LHFI and ACL, LHFI

12 Months Ended

Dec. 31, 2021

Accounts, Notes, Loans and Financing Receivable, Gross, Allowance, and Net [Abstract]

LHFI and ACL, LHFI

Note 4 – LHFI and ACL, LHFI

At December 31, 2021 and 2020, LHFI consisted of the following ($ in thousands):

	December 31,
	2021		2020
Loans secured by real estate:
Construction, land development and other land	$	596,968	$	514,056
Other secured by 1-4 family residential properties		517,683		524,732
Secured by nonfarm, nonresidential properties		2,977,084		2,709,026
Other real estate secured		726,043		1,065,964
Other loans secured by real estate:
Other construction		711,813		794,983
Secured by 1-4 family residential properties		1,460,310		1,216,400
Commercial and industrial loans		1,414,279		1,309,078
Consumer loans		162,555		164,386
State and other political subdivision loans		1,146,251		1,000,776
Other commercial loans		534,843		525,123
LHFI		10,247,829		9,824,524
Less ACL		99,457		117,306
Net LHFI	$	10,148,372	$	9,707,218

Accrued interest receivable is not included in the amortized cost basis of Trustmark’s LHFI. At December 31, 2021 and 2020, accrued interest receivable for LHFI totaled $26.7 million and $33.0 million, respectively, with no related ACL and was reported in other assets on the accompanying consolidated balance sheet.

Loan Concentrations

Trustmark does not have any loan concentrations other than those reflected in the preceding table, which exceed 10% of total LHFI. At December 31, 2021, Trustmark’s geographic loan distribution was concentrated primarily in its five key market regions: Alabama, Florida, Mississippi, Tennessee and Texas. Accordingly, the ultimate collectability of a substantial portion of these loans is susceptible to changes in market conditions in these areas.

Related Party Loans

At December 31, 2021 and 2020, loans to certain executive officers and directors, including their immediate families and companies in which they are principal owners, totaled $26.3 million and $37.7 million, respectively. During 2021, $170.3 million of new loan advances were made, while repayments were $181.3 million. In addition, decreases in loans due to changes in executive officers and directors totaled $426 thousand.

Nonaccrual and Past Due LHFI

No material interest income was recognized in the income statement on nonaccrual LHFI for each of the years in the three-year period ended December 31, 2021.

The following tables provide the amortized cost basis of loans on nonaccrual status and loans past due 90 days or more still accruing interest at December 31, 2021 and 2020 ($ in thousands):

	December 31, 2021
	Nonaccrual With No ACL		Total Nonaccrual		Loans Past Due 90 Days or More Still Accruing
Loans secured by real estate:
Construction, land development and other land	$	4,784	$	5,878	$	7
Other secured by 1-4 family residential properties		1,319		3,418		148
Secured by nonfarm, nonresidential properties		10,842		12,508		—
Other real estate secured		56		150		—
Other loans secured by real estate:
Other construction		—		—		—
Secured by 1-4 family residential properties		—		12,775		1,655
Commercial and industrial loans		1,363		19,328		—
Consumer loans		—		117		304
State and other political subdivision loans		—		3,664		—
Other commercial loans		4,405		4,860		—
Total	$	22,769	$	62,698	$	2,114

	December 31, 2020
	Nonaccrual With No ACL		Total Nonaccrual		Loans Past Due 90 Days or More Still Accruing
Loans secured by real estate:
Construction, land development and other land	$	5,756	$	5,985	$	—
Other secured by 1-4 family residential properties		1,895		4,487		79
Secured by nonfarm, nonresidential properties		12,037		15,197		—
Other real estate secured		60		185		—
Other loans secured by real estate:
Other construction		—		—		—
Secured by 1-4 family residential properties		—		11,807		1,257
Commercial and industrial loans		12,665		15,618		—
Consumer loans		—		86		240
State and other political subdivision loans		—		3,970		—
Other commercial loans		—		5,793		—
Total	$	32,413	$	63,128	$	1,576

The following tables provide an aging analysis of the amortized cost basis of past due LHFI (including nonaccrual loans) at December 31, 2021 and 2020 ($ in thousands):

	December 31, 2021
	Past Due
					90 Days		Total		Current
	30-59 Days		60-89 Days		or More		Past Due		Loans		Total LHFI
Loans secured by real estate:
Construction, land development and other land	$	323	$	11	$	5,241	$	5,575	$	591,393	$	596,968
Other secured by 1-4 family residential properties		1,811		368		567		2,746		514,937		517,683
Secured by nonfarm, nonresidential properties		845		—		1,442		2,287		2,974,797		2,977,084
Other real estate secured		—		—		142		142		725,901		726,043
Other loans secured by real estate:
Other construction		—		—		—		—		711,813		711,813
Secured by 1-4 family residential properties		2,799		531		6,720		10,050		1,450,260		1,460,310
Commercial and industrial loans		607		41		1,107		1,755		1,412,524		1,414,279
Consumer loans		1,673		182		305		2,160		160,395		162,555
State and other political subdivision loans		32		—		177		209		1,146,042		1,146,251
Other commercial loans		220		32		118		370		534,473		534,843
Total	$	8,310	$	1,165	$	15,819	$	25,294	$	10,222,535	$	10,247,829

	December 31, 2020
	Past Due
					90 Days		Total		Current
	30-59 Days		60-89 Days		or More		Past Due		Loans		Total LHFI
Loans secured by real estate:
Construction, land development and other land	$	339	$	34	$	161	$	534	$	513,522	$	514,056
Other secured by 1-4 family residential properties		1,505		523		896		2,924		521,808		524,732
Secured by nonfarm, nonresidential properties		920		—		972		1,892		2,707,134		2,709,026
Other real estate secured		103		101		107		311		1,065,653		1,065,964
Other loans secured by real estate:
Other construction		—		—		—		—		794,983		794,983
Secured by 1-4 family residential properties		3,291		1,289		5,110		9,690		1,206,710		1,216,400
Commercial and industrial loans		271		196		1,543		2,010		1,307,068		1,309,078
Consumer loans		926		190		240		1,356		163,030		164,386
State and other political subdivision loans		117		—		177		294		1,000,482		1,000,776
Other commercial loans		2,143		2,971		346		5,460		519,663		525,123
Total	$	9,615	$	5,304	$	9,552	$	24,471	$	9,800,053	$	9,824,524

TDRs

At December 31, 2021, 2020 and 2019, LHFI classified as TDRs totaled $21.6 million, $25.8 million and $31.5 million, respectively, At December 31, 2021, LHFI classified as TDRs were primarily comprised of bankruptcies, payment concessions and credits with interest-only payments for an extended period of time which totaled $18.2 million. At December 31, 2020, LHFI classified as TDRs were primarily comprised of credits with interest-only payments for an extended period of time, payment concessions and credits renewed at a rate that was not commensurate with that of new debt with similar risk which totaled $17.7 million. At December 31, 2019, LHFI classified as TDRs were primarily comprised of credits with interest-only payments for an extended period of time and credits renewed at a rate that was not commensurate with that of new debt with similar risk which totaled $20.8 million. Trustmark had $1.0 million of unused commitments on TDRs at December 31, 2021, compared to $4.5 million of unused commitments on TDRs at December 31, 2020 and $7.0 million of unused commitments on TDRs at December 31, 2019.

