Securities Available for Sale and Held to Maturity

6 Months Ended

Jun. 30, 2024

Investments, Debt and Equity Securities [Abstract]

Securities Available for Sale and Held to Maturity

Note 3 – 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 June 30, 2024 and December 31, 2023 ($ in thousands):

	Securities Available for Sale									Securities Held to Maturity
June 30, 2024	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	$	173,201	$	—	$	(246	)	$	172,955	$	29,455	$	—	$	(650	)	$	28,805
Mortgage-backed securities
Residential mortgage pass-    through securities
Guaranteed by GNMA		26,415		4		(2,930	)		23,489		17,998		1		(867	)		17,132
Issued by FNMA and    FHLMC		1,081,088		1,914		(22,133	)		1,060,869		449,781		35		(25,708	)		424,108
Other residential mortgage-    backed securities
Issued or guaranteed by    FNMA, FHLMC or    GNMA		—		—		—			—		138,951		1		(10,193	)		128,759
Commercial mortgage-backed    securities
Issued or guaranteed by    FNMA, FHLMC or    GNMA		362,606		2,653		(913	)		364,346		744,302		13		(49,988	)		694,327
Total	$	1,643,310	$	4,571	$	(26,222	)	$	1,621,659	$	1,380,487	$	50	$	(87,406	)	$	1,293,131

	Securities Available for Sale									Securities Held to Maturity
December 31, 2023	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	$	396,179	$	—	$	(23,811	)	$	372,368	$	29,068	$	—	$	(26	)	$	29,042
U.S. Government agency    obligations		6,207		1		(416	)		5,792		—		—		—			—
Obligations of states and    political subdivisions		—		—		—			—		340		—		—			340
Mortgage-backed securities
Residential mortgage pass-    through securities
Guaranteed by GNMA		25,744		4		(2,613	)		23,135		13,005		—		(497	)		12,508
Issued by FNMA and    FHLMC		1,338,256		32		(161,490	)		1,176,798		469,593		—		(18,205	)		451,388
Other residential mortgage-    backed securities
Issued or guaranteed by    FNMA, FHLMC or    GNMA		92,076		—		(6,002	)		86,074		154,466		—		(10,113	)		144,353
Commercial mortgage-backed    securities
Issued or guaranteed by    FNMA, FHLMC or    GNMA		100,545		—		(1,834	)		98,711		759,807		51		(41,985	)		717,873
Total	$	1,959,007	$	37	$	(196,166	)	$	1,762,878	$	1,426,279	$	51	$	(70,826	)	$	1,355,504

During 2022, Trustmark reclassified a total of $766.0 million of securities available for sale to securities held to maturity. At the date of these transfers, the net unrealized holding loss on the available for sale securities totaled approximately $91.9 million ($68.9 million, net of tax).

The securities were transferred at fair value, which became the cost basis for the securities held to maturity. The net unrealized holding loss will be 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 these transfers. At June 30, 2024, the net unamortized, unrealized loss on transferred securities included in accumulated other comprehensive income (loss) in the accompanying balance sheet totaled $52.1 million compared to $57.6 million at December 31, 2023.

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 recorded by Trustmark is 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 June 30, 2024 and December 31, 2023, the results of the analysis did not identify any securities that warranted DCF analysis, 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, 2024, accrued interest receivable totaled $4.1 million for securities available for sale compared to $3.7 million December 31, 2023 and was reported in other assets on the accompanying consolidated balance sheet .

Securities Held to Maturity

At June 30, 2024, Trustmark identified no securities held to maturity with the potential for credit loss exposure, compared to $340 thousand at December 31, 2023, which consisted of municipal securities. After applying appropriate analysis, the total amount of current expected credit losses was zero at June 30, 2024 and immaterial at December 31, 2023. No reserve was recorded either at June 30, 2024 and December 31, 2023.

Accrued interest receivable is excluded from the estimate of credit losses for securities held to maturity. At June 30, 2024, accrued interest receivable totaled $2.5 million for securities held to maturity compared to $2.6 million at December 31, 2023 and was reported in other assets on the accompanying consolidated balance sheet.

