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 December 31, 2023 and 2022, Trustmark had unused commitments to extend credit of $4.907 billion and $5.472 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 December 31, 2023 and 2022, Trustmark’s maximum exposure to credit loss in the event of nonperformance by the other party for letters of credit was $125.4 million and $144.1 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. At December 31, 2023 and 2022, the fair value of collateral held was $31.4 million and $15.4 million, respectively.

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 sheets.

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


	Years Ended December 31,
	2023			2022		2021
Balance at beginning of period	$	36,838		$	35,623	$	38,572
PCL, off-balance sheet credit exposures		(2,781	)		1,215		(2,949	)
Balance at end of period	$	34,057		$	36,838	$	35,623

Adjustments to the ACL on off-balance sheet credit exposures are recorded to PCL, off-balance sheet credit exposures. The decrease in the ACL on off-balance sheet credit exposures for the year ended December 31, 2023 was primarily due to decreases in unfunded commitments for the construction, land development and other land portfolio and other construction loan portfolio. The increase in the ACL on off-balance sheet credit exposures for the year ended December 31, 2022 was primarily due to the overall increase in the total reserve rates applied to off-balance sheet credit exposures as a result of the weakening in the macroeconomic forecasts and an increase in unfunded balances.

As previously announced, on December 31, 2022, Trustmark National Bank (TNB) agreed to a settlement in principle (the Stanford Settlement) relating to litigation involving the Stanford Financial Group. On January 13, 2023, TNB entered into a Settlement Agreement (the Stanford Settlement Agreement) reflecting the terms of the Stanford Settlement. The parties to the Stanford Settlement Agreement are, on the one hand, (i) Ralph S. Janvey, solely in his capacity as the court-appointed receiver (the Stanford Receiver) for the Stanford Receivership Estate; (ii) the Official Stanford Investors Committee; (iii) each of the plaintiffs in the Rotstain and Smith Actions; and, on the other hand, (iv) TNB. Under the terms of the Stanford Settlement Agreement, the parties agreed to settle and dismiss the Rotstain Action, the Smith Action, and all current or future claims by plaintiffs in either such Action arising from or related to Stanford. In addition, the Stanford Settlement Agreement provided that the parties would request dismissal of the Jackson Action pursuant to the terms of the bar orders described below. The Court’s approval of the Stanford Settlement Agreement, including the bar orders described below, has occurred and has been upheld on appeal, as described below. As a result, pursuant to the Stanford Settlement, TNB made a one-time cash payment of $100.0 million to the Stanford Receiver on February 2, 2024.

The Stanford Settlement Agreement included the parties’ agreement to seek the Northern District of Texas District Court’s entry of bar orders prohibiting any continued or future claims by the plaintiffs in the Actions or by any other person or entity against TNB and its related parties relating to Stanford, whether asserted to date or not. The bar orders prohibit all litigation relating to Stanford described herein, including not only the Actions and any pending matters but also any actions that may be brought in the future. Final Court approval of these bar orders was a condition of the Stanford Settlement.

The Stanford Settlement Agreement was also subject to notice to Stanford’s investor claimants (which has been provided) and final, non-appealable approval by the U.S. District Court for the Northern District of Texas (which has occurred).

The Stanford Settlement Agreement also provides that TNB denies and makes no admission of liability or wrongdoing in connection with any Stanford matter. As has been the case throughout the pendency of the Actions, TNB expressly denies any liability or wrongdoing with respect to any matter alleged in regard to the multi-billion dollar Ponzi scheme operated by Stanford for almost 20 years. TNB’s relationship with Stanford began as a result of TNB’s acquisition of a Houston-based bank in August 2006, and consisted of ordinary banking services provided to business deposit customers.

The foregoing description of the terms of the Stanford Settlement Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Stanford Settlement Agreement, a copy of which is filed as Exhibit 10.ai to the 2022 Annual Report and is incorporated herein by reference.

On January 20, 2023, the U.S. District Court for the Northern District of Texas entered an order preliminarily finding that the Stanford Settlement is fair, reasonable, and equitable; has no obvious deficiencies; and is the product of serious, informed, good faith, and arm’s-length negotiations. Following the provision of notice as required by the Stanford Settlement Agreement and by the Court’s preliminary order, the Court (Judge David C. Godbey, presiding) held a Final Approval Hearing on May 3, 2023, at which the Court approved the Stanford Settlement from the bench. On May 4, 2023, Judge Godbey signed the written orders confirming his oral ruling, including the bar order contemplated by the Stanford Settlement Agreement and the judgment and bar order with respect to the Jackson Action.