At December 31, 2021 and 2020, TDRs had a related ACL of $1.5 million and $2.4 million, respectively, compared to a related loan loss allowance of $3.2 million at December 31, 2019. Specific charge-offs related to TDRs totaled $3.7 million, $2.3 million and $1.6 million for the years ended December 31, 2021, 2020 and 2019, respectively.

The following tables illustrate the impact of modifications classified as TDRs for the periods presented ($ in thousands):

	Year Ended December 31, 2021
	Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Loans secured by real estate:
Construction, land development and other land		5	$	5,582	$	5,582
Other secured by 1-4 family residential properties		3		37		37
Secured by nonfarm, nonresidential properties		5		5,789		5,265
Other loans secured by real estate:
Secured by 1-4 family residential properties		8		909		906
Commercial and industrial loans		2		1,014		1,014
Consumer loans		1		6		6
Total		24	$	13,337	$	12,810

	Year Ended December 31, 2020
	Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Loans secured by real estate:
Other secured by 1-4 family residential properties		13	$	923	$	929
Secured by nonfarm, nonresidential properties		2		1,111		1,111
Commercial and industrial loans		4		1,665		1,664
Consumer loans		6		26		26
State and other political subdivision loans		2		3,902		3,872
Total		27	$	7,627	$	7,602

	Year Ended December 31, 2019
	Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Loans secured by real estate:
Secured by 1-4 family residential properties		19	$	1,742	$	1,738
Secured by nonfarm, nonresidential properties		1		5,055		5,055
Commercial and industrial loans		8		9,167		9,054
Consumer loans		2		30		30
Total		30	$	15,994	$	15,877

The table below includes the balances at default for TDRs modified within the last 12 months for which there was a payment default during the periods presented ($ in thousands):

	Years Ended December 31,
	2021				2020				2019
	Number of Contracts		Recorded Investment		Number of Contracts		Recorded Investment		Number of Contracts		Recorded Investment
Loans secured by real estate:
Construction, land development and other    land loans		5	$	5,582		—	$	—		—	$	—
Other secured by 1-4 family residential    properties		1		16		2		78		3		446
Secured by nonfarm, nonresidential    properties		—		—		1		139		—		—
Other loans secured by real estate:
Secured by 1-4 family residential properties		1		78		—		—		—		—
Commercial and industrial loans		—		—		1		82		7		192
Consumer loans		—		—		—		—		1		27
Total		7	$	5,676		4	$	299		11	$	665

Trustmark’s TDRs have resulted primarily from allowing the borrower to pay interest-only for an extended period of time and credits renewed at a rate that was not commensurate with that of new debt with similar risk rather than from forgiveness. Accordingly, as shown above, these TDRs have a similar recorded investment for both the pre-modification and post-modification disclosure. Trustmark has utilized loans 90 days or more past due to define payment default in determining TDRs that have subsequently defaulted.

The following tables detail LHFI classified as TDRs by loan class at December 31, 2021, 2020 and 2019 ($ in thousands):

	December 31, 2021
	Accruing		Nonaccrual		Total
Loans secured by real estate:
Construction, land development and other land	$	—	$	4,640	$	4,640
Other secured by 1-4 family residential properties		—		965		965
Secured by nonfarm, nonresidential properties		394		7,325		7,719
Other loans secured by real estate:
Secured by 1-4 family residential properties		50		2,484		2,534
Commercial and industrial loans		2,000		215		2,215
Consumer loans		7		9		16
State and other political subdivision loans		—		3,486		3,486
Other commercial loans		—		36		36
Total TDRs	$	2,451	$	19,160	$	21,611

	December 31, 2020
	Accruing		Nonaccrual		Total
Loans secured by real estate:
Construction, land development and other land	$	—	$	12	$	12
Other secured by 1-4 family residential properties		—		3,699		3,699
Secured by nonfarm, nonresidential properties		—		3,903		3,903
Commercial and industrial loans		1,500		12,749		14,249
Consumer loans		6		17		23
State and other political subdivision loans		—		3,793		3,793
Other commercial loans		—		81		81
Total TDRs	$	1,506	$	24,254	$	25,760

	December 31, 2019
	Accruing		Nonaccrual		Total
Loans secured by real estate:
Construction, land development and other land	$	—	$	15	$	15
Secured by 1-4 family residential properties		77		3,865		3,942
Secured by nonfarm, nonresidential properties		—		5,176		5,176
Commercial and industrial loans		3,319		18,913		22,232
Consumer loans		—		21		21
Other loans		—		137		137
Total TDRs	$	3,396	$	28,127	$	31,523

The CARES Act, as amended by subsequent legislation, specified that COVID-19 related modifications executed between March 1, 2020 and the earlier of (i) 60 days after the date of termination of the national emergency declared by the President or (ii) January 1, 2022, on loans that were current as of December 31, 2019 were not TDRs. Additionally, under guidance from the federal banking agencies, other short-term modifications made on a good faith basis in response to COVID-19 to borrowers that were current prior to any relief are not TDRs under FASB ASC Subtopic 310-40. These modifications include short-term (e.g., up to six months) modifications such as payment deferrals, fee waivers, extensions of repayment terms, or delays in payment that are insignificant. Borrowers considered current are those that are less than 30 days past due on their contractual payments at the time a modification program is implemented. Commercial concessions were primarily either interest only for 90 days or full payment deferrals for 90 days. Consumer concessions were 90-day full payment deferrals. At December 31, 2021 and 2020, the balance of loans remaining under some type of COVID-19 related concession totaled $1.1 million and $34.2 million, respectively.

Collateral-Dependent Loans

The following tables present the amortized cost basis of collateral-dependent loans by class of loans and collateral type at December 31, 2021 and 2020 ($ in thousands):

	December 31, 2021
	Real Estate		Equipment and  Machinery		Inventory and Receivables		Vehicles		Miscellaneous		Total
Loans secured by real estate:
Construction, land development and    other land	$	5,198	$	—	$	—	$	—	$	—	$	5,198
Secured by nonfarm, nonresidential    properties		11,072		—		—		—		—		11,072
Other real estate secured		56		—		—		—		—		56
Other loans secured by real estate:
Secured by 1-4 family residential    properties		1,319		—		—		—		—		1,319
Commercial and industrial loans		42		349		1,253		370		16,430		18,444
State and other political subdivision loans		3,664		—		—		—		—		3,664
Other commercial loans		4,572		—		—		—		36		4,608
Total	$	25,923	$	349	$	1,253	$	370	$	16,466	$	44,361

	December 31, 2020
	Real Estate		Equipment and  Machinery		Inventory and Receivables		Vehicles		Miscellaneous		Total
Loans secured by real estate:
Construction, land development and    other land	$	5,756	$	—	$	—	$	—	$	—	$	5,756
Other secured by 1-4 family    residential properties		454		—		—		—		—		454
Secured by nonfarm, nonresidential    properties		12,037		—		—		—		—		12,037
Other real estate secured		60		—		—		—		—		60
Other loans secured by real estate:
Secured by 1-4 family residential    properties		1,441		—		—		—		—		1,441
Commercial and industrial loans		86		425		4,899		135		8,531		14,076
State and other political subdivision loans		3,970		—		—		—		—		3,970
Other commercial loans		606		—		1,958		—		3,051		5,615
Total	$	24,410	$	425	$	6,857	$	135	$	11,582	$	43,409

A loan is collateral dependent when the borrower is experiencing financial difficulty and repayment of the loan is expected to be provided substantially through the sale of the collateral. The following provides a qualitative description by class of loan of the collateral that secures Trustmark’s collateral-dependent LHFI:

•Loans secured by real estate – Loans within these loan classes are secured by liens on real estate properties. There have been no significant changes to the collateral that secures these financial assets during the period.

