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 June 30, 2025 and 2024, Trustmark had unused commitments to extend credit of $4.361 billion and $4.590 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 June 30, 2025 and 2024, Trustmark’s maximum exposure to credit loss in the event of nonperformance by the customer for letters of credit was $136.4 million and $126.6 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. As of June 30, 2025 and 2024, the fair value of collateral held was $42.5 million and $26.4 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 as of June 30, 2025 and December 31, 2024.

During the first quarter of 2024, Management decided to implement a performance trends qualitative factor for unfunded commitments. The same assumptions are applied in this calculation that the funded balances utilize with the addition of using the funding rates on the unfunded commitments. The performance trends qualitative factor reserve is then added to the other calculated reserve to get a total reserve for off-balance sheet credit exposures.

During the third quarter of 2024, Management implemented the External Factor – Credit Quality Review qualitative factor for unfunded commitments. The same assumptions are applied in this calculation that the funded balances utilize with the addition of using the funding rates on the unfunded commitments. The Credit Quality Review qualitative factor reserve is then added to the other calculated reserve to get a total reserve for off-balance sheet credit exposures.

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


	Three Months Ended June 30,						Six Months Ended June 30,
	2025			2024			2025			2024
Balance at beginning of period	$	26,561		$	33,865		$	29,392		$	34,057
PCL, off-balance sheet credit exposures		(670	)		(3,600	)		(3,501	)		(3,792	)
Balance at end of period	$	25,891		$	30,265		$	25,891		$	30,265

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 three months ended June 30, 2025 was primarily due to positive credit migration partially offset by changes in the macroeconomic forecast. The decrease in the ACL on off-balance sheet credit exposures for the six months ended June 30, 2025 was primarily due to the decrease in required reserves as a result of a decrease in unfunded commitments coupled with positive credit migration.

The decrease in the ACL on off-balance sheet credit exposures for the three months ended June 30, 2024 was primarily due to the decrease in required reserves as a result of a decrease in unfunded commitments coupled with the decrease in the quantitative reserve rates due to changes in the macroeconomic factors. The decrease was partially offset by an increase in required reserves as a result of credit migration. The decrease in the ACL on off-balance sheet credit exposures for the six months ended June 30, 2024 was primarily due to the decrease in required reserves as a result of a decrease in unfunded commitments partially offset by an increase in required reserves as a result of implementing the performance trend qualitative reserve factor.

No credit loss estimate is reported for off-balance sheet credit exposures that are unconditionally cancellable by Trustmark or for undrawn amounts under such arrangements that may be drawn prior to the cancellation of the arrangement.

Trustmark and its subsidiaries are parties to 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.

In accordance with FASB ASC Subtopic 450-20, “Loss Contingencies,” Trustmark will establish an accrued liability for any litigation matter if and when such matter presents loss contingencies that are both probable and reasonably estimable. At the present time, Trustmark believes, based on its evaluation and the advice of legal counsel, that a loss in any currently pending legal proceeding is not probable and a reasonable estimate cannot be made.