Loans Held for Investment (LHFI) and Allowance for Loan Losses, LHFI

9 Months Ended

Sep. 30, 2022

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

Loans Held for Investment (LHFI) and Allowance for Credit Losses, LHFI

Note 3 – LHFI and ACL, LHFI

At September 30, 2022 and December 31, 2021, LHFI consisted of the following ($ in thousands):

	September 30, 2022		December 31, 2021
Loans secured by real estate:
Construction, land development and other land	$	693,741	$	596,968
Other secured by 1-4 family residential properties		566,985		517,683
Secured by nonfarm, nonresidential properties		3,206,946		2,977,084
Other real estate secured		593,119		726,043
Other loans secured by real estate:
Other construction		953,654		711,813
Secured by 1-4 family residential properties		2,030,127		1,460,310
Commercial and industrial loans		1,689,532		1,414,279
Consumer loans		166,027		162,555
State and other political subdivision loans		1,188,703		1,146,251
Other commercial loans		497,230		534,843
LHFI		11,586,064		10,247,829
Less ACL		115,050		99,457
Net LHFI	$	11,471,014	$	10,148,372

Accrued interest receivable is not included in the amortized cost basis of Trustmark’s LHFI. At September 30, 2022 and December 31, 2021, accrued interest receivable for LHFI totaled $38.2 million and $26.7 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 September 30, 2022, 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.

Nonaccrual and Past Due LHFI

No material interest income was recognized in the income statement on nonaccrual LHFI for each of the periods ended September 30, 2022 and 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 September 30, 2022 and December 31, 2021 ($ in thousands):

	September 30, 2022
	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	$	142	$	4,383	$	—
Other secured by 1-4 family residential properties		489		3,531		292
Secured by nonfarm, nonresidential properties		5,263		7,738		—
Other real estate secured		—		574		—
Other loans secured by real estate:
Other construction		—		7,620		—
Secured by 1-4 family residential properties		1,233		14,774		1,086
Commercial and industrial loans		407		25,899		—
Consumer loans		—		129		416
State and other political subdivision loans		—		2,988		—
Other commercial loans		—		291		48
Total	$	7,534	$	67,927	$	1,842

	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

The following tables provide an aging analysis of the amortized cost basis of past due LHFI (including nonaccrual LHFI) at September 30, 2022 and December 31, 2021 ($ in thousands):

	September 30, 2022
	Past Due
	30-59 Days		60-89 Days		90 Days or More		Total Past Due		Current Loans		Total LHFI
Loans secured by real estate:
Construction, land development and    other land	$	638	$	4,047	$	159	$	4,844	$	688,897	$	693,741
Other secured by 1-4 family residential    properties		2,490		559		862		3,911		563,074		566,985
Secured by nonfarm, nonresidential    properties		1,039		—		1,948		2,987		3,203,959		3,206,946
Other real estate secured		440		48		—		488		592,631		593,119
Other loans secured by real estate:
Other construction		—		—		7,620		7,620		946,034		953,654
Secured by 1-4 family residential properties		8,161		3,066		5,437		16,664		2,013,463		2,030,127
Commercial and industrial loans		1,592		45		790		2,427		1,687,105		1,689,532
Consumer loans		1,329		390		417		2,136		163,891		166,027
State and other political subdivision loans		143		—		177		320		1,188,383		1,188,703
Other commercial loans		378		29		190		597		496,633		497,230
Total	$	16,210	$	8,184	$	17,600	$	41,994	$	11,544,070	$	11,586,064

	December 31, 2021
	Past Due
	30-59 Days		60-89 Days		90 Days or More		Total Past Due		Current 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

Troubled Debt Restructurings (TDRs)

A TDR occurs when a borrower is experiencing financial difficulties, and for related economic or legal reasons, a concession is granted to the borrower that Trustmark would not otherwise consider. Whatever the form of concession that might be granted by Trustmark, Management’s objective is to enhance collectability by obtaining more cash or other value from the borrower or by increasing the probability of receipt by granting the concession than by not granting it. Other concessions may arise from court proceedings or may be imposed by law. In addition, TDRs also include those credits that are extended or renewed to a borrower who is not able to obtain funds from sources other than Trustmark at a market interest rate for new debt with similar risk.