•Other loans secured by real estate – Loans within these loan classes are secured by liens on real estate properties. There have been no significant changes to the collateral that secures these financial assets during the period.

•Commercial and industrial loans – Loans within this loan class are primarily secured by inventory, accounts receivables, equipment and other non-real estate collateral. There have been no significant changes to the collateral that secures these financial assets during the period.

•State and other political subdivision loans – Loans within this loan class are secured by liens on real estate properties or other non-real estate collateral. There have been no significant changes to the collateral that secures these financial assets during the period.

•Other commercial loans – Loans within this loan class are secured by non-real estate collateral. There have been no significant changes to the collateral that secures these financial assets during the period.

Credit Quality Indicators

Trustmark’s loan portfolio credit quality indicators focus on six key quality ratios that are compared against bank tolerances. The loan indicators are total classified outstanding, total criticized outstanding, nonperforming loans, nonperforming assets, delinquencies and net loan losses. Due to the homogenous nature of consumer loans, Trustmark does not assign a formal internal risk rating to each credit and therefore the criticized and classified measures are primarily composed of commercial loans.

In addition to monitoring portfolio credit quality indicators, Trustmark also measures how effectively the lending process is being managed and risks are being identified. As part of an ongoing monitoring process, Trustmark grades the commercial portfolio segment as it relates to credit file completion and financial statement exceptions, underwriting, collateral documentation and compliance with law as shown below:

•Credit File Completeness and Financial Statement Exceptions – evaluates the quality and condition of credit files in terms of content and completeness and focuses on efforts to obtain and document sufficient information to determine the quality and status of credits. Also included is an evaluation of the systems/procedures used to insure compliance with policy.

•Underwriting – evaluates whether credits are adequately analyzed, appropriately structured and properly approved within loan policy requirements. A properly approved credit is approved by adequate authority in a timely manner with all conditions of approval fulfilled. Total policy exceptions measure the level of underwriting and other policy exceptions within a portfolio segment.

•Collateral Documentation – focuses on the adequacy of documentation to perfect Trustmark’s collateral position and substantiate collateral value. Collateral exceptions measure the level of documentation exceptions within a portfolio segment. Collateral exceptions occur when certain collateral documentation is either not present or not current.

•Compliance with Law – focuses on underwriting, documentation, approval and reporting in compliance with banking laws and regulations. Primary emphasis is directed to the Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA), Regulation O requirements and regulations governing appraisals.

Commercial Credits

Trustmark has established a loan grading system that consists of ten individual credit risk grades (risk ratings) that encompass a range from loans where the expectation of loss is negligible to loans where loss has been established. The model is based on the risk of default for an individual credit and establishes certain criteria to delineate the level of risk across the ten unique credit risk grades. Credit risk grade definitions are as follows:

•Risk Rate (RR) 1 through RR 6 – Grades one through six represent groups of loans that are not subject to criticism as defined in regulatory guidance. Loans in these groups exhibit characteristics that represent low to moderate risk measured by using a variety of credit risk criteria such as cash flow coverage, debt service coverage, balance sheet leverage, liquidity, management experience, industry position, prevailing economic conditions, support from secondary sources of repayment and other credit factors that may be relevant to a specific loan. In general, these loans are supported by properly margined collateral and guarantees of principal parties.

•Other Assets Especially Mentioned (Special Mention) (RR 7) – a loan that has a potential weakness that if not corrected will lead to a more severe rating. This rating is for credits that are currently protected but potentially weak because of an adverse feature or condition that if not corrected will lead to a further downgrade.

•Substandard (RR 8) – a loan that has at least one identified weakness that is well defined. This rating is for credits where the primary sources of repayment are not viable at the time of evaluation or where either the capital or collateral is not adequate to support the loan and the secondary means of repayment do not provide a sufficient level of support to offset the identified weakness. Loss potential exists in the aggregate amount of substandard loans but does not necessarily exist in individual loans.

•Doubtful (RR 9) – a loan with an identified weakness that does not have a valid secondary source of repayment. Generally, these credits have an impaired primary source of repayment and secondary sources are not sufficient to prevent a loss in the credit. The exact amount of the loss has not been determined at this time.

•Loss (RR 10) – a loan or a portion of a loan that is deemed to be uncollectible.

By definition, credit risk grades special mention (RR 7), substandard (RR 8), doubtful (RR 9) and loss (RR 10) are criticized loans while substandard (RR 8), doubtful (RR 9) and loss (RR 10) are classified loans. These definitions are standardized by all bank regulatory agencies and are generally equally applied by each individual lending institution. The remaining credit risk grades are considered pass credits and are solely defined by Trustmark.

To enhance this process, Trustmark has determined that certain loans will be individually assessed, and a formal analysis will be performed and based upon the analysis the loan will be written down to net realizable value. Trustmark will individually assess and remove loans from the pool in the following circumstances:

•Commercial nonaccrual loans with total exposure of $500 thousand (excluding those portions of the debt that are government guaranteed or are secured by Trustmark deposits or marketable securities) or more.

•Any loan that is believed to not share similar risk characteristics with the rest of the pool will be individually assessed. Otherwise, the loan will be left within the pool based on the results of the assessment.

•Commercial accruing loans deemed to be a TDR with total exposure of $500 thousand (excluding those portions of the debt that are government guaranteed or are secured by Trustmark deposits or marketable securities) or more. If the loan is believed to not share similar risk characteristics with the rest of the loan pool, the loan will be individually assessed. Otherwise, the loan will be left within the pool and monitored on an ongoing basis.

Each loan officer assesses the appropriateness of the internal risk rating assigned to their credits on an ongoing basis. Trustmark’s Asset Review area conducts independent credit quality reviews of the majority of Trustmark’s commercial loan portfolio both on the underlying credit quality of each individual loan class as well as the adherence to Trustmark’s loan policy and the loan administration process.

In addition to the ongoing internal risk rate monitoring described above, Trustmark’s Credit Quality Review Committee meets monthly and performs a review of all loans of $100 thousand or more that are either delinquent thirty days or more or on nonaccrual. This review includes recommendations regarding risk ratings, accrual status, charge-offs and appropriate servicing officer as well as evaluation of problem credits for determination of TDRs. Quarterly, the Credit Quality Review Committee reviews and modifies continuous action plans for all credits risk rated seven or worse for relationships of $100 thousand or more.

In addition, periodic reviews of significant development, commercial construction, multi-family and nonowner-occupied projects are performed. These reviews assess each particular project with respect to location, project valuations, progress of completion, leasing status, current financial information, rents, operating expenses, cash flow, adherence to budget and projections and other information as applicable. Summary results are reviewed by Senior and Regional Credit Officers in addition to the Chief Credit Officer with a determination made as to the appropriateness of existing risk ratings and accrual status.

Consumer Credits

Consumer LHFI that do not meet a minimum custom credit score are reviewed quarterly. The Retail Credit Review Committee, Management Credit Policy Committee and the Directors Credit Policy Committee review the volume and/or percentage of approvals that did not meet the minimum passing custom score to ensure that Trustmark continues to originate quality loans.