On May 10, 2023, Robert Allen Stanford, writing from prison, appealed the District Court’s approval of the Stanford Settlement to the Fifth Circuit Court of Appeals. On June 12, 2023, the Stanford Receiver moved to dismiss the appeal as frivolous. On July 25, 2023, a three-judge panel of the Fifth Circuit issued a per curiam order dismissing Stanford’s appeal as frivolous. In July and August 2023, Mr. Stanford filed, then subsequently withdrew, a motion seeking panel rehearing of the Fifth Circuit’s July 25, 2023, decision.

When Stanford’s deadline to appeal the Fifth Circuit’s ruling to the Supreme Court of the United States passed without his filing a petition for certiorari, the trial court’s ruling approving the Stanford Settlement and entering the bar orders became final and non-appealable, as defined in the Stanford Settlement Agreement (the Stanford Settlement Effective Date). On November 14, the parties to the Rotstain and Smith Actions filed agreed dismissals of those cases, which were granted on November 27, 2023 (Smith Action) and December 18, 2023 (Rotstain Action). Those dismissals were final and non-appealable as of December 27, 2023 (Smith Action) and January 17, 2024 (Rotstain Action). Accordingly, pursuant to the Stanford Settlement Agreement, TNB made the settlement payment on February 2, 2024, concluding the Stanford Settlement.

TNB and Trustmark Corporation determined that it was in the best interest of TNB, Trustmark Corporation and the shareholders of Trustmark Corporation to enter into the Stanford Settlement and the Stanford Settlement Agreement to eliminate the risk, ongoing expense, uncertainty as to ultimate outcome, and imposition on management and the business of TNB of further litigation of the Actions and related Stanford claims.

As previously announced, on August 30, 2023, TNB agreed to a settlement in principle (the Adams/Madison Timber Settlement) relating to litigation and claims involving Arthur Lamar Adams and Madison Timber Properties, LLC (collectively, Adams/Madison Timber). On October 9, 2023, TNB entered into a Settlement Agreement (the Adams/Madison Timber Settlement Agreement) reflecting the terms of the Adams/Madison Timber Settlement. The parties to the Adams/Madison Timber Settlement are, on the one hand, Alysson Mills in her capacity as Court-appointed Receiver (the Adams/Madison Timber Receiver); and, on the other hand, TNB. Under the terms of the Adams/Madison Timber Settlement Agreement, the parties agreed to settle and dismiss the Adams/Madison Timber Action, and the Adams/Madison Timber Receiver agreed to fully release all claims against TNB and any of its employees, agents and representatives. The Adams/Madison Timber Settlement included the parties’ agreement to seek the Court’s entry of bar orders prohibiting any continued or future claims by anyone against TNB and its related parties relating to Adams/Madison Timber, whether asserted to date or not. Final Court approval of a bar order was a condition of the Adams/Madison Timber Settlement. On November 14, 2023, the Court entered a Partial Final Judgment and Final Bar Order approving the settlement. The bar order therefore is expected to prohibit all litigation relating to Adams/Madison Timber described herein.

The Adams/Madison Timber Settlement was subject to notice to Adams/Madison Timber investors, and final, non-appealable approval by the Court and entry of a judgment dismissing the Lawsuit against TNB. No investor or other interested parties appealed the bar order before the appeal deadline passed. Accordingly, TNB made the settlement payment to the Adams/Madison Timber Receiver on January 22, 2024, concluding the Adams/Madison Timber Settlement.

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, with the exception of the TD Bank Declaratory Action that, as noted above, TNB was not served in connection with. In accordance with FASB ASC Subtopic 450-20, “Loss Contingencies,” TNB will establish an accrued liability for any litigation matter if and when such matter presents loss contingencies that are both probable and reasonably estimable. As a result of the entry into the Stanford Settlement as described above, Trustmark Corporation recognized a $100.0 million litigation settlement expense included in noninterest expense related to the Stanford litigation during the fourth quarter of 2022, plus an additional $750 thousand in related legal fees. As a result of the entry into the Adams/Madison Timber Settlement as described above, Trustmark Corporation recognized a $6.5 million litigation settlement expense included in noninterest expense related to the Adams/Madison Timber litigation during the third quarter of 2023. Trustmark Corporation and TNB will remain substantially above levels considered to be well-capitalized under all relevant standards. At the present time, TNB believes, based on its evaluation and the advice of legal counsel, that a loss in any currently pending legal proceeding other than the settled Stanford and Adams/Madison Timber litigation is not probable and a reasonable estimate cannot reasonably be made.