At September 30, 2022 and 2021, LHFI classified as TDRs totaled $15.7 million and $23.5 million, respectively. At September 30, 2022, TDRs were primarily comprised of bankruptcies, payment concessions and credits with interest-only payments for an extended period of time which totaled $13.6 million. At September 30, 2021, TDRs were primarily comprised of bankruptcies, payment concessions and credits with interest-only payments for an extended period of time which totaled $20.1 million. Trustmark had $86 thousand in unused commitments on TDRs at September 30, 2022, compared to $1.0 million at September 30, 2021.

At September 30, 2022 and 2021, TDRs had a related ACL, LHFI of $1.3 million and $2.6 million, respectively. Trustmark had $9 thousand in charge-offs on TDRs for the nine months ended September 30, 2022, compared to $3.7 million for the nine months ended September 30, 2021.

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

	Three Months Ended September 30,
	2022						2021
	Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		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		2	$	248	$	241		—	$	—	$	—
Secured by nonfarm,    nonresidential properties		1		501		499		3		483		483
Other loans secured by real estate:
Secured by 1-4 family residential    properties		4		158		166		1		152		152
Total		7	$	907	$	906		4	$	635	$	635

	Nine Months Ended September 30,
	2022						2021
	Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Loans secured by real estate:
Construction, land development    and other land		1	$	146	$	146		5	$	5,582	$	5,582
Other secured by 1-4 family    residential properties		4		321		314		3		37		37
Secured by nonfarm,    nonresidential properties		4		6,505		6,503		4		860		860
Other real estate secured		1		85		85		—		—		—
Other loans secured by real estate:
Secured by 1-4 family residential    properties		10		1,182		1,209		4		401		401
Commercial and industrial loans		1		500		500		2		1,014		1,014
Other commercial loans		—		—		—		2		4,929		4,929
Total		21	$	8,739	$	8,757		20	$	12,823	$	12,823

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

	Nine Months Ended September 30,
	2022				2021
	Number of Contracts		Recorded Investment		Number of Contracts		Recorded Investment
Loans secured by real estate:
Construction, land development and other land		—	$	—		5	$	5,582
Other secured by 1-4 family residential properties		—		—		1		16
Other loans secured by real estate:
Secured by 1-4 family residential properties		—		—		1		78
Other commercial loans		—		—		2		4,929
Total		—	$	—		9	$	10,605

Trustmark’s TDRs have resulted primarily from allowing the borrower to pay interest-only for an extended period of time and payment concessions. 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 September 30, 2022 and 2021 ($ in thousands):

	September 30, 2022
	Accruing		Nonaccrual		Total
Loans secured by real estate:
Construction, land development and other land	$	—	$	4,162	$	4,162
Other secured by 1-4 family residential properties		195		862		1,057
Secured by nonfarm, nonresidential properties		—		4,117		4,117
Other real estate secured		—		79		79
Other loans secured by real estate:
Secured by 1-4 family residential properties		114		3,314		3,428
Commercial and industrial loans		—		49		49
State and other political subdivision loans		—		2,811		2,811
Other commercial loans		—		36		36
Total TDRs	$	309	$	15,430	$	15,739

	September 30, 2021
	Accruing		Nonaccrual		Total
Loans secured by real estate:
Construction, land development and other land	$	—	$	4,607	$	4,607
Other secured by 1-4 family residential properties		—		1,007		1,007
Secured by nonfarm, nonresidential properties		394		2,961		3,355
Other loans secured by real estate:
Secured by 1-4 family residential properties		—		2,292		2,292
Commercial and industrial loans		2,000		1,600		3,600
Consumer loans		—		11		11
State and other political subdivision loans		—		3,609		3,609
Other commercial loans		—		5,009		5,009
Total TDRs	$	2,394	$	21,096	$	23,490

