		8.50	%		8.00	%

Total Capital (to Risk Weighted Assets)
Trustmark Corporation	$	1,499,887		13.00	%		10.50	%	n/a			$	1,714,872		14.07	%		10.50	%	n/a
Trustmark National Bank		1,476,236		12.80	%		10.50	%		10.00	%		1,551,313		12.73	%		10.50	%		10.00	%

Tier 1 Leverage (to Average Assets)
Trustmark Corporation	$	1,377,378		9.08	%		4.00	%	n/a			$	1,487,077		9.11	%		4.00	%	n/a
Trustmark National Bank		1,353,727		8.94	%		4.00	%		5.00	%		1,446,395		8.87	%		4.00	%		5.00	%

At December 31, 2019:
At December 31, 2020:
Common Equity Tier 1 Capital (to Risk Weighted Assets)
Trustmark Corporation	$	1,312,668		11.93	%		7.00	%	n/a			$	1,395,844		11.62	%		7.00	%	n/a
Trustmark National Bank		1,352,893		12.30	%		7.00	%		6.50	%		1,412,015		11.75	%		7.00	%		6.50	%

Tier 1 Capital (to Risk Weighted Assets)
Trustmark Corporation	$	1,372,668		12.48	%		8.50	%	n/a			$	1,455,844		12.11	%		8.50	%	n/a
Trustmark National Bank		1,352,893		12.30	%		8.50	%		8.00	%		1,412,015		11.75	%		8.50	%		8.00	%

Total Capital (to Risk Weighted Assets)
Trustmark Corporation	$	1,457,760		13.25	%		10.50	%	n/a			$	1,696,794		14.12	%		10.50	%	n/a
Trustmark National Bank		1,437,985		13.07	%		10.50	%		10.00	%		1,530,044		12.73	%		10.50	%		10.00	%

Tier 1 Leverage (to Average Assets)
Trustmark Corporation	$	1,372,668		10.48	%		4.00	%	n/a			$	1,455,844		9.33	%		4.00	%	n/a
Trustmark National Bank		1,352,893		10.35	%		4.00	%		5.00	%		1,412,015		9.07	%		4.00	%		5.00	%

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. There is no guarantee as to the number of shares that may be repurchased by Trustmark, and Trustmark may discontinue purchases under the program at any time at Management’s discretion.

On March 9, 2020, Trustmark suspended its share repurchase programs to preserve capital to support customers during the COVID-19 pandemic. Trustmark resumed the repurchase of its shares in January 2021. Under this authority, Trustmark repurchased approximately 145 thousand shares of its outstanding common stock valued at $4.2 million during three months ended March 31, 2021. The shares may be purchased from time to time at prevailing market prices, through open market or privately negotiated transactions, depending on market conditions. There is no guarantee as to the number of shares that will be repurchased by Trustmark, and Trustmark may discontinue repurchases at any time at Management’s discretion.

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 1110 – 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.~~

	Six Months Ended June 30, 2020							Six Months Ended June 30, 2019									Three Months Ended March 31, 2021									Three Months Ended March 31, 2020
	Before Tax Amount		Tax (Expense) Benefit			Net of Tax Amount		Before Tax Amount			Tax (Expense) Benefit			Net of Tax Amount			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	$	43,155	$	(10,789	)	$	32,366	$	38,903		$	(9,726	)	$	29,177		$	(21,800	)	$	5,450		$	(16,350	)	$	40,507	$	(10,127	)	$	30,380
Change in net unrealized holding loss on securities transferred to held to maturity		1,639		(410	)		1,229		2,003			(501	)		1,502			711			(178	)		533			861		(215	)		646
Total securities available for sale and transferred securities		44,794		(11,199	)		33,595		40,906			(10,227	)		30,679			(21,089	)		5,272			(15,817	)		41,368		(10,342	)		31,026
Pension and other postretirement benefit plans:
Reclassification adjustments for changes realized in net income:
Net change in prior service costs		75		(19	)		56		125			(31	)		94			28			(7	)		21			37		(9	)		28
Recognized net loss due to lump sum settlements		40		(10	)		30		94			(23	)		71			0			0			0			0		0			0
Change in net actuarial loss		645		(161	)		484		502			(126	)		376			455			(114	)		341			326		(82	)		244
Total pension and other postretirement benefit plans		760		(190	)		570		721			(180	)		541			483			(121	)		362			363		(91	)		272
Cash flow hedge derivatives:
Change in accumulated gain (loss) on effective cash flow hedge derivatives		—		—			—		(164	)		41			(123	)
Reclassification adjustment for (gain) loss realized in net income		—		—			—		(312	)		78			(234	)
Total cash flow hedge derivatives		—		—			—		(476	)		119			(357	)
Total other comprehensive income (loss)	$	45,554	$	(11,389	)	$	34,165	$	41,151		$	(10,288	)	$	30,863		$	(20,606	)	$	5,151		$	(15,455	)	$	41,731	$	(10,433	)	$	31,298

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.

The methodologies Trustmark uses in determining the fair values are based primarily on the use of independent, market-based data to reflect a value that would be reasonably expected upon exchange of the position in an orderly transaction between market participants at the measurement date. The predominant portion of assets that are stated at fair value are of a nature that can be valued using prices or inputs that are readily observable through a variety of independent data providers. The providers selected by Trustmark for fair valuation data are widely recognized and accepted vendors whose evaluations support the pricing functions of financial institutions, investment and mutual funds, and portfolio managers. Trustmark has documented and evaluated the pricing methodologies used by the vendors and maintains internal processes that regularly test valuations for anomalies.

Trustmark utilizes an independent pricing service to advise it on the carrying value of the securities available for sale portfolio. As part of Trustmark’s procedures, the price provided from the service is evaluated for reasonableness given market changes. When a questionable price exists, Trustmark investigates further to determine if the price is valid. If needed, other market participants may be utilized to determine the correct fair value. Trustmark has also reviewed and confirmed its determinations in thorough discussions with the pricing source regarding their methods of price discovery.

Mortgage loan commitments are valued based on the securities prices of similar collateral, term, rate and delivery for which the loan is eligible to deliver in place of the particular security. Trustmark acquires a broad array of mortgage security prices that are supplied by a market data vendor, which in turn accumulates prices from a broad list of securities dealers. Prices are processed through a mortgage pipeline management system that accumulates and segregates all loan commitment and forward-sale transactions according to the similarity of various characteristics (maturity, term, rate, and collateral). Prices are matched to those positions that are deemed to be an eligible substitute or offset (i.e., “deliverable”) for a corresponding security observed in the market place.

Trustmark estimates fair value of the MSR through the use of prevailing market participant assumptions and market participant valuation processes. This valuation is periodically tested and validated against other third-party firm valuations.

Trustmark obtains the fair value of interest rate swaps from a third-party pricing service that uses an industry standard discounted cash flow methodology. In addition, credit valuation adjustments are incorporated in the fair values to account for potential nonperformance risk. In adjusting the fair value of its interest rate swap contracts for the effect of nonperformance risk, Trustmark has considered any applicable credit enhancements such as collateral postings, thresholds, mutual puts, and guarantees. In conjunction with the FASB’s fair value measurement guidance, Trustmark made an accounting policy election to measure the credit risk of these derivative financial instruments, which are subject to master netting agreements, on a net basis by counterparty portfolio.

Trustmark has determined that the majority of the inputs used to value its interest rate swaps offered to qualified commercial borrowers fall within Level 2 of the fair value hierarchy, while the credit valuation adjustments associated with these derivatives utilize Level 3 inputs, such as estimates of current credit spreads. Trustmark has assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its interest rate swaps and has determined that the credit valuation adjustment is not significant to the overall valuation of these derivatives. As a result, Trustmark classifies its interest rate swap valuations in Level 2 of the fair value hierarchy.

Trustmark also utilizes 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 the MSR attributable to interest rates. Fair values of these derivative instruments are determined from quoted prices in active markets for identical assets therefore allowing them to be classified within Level 1 of the fair value hierarchy. In addition, Trustmark utilizes derivative instruments such as interest rate lock commitments in its mortgage banking area which lack observable inputs for valuation purposes resulting in their inclusion in Level 3 of the fair value hierarchy.

At this time, Trustmark presents no fair values that are derived through internal modeling. Should positions requiring fair valuation arise that are not relevant to existing methodologies, Trustmark will make every reasonable effort to obtain market participant assumptions, or independent evaluation.

The following tables summarize financial assets and financial liabilities measured at fair value on a recurring basis ~~as of June 30, 2020~~at March 31, 2021 and December 31, ~~2019,~~2020, segregated by the level of valuation inputs within the fair value hierarchy utilized to measure fair value ($ in thousands). There were no transfers between fair value levels for the ~~six~~three months ended ~~June 30, 2020~~March 31, 2021 and the year ended December 31, ~~2019.~~2020.

The changes in Level 3 assets measured at fair value on a recurring basis for the ~~six~~three months ended ~~June 30,~~March 31, 2021 and 2020 ~~and 2019~~ are summarized as follows ($ in thousands):

Trustmark may be required, from time to time, to measure certain assets at fair value on a nonrecurring basis in accordance with GAAP. Assets at ~~June 30, 2020,~~March 31, 2021, which have been measured at fair value on a nonrecurring basis, include collateral-dependent LHFI. A loan is collateral dependent when the borrower is experiencing financial difficulty and repayment of the loan is expected to be provided substantially through the sale of the collateral. The expected credit loss for collateral-dependent loans is measured as the difference between the amortized cost basis of the loan and the fair value of the collateral, adjusted for the estimated cost to sell. Fair value estimates for collateral-dependent loans are derived from appraised values based on the current market value or as is value of the collateral, normally from recently received and reviewed appraisals. Current appraisals are ordered on an annual basis based on the inspection date or more often if market conditions necessitate. Appraisals are obtained from state-certified appraisers and are based on certain assumptions, which may include construction or development status and the highest and best use of the property. These appraisals are reviewed by Trustmark’s Appraisal Review Department to ensure they are acceptable, and values are adjusted down for costs associated with asset disposal. At ~~June 30, 2020,~~March 31, 2021, Trustmark had outstanding balances of ~~$42.1~~$40.7 million with a related ACL of ~~$2.3~~$9.5 million in collateral-dependent ~~LHFI. At December 31, 2019, Trustmark had~~LHFI, compared to outstanding balances of ~~$41.2~~$43.4 million with a related ~~allowance~~ACL of ~~$5.5~~$4.4 million in impaired LHFI that were individually evaluated for impairment and written down to the fair value of the underlying collateral less cost to sell based on the fair value of the collateral or other unobservable input compared. Both the collateral-dependent LHFI ~~and the individually evaluated impaired~~at December 31, 2020. The collateral-dependent LHFI are classified as Level 3 in the fair value hierarchy.

Certain nonfinancial assets measured at fair value on a nonrecurring basis include foreclosed assets (upon initial recognition or subsequent impairment), nonfinancial assets and nonfinancial liabilities measured at fair value in the second step of a goodwill impairment test, and intangible assets and other nonfinancial long-lived assets measured at fair value for impairment assessment.

Other real estate includes assets that have been acquired in satisfaction of debt through foreclosure and is ~~carried~~recorded at the ~~lower~~fair value less cost to sell (estimated fair value) at the time of ~~cost or estimated fair value.~~foreclosure. Fair value is based on independent appraisals and other relevant factors. In the determination of fair value subsequent to foreclosure, Management also considers other factors or recent developments, such as changes in market conditions from the time of valuation and anticipated sales values considering plans for disposition, which could result in an adjustment to lower the collateral value estimates indicated in the appraisals. Periodic revaluations are classified as Level 3 in the fair value hierarchy since assumptions are used that may not be observable in the market.

Foreclosed assets of ~~$3.2 million~~$521 thousand were remeasured during the first ~~six~~three months of ~~2020,~~2021, requiring write-downs of ~~$873~~$47 thousand to reach their current fair values compared to ~~$8.8~~$3.1 million of foreclosed assets that were remeasured during the first ~~six~~three months of ~~2019,~~2020, requiring write-downs of ~~$1.1 million.~~$357 thousand.

FASB ASC Topic 825, “Financial Instruments,” requires disclosure of the fair value of financial assets and financial liabilities, including those financial assets and financial liabilities that are not measured and reported at fair value on a recurring basis or non-recurring basis.

The carrying amounts and estimated fair values of financial instruments at ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, are as follows ($ in thousands):

Trustmark has elected to account for its mortgage LHFS under the fair value option, with interest income on these mortgage LHFS reported in interest and fees on LHFS and LHFI. The fair value of the mortgage LHFS is determined using quoted prices for a similar asset, adjusted for specific attributes of that loan. The mortgage LHFS are actively managed and monitored and certain market risks of the loans may be mitigated through the use of derivatives. These derivative instruments are carried at fair value with changes in fair value recorded as noninterest income in mortgage banking, net. The changes in the fair value of LHFS are largely offset by changes in the fair value of the derivative instruments. For the three ~~and six~~ months ended ~~June 30, 2020,~~March 31, 2021, a net loss of ~~$445 thousand and a net gain of $7.3~~$10.6 million ~~respectively,~~ was recorded as noninterest income in mortgage banking, net for changes in the fair value of LHFS accounted for under the fair value option, compared to a net ~~gains~~gain of ~~$2.2 million and $2.9~~$7.7 million for the three ~~and six~~ months ended ~~June 30, 2019, respectively.~~March 31, 2020. Interest and fees on LHFS and LHFI for the three ~~and six~~ months ended ~~June 30, 2020~~March 31, 2021 included ~~$1.5~~$2.1 million ~~and $2.8 million, respectively,~~ of interest earned on LHFS accounted for under the fair value option, compared to $1.3 million ~~and $2.4 million~~ for the three ~~and six~~ months ended ~~June 30, 2019, respectively.~~March 31, 2020. Election of the fair value option allows Trustmark to reduce the accounting volatility that would otherwise result from the asymmetry created by accounting for the financial instruments at the lower of cost or fair value and the derivatives at fair value. The fair value option election does not apply to GNMA optional repurchase loans which do not meet the requirements under FASB ASC Topic 825 to be accounted for under the fair value option. GNMA optional repurchase loans totaled ~~$121.4~~$123.4 million and ~~$57.1~~$141.2 million at ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, respectively, and are included in LHFS on the accompanying consolidated balance sheets. For additional information regarding GNMA optional repurchase loans, please see the section captioned “Past Due LHFS” included in Note 3 – LHFI and Allowance for Credit Losses, LHFI.

The following table provides information about the fair value and the contractual principal outstanding of LHFS accounted for under the fair value option as of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019~~2020 ($ in thousands):

On April 4, 2013, Trustmark entered into a forward interest rate swap contract on junior subordinated debentures with a total notional amount of $60.0 million. The interest rate swap contract was designated as a derivative instrument in a cash flow hedge under FASB ASC Topic 815, “Derivatives and Hedging,” with the objective of protecting the quarterly interest payments on Trustmark’s $60.0 million of junior subordinated debentures issued to Trustmark Preferred Capital Trust I throughout the ~~five-year~~ period which began December 31, 2014 and ended December 31, 2019 from the risk of variability of those payments resulting from changes in the three-month LIBOR interest rate. Under the swap, which became effective on December 31, 2014, Trustmark paid a fixed interest rate of 1.66% and received a variable interest rate based on three-month LIBOR on a total notional amount of $60.0 million, with quarterly net settlements.

The interest rate swap matured on December 31, 2019; therefore, there was 0 accumulated net after-tax amount related to the effective cash flow hedge included in accumulated other comprehensive income (loss) at December 31, 2019. NaN ineffectiveness related to the interest rate swap designated as a cash flow hedge was recognized in the consolidated statements of income for the six months ended June 30, 2019. Amounts reported in accumulated other comprehensive income (loss) related to this derivative were reclassified to other interest expense as interest payments were made on Trustmark’s variable rate junior subordinated debentures.

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 economically hedges changes in the fair value of the MSR attributable to interest rates. These transactions are considered freestanding derivatives that do not otherwise qualify for hedge accounting. The total notional amount of these derivative instruments was ~~$385.0~~$379.0 million at ~~June 30, 2020~~March 31, 2021 compared to ~~$564.0~~$326.5 million at December 31, ~~2019.~~2020. Changes in the fair value of these exchange-traded derivative instruments are recorded as noninterest income in mortgage banking, net and are offset by changes in the fair value of the MSR. The impact of this strategy resulted in a net ~~negative~~positive ineffectiveness of ~~$2.0~~$270 thousand and $9.9 million ~~and $53 thousand~~ for the three months ended ~~June 30,~~March 31, 2021 and 2020, ~~and 2019, respectively. For the six months ended June 30, 2020 and 2019, the impact was a net positive ineffectiveness of $7.9 million and a net negative ineffectiveness of $4.8 million,~~ respectively.

As part of Trustmark’s risk management strategy in the mortgage banking area, derivative instruments such as forward sales contracts are utilized. Trustmark’s obligations under forward sales contracts consist of commitments to deliver mortgage loans, originated and/or purchased, in the secondary market at a future date. Changes in the fair value of these derivative instruments are recorded as noninterest income in mortgage banking, net and are offset by changes in the fair value of LHFS. Trustmark’s off-balance sheet obligations under these derivative instruments totaled ~~$359.5~~$353.5 million at ~~June 30, 2020,~~March 31, 2021, with a ~~negative~~positive valuation adjustment of ~~$2.6~~$6.5 million, compared to ~~$209.0~~$377.5 million, with a negative valuation adjustment of ~~$486 thousand,~~$3.1 million, at December 31, ~~2019.~~2020.

Trustmark also utilizes derivative instruments such as interest rate lock commitments in its mortgage banking area. Interest rate lock commitments are residential mortgage loan commitments with customers, which guarantee a specified interest rate for a specified time period. Changes in the fair value of these derivative instruments are recorded as noninterest income in mortgage banking, net and are offset by the changes in the fair value of forward sales contracts. Trustmark’s off-balance sheet obligations under these derivative instruments totaled ~~$427.3~~$255.6 million at ~~June 30, 2020,~~March 31, 2021, with a positive valuation adjustment of ~~$14.3~~$4.1 million, compared to ~~$92.1~~$329.3 million, with a positive valuation adjustment of ~~$1.4~~$9.6 million, ~~as of~~at December 31, ~~2019.~~2020.

Trustmark offers certain derivatives products directly to qualified commercial lending clients seeking to manage their interest rate risk. Trustmark economically hedges interest rate swap transactions executed with commercial lending clients by entering into offsetting interest rate swap transactions with institutional derivatives market participants. Derivatives transactions executed as part of this program are not designated as qualifying hedging relationships and are, therefore, carried at fair value with the change in fair value recorded as noninterest income in bank card and other fees. Because these derivatives have mirror-image contractual terms, in addition to collateral provisions which mitigate the impact of ~~nonperformance~~non-performance risk, the changes in fair value are expected to substantially offset. The Chicago Mercantile Exchange rules legally characterize variation margin collateral payments made or received for centrally cleared interest rate swaps as settlements rather than collateral. As ~~of June 30, 2020,~~a result, centrally cleared interest rate swaps included in other assets and other liabilities are presented on a net basis in the accompanying consolidated balance sheets. At March 31, 2021, Trustmark had interest rate swaps with an aggregate notional amount of ~~$978.1 million~~$1.172 billion related to this program, compared to ~~$893.1 million as of~~$1.125 billion at December 31, ~~2019.~~2020.

Trustmark has agreements with its financial institution counterparties that contain provisions where if Trustmark defaults on any of its indebtedness, including default where repayment of the indebtedness has not been accelerated by the lender, then Trustmark could also be declared in default on its derivatives obligations.

~~As of June 30, 2020~~At March 31, 2021 and December 31, ~~2019,~~2020, the termination value of interest rate swaps in a liability position, which includes accrued interest but excludes any adjustment for nonperformance risk, related to these agreements was ~~$1.9 million~~$980 thousand and ~~$1.0~~$1.3 million, respectively. ~~As of June 30, 2020,~~At March 31, 2021, Trustmark had posted collateral of ~~$2.1~~$1.3 million against its obligations because of negotiated thresholds and minimum transfer amounts under these agreements. If Trustmark had breached any of these triggering provisions at ~~June 30, 2020,~~March 31, 2021, it could have been required to settle its obligations under the agreements at the termination value.

Credit risk participation agreements arise when Trustmark contracts with other financial institutions, as a guarantor or beneficiary, to share credit risk associated with certain interest rate swaps. These agreements provide for reimbursement of losses resulting from a third-party default on the underlying swap. At ~~both June 30, 2020 and December~~March 31, ~~2019,~~2021, Trustmark had entered into 5 risk participation agreements as a beneficiary with an aggregate notional amount of $49.3 million compared to 3 risk participation agreements as a beneficiary with an aggregate notional amount of ~~$41.7~~$41.1 million ~~and $37.6 million, respectively. At both June 30, 2020 and~~at December 31, ~~2019,~~2020. At March 31, 2021, Trustmark had entered into 10NaN risk participation agreements as a guarantor with an aggregate notional amount of ~~$73.4~~$172.0 million ~~and $79.3~~compared to NaN risk participation agreements as a guarantor with an aggregate notional amount of $172.0 million ~~respectively.~~at December 31, 2020. The aggregate fair values of these risk participation agreements were immaterial at both ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019.~~2020.

The following tables disclose the fair value of derivative instruments in Trustmark’s consolidated balance sheets ~~as of June 30, 2020~~at March 31, 2021 and December 31, ~~2019~~2020 as well as the effect of these derivative instruments on Trustmark’s results of operations for the periods presented ($ in thousands):

The following table discloses the amount included in other comprehensive income (loss), net of tax, for derivative instruments designated as cash flow hedges for the periods presented ($ in thousands):

Trustmark’s interest rate swap derivative instruments are subject to master netting agreements, and therefore, eligible for offsetting in the consolidated balance sheets. Trustmark has elected to not offset any derivative instruments in its consolidated balance sheets. Information about financial instruments that are eligible for offset in the consolidated balance sheets as of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019~~2020 is presented in the following tables ($ in thousands):

Trustmark’s management reporting structure includes 3 segments: General Banking, Wealth Management and Insurance. For a complete overview of Trustmark’s operating segments, see Note 2221 – Segment Information included in Part II. Item 8. – Financial Statements and Supplementary Data, of Trustmark’s ~~2019~~2020 Annual Report. During the first quarter of 2020, Trustmark revised the composition of its operating segments by moving the Retail Private Banking Group from the General Banking Segment to the Wealth Management Segment as a result of a change in supervision of this group for segment reporting purposes. The prior period amounts presented include reclassifications to conform to the current period presentation.

The accounting policies of each reportable segment are the same as those of Trustmark except for its internal allocations. Noninterest expenses for back-office operations support are allocated to segments based on estimated uses of those services. Trustmark measures the net interest income of its business segments with a process that assigns cost of funds or earnings credit on a matched-term basis. This process, called “funds transfer pricing”, charges an appropriate cost of funds to assets held by a business unit, or credits the business unit for potential earnings for carrying liabilities. The net of these charges and credits flows through to the General Banking Segment, which contains the management team responsible for determining TNB’s funding and interest rate risk strategies.

The following table discloses financial information by reportable segment for the periods presented ($ in thousands):

	Three Months Ended June 30,						Six Months Ended June 30,					Three Months Ended March 31,
	2020			2019			2020		2019			2021			2020
General Banking
Net interest income	$	103,376		$	105,897		$	205,779	$	208,902		$	101,108		$	102,403
Provision for credit losses		18,188			2,596			36,562		4,289			(10,499	)		18,374
Noninterest income		50,051			30,808			95,227		53,721			39,652			45,176
Noninterest expense		103,355			90,093			209,805		180,108			94,597			106,450
Income before income taxes		31,884			44,016			54,639		78,226			56,662			22,755
Income taxes		4,093			5,362			6,184		9,517			8,123			2,091
General banking net income	$	27,791		$	38,654		$	48,455	$	68,709		$	48,539		$	20,664

Selected Financial Information
Total assets	$	15,378,653		$	13,161,680		$	15,378,653	$	13,161,680		$	16,555,481		$	13,663,877
Depreciation and amortization	$	10,422		$	9,592		$	19,216	$	18,731		$	10,864		$	8,794

Wealth Management
Net interest income	$	1,576		$	1,772		$	3,080	$	3,520		$	1,231		$	1,504
Provision for credit losses		(3	)		(4	)		2,204		(8	)		(2	)		2,207
Noninterest income		7,550			7,740			16,066		15,443			8,463			8,516
Noninterest expense		6,944			7,727			15,460		15,390			8,194			8,516
Income before income taxes		2,185			1,789			1,482		3,581			1,502			(703	)
Income taxes		547			447			371		891			376			(176	)
Wealth management net income	$	1,638		$	1,342		$	1,111	$	2,690		$	1,126		$	(527	)

Selected Financial Information
Total assets	$	232,467		$	313,398		$	232,467	$	313,398		$	243,132		$	280,181
Depreciation and amortization	$	67		$	68		$	134	$	137		$	68		$	67

Insurance
Net interest income	$	48		$	55		$	93	$	110		$	(3	)	$	45
Noninterest income		11,910			11,091			23,482		21,966			12,468			11,572
Noninterest expense		8,360			8,281			17,204		16,624			9,390			8,844
Income before income taxes		3,598			2,865			6,371		5,452			3,075			2,773
Income taxes		877			721			1,569		1,372			778			692
Insurance net income	$	2,721		$	2,144		$	4,802	$	4,080		$	2,297		$	2,081

Selected Financial Information
Total assets	$	80,959		$	73,880		$	80,959	$	73,880		$	79,700		$	75,771
Depreciation and amortization	$	171		$	126		$	306	$	255		$	194		$	135

Consolidated
Net interest income	$	105,000		$	107,724		$	208,952	$	212,532		$	102,336		$	103,952
Provision for credit losses		18,185			2,592			38,766		4,281			(10,501	)		20,581
Noninterest income		69,511			49,639			134,775		91,130			60,583			65,264
Noninterest expense		118,659			106,101			242,469		212,122			112,181			123,810
Income before income taxes		37,667			48,670			62,492		87,259			61,239			24,825
Income taxes		5,517			6,530			8,124		11,780			9,277			2,607
Consolidated net income	$	32,150		$	42,140		$	54,368	$	75,479		$	51,962		$	22,218

Selected Financial Information
Total assets	$	15,692,079		$	13,548,958		$	15,692,079	$	13,548,958		$	16,878,313		$	14,019,829
Depreciation and amortization	$	10,660		$	9,786		$	19,656	$	19,123		$	11,126		$	8,996

Note 2019 – Accounting Policies Recently Adopted and Pending Accounting Pronouncements

Except for the changes detailed below, Trustmark has consistently applied its accounting policies to all periods presented in the accompanying consolidated financial statements.

ASU ~~2018-15, “Intangibles-Goodwill and Other–Internal-Use Software (Subtopic 350-40)~~2019-12, “Income Taxes (Topic 740): ~~Customer’s~~Simplifying the Accounting for ~~Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (a consensus of the FASB Emerging Issues Task Force).~~Income Taxes.” Issued in ~~August 2018,~~December 2019, ASU ~~2018-15 aims~~2019-12 seeks to ~~reduce complexity in~~simplify the accounting for ~~costs~~income taxes by removing certain exceptions to the general principles in FASB ASC Topic 740. In particular, the amendments of ~~implementing a cloud computing service arrangement.~~ ASU ~~2018-15 aligns~~2019-12 remove the ~~requirements~~exceptions to (1) the incremental approach for ~~capitalizing implementation costs incurred in a hosting arrangement that~~intra-period tax allocation when there is a ~~service contract with~~loss from continuing operations and income or a gain from other items (e.g., discontinued operations or other comprehensive income); (2) the ~~requirements~~requirement to recognize a deferred tax liability for ~~capitalizing implementation costs incurred~~equity method investments when a foreign subsidiary becomes an equity method investment; (3) the ability not to ~~develop or obtain internal-use software (and hosting arrangements that include~~recognize a deferred tax liability for a foreign subsidiary when a foreign equity method investment becomes a subsidiary; and (4) the general methodology for calculating income taxes in an ~~internal-use software license).~~interim period when a year-to-date loss exceeds the anticipated loss for the year. The amendments of ASU ~~2018-15~~2019-12 (1) require that an entity ~~to follow the guidance~~recognize a franchise tax (or similar tax), that is partially based on income, in accordance with FASB ASC ~~Subtopic 350-40, “Intangibles-Goodwill~~Topic 740 and ~~Other-Internal-Use Software,”~~account for any incremental amount incurred as a non-income-based tax; (2) require that an entity evaluate when a step up in ~~order~~the tax basis of goodwill should be considered part of the business combination in which the book goodwill was originally recognized and when it should instead be considered a separate transaction; (3) specify that an entity is not required to ~~determine which implementation costs~~allocate the consolidated amount of current and deferred tax expense to ~~capitalize as~~a legal entity that is not subject to tax in its separate financial statements, but rather may elect to do so for a legal entity that is both not subject to tax and disregarded by the taxing authority; and (4) require that an ~~asset related to~~entity reflect the ~~service contract and which costs to expense. The~~effect of an enacted change in tax laws or rates in the annual effective tax rate computation in the interim period that includes the enactment date. Trustmark adopted the amendments of ASU 2018-15 also require an entity to expense the capitalized implementation costs of a hosting arrangement that is a service contract over the term of the hosting arrangement (i.e. the noncancellable period of the arrangement plus periods covered by (1) an option to extend the arrangement if the entity is reasonably certain to exercise that option, (2) an option to terminate the arrangement if the entity is reasonably certain not to exercise the option, and (3) an option to extend (or not to terminate) the arrangement in which exercise of the option is in the control of the vendor). ASU 2018-15 also requires an entity to present the expense related to the capitalized implementation costs in the same line item in the statement of income as the fees associated with the hosting element (service) of the arrangement, and to classify payments for capitalized implementation costs in the statement of cash flows in the same manner as payments made for fees associated with the hosting element. ASU 2018-15 became2019-12 effective ~~for Trustmark on~~ January 1, ~~2020. Trustmark does not currently have any material amount of implementation costs related to hosting arrangements that are service contracts within the scope of this ASU; therefore, adoption~~2021. Adoption of ASU ~~2018-15~~2019-12 did not have a material impact to Trustmark’s consolidated financial statements.