Trustmark monitors the levels and severity of past due consumer LHFI on a daily basis through its collection activities. A detailed assessment of consumer LHFI delinquencies is performed monthly at both a product and market level.

The tables below present the amortized cost basis of loans by credit quality indicator and class of loans based on analyses performed at December 31, 2021 and 2020 ($ in thousands):

	Term Loans by Origination Year
	2021		2020		2019		2018		2017		Prior		Revolving Loans		Total
As of December 31, 2021	Commercial LHFI
Loans secured by real estate:
Construction, land development    and other land:
Pass - RR 1 through RR 6	$	376,438	$	76,176	$	21,366	$	2,189	$	1,367	$	2,890	$	26,505	$	506,931
Special Mention - RR 7		71		6,382		—		—		—		—		—		6,453
Substandard - RR 8		2,243		—		3,435		30		—		—		—		5,708
Doubtful - RR 9		—		—		—		—		—		42		—		42
Total		378,752		82,558		24,801		2,219		1,367		2,932		26,505		519,134
Other secured by 1-4 family residential    properties:
Pass - RR 1 through RR 6	$	44,208	$	23,269	$	13,194	$	9,722	$	5,737	$	3,076	$	8,771	$	107,977
Special Mention - RR 7		111		143		—		—		—		—		—		254
Substandard - RR 8		721		150		6		166		46		627		—		1,716
Doubtful - RR 9		22		—		—		—		—		—		—		22
Total		45,062		23,562		13,200		9,888		5,783		3,703		8,771		109,969
Secured by nonfarm, nonresidential    properties:
Pass - RR 1 through RR 6	$	750,869	$	604,026	$	610,446	$	350,603	$	183,115	$	279,529	$	113,808	$	2,892,396
Special Mention - RR 7		1,510		9,584		412		—		1,562		4,522		—		17,590
Substandard - RR 8		11,017		2,357		13,609		3,591		5,988		29,309		1,025		66,896
Doubtful - RR 9		43		—		105		—		—		21		—		169
Total		763,439		615,967		624,572		354,194		190,665		313,381		114,833		2,977,051
Other real estate secured:
Pass - RR 1 through RR 6	$	256,273	$	105,687	$	220,487	$	64,268	$	6,816	$	56,196	$	13,350	$	723,077
Special Mention - RR 7		—		—		—		—		—		773		—		773
Substandard - RR 8		1,684		65		—		8		—		101		—		1,858
Doubtful - RR 9		—		—		—		—		—		—		—		—
Total		257,957		105,752		220,487		64,276		6,816		57,070		13,350		725,708

	Term Loans by Origination Year
	2021		2020		2019		2018		2017		Prior		Revolving Loans		Total
As of December 31, 2021	Commercial LHFI
Other loans secured by real estate:
Other construction
Pass - RR 1 through RR 6	$	273,747	$	393,580	$	25,142	$	—	$	—	$	—	$	17,909	$	710,378
Special Mention - RR 7		—		—		—		—		—		—		—		—
Substandard - RR 8		1,435		—		—		—		—		—		—		1,435
Doubtful - RR 9		—		—		—		—		—		—		—		—
Total		275,182		393,580		25,142		—		—		—		17,909		711,813
Commercial and industrial loans:
Pass - RR 1 through RR 6	$	503,073	$	249,171	$	74,239	$	33,403	$	50,016	$	35,883	$	400,423	$	1,346,208
Special Mention - RR 7		643		365		147		550		48		—		99		1,852
Substandard - RR 8		14,530		1,338		1,221		1,119		9,237		386		38,182		66,013
Doubtful - RR 9		20		46		29		107		—		4		—		206
Total		518,266		250,920		75,636		35,179		59,301		36,273		438,704		1,414,279
State and other political subdivision loans:
Pass - RR 1 through RR 6	$	381,317	$	148,156	$	56,987	$	30,558	$	95,491	$	418,319	$	8,409	$	1,139,237
Special Mention - RR 7		—		—		—		—		—		3,350		—		3,350
Substandard - RR 8		—		—		—		—		—		3,664		—		3,664
Doubtful - RR 9		—		—		—		—		—		—		—		—
Total		381,317		148,156		56,987		30,558		95,491		425,333		8,409		1,146,251
Other commercial loans:
Pass - RR 1 through RR 6	$	103,504	$	38,661	$	64,871	$	8,643	$	7,924	$	41,112	$	232,476	$	497,191
Special Mention - RR 7		4,059		—		—		—		—		—		9,013		13,072
Substandard - RR 8		4,532		6,681		82		212		—		—		13,000		24,507
Doubtful - RR 9		—		50		—		—		—		23		—		73
Total		112,095		45,392		64,953		8,855		7,924		41,135		254,489		534,843
Total commercial LHFI	$	2,732,070	$	1,665,887	$	1,105,778	$	505,169	$	367,347	$	879,827	$	882,970	$	8,139,048

	Term Loans by Origination Year
	2021		2020		2019		2018		2017		Prior		Revolving Loans		Total
As of December 31, 2021	Consumer LHFI
Loans secured by real estate:
Construction, land development and    other land:
Current	$	51,849	$	16,204	$	3,024	$	3,059	$	797	$	2,404	$	—	$	77,337
Past due 30-89 days		—		265		49		5		—		14		—		333
Past due 90 days or more		—		—		—		—		—		7		—		7
Nonaccrual		64		—		—		—		—		93		—		157
Total		51,913		16,469		3,073		3,064		797		2,518		—		77,834
Other secured by 1-4 family residential    properties:
Current	$	21,166	$	11,098	$	6,119	$	5,903	$	3,291	$	7,853	$	347,743	$	403,173
Past due 30-89 days		5		34		87		114		—		145		1,214		1,599
Past due 90 days or more		—		4		—		—		—		13		91		108
Nonaccrual		26		70		29		9		341		274		2,085		2,834
Total		21,197		11,206		6,235		6,026		3,632		8,285		351,133		407,714
Secured by nonfarm, nonresidential    properties:
Current	$	31	$	—	$	—	$	—	$	2	$	—	$	—	$	33
Past due 30-89 days		—		—		—		—		—		—		—		—
Past due 90 days or more		—		—		—		—		—		—		—		—
Nonaccrual		—		—		—		—		—		—		—		—
Total		31		—		—		—		2		—		—		33
Other real estate secured:
Current	$	—	$	97	$	—	$	8	$	60	$	170	$	—	$	335
Past due 30-89 days		—		—		—		—		—		—		—		—
Past due 90 days or more		—		—		—		—		—		—		—		—
Nonaccrual		—		—		—		—		—		—		—		—
Total		—		97		—		8		60		170		—		335

	Term Loans by Origination Year
	2021		2020		2019		2018		2017		Prior		Revolving Loans		Total
As of December 31, 2021	Consumer LHFI
Other loans secured by real estate:
Secured by 1-4 family residential properties
Current	$	622,330	$	233,951	$	137,500	$	107,345	$	56,374	$	285,919	$	—	$	1,443,419
Past due 30-89 days		542		494		333		10		369		714		—		2,462
Past due 90 days or more		199		501		165		122		218		450		—		1,655
Nonaccrual		272		1,875		1,419		2,105		916		6,187		—		12,774
Total		623,343		236,821		139,417		109,582		57,877		293,270		—		1,460,310
Consumer loans:
Current	$	65,366	$	25,512	$	8,498	$	4,734	$	1,289	$	378	$	54,518	$	160,295
Past due 30-89 days		989		223		123		22		10		5		468		1,840
Past due 90 days or more		26		23		6		—		—		—		248		303
Nonaccrual		71		17		2		13		8		—		6		117
Total		66,452		25,775		8,629		4,769		1,307		383		55,240		162,555
Total consumer LHFI	$	762,936	$	290,368	$	157,354	$	123,449	$	63,675	$	304,626	$	406,373	$	2,108,781
Total LHFI	$	3,495,006	$	1,956,255	$	1,263,132	$	628,618	$	431,022	$	1,184,453	$	1,289,343	$	10,247,829

