Note 13 - 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 Topic 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. Trustmark’s repurchase agreements are transacted under master repurchase agreements that give Trustmark, in the event of default by the counterparty, the right of offset with the same counterparty. As of December 31, 2015, 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, 2015 ($ in thousands):

	December 31, 2015
U.S. Government agency obligations
Issued by U.S. Government sponsored agencies	$	22,516
Mortgage-backed securities
Other residential mortgage-backed securities
Issued or guaranteed by FNMA, FHLMC or GNMA		102,604
Total securities sold under repurchase agreements	$	125,120

Short-Term Borrowings

At December 31, 2015 and 2014, short-term borrowings consisted of the following ($ in thousands):

	December 31,
	2015		2014
FHLB advances	$	350,000	$	356,758
Serviced GNMA loans eligible for repurchase		36,025		41,014
Other		26,592		27,305
Total short-term borrowings	$	412,617	$	425,077

At December 31, 2015, Trustmark had two outstanding short-term FHLB advances totaling $350.0 million with the FHLB of Dallas. These outstanding advances with the FHLB of Dallas had fixed interest rates of 0.31% and balances of $100.0 million and $250.0 million. At December 31, 2015, these advances had a weighted average remaining maturity of 13 days with a weighted-average cost of 0.31%. Trustmark had four outstanding short-term FHLB advances totaling $350.0 million with the FHLB of Dallas at December 31, 2014. 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%. At December 31, 2015 and 2014, Trustmark had $1.328 billion and $1.678 billion, respectively, available in additional short and long-term borrowing capacity from the FHLB of Dallas.

At December 31, 2015, Trustmark had no outstanding short-term FHLB advances with the FHLB of Atlanta. At December 31, 2014, 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. A fair market value adjustment of $178 thousand associated with the BancTrust merger was included in the short-term FHLB advances at December 31, 2014. Trustmark has a non-member status and no additional borrowing capacity with the FHLB of Atlanta.

Interest expense on short-term FHLB advances totaled $727 thousand in 2015, $197 thousand in 2014 and $6 thousand in 2013.

Long-Term FHLB Advances

At December 31, 2015, Trustmark had one outstanding long-term FHLB advance totaling $500.00 million with the FHLB of Dallas. This advance reprices on a monthly basis and is set to mature on December 20, 2017. This advance has a remaining maturity of 1.97 years and had an average cost of 0.32% during 2015.

At both December 31, 2015 and 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 had fixed interest rates ranging from 0.08% to 6.50% with outstanding balances ranging from $15 thousand to $868 thousand at December 31, 2015 and from $23 thousand to $913 thousand at December 31, 2014. At December 31, 2015, these advances had a weighted average remaining maturity of 6.21 years with a weighted-average cost of 1.00%. At December 31, 2014, these advances had a weighted average remaining maturity of 7.13 years with a weighted-average cost of 1.11%. A fair market value adjustment of $3 thousand and $7 thousand associated with the BancTrust merger was included in the long-term FHLB advances at December 31, 2015 and 2014, respectively. Trustmark’s long-term FHLB advances are collateralized by securities held in safekeeping with the FHLB of Atlanta.

Trustmark incurred $49 thousand of interest expense on long-term FHLB advances in 2015, compared to $45 thousand of interest expense in 2014 and $57 thousand of interest expense in 2013.

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, 2015 and 2014, the carrying amount of the Notes was $50.0 million and $49.9 million, respectively. The Notes have not been, and are not required to be, registered with the SEC under the Securities Act of 1933, as amended. The Notes were sold pursuant to the terms of regulations issued by the Office of the Comptroller of the Currency (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. Because the Notes, which are not redeemable prior to maturity, now have a remaining maturity of less than one year, none of the remaining balance qualified as Tier 2 capital for both TNB and Trustmark at December 31, 2015.

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 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 December 31, 2015 and 2014, 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, 2015 and 2014, 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 2015, net income for the Trust equaled $38 thousand resulting from interest income from the junior subordinated debt securities issued by Trustmark to the Trust, compared with net income of $37 thousand during 2014 and $38 thousand during 2013. Dividends issued to Trustmark by the Trust during 2015 totaled $38 thousand, compared to $37 thousand during 2014 and $38 thousand during 2013.