Securities Available for Sale and Held to Maturity

9 Months Ended

Sep. 30, 2021

Investments, Debt and Equity Securities [Abstract]

Securities Available for Sale and Held to Maturity

Note 2 – Securities Available for Sale and Held to Maturity

The following tables are a summary of the amortized cost and estimated fair value of securities available for sale and held to maturity at September 30, 2021 and December 31, 2020 ($ in thousands):

	Securities Available for Sale									Securities Held to Maturity
September 30, 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. Treasury securities	$	280,758	$	—	$	(2,143	)	$	278,615	$	—	$	—	$	—		$	—
U.S. Government agency    obligations		15,253		88		(362	)		14,979		—		—		—			—
Obligations of states and political    subdivisions		5,150		584		—			5,734		10,683		78		(4	)		10,757
Mortgage-backed securities
Residential mortgage pass-    through securities
Guaranteed by GNMA		42,772		1,100		(12	)		43,860		5,912		299		—			6,211
Issued by FNMA and    FHLMC		2,185,140		13,366		(11,094	)		2,187,412		48,554		1,468		—			50,022
Other residential mortgage-    backed securities
Issued or guaranteed by    FNMA, FHLMC or    GNMA		231,793		5,146		(54	)		236,885		264,638		13,143		(41	)		277,740
Commercial mortgage-backed    securities
Issued or guaranteed by    FNMA, FHLMC or    GNMA		292,428		731		(3,039	)		290,120		65,118		1,284		—			66,402
Total	$	3,053,294	$	21,015	$	(16,704	)	$	3,057,605	$	394,905	$	16,272	$	(45	)	$	411,132

	Securities Available for Sale									Securities Held to Maturity
December 31, 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	$	18,378	$	144	$	(481	)	$	18,041	$	—	$	—	$	—		$	—
Obligations of states and political    subdivisions		5,198		637		—			5,835		26,584		258		(3	)		26,839
Mortgage-backed securities
Residential mortgage pass-    through securities
Guaranteed by GNMA		55,193		1,672		(3	)		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
Issued or guaranteed by    FNMA, FHLMC or    GNMA		409,883		9,600		(46	)		419,437		360,361		19,678		(55	)		379,984
Commercial mortgage-backed    securities
Issued or guaranteed by    FNMA, FHLMC or    GNMA		49,260		1,068		(9	)		50,319		75,585		2,386		—			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 September 30, 2021, the net unamortized, unrealized loss on the transferred securities included in accumulated other comprehensive income (loss) in the accompanying balance sheet totaled approximately $6.8 million ($5.1 million, net of tax) compared to approximately $8.9 million ($6.7 million, net of tax) at December 31, 2020.

ACL on Securities

Securities Available for Sale

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 September 30, 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 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 September 30, 2021, accrued interest receivable totaled $4.8 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.

Securities Held to Maturity

At September 30, 2021, the potential credit loss exposure was $10.7 million compared to $26.6 million at December 31, 2020 and consisted of municipal securities. After applying appropriate probability of default (PD) and loss given default (LGD) assumptions, the total amount of current expected credit losses was deemed immaterial. Therefore, no reserve was recorded at September 30, 2021 and December 31, 2020.

Accrued interest receivable is excluded from the estimate of credit losses for securities held to maturity. At September 30, 2021 and accrued interest receivable totaled $833 thousand for securities held to maturity compared to $1.2 million at December 31, 2020 and was reported in other assets on the accompanying consolidated balance sheets.

At both September 30, 2021 and December 31, 2020, Trustmark had no securities held to maturity that were past due 30 days or more as to principal or interest payments. Trustmark had no securities held to maturity classified as nonaccrual at September 30, 2021 and December 31, 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 September 30, 2021 and December 31, 2020 ($ in thousands):

	September 30, 2021		December 31, 2020
Aaa	$	384,222	$	511,488
Aa1 to Aa3		7,510		22,528
Not Rated (1)		3,173		4,056
Total	$	394,905	$	538,072

(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 September 30, 2021 and December 31, 2020 ($ in thousands):

	Less than 12 Months					12 Months or More					Total
September 30, 2021	Estimated Fair Value		Gross Unrealized Losses			Estimated Fair Value		Gross Unrealized Losses			Estimated Fair Value		Gross Unrealized Losses
U.S. Treasury securities	$	278,615	$	(2,143	)	$	—	$	—		$	278,615	$	(2,143	)
U.S. Government agency obligations		—		—			9,355		(362	)		9,355		(362	)
Obligations of states and political subdivisions		5,506		(2	)		667		(2	)		6,173		(4	)
Mortgage-backed securities
Residential mortgage pass-through    securities
Guaranteed by GNMA		1,131		(12	)		—		—			1,131		(12	)
Issued by FNMA and FHLMC		1,553,063		(10,637	)		56,089		(457	)		1,609,152		(11,094	)
Other residential mortgage-backed    securities
Issued or guaranteed by FNMA,    FHLMC or GNMA		18,583		(95	)		—		—			18,583		(95	)
Commercial mortgage-backed securities
Issued or guaranteed by FNMA,    FHLMC or GNMA		161,174		(3,030	)		644		(9	)		161,818		(3,039	)
Total	$	2,018,072	$	(15,919	)	$	66,755	$	(830	)	$	2,084,827	$	(16,749	)
December 31, 2020
U.S. Government agency obligations	$	—	$	—		$	11,167	$	(481	)	$	11,167	$	(481	)
Obligations of states and political subdivisions		—		—			667		(3	)		667		(3	)
Mortgage-backed securities
Residential mortgage pass-through    securities
Guaranteed by GNMA		1,636		(3	)		—		—			1,636		(3	)
Issued by FNMA and FHLMC		324,905		(1,308	)		—		—			324,905		(1,308	)
Other residential mortgage-backed    securities
Issued or guaranteed by FNMA,    FHLMC or GNMA		29,398		(101	)		—		—			29,398		(101	)
Commercial mortgage-backed securities
Issued or guaranteed by FNMA,    FHLMC or GNMA		—		—			659		(9	)		659		(9	)
Total	$	355,939	$	(1,412	)	$	12,493	$	(493	)	$	368,432	$	(1,905	)

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 at maturity.

Security Gains and Losses

During the nine months ended September 30, 2021 and 2020, 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 Pledged

Securities with a carrying value of $2.300 billion and $1.964 billion at September 30, 2021 and December 31, 2020, respectively, were pledged to collateralize public deposits and securities sold under repurchase agreements and for other purposes as permitted by law. At both September 30, 2021 and December 31, 2020, none of these securities were pledged under the Federal Reserve Discount Window program to provide additional contingency funding capacity.

Contractual Maturities

The amortized cost and estimated fair value of securities available for sale and held to maturity at September 30, 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.

	Securities Available for Sale				Securities Held to Maturity
	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
Due in one year or less	$	1,709	$	1,729	$	6,161	$	6,186
Due after one year through five years		189,184		188,236		4,522		4,571
Due after five years through ten years		94,838		93,690		—		—
Due after ten years		15,430		15,673		—		—
		301,161		299,328		10,683		10,757
Mortgage-backed securities		2,752,133		2,758,277		384,222		400,375
Total	$	3,053,294	$	3,057,605	$	394,905	$	411,132