ASU ~~2018-13, “Fair Value Measurement (Topic 820)~~2018-14, “Compensation-Retirement Benefits-Defined Benefit Plans-General (Subtopic 715-20): Disclosure Framework-Changes to the Disclosure Requirements for ~~Fair Value Measurement.~~Defined Benefit Plans.” Issued in August 2018, ~~the amendments in this~~ ASU ~~remove disclosure requirements in FASB ASC Topic 820 related to (1)~~2018-14 modifies the amount of, and reasons for, transfers between Level 1 and Level 2 of the fair value hierarchy; (2) the policy for timing of transfers between levels; (3) the valuation processes for Level 3 fair value measurements; and (4) for non-public entities, the changes in unrealized gains and losses for the period included in earnings for recurring Level 3 fair value measurements held at the end of the reporting period. The ASU also modifies disclosure requirements such that (1) in place of a rollforward for Level 3 fair value measurements, a non-public entity is required to disclose transfers into and out of Level 3 of the fair value hierarchy and purchases and issues of Level 3 assets and liabilities; (2) for investments in certain entities that calculate net asset value, an entity is required to disclose the timing of liquidation of an investee’s assets and the date that restrictions from redemption might lapse, only if the investee has communicated the timing to the entity or announced the timing publicly; and (3) it is clear that the measurement uncertainty disclosure is to communicate information about the uncertainty in measurement as of the reporting date. Additionally, this ASU adds disclosure requirements for ~~public entities about (1)~~employers that sponsor defined benefit pension or other postretirement plans. The amendments in ASU 2018-14 remove certain disclosure requirements that are no longer considered cost beneficial, clarify the ~~changes in unrealized gains~~specific requirements of disclosures and ~~losses for~~add disclosure requirements identified as relevant. Trustmark adopted the period included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period, and (2) the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. The amendments of ASU ~~2018-13 became~~2018-14 effective ~~for Trustmark on~~ January 1, ~~2020. Adoption~~2021. Trustmark will include the revised disclosures in its Annual Report on Form 10-K for the year ending December 31, 2021. Changes to the disclosures related to the defined benefit plans as a result of adopting ASU ~~2018-13 did~~2018-14 will not have a material impact onto Trustmark’s consolidated financial ~~statements. Disclosures required by FASB ASC Topic 820 are presented in Note 17 – Fair Value, of this report.~~statements.

~~ASU 2017-04, “Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment.”~~ Issued in January 2017, ASU 2017-04 simplifies the manner in which an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test. Step 2 measures a goodwill impairment loss by comparing the implied fair value of a reporting unit's goodwill with the carrying amount of that goodwill. In computing the implied fair value of goodwill under Step 2, an entity, prior to the amendments in ASU 2017-04, had to perform procedures to determine the fair value at the impairment testing date of its assets and liabilities, including unrecognized assets and liabilities, in accordance with the procedure that would be required in determining the fair value of assets acquired and liabilities assumed in a business combination. However, under the amendments in ASU 2017-04, an entity should (1) perform its annual or interim goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount, and (2) recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit's fair value, with the understanding that the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. Additionally, ASU 2017-04 removes the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment and, if it fails such qualitative test, to perform Step 2 of the goodwill impairment test. ASU 2017-04 became effective for Trustmark on January 1, 2020, and the amendments of this ASU will be applicable to the annual goodwill impairment

test performed as of October 1, 2020. Based on Trustmark’s annual goodwill impairment test performed as of October 1, 2019, the fair value of its reporting units exceeded the carrying value and, therefore, the related goodwill was not impaired.

~~ASU 2016-13, “Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.”~~ Issued in June 2016, ASU 2016-13 will add FASB ASC Topic 326, “Financial Instruments-Credit Losses” and finalizes amendments to FASB ASC Subtopic 825-15, “Financial Instruments-Credit Losses.” The amendments of ASU 2016-13 are intended to provide financial statement users with more decision-useful information related to expected credit losses on financial instruments and other commitments to extend credit by replacing the current incurred loss impairment methodology with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to determine credit loss estimates. The amendments of ASU 2016-13 eliminate the probable initial recognition threshold and, in turn, reflect an entity’s current estimate of all expected credit losses. ASU 2016-13 does not specify the method for measuring expected credit losses, and an entity is allowed to apply methods that reasonably reflect its expectations of the credit loss estimate. Additionally, the amendments of ASU 2016-13 require that credit losses on available for sale debt securities be presented as an allowance rather than as a write-down. The amendments of ASU 2016-13, and all subsequent ASUs issued by FASB to provide additional guidance and clarification related to this Topic, became effective for Trustmark on January 1, 2020.

As previously disclosed, Trustmark established a cross-functional Current Expected Credit Loss (CECL) Steering Committee, a CECL Solution Development Working Group and a CECL Working Group which included the appropriate members of Management to evaluate the impact this ASU, and all subsequent ASUs issued by FASB, will have on Trustmark’s financial position, results of operations and financial statement disclosures and determine the most appropriate method of implementing the amendments in these ASUs as well as any resources needed to implement the amendments. Trustmark selected a third-party vendor to provide allowance for loan loss software as well as advisory services in developing a new methodology that would be compliant with amendments of ASU 2016-13.

In accordance with the amendments of ASU 2016-13, Trustmark elected to maintain pools of loans that were previously accounted for under FASB ASC Subtopic 310-30 and will continue to account for these pools as a unit of account. Loans are only removed from the existing loan pools if they are written off, paid off or sold. Upon adoption of ASU 2016-13, the allowance for credit losses was determined for each pool and added to the pool’s carrying value to establish a new amortized cost basis. The difference between the unpaid principle balance of the pool and the new amortized cost basis is the noncredit premium or discount which will be amortized into interest income over the remaining life of the pool.

As a result of adopting the amendments of ASU 2016-13, Trustmark recorded a decrease to its ACL LHFI of $3.0 million and an increase to its ACL on off-balance sheet credit exposures of $29.6 million resulting in a one-time cumulative effect adjustment through retained earnings of $26.6 million ($19.9 million, net of tax) at the date of adoption. This adjustment included a qualitative adjustment to the allowance for credit losses related to loans and an allowance on off-balance sheet credit exposures. Trustmark estimates losses over an approximate one-year forecast period using Moody’s baseline economic forecasts, and then reverts to longer term historical loss experience over a one-year period.

Trustmark’s estimated allowance for credit losses on both held to maturity securities and available for sale securities under the CECL model was deemed immaterial due to the composition of the portfolios being primarily government agency-backed securities for which the risk of loss is minimal. Therefore, Trustmark did not recognize a cumulative effective adjustment through retained earnings at the date of adoption related to the held to maturity or available for sale securities.

Disclosures required by the amendments ASU 2016-13 are presented in Note 2 – Securities Available for Sale and Held to Maturity and Note 3 – Loans Held for Investment and Allowance for Credit Losses, of this report.

ASU 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” Issued in March 2020, ASU 2020-04 seeks to provided additional guidance, for a limited time, to ease the potential burden in accounting for or recognizing the effects of reference rate reform on financial reporting. The FASB issued ASU 2020-04 is response to concerns about the structural risks of interbank offered rates (IBORs) and, in particular, the risk that the London Interbank Offer Rate (LIBOR) will no longer be used. Regulators have begun reference rate reform initiatives to identify alternative reference rates that are more observable or transaction-based and less susceptible to manipulation. Stakeholders have raised operational challenges likely to arise with the reference rate reform, particularly related to contract modifications and hedge accounting. The amendments of ASU 2020-04, which are elective and apply to all entities, provide expedients and exceptions for applying GAAP to contract modifications and hedging relationships affected by the reference rate reform idif certain criteria are met. The amendments apply only to contracts and hedging relationships that reference LIBOR or another reference rate that is expected to be discontinued due to reference rate reform. The optional expedients for contract modifications should be applied consistently for all contracts or

transactions within the relevant Codification Topic or Subtopic or Industry Subtopic that contains the related guidance. The optional expedients for hedging relationships can be elected on an individual hedging relationship basis. As the guidance in ASU 2020-04 is intended to assist ~~entity’s~~entities during the global market-wide reference rate transition period, it is in effect for a limited time, from March 12, 2020 through December 31, 2022. Management is currently evaluating the impact to Trustmark as a result of the potential discontinuance of LIBOR, and a determination cannot be made at this time as to the impact the amendments of ASU 2020-04 or the reference rate reform will have on its consolidated financial statements.

~~ASU 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes.”~~ Issued in December 2019, ASU 2019-12 seeks to simplify the accounting for income taxes by removing certain exceptions to the general principles in FASB ASC Topic 740, Income Taxes. In particular, the amendments of ASU 2019-12 remove the exceptions to (1) the incremental approach for intra-period tax allocation when there is a loss from continuing operations and income or a gain from other items (e.g., discontinued operations or other comprehensive income); (2) the requirement to recognize a deferred tax liability for equity method investments when a foreign subsidiary becomes an equity method investment; (3) the ability not to recognize a deferred tax liability for a foreign subsidiary when a foreign equity method investment becomes a subsidiary; and (4) the general methodology for calculating income taxes in an interim period when a year-to-date loss exceeds the anticipated loss for the year. The amendments of ASU 2019-12 (1) require that an entity recognize a franchise tax (or similar tax), that is partially based on income, in accordance with FASB ASC Topic 740 and account for any incremental amount incurred as a non-income-based tax; (2) require that an entity evaluate when a step up in the tax basis of goodwill should be considered part of the business combination in which the book goodwill was originally recognized and when it should instead be considered a separate transaction; (3) specify that an entity is not required to allocate the consolidated amount of current and deferred tax expense to a legal entity that is not subject to tax in its separate financial statements, but rather may elect to do so for a legal entity that is both not subject to tax and disregarded by the taxing authority; and (4) require that an entity reflect the effect of an enacted change in tax laws or rates in the annual effective tax rate computation in the interim period that includes the enactment date. ASU 2019-12 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. Early adoption of ASU 2019-12 is permitted, including adoption in any interim period for periods for which financial statements have not yet been issued. An entity that elects to early adopt the amendments in an interim period should reflect any adjustments as of the beginning of the annual period that includes that interim period. Additionally, an entity that elects early adoption must adopt all the amendments in the same period. The amendments related to separate financial statements of legal entities that are not subject to tax should be applied on a retrospective basis for all periods presented. The amendments related to changes in ownership of foreign equity method investments or foreign subsidiaries should be applied on a modified retrospective basis through a cumulative-effect adjustment to retained earnings as of the beginning of the period of adoption. The amendments related to franchise taxes that are partially based on income should be applied on either a retrospective basis for all periods presented or a modified retrospective basis through a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year of adoption. All other amendments should be applied on a prospective basis. Trustmark intends to adopt the amendments in ASU 2019-12 during the first quarter of 2021. Adoption of ASU 2019-12 is not expected to have a material impact to Trustmark’s consolidated financial statements.

~~ASU 2018-14, “Compensation-Retirement Benefits-Defined Benefit Plans-General (Subtopic 715-20): Disclosure Framework-Changes to the Disclosure Requirements for Defined Benefit Plans.”~~ Issued in August 2018, ASU 2018-14 modifies the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans. The amendments in ASU 2018-14 remove certain disclosure requirements that are no longer considered cost beneficial, clarify the specific requirements of disclosures and add disclosure requirements identified as relevant. T~~he amendments of ASU 2018-14 become effective for fiscal years beginning after December 15, 2020. Trustmark plans to adopt these amendments during the first quarter of 2021.~~ Management is currently assessing all the potential impacts of the amendments in ASU 2018-14 on Trustmark’s consolidated financial statements; however, the adoption of ASU 2018-14 is not expected to have a material impact on Trustmark’s consolidated financial statements.

The following provides a narrative discussion and analysis of Trustmark Corporation’s (Trustmark) financial condition and results of operations. This discussion should be read in conjunction with the unaudited consolidated financial statements and the supplemental financial data included in Part I. Item 1. – Financial Statements of this report.

Trustmark, a Mississippi business corporation incorporated in 1968, is a bank holding company headquartered in Jackson, Mississippi. Trustmark’s principal subsidiary is Trustmark National Bank (TNB), initially chartered by the State of Mississippi in 1889. At ~~June 30, 2020,~~March 31, 2021, TNB had total assets of ~~$15.690~~$16.876 billion, which represented approximately 99.99% of the consolidated assets of Trustmark.

Through TNB and its other subsidiaries, Trustmark operates as a financial services organization providing banking and other financial solutions through ~~187~~181 offices and ~~2,798~~2,793 full-time equivalent associates (measured at ~~June 30, 2020)~~March 31, 2021) located in the states of Alabama, Florida (primarily in the northwest or “Panhandle” region of that state, which is referred to herein as Trustmark’s Florida market), Mississippi, Tennessee (in the Memphis and Northern Mississippi regions, which are collectively referred to herein as Trustmark’s Tennessee market), and Texas (primarily in Houston, which is referred to herein as Trustmark’s Texas market). Trustmark’s operations are managed along three operating segments: General Banking Segment, Wealth Management Segment and Insurance Segment. For a complete overview of Trustmark’s business, see the section captioned “The Corporation” included in Part I. Item 1. – Business of Trustmark’s Annual Report on Form 10-K for its fiscal year ended December 31, ~~2019 (2019~~2020 (2020 Annual Report).

Trustmark has been ~~proactive~~committed to meeting the banking and financial needs of its customers and communities for over 130 years, and remains focused on providing support, advice and solutions to meet its customers’ unique needs. Trustmark’s financial performance during the first quarter of 2021 reflect solid growth in ~~responding~~loans held for investment (LHFI) of $159.2 million, or 1.6%, and deposits of $334.7 million, or 2.4%. Mortgage banking revenue remained strong during the first quarter following record setting levels in the prior quarter. Improvement in the economic outlook resulted in negative provision and expense for credit losses, which also contributed to earnings for the first three months of 2021. Trustmark is 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 to enhance long-term shareholder value. Trustmark’s capital position remained solid, reflecting the consistent profitability of its diversified financial services businesses. Trustmark’s Board of Directors declared a quarterly cash dividend of $0.23 per share. The dividend is payable June 15, 2020, to shareholders of record on June 1, 2020.

The COVID-19 pandemic and actions taken to mitigate the spread of it have had and may continue to have an adverse impact on economic activity globally, nationally and locally, including the geographical area in which Trustmark operates and industries in which Trustmark regularly extends credit. For additional information regarding Trustmark’s exposure to industries impacted by the COVID-19 pandemic, please see the section captioned “Exposure to COVID-19 Stressed Industries.” Economic activity during the first three months of 2021 increased as certain restrictions were lifted following the availability of the COVID-19 vaccination; however, restrictions remain in place for many areas and the long-term effectiveness of the vaccine and the full impact of the COVID-19 pandemic on economies and financial markets remains unknown.

Additionally, the COVID-19 pandemic has significantly affected the financial markets and resulted in a number of actions by the FRB during 2020 and continuing in 2021. Market interest rates declined to and remain at historical lows. During 2020, the ten-year Treasury yield fell below 1.00% for the first time, and the FRB reduced the target federal funds rate to a range of 0.00% to 0.25% and announced a $700 billion quantitative easing program in response to the novel coronavirus (COVID-19) pandemic, and taken comprehensive action to support customers, associates and the communities it serves. Trustmark activated its Pandemic Preparedness Plan in March 2020 to protect the health and safety of its employees and customers, and continues to take additional precautions as recommendedexpected economic downturn caused by the ~~Centers~~COVID-19 pandemic. The FRB reduced the interest that it pays on excess reserves from 1.60% to 0.10% during 2020. These rates have continued into the first quarter of 2021. The prolonged reduction in interest rates has had and is expected to continue to have an adverse effect on net interest income and margins and profitability for ~~Disease Control~~financial institutions, including Trustmark.

In the April 2021 “Summary of Commentary on Current Economic Conditions by Federal Reserve District,” the twelve Federal Reserve Districts’ reports suggested that economic activity during the reporting period (covering the period from February 22, 2021 through April 5, 2021) increased to a moderate pace; however, changes in economic activities remained varied by sector. Reports by the twelve Federal Reserve Districts (Districts) noted the following during the reporting period:

Reports by the Federal Reserve’s Sixth District, Atlanta (which includes Trustmark’s Alabama, Florida and ~~Prevention~~Mississippi market regions), Eighth District, St. Louis (which includes Trustmark’s Tennessee market region), and ~~mandated~~Eleventh District, Dallas (which includes Trustmark’s Texas market region), noted similar findings for the reporting period as those discussed above. The Federal Reserve’s Sixth District also noted that banking conditions were steady, cash balances continued to increase as deposits remained elevated, loan demand weakened, net interest margins remained compressed, financial institutions continued to add to their securities portfolios, loan balances remained flat across most portfolios with commercial real estate balances declining slightly and increases to loan loss reserves slowed as credit quality had not deteriorated. The Federal Reserve’s Eighth District also reported that banking conditions improved moderately as outstanding loan volumes increased moderately, noting strong growth in residential real estate lending and slight growth in consumer and commercial loans, banks reported ample liquidity, high asset quality and decreasing deferral requests on loan payments, and demand for the second round of Paycheck Protection Program (PPP) loans was much lower than for the first round. The Federal Reserve’s Eleventh District also reported that drilling and completion activity rose further, oil field services firms noted improved margin outlooks and a pickup in hiring driven by ~~government ordinances. Trustmark remains committed~~higher demand, exploration and production firms said they expect continued incremental increases in drilling and completion activity in the second quarter, and sentiment in the oil and gas industry was notably improved, however, contacts remain anxious about the adverse impact of tighter federal regulations, ample spare capacity and worsening COVID-19 statistics in Europe relating to ~~serving its customers through its branches, actively promoting digital touchpoints~~demand, profitability and pricing.

It is unknown what the complete financial effect of the COVID-19 pandemic will be on Trustmark. It is reasonably possible that estimates made in the financial statements, including ~~its automated teller machine (ATM)~~the expected credit losses on loans and ~~interactive teller machine (ITM) network~~off-balance sheet credit exposures, could be materially and ~~robust digital and mobile banking options. Trustmark has been proactive~~adversely impacted in ~~reaching out to customers to discuss challenges and solutions, provided waivers~~the near term as a result of certain fees and charges, granted extensions, deferrals and forbearance as appropriate, paused all foreclosures and repossessions and refrained from negative credit bureau reporting for previously up-to-date customers. To date, Trustmark has not incurred any significant disruptions to its business activities.the adverse conditions associated with the COVID-19 pandemic.

The full impact of COVID-19 is unknown and ~~rapidly evolving.~~continues to evolve rapidly. It has caused substantial disruption in international and the United States economies, markets and employment. The ~~outbreak~~pandemic has had and may continue to have a significant adverse impact on certain industries Trustmark serves. The following provides a summary of Trustmark’s exposure to COVID-19 impacted industries within the ~~loans held for investment (LHFI)~~LHFI portfolio as of ~~June 30, 2020:~~March 31, 2021:

During the three and six months ended June 30, 2020, Trustmark incurred total credit loss expenses of $24.4 million and $51.8 million, respectively, primarily due to net changes in the economic forecast due to the negative effects of the COVID-19 pandemic on the overall economy and macroeconomic factors. Because of the significant uncertainties related to the ultimate duration of the COVID-19 pandemic and its potential effects on clients and prospects, and on the national and local economy as a whole, there can be no assurances as to how the crisis may ultimately affect Trustmark’s loan portfolio.

On March 22, 2020, the federal banking agencies issued an “Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus”. This guidance ~~encourages~~encouraged financial institutions to work prudently with borrowers that may be unable to meet their contractual obligations because of the effects of COVID-19. The guidance ~~goes~~went on to explain that in consultation with the ~~Financial Accounting Standards Board (FASB)~~FASB staff that the federal banking agencies ~~conclude~~concluded that short-term modifications (e.g., six months) made on a good faith basis to borrowers ~~who~~that were current as of the implementation date of a relief program ~~are~~were not ~~troubled debt restructurings (TDRs).~~TDRs. On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the CARES Act), a ~~$2 trillion~~ stimulus package intended to provide relief to businesses and

consumers in the United States struggling as a result of the pandemic, was signed into law. Section 4013 of the CARES Act also addressed COVID-19 related modifications and specified that COVID-19 related modifications on loans that were current as of December 31, 2019 ~~are~~were not TDRs. On April 7, 2020, the federal banking agencies revised its earlier guidance to clarify the interaction between the March 22, 2020 interagency statement and section 4013 of the CARES Act, as well as the agencies’ views on consumer protection considerations. AsAt March 31, 2021, the balance of ~~June 30, 2020, Trustmark had 2,646 individual~~ loans ~~with aggregate principal balances totaling $1.419 billion which were modified~~remaining under ~~this guidance. In addition, Trustmark had 46 individual loans with aggregate principal balances totaling $2.6~~some type of COVID-19 related concession totaled $28.1 million compared to $34.2 million at June 30, 2020 which were not eligible under this guidance, but were not classified as a TDR because the concessions were temporary (not exceeding six months). More of these types of modifications are likely to be executed in the third quarter ofDecember 31, 2020. Commercial concessions were primarily either interest only for 90 days or full payment deferrals for 90 days. Consumer concessions were 90-day full payment deferrals.

A provision in the CARES Act included ~~a $349 billion fund~~initial funds for the creation of the ~~Paycheck Protection Program (PPP)~~PPP through the Small Business Administration (SBA) and Treasury Department. The PPP is intended to provide loans to small businesses, sole proprietorships, independent contractors and self-employed individuals to pay their employees, rent, mortgage interest and utilities. PPP loans are forgivable, in whole or in part, if the proceeds are used for payroll and other permitted purposes in accordance with the requirements of the PPP. If not forgiven, in whole or in part, these loans carry a fixed rate of 1.00% per annum with payments deferred for the first six months of the loan. Originally, the loans carried a term of two years under SBA rules implemented by the CARES Act, but a June 5, 2020 amendment to the CARES Act provided for a five-year minimum loan term for loans made beginning as of such date, and permitted lenders and borrowers to mutually agree to amend existing two-year loans to have terms of five to ten years. The loans are 100% guaranteed by the SBA. The SBA ~~pays~~and Treasury Department released a series of rules, guidance documents and processes governing the ~~originating bank~~PPP, including a ~~processing fee ranging from 1.0% to 5.0%, based~~streamlined process for loan forgiveness of PPP loans of $150 thousand or less. The Consolidated Appropriations Act, 2021, enacted on ~~the size~~December 27, 2020, extended some of the ~~loan. The SBA began accepting submissions for these PPP loans on April 3, 2020 and reached the limit~~relief provisions in certain respects of funds originally available to disburse under this program on April 16, 2020. Legislation providing an additional $320 billion in funding for the PPP was signed into law on April 24, 2020. The SBA began accepting applications for the new funding on April 27, 2020. Under the CARES Act, and ~~interim final rules released by~~appropriated an additional funds to the ~~federal banking agencies,~~PPP and permitted certain PPP borrowers to make “second draw” loans. Subsequently, the American Rescue Plan Act of 2021, enacted on March 11, 2021, expanded the eligibility criteria for both first and second draw PPP loans ~~receive a zero percent risk weight~~and revised the exclusions from payroll costs for ~~regulatory capital~~ purposes of loan forgiveness. The PPP Extension Act of 2021, enacted on March 30, 2021, extended the PPP through May 31, 2021.

From April to August 2020, Trustmark originated PPP loans for qualified small businesses and if pledged as part of the Paycheck Protection Program Liquidity Facility (PPPLF), are subtracted from the lender’s tier 1 leverage ratio. The PPPLF was established by the Federal Reserve Board (FRB) to provide a liquidity source toother borrowers. Trustmark resumed submitting PPP ~~lenders, through non-recourse credit secured by PPP loans.~~

~~TNB began submitting~~ applications to the SBA on behalf of ~~its customers on Saturday, April 4, 2020~~qualified small businesses and ~~began funding those loans on Monday, April 13, 2020. Through~~other borrowers under the CARES Act, as amended by the Consolidated Appropriations Act, 2021, in January 2021. During the first quarter of 2021, Trustmark originated 4,774 PPP ~~TNB had 9,693~~ loans totaling ~~$969.7~~$318.0 million ~~with an average loan size~~($301.5 million net of ~~$100 thousand outstanding as of June 30, 2020. Net~~$16.5 million of deferred fees and ~~costs of $29.9 million,~~costs). At March 31, 2021, Trustmark had 7,456 PPP loans ~~totaled $939.8~~outstanding totaling $701.8 million ($679.7 million net of $22.1 million of deferred fees and costs), compared to 7,398 PPP loans outstanding totaling $623.0 million ($610.1 million net of 12.9 million of deferred fees and costs) at ~~June 30,~~December 31, 2020. During the first three months of 2021, PPP loans totaling $239.2 million were forgiven by SBA, compared to PPP loans totaling $346.9 million forgiven by the SBA during the fourth quarter of 2020. Due to the amount and nature of the PPP loans, these loans are not included in Trustmark’s LHFI portfolio and are presented separately in the accompanying consolidated balance sheet. ~~At June 30, 2020, TNB had $4.0 million of outstanding PPP loans pledged as collateral at the PPPLF.~~ Trustmark cannot predict the amount of PPP loans that will be forgiven in whole or in part by the SBA, nor can it predict the magnitude and timing of the impact the PPP loans and related fees will have on Trustmark’s net interest margin. However, ~~TNB’s~~ participation in the PPP will likely have a significant impact on Trustmark’s asset mix and net interest margin ~~for the remainder of 2020~~in 2021 as a result of the addition of these low interest rate loans and the related processing fees earned on these loans.

Trustmark has been committed to meeting the banking and financial needs of its customers and communities for over 130 years. During the COVID-19 pandemic, Trustmark remains focused on providing support, advice and solutions to meet its customers’ unique needs. During the first six months of 2020, Trustmark experienced strong growth in its fee businesses as noninterest income increased $43.6 million, or 47.9%, when compared to the same time period in 2019. Trustmark continued to maintain and expand customer relationships as reflected by growth in the LHFI portfolio of $324.2 million, or 3.5%, and growth in deposits of $2.260 billion, or 20.1%, during the first six months of 2020. Trustmark is 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 to enhance long-term shareholder value. Trustmark continued to invest in its insurance business with the completion of the acquisition of another Mississippi-based agency during the second quarter of 2020. Trustmark’s capital position remained solid, reflecting the consistent profitability of its diversified financial services businesses. Trustmark’s Board of Directors declared a quarterly cash dividend of $0.23 per share. The dividend is payable September 15, 2020, to shareholders of record on September 1, 2020.

On March 11, 2020, the World Health Organization declared the outbreak of COVID-19 as a global pandemic, which continues to spread throughout the United States and around the world. The COVID-19 pandemic has adversely affected, and may continue to

~~adversely affect economic activity globally, nationally and locally.~~ Actions taken around the world to help mitigate the spread of COVID-19 include restrictions on travel, quarantines in certain areas, and forced closures for certain types of public places and businesses. COVID-19 and actions taken to mitigate the spread of it have had and are expected to continue to have an adverse impact on the economies and financial markets of many regions, including the geographical area in which Trustmark operates.