	Term Loans by Origination Year
	2020		2019		2018		2017		2016		Prior		Revolving Loans		Total
As of December 31, 2020	Commercial LHFI
Loans secured by real estate:
Construction, land development    and other land:
Pass - RR 1 through RR 6	$	287,218	$	62,078	$	26,401	$	4,487	$	3,274	$	3,564	$	28,548	$	415,570
Special Mention - RR 7		—		—		—		—		—		—		—		—
Substandard - RR 8		5,419		4,363		1,226		12		494		22		101		11,637
Doubtful - RR 9		—		—		—		—		—		42		—		42
Total		292,637		66,441		27,627		4,499		3,768		3,628		28,649		427,249
Other secured by 1-4 family residential    properties:
Pass - RR 1 through RR 6	$	35,139	$	19,596	$	15,399	$	9,605	$	10,273	$	4,786	$	8,486	$	103,284
Special Mention - RR 7		255		—		50		—		—		—		—		305
Substandard - RR 8		1,155		8		914		341		302		337		3,950		7,007
Doubtful - RR 9		29		—		—		—		—		—		—		29
Total		36,578		19,604		16,363		9,946		10,575		5,123		12,436		110,625
Secured by nonfarm, nonresidential    properties:
Pass - RR 1 through RR 6	$	697,439	$	496,476	$	442,264	$	293,072	$	254,747	$	251,219	$	96,098	$	2,531,315
Special Mention - RR 7		13,452		6,139		2,956		4,466		4,957		20,545		—		52,515
Substandard - RR 8		19,119		20,572		4,516		12,956		38,956		25,438		2,779		124,336
Doubtful - RR 9		52		163		—		—		217		306		—		738
Total		730,062		523,350		449,736		310,494		298,877		297,508		98,877		2,708,904
Other real estate secured:
Pass - RR 1 through RR 6	$	146,803	$	376,765	$	347,472	$	48,626	$	89,824	$	23,680	$	12,116	$	1,045,286
Special Mention - RR 7		—		—		—		—		—		841		—		841
Substandard - RR 8		18,649		14		18		—		556		122		—		19,359
Doubtful - RR 9		—		—		—		—		—		—		—		—
Total		165,452		376,779		347,490		48,626		90,380		24,643		12,116		1,065,486

	Term Loans by Origination Year
	2020		2019		2018		2017		2016		Prior		Revolving Loans		Total
As of December 31, 2020	Commercial LHFI
Other loans secured by real estate:
Other construction
Pass - RR 1 through RR 6	$	262,544	$	425,936	$	81,476	$	14,074	$	2,464	$	—	$	7,735	$	794,229
Special Mention - RR 7		—		—		—		—		—		—		—		—
Substandard - RR 8		754		—		—		—		—		—		—		754
Doubtful - RR 9		—		—		—		—		—		—		—		—
Total		263,298		425,936		81,476		14,074		2,464		—		7,735		794,983
Commercial and industrial loans:
Pass - RR 1 through RR 6	$	444,304	$	165,163	$	77,611	$	77,985	$	59,131	$	43,214	$	372,486	$	1,239,894
Special Mention - RR 7		677		45		—		—		—		—		240		962
Substandard - RR 8		12,090		1,814		9,737		3,735		2,160		5,024		33,380		67,940
Doubtful - RR 9		151		95		—		—		32		4		—		282
Total		457,222		167,117		87,348		81,720		61,323		48,242		406,106		1,309,078
State and other political subdivision loans:
Pass - RR 1 through RR 6	$	250,363	$	79,595	$	41,334	$	113,817	$	132,634	$	372,831	$	1,446	$	992,020
Special Mention - RR 7		—		—		—		—		—		4,018		—		4,018
Substandard - RR 8		—		—		—		247		—		4,491		—		4,738
Doubtful - RR 9		—		—		—		—		—		—		—		—
Total		250,363		79,595		41,334		114,064		132,634		381,340		1,446		1,000,776
Other commercial loans:
Pass - RR 1 through RR 6	$	101,230	$	70,990	$	20,769	$	9,723	$	33,481	$	30,715	$	225,533	$	492,441
Special Mention - RR 7		7,500		—		—		—		—		—		11,333		18,833
Substandard - RR 8		381		2,099		683		6		707		—		9,948		13,824
Doubtful - RR 9		2		—		—		—		—		23		—		25
Total		109,113		73,089		21,452		9,729		34,188		30,738		246,814		525,123
Total commercial LHFI	$	2,304,725	$	1,731,911	$	1,072,826	$	593,152	$	634,209	$	791,222	$	814,179	$	7,942,224

	Term Loans by Origination Year
	2020		2019		2018		2017		2016		Prior		Revolving Loans		Total
As of December 31, 2020	Consumer LHFI
Loans secured by real estate:
Construction, land development and    other land:
Current	$	47,336	$	24,174	$	8,496	$	2,036	$	1,447	$	2,868	$	—	$	86,357
Past due 30-89 days		—		318		20		—		1		12		—		351
Past due 90 days or more		—		—		—		—		—		—		—		—
Nonaccrual		—		—		—		—		—		99		—		99
Total		47,336		24,492		8,516		2,036		1,448		2,979		—		86,807
Other secured by 1-4 family residential    properties:
Current	$	20,864	$	10,253	$	12,037	$	4,177	$	2,082	$	11,124	$	348,830	$	409,367
Past due 30-89 days		93		12		—		13		—		133		1,058		1,309
Past due 90 days or more		—		—		—		—		—		30		22		52
Nonaccrual		6		44		121		428		—		382		2,398		3,379
Total		20,963		10,309		12,158		4,618		2,082		11,669		352,308		414,107
Secured by nonfarm, nonresidential    properties:
Current	$	109	$	—	$	—	$	4	$	—	$	9	$	—	$	122
Past due 30-89 days		—		—		—		—		—		—		—		—
Past due 90 days or more		—		—		—		—		—		—		—		—
Nonaccrual		—		—		—		—		—		—		—		—
Total		109		—		—		4		—		9		—		122
Other real estate secured:
Current	$	107	$	—	$	38	$	37	$	96	$	200	$	—	$	478
Past due 30-89 days		—		—		—		—		—		—		—		—
Past due 90 days or more		—		—		—		—		—		—		—		—
Nonaccrual		—		—		—		—		—		—		—		—
Total		107		—		38		37		96		200		—		478

	Term Loans by Origination Year
	2020		2019		2018		2017		2016		Prior		Revolving Loans		Total
As of December 31, 2020	Consumer LHFI
Other loans secured by real estate:
Secured by 1-4 family residential properties
Current	$	289,521	$	214,056	$	173,324	$	92,564	$	109,031	$	321,250	$	—	$	1,199,746
Past due 30-89 days		499		93		753		366		1,080		799		—		3,590
Past due 90 days or more		159		214		208		127		—		549		—		1,257
Nonaccrual		283		711		2,024		682		239		7,868		—		11,807
Total		290,462		215,074		176,309		93,739		110,350		330,466		—		1,216,400
Consumer loans:
Current	$	65,370	$	25,303	$	13,140	$	3,893	$	1,257	$	345	$	53,669	$	162,977
Past due 30-89 days		524		158		67		19		7		3		305		1,083
Past due 90 days or more		77		—		4		—		—		—		159		240
Nonaccrual		12		4		55		13		2		—		—		86
Total		65,983		25,465		13,266		3,925		1,266		348		54,133		164,386
Total consumer LHFI	$	424,960	$	275,340	$	210,287	$	104,359	$	115,242	$	345,671	$	406,441	$	1,882,300
Total LHFI	$	2,729,685	$	2,007,251	$	1,283,113	$	697,511	$	749,451	$	1,136,893	$	1,220,620	$	9,824,524

Past Due LHFS

LHFS past due 90 days or more totaled $69.9 million and $119.4 million at December 31, 2021 and 2020, respectively.