Collateral-Dependent Loans

The following tables present the amortized cost basis of collateral-dependent loans by class of loans and collateral type as of September 30, 2022 and December 31, 2021 ($ in thousands):

	September 30, 2022
	Real Estate		Equipment and  Machinery		Inventory and Receivables		Vehicles		Miscellaneous		Total
Loans secured by real estate:
Construction, land development and    other land	$	4,273	$	—	$	—	$	—	$	—	$	4,273
Other secured by 1-4 family    residential properties		489		—		—		—		—		489
Secured by nonfarm, nonresidential    properties		5,493		—		—		—		—		5,493
Other loans secured by real estate:
Other construction		7,620		—		—		—		—		7,620
Secured by 1-4 family residential    properties		1,233		—		—		—		—		1,233
Commercial and industrial loans		40		—		349		398		24,494		25,281
State and other political subdivision loans		2,988		—		—		—		—		2,988
Other commercial loans		—		—		—		—		36		36
Total	$	22,136	$	—	$	349	$	398	$	24,530	$	47,413

	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

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 LHFI 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 ensure 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 the bank regulatory agencies and are generally equally applied to 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 the 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 30 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 September 30, 2022 and December 31, 2021 ($ in thousands):

	Term Loans by Origination Year
	2022		2021		2020		2019		2018		Prior		Revolving Loans		Total
As of September 30, 2022	Commercial LHFI
Loans secured by real estate:
Construction, land    development and other    land:
Pass - RR 1 through RR 6	$	303,156	$	162,650	$	36,577	$	7,545	$	1,445	$	2,772	$	78,876	$	593,021
Special Mention - RR 7		—		—		—		—		—		—		—		—
Substandard - RR 8		159		245		—		3,886		—		—		—		4,290
Doubtful - RR 9		—		—		—		—		—		42		—		42
Total		303,315		162,895		36,577		11,431		1,445		2,814		78,876		597,353
Other secured by 1-4 family    residential properties:
Pass - RR 1 through RR 6	$	33,783	$	34,326	$	18,228	$	9,818	$	7,141	$	3,556	$	13,669	$	120,521
Special Mention - RR 7		—		98		19		—		—		—		—		117
Substandard - RR 8		522		126		123		89		156		295		—		1,311
Doubtful - RR 9		—		16		—		—		—		—		—		16
Total		34,305		34,566		18,370		9,907		7,297		3,851		13,669		121,965
Secured by nonfarm,    nonresidential properties:
Pass - RR 1 through RR 6	$	680,957	$	654,012	$	616,131	$	494,170	$	258,703	$	331,303	$	121,487	$	3,156,763
Special Mention - RR 7		933		—		—		273		—		—		—		1,206
Substandard - RR 8		13,216		1,779		9,408		928		4,626		18,861		—		48,818
Doubtful - RR 9		36		—		—		84		—		18		—		138
Total		695,142		655,791		625,539		495,455		263,329		350,182		121,487		3,206,925
Other real estate secured:
Pass - RR 1 through RR 6	$	193,674	$	124,859	$	113,221	$	115,830	$	11,679	$	19,849	$	13,557	$	592,669
Special Mention - RR 7		—		—		—		—		—		—		—		—
Substandard - RR 8		—		—		64		—		7		79		96		246
Doubtful - RR 9		—		—		—		—		—		—		—		—
Total		193,674		124,859		113,285		115,830		11,686		19,928		13,653		592,915