Additionally, the COVID-19 pandemic has significantly affected the financial markets and has resulted in a number of actions by the FRB. Market interest rates have declined significantly. On March 3, 2020, the ten-year Treasury yield fell below 1.00% for the first time, and the FRB reduced the target federal funds rate by 50 basis points to a range of 1.00% to 1.25%. On March 15, 2020, the FRB further reduced the target federal funds rate by 100 basis points to a range of 0.00% to 0.25% and announced a $700 billion quantitative easing program in response to the expected economic downturn caused by the COVID-19 pandemic. The FRB reduced the interest that it pays on excess reserves from 1.60% to 1.10% on March 3, 2020, and then to 0.10% on March 15, 2020. Trustmark expects that these reductions in interest rates, especially if prolonged, could adversely affect its net interest income and margins and its profitability.

In the July 2020 “Summary of Commentary on Current Economic Conditions by Federal Reserve District,” the twelve Federal Reserve Districts’ reports suggested that economic activity during the reporting period (covering the period from May 18, 2020 through July 6, 2020) increased in almost all Districts, but remains well below levels prior to the COVID-19 pandemic. Reports by the twelve Federal Reserve Districts noted the following during the reporting period:

Reports by the Federal Reserve’s Sixth District, Atlanta (which includes Trustmark’s Alabama, Florida and Mississippi market regions), Eighth District, St. Louis (which includes Trustmark’s Tennessee market region), and Eleventh District, Dallas (which includes Trustmark’s Texas market region), noted similar findings for the reporting period as those discussed above.

It is unknown what the complete financial effect of the COVID-19 pandemic will be on Trustmark. It is reasonably possible that estimates made in the financial statements, including the expected credit losses on loans and off-balance sheet credit exposures, could be materially and adversely impacted in the near term as a result of the adverse conditions associated with the COVID-19 pandemic.

Trustmark reported net income of ~~$32.2~~$52.0 million, or basic and diluted earnings per share (EPS) of ~~$0.51,~~$0.82, in the ~~second~~first quarter of ~~2020,~~2021, compared to ~~$42.1~~$22.2 million, or basic and diluted EPS of ~~$0.65,~~$0.35, in the ~~second~~first quarter of ~~2019.~~2020. Trustmark’s reported performance during the quarter ended ~~June 30, 2020~~March 31, 2021 produced a return on average tangible equity of ~~10.32%~~15.56%, a return on average assets of ~~0.83%~~1.26%, an average equity to average assets ratio of ~~10.73%~~10.55% and a dividend payout ratio of ~~45.10%~~28.05%, compared to a return on average tangible equity of ~~14.14%~~7.34%, a return on average assets of ~~1.24%~~0.66%, an average equity to average assets ratio of ~~11.78%~~12.02% and a dividend payout ratio of ~~35.38%~~65.71% during the quarter ended ~~June 30, 2019.~~

Trustmark reported net income of $54.4 million, or basic and diluted EPS of $0.86 and $0.85, respectively, for the first six months of 2020, compared to $75.5 million, or basic and diluted EPS of $1.16, for the first six months of 2019. Trustmark’s reported performance during the first six months of 2020 produced a return on average tangible equity of 8.84%, a return on average assets of 0.75%, an average equity to average assets ratio of 11.33% and a dividend payout ratio of 53.49%, compared to a return on average tangible equity of 12.86%, a return on average assets of 1.12%, an average equity to average assets ratio of 11.81% and a dividend payout ratio of 39.66% during the first six months of 2019.March 31, 2020.

Total revenue, which is defined as net interest income plus noninterest income, for the three ~~and six~~ months ended ~~June 30, 2020~~March 31, 2021 was ~~$174.5~~$162.9 million, ~~and $343.7 million, an increase~~a decrease of ~~$17.1~~$6.3 million, or ~~10.9%~~3.7%, ~~and $40.1 million, or 13.2%, respectively,~~ when compared

to the same time ~~periods~~period in ~~2019.~~2020. The ~~increase~~decrease in total revenue for the three ~~and six~~ months ended ~~June 30, 2020~~March 31, 2021 when compared to the same time ~~periods~~period in ~~2019, was~~2020, resulted from a decline in noninterest income, primarily due to ~~the increase~~decreases in mortgage banking, ~~net.~~net and service charges on deposit accounts, partially offset by an increase in bank card and other fees, as well as a decline in net interest income, primarily due to declines in interest and fees on LHFI and LHFS and interest on securities, partially offset by an increase in interest and fees on PPP loans and a decline in interest on deposits. These factors are discussed in further detail below.

Net interest income for the three ~~and six~~ months ended ~~June 30, 2020~~March 31, 2021 totaled ~~$105.0~~$102.3 million, ~~and $209.0 million, respectively,~~ a decrease of ~~$2.7~~$1.6 million, or ~~2.5%~~1.6%, ~~and $3.6 million, or 1.7%, respectively,~~ when compared to the same time ~~periods~~period in ~~2019, as declines in interest income were largely offset by a decrease in interest on deposits resulting from lower interest rates.~~2020. Interest income totaled ~~$114.7 million and $235.0~~$109.5 million for the three ~~and six~~ months ended ~~June 30, 2020, respectively,~~March 31, 2021, a decline of ~~$15.5~~$10.9 million, or ~~11.9%~~9.1%, ~~and $20.6 million, or 8.1%, respectively,~~ when compared to the same time ~~periods~~period in ~~2019,~~2020, principally due to declines in interest and fees from LHFI and LHFS and interest on securities as a result of lower interest rates, ~~during the respective periods.~~partially offset by an increase in interest and fees from PPP loans. Interest expense totaled ~~$9.7 million and $26.1~~$7.1 million for the three ~~and six~~ months ended ~~June 30, 2020, respectively,~~March 31, 2021, a decrease of ~~$12.8~~$9.3 million, or ~~56.9%~~56.6%, ~~and $17.0 million, or 39.4%, respectively,~~ when compared to the same time ~~periods~~period in ~~2019,~~2020, principally due to the decline in interest on deposits as a result of lower interest rates.

Noninterest income for the three ~~and six~~ months ended ~~June 30, 2020~~March 31, 2021 totaled ~~$69.5~~$60.6 million, ~~and $134.8 million, respectively, an increase~~a decrease of ~~$19.9~~$4.7 million, or ~~40.0%~~7.2%, and $43.6 million, or 47.9%, respectively, when compared to the same time periods in 2019. The increase in noninterest income for the three and six months ended June 30, 2020 when compared to the same time periods in 2019 was primarily due to an increase in mortgage banking, net. Mortgage banking, net totaled $33.7 million for the three months ended June 30, 2020, an increase of $23.5 million when compared to the same time period in ~~2019,~~2020, primarily due to decreases in mortgage banking, net and service charges on deposit accounts, partially offset by an increase in bank cards and other fees. Mortgage banking, net totaled $20.8 million for the three months ended March 31, 2021, a decrease of $6.7 million, or 24.3%, when compared to the same time period in 2020, principally due to a decline in the net hedge ineffectiveness and an increase in the MSR run-off partially offset by an increase in the gain on sales of loans, net. ~~Mortgage banking, net~~Service charges on deposit accounts totaled ~~$61.2~~$7.4 million for the ~~six~~three months ended ~~June 30, 2020, an increase~~March 31, 2021, a decrease of ~~$47.5~~$2.7 million, or 26.7%, when compared to the same time period in ~~2019,~~2020 principally due to a decline in the amount of non-sufficient funds (NSF) and overdraft occurrences on consumer deposit accounts primarily as a result of higher average customer account balances resulting from the various COVID-19 related stimulus programs. Bank card and other fees totaled $9.5 million for the three months ended March 31, 2021, an increase of $4.1 million, or 76.9%, when compared to the same time period in ~~the gain on sales of loans, net and the positive net hedge ineffectiveness.~~2020 principally due to revenue from customer derivatives.

Noninterest expense for the three ~~and six~~ months ended ~~June 30, 2020~~March 31, 2021 totaled ~~$118.7~~$112.2 million, ~~and $242.5 million, respectively, an increase~~a decrease of ~~$12.6~~$11.6 million, or ~~11.8%~~9.4%, ~~and $30.3 million, or 14.3%, respectively,~~ when compared to the same time ~~periods~~period in ~~2019,~~2020. The decrease in noninterest expense when the first three months of 2021 is compared to the same time period in 2020 was principally due to ~~increases~~a decrease in ~~salaries and employee benefits and services and fees and the addition of~~ the credit loss expense related to off-balance sheet credit exposures ~~as a result of adopting FASB ASC Topic 326 “Financial Instruments – Credit Losses”.~~partially offset by increases in salaries and employee benefits and services and fees. Salaries and employee benefits totaled ~~$66.1 million and $135.3~~$71.2 million for the three ~~and six~~ months ended ~~June 30, 2020, respectively,~~March 31, 2021, an increase of ~~$4.2~~$2.0 million, or ~~6.7%~~2.9%, ~~and $12.4 million, or 10.1%, respectively,~~ when compared to the same time ~~periods~~period in ~~2019. During~~2020. The increase in salaries and employee benefits when the first quarter of 2020, Trustmark completed a voluntary early retirement program and incurred $4.3 million of non-routine salaries and employee benefits expense related to this program. Excluding these non-routine expenses, salaries and employee benefits increased $8.1 million, or 6.6%, when the first six months of 20202021 is compared to the same time period in ~~2019. The increase in salaries and employee benefits expense, excluding the non-routine expenses, for the three and six months ended June 30,~~ 2020 was principally due to higher commissions expense resulting from improvements in mortgage production, ~~as well as~~ an increase in salary expenses as a result of general merit increases and increases in incentive stock compensation and other performance based incentives, partially offset by non-routine expenses related to the ~~COVID-19 pandemic, as a result~~voluntary early retirement program completed by Trustmark during the first quarter of ~~temporary compensation adjustments~~2020. Trustmark incurred $4.3 million of non-routine salaries and ~~one-time payments~~employee benefits expense during the first quarter of 2020 related to ~~front-line associates.~~this program. Excluding these non-routine expenses, salaries and employee benefits increased $6.3 million, or 9.7%, when the first three months of 2021 is compared to the same time period in 2020. Services and fees totaled ~~$20.6 million and $40.5~~$22.5 million for the three ~~and six~~ months ended ~~June 30, 2020, respectively,~~March 31, 2021, an increase of $2.6 million, or ~~14.2%~~12.8%, ~~and $5.5 million, or 15.8%, respectively,~~ when compared to the same time ~~periods~~period in ~~2019,~~2020, primarily due to increases in legal fees related to ongoing litigation matters, service fees related to independent contractors and data processing charges related to software.

Trustmark adopted FASB ASC Topic 326, in accordance with the amendments of FASB Accounting Standard Update (ASU) 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments,” effective January 1, 2020. The guidance in FASB ASC 326 replaces Trustmark’s previous incurred loss methodology with a methodology that reflects the current expected credit losses (often referred to as CECL) and requires consideration of a broader range of reasonable and supportable information to determine credit losses. Trustmark’s allowance for credit losses (ACL) for LHFI is an estimate of expected credit losses inherent within Trustmark’s existing LHFI portfolio. The ACL, LHFI is adjusted through the provision for credit losses and reduced by the charge off of loan amounts, net of recoveries. FASB ASC Topic 326 also requires Trustmark to estimate expected credit losses for off-balance sheet credit exposures which are not unconditionally cancellable by Trustmark. Trustmark maintains a separate allowance for credit losses for off-balance sheet credit exposures, including unfunded commitments and letters of credit. Adjustments to the allowance for credit losses on off-balance sheet credit exposures are recorded as noninterest expense in credit loss expense related to off-balance sheet credit exposures. Trustmark adopted FASB ASC Topic 326 using the modified retrospective approach prescribed by the amendments of FASB ASU 2016-13; therefore, prior period loan loss provision balances are presented under legacy GAAP and may not be comparable to current period credit loss presentation.

Trustmark’s provision for credit losses for the three ~~and six~~ months ended ~~June 30, 2020~~March 31, 2021 totaled ~~$18.2~~a negative $10.5 million ~~and $38.8 million, respectively,~~ compared to a provision for ~~loan~~credit losses ~~LHFI~~ of ~~$2.5 million and $4.1~~$20.6 million for the ~~three and six months ended June 30, 2019, respectively.~~same time period in 2020. Credit loss expense related to off-balance sheet credit exposures totaled a negative $9.4 million for the three ~~and six~~ months ended ~~June 30, 2020 totaled $6.2~~March 31, 2021 compared to $6.8 million ~~and $13.0 million, respectively.~~for the same time period in 2020. The ~~increase~~decrease in both the provision for credit losses and the credit loss expense related to off-balance sheet credit exposures for the first ~~six~~three months of ~~2020~~2021 was primarily due to ~~net changes~~improvements in the ~~economic~~macroeconomic forecast used in the

~~due to the current and anticipated negative effects of the COVID-19 pandemic on the overall economy and macroeconomic factors used in the~~ quantitative calculation of the ~~ACL.~~allowance for credit losses (ACL). Please see the section captioned “Provision for Credit Losses” for additional information regarding the provision for credit losses.

At ~~June 30, 2020,~~March 31, 2021, nonperforming assets totaled ~~$68.3~~$74.2 million, a decrease of ~~$14.2 million,~~$614 thousand, or ~~17.2%~~0.8%, compared to December 31, ~~2019, reflecting declines~~2020, primarily due to a decline in ~~both nonaccrual LHFI and~~ other real estate. Nonaccrual LHFI totaled ~~$50.0~~$63.5 million at ~~June 30, 2020, a decrease~~March 31, 2021, an increase of ~~$3.2 million,~~$386 thousand, or ~~6.1%~~0.6%, relative to December 31, ~~2019,~~2020, primarily due to ~~reductions,~~LHFI placed on nonaccrual status largely offset by one large commercial credit which was returned to accrual status as well as pay-offs ~~and charge-offs~~ of nonaccrual LHFI in Trustmark’s Mississippi ~~and Tennessee~~ market ~~regions, which were partially offset by LHFI placed on nonaccrual status in the Mississippi and Alabama market regions during the first six months of 2020.~~region. Other real estate totaled ~~$18.3~~$10.7 million at ~~June 30, 2020,~~March 31, 2021, a decline of ~~$11.0~~$1.0 million, or ~~37.5%~~8.6%, compared to December 31, ~~2019,~~2020, principally due to properties sold in Trustmark’s Mississippi, Alabama ~~Florida~~ and Tennessee market regions.

LHFI totaled ~~$9.660~~$9.984 billion at ~~June 30, 2020,~~March 31, 2021, an increase of ~~$324.2~~$159.2 million, or ~~3.5%~~1.6%, compared to December 31, 2019. On January 1, 2020, Trustmark transferred $72.6 million, the remaining balance of the loans acquired in the BancTrust merger, from acquired impaired loans to LHFI as purchased credit deteriorated (PCD) loans as part of its adoption of FASB ASC Topic 326. For additional information regarding the acquired loans transferred to LHFI, see the section captioned “Acquired Loans.” Excluding the transferred acquired loans, LHFI increased $251.6 million, or 2.7%, compared to December 31, 2019.2020. The increase in LHFI ~~excluding the transferred acquired loans,~~ during the first ~~six~~three months of ~~2020~~2021 was primarily due to net growth in LHFI secured by real estate across all five market regions, ~~as well as increases in other commercial loans in the Mississippi and Tennessee market regions,~~ partially offset by declines in other commercial ~~and industrial~~ LHFI in the Mississippi, Texas, Alabama and ~~Tennessee market regions and state and other political subdivision loans in Trustmark’s Alabama, Texas and Mississippi~~Florida market regions. For additional information regarding changes in LHFI and comparative balances by loan category, see the section captioned “LHFI.”

Management has continued its practice of maintaining excess funding capacity to provide Trustmark with adequate liquidity for its ongoing operations. In this regard, Trustmark benefits from its strong deposit base, its highly liquid investment portfolio and its access to funding from a variety of external funding sources such as upstream federal funds lines, FHLB advances and, on a limited basis, brokered deposits. See the section captioned “Liquidity” for further discussion of the components of Trustmark’s excess funding capacity.

Total deposits were ~~$13.505~~$14.383 billion at ~~June 30, 2020,~~March 31, 2021, an increase of ~~$2.260 billion,~~$334.7 million, or ~~20.1%~~2.4%, compared to December 31, ~~2019,~~2020, primarily reflecting ~~increases in both noninterest-bearing and interest-bearing deposit accounts as customers deposited~~deposits of proceeds from line draws, PPP loans and other COVID-19 related stimulus programs. During the first ~~six~~three months of ~~2020,~~2021, noninterest-bearing deposits increased ~~$989.3~~$357.0 million, or ~~34.2%~~8.2%, ~~primarily~~ due to growth ~~in commercial and consumer~~across all types of noninterest-bearing deposit accounts. Interest-bearing deposits ~~increased $1.271 billion,~~decreased $22.3 million, or ~~15.2%~~0.2%, during the first ~~six~~three months of ~~2020,~~2021, primarily due to declines in public interest checking accounts and all categories of certificates of deposits, largely offset by growth in all other categories of ~~interest checking accounts, commercial money market~~interest-bearing deposit ~~accounts, and consumer savings accounts, partially offset by declines in consumer time deposits.~~accounts.

On March ~~27, 2020, President Trump signed~~5, 2021, the ~~CARES Act,~~United Kingdom Financial Conduct Authority (FCA), which ~~established a $2 trillion economic stimulus package, including cash payments to individuals, supplemental unemployment insurance benefits~~regulates London Interbank Offered Rate (LIBOR), confirmed that the publication of most LIBOR term rates will end on June 30, 2023 (excluding 1-week U.S. LIBOR and ~~$349 billion to fund~~2-month U.S. LIBOR, the PPP, a loan program administered by the SBA. Under the PPP, small businesses, sole proprietorships, independent contractors and self-employed individuals may apply for loans from existing SBA lenders and other approved regulated lenders that enroll in the program, subject to numerous limitations and eligibility criteria. TNB is participating as a lender in the PPP. Congress appropriated an additional $320 billion to the PPPpublication of which will end on December 31, 2021). Additionally, on April ~~24, 2020,~~6, 2021, New York Governor Cuomo signed into law legislation that provides for the substitution of an alternative reference rate, the Secured Overnight Funding Rate (SOFR), in any LIBOR-based contract governed by New York state law that does not include clear fallback language, once LIBOR is discontinued. The Federal Reserve and ~~amended the PPP on June 5, 2020 to make the terms of the PPP loans and loan forgiveness more flexible.~~

~~In addition, the CARES Act and related guidance from the~~other federal banking agencies ~~provide~~have continued to encourage banks to transition away from LIBOR as soon as practicable. Given LIBOR’s extensive use across financial markets, the transition away from LIBOR presents various risks and challenges to financial markets and institutions, including Trustmark. For additional information regarding the ~~option to temporarily suspend requirements under GAAP related to classification~~transition from LIBOR and Trustmark’s management of ~~certain loan modifications as TDRs to account for~~this transition, please see the ~~current and anticipated effects~~respective risk factor included in Part I. Item 1A. – Risk Factors, of ~~COVID-19.~~

The CARES Act permits financial institutions to defer temporarily the use of FASB ASU 2016-13, also known as CECL, for a limited period of time, but Trustmark has elected not to apply such a deferral. Relatedly, the federal bank regulatory agencies issued an interim final rule effective March 31,Trustmark’s 2020 that allows banking organizations that implement CECL this year to elect to mitigate the effects of the CECL accounting standard on their regulatory capital for two years. This two-year delay is in addition to the three-year transition period that the agencies had already made available (five-year phase-in transition period). Trustmark has elected to defer the regulatory capital effects of CECL in accordance with the interim final rule, which will largely delay the effects of the adoption of CECL on its regulatory capital for the next two years, after which the effects will be phased-in over a three-year period from January 1, 2022 through December 31, 2024.

The CARES Act also includes a range of other provisions designed to support the U.S. economy and mitigate the impact of COVID-19 on financial institutions and their customers, including through the authorization of various programs and measures that the U.S. Department of the Treasury, the FRB and other federal agencies may or are required to implement. Under section 4022 of the CARES Act, a mortgage servicer must grant up to two 180-day forbearances to any borrower with a federally backed mortgage loan who affirms that he or she is experiencing financial hardship during the COVID-19 emergency. Additionally, servicers of federally backed mortgage loans are prohibited from initiating judicial or non-judicial foreclosures, other than with respect to vacant or abandoned property, for at least 60 days beginning March 18, 2020. Under section 4023 of the CARES Act, a servicer of a multifamily mortgage loan must grant up to three 30-day forbearances to a multifamily borrower that was current on payments as of February 1, 2020, requests forbearance, and affirms that the borrower is experiencing a financial hardship during the COVID-19 emergency. This provision applies from the date of enactment until the earlier of (i) the termination date of the national emergency declared by the President on March 13, 2020, or (ii) December 31, 2020. Further, in response to the COVID-19 outbreak, the FRB has implemented or announced a number of facilities to provide emergency liquidity to various segments of the U.S. economy and financial markets.

On May 20, 2020, the Office of the Comptroller of the Currency (OCC) released a final rule revising its regulations implementing the Community Reinvestment Act (CRA). Among other things, the final rule establishes a new evaluation framework to assess the distribution of an OCC-supervised institution’s retail loans in major retail lending business lines within each assessment area and the value of the institution’s qualifying CRA activities relative to its retail domestic deposits, and clarifies the types of loans, investments, and services that are qualifying CRA activities. The final rule becomes effective on October 1, 2020, and requires institutions of TNB’s size to comply with its most significant changes beginning January 1, 2023. Management is reviewing the potential impact of the final rule on TNB.

In October 2017, the CFPB issued a final rule generally requiring lenders that make certain covered short-term loans, longer-term balloon-payment loans, or longer-term loans with certain costs and features, to reasonably determine that a borrower of a covered loan has the ability to repay such a loan, make certain disclosures to the borrower before attempting to withdraw payment from the borrower’s account, forego from making three consecutive attempts to withdraw payments and report covered loans to registered information systems. On July 7, 2020, the CFPB rescinded the rule’s requirements for a lender to determine a consumer’s ability to repay a covered loan and report covered loans to registered information systems, and retained the rule’s other requirements. Based on TNB’s current credit portfolio, any covered loans made by TNB are considered exempt “accommodation loans” under the CFPB’s 2017 final rule, and accordingly, Trustmark does not expect that the 2017 final rule, or the July 7, 2020 rescission of the rule’s underwriting and reporting requirements, will have a material impact on its operations.Annual Report.

For additional information regarding legislation and regulation applicable to Trustmark, see the section captioned “Supervision and Regulation” included in Part I. Item 1. – Business of Trustmark’s ~~2019~~2020 Annual Report.

The following tables present financial data derived from Trustmark’s consolidated financial statements as of and for the periods presented ($ in thousands, except per share data):

	Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended March 31,
	2020			2019			2020			2019			2021			2020
Consolidated Statements of Income
Total interest income	$	114,653		$	130,136		$	235,047		$	255,627		$	109,472		$	120,394
Total interest expense		9,653			22,412			26,095			43,095			7,136			16,442
Net interest income		105,000			107,724			208,952			212,532			102,336			103,952
Provision for credit losses ~~(1)~~		18,185			2,486			38,766			4,097			(10,501	)		20,581
Provision for loan losses, acquired loans (1)		—			106			—			184
Noninterest income		69,511			49,639			134,775			91,130			60,583			65,264
Noninterest expense		118,659			106,101			242,469			212,122			112,181			123,810
Income before income taxes		37,667			48,670			62,492			87,259			61,239			24,825
Income taxes		5,517			6,530			8,124			11,780			9,277			2,607
Net Income	$	32,150		$	42,140		$	54,368		$	75,479		$	51,962		$	22,218

Total Revenue (2)	$	174,511		$	157,363		$	343,727		$	303,662
Total Revenue (1)													$	162,919		$	169,216

Per Share Data
Basic earnings per share	$	0.51		$	0.65		$	0.86		$	1.16
Diluted earnings per share		0.51			0.65			0.85			1.16
Basic EPS													$	0.82		$	0.35
Diluted EPS														0.82			0.35
Cash dividends per share		0.23			0.23			0.46			0.46			0.23			0.23

Performance Ratios
Return on average equity		7.76	%		10.53	%		6.61	%		9.52	%		11.98	%		5.45	%
Return on average tangible equity		10.32	%		14.14	%		8.84	%		12.86	%		15.56	%		7.34	%
Return on average assets		0.83	%		1.24	%		0.75	%		1.12	%		1.26	%		0.66	%
Average equity / average assets		10.73	%		11.78	%		11.33	%		11.81	%		10.55	%		12.02	%
Net interest margin (fully taxable equivalent)		3.12	%		3.64	%		3.31	%		3.63	%		2.81	%		3.52	%
Dividend payout ratio		45.10	%		35.38	%		53.49	%		39.66	%		28.05	%		65.71	%

Credit Quality Ratios (3)
Credit Quality Ratios (2)
Net charge-offs (recoveries) / average loans		-0.02	%		0.05	%		0.05	%		0.07	%		-0.09	%		0.13	%
Provision for credit losses / average loans (1)		0.74	%		0.11	%		0.80	%		0.09	%
Provision for credit losses / average loans														-0.41	%		0.86	%
Nonaccrual LHFI / (LHFI + LHFS)		0.50	%		0.57	%								0.61	%		0.54	%
Nonperforming assets / (LHFI + LHFS) plus other real estate		0.68	%		0.90	%								0.71	%		0.78	%
ACL LHFI / LHFI (1)		1.23	%		0.88	%
ACL LHFI / LHFI														1.09	%		1.05	%

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 intangible 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 and the notes related thereto 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 for the periods presented ($ in thousands, except per share data):

		Three Months Ended June 30,						Six Months Ended June 30,							Three Months Ended March 31,
		2020			2019			2020			2019				2021			2020
TANGIBLE EQUITY
AVERAGE BALANCES
Total shareholders' equity		$	1,665,716		$	1,605,745		$	1,652,893		$	1,598,009			$	1,759,351		$	1,640,070
Less: Goodwill			(383,081	)		(379,627	)		(381,876	)		(379,627	)			(385,155	)		(380,671	)
Identifiable intangible assets			(7,834	)		(9,631	)		(7,942	)		(10,146	)			(7,118	)		(8,049	)
Total average tangible equity		$	1,274,801		$	1,216,487		$	1,263,075		$	1,208,236			$	1,367,078		$	1,251,350

PERIOD END BALANCES
Total shareholders' equity		$	1,673,944		$	1,618,550									$	1,759,705		$	1,652,399
Less: Goodwill			(385,270	)		(379,627	)									(384,237	)		(381,717	)
Identifiable intangible assets			(8,895	)		(9,101	)									(6,724	)		(7,537	)
Total tangible equity	(a)	$	1,279,779		$	1,229,822								(a)	$	1,368,744		$	1,263,145

TANGIBLE ASSETS
Total assets		$	15,692,079		$	13,548,958									$	16,878,313		$	14,019,829
Less: Goodwill			(385,270	)		(379,627	)									(384,237	)		(381,717	)
Identifiable intangible assets			(8,895	)		(9,101	)									(6,724	)		(7,537	)
Total tangible assets	(b)	$	15,297,914		$	13,160,230								(b)	$	16,487,352		$	13,630,575
Risk-weighted assets	(c)	$	11,539,157		$	10,796,903								(c)	$	12,188,988		$	11,427,297

NET INCOME ADJUSTED FOR INTANGIBLE AMORTIZATION	NET INCOME ADJUSTED FOR INTANGIBLE AMORTIZATION													NET INCOME ADJUSTED FOR INTANGIBLE AMORTIZATION
Net income		$	32,150		$	42,140		$	54,368		$	75,479			$	51,962		$	22,218
Plus: Intangible amortization net of tax			552			744			1,161			1,570				500			609
Net income adjusted for intangible amortization		$	32,702		$	42,884		$	55,529		$	77,049			$	52,462		$	22,827
Period end shares outstanding	(d)		63,422,439			64,398,846								(d)		63,394,522			63,396,912

TANGIBLE EQUITY MEASUREMENTS
Return on average tangible equity (1)			10.32	%		14.14	%		8.84	%		12.86	%			15.56	%		7.34	%
Tangible equity/tangible assets	(a)/(b)		8.37	%		9.34	%							(a)/(b)		8.30	%		9.27	%
Tangible equity/risk-weighted assets	(a)/(c)		11.09	%		11.39	%							(a)/(c)		11.23	%		11.05	%
Tangible book value	(a)/(d)*1,000	$	20.18		$	19.10								(a)/(d)*1,000	$	21.59		$	19.92

COMMON EQUITY TIER 1 CAPITAL (CET1)
Total shareholders' equity		$	1,673,944		$	1,618,550									$	1,759,705		$	1,652,399
CECL transitional adjustment (2)			32,693			—										26,829			26,476
AOCI-related adjustments			(10,565	)		24,816										16,506			(7,698	)
CET1 adjustments and deductions:
Goodwill net of associated deferred tax liabilities (DTLs)			(371,342	)		(365,745	)									(370,288	)		(367,825	)
Other adjustments and deductions for CET1 (3)			(7,352	)		(8,268	)									(5,675	)		(6,269	)
CET1 capital	(e)		1,317,378			1,269,353								(e)		1,427,077			1,297,083
Additional tier 1 capital instruments plus related surplus			60,000			60,000
Additional Tier 1 capital instruments plus related surplus																60,000			60,000
Tier 1 Capital		$	1,377,378		$	1,329,353									$	1,487,077		$	1,357,083

Common equity tier 1 risk-based capital ratio	(e)/(c)		11.42	%		11.76	%
Common equity Tier 1 risk-based capital ratio														(e)/(c)		11.71	%		11.35	%

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 these as measures of its core operating business, which exclude the impact of the items detailed below, as these items are generally not operational in nature. These non-GAAP financial measures also provide another basis for comparing period-to-period results as presented in the accompanying selected financial data table and the 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 selected 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):

Net interest income is the principal component of Trustmark’s income stream and represents the difference, or spread, between interest and fee income generated from earning assets and the interest expense paid on deposits and borrowed funds. Fluctuations in interest rates, as well as volume and mix changes in earning assets and interest-bearing liabilities, can materially impact net interest income. The net interest margin is computed by dividing fully taxable equivalent (FTE) net interest income by average interest-earning assets and measures how effectively Trustmark utilizes its interest-earning assets in relationship to the interest cost of funding them. The accompanying yield/rate analysis ~~tables show~~table shows the average balances for all assets and liabilities of Trustmark and the interest income or expense associated with earning assets and interest-bearing liabilities. The yields and rates have been computed based upon interest income and expense adjusted to a FTE basis using the federal statutory corporate tax rate in effect for each of the periods shown. Loans on nonaccrual have been included in the average loan balances, and interest collected prior to these loans having been placed on nonaccrual has been included in interest income. Loan fees included in interest associated with the average ~~loan~~LHFI and LHFS balances were immaterial.