At both June 30, 2024 and December 31, 2023, 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 June 30, 2024 and December 31, 2023.

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, 2024 and December 31, 2023 ($ in thousands):

	June 30, 2024		December 31, 2023
Aaa	$	1,380,487	$	1,425,939
Not Rated (1)		—		340
Total	$	1,380,487	$	1,426,279

(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 segregated by length of impairment at June 30, 2024 and December 31, 2023 ($ in thousands):

	Less than 12 Months					12 Months or More					Total
June 30, 2024	Estimated Fair Value		Gross Unrealized Losses			Estimated Fair Value		Gross Unrealized Losses			Estimated Fair Value		Gross Unrealized Losses
U.S. Treasury securities	$	172,955	$	(246	)	$	28,804	$	(650	)	$	201,759	$	(896	)
U.S. Government agency obligations		—		—			—		—			—		—
Mortgage-backed securities
Residential mortgage pass-through    securities
Guaranteed by GNMA		15,142		(339	)		25,205		(3,458	)		40,347		(3,797	)
Issued by FNMA and FHLMC		645,501		(2,664	)		542,530		(45,177	)		1,188,031		(47,841	)
Other residential mortgage-backed    securities
Issued or guaranteed by FNMA,    FHLMC or GNMA		—		—			128,759		(10,193	)		128,759		(10,193	)
Commercial mortgage-backed securities
Issued or guaranteed by FNMA,    FHLMC or GNMA		—		—			777,466		(50,901	)		777,466		(50,901	)
Total	$	833,598	$	(3,249	)	$	1,502,764	$	(110,379	)	$	2,336,362	$	(113,628	)
December 31, 2023
U.S. Treasury Securities	$	29,042	$	(26	)	$	372,368	$	(23,811	)	$	401,410	$	(23,837	)
U.S. Government agency obligations		—		—			5,791		(416	)		5,791		(416	)
Mortgage-backed securities
Residential mortgage pass-through    securities
Guaranteed by GNMA		9,381		(172	)		25,967		(2,938	)		35,348		(3,110	)
Issued by FNMA and FHLMC		309,466		(3,274	)		1,311,865		(176,421	)		1,621,331		(179,695	)
Other residential mortgage-backed    securities
Issued or guaranteed by FNMA,    FHLMC or GNMA		—		—			230,368		(16,115	)		230,368		(16,115	)
Commercial mortgage-backed securities
Issued or guaranteed by FNMA,    FHLMC or GNMA		1,656		(13	)		812,520		(43,806	)		814,176		(43,819	)
Total	$	349,545	$	(3,485	)	$	2,758,879	$	(263,507	)	$	3,108,424	$	(266,992	)

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

Realized gains and losses are determined using the specific identification method and are included in noninterest income (loss) as security gains (losses), net. For the periods presented, gross realized losses as a result of calls and dispositions of securities, as well as any associated proceeds, are shown below ($ in thousands). There were no gross realized gains during the periods presented.

	Three Months Ended June 30,					Six Months Ended June 30,
Available for Sale	2024			2023		2024			2023
Proceeds from calls and sales of securities	$	1,378,272		$	—	$	1,378,272		$	—
Gross realized (losses)		(182,792	)		—		(182,792	)		—

During the second quarter of 2024, Trustmark restructured its investment securities portfolio by selling $1.561 billion of available for sale securities with an average yield of 1.36%, which generated a loss of $182.8 million ($137.1 million, net of taxes) and was recorded to noninterest income (loss) in security gains (losses), net. Proceeds from the sale were used to purchase $1.378 billion of available for sale securities with an average yield of 4.85%.

Securities Pledged

Securities with a carrying value of $2.276 billion and $2.321 billion at June 30, 2024 and December 31, 2023, 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, 2024 and December 31, 2023, 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 June 30, 2024, 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	$	39,770	$	39,748	$	—	$	—
Due after one year through five years		83,002		82,927		29,455		28,805
Due after five years through ten years		50,429		50,280		—		—
		173,201		172,955		29,455		28,805
Mortgage-backed securities		1,470,109		1,448,704		1,351,032		1,264,326
Total	$	1,643,310	$	1,621,659	$	1,380,487	$	1,293,131