Note 13 - Borrowings

Short-Term Borrowings

At December 31, 2014 and 2013, short-term borrowings consisted of the following ($ in thousands):

	2014		2013
FHLB advances	$	356,758	$	2,062
Serviced GNMA loans eligible for repurchase		41,014		38,036
Other		27,305		26,287
Total short-term borrowings	$	425,077	$	66,385

At December 31, 2014, Trustmark had four outstanding short-term FHLB advances totaling $350.0 million with the FHLB of Dallas. All of the outstanding advances with the FHLB of Dallas had fixed rates and ranged from $50.0 million to $100.0 million with interest rates ranging from 0.10% to 0.18%. At December 31, 2014, these advances had a weighted average remaining maturity of 9 days with a weighted-average cost of 0.14%. Trustmark had no outstanding short-term FHLB advances with the FHLB of Dallas at December 31, 2013. At December 31, 2014 and 2013, Trustmark had $1.678 billion and $1.768 billion, respectively, available in additional short and long-term borrowing capacity from the FHLB of Dallas.

At both December 31, 2014 and 2013, Trustmark had two outstanding short-term FHLB advances with the FHLB of Atlanta. All of the advances with the FHLB of Atlanta were assumed through the BancTrust merger. The advances outstanding at December 31, 2014 had a weighted average remaining maturity of 297 days with a weighted-average cost of 3.96%. These advances had balances of $80 thousand and $6.5 million with fixed interest rates of 6.95% and 3.92%, respectively. The advances outstanding at December 31, 2013 had a weighted average remaining maturity of 134 days with a weighted-average cost of 4.24%. The advances had balances of $2.0 million and $34 thousand with fixed interest rates of 4.21% and 6.11%, respectively. A fair market value adjustment of $178 thousand and $28 thousand associated with the BancTrust merger was included in the short-term FHLB advances at December 31, 2014 and 2013, respectively. Trustmark has a non-member status and no additional borrowing capacity with the FHLB of Atlanta.

Interest expense on short-term FHLB advances totaled $197 thousand in 2014, $6 thousand in 2013 and $81 thousand in 2012.

Long-Term FHLB Advances

At December 31, 2014, Trustmark had four outstanding long-term FHLB advances totaling $1.2 million with the FHLB of Atlanta, which were assumed through the BancTrust merger. All of the advances outstanding at December 31, 2014 had fixed rates and ranged from $23 thousand to $913 thousand with interest rates ranging from 0.08% to 6.50%. At December 31, 2014, these advances had a weighted average remaining maturity of 7.13 years with a weighted-average cost of 1.11%. At December 31, 2013, Trustmark had six outstanding long-term FHLB advances totaling $8.5 million with the FHLB of Atlanta, which were assumed through the BancTrust merger. All of the advances outstanding at December 31, 2013 had fixed rates and ranged from $30 thousand to $6.5 million with interest rates ranging from 0.08% to 6.95%. At December 31, 2013, these advances had a weighted average remaining maturity of 2.85 years with a weighted-average cost of 3.55%. A fair market value adjustment of $7 thousand and $412 thousand associated with the BancTrust merger was included in the long-term FHLB advances at December 31, 2014 and 2013, respectively. Trustmark’s long-term FHLB advances are collateralized by securities held in safekeeping with the FHLB of Atlanta. Trustmark incurred $45 thousand of interest expense on long-term FHLB advances in 2014, compared to $57 thousand of interest expense in 2013 and no interest expense in 2012.

Subordinated Notes Payable

During 2006, TNB issued $50.0 million aggregate principal amount of Subordinated Notes (the Notes) due December 15, 2016. Proceeds from the sale of the Notes were used for general corporate purposes. At December 31, 2014 and 2013, the carrying amount of the Notes was $49.9 million. The Notes have not been, and are not required to be, registered with the U.S. Securities and Exchange Commission (SEC) under the Securities Act of 1933, as amended. The Notes were sold pursuant to the terms of regulations issued by the OCC and in reliance upon an exemption provided by the Securities Act of 1933, as amended. The Notes bear interest at the rate of 5.673% per annum from December 13, 2006, until the principal of the Notes has been paid in full. Interest on the Notes is payable semi-annually in arrears on June 15 and December 15 of each year, commencing June 15, 2007, and through the date of maturity. The Notes are unsecured and subordinate and junior in right of payment to TNB’s obligations to its depositors, its obligations under bankers’ acceptances and letters of credit, its obligations to any Federal Reserve Bank or the FDIC and its obligations to its other creditors, and to any rights acquired by the FDIC as a result of loans made by the FDIC to TNB. The Notes, which are not redeemable prior to maturity, qualify as Tier 2 capital for both TNB and Trustmark. Because the Notes now have a remaining maturity of more than one year, but less than two years, only 20% of the remaining balance qualified as Tier 2 capital for both TNB and Trustmark at December 31, 2014. After December 15, 2015, no portion of the Notes will qualify as Tier 2 capital.

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 rulings of the Federal Reserve Board, 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 December 31, 2014 and 2013, total assets for the Trust totaled $61.9 million, resulting from the investment in junior subordinated debentures issued by Trustmark. Liabilities and shareholder’s equity for the Trust also totaled $61.9 million at December 31, 2014 and 2013, 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 2014, net income for the Trust equaled $36.8 thousand resulting from interest income from the junior subordinated debt securities issued by Trustmark to the Trust, compared with net income of $37.6 thousand during 2013 and $41.3 thousand during 2012. Dividends issued to Trustmark by the Trust during 2014 totaled $36.8 thousand, compared to $37.6 thousand during 2013 and $41.3 thousand during 2012.