Trustmark did not exercise its buy-back option on any delinquent loans serviced for GNMA during 2021 or 2020.

ACL, LHFI

Trustmark’s ACL methodology for LHFI is based upon guidance within FASB ASC Subtopic 326-20 as well as applicable regulatory guidance. The ACL is a valuation account that is deducted from the loans’ amortized cost basis to present the net amount expected to be collected on the loans. Credit quality within the LHFI portfolio is continuously monitored by Management and is reflected within the ACL for loans. The ACL is an estimate of expected losses inherent within Trustmark’s existing LHFI portfolio. The ACL for LHFI is adjusted through the PCL, LHFI and reduced by the charge off of loan amounts, net of recoveries.

The methodology for estimating the amount of expected credit losses reported in the ACL has two basic components: a collective, or pooled, component for estimated expected credit losses for pools of loans that share similar risk characteristics, and an asset-specific component involving individual loans that do not share risk characteristics with other loans and the measurement of expected credit losses for such individual loans. In estimating the ACL for the collective component, loans are segregated into loan pools based on loan product types and similar risk characteristics.

The loans secured by real estate and other loans secured by real estate portfolio segments include loans for both commercial and residential properties. The underwriting process for these loans includes analysis of the financial position and strength of both the borrower and guarantor, experience with similar projects in the past, market demand and prospects for successful completion of the proposed project within the established budget and schedule, values of underlying collateral, availability of permanent financing, maximum loan-to-value ratios, minimum equity requirements, acceptable amortization periods and minimum debt service coverage requirements, based on property type. The borrower’s financial strength and capacity to repay their obligations remain the primary focus of underwriting. Financial strength is evaluated based upon analytical tools that consider historical and projected cash flows and performance in addition to analysis of the proposed project for income-producing properties. Additional support offered by guarantors is also considered. Ultimate repayment of these loans is sensitive to interest rate changes, general economic conditions, liquidity and availability of long-term financing.

The commercial and industrial LHFI portfolio segment includes loans within Trustmark’s geographic markets made to many types of businesses for various purposes, such as short-term working capital loans that are usually secured by accounts receivable and inventory and term financing for equipment and fixed asset purchases that are secured by those assets. Trustmark’s credit underwriting process for commercial and industrial loans includes analysis of historical and projected cash flows and performance, evaluation of financial strength of both borrowers and guarantors as reflected in current and detailed financial information and evaluation of underlying collateral to support the credit.

The consumer LHFI portfolio segment is comprised of loans which are underwritten after evaluating a borrower’s repayment capacity, credit and collateral. Several factors are considered when assessing a borrower’s capacity to repay the obligation, including the borrower’s employment, income, current debt and assets. Credit is assessed using a credit report that provides credit scores and the borrower’s current and past information about their credit history. Property appraisals are obtained to assist in evaluating collateral. Loan-to-value and debt-to-income ratios, loan amount and lien position are also considered in assessing whether to originate a loan. These borrowers are particularly susceptible to downturns in economic trends such as conditions that negatively affect housing prices and demand and levels of unemployment.

The state and other political subdivision LHFI and the other commercial LHFI portfolio segments primarily consist of loans to non-depository financial institutions, such as mortgage companies, finance companies and other financial intermediaries, loans to state and political subdivisions, and loans to non-profit and charitable organizations. These loans are underwritten based on the specific nature or purpose of the loan and underlying collateral with special consideration given to the specific source of repayment for the loan.

The following table provides a description of each of Trustmark’s portfolio segments, loan classes, loan pools and the ACL methodology and loss drivers:

Portfolio Segment	Loan Class	Loan Pool	Methodology	Loss Drivers
Loans secured by real estate	Construction, land    development and other land	1-4 family residential    construction	DCF	Prime Rate, National GDP
		Lots and development	DCF	Prime Rate, Southern Unemployment
		Unimproved land	DCF	Prime Rate, Southern Unemployment
		All other consumer	DCF	Southern Unemployment
	Other secured by 1-4    family residential    properties	Consumer 1-4 family - 1st liens	DCF	Prime Rate, Southern Unemployment
		All other consumer	DCF	Southern Unemployment
		Nonresidential owner-occupied	DCF	Southern Unemployment, National GDP
	Secured by nonfarm,    nonresidential properties	Nonowner-occupied -    hotel/motel	DCF	Southern Vacancy Rate, Southern Unemployment
		Nonowner-occupied - office	DCF	Southern Vacancy Rate, Southern Unemployment
		Nonowner-occupied- Retail	DCF	Southern Vacancy Rate, Southern Unemployment
		Nonowner-occupied - senior    living/nursing homes	DCF	Southern Vacancy Rate, Southern Unemployment
		Nonowner-occupied -    all other	DCF	Southern Vacancy Rate, Southern Unemployment
		Nonresidential owner-occupied	DCF	Southern Unemployment, National GDP
	Other real estate secured	Nonresidential nonowner    -occupied - apartments	DCF	Southern Vacancy Rate, Southern Unemployment
		Nonresidential owner-occupied	DCF	Southern Unemployment, National GDP
		Nonowner-occupied -    all other	DCF	Southern Vacancy Rate, Southern Unemployment
Other loans secured by    real estate	Other construction	Other construction	WARM	Prime Rate, National Unemployment
	Secured by 1-4 family    residential properties	Trustmark mortgage	WARM	Southern Unemployment
Commercial and    industrial loans	Commercial and    industrial loans	Commercial and industrial -    non-working capital	DCF	Trustmark historical data
		Commercial and industrial -    working capital	DCF	Trustmark historical data
		Credit cards	WARM	Trustmark call report data
Consumer loans	Consumer loans	Credit cards	WARM	Trustmark call report data
		Overdrafts	Loss Rate	Trustmark historical data
		All other consumer	DCF	Southern Unemployment
State and other political    subdivision loans	State and other political    subdivision loans	Obligations of state and    political subdivisions	DCF	Moody's Bond Default Study
Other commercial loans	Other commercial loans	Other loans	DCF	Prime Rate, Southern Unemployment
		Commercial and industrial -    non-working capital	DCF	Trustmark historical data
		Commercial and industrial -    working capital	DCF	Trustmark historical data

In general, Trustmark utilizes a DCF method to estimate the quantitative portion of the ACL for loan pools. The DCF model consists of two key components, a loss driver analysis (LDA) and a cash flow analysis. For loan pools utilizing the DCF methodology, multiple assumptions are in place, depending on the loan pool. A reasonable and supportable forecast is utilized for each loan pool by developing a LDA for each loan class. The LDA uses charge off data from Federal Financial Institutions Examination Council (FFIEC) reports to construct a periodic default rate (PDR). The PDR is decomposed into a probability of default (PD). Regressions are run using the data for various macroeconomic variables in order to determine which ones correlate to Trustmark’s losses. These variables are then incorporated into the application to calculate a quarterly PD using a third-party baseline forecast. In addition to the PD, a loss given default (LGD) is derived using a method referred to as Frye Jacobs. The Frye Jacobs method is a mathematical formula that traces the

relationship between LGD and PD over time and projects the LGD based on the levels of PD forecasts. This model approach is applicable to all pools within the construction, land development and other land, other secured by 1-4 family residential properties, secured by nonfarm, nonresidential properties and other real estate secured loan classes as well as the all other consumer and other loans pools.