	Term Loans by Origination Year
	2022		2021		2020		2019		2018		Prior		Revolving Loans		Total
As of September 30, 2022	Commercial LHFI
Other loans secured by real    estate:
Other construction:
Pass - RR 1 through RR 6	$	254,890	$	320,751	$	369,552	$	841	$	—	$	—	$	—	$	946,034
Special Mention - RR 7		—		—		—		—		—		—		—		—
Substandard - RR 8		—		7,620		—		—		—		—		—		7,620
Doubtful - RR 9		—		—		—		—		—		—		—		—
Total		254,890		328,371		369,552		841		—		—		—		953,654
Commercial and industrial    loans:
Pass - RR 1 through RR 6	$	505,209	$	273,347	$	151,087	$	50,821	$	17,795	$	72,908	$	574,211	$	1,645,378
Special Mention - RR 7		—		—		9		—		—		—		—		9
Substandard - RR 8		7,577		10,000		1,208		375		91		5,403		19,273		43,927
Doubtful - RR 9		127		16		12		10		38		4		11		218
Total		512,913		283,363		152,316		51,206		17,924		78,315		593,495		1,689,532
State and other political    subdivision loans:
Pass - RR 1 through RR 6	$	320,188	$	234,723	$	127,801	$	41,354	$	22,216	$	436,733	$	—	$	1,183,015
Special Mention - RR 7		—		—		—		—		—		2,700		—		2,700
Substandard - RR 8		—		—		—		—		—		2,988		—		2,988
Doubtful - RR 9		—		—		—		—		—		—		—		—
Total		320,188		234,723		127,801		41,354		22,216		442,421		—		1,188,703
Other commercial loans:
Pass - RR 1 through RR 6	$	80,800	$	42,678	$	30,671	$	38,759	$	6,919	$	25,768	$	256,633	$	482,228
Special Mention - RR 7		879		—		—		—		—		—		—		879
Substandard - RR 8		3,711		106		2		36		29		1,179		9,013		14,076
Doubtful - RR 9		24		—		—		—		—		23		—		47
Total		85,414		42,784		30,673		38,795		6,948		26,970		265,646		497,230
Total commercial    LHFI	$	2,399,841	$	1,867,352	$	1,474,113	$	764,819	$	330,845	$	924,481	$	1,086,826	$	8,848,277

	Term Loans by Origination Year
	2022		2021		2020		2019		2018		Prior		Revolving Loans		Total
As of September 30, 2022	Consumer LHFI
Loans secured by real estate:
Construction, land    development and other    land:
Current	$	43,286	$	42,072	$	4,438	$	2,265	$	1,728	$	2,179	$	—	$	95,968
Past due 30-89 days		—		306		—		—		19		27		—		352
Past due 90 days or more		—		—		—		—		—		—		—		—
Nonaccrual		—		59		—		—		—		9		—		68
Total		43,286		42,437		4,438		2,265		1,747		2,215		—		96,388
Other secured by 1-4 family    residential properties:
Current	$	15,589	$	8,922	$	5,635	$	5,245	$	4,473	$	8,101	$	391,803	$	439,768
Past due 30-89 days		81		77		10		57		6		333		1,256		1,820
Past due 90 days or more		—		—		—		—		—		37		256		293
Nonaccrual		88		22		4		22		8		450		2,545		3,139
Total		15,758		9,021		5,649		5,324		4,487		8,921		395,860		445,020
Secured by nonfarm,    nonresidential properties:
Current	$	—	$	21	$	—	$	—	$	—	$	—	$	—	$	21
Past due 30-89 days		—		—		—		—		—		—		—		—
Past due 90 days or more		—		—		—		—		—		—		—		—
Nonaccrual		—		—		—		—		—		—		—		—
Total		—		21		—		—		—		—		—		21
Other real estate secured:
Current	$	—	$	—	$	91	$	—	$	6	$	107	$	—	$	204
Past due 30-89 days		—		—		—		—		—		—		—		—
Past due 90 days or more		—		—		—		—		—		—		—		—
Nonaccrual		—		—		—		—		—		—		—		—
Total		—		—		91		—		6		107		—		204

