Borrowings

12 Months Ended

Dec. 31, 2021

Debt Disclosure [Abstract]

Borrowings

Note 12 - Borrowings

Securities Sold Under Repurchase Agreements

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 are secured by securities with a carrying amount of $252.4 million and $156.1 million at December 31, 2021 and 2020, respectively. At December 31, 2021, all repurchase agreements were short-term and consisted primarily of sweep repurchase arrangements, under which excess deposits are “swept” into overnight repurchase agreements with Trustmark. The following table presents the securities sold under repurchase agreements by collateral pledged at December 31, 2021 and 2020 ($ in thousands):

	December 31,
	2021		2020
Mortgage-backed securities
Residential mortgage pass-through securities
Issued by FNMA and FHLMC	$	167,310	$	115,357
Other residential mortgage-backed securities
Issued or guaranteed by FNMA, FHLMC or GNMA		1,475		12,696
Commercial mortgage-backed securities
Issued or guaranteed by FNMA, FHLMC or GNMA		24,528		—
Total securities sold under repurchase agreements	$	193,313	$	128,053

Other Borrowings

At December 31, 2021 and 2020, other borrowings consisted of the following ($ in thousands):

	December 31,
	2021		2020
FHLB advances	$	97	$	741
Serviced GNMA loans eligible for repurchase		84,464		141,160
Finance lease liabilities		6,464		7,805
Other		—		18,546
Total other borrowings	$	91,025	$	168,252

FHLB Advances

At December 31, 2021, Trustmark had no outstanding short-term FHLB advances with the FHLB of Atlanta, compared to one outstanding FHLB advance totaling $625 thousand at December 31, 2020. This advance was assumed through the BancTrust merger and had a fixed interest rate of 0.75%.

Trustmark incurred $2 thousand of interest expense on short-term FHLB advances in 2021, compared to $9 thousand of interest expense in 2020 and no interest expense in 2019.

At both December 31, 2021 and 2020, Trustmark had one outstanding long-term FHLB advance with the FHLB of Atlanta totaling $97 thousand and $116 thousand, respectively. This advance was assumed through the BancTrust merger and had a fixed interest rate of 0.08%. At December 31, 2021 and 2020, this advance had a remaining maturity of 4.71 years and 5.71 years. There was no fair market value adjustment associated with the BancTrust merger included in the FHLB advances at December 31, 2021 and 2020. Trustmark’s FHLB advances are collateralized by securities held in safekeeping with the FHLB of Atlanta.

Trustmark incurred no interest expense on long-term FHLB advances in 2021, compared to $8 thousand of interest expense in 2020 and $5 thousand of interest expense in 2019.

At both December 31, 2021 and 2020, Trustmark had no outstanding FHLB advances with the FHLB of Dallas.

At December 31, 2021 and 2020, Trustmark had $3.449 billion and $2.725 billion, respectively, available in additional borrowing capacity from the FHLB of Dallas.

Subordinated Notes

During 2020, Trustmark agreed to issue and sell $125.0 million aggregate principal amount of its 3.625% Fixed-to-Floating Rate Subordinated Notes (the Notes) due December 1, 2030. The 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 December 31, 2021 and 2020, the carrying amount of the Notes was $123.0 million and $122.9 million, respectively. The 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 Notes are obligations of Trustmark only and are not obligations of, and are not guaranteed by, any of its subsidiaries, including TNB. From the date of issuance until November 30, 2025, the Notes bear interest at a fixed rate of 3.625% per year, payable semi-annually in arrears on June 1 and December 1 of each year. Beginning December 1, 2025, the Notes will bear interest at a floating rate per year equal to the Benchmark rate, which is the Three-Month Term Secured Overnight Financing Rate (SOFR), plus 338.7 basis points, payable quarterly in arrears on March 1, June 1, September 1 and December 1 of each year. The Notes qualify as Tier 2 capital for Trustmark. The Notes may be redeemed at Trustmark’s option under certain circumstances. Trustmark intends to use the net proceeds for general corporate purposes.

Junior Subordinated Debt Securities

On August 18, 2006, Trustmark completed a private placement of $60.0 million of trust preferred securities through a newly formed Delaware trust affiliate, Trustmark Preferred Capital Trust I (the Trust). The trust preferred securities mature September 30, 2036, are redeemable at Trustmark’s option and bear interest at a variable rate per annum equal to the three-month LIBOR plus 1.72%. Under applicable regulatory guidelines, these trust preferred securities qualify as Tier 1 capital. 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 debentures were issued pursuant to a Junior Subordinated Indenture, dated August 18, 2006, between Trustmark, as issuer, and Wilmington Trust Company, National Association, as trustee. Like the trust preferred securities, the debentures bear interest at a variable rate per annum equal to the three-month LIBOR plus 1.72% and mature on September 30, 2036. The debentures may be redeemed at Trustmark’s option at any time. The interest payments by Trustmark will be used to pay the quarterly distributions payable by the Trust to the holder of the trust preferred securities. However, so long as no event of default has occurred under the debentures, Trustmark may defer interest payments on the debentures (in which case the Trust will also defer distributions otherwise due on the trust preferred securities) for up to 20 consecutive quarters.

The debentures are subordinated to the prior payment of any other indebtedness of Trustmark that, by its terms, is not similarly subordinated. The trust preferred securities are recorded as a long-term liability on Trustmark’s balance sheet; however, for regulatory purposes the trust preferred securities are treated as Tier 1 capital under the rules of the Federal Reserve Board (FRB), Trustmark’s primary federal regulatory agency.

Trustmark also entered into a Guarantee Agreement, dated August 18, 2006, pursuant to which it has agreed to guarantee the payment by the Trust of distributions on the trust preferred securities and the payment of principal of the trust preferred securities when due, either at maturity or on redemption, but only if and to the extent that the Trust fails to pay distributions on or principal of the trust preferred securities after having received interest payments or principal payments on the junior subordinated debentures from Trustmark for the purpose of paying those distributions or the principal amount of the trust preferred securities.

As defined in applicable accounting standards, the Trust, a wholly-owned subsidiary of Trustmark, is considered a variable interest entity for which Trustmark is not the primary beneficiary. Accordingly, the accounts of the Trust are not included in Trustmark’s consolidated financial statements.

At both December 31, 2021 and 2020, assets for the Trust totaled $61.9 million, resulting from the investment in junior subordinated debentures issued by Trustmark. Liabilities and shareholders’ equity for the Trust also totaled $61.9 million at both December 31, 2021 and 2020, resulting from the issuance of trust preferred securities in the amount of $60.0 million as well as $1.9 million in common securities issued to Trustmark. During 2021, net income for the Trust equaled $36 thousand resulting from interest income from the junior subordinated debt securities issued by Trustmark to the Trust, compared with net income of $51 thousand during 2020 and $79 thousand during 2019. Dividends issued to Trustmark by the Trust during 2021 totaled $36 thousand, compared to $51 thousand during 2020 and $79 thousand during 2019.