Net interest income-FTE for the three ~~and six~~ months ended ~~June 30, 2020~~March 31, 2021 decreased ~~$3.0~~$1.8 million, or ~~2.7%~~1.7%, ~~and $3.9 million, or 1.8%, respectively,~~ when compared with the same time ~~periods~~period in ~~2019.~~2020. The net interest margin for the three months ended ~~June 30, 2020~~March 31, 2021 decreased 5271 basis points to ~~3.12%~~2.81% when compared to the same time period in ~~2019. The net interest margin for the six months ended June 30, 2020 decreased 32 basis points to 3.31% when compared to the same time period in 2019.~~2020. The net interest margin excluding PPP loans and ~~acquired loans,~~the balance held at the FRB of Atlanta, which equals the reported net interest income-FTE excluding interest and fees on PPP and ~~acquired loans,~~interest on the FRB balance, as a percentage of average earning assets excluding average PPP loans and ~~acquired loans,~~the FRB balance, was ~~3.14% and 3.32%~~2.99% for the three ~~and six~~ months ended ~~June 30, 2020, respectively,~~March 31, 2021, a decrease of 4656 basis points when compared to 3.55% for the same time period in 2020. The decrease in the net interest margin excluding PPP loans and ~~28 basis points, respectively, when~~the balance held at the FRB of Atlanta for the three months ended March 31, 2021 compared to the same time ~~periods~~period in ~~2019. The decreases in the net interest margin for the three and six months ended June 30,~~ 2020, ~~were~~was principally due to declines in the yield on the LHFI and LHFS ~~portfolios~~ and ~~the acquired loans that were transferred to LHFI as a result of the adoption of FASB ASC Topic 326,~~securities portfolios, partially offset by lower costs of interest-bearing ~~deposits and the addition of the PPP loans.~~deposits.

~~TNB actively participated in the PPP created by the CARES Act on behalf of its customers during the second quarter of 2020.~~ As of ~~June 30, 2020,~~March 31, 2021, TNB had ~~approximately 9,700~~7,456 PPP loans outstanding totaling ~~$969.7~~$701.8 million. Net of deferred fees and costs of ~~$29.9~~$22.1 million, PPP loans totaled ~~$939.8~~$679.7 million at ~~June 30, 2020.~~March 31, 2021. Processing fees earned by TNB as the originating lender are being amortized over ~~twenty-four months,~~ the ~~maximum~~ life of the loans. Payments on PPP loans are deferred until the date the SBA remits the borrower’s loan forgiveness amount to the lender (or, if the borrower does not apply for ~~six~~loan forgiveness, ten months ~~at which time they may be forgiven in whole or in part by~~after the ~~SBA.~~end of the borrower’s loan forgiveness covered period). Trustmark cannot predict the amount of PPP loans that will be forgiven in whole or in part by the SBA, nor can it predict the magnitude and timing of the impact the PPP loans and related fees will have on Trustmark’s net interest margin. However, TNB’s participation in the PPP will likely have a significant impact on Trustmark’s asset mix and net interest margin for the remainder of ~~2020~~2021 as a result of the addition of these low interest rate loans and the related processing fees earned on these loans.

The average FRB balance for the three months ended March 31, 2021 and 2020 totaled $1.618 billion and $147.0 million, respectively, an increase of $1.471 billion, while interest earned on the FRB balance declined $168 thousand when the three months ended March 31, 2021 is compared to the same time period in 2020. The yield on the FRB balance was 0.09% for the three months

ended March 31, 2021, a decline of 140 basis points when compared to 1.49% for the three months ended March 31, 2020. The decline in the yield on the FRB balance was the result of the FRB’s decision in March 2020 to reduce the interest that it pays on excess reserves from 1.60% to 0.10%.

Average interest-earning assets for the first ~~six~~three months of ~~2020~~2021 were ~~$13.085~~$15.199 billion compared to ~~$12.160~~$12.229 billion for the same time period in ~~2019,~~2020, an increase of ~~$925.7 million,~~$2.971 billion, or ~~7.6%~~24.3%. The increase in average earning assets during the first ~~six~~three months of ~~2020~~2021 was primarily due to increases in average other earning assets of $1.481 billion, average loans (LHFS and LHFI) of ~~$643.4~~$638.1 million, or ~~7.0%~~6.6%, average PPP loans of ~~$382.2~~$598.1 million and average securities of $253.7 million, or 10.7%. The increase in average other earning assets when the first three months of ~~$240.7 million, or 85.9%, which~~2021 is compared to the same time period in 2020, was ~~partially offset by~~primarily due to an increase in excess reserves held at the FRB as a ~~decrease~~result of the increase in ~~average taxable securities of $203.7 million, or 8.0%.~~customer deposit account balances. The increase in average loans (LHFS and LHFI) was primarily attributable to the ~~$543.0~~$415.8 million, or ~~6.0%~~4.3%, increase in the LHFI portfolio when balances at ~~June 30, 2020~~March 31, 2021 are compared to balances at ~~June 30, 2019.~~March 31, 2020. This increase was principally due to net growth in loans secured by real estate, partially offset by net declines in commercial and industrial loans and ~~state and~~ other ~~political subdivision~~commercial loans. The increase in ~~other earning assets~~average securities when the first ~~six~~three months of ~~2020~~2021 is compared to the same time period in ~~2019,~~2020 was primarily due to ~~an increase in interest-bearing deposits due from banks as a result~~purchase of ~~the increase in customer deposit account balances. The decrease in average taxable~~ securities ~~when the first six months of 2020 is compared to the same time period in 2019 was primarily due to~~available for sale, partially offset by calls, maturities and pay-downs of the underlying loans of government-sponsored enterprise (GSE) guaranteed securities.

During the first ~~six~~three months of ~~2020,~~2021, interest income-FTE totaled ~~$241.2~~$112.4 million, a decrease of ~~$20.9~~$11.1 million, or ~~8.0%~~9.0%, while the yield on total earning assets declined 64106 basis points to ~~3.71%~~3.00% when compared to the first ~~six~~three months of ~~2019.~~2020. The decrease in interest income-FTE for the first ~~six~~three months of ~~2020 reflects~~2021 was primarily due to declines in ~~all categories of~~ interest ~~income~~and fees on LHFS and LHFI-FTE and interest on securities-taxable, partially offset by the addition of interest and fees on PPP loans. ~~Interest and fees on PPP loans totaled $5.0 million for the six months ended June 30, 2020, while the yield on these loans was 2.65%.~~ During the first ~~six~~three months of ~~2020,~~2021, interest and fees on LHFS and LHFI-FTE declined ~~$16.1~~$16.0 million, or ~~7.2%~~14.6%, when compared to the same time period in ~~2019,~~2020, while the yield on loans (LHFS and LHFI) decreased 6787 basis points to ~~4.28%~~3.67% as a result of lower interest rates. Interest and fees on acquired loans declined $3.9 million when the first six months of 2020 is compared to the same time period in 2019, primarily due to acquired loans that were transferred to LHFI as PCD loans on January 1, 2020 as part of Trustmark’s adoption of FASB ASC Topic 326. As a result of this transfer, Trustmark no longer receives the net interest margin benefit that the acquired loan portfolio previously provided. During the first ~~six~~three months of ~~2020,~~2021, interest on securities-taxable decreased ~~$2.9~~$4.0 million, or ~~10.0%~~31.0%, while the yield on securities-taxable declined 685 basis points to ~~2.20%~~1.40% when compared to the same time period in ~~2019,~~2020, primarily due to the run off of maturing investment securities ~~during 2019. Other~~and lower interest ~~income declined $2.4~~rates on securities available for sale purchased. Interest and fees on PPP loans totaled $9.2 million ~~or 71.4%, when~~for the ~~first six~~three months ~~of 2020 is compared to the same time period in 2019,~~ended March 31, 2021, while the yield on ~~other earning assets declined to 0.38% for 2020 compared to 2.46% for 2019. The decline in other interest income and the yield on other earning assets~~these loans was ~~principally due to the decline in the interest rate paid on deposits held at the FRB.~~6.27%.

Average interest-bearing liabilities for the first ~~six~~three months of ~~2020~~2021 totaled ~~$9.355~~$10.293 billion compared to ~~$8.845~~$8.843 billion for the same time period in ~~2019,~~2020, an increase of ~~$509.9 million,~~$1.450 billion, or ~~5.8%~~16.4%. The increase in average interest-bearing liabilities was primarily the result of ~~increases~~the increase in average interest-bearing ~~deposits and average federal funds purchased and securities sold under repurchase agreements.~~deposits. Average interest-bearing deposits for the first ~~six~~three months of ~~2020~~2021 increased ~~$390.7 million,~~$1.326 billion, or ~~4.5%~~15.7%, when compared to the same time period in ~~2019,~~2020, primarily due to growth in average savings deposits and interest-bearing demand deposits ~~and savings deposits during the second quarter of 2020~~ as customers deposited proceeds from line draws, PPP loans and other COVID-19 related stimulus programs. Average federal funds purchased and securities sold under repurchase agreements for the first six months of 2020 increased $108.9 million when compared to the same time period in 2019, primarily due to an increase in upstream federal funds purchased during the first quarter of 2020 as a result of changes in funding needs as growth in earning assets exceeded deposit growth.

Interest expense for the first ~~six~~three months of ~~2020~~2021 totaled ~~$26.1~~$7.1 million, a decrease of ~~$17.0~~$9.3 million, or ~~39.4%~~56.6%, when compared with the same time period in ~~2019,~~2020, while the rate on total interest-bearing liabilities decreased 4247 basis points to ~~0.56%. The decrease in total interest expense for the first six months of 2020 when compared to the same time period in 2019 was~~0.28%, primarily due to a decline in interest on deposits. Interest on deposits decreased ~~$17.4~~$9.7 million, or ~~42.3%~~65.1%, while the rate on interest-bearing deposits decreased 4349 basis points to ~~0.53%~~0.22% when the first ~~six~~three months of ~~2020~~2021 is compared to the same time period in ~~2019,~~2020, primarily due to lower interest ~~rates.~~rates, partially offset by the increase in average interest-bearing deposits.

The following ~~tables provide~~table provides the tax equivalent basis yield or rate for each component of the tax equivalent net interest margin for the periods presented ($ in thousands):

Three Months Ended June 30,

2020

2019

Average
Balance

Interest

Yield/
Rate

Average
Balance

Interest

Yield/
Rate

Assets

Interest-earning assets:

Federal funds sold and securities purchased under
   reverse repurchase agreements

$
113

$
—

—

$
34,057

$
214

2.52
%
Securities - taxable

2,379,405

12,762

2.16
%

2,482,821

13,916

2.25
%
Securities - nontaxable

35,365

315

3.58
%

58,509

551

3.78
%
PPP Loans

764,416

5,044

2.65
%

—

—

—

Loans (LHFS and LHFI)

9,908,132

99,300

4.03
%

9,260,028

114,873

4.98
%
Acquired loans (1)

—

—

—

91,217

2,010

8.84
%
Other earning assets

854,642

239

0.11
%

316,604

1,820

2.31
%
Total interest-earning assets

13,942,073

117,660

3.39
%

12,243,236

133,384

4.37
%
Other assets

1,685,317

1,467,462

Allowance for credit losses, LHFI (2)

(103,006
)

(81,996
)

Total Assets

$
15,524,384

$
13,628,702

Liabilities and Shareholders' Equity

Interest-bearing liabilities:

Interest-bearing deposits

$
9,591,649

8,730

0.37
%

$
8,690,128

21,500

0.99
%
Federal funds purchased and securities sold under
   repurchase agreements

105,696

42

0.16
%

51,264

81

0.63
%
Other borrowings

169,389

881

2.09
%

143,208

831

2.33
%
Total interest-bearing liabilities

9,866,734

9,653

0.39
%

8,884,600

22,412

1.01
%
Noninterest-bearing demand deposits

3,645,761

2,898,266

Other liabilities

346,173

240,091

Shareholders' equity

1,665,716

1,605,745

Total Liabilities and Shareholders' Equity

$
15,524,384

$
13,628,702

Net Interest Margin

108,007

3.12
%

110,972

3.64
%

Less tax equivalent adjustment

3,007

3,248

Net Interest Margin per Consolidated
   Statements of Income

$
105,000

$
107,724

Six Months Ended June 30,

2020

2019

Average
Balance

Interest

Yield/
Rate

Average
Balance

Interest

Yield/
Rate

Assets

Interest-earning assets:

Federal funds sold and securities purchased under
   reverse repurchase agreements

$
139

$
—

—

$
17,260

$
216

2.52
%
Securities - taxable

2,347,284

25,710

2.20
%

2,550,998

28,581

2.26
%
Securities - nontaxable

41,548

772

3.74
%

63,661

1,197

3.79
%
PPP Loans

382,208

5,044

2.65
%

—

—

—

Loans (LHFS and LHFI)

9,793,153

208,657

4.28
%

9,149,729

224,763

4.95
%
Acquired loans (1)

—

—

—

97,730

3,926

8.10
%
Other earning assets

520,985

979

0.38
%

280,250

3,423

2.46
%
Total interest-earning assets

13,085,317

241,162

3.71
%

12,159,628

262,106

4.35
%
Other assets

1,592,019

1,457,592

Allowance for credit losses, LHFI (2)

(94,011
)

(82,111
)

Total Assets

$
14,583,325

$
13,535,109

Liabilities and Shareholders' Equity

Interest-bearing liabilities:

Interest-bearing deposits

$
9,020,013

23,687

0.53
%

$
8,629,331

41,070

0.96
%
Federal funds purchased and securities sold under
   repurchase agreements

176,605

667

0.76
%

67,717

369

1.10
%
Other borrowings

158,262

1,741

2.21
%

147,908

1,656

2.26
%
Total interest-bearing liabilities

9,354,880

26,095

0.56
%

8,844,956

43,095

0.98
%
Noninterest-bearing demand deposits

3,278,356

2,861,448

Other liabilities

297,196

230,696

Shareholders' equity

1,652,893

1,598,009

Total Liabilities and Shareholders' Equity

$
14,583,325

$
13,535,109

Net Interest Margin

215,067

3.31
%

219,011

3.63
%

Less tax equivalent adjustment

6,115

6,479

Net Interest Margin per Consolidated
   Statements of Income

$
208,952

$
212,532

~~(2)~~

Effective January 1, 2020, Trustmark adopted FASB ASU 2016-13 using the modified retrospective approach; therefore, prior period balances are presented under legacy GAAP and may not be comparable to current period presentation.

	Three Months Ended March 31,
	2021								2020
	Average Balance			Interest		Yield/ Rate			Average Balance			Interest		Yield/ Rate
Assets
Interest-earning assets:
Federal funds sold and securities purchased under reverse repurchase agreements	$	136		$	—		—		$	164		$	—		—
Securities - taxable		2,587,349			8,938		1.40	%		2,315,162			12,948		2.25	%
Securities - nontaxable		29,260			290		4.02	%		47,729			457		3.85	%
PPP Loans		598,139			9,241		6.27	%		—			—		—
Loans (LHFS and LHFI)		10,316,319			93,394		3.67	%		9,678,174			109,357		4.54	%
Other earning assets		1,667,906			503		0.12	%		187,327			740		1.59	%
Total interest-earning assets		15,199,109			112,366		3.00	%		12,228,556			123,502		4.06	%
Other assets		1,601,250								1,498,725
Allowance for credit losses, LHFI		(119,557	)							(85,015	)
Total Assets	$	16,680,802							$	13,642,266

Liabilities and Shareholders' Equity
Interest-bearing liabilities:
Interest-bearing deposits	$	9,774,518			5,223		0.22	%	$	8,448,377			14,957		0.71	%
Federal funds purchased and securities sold under repurchase agreements		166,909			56		0.14	%		247,513			625		1.02	%
Other borrowings		351,657			1,857		2.14	%		147,135			860		2.35	%
Total interest-bearing liabilities		10,293,084			7,136		0.28	%		8,843,025			16,442		0.75	%
Noninterest-bearing demand deposits		4,363,559								2,910,951
Other liabilities		264,808								248,220
Shareholders' equity		1,759,351								1,640,070
Total Liabilities and Shareholders' Equity	$	16,680,802							$	13,642,266

Net Interest Margin					105,230		2.81	%					107,060		3.52	%

Less tax equivalent adjustment					2,894								3,108

Net Interest Margin per Consolidated Statements of Income				$	102,336							$	103,952

Trustmark adopted FASB ASC Topic 326, in accordance with the amendments of FASB ASU 2016-13, effective January 1, 2020. The guidance in FASB ASC 326 replaces Trustmark’s previous incurred loss methodology with a methodology that reflects the current expected credit losses and requires consideration of a broader range of reasonable and supportable information to determine credit losses. The provision for credit losses is the amount necessary to maintain the ~~allowance~~ACL for ~~credit losses,~~ LHFI at the amount of expected credit losses inherent within the LHFI portfolio. The amount of provision for credit losses and the related ACL for LHFI are based on Trustmark’s ACL methodology. The provision for credit losses totaled ~~$18.2 million and $38.8~~a negative $10.5 million for the three ~~and six~~ months ended ~~June 30, 2020, respectively,~~March 31, 2021, compared to a provision for ~~loan~~credit losses ~~LHFI~~ of ~~$2.5 million and $4.1~~$20.6 million for the same time ~~periods~~period in ~~2019, respectively.~~2020. The ~~increase in the~~negative provision for credit losses for the ~~three and six months ended June 30, 2020 was~~first quarter of 2021 primarily ~~due to net changes~~reflected improvements in the ~~economic~~macroeconomic forecast ~~due to the current and anticipated negative effects of the COVID-19 pandemic on the overall economy and macroeconomic factors~~ used in the quantitative calculation of the ACL. See the section captioned “Allowance for Credit Losses, LHFI” for information regarding Trustmark’s ACL methodology as well as further analysis of the provision for credit losses.

Noninterest income represented ~~39.8% and 39.2%~~37.2% of total revenue ~~before securities gains (losses), net,~~ for the three ~~and six~~ months ended ~~June 30, 2020, respectively,~~March 31, 2021, compared to ~~31.5% and 30.0%~~38.6% for the three ~~and six~~ months ended ~~June 30, 2019, respectively.~~March 31, 2020. The following table provides the comparative components of noninterest income for the periods presented ($ in thousands):

~~n/m - percentage changes greater than +/- 100% are not considered meaningful~~

Changes in various components of noninterest income are discussed in further detail below. For analysis of Trustmark’s insurance commissions and wealth management income, please see the section captioned “Results of Segment Operations.”

The decrease in service charges on deposit accounts for the three ~~and six~~ months ended ~~June 30, 2020~~March 31, 2021 compared to the same time ~~periods~~period in ~~2019~~2020 was principally due to ~~declines~~a decline in ~~nonsufficient funds~~the amount of NSF and overdraft ~~fees~~occurrences on consumer deposit accounts primarily ~~due to declines in overdraft occurrences.~~as a result of higher average customer account balances resulting from the various COVID-19 related stimulus programs.

The ~~decrease~~increase in bank card and other fees for the ~~six~~three months ended ~~June 30, 2020~~March 31, 2021 compared to the same time period in ~~2019~~2020 was principally due to ~~declines in income~~revenue from customer derivatives primarily related to the credit valuation adjustment as a result of the declining interest rate environment, as well as declines in ATM surcharges and interchange income caused by a decline in bank card and ATM usage during the first six months of 2020.derivatives.

The following table illustrates the components of mortgage banking, net included in noninterest income for the periods presented ($ in thousands):

The ~~increase~~decrease in mortgage banking, net for the three months ended ~~June 30, 2020~~March 31, 2021 when compared to the same time period in ~~2019~~2020 was principally due to a decline in the net hedge ineffectiveness and an increase in the MSR run-off partially offset by an increase in the gain on sales of loans, net. The ~~increase~~decline in ~~mortgage banking, net~~the positive hedge ineffectiveness for the ~~six~~three months ended ~~June 30, 2020 when~~March 31, 2021 compared to the same time period in ~~2019 was principally due to an increase in the gain on sales of loans, net and the positive net hedge ineffectiveness. The positive hedge ineffectiveness for the six months ended June 30,~~ 2020 was primarily due to ~~widening~~reduced spreads between mortgage and ten-year Treasury rates. Mortgage loan production for the three ~~and six~~ months ended ~~June 30, 2020~~March 31, 2021 was ~~$853.3~~$766.6 million, ~~and $1.310 billion, respectively,~~ an increase of ~~$439.3~~$309.4 million, ~~and $613.0 million, respectively,~~or 67.7%, when compared to the same time ~~periods~~period in ~~2019~~2020 and was primarily due to the increase in refinance activity and new home purchases driven by the low interest rate environment. Loans serviced for others totaled ~~$7.393~~$7.716 billion at ~~June 30, 2020,~~March 31, 2021, compared with ~~$6.897~~$7.157 billion at ~~June 30, 2019,~~March 31, 2020, an increase of ~~$495.6~~$559.6 million, or ~~7.2%~~7.8%.

Representing a significant component of mortgage banking income is the gain on sales of loans, net. The increase in the gain on sales of loans, net when the three ~~and six~~ months ended ~~June 30, 2020~~March 31, 2021 is compared to the same time ~~periods~~period in ~~2019,~~2020, was primarily the result of ~~increases in the mortgage valuation adjustment and the volume of loans sold as well as~~ higher profit margins in secondary marketing ~~activities.~~activities and an increase in the volume of loans sold partially offset by a decline the mortgage valuation adjustment. Loan sales totaled ~~$785.8~~$659.4 million ~~and $1.103 billion~~ for the three ~~and six~~ months ended ~~June 30, 2020, respectively,~~March 31, 2021, an increase of ~~$506.7~~$342.3 million ~~and $614.8 million, respectively,~~ when compared with the same time ~~periods~~period in ~~2019,~~2020, reflecting the increase in mortgage loan production during the ~~respective periods.~~period.

The following table illustrates the components of other income, net included in noninterest income for the periods presented ($ in thousands):

The increase in other income, net for the first six months of 2020 when compared to the same time period in 2019, was principally due to a decline in amortization of tax credit partnerships, primarily due to the run-off of the tax credit partnerships and associated tax benefits, which was largely offset by a decline in other miscellaneous income, primarily due to gains on sales of premises and equipment during the first six months of 2019.

The following table illustrates the comparative components of noninterest expense for the periods presented ($ in thousands):

	Three Months Ended June 30,												Six Months Ended June 30,											Three Months Ended March 31,
	2020			2019			$ Change			% Change			2020		2019			$ Change			% Change			2021			2020		$ Change			% Change
Salaries and employee benefits	$	66,107		$	61,949		$	4,158			6.7	%	$	135,255	$	122,903		$	12,352			10.1	%	$	71,162		$	69,148	$	2,014			2.9	%
Services and fees		20,567			18,009			2,558			14.2	%		40,497		34,977			5,520			15.8	%		22,484			19,930		2,554			12.8	%
Net occupancy-premises		6,587			6,403			184			2.9	%		12,873		12,857			16			0.1	%		6,795			6,286		509			8.1	%
Equipment expense		5,620			5,958			(338	)		-5.7	%		11,236		11,882			(646	)		-5.4	%		6,244			5,616		628			11.2	%
Other real estate expense:
Write-downs		(153	)		11			(164	)	n/m				844		1,667			(823	)		-49.4	%		150			996		(846	)		-84.9	%
Net (gain) loss on sale		185			(124	)		309		n/m				255		(246	)		501		n/m				(59	)		70		(129	)	n/m
Carrying costs		239			245			(6	)		-2.4	%		466		463			3			0.6	%		233			228		5			2.2	%
Total other real estate expense, net		271			132			139		n/m				1,565		1,884			(319	)		-16.9	%		324			1,294		(970	)		-75.0	%
Credit loss expense related to off-balance sheet credit exposures (1)		6,242			—			6,242		n/m				13,025		—			13,025		n/m
Credit loss expense related to off-balance sheet credit exposures																									(9,367	)		6,783		(16,150	)	n/m
Other expense		13,265			13,650			(385	)		-2.8	%		28,018		27,619			399			1.4	%		14,539			14,753		(214	)		-1.5	%
Total noninterest expense	$	118,659		$	106,101		$	12,558			11.8	%	$	242,469	$	212,122		$	30,347			14.3	%	$	112,181		$	123,810	$	(11,629	)		-9.4	%

Changes in the various components of noninterest expense are discussed in further detail below. Management considers disciplined expense management a key area of focus in the support of improving shareholder value.

The increase in salaries and employee benefits when the ~~second~~first quarter of ~~2020~~2021 is compared to ~~2019~~the same time period in 2020 was principally due to ~~increases~~higher commissions expense resulting from improvements in ~~commission expense, primarily due to increased~~ mortgage production, ~~and additional~~an increase in salary ~~expense~~expenses as a result of general merit increases and increases in incentive stock compensation and other performance based incentives, partially offset by non-routine expenses related to the ~~COVID-19 pandemic.~~voluntary early retirement program completed by Trustmark during the first quarter of 2020.

During the first quarter of 2020, Trustmark completed a voluntary early retirement program and incurred $4.3 million of non-routine salaries and employee benefits expense related to this program. Excluding these non-routine expenses, salaries and employee benefits increased ~~$8.1~~$6.3 million, or ~~6.6%~~9.7%, when the first ~~six~~three months of ~~2020~~2021 is compared to the same time period in 2019, principally due to higher commissions expense, primarily due to increased mortgage production, as well as an increase in salary expenses as a result of general merit increases and the COVID-19 pandemic, as a result of temporary compensation adjustments and one-time payments to front line associates.2020.

The increase in services and fees when the three ~~and six~~ months ended ~~June 30, 2020 are~~March 31, 2021 is compared to the same time ~~periods~~period in ~~2019,~~2020, was primarily due to increases in legal fees related to ongoing litigation matters, service fees related to independent contractors and data processing charges related to software.