	Term Loans by Origination Year
	2022		2021		2020		2019		2018		Prior		Revolving Loans		Total
As of September 30, 2022	Consumer LHFI
Other loans secured by real    estate:
Secured by 1-4 family    residential properties
Current	$	859,525	$	571,302	$	207,478	$	112,197	$	84,201	$	169,410	$	—	$	2,004,113
Past due 30-89 days		1,797		3,525		1,318		313		542		2,665		—		10,160
Past due 90 days or more		—		918		136		—		—		31		—		1,085
Nonaccrual		855		1,856		2,849		1,871		1,722		5,616		—		14,769
Total		862,177		577,601		211,781		114,381		86,465		177,722		—		2,030,127
Consumer loans:
Current	$	57,103	$	33,978	$	12,889	$	3,337	$	2,137	$	596	$	53,725	$	163,765
Past due 30-89 days		739		153		134		24		25		15		626		1,716
Past due 90 days or more		44		174		2		1		—		—		196		417
Nonaccrual		61		20		3		2		5		—		38		129
Total		57,947		34,325		13,028		3,364		2,167		611		54,585		166,027
Total consumer LHFI	$	979,168	$	663,405	$	234,987	$	125,334	$	94,872	$	189,576	$	450,445	$	2,737,787
Total LHFI	$	3,379,009	$	2,530,757	$	1,709,100	$	890,153	$	425,717	$	1,114,057	$	1,537,271	$	11,586,064

	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
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

Past Due LHFS

LHFS past due 90 days or more totaled $48.3 million and $69.9 million at September 30, 2022 and December 31, 2021, respectively. LHFS past due 90 days or more are serviced loans eligible for repurchase, which are fully guaranteed by the Government National Mortgage Association (GNMA). GNMA optional repurchase programs allow financial institutions to buy back individual delinquent mortgage loans that meet certain criteria from the securitized loan pool for which the institution provides servicing. At the servicer’s option and without GNMA’s prior authorization, the servicer may repurchase such a delinquent loan for an amount equal to 100% of the remaining principal balance of the loan. This buy-back option is considered a conditional option until the delinquency criteria are met, at which time the option becomes unconditional. When Trustmark is deemed to have regained effective control over these loans under the unconditional buy-back option, the loans can no longer be reported as sold and must be brought back onto the balance sheet as loans held for sale, regardless of whether Trustmark intends to exercise the buy-back option. These loans are reported as held for sale with the offsetting liability being reported as short-term borrowings.

Trustmark did not exercise its buy-back option on any delinquent loans serviced for GNMA during the first nine months of 2022 or 2021.

ACL on LHFI

Trustmark’s ACL methodology for LHFI is based upon guidance within the Financial Accounting Standards Board (FASB) Accounting Standards Codification (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 that are centrally underwritten based on a credit scoring system as well as an evaluation of the borrower’s repayment capacity, credit, and collateral. 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	DCF	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 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 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.

During the first quarter of 2022, Management elected to incorporate a methodology change related to the other construction pool. Components of this change include management utilizing an alternative LDA to support the PD and LGD assumptions necessary to apply a DCF methodology to the other construction pool. Fundamentally, this approach utilizes publicly reported default balances and leverages a generalized linear model (GLM) framework to estimate PD. Taken together, these differences allow for results to be scaled to be specific and directly applicable to the other construction segment. LGD is assumed to be a through-the-cycle constant based on the actual performance of Trustmark’s other construction segment. These assumptions are then input into the DCF model and used in conjunction with prepayment data to calculate the cash flows at the individual loan level. Previously, the other construction pool used the weighted average remaining maturity (WARM) method. Management believes this change is commensurate with the level of risk in the pool.

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 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 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 percentiles, 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. Due to multiple periods having a PD or LGD at or near zero as a result of the 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 four are currently considered active: (i) economic conditions and concentrations of credit, (ii) nature and volume of the portfolio, (iii) performance trends and (iv) 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 nature and volume of the portfolio qualitative factor utilizes peer and industry assumptions for pools of loans where Trustmark’s historical experience might not capture the risk associated within a specific pool due to it being a different type of lending, different sources of repayment or a new line of business.

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). Trustmark's External Factor – Pandemic ensures 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 PD (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.

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 were 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.

During the first quarter of 2022, in order to account for the potential uncertainty related to higher prices and low economic growth, Trustmark chose to enact a portion of the qualitative framework, External Factor - Stagflation. Management calculated the reserve using a third-party stagflation forecast and compared it to the third-party baseline forecast used in the quantitative modeling. The weighted differential is added as qualitative reserves to account for potential uncertainty.