For the commercial and industrial loans related pools, Trustmark uses its own PD and LGD data, instead of the macroeconomic variables and the Frye Jacobs method described above, to calculate the PD and LGD as there were no defensible macroeconomic variables that correlated to Trustmark’s losses. Trustmark utilizes a third-party Bond Default Study to derive the PD and LGD for the obligations of state and political subdivisions pool. Due to the lack of losses within this pool, no defensible macroeconomic factors were identified to correlate.

The PD and LGD measures are used in conjunction with prepayment data as inputs into the DCF model to calculate the cash flows at the individual loan level. Contractual cash flows based on loan terms are adjusted for PD, LGD and prepayments to derive loss cash flows. These loss cash flows are discounted by the loan’s coupon rate to arrive at the discounted cash flow based quantitative loss. The prepayment studies are updated quarterly by a third-party for each applicable pool.

An alternate method of estimating the ACL is used for certain loan pools due to specific characteristics of these loans. For the non-DCF pools, specifically, those using the weighted average remaining maturity (WARM) method, the remaining life is incorporated into the ACL quantitative calculation.

Trustmark determined that reasonable and supportable forecasts could be made for a twelve-month period for all of its loan pools. To the extent the lives of the loans in the LHFI portfolio extend beyond this forecast period, Trustmark uses a reversion period of four quarters and reverts to the historical mean on a straight-line basis over the remaining life of the loans. The econometric models currently in production reflect segment or pool level sensitivities of PD to changes in macroeconomic variables. By measuring the relationship between defaults and changes in the economy, the quantitative reserve incorporates reasonable and supportable forecasts of future conditions that will affect the value of its assets, as required by FASB ASC Topic 326. Under stable forecasts, these linear regressions will reasonably predict a pool’s PD. However, due to the COVID-19 pandemic, the macroeconomic variables used for reasonable and supportable forecasting have changed rapidly. At the current levels, it is not clear that the models currently in production will produce reasonably representative results since the models were originally estimated using data beginning in 2004 through 2019. During this period, a traditional, albeit severe, economic recession occurred. Thus, econometric models are sensitive to similar future levels of PD.

In order to prevent the econometric models from extrapolating beyond reasonable boundaries of their input variables, Trustmark chose to establish an upper and lower limit process when applying the periodic forecasts. In this way, Management will not rely upon unobserved and untested relationships in the setting of the quantitative reserve. This approach applies to all input variables, including: Southern Unemployment, National Unemployment, National Gross Domestic Product (GDP), Southern Vacancy Rate and the Prime Rate. The upper and lower limits are based on the distribution of the macroeconomic variable by selecting extreme percentiles at the upper and lower limits of the distribution, the 1st and 99th, respectively. These upper and lower limits are then used to calculate the PD for the forecast time period in which the forecasted values are outside of the upper and lower limit range. During 2021, the forecast related to the macroeconomic variables used in the quantitative modeling process were positively impacted due to the updated forecast effects. However, due to multiple periods having a PD or LGD at or near zero as a result of improving macroeconomic forecasts, Management implemented PD and LGD floors to account for the risk associated with each portfolio. The PD and LGD floors are based on Trustmark's historical loss experience and applied at a portfolio level.

Qualitative factors used in the ACL methodology include the following:

•Lending policies and procedures

•Economic conditions and concentrations of credit

•Nature and volume of the portfolio

•Performance trends

•External factors

While all these factors are incorporated into the overall methodology, only three are currently considered active: economic conditions and concentrations of credit, performance trends and external factors.

Two of Trustmark’s largest loan classes are the loans secured by nonfarm, nonresidential properties and the loans secured by other real estate. Trustmark elected to create a qualitative factor specifically for these loan classes which addresses changes in the economic conditions of metropolitan areas and applies additional pool level reserves. This qualitative factor is based on third-party market data and forecast trends and is updated quarterly as information is available, by market and by loan pool.

For the performance trends factor, Trustmark uses migration analyses to allocate additional ACL to non-pass/delinquent loans within each pool. In this way, Management believes the ACL will directly reflect changes in risk, based on the performance of the loans within a pool, whether declining or improving.

The external factors qualitative factor is Management’s best judgement on the loan or pool level impact of all factors that affect the portfolio that are not accounted for using any other part of the ACL methodology (e.g., natural disasters, changes in legislation, impacts due to technology and pandemics). During 2020, Trustmark activated the External Factor – Pandemic to ensure reserve adequacy for collectively evaluated loans most likely to be impacted by the unique economic and behavioral conditions created by the COVID-19 pandemic. Additional qualitative reserves are derived based on two principles. The first is the disconnect of economic factors to Trustmark’s modeled probability of default (derived from the econometric models underpinning the quantitative pooled reserves). During the pandemic, extraordinary measures by the federal government were made available to consumers and businesses, including COVID-19 loan payment concessions, direct transfer payments to households, tax deferrals, and reduced interest rates, among others. These government interventions may have extended the lag between economic conditions and default, relative to what was captured in the model development data. Because Trustmark’s econometric PD models rely on the observed relationship from the economic downturn from 2007 to 2009 in both timing and severity, Management does not expect the models to reflect these current conditions. For example, while the models would predict contemporaneous unemployment peaks and loan defaults, this may not occur when borrowers can request payment deferrals. Thus, for the affected population, economic conditions are not fully considered as a part of Trustmark’s quantitative reserve. The second principle is the change in risk that is identified by rating changes. As a part of Trustmark’s credit review process, loans in the affected population have been given more frequent screening to ensure accurate ratings are maintained through this dynamic period. Trustmark’s quantitative reserve does not directly address changes in ratings, thus a migration qualitative factor was designed to work in concert with the quantitative reserve. In a downturn, the qualitative factor is inactive for most pools because changes in ratings are congruent with changes in macroeconomic conditions, which directly influence the PD models in the quantitative reserve.

As discussed above, the disconnect of economic factors means that changes in rating caused by deteriorating and weak economic conditions as a result of the pandemic are not being captured in the quantitative reserve. During 2020, due to unforeseen pandemic conditions that varied from Management’s expectations, additional reserves were further dimensioned in order to appropriately reflect the risk within the portfolio related to the COVID-19 pandemic. In an effort to ensure the External Factor-Pandemic qualitative factor is reasonable and supportable, historical Trustmark loss data was leveraged to construct a framework that is quantitative in nature. To dimension the additional reserve, Management uses the sensitivity of the quantitative commercial loan reserve to changes in macroeconomic conditions to apply to loans rated acceptable or better (RR 1-4). In addition, to account for the known changes in risk, a weighted average of the commercial loan portfolio loss rate, derived from the performance trends qualitative factor, is used to dimension additional reserves for downgraded credits. Loans rated acceptable with risk (RR 5) or watch (RR 6) received the additional reserves based on the average of the macroeconomic conditions and weighted- average of the commercial loan portfolio loss rate while the loans rated special mention and substandard received additional reserves based on the weighted-average described above.