~~Trustmark adopted~~ FASB ASC Topic 326 in accordance with the amendments of FASB ASU 2016-13, effective January 1, 2020. The guidance in FASB ASC 326 replaces Trustmark’s previous incurred loss methodology with a methodology that reflects the current expected credit losses and requires consideration of a broader range of reasonable and supportable information to determine credit losses. FASB ASC Topic 326 also requires Trustmark to estimate expected credit losses for off-balance sheet credit exposures which are not unconditionally cancellable by Trustmark. Trustmark maintains a separate ACL for off-balance sheet credit exposures, including unfunded commitments and letters of credit. Adjustments to the ACL on off-balance sheet credit exposures are recorded as noninterest expense in credit loss expense related to off-balance sheet credit exposures. The ~~increase in the~~negative credit loss expense related to off-balance sheet exposures for the ~~three and six months ended June 30, 2020~~first quarter of 2021 was primarily due to ~~net changes~~improvements in the ~~economic~~macroeconomic forecast ~~due to the current and anticipated negative effects of the COVID-19 pandemic on the overall economy and macroeconomic factors~~ used in the quantitative calculation of the ACL.

The following table illustrates the comparative components of other noninterest expense for the periods presented ($ in thousands):

The increase in other expense when the six months ended June 30, 2020 is compared to the same time period in 2019, was primarily due to an increase in other miscellaneous expense principally resulting from accrued expense related to the Trust Department and an increase in charitable contributions and sponsorships, partially offset by a decline in travel and entertainment expenses as a result of travel restrictions during the COVID-19 pandemic.

For a description of the methodologies used to measure financial performance and financial information by reportable segment, please see Note 1918 – Segment Information included in Part I. Item 1. – Financial Statements of this report. During the first quarter of 2020, Trustmark revised the composition of its operating segments by moving the Retail Private Banking Group from the General Banking Segment to the Wealth Management Segment as a result of a change in supervision of this group for segment reporting purposes. Prior period amounts include reclassifications to conform to the current period presentation. The following discusses changes in the results of operations of each reportable segment for the ~~six~~three months ended ~~June 30, 2020~~March 31, 2021 and ~~2019.~~2020.

Net interest income for the General Banking Segment decreased ~~$3.1~~$1.3 million, or ~~1.5%~~1.3%, when the ~~six~~three months ended ~~June 30, 2020~~March 31, 2021 is compared with the same time period in ~~2019.~~2020. The decrease in net interest income was principally due to decreases in interest and fees on LHFI and LHFS and interest on securities, which were largely offset by the addition of interest and fees on PPP loans and a decrease in interest on deposits, primarily due to declines in interest rates in general. The provision for credit losses for the ~~six~~three months ended ~~June 30, 2020~~March 31, 2021 totaled ~~$36.6~~a negative $10.5 million compared to a provision for ~~loan~~credit losses ~~net~~ of ~~$4.3~~$18.4 million for the same period in ~~2019, an increase~~2020, a decrease of ~~$32.3~~$28.9 million primarily due to improvements in the ~~impact~~macroeconomic forecast used in the quantitative calculation of the ~~COVID-19 pandemic on the macroeconomic factors used in Trustmark’s ACL methodology.~~ACL. For more information on these net interest income items, please see the sections captioned “Financial Highlights” and “Results of Operations.”

Noninterest income for the General Banking Segment ~~increased $41.5~~decreased $5.5 million, or ~~77.3%~~12.2%, when the first ~~six~~three months of ~~2020~~2021 is compared to the same time period in ~~2019,~~2020, primarily due to the ~~increase~~declines in mortgage banking, net, ~~principally due to increases~~and service charges on deposit accounts partially offset by an increase in ~~the net hedge ineffectiveness~~bank card and ~~gain on sales of loans, net.~~other fees. Noninterest income for the General Banking Segment represented ~~31.6%~~28.2% of total revenue for this segment for the first ~~six~~three months of ~~2020~~2021 compared to ~~20.5%~~30.6% for the same time period in ~~2019.~~2020. Noninterest income for the General Banking Segment includes service charges on deposit accounts; bank card and other fees; mortgage banking, net; other income, net and securities gains (losses), net. For more information on these noninterest income items, please see the analysis included in the section captioned “Noninterest Income.”

Noninterest expense for the General Banking Segment ~~increased $29.7~~decreased $11.9 million, or ~~16.5%~~11.1%, when the first ~~six~~three months of ~~2020~~2021 is compared with the same time period in ~~2019,~~2020, principally due to ~~increases~~the decrease in ~~salaries and employee benefits, services and fees and the addition of~~ the credit loss expense related to off-balance sheet credit exposures ~~as a result of the adoption of FASB ASC Topic 326. During the first quarter of 2020, Trustmark completed a voluntary early retirement program which resulted~~partially offset by increases in ~~non-routine transaction expenses of $4.4 million ($4.3 million of~~ salaries and employee benefits ~~expense~~ and ~~$102 thousand of other expense).~~services and fees. For more information on these noninterest expense items, please see the analysis included in the section captioned “Noninterest Expense.”

Net income for the Wealth Management Segment for the first ~~six~~three months of ~~2020 decreased $1.6~~2021 increased $1.7 million ~~or 58.7%,~~ when compared to the same time period in ~~2019,~~2020, primarily due to ~~the $2.2 million increase~~a decrease in the provision for credit ~~losses related~~losses. Net interest income for the Wealth Management Segment declined $273 thousand, or 18.2%, when the first three months of 2021 are compared to the same time period in 2020, principally due to a decline in interest and fees on loans generated by the Private Banking ~~Department as~~Department. The provision for credit losses for the three months ended March 31, 2021 totaled a ~~result~~negative $2 thousand compared to a provision for credit losses of $2.2 million for the ~~change~~same period in ~~allowance methodology and the impact~~2020, a decrease of ~~the COVID-19 pandemic on~~$2.2 million primarily due to improvements in the macroeconomic ~~factors~~forecast used in the ~~ACL methodology.~~quantitative calculation of the ACL. Noninterest income for the Wealth Management Segment, which primarily includes income related to investment management, trust and brokerage services, ~~increased $623~~decreased $53 thousand, or ~~4.0%~~0.6%, when the first ~~six~~three months of ~~2020~~2021 is compared to the same time period in ~~2019,~~2020, primarily due to ~~increases~~decreases in income from trust management services, mostly offset by an increase in income from brokerage ~~services and trust~~

~~management service fee income, partially offset by a decline in other miscellaneous income.~~services. Noninterest expense for the Wealth Management Segment ~~increased $70~~decreased $322 thousand, or ~~0.5%~~3.8%, when the first ~~six~~three months of ~~2020~~2021 is compared to the same time period in ~~2019,~~2020, principally due to ~~an increase~~declines in other miscellaneous ~~expense related to accrued expense for the Trust Department, which was largely~~expenses partially offset by ~~declines~~increases in ~~outside services and fees and~~ salary and employee benefit expense.

At ~~June 30,~~March 31, 2021 and 2020, ~~and 2019,~~ Trustmark held assets under management and administration of ~~$13.755~~$13.286 billion and ~~$12.198~~$11.641 billion, respectively, and brokerage assets of ~~$1.945~~$2.213 billion and ~~$1.910~~$1.764 billion, respectively.

Net income for the Insurance Segment for the first ~~six~~three months of ~~2020~~2021 increased ~~$722~~$216 thousand, or ~~17.7%~~10.4%, when compared to the same time period in ~~2019.~~2020. Noninterest income for the Insurance Segment, which is predominately composed of insurance commissions, increased ~~$1.5 million,~~$896 thousand, or ~~6.9%~~7.7%, when the first ~~six~~three months of ~~2020~~2021 is compared to the same time period in ~~2019,~~2020, primarily due to new business commission volume in the property and casualty business and increases in other commission income. Noninterest expense for the Insurance Segment increased ~~$580~~$546 thousand, or ~~3.5%~~6.2%, when the first ~~six~~three months of ~~2020~~2021 is compared to the same time period in ~~2019,~~2020, primarily due to higher salaries expense resulting from modest general merit increases and ~~higher commission expense due to improvements in business volumes and~~ associates added as a result of ~~an insurance agency~~agencies acquired during ~~the period.~~

Fisher Brown Bottrell Insurance, Inc. (FBBI), a wholly-owned subsidiary of TNB, acquired Boyles Moak Insurance Services (Boyles), a Mississippi based insurance agency, for $5.0 million on May 1, 2020. The acquisition was accounted for2020, as well as increases in ~~accordance with FASB ASC Topic 805, “Business Combinations.” Accordingly, the assets~~outside services and liabilities, both tangible and intangible, were recorded at their estimated fair values as of the acquisition date. The excess of the consideration paid over the estimated fair value of the net assets acquired was $3.6 million, which was recorded as goodwill under FASB ASC Topic 805. The identifiable intangible assets acquired represented insurance customer relationships and trade name and totaled $2.1 million, the estimated fair value at the acquisition date.fees.

For the three ~~and six~~ months ended ~~June 30, 2020,~~March 31, 2021, Trustmark’s combined effective tax rate was ~~14.6% and 13.0%, respectively,~~15.1% compared to ~~13.4% and 13.5%~~10.5% for the same time ~~periods~~period in ~~2019, respectively.~~2020. The increase in the effective tax rate for the three months ended March 31, 2021 compared to the same time period in 2020 was principally due to an increase in the amount of forecasted net income for the respective years. Trustmark’s effective tax rate continues to be less than the statutory rate primarily due to various tax-exempt income items and its utilization of income tax credit programs. 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 or 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.

Earning assets serve as the primary revenue streams for Trustmark and are comprised of securities, loans, federal funds sold and other earning assets. Average earning assets totaled ~~$13.085~~$15.199 billion, or ~~89.7%~~91.1% of total average assets, for the ~~six~~three months ended ~~June 30, 2020,~~March 31, 2021, compared to ~~$12.160~~$12.229 billion, or ~~89.8%~~89.6% of total average assets, for the ~~six~~three months ended ~~June 30, 2019,~~March 31, 2020, an increase of ~~$925.7 million,~~$2.971 billion, or ~~7.6%~~24.3%.

The securities portfolio is utilized by Management to manage interest rate risk, generate interest income, provide liquidity and use as collateral for public deposits and wholesale funding. Risk and return can be adjusted by altering duration, composition and/or balance of the portfolio. The weighted-average life of the portfolio was ~~3.2~~3.7 years at ~~June 30, 2020~~March 31, 2021 compared to ~~3.5~~2.9 years at December 31, ~~2019.~~2020. The increase in the weighted-average life of the securities portfolio was principally due to available for sale securities purchased during the period and lower projected mortgage prepayment estimates.

When compared to December 31, ~~2019,~~2020, total investment securities increased by ~~$203.7~~$301.5 million, or ~~8.7%~~11.9%, during the first ~~six~~three months of ~~2020.~~2021. This increase resulted primarily from purchases ~~of and improvement in the fair market value~~ of available for sale securities, partially offset by calls, maturities and pay-downs of the loans underlying GSE guaranteed securities. Trustmark sold no securities during the first ~~six~~three months of ~~2020~~2021 or ~~2019.~~2020.

During 2013, Trustmark reclassified approximately $1.099 billion of securities available for sale to securities held to maturity to mitigate the potential adverse impact of a rising interest rate environment on the fair value of the available for sale securities and the related impact on tangible common equity. The resulting net unrealized holding loss is being 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. At ~~June 30, 2020,~~March 31, 2021, the net unamortized, unrealized loss on the transferred securities included in accumulated other comprehensive income (loss), net of tax, (AOCI) in the accompanying consolidated balance sheets totaled ~~$10.5~~$8.2 million ($~~7.9~~6.2 million net of tax) compared to ~~$12.1~~$8.9 million ($~~9.1~~6.7 million net of tax) at December 31, ~~2019.~~2020.

Available for sale securities are carried at their estimated fair value with unrealized gains or losses recognized, net of taxes, in AOCI, a separate component of shareholders’ equity. At ~~June 30, 2020,~~March 31, 2021, available for sale securities totaled ~~$1.884~~$2.338 billion, which represented ~~74.1%~~82.6% of the securities portfolio, compared to ~~$1.602~~$1.992 billion, or ~~68.5%~~78.7%, at December 31, ~~2019.~~2020. At ~~June 30, 2020,~~March 31, 2021, unrealized gains, net on available for sale securities totaled ~~$44.6~~$10.2 million compared to unrealized gains, net of ~~$1.4~~$32.0 million at December 31, ~~2019.~~2020. At ~~June 30, 2020,~~March 31, 2021, available for sale securities consisted of obligations of states and political subdivisions, GSE guaranteed mortgage-related securities and direct obligations of government agencies and GSEs.

Held to maturity securities are carried at amortized cost and represent those securities that Trustmark both intends and has the ability to hold to maturity. At ~~June 30, 2020,~~March 31, 2021, held to maturity securities totaled ~~$660.0~~$493.7 million, which represented ~~25.9%~~17.4% of the total securities portfolio, compared with ~~$738.1~~$538.1 million, or ~~31.5%~~21.3%, at December 31, ~~2019.~~2020.

Management continues to focus on asset quality as one of the strategic goals of the securities portfolio, which is evidenced by the investment of ~~98.3%~~98.0% of the portfolio in GSE-backed obligations and other Aaa-rated securities as determined by Moody’s Investors Services (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 FHLB of Dallas, FHLB of Atlanta and Federal Reserve Bank of Atlanta, Trustmark does not hold any other equity investment in a GSE.

As of ~~June 30, 2020,~~March 31, 2021, Trustmark did not hold securities of any one issuer with a carrying value exceeding 10% of total shareholders’ equity, other than certain GSEs which are exempt from inclusion. Management continues to closely monitor the credit quality as well as the ratings of the debt and mortgage-backed securities issued by the GSEs and held in Trustmark’s securities portfolio.

The following table presents Trustmark’s securities portfolio by amortized cost and estimated fair value and by credit rating, as determined by Moody’s, at ~~June 30, 2020~~March 31, 2021 ($ in thousands):

The table above presenting the credit rating of Trustmark’s securities is formatted to show the securities according to the credit rating category, and not by category of the underlying security. At ~~June 30, 2020,~~March 31, 2021, approximately ~~99.4%~~99.8% of the available for sale securities, measured at the estimated fair value, and ~~95.2%~~94.6% of the held to maturity securities, measured at amortized cost, were rated Aaa.

At ~~June 30, 2020,~~March 31, 2021, LHFS totaled ~~$355.1~~$413.0 million, consisting of ~~$233.7~~$289.6 million of residential real estate mortgage loans in the process of being sold to third parties and ~~$121.4~~$123.4 million of GNMA optional repurchase loans. At December 31, ~~2019,~~2020, LHFS totaled ~~$226.3~~$447.0 million, consisting of ~~$169.3~~$305.8 million of residential real estate mortgage loans in the process of being sold to third parties and ~~$57.1~~$141.2 million of GNMA optional repurchase loans. Please refer to the nonperforming assets table that follows for information on GNMA loans eligible for repurchase which are past due 90 days or more.

Trustmark did not exercise its buy-back option on any delinquent loans serviced for GNMA during the first ~~six~~three months of ~~2020~~2021 or ~~2019.~~2020.

For additional information regarding the GNMA optional repurchase loans, please see the section captioned “Past Due LHFS” included in Note 3 – LHFI and Allowance for ~~Loan~~Credit Losses, LHFI of Part I. Item 1. – Financial Statements of this report.

The full impact of the COVID-19 pandemic is unknown and rapidly evolving. It has caused substantial disruption in international and the United States economies, markets and employment. The ~~outbreak~~pandemic has had and may continue to have a significant adverse impact on certain industries Trustmark serves, including the restaurant and food services, hotel, retail and energy industries. See the section captioned ~~“COVID-19 Update”~~“Executive Overview” for further information and discussion regarding the current and anticipated impact of the COVID-19 pandemic.

At ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, LHFI consisted of the following ($ in thousands):

LHFI increased ~~$324.2~~$159.2 million, or ~~3.5%~~1.6%, compared to December 31, 2019. On January 1, 2020, Trustmark transferred $72.6 million, the remaining balance of the loans acquired in the BancTrust merger, from acquired impaired loans to LHFI as PCD loans as part of its adoption of FASB ASC Topic 326. For additional information regarding the acquired loans transferred to LHFI, see the section captioned “Acquired Loans.” Excluding the transferred acquired loans, LHFI increased $251.6 million, or 2.7%, compared to December 31, 2019.2020. The increase in LHFI ~~excluding the transferred acquired loans,~~ during the first ~~six~~three months of ~~2020~~2021 was primarily due to net growth in LHFI secured by real estate across all five market regions, ~~as well as increases in other commercial loans in the Mississippi and Tennessee market regions,~~ partially offset by declines in other commercial ~~and industrial~~ LHFI in the Mississippi, Texas, Alabama and ~~Tennessee~~Florida market ~~regions and state and other political subdivision loans in Trustmark’s Alabama, Texas and Mississippi market~~ regions. ~~The following discussion of changes in LHFI excludes the acquired loans transferred on January 1, 2020.~~

LHFI secured by real estate increased ~~$303.1~~$193.9 million, or ~~4.8%~~2.8%, during the first ~~six~~three months of ~~2020~~2021 primarily due to net growth in LHFI secured by nonfarm, nonresidential properties (NFNR LHFI), LHFI secured by other real estate ~~other construction loans~~ and LHFI secured by ~~nonfarm, nonresidential properties (NFNR LHFI).~~construction, land development and other land. NFNR LHFI increased $90.2 million, or 3.3%, during the first three months of 2021, principally due to movement from the other construction loans category. Excluding other construction loan reclassifications, the NFNR LHFI portfolio decreased $50.1 million, or 1.9%, during the first three months of 2021 primarily due to declines in owner-occupied loans in the Mississippi, Alabama and Texas market regions and nonowner-occupied loans in the Alabama market region, which were partially offset by growth in nonowner-occupied loans in the Texas and Mississippi market regions. LHFI secured by other real estate increased ~~$156.4~~$69.0 million, or ~~21.5%~~6.5%, during the first ~~six~~three months of ~~2020,~~2021, primarily due to other construction loans that moved to LHFI secured by multi-family residential properties in the Alabama, Mississippi and Texas market regions. Excluding other construction loan reclassifications, LHFI secured by other real estate increased $1.1 million, or 0.1%, during the first three months of 2021. Other construction loans increased ~~$116.7~~$4.2 million, or ~~17.2%~~0.5%, during the first ~~six~~three months of ~~2020~~2021 primarily due to new construction loans across all five market regions, ~~partially~~which were largely offset by other construction loans moved to other loan categories upon the completion of the related construction project. During the first ~~six~~three months of ~~2020, $340.8~~2021, $208.6 million loans were moved from other construction to other loan categories, including ~~$205.9~~$67.9 million to multi-family residential loans, ~~$97.4~~$96.4 million to ~~nonowner-occupied~~nonowner-

occupied loans and ~~$37.5~~$43.9 million to owner-occupied loans. Excluding all reclassifications between loan categories, growth in other construction loans across all five market regions totaled ~~$457.4~~$212.8 million during the first ~~six~~three months of ~~2020. NFNR~~2021. LHFI secured by construction, land development and other land increased ~~$96.9~~$28.8 million, or ~~3.9%~~5.6%, during the first ~~six~~three months of 2020, principally due to movement from the other construction loans category. Excluding other construction loan reclassifications, the NFNR LHFI portfolio declined $37.8 million, or 1.5%, during the first six months of 20202021 primarily due to ~~declines~~net growth in ~~nonowner-occupied~~development, unimproved land and 1-4 family construction loans in ~~the~~Trustmark’s Mississippi, ~~Texas~~Alabama and ~~Alabama~~Tennessee market ~~regions and owner-occupied loans in the Mississippi and Alabama market~~ regions.

Other commercial loans, which include loans to ~~churches, hospitals, finance companies and real estate investment trusts, increased $66.2~~financial intermediaries, decreased $75.8 million, or ~~13.3%~~14.4%, during the first ~~six~~three months of ~~2020,~~2021, primarily ~~due to growth in the Mississippi and Tennessee market regions. State and other political subdivision loans declined $36.4 million, or 3.8%, during the first six months of 2020, principally~~ due to declines in the ~~Alabama, Texas,~~ Mississippi and ~~Florida~~Texas market regions.

Commercial and industrial LHFI ~~declined $69.7~~increased $14.2 million, or ~~4.7%~~1.1%, during the first ~~six~~three months of ~~2020,~~2021, primarily due to ~~declines~~growth in Trustmark’s Tennessee, Mississippi ~~Alabama~~ and ~~Tennessee~~Alabama market regions partially offset by ~~growth~~declines in the Texas market region. Trustmark’s exposure to the energy sector is primarily included in the commercial and industrial loan portfolio in Trustmark’s Mississippi and Texas market regions. At ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, energy-related LHFI had outstanding balances of ~~$113.7~~$106.4 million and ~~$122.9~~$102.3 million, respectively, which represented ~~1.2%~~1.1% of Trustmark’s total LHFI portfolio at ~~June 30, 2020~~March 31, 2021 compared to ~~1.3%~~1.0% of the total LHFI portfolio at December 31, ~~2019.~~2020. Trustmark has no loan exposure where the source of repayment, or the underlying security of such exposure, is tied to the realization of value from energy reserves. Should oil prices fall below current levels for a prolonged period of time, there is potential for downgrades to occur. Management will continue to monitor this exposure.

The following table provides information regarding Trustmark’s home equity loans and home equity lines of credit which are included in the LHFI secured by 1-4 family residential properties for the periods presented ($ in thousands):

Due to the increased risk associated with second liens, loan terms and underwriting guidelines differ from those used for products secured by first liens. Loan amounts and loan-to-value ratios are limited and are lower for second liens than first liens. Also, interest rates and maximum amortization periods are adjusted accordingly. In addition, regardless of lien position, the passing credit score for approval of all home equity lines of credit is higher than that of term loans. The ~~allowance for loan losses,~~ACL on LHFI is also reflective of the increased risk related to second liens through application of a greater loss factor to this portion of the portfolio.

The following tables provide information regarding the interest rate terms of Trustmark’s LHFI as of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019~~2020 ($ in thousands). Trustmark’s variable rate LHFI are based primarily on various prime and LIBOR interest rate bases.

In the following tables, LHFI reported by region (along with related nonperforming assets and net charge-offs) are associated with location of origination except for loans secured by 1-4 family residential properties (representing traditional mortgages) and credit cards. These loans are included in the Mississippi Region because they are centrally analyzed and approved as part of a specific line of business located at Trustmark’s headquarters in Jackson, Mississippi.

The following table presents the LHFI composition by region at ~~June 30, 2020~~March 31, 2021 and reflects each ~~region’s~~region��s diversified mix of loans ($ in thousands):

		June 30, 2020													March 31, 2021
LHFI Composition by Region		Total		Alabama		Florida		Mississippi		Tennessee		Texas			Total		Alabama		Florida		Mississippi		Tennessee		Texas
Loans secured by real estate:
Construction, land development and other land		$	482,309	$	157,001	$	69,107	$	168,598	$	25,285	$	62,318		$	542,902	$	214,722	$	48,291	$	171,539	$	39,145	$	69,205
Other secured by 1-4 family residential properties			562,828		127,961		40,303		313,279		69,499		11,786			509,732		112,699		37,777		284,646		61,178		13,432
Secured by nonfarm, nonresidential properties			2,610,392		670,633		278,285		936,469		188,264		536,741			2,799,195		765,496		263,877		976,949		181,688		611,185
Other real estate secured			884,815		256,797		26,201		348,224		7,898		245,695			1,135,005		325,951		6,139		418,988		19,910		364,017
Other loans secured by real estate:
Other construction			794,968		234,697		30,945		179,431		356		349,539			799,186		283,117		16,741		143,588		972		354,768
Secured by 1-4 family residential properties			1,250,697		—		—		1,240,451		10,246		—			1,233,050		—		—		1,224,857		8,193		—
Commercial and industrial loans			1,413,255		195,494		22,629		674,592		305,918		214,622			1,323,277		203,778		22,980		621,592		290,619		184,308
Consumer loans			164,560		16,952		5,600		121,140		18,493		2,375			155,356		22,461		7,754		102,459		19,225		3,457
State and other political subdivision loans			931,536		90,539		37,549		603,171		29,236		171,041			1,036,694		95,707		35,179		684,640		45,335		175,833
Other commercial loans			564,446		77,415		14,771		365,288		82,251		24,721			449,307		80,019		13,017		277,384		64,803		14,084
LHFI		$	9,659,806	$	1,827,489	$	525,390	$	4,950,643	$	737,446	$	1,618,838		$	9,983,704	$	2,103,950	$	451,755	$	4,906,642	$	731,068	$	1,790,289

Construction, Land Development and Other Land Loans by Region	Construction, Land Development and Other Land Loans by Region													Construction, Land Development and Other Land Loans by Region
Lots		$	79,174	$	17,812	$	24,342	$	30,072	$	1,932	$	5,016		$	67,471	$	21,575	$	11,036	$	26,266	$	1,373	$	7,221
Development			66,900		16,233		5,018		31,184		5,284		9,181			110,837		42,509		610		42,838		13,709		11,171
Unimproved land			101,285		24,335		18,401		26,874		11,359		20,316			108,607		33,232		14,333		31,363		11,568		18,111
1-4 family construction			234,950		98,621		21,346		80,468		6,710		27,805			255,987		117,406		22,312		71,072		12,495		32,702
Construction, land development and other land loans		$	482,309	$	157,001	$	69,107	$	168,598	$	25,285	$	62,318		$	542,902	$	214,722	$	48,291	$	171,539	$	39,145	$	69,205

Loans Secured by Nonfarm, Nonresidential Properties by Region	Loans Secured by Nonfarm, Nonresidential Properties by Region													Loans Secured by Nonfarm, Nonresidential Properties by Region
Nonowner-occupied:
Retail		$	410,176	$	147,990	$	39,904	$	120,699	$	27,437	$	74,146		$	400,595	$	162,007	$	31,393	$	106,249	$	25,339	$	75,607
Office			233,980		67,549		27,499		65,692		12,335		60,905			236,662		68,374		26,516		64,074		12,449		65,249
Hotel/motel			348,958		135,970		102,544		59,237		40,207		11,000			352,191		150,807		90,266		51,443		36,164		23,511
Mini-storage			114,380		16,312		3,928		49,075		412		44,653			135,538		23,176		2,392		62,461		390		47,119
Industrial			193,415		62,803		10,991		36,216		2,166		81,239			201,182		47,521		18,356		47,369		419		87,517
Health care			45,871		13,166		11,739		18,738		—		2,228			41,973		21,803		1,194		16,417		383		2,176
Convenience stores			22,416		3,425		—		6,477		401		12,113			16,773		3,289		200		3,134		373		9,777
Nursing homes/senior living			48,453		18,627		—		4,012		7,243		18,571			158,489		71,123		—		42,050		6,760		38,556
Other			70,999		4,595		6,280		15,121		6,629		38,374			78,407		10,075		7,261		25,585		8,846		26,640
Total nonowner-occupied loans			1,488,648		470,437		202,885		375,267		96,830		343,229			1,621,810		558,175		177,578		418,782		91,123		376,152
Owner-occupied:
Office			159,624		39,672		35,831		49,691		9,609		24,821			163,874		40,240		44,295		37,566		8,662		33,111
Churches			104,498		24,138		7,731		47,965		10,785		13,879			102,001		21,454		6,586		50,270		10,030		13,661
Industrial warehouses			159,246		10,878		2,588		48,310		17,150		80,320			177,666		12,410		3,169		49,610		17,122		95,355
Health care			140,073		16,535		5,953		102,405		2,493		12,687			141,491		26,787		7,525		94,096		2,327		10,756
Convenience stores			110,245		14,870		7,641		66,720		609		20,405			136,175		17,369		9,348		65,479		531		43,448
Retail			74,453		15,863		7,125		28,915		6,771		15,779			69,585		14,050		6,670		23,696		10,512		14,657
Restaurants			57,884		4,127		2,401		34,467		15,424		1,465			56,319		4,267		4,394		32,341		15,025		292
Auto dealerships			47,720		7,982		290		12,615		26,833		—			56,449		7,033		274		23,599		25,543		—
Nursing homes/senior living			184,563		61,645		5,840		117,078		—		—			176,746		58,770		—		117,976		—		—
Other			83,438		4,486		—		53,036		1,760		24,156			97,079		4,941		4,038		63,534		813		23,753
Total owner-occupied loans			1,121,744		200,196		75,400		561,202		91,434		193,512			1,177,385		207,321		86,299		558,167		90,565		235,033
Loans secured by nonfarm, nonresidential properties		$	2,610,392	$	670,633	$	278,285	$	936,469	$	188,264	$	536,741		$	2,799,195	$	765,496	$	263,877	$	976,949	$	181,688	$	611,185

Trustmark adopted FASB ASC Topic 326, in accordance with the amendments of FASB ASU 2016-13, effective January 1, 2020. The guidance in FASB ASC 326 replaces Trustmark’s previous incurred loss methodology with a methodology that reflects the current expected credit losses and requires consideration of a broader range of reasonable and supportable information to determine credit losses. Trustmark’s ACL methodology for LHFI is based upon guidance within FASB ASC Subtopic 326-20, “Financial Instruments – Credit Losses – Measured at Amortized Cost,” as well as applicable regulatory ~~guidance from its primary regulator.~~guidance. The ACL is a valuation account that is deducted from the loans’ amortized cost basis to present the net amount expected to be collected on the loans. Credit quality within the LHFI portfolio is continuously monitored by Management and is reflected within the ACL for loans. The ACL is an estimate of expected losses inherent within Trustmark’s existing LHFI portfolio. The ACL on LHFI is adjusted through the provision for credit losses and reduced by the charge off of loan amounts, net of recoveries.