The following tables disaggregate the ACL and the amortized cost basis of the loans by the measurement methodology used at September 30, 2022 and December 31, 2021 ($ in thousands):

	September 30, 2022
	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	$	451	$	9,800	$	10,251	$	4,273		689,468	$	693,741
Other secured by 1-4 family residential    properties		—		10,739		10,739		489		566,496		566,985
Secured by nonfarm, nonresidential    properties		—		25,924		25,924		5,493		3,201,453		3,206,946
Other real estate secured		—		3,398		3,398		—		593,119		593,119
Other loans secured by real estate:
Other construction		7,620		6,299		13,919		7,620		946,034		953,654
Secured by 1-4 family residential    properties		—		15,395		15,395		1,233		2,028,894		2,030,127
Commercial and industrial loans		10,622		13,482		24,104		25,281		1,664,251		1,689,532
Consumer loans		—		5,028		5,028		—		166,027		166,027
State and other political subdivision loans		719		875		1,594		2,988		1,185,715		1,188,703
Other commercial loans		36		4,662		4,698		36		497,194		497,230
Total	$	19,448	$	95,602	$	115,050	$	47,413	$	11,538,651	$	11,586,064

	December 31, 2021
	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	$	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

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

	Three Months Ended September 30,						Nine Months Ended September 30,
	2022			2021			2022			2021
Balance at beginning of period	$	103,140		$	104,032		$	99,457		$	117,306
Loans charged-off		(2,920	)		(1,586	)		(7,439	)		(7,659	)
Recoveries		1,911			4,119			8,257			11,410
Net (charge-offs) recoveries		(1,009	)		2,533			818			3,751
PCL, LHFI		12,919			(2,492	)		14,775			(16,984	)
Balance at end of period	$	115,050		$	104,073		$	115,050		$	104,073

The following tables detail changes in the ACL, LHFI by loan class for the periods presented ($ in thousands):

	Three Months Ended September 30, 2022
	Balance at Beginning of Period		Charge-offs			Recoveries		PCL			Balance at End of Period
Loans secured by real estate:											.
Construction, land development and other land	$	7,301	$	(189	)	$	43	$	3,096		$	10,251
Other secured by 1-4 family residential properties		10,038		(33	)		234		500			10,739
Secured by nonfarm, nonresidential properties		29,735		—			35		(3,846	)		25,924
Other real estate secured		3,297		—			4		97			3,398
Other loans secured by real estate:
Other construction		14,397		(153	)		1		(326	)		13,919
Secured by 1-4 family residential properties		12,250		(37	)		125		3,057			15,395
Commercial and industrial loans		14,103		(191	)		111		10,081			24,104
Consumer loans		5,139		(458	)		425		(78	)		5,028
State and other political subdivision loans		1,917		—			—		(323	)		1,594
Other commercial loans		4,963		(1,859	)		933		661			4,698
Total	$	103,140	$	(2,920	)	$	1,911	$	12,919		$	115,050

The increases in the PCL, LHFI for the three months ended September 30, 2022 were primarily due to a less positive outlook in the macroeconomic forecasting, an increase in loan growth and specific reserves for individually analyzed loans.

The PCL, LHFI for the secured by nonfarm, nonresidential properties portfolio decreased $3.8 million during the three months ended September 30, 2022 primarily due to reductions in the pandemic qualitative factor.

	Three Months Ended September 30, 2021
	Balance at Beginning of Period		Charge-offs			Recoveries		PCL			Balance at End of Period
Loans secured by real estate:
Construction, land development and other land	$	5,110	$	(3	)	$	391	$	(365	)	$	5,133
Other secured by 1-4 family residential properties		10,399		(7	)		85		(254	)		10,223
Secured by nonfarm, nonresidential properties		44,416		—			45		(1,155	)		43,306
Other real estate secured		5,311		—			4		(945	)		4,370
Other loans secured by real estate:
Other construction		6,530		—			2		(587	)		5,945
Secured by 1-4 family residential properties		2,910		(144	)		15		(127	)		2,654
Commercial and industrial loans		13,973		(5	)		2,028		3,377			19,373
Consumer loans		4,876		(287	)		451		(178	)		4,862
State and other political subdivision loans		3,233		—			—		(269	)		2,964
Other commercial loans		7,274		(1,140	)		1,098		(1,989	)		5,243
Total	$	104,032	$	(1,586	)	$	4,119	$	(2,492	)	$	104,073