The following tables disaggregate the ACL and the amortized cost basis of the loans by the measurement methodology used at December 31, 2021 and 2020 ($ in thousands):

	Year Ended December 31, 2021
	ACL						LHFI
	Individually Evaluated for Credit Loss		Collectively Evaluated for Credit Loss		Total ACL		Individually Evaluated for Credit Loss		Collectively Evaluated for Credit Loss		Total LHFI
Loans secured by real estate:
Construction, land development and other land	$	278	$	5,801	$	6,079	$	5,198		591,770	$	596,968
Other secured by 1-4 family residential properties		—		10,310		10,310		—		517,683		517,683
Secured by nonfarm, nonresidential properties		—		37,912		37,912		11,072		2,966,012		2,977,084
Other real estate secured		—		4,713		4,713		56		725,987		726,043
Other loans secured by real estate:
Other construction		—		5,968		5,968		—		711,813		711,813
Secured by 1-4 family residential properties		—		2,706		2,706		1,319		1,458,991		1,460,310
Commercial and industrial loans		5,750		13,189		18,939		18,444		1,395,835		1,414,279
Consumer loans		—		4,774		4,774		—		162,555		162,555
State and other political subdivision loans		1,394		1,314		2,708		3,664		1,142,587		1,146,251
Other commercial loans		203		5,145		5,348		4,608		530,235		534,843
Total	$	7,625	$	91,832	$	99,457	$	44,361	$	10,203,468	$	10,247,829

	December 31, 2020
	ACL						LHFI
	Individually Evaluated for Credit Loss		Collectively Evaluated for Credit Loss		Total		Individually Evaluated for Credit Loss		Collectively Evaluated for Credit Loss		Total
Loans secured by real estate:
Construction, land development and other land	$	—	$	6,854	$	6,854	$	5,756	$	508,300	$	514,056
Other secured by 1-4 family residential properties		—		9,928		9,928		454		524,278		524,732
Secured by nonfarm, nonresidential properties		—		48,523		48,523		12,037		2,696,989		2,709,026
Other real estate secured		—		7,382		7,382		60		1,065,904		1,065,964
Other loans secured by real estate:
Other construction		—		8,158		8,158		—		794,983		794,983
Secured by 1-4 family residential properties		—		5,143		5,143		1,441		1,214,959		1,216,400
Commercial and industrial loans		579		14,272		14,851		14,076		1,295,002		1,309,078
Consumer loans		—		5,838		5,838		—		164,386		164,386
State and other political subdivision loans		1,700		1,490		3,190		3,970		996,806		1,000,776
Other loans		2,100		5,339		7,439		5,615		519,508		525,123
Total	$	4,379	$	112,927	$	117,306	$	43,409	$	9,781,115	$	9,824,524

Changes in the ACL were as follows for the periods presented ($ in thousands):

	Years Ended December 31,
	2021			2020			2019
Balance at beginning of period	$	117,306		$	84,277		$	79,290
FASB ASU 2016-13 adoption adjustments:
LHFI		—			(3,039	)		—
Allowance for loan losses, acquired loans transfer		—			815			—
Acquired loans ACL adjustment		—			1,007			—
Loans charged-off		(10,275	)		(11,475	)		(14,481	)
Recoveries		13,925			9,608			8,671
Net (charge-offs) recoveries		3,650			(1,867	)		(5,810	)
PCL, LHFI		(21,499	)		36,113			10,797
Balance at end of period	$	99,457		$	117,306		$	84,277

The following tables detail changes in the ACL by loan class for the years ended December 31, 2021 and 2020 ($ in thousands):

	2021
	Balance										Balance
	January 1,		Charge-offs			Recoveries		PCL			December 31,
Loans secured by real estate:
Construction, land development and other land	$	6,854	$	(39	)	$	1,564	$	(2,300	)	$	6,079
Other secured by 1-4 family residential properties		9,928		(109	)		505		(14	)		10,310
Secured by nonfarm, nonresidential properties		48,523		(169	)		1,245		(11,687	)		37,912
Other real estate secured		7,382		—			20		(2,689	)		4,713
Other loans secured by real estate:
Other construction		8,158		—			47		(2,237	)		5,968
Secured by 1-4 family residential properties		5,143		(177	)		128		(2,388	)		2,706
Commercial and industrial loans		14,851		(4,391	)		4,727		3,752			18,939
Consumer loans		5,838		(1,640	)		1,665		(1,089	)		4,774
State and other political subdivision loans		3,190		—			—		(482	)		2,708
Other commercial loans		7,439		(3,750	)		4,024		(2,365	)		5,348
Total	$	117,306	$	(10,275	)	$	13,925	$	(21,499	)	$	99,457

The increase in the PCL for the commercial and industrial loan portfolio for the year ended December 31, 2021 was primarily due to specific reserves for individually analyzed credits.

The PCL for loans secured by real estate, other loans secured by real estate, state and other political subdivision loans and other commercial loans decreased during the year ended December 31, 2021 primarily due to improvements in the macroeconomic forecast and credit quality.

	2020
	Balance January 1,		FASB ASU 2016-13 Adoption Adjustment			Charge-offs			Recoveries		PCL			Balance December 31,
Loans secured by real estate:
Construction, land development and other land	$	6,371	$	(188	)	$	(12	)	$	716	$	(33	)	$	6,854
Other secured by 1-4 family residential properties		5,888		4,188			(117	)		378		(409	)		9,928
Secured by nonfarm, nonresidential properties		26,158		(8,179	)		(3,777	)		546		33,775			48,523
Other real estate secured		4,024		(765	)		(8	)		68		4,063			7,382
Other loans secured by real estate:
Other construction		1,889		3,202			—			208		2,859			8,158
Secured by 1-4 family residential properties		3,044		2,891			(43	)		203		(952	)		5,143
Commercial and industrial loans		25,992		(8,964	)		(1,557	)		1,736		(2,356	)		14,851
Consumer loans		3,379		2,059			(2,039	)		1,824		615			5,838
State and other political subdivision loans		2,229		2,455			—			—		(1,494	)		3,190
Other commercial loans		5,303		2,084			(3,922	)		3,929		45			7,439
Total	$	84,277	$	(1,217	)	$	(11,475	)	$	9,608	$	36,113		$	117,306

The increases in the PCL for nonfarm, nonresidential properties, other real estate secured loans, other construction loans and consumer loans for the year ended December 31, 2020 were primarily due to the negative impact of COVID-19.

The PCL for the commercial and industrial loan portfolio decreased $2.4 million during the year ended December 31, 2020 primarily due to loans that had been specifically reserved for being charged down, upgrades on loans from substandard to pass, paydowns as well as a slight decrease in the calculated PD and LGD, which uses Trustmark’s historical data. The decrease in the PCL for state and other political subdivision loans of $1.5 million was primarily due to a decrease in reserves based on routine updates to the qualitative portion of the allowance calculation.