The econometric models currently in production ~~today~~ reflect segment or pool level sensitivities of probability of default (PD) to changes in macroeconomic variables. By measuring the relationship between defaults and changes in the economy, the quantitative reserve incorporates reasonable and supportable forecasts of future conditions that will affect the value of its assets, as required by FASB ASC Topic 326. Under stable forecasts, these linear regressions will reasonably predict a pool’s PD. However, due to the COVID-19 pandemic, the macroeconomic variables used for reasonable and supportable forecasting have changed rapidly. At the current levels, it is not clear that the models currently in production will produce reasonably representative results since the models were originally estimated using data beginning in 2004 through ~~2017.~~2019. During this period, a traditional, albeit severe, economic recession occurred. Thus, econometric models are sensitive to similar future levels of PD.

The upper and lower limits are based on the distribution of the macroeconomic variable by selecting extreme percentiles at the upper and lower limits of the distribution, the 1st and 99th percentiles, respectively. These upper and lower limits are then used to calculate the PD for the forecast time period in which the forecasted values are outside of the upper and lower limit range. For the ~~current period,~~first quarter of 2021, the forecast related to the macroeconomic variables used in the quantitative modeling process were ~~adversely affected~~positively impacted due to the ~~impact of~~updated forecast effects related to the COVID-19 pandemic, causing an overall ~~increase~~decrease in quantitative reserve levels.

The external factors qualitative factor is Management’s best judgement on the loan or pool level impact of all factors that affect the portfolio that are not accounted for using any other part of the ACL methodology (e.g., natural disasters, changes in legislation, impacts due to technology and pandemics). During the third quarter of 2020, Trustmark activated the External Factor – Pandemic to ensure reserve adequacy for collectively evaluated loans most likely to be impacted by the unique economic and behavioral conditions created by the COVID-19 pandemic. Additional qualitative reserves are derived based on two principles. The first is the disconnect of economic factors to Trustmark’s modeled PD (derived from the econometric models underpinning the quantitative pooled reserves). During the pandemic, extraordinary measures by the federal government were made available to consumers and businesses, including COVID-19 loan payment concessions, direct transfer payments to households, tax deferrals and reduced interest rates, among others. These government interventions may have extended the lag between economic conditions and default, relative to what was captured in the model development data. Because Trustmark’s econometric PD models rely on the observed relationship from the economic downturn from 2007 to 2009 in both timing and severity, Management does not expect the models to reflect these current conditions. For example, while the models would predict contemporaneous unemployment peaks and loan defaults, this may not occur when borrowers can request payment deferrals. Thus, for the affected population, economic conditions are not fully considered as a part of Trustmark’s quantitative reserve. The second principle is the change in risk that is identified by rating changes. As a part of Trustmark’s credit review process, loans in the affected population have been given more frequent screening to ensure accurate ratings are maintained through this dynamic period. Trustmark’s quantitative reserve does not directly address changes in ratings; thus, a migration qualitative factor was designed to work in concert with the quantitative reserve. In a downturn, the qualitative factor is inactive for most pools because changes in ratings are congruent with changes in macroeconomic conditions, which directly influence the PD models in the quantitative reserve.

As discussed above, the disconnect of economic factors means that changes in rating caused by deteriorating and weak economic conditions as a result of the pandemic are not being captured in the quantitative reserve. During the fourth quarter of 2020, due to unforeseen pandemic conditions that varied from Management’s expectations during the third quarter of 2020, additional reserves

were further dimensioned in order to appropriately reflect the risk within the portfolio related to the COVID-19 pandemic. In an effort to ensure the External Factor – Pandemic qualitative factor is reasonable and supportable, historical Trustmark loss data was leveraged to construct a framework that is quantitative in nature. To dimension the additional reserve, Management uses the sensitivity of the quantitative commercial loan reserve to changes in macroeconomic conditions to apply to loans rated acceptable or better (risk rates 1-4). In addition, to account for the known changes in risk, a weighted average of the commercial loan portfolio loss rate, derived from the performance trends qualitative factor, is used to dimension additional reserves for downgraded credits. Loans rated acceptable with risk (risk rate 5) or watch (risk rate 6) received the additional reserves based on the average of the macroeconomic conditions and weighted average of the commercial loan portfolio loss rate while the loans rated special mention (risk rate 7) and substandard (risk rate 8) received additional reserves based on the weighted-average described above.

Determining the appropriateness of the allowance is complex and requires judgement by Management about the effect of matters that are inherently uncertain. In future periods, evaluations of the overall LHFI portfolio, in light of the factors and forecasts then prevailing, may result in significant changes in the allowance and credit loss expense.

For a complete description of Trustmark’s ACL methodology and the quantitative and qualitative factors included in the calculation, please see Note 3 – LHFI and Allowance for Credit Losses, LHFI included in Part I. Item 1. – Financial Statements of this report.

Upon adoption of FASB ASC Topic 326 on January 1, 2020, Trustmark recorded a decrease to the ACL on LHFI of $3.0 million and an increase of $1.8 million for the ACL calculated on the acquired loans transferred to LHFI as PCD loans. At ~~June 30, 2020,~~March 31, 2021, the ACL on LHFI was ~~$119.2~~$109.2 million, ~~an increase~~a decrease of ~~$36.1~~$8.1 million, or ~~43.5%~~6.9%, when compared with ~~January 1,~~December 31, 2020. The ~~increase~~decrease in the ACL during the first ~~six~~three months of ~~2020~~2021 was principally due to ~~net changes~~improvements in the ~~economic~~macroeconomic forecast ~~due to the current and anticipated negative effects of the COVID-19 pandemic on the overall economy and macroeconomic factors~~ used in the ~~quantitative~~ calculation of the ACL. Allocation of Trustmark’s ~~$119.2~~$109.2 million ACL on LHFI, represented ~~1.15%~~1.13% of commercial LHFI and ~~1.56%~~0.95% of consumer and home mortgage LHFI, resulting in an ACL to total LHFI of ~~1.23%~~1.09% as of ~~June 30, 2020.~~March 31, 2021. This compares with an allowance to total LHFI of ~~0.90%~~1.19% at December 31, ~~2019,~~2020, which was allocated to commercial LHFI at ~~0.98%~~1.20% and to consumer and mortgage LHFI at ~~0.61%~~1.16%.

The following table ~~present~~presents changes in the ACL, LHFI for the periods presented ($ in thousands):

Net recoveries for the three months ended ~~June 30, 2020~~March 31, 2021 increased ~~$1.5~~$5.5 million when compared to net charge-offs for the same time period in ~~2019.~~2020. The increase in net recoveries ~~during~~when the ~~second quarter~~first three months of ~~2020 when~~2021 is compared to ~~2019,~~the same time period in 2020, was primarily due to declines in charge-offs in the ~~Mississippi~~Tennessee and Alabama market regions as well as an increase in recoveries in the ~~Alabama~~Mississippi market region. Net charge-offs for the six months ended June 30, 2020 decreased $350 thousand, or 11.7%, when compared to the same time period in 2019, primarily due to a decline in charge-offs in the Mississippi market region as well as an increase in recoveries in the Alabama and Mississippi market regions, which were largely offset by two large commercial credits in the Tennessee and Alabama market regions that were charged off during the first six months of 2020.

The following table presents the net (charge-offs) recoveries by geographic market region for the periods presented ($ in thousands):

The provision for credit losses for the three ~~and six~~ months ended ~~June 30, 2020~~March 31, 2021 totaled ~~0.74% and 0.80%~~-0.41% of average loans (LHFS and LHFI), ~~respectively,~~ compared to ~~0.11% and 0.09%~~0.86% of average loans (LHFS and LHFI) for the same time ~~periods~~period in ~~2019, respectively.~~2020. The ~~increase in the~~negative provision for credit losses ~~when~~for the ~~three and six months ended June 30, 2020 is compared to the same time period in 2019 was~~first quarter of 2021 primarily ~~due to net changes~~reflected improvements in the ~~economic~~macroeconomic forecast ~~due to the current and anticipated negative effects of the COVID-19 pandemic on the overall economy and macroeconomic factors~~ used in the quantitative calculation of the ACL.

The provision for credit losses ~~related to loans~~for all loan classes, with the exception of commercial and ~~other loans secured by real estate increased $19.8 million and $43.4 million during~~industrial LHFI, was negative for the ~~three and six months ended June 30, 2020, respectively,~~first quarter of 2021, primarily ~~due to the negative impact~~reflecting improvement of ~~the COVID-19 pandemic on~~ the macroeconomic forecasting variables used in the ACL modeling, such as National and Southern Unemployment, National GDP, Prime Rate and South Vacancy Rate. The provision for credit losses related to commercial and industrial ~~loans declined $1.9~~LHFI totaled $4.1 million ~~and $3.9 million during~~for the ~~three and six months ended June 30, 2020, respectively,~~first quarter of 2021, primarily due to specific reserves recorded for loans ~~upgraded from substandard to pass, paydowns and a slight decrease in the calculated PD and LGD, which uses Trustmark's historical data.~~of one borrower.

~~FASB ASC Topic 326 requires Trustmark to estimate expected credit losses for off-balance sheet credit exposures which are not unconditionally cancellable.~~ Trustmark maintains a separate ACL on off-balance sheet credit exposures, including unfunded loan commitments and letters of credit, which is included on the accompanying consolidated balance ~~sheet as of June 30, 2020. Upon adoption of FASB ASC Topic 326 on January 1, 2020, Trustmark recorded an ACL on off-balance sheet credit exposures of $29.6 million.~~

sheet. Expected credit losses for off-balance sheet credit exposures are estimated by calculating a commitment usage factor over the contractual period for exposures that are not unconditionally cancellable by Trustmark. Trustmark ~~generates~~calculates a loan pool level unfunded amount for the period. Trustmark calculates aan expected funding rate each period which is applied to ~~the pool~~each pool’s unfunded commitment balances to ensure that reserves will be applied to ~~the~~each pool ~~as Trustmark believes the pool will reach its~~based upon balances expected to be funded based upon historical levels. Additionally, a ~~total~~ reserve rate is applied to the unfunded commitment ~~balance. The total reserve rate~~balance, which incorporates both quantitative and qualitative aspects of the current period’s expected credit loss rate. The ~~total~~ reserve rate is loan pool specific and is applied to the unfunded amount to ensure loss factors, both quantitative and qualitative, are being considered on the unfunded portion of the loan pool, consistent with the methodology applied to the funded loan pools. See the section captioned “Lending Related” in Note 1312 – Contingencies included in Part I. Item 1. – Financial Statements of this report for complete description of Trustmark’s ACL methodology on off-balance sheet credit exposures.

Adjustments to the ACL on off-balance sheet credit exposures are recorded to credit loss expense related to off-balance sheet credit exposures in noninterest expense. Trustmark recorded a credit loss expense related to off-balance sheet credit exposures of ~~$6.2~~a negative $9.4 million ~~and $13.0 million during~~for the three ~~and six~~ months ended ~~June 30,~~March 31, 2021, resulting in an ACL on off-balance sheet credit exposures of $29.2 million at March 31, 2021. Trustmark recorded a credit loss expense related to off-balance sheet credit exposures of $6.8 million for the three months ended March 31, 2020, resulting in an ACL on off-balance sheet credit exposures of ~~$42.7~~$36.4 million ~~as of June 30,~~at March 31, 2020. The ~~increase~~decrease in the ACL on off-balance sheet credit exposures for the three ~~and six~~ months ended ~~June 30, 2020~~March 31, 2021 was primarily due to net changes in ~~the economic forecast due to the current and anticipated negative effects of the COVID-19 pandemic on~~ the overall economy and macroeconomic factors used in the quantitative calculation of the ACL.

The table below provides the components of nonperforming assets ~~excluding acquired loans,~~ by geographic market region at ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019~~2020 ($ in thousands):

See the previous discussion of LHFS for more information on Trustmark’s serviced GNMA loans eligible for repurchase and the impact of Trustmark’s repurchases of delinquent mortgage loans under the GNMA optional repurchase program.

At ~~June 30, 2020,~~March 31, 2021, nonaccrual LHFI totaled ~~$50.0~~$63.5 million, or ~~0.50%~~0.61% of total LHFS and LHFI, reflecting ~~a decrease~~an increase of ~~$3.2 million,~~$386 thousand, or ~~6.1%~~0.6%, relative to December 31, ~~2019.~~2020. The ~~decrease~~increase in nonaccrual LHFI during the first ~~six~~three months of ~~2020~~2021 was primarily due to ~~reductions,~~LHFI placed on nonaccrual status largely offset by one large commercial credit which was returned to accrual status as well as pay-offs ~~and charge-offs~~ of nonaccrual LHFI in Trustmark’s Mississippi ~~and Tennessee~~ market ~~regions, which were~~

~~partially offset by LHFI placed on nonaccrual status in the Mississippi and Alabama market regions during the first six months of 2020.~~ region.

As of ~~June 30, 2020,~~March 31, 2021, nonaccrual energy-related LHFI totaled ~~$10.9~~$10.0 million and represented ~~9.6%~~9.4% of Trustmark’s total energy-related portfolio, compared to ~~$10.6~~$10.4 million, or ~~8.6%~~10.2% of Trustmark’s total energy-related portfolio, as of December 31, ~~2019.~~2020. For additional information regarding nonaccrual LHFI, see the section captioned “Nonaccrual and Past Due LHFI” included in Note 3 – LHFI and Allowance for Credit Losses, LHFI in Part I. Item 1. – Financial Statements of this report.

Other real estate at ~~June 30, 2020~~March 31, 2021 decreased ~~$11.0~~$1.0 million, or ~~37.5%~~8.6%, when compared with December 31, ~~2019.~~2020. The decrease in other real estate was principally ~~a result of~~due to properties sold in Trustmark’s Mississippi, Alabama ~~Florida~~ and Tennessee market regions.

The following tables illustrate changes in other real estate by geographic market region for the periods presented ($ in thousands):

Other real estate is revalued on an annual basis or more often if market conditions necessitate. Subsequent to foreclosure, losses on the periodic revaluation of the property are charged against the reserve for other real estate write-downs or net income in other real estate expense, if a reserve does not exist. Write-downs of other real estate decreased ~~$823~~$846 thousand, or ~~49.4%~~84.9%, when the first ~~six~~three months of ~~2020~~2021 is compared to the same time period in ~~2019,~~2020, primarily due to a decrease in write-downs of other real estate properties in the Alabama, Florida and Mississippi market region and properties sold for which a reserve for write-down was previously recorded.

For additional information regarding other real estate, please see Note 65 – Other Real Estate ~~included in Part I. Item 1. – Financial Statements of this report.~~

~~Trustmark’s loss-share agreement with the FDIC covering the acquired covered loans secured by 1-4 family residential properties will expire in 2021.~~

Upon adoption of FASB ASC Topic 326, which was effective for Trustmark on January 1, 2020 in accordance with the amendments in FASB ASU 2016-13, Trustmark elected to account for its existing acquired loans as PCD loans included within the LHFI portfolio. Trustmark elected to maintain pools of loans that were previously accounted for under FASB ASC Subtopic 310-30, “Receivables – Loans and Debt Securities Acquired with Deteriorated Credit Quality,” and will continue to account for these pools as a unit of account. Loans are only removed from the existing loan pools if they are written off, paid off or sold. Upon adoption of FASB ASC Topic 326, the ACL was determined for each pool and added to the pool’s carrying value to establish a new amortized cost basis. The difference between the unpaid principal balance of the pool and the new amortized cost basis is the noncredit premium or discount which will be amortized into interest income over the remaining life of the pool. Changes to the ACL after adoption of FASB ASC Topic 326 are recorded through the provision for credit losses.

As a result of adopting FASB ASC Topic 326, Trustmark transferred $72.6 million of acquired loans, $815 thousand of related allowance for loan losses, acquired loans as well as $1.0 million of ACL calculated for these loans to LHFI on January 1, 2020. The acquired loans and related allowance transferred were acquired in the BancTrust merger.

~~As of December 31, 2019, acquired loans consisted of the following ($ in thousands):~~

~~For additional information regarding acquired loans, including changes in the net carrying value, see Note 4 – Acquired Loans~~ included in Part I. Item 1. – Financial Statements of this report.

Trustmark’s deposits are its primary source of funding and consist of core deposits from the communities Trustmark serves. Deposits include interest-bearing and noninterest-bearing demand accounts, savings, money market, certificates of deposit and individual retirement accounts. Total deposits were ~~$13.505~~$14.383 billion at ~~June 30, 2020~~March 31, 2021 compared to ~~$11.246~~$14.049 billion at December 31, ~~2019,~~2020, an increase of ~~$2.260 billion,~~$334.7 million, or ~~20.1%~~2.4%, reflecting increases in ~~both noninterest-bearing and interest-bearing~~ deposit accounts as customers deposited proceeds from line draws, PPP loans and other COVID-19 related stimulus programs. During the first ~~six~~three months of ~~2020,~~2021, noninterest-bearing deposits increased ~~$989.3~~$357.0 million, or ~~34.2%~~8.2%, ~~primarily~~ due to ~~increases in commercial and consumer~~growth across all types of noninterest-bearing deposit accounts. Interest-bearing deposits ~~increased $1.271 billion,~~decreased $22.3 million, or ~~15.2%~~0.2%, during the first ~~six~~three months of ~~2020,~~2021, primarily due to declines in public interest checking accounts and all categories of certificates of deposits, largely offset by growth in all other categories of ~~interest checking accounts, commercial money market~~interest-bearing deposit ~~accounts, and consumer savings accounts, partially offset by declines in consumer time deposits.~~accounts.

Trustmark uses short-term borrowings, such as federal funds purchased, securities sold under repurchase agreements and short-term FHLB advances, to fund growth of earning assets in excess of deposit growth. See the section captioned “Liquidity” for further discussion of the components of Trustmark’s excess funding capacity.

Federal funds purchased and securities sold under repurchase agreements totaled ~~$70.3~~$161.0 million at ~~June 30, 2020~~March 31, 2021 compared to ~~$256.0~~$164.5 million at December 31, ~~2019,~~2020, a decrease of ~~$185.8~~$3.5 million, or ~~72.6%. Of these amounts $70.3 million~~2.1%, and ~~$62.5 million, respectively,~~ represented customer related transactions, such as commercial sweep repurchase balances. ~~Excluding customer related transactions,~~ Trustmark had no upstream federal funds purchased at ~~June 30, 2020,~~March 31, 2021 or December 31, 2020.

Other borrowings totaled $146.0 million at March 31, 2021, a decrease of $22.3 million, or 13.2%, when compared ~~to $193.5~~with $168.3 million at December 31, ~~2019. The decrease in the upstream federal funds purchased during the first six months of~~ 2020, was due primarily to reduced funding needs caused by the increases in deposit balances as customers deposited proceeds from line draws, PPP loans and other COVID-19 related stimulus programs, as well as the FRB’s decision to reduce reserve requirement ratios to zero.

~~Other borrowings totaled $152.9 million at June 30, 2020, an increase of $67.5 million, or 79.0%, when compared with $85.4 million at December 31, 2019,~~ primarily due to the ~~increase~~decrease in the amount of GNMA loans eligible for repurchase.

Information required in this section is set forth under the heading “Legal Proceedings” of Note 1312 – Contingencies included in Part I. Item 1. – Financial Statements of this report.

Information required in this section is set forth under the heading “Lending Related” of Note 1312 – Contingencies included in Part I. Item 1. – Financial Statements of this report.

Payments due from Trustmark under specified long-term and certain other binding contractual obligations were scheduled in Trustmark’s ~~2019~~2020 Annual Report. The most significant obligations, other than obligations under deposit contracts and short-term borrowings, were for operating leases for banking facilities. There have been no material changes in Trustmark’s contractual obligations since year-end.

At ~~June 30, 2020,~~March 31, 2021, Trustmark’s total shareholders’ equity was ~~$1.674~~$1.760 billion, an increase of ~~$13.2~~$18.6 million, or ~~0.8%~~1.1%, when compared to December 31, ~~2019.~~2020. During the first ~~six~~three months of ~~2020,~~2021, shareholders’ equity increased primarily as a result of net income of ~~$54.4~~$52.0 million, ~~and improvements~~partially offset by a decline in the fair market value of securities available for sale, net of tax, of ~~$32.4~~$16.4 million, ~~partially offset by a $19.9~~common stock dividends of $14.7 million ~~net of tax, adjustment to the beginning balance of retained earnings as a result of the adoption of FASB ASU 2016-13,~~and common stock repurchases of ~~$27.5 million and common stock dividends of $29.4~~$4.2 million. Trustmark utilizes a capital model in order to provide Management with a monthly tool for analyzing changes in its strategic capital ratios. This allows Management to hold sufficient capital to provide for growth opportunities and protect the balance sheet against sudden adverse market conditions, while maintaining an attractive return on equity to shareholders.

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~~2020 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 ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019.~~2020. AOCI is not included in computing regulatory capital. Trustmark has elected the five-year phase-in transition period (through December 31, 2024) 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 ~~June 30, 2020,~~March 31, 2021, Trustmark and TNB exceeded all applicable minimum capital standards. In addition, Trustmark and TNB met applicable regulatory guidelines to be considered well-capitalized at ~~June 30, 2020.~~March 31, 2021. 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, 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 ~~June 30, 2020,~~March 31, 2021, which Management believes have affected Trustmark’s or TNB’s present classification.

During the fourth quarter of 2020, Trustmark enhanced its capital structure with the issuance of $125.0 million of subordinated notes. The subordinated notes were sold at an underwriting discount of 1.2%, resulting in net proceeds to Trustmark of $123.5 million before deducting offering expenses. At both March 31, 2021 and December 31, 2020,the carrying amount of the subordinated notes was $122.9 million. The subordinated notes mature December 1, 2030 and are redeemable at Trustmark’s option under certain circumstances. For regulatory capital purposes, the subordinated notes qualify as Tier 2 capital for Trustmark at December 31, 2020. Trustmark may utilize the full carrying value of the subordinated notes as Tier 2 capital until December 1, 2025 (five years prior to maturity). Beginning December 1, 2025, the subordinated notes will phase out of Tier 2 capital at a rate of 20.0% each year until maturity.

In 2006, Trustmark enhanced its capital structure with the issuance of trust preferred securities. For regulatory capital purposes, the trust preferred securities currently qualify as Tier 1 capital. Trustmark intends to continue to utilize $60.0 million in trust preferred securities issued by Trustmark Preferred Capital Trust I (the Trust) as Tier 1 capital up to the regulatory limit, as permitted by the grandfather provision in the Dodd-Frank Act and the Basel III Final Rule.

Refer to the section captioned “Regulatory Capital” included in Note 1615 – Shareholders’ Equity in Part I. Item 1. – Financial Statements of this report for an illustration of Trustmark’s and TNB’s actual regulatory capital amounts and ratios under regulatory capital standards in effect at ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019.~~2020.

Dividends per common share for the ~~six~~three months ended ~~June 30,~~March 31, 2021 and 2020 ~~and 2019~~ were ~~$0.46.~~$0.23. Trustmark’s indicated dividend for ~~2020~~2021 is $0.92 per common share, which is the same as dividends per common share declared in ~~2019.~~2020.

The Board of Directors of Trustmark authorized a stock repurchase program effective April 1, 2019, under which $100.0 million of Trustmark’s outstanding common shares could be acquired through March 31, 2020. Trustmark repurchased approximately 887 thousand shares of its outstanding 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. On March 9, 2020, Trustmark suspended its share repurchase programs to preserve capital to support customers during the COVID-19 pandemic. Trustmark resumed the repurchase of its shares in January 2021. Under this authority, Trustmark repurchased approximately 145 thousand shares of its outstanding common stock valued at $4.2 million during the first quarter of 2021. The shares may be purchased from time to time at prevailing market prices, through open market or private transactions, depending on market ~~conditions.~~conditions, and in conjunction with its disciplined share repurchase framework. There is no guarantee as to the number of shares that may be repurchased by Trustmark, and Trustmark may discontinue ~~purchases under the program~~repurchases at any time at Management’s discretion.

~~On March 9, 2020, Trustmark suspended its share repurchase programs to preserve capital to support customers during the COVID-19 pandemic.~~

Liquidity is the ability to ensure that sufficient cash flow and liquid assets are available to satisfy current and future financial obligations, including demand for loans and deposit withdrawals, funding operating costs and other corporate purposes. Consistent cash flows from operations and adequate capital provide internally generated liquidity. Furthermore, Management maintains funding capacity from a variety of external sources to meet daily funding needs, such as those required to meet deposit withdrawals, loan disbursements and security settlements. Liquidity strategy also includes the use of wholesale funding sources to provide for the seasonal fluctuations of deposit and loan demand and the cyclical fluctuations of the economy that impact the availability of funds. Management keeps excess funding capacity available to meet potential demands associated with adverse circumstances.

The asset side of the balance sheet provides liquidity primarily through maturities and cash flows from loans and securities as well as the ability to sell certain loans and securities while the liability portion of the balance sheet provides liquidity primarily through noninterest and interest-bearing deposits. Trustmark utilizes federal funds purchased, FHLB advances, securities sold under repurchase agreements as well as the Federal Reserve Discount Window (Discount Window) and, on a limited basis as discussed below, brokered deposits to provide additional liquidity. Access to these additional sources represents Trustmark’s incremental borrowing capacity.

Deposit accounts represent Trustmark’s largest funding source. Average deposits totaled to ~~$12.298~~$14.138 billion for the first ~~six~~three months of ~~2020~~2021 and represented approximately ~~84.3%~~84.8% of average liabilities and shareholders’ equity, compared to average deposits of ~~$11.491~~$11.359 billion, which represented ~~84.9%~~83.3% of average liabilities and shareholders’ equity for the first ~~six~~three months of ~~2019.~~2020.

Trustmark utilizes a limited amount of brokered deposits to supplement other wholesale funding sources. At ~~June 30, 2020,~~March 31, 2021, brokered sweep Money Market Deposit Account (MMDA) deposits totaled ~~$26.8~~$28.8 million compared to ~~$26.2~~$28.1 million at December 31, ~~2019.~~2020.

At ~~June 30,~~both March 31, 2021 and December 31, 2020, Trustmark had no upstream federal funds purchased, compared to $193.5 million at December 31, 2019. The decrease in the upstream federal funds purchased during the first six months of 2020, was due primarily to the increases in deposit balances as customers deposited proceeds from line draws, PPP loans and other stimulus programs, as well as the FRB’s decision to reduce reserve requirement ratios to zero.purchased. Trustmark maintains adequate federal funds lines to provide sufficient short-term liquidity.

Trustmark maintains a relationship with the FHLB of Dallas, which provided no outstanding short-term or long-term advances at ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019.~~2020. Trustmark had a $600.0 million letter of credit outstanding with the FHLB of Dallas at ~~June 30, 2020, compared to no outstanding letters of credit at~~both March 31, 2021 and December 31, ~~2019.~~2020. Under the existing borrowing agreement, Trustmark had sufficient qualifying collateral to increase FHLB advances or letters of credit with the FHLB of Dallas by ~~$2.565~~$2.750 billion at ~~June 30, 2020.~~ March 31, 2021.

In addition, at ~~June 30, 2020,~~March 31, 2021, Trustmark had ~~$777~~$612 thousand in short-term and $112 thousand in long-term FHLB advances outstanding with the FHLB of Atlanta, which were acquired in the BancTrust merger, compared to ~~$811~~$625 thousand in short-term and $116 thousand in long-term FHLB advances at December 31, ~~2019.~~2020. Trustmark has non-member status and thus no additional borrowing capacity with the FHLB of Atlanta.

Additionally, Trustmark has the ability to leverage its unencumbered investment securities as collateral. At ~~June 30, 2020,~~March 31, 2021, Trustmark had approximately ~~$554.0~~$962.0 million available in unencumbered agency securities compared to ~~$546.0~~$560.0 million at December 31, ~~2019.~~2020.