The decreases in the PCL, LHFI for the three months ended September 30, 2021 were primarily due to improvements in the macroeconomic forecasting variables used in the ACL modeling, such as National and Southern Unemployment, National GDP, Prime Rate and Southern Vacancy Rate and the PD and LGD floors.

The PCL, LHFI for the commercial and industrial loan portfolio increased $3.4 million during the three months ended September 30, 2021 primarily due to specific reserves on individually analyzed credits.

	Nine Months Ended September 30, 2022
	Balance at Beginning of Period		Charge-offs			Recoveries		PCL			Balance at End of Period
Loans secured by real estate:
Construction, land development and other land	$	6,079	$	(223	)	$	1,230	$	3,165		$	10,251
Other secured by 1-4 family residential properties		10,310		(95	)		529		(5	)		10,739
Secured by nonfarm, nonresidential properties		37,912		—			1,536		(13,524	)		25,924
Other real estate secured		4,713		(131	)		11		(1,195	)		3,398
Other loans secured by real estate:
Other construction		5,968		(153	)		205		7,899			13,919
Secured by 1-4 family residential properties		2,706		(116	)		135		12,670			15,395
Commercial and industrial loans		18,939		(566	)		414		5,317			24,104
Consumer loans		4,774		(1,394	)		1,256		392			5,028
State and other political subdivision loans		2,708		—			—		(1,114	)		1,594
Other commercial loans		5,348		(4,761	)		2,941		1,170			4,698
Total	$	99,457	$	(7,439	)	$	8,257	$	14,775		$	115,050

The increases in the PCL, LHFI for the nine months ended September 30, 2022 were primarily due to loan growth, the nature and volume of the portfolio, and specific reserves for individually analyzed loans.

For the nine months ended September 30, 2022, the decreases in the PCL, LHFI for the secured by nonfarm, nonresidential properties and other real estate secured loan portfolios was primarily due to a positive economic outlook and the initial stages of resolution of the External Factor- Pandemic qualitative factor. The decrease in the PCL, LHFI for the state and other political subdivision loans portfolio was due to routine modeling assumption updates.

	Nine Months Ended September 30, 2021
	Balance at Beginning of Period		Charge-offs			Recoveries		PCL			Balance at End of Period
Loans secured by real estate:
Construction, land development and other land	$	6,854	$	(3	)	$	1,470	$	(3,188	)	$	5,133
Other secured by 1-4 family residential properties		9,928		(91	)		337		49			10,223
Secured by nonfarm, nonresidential properties		48,523		(79	)		1,102		(6,240	)		43,306
Other real estate secured		7,382		—			15		(3,027	)		4,370
Other loans secured by real estate:
Other construction		8,158		—			46		(2,259	)		5,945
Secured by 1-4 family residential properties		5,143		(148	)		123		(2,464	)		2,654
Commercial and industrial loans		14,851		(3,702	)		3,967		4,257			19,373
Consumer loans		5,838		(1,120	)		1,200		(1,056	)		4,862
State and other political subdivision loans		3,190		—			—		(226	)		2,964
Other commercial loans		7,439		(2,516	)		3,150		(2,830	)		5,243
Total	$	117,306	$	(7,659	)	$	11,410	$	(16,984	)	$	104,073

The decreases in the PCL, LHFI for the nine months ended September 30, 2021 were primarily due to improvements in the macroeconomic forecasting variables used in the ACL modeling, such as National and Southern Unemployment, National GDP, Prime Rate and Southern Vacancy Rate.

The PCL, LHFI for the commercial and industrial loan portfolio increased $4.3 million during the nine months ended September 30, 2021 and was primarily due to specific reserves on individually analyzed loans.