Borrowings

12 Months Ended

Dec. 31, 2023

Debt Disclosure [Abstract]

Borrowings

Note 11 - 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 $61.6 million and $102.4 million at December 31, 2023 and 2022, respectively. At both December 31, 2023 and 2022, 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, 2023 and 2022 ($ in thousands):

	December 31,
	2023		2022
Mortgage-backed securities
Residential mortgage pass-through securities
Issued by FNMA and FHLMC	$	28,600	$	41,732
Other residential mortgage-backed securities
Issued or guaranteed by FNMA, FHLMC or GNMA		526		1,111
Commercial mortgage-backed securities
Issued or guaranteed by FNMA, FHLMC or GNMA		—		21,277
Total securities sold under repurchase agreements	$	29,126	$	64,120

Other Borrowings

At December 31, 2023 and 2022, other borrowings consisted of the following ($ in thousands):

	December 31,
	2023		2022
FHLB advances	$	400,058	$	975,078
Serviced GNMA loans eligible for repurchase		78,838		70,805
Finance lease liabilities		4,334		5,055
Total other borrowings	$	483,230	$	1,050,938

FHLB Advances

At both December 31, 2023 and 2022, Trustmark had no outstanding short-term FHLB advances with the FHLB of Atlanta.

At both December 31, 2023 and 2022, Trustmark had one outstanding long-term FHLB advance with the FHLB of Atlanta totaling $58 thousand and $78 thousand, respectively. This advance was assumed through the BancTrust merger and had a fixed interest rate of 0.08%. At December 31, 2023 and 2022, this advance had a remaining maturity of 2.71 years and 3.71 years, respectively. There was no fair market value adjustment associated with the BancTrust merger included in the FHLB advances at December 31, 2023 and 2022. Trustmark’s FHLB advances are collateralized by securities held in safekeeping with the FHLB of Atlanta.

At December 31, 2023, Trustmark had five outstanding short-term FHLB advances totaling $400.0 million and no long-term FHLB advances with the FHLB of Dallas, compared to four outstanding short-term FHLB advances totaling $975.0 million and no long-term FHLB advances with the FHLB of Dallas at December 31, 2022. The outstanding short-term advances with the FHLB of Dallas had fixed rates ranging from 5.38% and 5.61% with balances ranging from $50.0 million to $125.0 million. The outstanding short-term FHLB advances had a weighted-average remaining maturity of 9 days with a weighted-average cost of 5.54% at December 31, 2023, compared to a weighted-average remaining maturity of 10 days with a weighted-average cost of 4.58% at December 31, 2022.

Trustmark incurred $49.9 million of interest expense on short-term FHLB advances in 2023, compared to $4.8 million of interest expense in 2022 and $2 thousand of interest expense in 2021. Trustmark incurred no interest expense on long-term FHLB advances in 2023, 2022 and 2021.

At December 31, 2023 and 2022, Trustmark had $4.003 billion and $3.034 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, 2023 and 2022, the carrying amount of the Notes was $123.5 million and $123.3 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 Chicago Mercantile Exchange, Inc. (CME) SOFR plus a spread adjustment of 0.26% and a margin of 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 CME SOFR plus a spread adjustment of 0.26% and a margin of 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, 2023 and 2022, 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, 2023 and 2022, 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 2023, net income for the Trust equaled $132 thousand resulting from interest income from the junior subordinated debt securities issued by Trustmark to the Trust, compared with net income of $66 thousand during 2022 and $36 thousand during 2021. Dividends issued to Trustmark by the Trust during 2023 totaled $132 thousand, compared to $66 thousand during 2022 and $36 thousand during 2021.