Another borrowing source is the Discount Window. At ~~June 30, 2020,~~March 31, 2021, Trustmark had approximately ~~$913.9~~$872.3 million available in collateral capacity at the Discount Window primarily from pledges of commercial and industrial LHFI, compared with ~~$982.7 billion~~$893.5 million at December 31, ~~2019.~~2020.

Additionally, on March 15, 2020, in response to the COVID-19 pandemic, the FRB reduced reserve requirements for insured depository institutions to zero percent, which increased TNB’s available liquidity.

During the fourth quarter of 2020, Trustmark agreed to issue and sell $125.0 million aggregate principal amount of its 3.625% fixed-to-floating rate subordinated notes. The ~~PPPLF was established by the FRB to provide a liquidity source to PPP lenders, through non-recourse credit secured by PPP loans. The PPPLF is available~~subordinated notes were sold at an underwriting discount of 1.2%, resulting in net proceeds to Trustmark ~~as a liquidity source as needed.~~of $123.5 million before deducting offering expenses. At ~~June 30,~~both March 31, 2021 and December 31, 2020,the carrying amount of the subordinated notes was $122.9 million. The subordinated notes mature December 1, 2030 and are redeemable at Trustmark’s option under certain circumstances. The subordinated notes are unsecured obligations and are subordinated in right of payment to all of Trustmark’s existing and future senior indebtedness, whether secured or unsecured. The subordinated notes are obligations of Trustmark ~~had $4.0 million~~only and are not obligations of, ~~outstanding PPP loans pledged as collateral at~~and are not guaranteed by, any of its subsidiaries, including TNB. Trustmark intends to use the ~~PPPLF.~~net proceeds for general corporate purposes.

During 2006, Trustmark completed a private placement of $60.0 million of trust preferred securities through a newly formed Delaware trust affiliate, the Trust. The trust preferred securities mature September 30, 2036 and are redeemable at Trustmark’s option. The proceeds from the sale of the trust preferred securities were used by the Trust to purchase $61.9 million in aggregate principal amount of Trustmark’s junior subordinated debentures.

The Board of Directors of Trustmark currently has the authority to issue up to 20.0 million preferred shares with no par value. The ability to issue preferred shares in the future will provide Trustmark with additional financial and management flexibility for general corporate and acquisition purposes. At ~~June 30, 2020,~~March 31, 2021, Trustmark had no shares of preferred stock issued and outstanding.

Liquidity position and strategy are reviewed regularly by Management and continuously adjusted in relationship to Trustmark’s overall strategy. Management believes that Trustmark has sufficient liquidity and capital resources to meet presently known cash flow requirements arising from ongoing business transactions.

Market risk reflects the potential risk of loss arising from adverse changes in interest rates and market prices. Trustmark has risk management policies to monitor and limit exposure to market risk. Trustmark’s primary market risk is interest rate risk created by core banking activities. Interest rate risk is the potential variability of the income generated by Trustmark’s financial products or services, which results from changes in various market interest rates. Market rate changes may take the form of absolute shifts, variances in the relationships between different rates and changes in the shape or slope of the interest rate term structure.

On March 5, 2021, the United Kingdom’s Financial Conduct Authority, which regulates LIBOR, confirmed that the publication of most LIBOR term rates will end on June 30, 2023 (excluding 1-week U.S. LIBOR and 2-month U.S. LIBOR, the publication of which will end on December 31, 2021). Trustmark has a significant number of loans, derivative contracts, borrowings and other financial instruments with attributes that are either directly or indirectly dependent on LIBOR. The transition from LIBOR could create considerable costs and additional risk. Trustmark cannot predict what the ultimate impact of the transition from LIBOR will be; however, failure to adequately manage the transition could have a material adverse effect on Trustmark’s business, financial condition and results of operations. Trustmark has organized an internal LIBOR Transition Working Group to identify operational and contractual best practices, assess its risk, manage the transition, facilitate communication with its customers and monitor the impacts. For additional information regarding the transition from LIBOR and Trustmark’s management of this transition, please see the respective risk factor included in Part I. Item 1A. – Risk Factors, of Trustmark’s 2020 Annual Report.

Management continually develops and applies cost-effective strategies to manage these risks. Management’s Asset/Liability Committee sets the day-to-day operating guidelines, approves strategies affecting net interest income and coordinates activities within policy limits established by the Board of Directors of Trustmark. A key objective of the asset/liability management program is to quantify, monitor and manage interest rate risk and to assist Management in maintaining stability in the net interest margin under varying interest rate environments.

Trustmark uses financial derivatives for management of interest rate risk. Management’s Asset/Liability Committee, in its oversight role for the management of interest rate risk, approves the use of derivatives in balance sheet hedging strategies. The most common derivatives employed by Trustmark are interest rate lock commitments, forward contracts (both futures contracts and options on futures contracts), interest rate swaps, interest rate caps and interest rate floors. As a general matter, the values of these instruments

are designed to be inversely related to the values of the assets that they hedge (i.e., if the value of the hedged asset falls, the value of the related hedge rises). In addition, Trustmark has entered into derivatives contracts as counterparty to one or more customers in connection with loans extended to those customers. These transactions are designed to hedge interest rate, currency or other exposures of the customers and are not entered into by Trustmark for speculative purposes. Increased federal regulation of the derivatives markets may increase the cost to Trustmark to administer derivatives programs.

On April 4, 2013, Trustmark entered into a forward interest rate swap contract on junior subordinated debentures with a total notional amount of $60.0 million. The interest rate swap contract was designatedDerivatives Not Designated as a derivative instrument in a cash flow hedge under FASB ASC Topic 815, with the objective of protecting the quarterly interest payments on Trustmark’s $60.0 million of junior subordinated debentures issued to the Trust throughout the five-year period which began December 31, 2014 and ended December 31, 2019 from the risk of variability of those payments resulting from changes in the three-month LIBOR interest rate. Under the swap, which became effective on December 31, 2014, Trustmark paid a fixed interest rate of 1.66% and received a variable interest rate based on three-month LIBOR on a total notional amount of $60.0 million, with quarterly net settlements.

The interest rate swap matured on December 31, 2019; therefore, there was no accumulated net after-tax amount related to the effective cash flow hedge included in AOCI at December 31, 2019. No ineffectiveness related to the interest rate swap designated as a cash flow hedge was recognized in the consolidated statements of income during the six months ended June 30, 2019. Amounts reported in AOCI related to this derivative were reclassified to other interest expense as interest payments were made on Trustmark’s variable rate junior subordinated debentures.Hedging Instruments

As part of Trustmark’s risk management strategy in the mortgage banking business, various derivative instruments such as interest rate lock commitments and forward sales contracts are utilized. Rate lock commitments are residential mortgage loan commitments with customers, which guarantee a specified interest rate for a specified period of time. Trustmark’s obligations under forward contracts consist of commitments to deliver mortgage loans, originated and/or purchased, in the secondary market at a future date. The gross notional amount of Trustmark’s off-balance sheet obligations under these derivative instruments totaled ~~$786.8~~$609.1 million at ~~June 30, 2020,~~March 31, 2021, with a positive valuation adjustment of ~~$11.8~~$10.6 million, compared to ~~$301.1~~$706.8 million, with a positive valuation adjustment of ~~$953 thousand~~$6.4 million at December 31, ~~2019.~~2020.

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 economically hedges changes in fair value of the MSR attributable to interest rates. These transactions are considered freestanding derivatives that do not otherwise qualify for hedge accounting under GAAP. The total notional amount of these derivative instruments was ~~$385.0~~$379.0 million at ~~June 30, 2020~~March 31, 2021 compared to ~~$564.0~~$326.5 million at December 31, ~~2019.~~2020. These exchange-traded derivative instruments are accounted for at fair value with changes in the fair value recorded as 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~~positive ineffectiveness of ~~$2.0~~$270 thousand and $9.9 million ~~and $53 thousand~~ for the three months ended ~~June 30,~~March 31, 2021 and 2020, ~~and 2019, respectively. For the six months ended June 30, 2020 and 2019, the impact was a net positive ineffectiveness of $7.9 million and a net negative ineffectiveness of $4.8 million,~~ respectively.

Trustmark offers certain interest rate derivatives products directly to qualified commercial lending clients seeking to manage their interest rate risk under loans they have entered into with TNB. Trustmark economically hedges interest rate swap transactions executed with commercial lending clients by entering into offsetting interest rate swap transactions with institutional derivatives market participants. Derivatives transactions executed as part of this program are not designated as qualifying hedging relationships under GAAP and are, therefore, carried on Trustmark’s financial statements at fair value with the change in fair value recorded as noninterest income in bank card and other fees. Because these derivatives have mirror-image contractual terms, in addition to collateral provisions which mitigate the impact of non-performance risk, the changes in fair value are expected to substantially offset. The Chicago Mercantile Exchange rules legally characterize variation margin collateral payments made or received for centrally cleared interest rate swaps as settlements rather than collateral. As a result, centrally cleared interest rate swaps included in other assets and other liabilities are presented on a net basis in the accompanying consolidated balance sheets. As of ~~June 30, 2020,~~March 31, 2021, Trustmark had interest rate swaps with an aggregate notional amount of ~~$978.1 million~~$1.172 billion related to this program, compared to ~~$893.1 million~~$1.125 billion as of December 31, ~~2019.~~2020.

~~As of June 30, 2020,~~At March 31, 2021, the termination value of interest rate swaps in a liability position, which includes accrued interest but excludes any adjustment for nonperformance risk, related to these agreements was ~~$1.9 million~~$980 thousand compared to ~~$1.0~~$1.3 million at December 31, ~~2019. As of June 30, 2020,~~2020. At March 31, 2021, Trustmark had posted collateral of ~~$2.1~~$1.3 million against its obligations because of negotiated thresholds and minimum transfer amounts under these agreements. If Trustmark had breached any of these triggering provisions at ~~June 30,~~

~~2020,~~March 31, 2021, it could have been required to settle its obligations under the agreements at the termination value (which is expected to approximate fair market value).

Credit risk participation agreements arise when Trustmark contracts with other financial institutions, as a guarantor or beneficiary, to share credit risk associated with certain interest rate swaps. These agreements provide for reimbursement of losses resulting from a third-party default on the underlying swap. At ~~June 30, 2020,~~March 31, 2021, Trustmark had entered into ~~three~~five risk participation agreements as a beneficiary with an aggregate notional amount of ~~$41.7~~$49.3 million, compared to three risk participation agreements as a beneficiary with an aggregate notional amount of ~~$37.6~~$41.1 million at December 31, ~~2019.~~ 2020. At ~~both June 30, 2020 and December~~March 31, ~~2019,~~2021, Trustmark had entered into ~~ten~~twenty-two risk participation agreements as a guarantor with an aggregate notional amount of ~~$73.4~~$172.0 million, ~~and $79.3~~compared to twenty-four risk participation agreements as a guarantor with an aggregate notional amount of $172.0 million ~~respectively.~~at December 31, 2020. The aggregate fair values of these risk participation agreements were immaterial at both ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019.~~2020.

Trustmark’s participation in the derivatives markets is subject to increased federal regulation of these markets. Trustmark believes that it may continue to use financial derivatives to manage interest rate risk and also to offer derivatives products to certain qualified commercial lending clients in compliance with the Volcker Rule. However, the increased federal regulation of the derivatives markets has increased the cost to Trustmark of administering its derivatives programs. Some of these costs (particularly compliance costs related to the Volcker Rule and other federal regulations) are expected to recur in the future.

The primary purpose in managing interest rate risk is to invest capital effectively and preserve the value created by the core banking business. This is accomplished through the development and implementation of lending, funding, pricing and hedging strategies designed to maximize net interest income performance under varying interest rate environments subject to specific liquidity and interest rate risk guidelines.

Financial simulation models are the primary tools used by Management’s Asset/Liability Committee to measure interest rate exposure. Using a wide range of scenarios, Management is provided with extensive information on the potential impact on net interest income caused by changes in interest rates. Models are structured to simulate cash flows and accrual characteristics of Trustmark’s balance sheet. Assumptions are made about the direction and volatility of interest rates, the slope of the yield curve and the changing composition of Trustmark’s balance sheet, resulting from both strategic plans and customer behavior. In addition, the model incorporates Management’s assumptions and expectations regarding such factors as loan and deposit growth, pricing, prepayment speeds and spreads between interest rates.

Based on the results of the simulation models using static balances, the table below summarizes the effect various one-year interest rate shift scenarios would have on net interest income compared to a base case, flat scenario at ~~June 30,~~March 31, 2021 and 2020. At March 31, 2021 and 2020, ~~and 2019. At June 30, 2020 and 2019,~~ the impact of a 200-basis point drop scenario was ~~not calculated~~excluded from the table below due to the low interest rate environment.

Management cannot provide any assurance about the actual effect of changes in interest rates on net interest income. The estimates provided do not include the effects of possible strategic changes in the balances of various assets and liabilities throughout ~~2020~~2021 or additional actions Trustmark could undertake in response to changes in interest rates. Management will continue to prudently manage the balance sheet in an effort to control interest rate risk and maintain profitability over the long term.

Another component of interest rate risk management is measuring the economic value-at-risk for a given change in market interest rates. The economic value-at-risk may indicate risks associated with longer-term balance sheet items that may not affect net interest income at risk over shorter time periods. Trustmark uses computer-modeling techniques to determine the present value of all asset and liability cash flows (both on- and off-balance sheet), adjusted for prepayment expectations, using a market discount rate. The economic value of equity (EVE), also known as net portfolio value, is defined as the difference between the present value of asset cash flows and the present value of liability cash flows. The resulting change in EVE in different market rate environments, from the base case scenario, is the amount of EVE at risk from those rate environments.

The following table summarizes the effect that various interest rate shifts would have on net portfolio value at ~~June 30, 2020~~March 31, 2021 and ~~2019. At June 30, 2020~~2020. Based upon quarter-end current and ~~2019,~~implied market rates, scenarios reflecting lower rates could result in negative interest rates. The U.S. has never experienced an interest rate environment where the FRB has a negative interest rate policy. While the impact of negative interest rates on earnings-at-risk would vary by scenario, a parallel shift downward would be expected to negatively impact net interest income. However, in a negative interest rate environment, the modeling assumptions used for certain assets and liabilities

require additional management judgment and therefore, the actual outcomes may differ from the modeled assumptions. At March 31, 2021 and 2020, the results of the 100-basis point drop scenario and the 200-basis point drop scenario ~~was not calculated~~were excluded from the table below due to the low interest rate environment.

Trustmark determines the fair value of the MSR using a valuation model administered by a third party that calculates the present value of estimated future net servicing income. The model incorporates assumptions that market participants use in estimating future net servicing income, including estimates of prepayment speeds, discount rate, default rates, cost to service (including delinquency and foreclosure costs), escrow account earnings, contractual servicing fee income and other ancillary income such as late fees. Management reviews all significant assumptions quarterly. Mortgage loan prepayment speeds, a key assumption in the model, is the annual rate at which borrowers are forecasted to repay their mortgage loan principal. The discount rate used to determine the present value of estimated future net servicing income, another key assumption in the model, is an estimate of the required rate of return investors in the market would require for an asset with similar risk. Both assumptions can, and generally will, change as market conditions and interest rates change.

By way of example, an increase in either the prepayment speed or discount rate assumption will result in a decrease in the fair value of the MSR, while a decrease in either assumption will result in an increase in the fair value of the MSR. In recent years, there have been significant market-driven fluctuations in loan prepayment speeds and discount rates. These fluctuations can be rapid and may continue to be significant. Therefore, estimating prepayment speed and/or discount rates within ranges that market participants would use in determining the fair value of the MSR requires significant management judgment.

At ~~June 30, 2020,~~March 31, 2021, the MSR fair value was ~~$57.8~~$83.0 million, compared to ~~$79.3~~$56.4 million at ~~June 30, 2019.~~March 31, 2020. The impact on the MSR fair value of a 10% adverse change in prepayment speed or a 100 basis point increase in discount rate at ~~June 30, 2020,~~March 31, 2021, would be a decline in fair value of approximately ~~$4.2~~$4.4 million and ~~$2.0~~$3.2 million, respectively, compared to a decline in fair value of approximately ~~$3.4~~$3.8 million and ~~$2.7~~$1.7 million, respectively, at ~~June 30, 2019.~~March 31, 2020. Changes of equal magnitude in the opposite direction would produce similar increases in fair value in the respective amounts.

Trustmark’s accounting policies are fundamental to understanding of Management’s discussion and analysis of Trustmark’s results of operations and financial condition. Trustmark has identified critical accounting policies which involve a higher degree of judgment and complexity in making certain estimates and assumptions that affect amounts reported in its consolidated financial statements. Certain accounting estimates are important to the portrayal of Trustmark’s financial condition, as they require Management to make difficult, complex or subjective judgments, some of which may relate to matters that are inherently uncertain. Accounting estimates are susceptible to material changes as a result of changes in facts and circumstances, which include, but are not limited to, changes in interest rates, changes in the performance of the economy, including COVID-19 related changes and changes in the financial condition of borrowers. For an overview of Trustmark’s critical accounting policies, ~~at December 31, 2019,~~ see the section captioned “Critical Accounting Policies” included in Part II. Item 7. – Management’s Discussion and Analysis of Financial Condition and Results of Operations, of Trustmark’s ~~2019~~2020 Annual Report. There have been no significant changes in Trustmark’s critical accounting policies during the first three months of 2021.

For additional information regarding Trustmark’s basis of presentation and accounting policies, see Note 1 – Business, Basis of Financial Statement Presentation and Principles of Consolidation ~~included in Part I. Item 1. – Financial Statements of this report.~~

On January 1, 2020, Trustmark adopted FASB ASU 2016-13, which created material changes to Trustmark’s allowance for loan losses, LHFI critical accounting policy that existed at December 31, 2019. The allowance for loan losses, LHFI critical accounting policy was replaced with the allowance for credit losses, LHFI critical accounting policy presented below effective January 1, 2020.

The allowance for credit losses (ACL), LHFI is a valuation account that is deducted from the loans’ amortized cost basis to present the net amount expected to be collected on the loans. Credit quality within the LHFI portfolio is continuously monitored by Management and is reflected within the ACL for loans. The ACL is an estimate of expected losses inherent within Trustmark’s existing LHFI portfolio. The ACL for LHFI is adjusted through the provision for credit losses and reduced by the charge off of loan amounts, net of recoveries.

~~For a complete description of Trustmark’s ACL methodology for the LHFI portfolio, please see Note 3 – LHFI and Allowance for Credit Losses, LHFI~~ included in Part I. Item 1. – Financial Statements of this report.

For a complete list of recently adopted and pending accounting policies and the impact on Trustmark, see Note 2019 – Accounting Policies Recently Adopted and Pending Accounting Pronouncements included in Part I. Item 1. – Financial Statements of this report.

The information required by this item is included in the discussion of Market/Interest Rate Risk Management found in Management’s Discussion and Analysis.

As of the end of the period covered by this Quarterly Report on Form 10-Q, an evaluation was carried out by Trustmark’s Management, with the participation of its Chief Executive Officer and Treasurer and Principal Financial Officer (Principal Financial Officer), of the effectiveness of Trustmark’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934). Based on that evaluation, the Chief Executive Officer and the Principal Financial Officer concluded that Trustmark’s disclosure controls and procedures were effective as of the end of the period covered by this report.

Effective January 1, 2020, Trustmark adopted FASB ASU 2016-13. Trustmark implemented changes to its policies, processes and controls over the estimation of the allowance for credit losses to support the adoption of FASB ASU 2016-13. Management revised previous internal controls used under legacy GAAP and incorporated new internal controls to ensure adequacy of the reserve levels under the new allowance for credit losses methodology. Changes to internal controls as a result of adopting FASB ASU 2016-13 were a result of changes in the calculation under the new allowance for credit losses methodology and did not change the overall nature of the controls. There has been no change in Trustmark’s internal control over financial reporting during the last fiscal quarter that has materially affected, or is reasonably likely to materially affect, Trustmark’s internal control over financial reporting.

~~Trustmark’s wholly-owned subsidiary, TNB, has been named as a defendant in several lawsuits related to the collapse of the Stanford Financial Group.~~

In November 2009, the lawsuit was removed to federal court by certain defendants and then transferred by the United States Panel on Multidistrict Litigation to federal court in the Northern District of Texas (Dallas) where multiple Stanford related matters are being consolidated for pre-trial proceedings. In May 2010, all defendants (including TNB) filed motions to dismiss the lawsuit. In August 2010, the court authorized and approved the formation of an Official Stanford Investors Committee (OSIC) to represent the interests of Stanford investors and, under certain circumstances, to file legal actions for the benefit of Stanford investors. In December 2011, the OSIC filed a motion to interveneInformation required in this ~~action. In September 2012,~~section is set forth under the ~~district court referred the case to a magistrate judge for hearing and determination~~heading “Legal Proceedings” of ~~certain pretrial issues. In December 2012, the court granted the OSIC’s motion to intervene, and the OSIC filed an Intervenor Complaint against one~~Note 12 – Contingencies in Part I. Item 1 – Financial Statements of the other defendant financial institutions. In February 2013, the OSIC filed a second Intervenor Complaint that asserts claims against TNB and the remaining defendant financial institutions. The OSIC seeks to recover: (i) alleged fraudulent transfers in the amount of the fees each of the defendants allegedly received from Stanford Financial Group, the profits each of the defendants allegedly made from Stanford Financial Group deposits, and other monies each of the defendants allegedly received from Stanford Financial Group; (ii) damages attributable to alleged conspiracies by each of the defendants with the Stanford Financial Group to commit fraud and/or aid and abet fraud and conversion on the asserted grounds that the defendants knew or should have known the Stanford Financial Group was conducting an illegal and fraudulent scheme; and (iii) punitive damages. The OSIC did not quantify damages. this report.

On June 23, 2015, the court allowed the Class Plaintiffs to file a Second Amended Class Action Complaint (SAC), which asserted new claims against TNB and certain of the other defendants for (i) aiding, abetting and participating in a fraudulent scheme, (ii) aiding, abetting and participating in violations of the Texas Securities Act, (iii) aiding, abetting and participating in breaches of fiduciary duty, (iv) aiding, abetting and participating in conversion and (v) conspiracy. On July 14, 2015, the defendants (including TNB) filed motions to dismiss the SAC and to reconsider the court’s prior denial to dismiss the OSIC’s constructive fraudulent transfer claims against TNB and the other financial institutions that are defendants in the action. On July 27, 2016, the court denied the motion by TNB and the other financial institution defendants to dismiss the SAC and also denied the motion by TNB and the other financial institution defendants to reconsider the court’s prior denial to dismiss the OSIC’s constructive fraudulent transfer claims. On August 24, 2016, TNB filed its answer to the SAC. On October 20, 2017, the OSIC filed a motion seeking an order lifting the discovery stay and establishing a trial schedule. On November 4, 2016, the OSIC filed a First Amended Intervenor Complaint, which added claims for (i) aiding, abetting or participation in violations of the Texas Securities Act and (ii) aiding, abetting or participation in the breach of fiduciary duty. On November 7, 2017, the court denied the Class Plaintiffs’ motion seeking class certification and designation of class representatives and counsel, finding that common issues of fact did not predominate. The court granted the OSIC’s motion to lift the discovery stay that it had previously ordered.

federal court in the Northern District of Texas (Dallas) where multiple Stanford related matters are being consolidated for pre-trial proceedings. On March 29, 2010, the court stayed the case. TNB filed a motion to lift the stay, which was denied on February 28, 2012. In September 2012, the district court referred the case to a magistrate judge for hearing and determination of certain pretrial issues.

On April 11, 2016, Trustmark learned that a different Stanford-related lawsuit had been filed on that date in the Superior Court of Justice in Ontario, Canada, by The Toronto-Dominion Bank (“TD Bank”), naming TNB and three other financial institutions not affiliated with Trustmark as defendants. The complaint seeks a declaration specifying the degree to which each of TNB and the other defendants are liable in respect of any loss and damage for which TD Bank is found to be liable in a litigation commenced against TD Bank brought by the Joint Liquidators of Stanford International Bank Limited in the Superior Court of Justice, Commercial List in Ontario, Canada (the “Joint Liquidators’ Action”), as well as contribution and indemnity in respect of any judgment, interest and costs TD Bank is ordered to pay in the Joint Liquidators’ Action. To date, TNB has not been served in connection with this action.

On November 1, 2019, TNB was named as a defendant in a complaint filed by Paul Blaine Smith, Carolyn Bass Smith and other plaintiffs identified therein (the Smith Complaint). The Smith Complaint was filed in District Court, Harris County, Texas and named TNB and four other financial institutions and one individual, each of which are unaffiliated with Trustmark, as defendants. The Smith Complaint relates to the collapse of the Stanford Financial Group, as does the other pending litigation relating to Stanford summarized above. Plaintiffs in the Smith Complaint have demanded a jury trial.

On January 15, 2020, the court granted Stanford Financial Group receiver’s motion to stay the state court action. On February 26, 2020, the lawsuit was removed to federal court in the Southern District of Texas by TNB. Trustmark and its counsel are carefully evaluating the Smith Complaint in the form that is publicly available, and will update the foregoing description to the extent that additional material facts are ascertained.

~~TNB’s relationship with Adams and Madison Timber consisted of traditional banking services in the ordinary course of business.~~

~~All pending legal proceedings described above are being vigorously contested.~~ In accordance with FASB Accounting Standards Codification (ASC) Topic 450-20, “Loss Contingencies,” Trustmark will establish an accrued liability for litigation matters when those matters present loss contingencies that are both probable and reasonably estimable. At the present time, ~~Management~~Trustmark believes, based on its evaluation and the advice of legal counsel, ~~and Management’s evaluation,~~ that a loss in any such proceeding is not probable and reasonably estimable. All matters will continue to be monitored for further developments that would make such loss contingency both probable and reasonably estimable. In view of the inherent difficulty of predicting the outcome of legal proceedings, Trustmark cannot predict the eventual outcomes of the currently pending matters or the timing of their ultimate resolution. ~~Management~~Trustmark currently believes, however, based upon the advice of legal counsel and Management’s evaluation and after taking into account its current insurance coverage, that the legal proceedings currently pending should not have a material adverse effect on Trustmark’s consolidated financial condition.

~~Information about Trustmark’s~~There has been no material change in the risk factors ispreviously disclosed in ~~Part I. Item 1A. – Risk Factors included in~~ Trustmark’s ~~2019~~2020 Annual Report. ~~Supplemental risk factors were included in Trustmark’s Quarterly Report on Form 10-Q for the period ended March 31, 2020~~

~~(Q1 2020 Quarterly Report). There are no other material changes in Trustmark’s risk factors from those disclosed in the 2019 Annual Report and the Q1 2020 Quarterly Report.~~

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. On March 9, 2020, Trustmark suspended its share repurchase programs to preserve capital to support customers during the COVID-19 pandemic. Trustmark resumed the repurchase of its shares in January 2021. The shares may be purchased from time to time at prevailing market prices, through open market or private transactions, depending on market ~~conditions.~~conditions, and in conjunction with its disciplined share repurchase framework. There is no guarantee as to the number of shares that may be repurchased by Trustmark, and Trustmark may discontinue ~~purchases under the program~~repurchases at any time at Management’s discretion.

~~On March 9, 2020, Trustmark suspended its share repurchase programs to preserve capital to support customers during the COVID-19 pandemic.~~

The following table provides information with respect to purchases by Trustmark or made on behalf of Trustmark of its common stock during the three months ended ~~June 30, 2020~~March 31, 2021 ($ in thousands, except per share amounts):

The exhibits listed in the Exhibit Index are filed herewith or are incorporated herein by reference.

All other exhibits are omitted, as they are inapplicable or not required by the related instructions.

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Mississippi		64-0471500
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

248 East Capitol Street, Jackson, Mississippi		39201
(Address of principal executive offices)		(Zip Code)


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, no par value	TRMK	Nasdaq Global Select Market

	(Unaudited)
	June 30, 2020		December 31, 2019
Assets
Cash and due from banks	$	1,026,640	$	358,916
Securities available for sale, at fair value (amortized cost: $1,839,578; allowance for credit losses: $0)		1,884,153		1,602,404
Securities held to maturity, net of allowance for credit losses of $0 (fair value: $690,561-2020; $746,202-2019)		660,048		738,099
Paycheck Protection Program (PPP) loans		939,783		—
Loans held for sale (LHFS)		355,089		226,347
Loans held for investment (LHFI) (1)		9,659,806		9,335,628
Less allowance for credit losses (ACL), LHFI (1)		119,188		84,277
Net LHFI		9,540,618		9,251,351
Acquired loans (1)		—		72,601
Less allowance for loan losses, acquired loans (1)		—		815
Net acquired loans		—		71,786
Net LHFI and acquired loans		9,540,618		9,323,137
Premises and equipment, net		190,567		189,791
Mortgage servicing rights		57,811		79,394
Goodwill		385,270		379,627
Identifiable intangible assets, net		8,895		7,343
Other real estate		18,276		29,248
Operating lease right-of-use assets		29,819		31,182
Other assets		595,110		532,389
Total Assets	$	15,692,079	$	13,497,877

Liabilities
Deposits:
Noninterest-bearing	$	3,880,540	$	2,891,215
Interest-bearing		9,624,933		8,354,342
Total deposits		13,505,473		11,245,557
Federal funds purchased and securities sold under repurchase agreements		70,255		256,020
Other borrowings		152,860		85,396
ACL on off-balance sheet credit exposures (1)		42,663		—
Junior subordinated debt securities		61,856		61,856
Operating lease liabilities		31,076		32,354
Other liabilities		153,952		155,992
Total Liabilities		14,018,135		11,837,175

Shareholders' Equity
Common stock, no par value:
Authorized: 250,000,000 shares Issued and outstanding: 63,422,439 shares - 2020; 64,200,111 shares - 2019		13,214		13,376
Capital surplus		230,613		256,400
Retained earnings		1,419,552		1,414,526
Accumulated other comprehensive income (loss), net of tax		10,565		(23,600	)
Total Shareholders' Equity		1,673,944		1,660,702
Total Liabilities and Shareholders' Equity	$	15,692,079	$	13,497,877

	(Unaudited)
	March 31, 2021			December 31, 2020
Assets
Cash and due from banks	$	1,774,541		$	1,952,504
Federal funds sold and securities purchased under reverse repurchase agreements		—			50
Securities available for sale, at fair value (amortized cost: $2,327,434-2021 $1,959,773-2020; allowance for credit losses: $0)		2,337,676			1,991,815
Securities held to maturity, net of allowance for credit losses of $0 (fair value: $515,296-2021; $563,115-2020)		493,738			538,072
Paycheck Protection Program (PPP) loans		679,725			610,134
Loans held for sale (LHFS)		412,999			446,951
Loans held for investment (LHFI)		9,983,704			9,824,524
Less allowance for credit losses (ACL), LHFI		109,191			117,306
Net LHFI		9,874,513			9,707,218
Premises and equipment, net		199,098			194,278
Mortgage servicing rights		83,035			66,464
Goodwill		384,237			385,270
Identifiable intangible assets, net		6,724			7,390
Other real estate, net		10,651			11,651
Operating lease right-of-use assets		33,704			30,901
Other assets		587,672			609,142
Total Assets	$	16,878,313		$	16,551,840

Liabilities
Deposits:
Noninterest-bearing	$	4,705,991		$	4,349,010
Interest-bearing		9,677,449			9,699,754
Total deposits		14,383,440			14,048,764
Federal funds purchased and securities sold under repurchase agreements		160,991			164,519
Other borrowings		145,994			168,252
Subordinated notes		122,877			122,921
Junior subordinated debt securities		61,856			61,856
ACL on off-balance sheet credit exposures		29,205			38,572
Operating lease liabilities		35,389			32,290
Other liabilities		178,856			173,549
Total Liabilities		15,118,608			14,810,723

Shareholders' Equity
Common stock, no par value:
Authorized: 250,000,000 shares Issued and outstanding: 63,394,522 shares - 2021; 63,424,526 shares - 2020		13,209			13,215
Capital surplus		229,892			233,120
Retained earnings		1,533,110			1,495,833
Accumulated other comprehensive income (loss), net of tax		(16,506	)		(1,051	)
Total Shareholders' Equity		1,759,705			1,741,117
Total Liabilities and Shareholders' Equity	$	16,878,313		$	16,551,840


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
Emerging growth company	☐

	March 31, 2021		December 31, 2020
Aaa	$	467,185	$	511,488
Aa1 to Aa3		8,950		22,528
Not Rated (1)		17,603		4,056
Total	$	493,738	$	538,072

	Securities Available for Sale				Securities Held to Maturity				Securities Available for Sale				Securities Held to Maturity
	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
Due in one year or less	$	7,867	$	7,945	$	18,599	$	18,715	$	1,479	$	1,507	$	19,212	$	19,275
Due after one year through five years		1,559		1,601		13,030		13,350		1,510		1,554		7,342		7,428
Due after five years through ten years		2,161		2,112		—		—		1,967		1,928		0		0
Due after ten years		19,232		19,416		—		—		18,004		18,158		0		0
		30,819		31,074		31,629		32,065		22,960		23,147		26,554		26,703
Mortgage-backed securities		1,808,759		1,853,079		628,419		658,496		2,304,474		2,314,529		467,184		488,593
Total	$	1,839,578	$	1,884,153	$	660,048	$	690,561	$	2,327,434	$	2,337,676	$	493,738	$	515,296

	June 30, 2020						March 31, 2021
	Nonaccrual With No ACL		Total Nonaccrual		Loans Past Due 90 Days or More Still Accruing		Nonaccrual With No ACL		Total Nonaccrual		Loans Past Due 90 Days or More Still Accruing
Loans secured by real estate:
Construction, land development and other land	$	575	$	932	$	—	$	5,885	$	6,109	$	—
Other secured by 1-4 family residential properties		496		4,441		51		1,629		3,964		7
Secured by nonfarm, nonresidential properties		5,389		7,883		—		12,617		15,695		—
Other real estate secured		63		881		—		58		183		—
Other loans secured by real estate:
Other construction		—		—		—		—		—		—
Secured by 1-4 family residential properties		1,480		12,523		528		—		15,036		2,368
Commercial and industrial loans		16,436		18,181		—		1,176		12,776		—
Consumer loans		—		120		217		—		71		218
State and other political subdivision loans		—		4,049		—		—		3,914		—
Other commercial loans		12		984		11		—		5,766		—
Total	$	24,451	$	49,994	$	807	$	21,365	$	63,514	$	2,593

	June 30, 2020						March 31, 2021
	Accruing		Nonaccrual		Total		Accruing		Nonaccrual		Total
Loans secured by real estate:
Construction, land development and other land	$	—	$	14	$	14	$	0	$	11	$	11
Other secured by 1-4 family residential properties		71		3,761		3,832		42		3,644		3,686
Secured by nonfarm, nonresidential properties		—		3,010		3,010		0		3,846		3,846
Commercial and industrial loans		1,500		14,487		15,987		1,500		10,073		11,573
Consumer loans		18		21		39		0		15		15
State and other political subdivision loans		—		3,872		3,872		0		3,737		3,737
Other commercial loans		—		125		125		0		81		81
Total TDRs	$	1,589	$	25,290	$	26,879	$	1,542	$	21,407	$	22,949

	June 30, 2019						March 31, 2020
	Accruing		Nonaccrual		Total		Accruing		Nonaccrual		Total
Loans secured by real estate:
Construction, land development and other land	$	—	$	20	$	20	$	0	$	14	$	14
Secured by 1-4 family residential properties		50		3,563		3,613
Other secured by 1-4 family residential properties								0		3,672		3,672
Secured by nonfarm, nonresidential properties		—		5,311		5,311		0		2,899		2,899
Commercial and industrial loans		14,897		11,965		26,862		2,640		17,103		19,743
Consumer loans		—		30		30		17		23		40
Other loans		—		510		510
Other commercial loans								0		125		125
Total TDRs	$	14,947	$	21,399	$	36,346	$	2,657	$	23,836	$	26,493

	December 31, 2019
		Commercial LHFI
		Pass - Categories 1-6		Special Mention - Category 7		Substandard - Category 8		Doubtful - Category 9		Subtotal
Loans secured by real estate:
Construction, land development and other land		$	1,075,146	$	—	$	15,726	$	42	$	1,090,914
Secured by 1-4 family residential properties			116,592		45		6,355		41		123,033
Secured by nonfarm, nonresidential properties			2,430,761		—		44,001		328		2,475,090
Other real estate secured			721,238		—		2,547		—		723,785
Commercial and industrial loans			1,407,837		909		68,262		888		1,477,896
Consumer loans			—		—		—		—		—
State and other political subdivision loans			957,948		4,650		5,346		—		967,944
Other loans			469,095		3,445		16,926		30		489,496
Total		$	7,178,617	$	9,049	$	159,163	$	1,329	$	7,348,158

	Consumer LHFI
	Current		Past Due 30-89 Days		Past Due 90 Days or More		Nonaccrual		Subtotal		Total LHFI
Loans secured by real estate:
Construction, land development and other land	$	71,413	$	332	$	—	$	132	$	71,877	$	1,162,791
Secured by 1-4 family residential properties		1,710,930		5,922		211		15,817		1,732,880		1,855,913
Secured by nonfarm, nonresidential properties		155		—		—		—		155		2,475,245
Other real estate secured		695		—		—		—		695		724,480
Commercial and industrial loans		—		—		—		—		—		1,477,896
Consumer loans		172,649		2,588		393		108		175,738		175,738
State and other political subdivision loans		—		—		—		—		—		967,944
Other loans		6,125		—		—		—		6,125		495,621
Total	$	1,961,967	$	8,842	$	604	$	16,057	$	1,987,470	$	9,335,628

Portfolio Segment	Loan Class	Loan Pool	Methodology	Loss Drivers
Loans secured by real estate	Construction, land development and other land	1-4 family residential construction	DCF	Prime Rate, National GDP
		Lots and development	DCF	Prime Rate, Southern Unemployment
		Unimproved land	DCF	Prime Rate, Southern Unemployment
		All other consumer	DCF	~~Prime Rate,~~ Southern Unemployment
	Other secured by 1-4 family residential properties	Consumer 1-4 family - 1st liens	DCF	Prime Rate, Southern Unemployment
		All other consumer	DCF	~~Prime Rate,~~ Southern Unemployment
		Nonresidential owner-occupied	DCF	Southern Unemployment, National GDP
	Secured by nonfarm, nonresidential properties	Nonowner-occupied - hotel/motel	DCF	Southern Vacancy Rate, Southern Unemployment
		Nonowner-occupied - office	DCF	Southern Vacancy Rate, Southern Unemployment
		Nonowner-occupied- Retail	DCF	Southern Vacancy Rate, Southern Unemployment
		Nonowner-occupied - senior living/nursing homes	DCF	Southern Vacancy Rate, Southern Unemployment
		Nonowner-occupied - all other	DCF	Southern Vacancy Rate, Southern Unemployment
		Nonresidential owner-occupied	DCF	Southern Unemployment, National GDP
	Other real estate secured	Nonresidential nonowner -occupied - apartments	DCF	Southern Vacancy Rate, Southern Unemployment
		Nonresidential owner-occupied	DCF	Southern Unemployment, National GDP
		Nonowner-occupied - all other	DCF	Southern Vacancy Rate, Southern Unemployment
Other loans secured by real estate	Other construction	Other construction	WARM	Prime Rate, National Unemployment
	Secured by 1-4 family residential properties	Trustmark mortgage	WARM	Southern Unemployment
Commercial and industrial loans	Commercial and industrial loans	Commercial and industrial - non-working capital	DCF	Trustmark historical data
		Commercial and industrial - working capital	DCF	Trustmark historical data
		Credit cards	WARM	Trustmark call report data
Consumer loans	Consumer loans	Credit cards	WARM	Trustmark call report data
		Overdrafts	Loss Rate	Trustmark historical data
		All other consumer	DCF	~~Prime Rate,~~ Southern Unemployment
State and other political subdivision loans	State and other political subdivision loans	Obligations of state and political subdivisions	DCF	Moody's Bond Default Study
Other commercial loans	Other commercial loans	Other loans	DCF	Prime Rate, Southern Unemployment
		Commercial and industrial - non-working capital	DCF	Trustmark historical data
		Commercial and industrial - working capital	DCF	Trustmark historical data

	2019
	Balance January 1,		Charge-offs			Recoveries		Provision for Loan Losses			Balance June 30,
Loans secured by real estate:
Construction, land development and other land loans	$	7,390	$	(35	)	$	577	$	(1,001	)	$	6,931
Secured by 1-4 family residential properties		8,641		(281	)		336		(337	)		8,359
Secured by nonfarm, nonresidential properties		22,376		(34	)		30		1,876			24,248
Other real estate secured		3,450		—			16		255			3,721
Commercial and industrial loans		27,359		(2,831	)		329		2,761			27,618
Consumer loans		2,890		(1,269	)		954		673			3,248
State and other political subdivision loans		990		—			—		(552	)		438
Other loans		6,194		(2,520	)		1,740		422			5,836
Total	$	79,290	$	(6,970	)	$	3,982	$	4,097		$	80,399

	Acquired Impaired			Acquired Not ASC 310-30 (1)
Carrying value, net at January 1, 2019	$	102,890		$	2,811
Transfers (2)		—			(2,926	)
Accretion to interest income		5,532			115
Payments received, net		(37,230	)		—
Other (3)		178			—
Change in allowance for loan losses, acquired loans		416			—
Carrying value, net at December 31, 2019		71,786			—
FASB ASU 2016-13 adoption adjustment		(71,786	)		—
Accretion to interest income		—			—
Payments received, net		—			—
Other (3)		—			—
Change in allowance for loan losses, acquired loans		—			—
Carrying value, net at June 30, 2020	$	—		$	—

	December 31, 2019
			Commercial Loans
			Pass - Categories 1-6		Special Mention - Category 7		Substandard - Category 8		Doubtful - Category 9		Subtotal
Loans secured by real estate:
Construction, land development and other land			$	4,022	$	—	$	192	$	—	$	4,214
Secured by 1-4 family residential properties				3,164		42		580		—		3,786
Secured by nonfarm, nonresidential properties				27,848		—		9,972		386		38,206
Other real estate secured				3,878		—		68		0		3,946
Commercial and industrial loans				3,419		—		—		1,616		5,035
Consumer loans				—		—		—		—		—
Other loans				2,591		—		7		—		2,598
Total acquired loans			$	44,922	$	42	$	10,819	$	2,002	$	57,785

	Consumer Loans
	Current		Past Due 30-89 Days		Past Due 90 Days or More		Nonaccrual (1)		Subtotal		Total Acquired Loans
Loans secured by real estate:
Construction, land development and other land	$	463	$	94	$	—	$	—	$	557	$	4,771
Secured by 1-4 family residential properties		12,843		615		281		—		13,739		17,525
Secured by nonfarm, nonresidential properties		—		—		—		—		—		38,206
Other real estate secured		—		—		—		—		—		3,946
Commercial and industrial loans		—		—		—		—		—		5,035
Consumer loans		489		31		—		—		520		520
Other loans		—		—		—		—		—		2,598
Total acquired loans	$	13,795	$	740	$	281	$	—	$	14,816	$	72,601

	Finance Leases			Operating Leases			Finance Leases			Operating Leases
2020 (excluding the six months ended June 30, 2020)	$	1,740		$	4,890
2021		1,617			4,355
2021 (excluding the three months ended March 31, 2021)							$	1,242		$	3,826
2022		1,350			4,139			1,597			4,727
2023		549			4,102			885			4,619
2024		582			3,994			572			4,731
2025								584			4,752
Thereafter		4,161			14,738			3,868			18,305
Total minimum lease payments		9,999			36,218			8,748			40,960
Less imputed interest		(1,383	)		(5,142	)		(1,204	)		(5,571	)
Lease liabilities	$	8,616		$	31,076		$	7,544		$	35,389

	Three Months Ended June 30, 2020
	Performance Awards and Units			Time-Vested Awards and Units
Nonvested shares, beginning of period		147,533			329,732
Granted		—			6,040
Released from restriction		—			(28,065	)
Forfeited		(1,025	)		(3,014	)
Nonvested shares, end of period		146,508			304,693

	Three Months Ended		Six Months Ended		Three Months Ended March 31,
	June 30, 2020		June 30, 2020		2021			2020
Balance at beginning of period	$	36,421	$	—	$	38,572		$	0
FASB ASU 2016-13 adoption adjustment		—		29,638		0			29,638
Credit loss expense related to off-balance sheet credit exposures		6,242		13,025		(9,367	)		6,783
Balance at end of period	$	42,663	$	42,663	$	29,205		$	36,421

													Securities Available for Sale and Transferred Securities			Defined Benefit Pension Items			Total
Balance at January 1, 2021													$	17,331		$	(18,382	)	$	(1,051	)
Other comprehensive income (loss) before reclassification														(15,817	)		—			(15,817	)
Amounts reclassified from accumulated other comprehensive income (loss)														—			362			362
Net other comprehensive income (loss)														(15,817	)		362			(15,455	)
Balance at March 31, 2021													$	1,514		$	(18,020	)	$	(16,506	)
	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	)	$	(8,017	)	$	(15,583	)	$	(23,600	)
Other comprehensive income (loss) before reclassification		33,595			—			—			33,595			31,026			—			31,026
Amounts reclassified from accumulated other comprehensive income (loss)		—			570			—			570			—			272			272
Net other comprehensive income (loss)		33,595			570			—			34,165			31,026			272			31,298
Balance at June 30, 2020	$	25,578		$	(15,013	)	$	—		$	10,565

Balance at January 1, 2019	$	(43,824	)	$	(12,324	)	$	469		$	(55,679	)
Other comprehensive income (loss) before reclassification		30,679			—			(123	)		30,556
Amounts reclassified from accumulated other comprehensive income (loss)		—			541			(234	)		307
Net other comprehensive income (loss)		30,679			541			(357	)		30,863
Balance at June 30, 2019	$	(13,145	)	$	(11,783	)	$	112		$	(24,816	)
Balance at March 31, 2020													$	23,009		$	(15,311	)	$	7,698

							MSR			Other Assets - Derivatives
Balance, January 1, 2021							$	66,464		$	9,560
Total net (loss) gain included in Mortgage banking, net (1)								8,593			2,748
Additions								7,978			0
Sales								0			(8,203	)
Balance, March 31, 2021							$	83,035		$	4,105

The amount of total gains (losses) for the period included in earnings that are attributable to the change in unrealized gains or losses still held at March 31, 2021							$	13,696		$	1,579
	MSR			Other Assets - Derivatives
Balance, January 1, 2020	$	79,394		$	1,439		$	79,394		$	1,439
Total net (loss) gain included in Mortgage banking, net (1)		(33,979	)		22,382			(26,606	)		9,606
Additions		12,396			—			3,649			0
Sales		—			(9,491	)		0			(1,219	)
Balance, June 30, 2020	$	57,811		$	14,330
Balance, March 31, 2020							$	56,437		$	9,826

The amount of total gains (losses) for the period included in earnings that are attributable to the change in unrealized gains or losses still held at June 30, 2020	$	(27,158	)	$	12,897

Balance, January 1, 2019	$	95,596		$	1,187
Total net (loss) gain included in Mortgage banking, net (1)		(22,388	)		3,889
Additions		6,075			—
Sales		—			(2,531	)
Balance, June 30, 2019	$	79,283		$	2,545

The amount of total gains (losses) for the period included in earnings that are attributable to the change in unrealized gains or losses still held at June 30, 2019	$	(17,072	)	$	678
The amount of total gains (losses) for the period included in earnings that are attributable to the change in unrealized gains or losses still held at March 31, 2020							$	(23,999	)	$	4,428

Offsetting of Derivative Assets
As of June 30, 2020
As of March 31, 2021
							Gross Amounts Not Offset in the Statement of Financial Position													Gross Amounts Not Offset in the Statement of Financial Position
	Gross Amounts of Recognized Assets		Gross Amounts Offset in the Statement of Financial Position		Net Amounts of Assets presented in the Statement of Financial Position		Financial Instruments			Cash Collateral Received		Net Amount		Gross Amounts of Recognized Assets		Gross Amounts Offset in the Statement of Financial Position		Net Amounts of Assets presented in the Statement of Financial Position		Financial Instruments		Cash Collateral Received		Net Amount
Derivatives	$	43,579	$	—	$	43,579	$	(1	)	$	—	$	43,578	$	22,586	$	0	$	22,586	$	0	$	0	$	22,586

Offsetting of Derivative Liabilities
As of June 30, 2020
As of March 31, 2021
								Gross Amounts Not Offset in the Statement of Financial Position														Gross Amounts Not Offset in the Statement of Financial Position
	Gross Amounts of Recognized Liabilities		Gross Amounts Offset in the Statement of Financial Position			Net Amounts of Liabilities presented in the Statement of Financial Position		Financial Instruments			Cash Collateral Posted			Net Amount		Gross Amounts of Recognized Liabilities		Gross Amounts Offset in the Statement of Financial Position		Net Amounts of Liabilities presented in the Statement of Financial Position		Financial Instruments		Cash Collateral Posted			Net Amount
Derivatives	$	1,932	$	—	��	$	1,932	$	(1	)	$	(1,931	)	$	—	$	5,269	$	0	$	5,269	$	0	$	(1,310	)	$	3,959

Offsetting of Derivative Assets
As of December 31, 2019
As of December 31, 2020
							Gross Amounts Not Offset in the Statement of Financial Position												Gross Amounts Not Offset in the Statement of Financial Position
	Gross Amounts of Recognized Assets		Gross Amounts Offset in the Statement of Financial Position		Net Amounts of Assets presented in the Statement of Financial Position		Financial Instruments		Cash Collateral Received		Net Amount		Gross Amounts of Recognized Assets		Gross Amounts Offset in the Statement of Financial Position		Net Amounts of Assets presented in the Statement of Financial Position		Financial Instruments		Cash Collateral Received		Net Amount
Derivatives	$	16,209	$	—	$	16,209	$	—	$	—	$	16,209	$	37,974	$	0	$	37,974	$	0	$	0	$	37,974

June 30,	2020			2019
March 31,							2021			2020
Consolidated Balance Sheets
Total assets	$	15,692,079		$	13,548,958		$	16,878,313		$	14,019,829
Securities		2,544,201			2,469,261			2,831,414			2,538,055
Total loans (incl LHFS and acquired loans)		10,014,895			9,445,023
Total loans (LHFI + LHFS)								10,396,703			9,893,309
Deposits		13,505,473			11,566,629			14,383,440			11,575,764
Total shareholders' equity		1,673,944			1,618,550			1,759,705			1,652,399

Stock Performance
Market value - close	$	24.52		$	33.25		$	33.66		$	23.30
Book value		26.39			25.13			27.76			26.06
Tangible book value		20.18			19.10			21.59			19.92

Capital Ratios
Total equity / total assets		10.67	%		11.95	%		10.43	%		11.79	%
Tangible equity / tangible assets		8.37	%		9.34	%		8.30	%		9.27	%
Tangible equity / risk-weighted assets		11.09	%		11.39	%		11.23	%		11.05	%
Tier 1 leverage ratio (1)		9.08	%		10.03	%		9.11	%		10.21	%
Common equity tier 1 risk-based capital ratio (1)		11.42	%		11.76	%
Common equity Tier 1 risk-based capital ratio (1)								11.71	%		11.35	%
Tier 1 risk-based capital ratio (1)		11.94	%		12.31	%		12.20	%		11.88	%
Total risk-based capital ratio (1)		13.00	%		13.07	%		14.07	%		12.78	%

	June 30, 2020										March 31, 2021
	Amortized Cost					Estimated Fair Value					Amortized Cost					Estimated Fair Value
	Amount		%			Amount		%			Amount		%			Amount		%
Securities Available for Sale
Aaa	$	1,829,011		99.4	%	$	1,872,977		99.4	%	$	2,322,251		99.8	%	$	2,331,878		99.8	%
Aa1 to Aa3		2,500		0.1	%		2,513		0.1	%
Baa1 to Baa3		1,073		0.1	%		1,112		0.1	%
A1 to A3												1,060		—			1,101		—
Not Rated (1)		6,994		0.4	%		7,551		0.4	%		4,123		0.2	%		4,697		0.2	%
Total securities available for sale	$	1,839,578		100.0	%	$	1,884,153		100.0	%	$	2,327,434		100.0	%	$	2,337,676		100.0	%

Securities Held to Maturity
Aaa	$	628,419		95.2	%	$	658,497		95.4	%	$	467,185		94.6	%	$	488,593		94.8	%
Aa1 to Aa3		26,179		4.0	%		26,449		3.8	%		8,950		1.8	%		8,987		1.8	%
Not Rated (1)		5,450		0.8	%		5,615		0.8	%		17,603		3.6	%		17,716		3.4	%
Total securities held to maturity	$	660,048		100.0	%	$	690,561		100.0	%	$	493,738		100.0	%	$	515,296		100.0	%

	June 30, 2020 (1)					December 31, 2019
	Amount		%			Amount		%
Loans secured by real estate:
Construction, land development and other land (2)	$	482,309		5.0	%	$	1,162,791		12.4	%
Other secured by 1-4 family residential properties (2)		562,828		5.8	%		1,855,913		19.9	%
Secured by nonfarm, nonresidential properties		2,610,392		27.0	%		2,475,245		26.5	%
Other real estate secured		884,815		9.2	%		724,480		7.8	%
Other loans secured by real estate: (2)
Other construction		794,968		8.2	%		—		—
Secured by 1-4 family residential properties		1,250,697		13.0	%		—		—
Commercial and industrial loans		1,413,255		14.6	%		1,477,896		15.8	%
Consumer loans		164,560		1.7	%		175,738		1.9	%
State and other political subdivision loans		931,536		9.6	%		967,944		10.4	%
Other commercial loans (2)		564,446		5.9	%		495,621		5.3	%
LHFI	$	9,659,806		100.0	%	$	9,335,628		100.0	%

	June 30, 2020						March 31, 2021
	Fixed		Variable		Total		Fixed		Variable		Total
Loans secured by real estate:
Construction, land development and other land	$	151,525	$	330,784	$	482,309	$	160,049	$	382,853	$	542,902
Other secured by 1- 4 family residential properties		42,949		519,879		562,828		11,574		498,158		509,732
Secured by nonfarm, nonresidential properties		1,463,454		1,146,938		2,610,392		1,581,813		1,217,382		2,799,195
Other real estate secured		176,379		708,436		884,815		330,656		804,349		1,135,005
Other loans secured by real estate:
Other construction		51,050		743,918		794,968		119,660		679,526		799,186
Secured by 1- 4 family residential properties		767,571		483,126		1,250,697		751,108		481,942		1,233,050
Commercial and industrial loans		659,638		753,617		1,413,255		659,261		664,016		1,323,277
Consumer loans		142,288		22,272		164,560		130,407		24,949		155,356
State and other political subdivision loans		900,474		31,062		931,536		993,449		43,245		1,036,694
Other commercial loans		340,320		224,126		564,446		247,235		202,072		449,307
LHFI	$	4,695,648	$	4,964,158	$	9,659,806	$	4,985,212	$	4,998,492	$	9,983,704

	Estimated % Change in Net Interest Income						Estimated % Change in Net Interest Income
Change in Interest Rates	2020			2019			2021			2020
+200 basis points		10.9	%		2.5	%		24.4	%		5.9	%
+100 basis points		5.5	%		1.3	%		12.8	%		3.0	%
-100 basis points		-5.1	%		-2.0	%		-8.4	%		-10.9	%

	Estimated % Change in Net Portfolio Value						Estimated % Change in Net Portfolio Value
Change in Interest Rates	2020			2019			2021			2020
+200 basis points		16.1	%		2.3	%		11.9	%		8.7	%
+100 basis points		9.4	%		2.0	%		6.8	%		5.6	%
-100 basis points		-11.5	%		-4.6	%

Period	Total Number of Shares Purchased		Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plan		Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plan at the End of the Period
April 1, 2020 to April 30, 2020		—	$	—		—	$	52,740
May 1, 2020 to May 31, 2020		—		—		—		52,740
June 1, 2020 to June 30, 2020		—		—		—		52,740
Total		—				—



31-a		Certification by Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31-b		Certification by Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32-a		Certification by Chief Executive Officer pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32-b		Certification by Principal Financial Officer pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101		Inline XBRL Interactive Data.

104		Cover Page Interactive Data File (embedded within the Inline XBRL document).

BY:	/s/ ~~Gerard R. Host~~Duane A. Dewey	BY:	/s/ ~~Louis E. Greer~~Thomas C. Owens
	~~Gerard R. Host~~Duane A. Dewey		~~Louis E. Greer~~Thomas C. Owens
	~~Chairman of the Board,~~ President and Chief Executive Officer		Treasurer and Principal Financial Officer ~~and~~
	~~Chief Executive Officer~~		~~Principal Accounting Officer~~

DATE:	~~August~~May 6, ~~2020~~2021	DATE:	~~August~~May 6, ~~2020~~2021