LHFI and ACL, LHFI

3 Months Ended

Mar. 31, 2023

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

LHFI and ACL, LHFI

Note 3 – LHFI and ACL, LHFI

At March 31, 2023 and December 31, 2022, LHFI consisted of the following ($ in thousands):

	March 31, 2023		December 31, 2022
Loans secured by real estate:
Construction, land development and other land	$	682,214	$	690,616
Other secured by 1-4 family residential properties		595,520		590,790
Secured by nonfarm, nonresidential properties		3,375,579		3,278,830
Other real estate secured		847,527		742,538
Other loans secured by real estate:
Other construction		1,041,558		1,028,926
Secured by 1-4 family residential properties		2,226,528		2,185,057
Commercial and industrial loans		1,914,137		1,821,259
Consumer loans		166,464		170,230
State and other political subdivision loans		1,193,727		1,223,863
Other commercial loans		453,941		471,930
LHFI		12,497,195		12,204,039
Less ACL		122,239		120,214
Net LHFI	$	12,374,956	$	12,083,825

Accrued interest receivable is not included in the amortized cost basis of Trustmark’s LHFI. At March 31, 2023 and December 31, 2022, accrued interest receivable for LHFI totaled $57.5 million and $50.7 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 March 31, 2023, 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 March 31, 2023 and 2022.

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 March 31, 2023 and December 31, 2022 ($ in thousands):

	March 31, 2023
	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	$	119	$	2,039	$	—
Other secured by 1-4 family residential properties		473		4,313		787
Secured by nonfarm, nonresidential properties		4,168		6,871		—
Other real estate secured		—		172		—
Other loans secured by real estate:
Other construction		—		7,620		—
Secured by 1-4 family residential properties		1,672		25,247		953
Commercial and industrial loans		14,181		24,842		135
Consumer loans		—		239		286
Other commercial loans		—		1,032		94
Total	$	20,613	$	72,375	$	2,255

	December 31, 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	$	137	$	1,902	$	—
Other secured by 1-4 family residential properties		482		3,957		534
Secured by nonfarm, nonresidential properties		4,841		6,957		—
Other real estate secured		—		231		—
Other loans secured by real estate:
Other construction		—		7,620		—
Secured by 1-4 family residential properties		1,193		19,775		3,118
Commercial and industrial loans		14,441		25,102		—
Consumer loans		—		181		277
Other commercial loans		—		247		—
Total	$	21,094	$	65,972	$	3,929

The following tables provide an aging analysis of the amortized cost basis of past due LHFI (including nonaccrual LHFI) at March 31, 2023 and December 31, 2022 ($ in thousands):

	March 31, 2023
	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	$	856	$	—	$	1,495	$	2,351	$	679,863	$	682,214
Other secured by 1-4 family residential    properties		2,385		1,115		1,910		5,410		590,110		595,520
Secured by nonfarm, nonresidential    properties		1,161		16		1,093		2,270		3,373,309		3,375,579
Other real estate secured		2,536		42		—		2,578		844,949		847,527
Other loans secured by real estate:
Other construction		—		—		7,620		7,620		1,033,938		1,041,558
Secured by 1-4 family residential properties		7,199		4,439		9,692		21,330		2,205,198		2,226,528
Commercial and industrial loans		1,313		503		883		2,699		1,911,438		1,914,137
Consumer loans		1,324		312		286		1,922		164,542		166,464
State and other political subdivision loans		1,286		—		—		1,286		1,192,441		1,193,727
Other commercial loans		402		179		118		699		453,242		453,941
Total	$	18,462	$	6,606	$	23,097	$	48,165	$	12,449,030	$	12,497,195

	December 31, 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	$	1,972	$	199	$	34	$	2,205	$	688,411	$	690,616
Other secured by 1-4 family residential    properties		3,682		1,206		1,281		6,169		584,621		590,790
Secured by nonfarm, nonresidential    properties		825		18		794		1,637		3,277,193		3,278,830
Other real estate secured		131		30		—		161		742,377		742,538
Other loans secured by real estate:
Other construction		—		—		7,620		7,620		1,021,306		1,028,926
Secured by 1-4 family residential properties		10,709		4,236		9,999		24,944		2,160,113		2,185,057
Commercial and industrial loans		1,966		508		8,974		11,448		1,809,811		1,821,259
Consumer loans		2,199		645		279		3,123		167,107		170,230
State and other political subdivision loans		431		—		—		431		1,223,432		1,223,863
Other commercial loans		785		45		24		854		471,076		471,930
Total	$	22,700	$	6,887	$	29,005	$	58,592	$	12,145,447	$	12,204,039

Modified LHFI

Occasionally, Trustmark modifies loans for borrowers experiencing financial difficulties by providing payment concessions, interest-only payments for an extended period of time, maturity extensions or interest rate reductions. Other concessions may arise from court proceedings or may be imposed by law. In some cases, Trustmark provides multiple types of concessions on one loan.

The following table presents the amortized cost of LHFI at March 31, 2023 by class of loan and type of modification that were both experiencing financial difficulty and modified during the three months ended March 31, 2023 ($ in thousands). The percentage of the amortized cost basis of LHFI that were modified to borrowers in financial distress as compared to the amortized cost basis of each class of LHFI is also presented below:

	March 31, 2023
	Term Extension		% of Total Class of Loan
Loans secured by real estate:
Secured by nonfarm,    nonresidential properties	$	384		0.01	%
Other loans secured by real estate:
Secured by 1-4 family    residential properties		492		0.02	%
Total	$	876		0.01	%

The following table details the financial effect of the loan modifications presented above to borrowers experiencing financial difficulty for the period presented:

	Three Months Ended March 31, 2023
	Financial Effect
Loans secured by real estate:
Secured by nonfarm, nonresidential properties	Renewed with an extended amortization period and lowered the monthly payment amount for the borrower.
Other loans secured by real estate:
Secured by 1-4 family residential properties	Extended the amortization periods on four loans by a weighted-average of 14 years, which reduced the aggregate monthly payment amounts for the borrowers.

Trustmark had no unused commitments on modified loans to borrowers experiencing financial difficulty at March 31, 2023.

During the three months ended March 31, 2023, Trustmark had term extension balances of $56 thousand at default for LHFI in the loans secured by 1-4 family residential properties portfolio that had a payment default and were modified within the twelve months prior to that default to borrowers experiencing financial difficulty.

Trustmark has utilized loans 90 days or more past due to define payment default in determining modified loans that have subsequently defaulted. If Trustmark determines that a modified loan (or a portion of a loan) has subsequently been deemed uncollectible, the loan (or a portion of the loan) is charged off against the ACL, LHFI.

Trustmark closely monitors the performance of loans that are modified to borrowers experiencing financial difficulty to understand the effectiveness of its modification efforts. The following table provides details of the performance of such LHFI that have been modified during the period presented ($ in thousands):

	Three Months Ended March 31, 2023
	Past Due
	30-59 Days		60-89 Days		90 Days or More		Total Past Due		Current Loans		Total
Loans secured by real estate:
Secured by nonfarm, nonresidential    properties	$	—	$	—	$	—	$	—	$	384	$	384
Other loans secured by real estate:
Secured by 1-4 family residential properties		—		—		—		—		492		492
Total	$	—	$	—	$	—	$	—	$	876	$	876

Collateral-Dependent Loans

The following tables present the amortized cost basis of collateral-dependent loans by class of loans and collateral type as of March 31, 2023 and December 31, 2022 ($ in thousands):

	March 31, 2023
	Real Estate		Vehicles		Miscellaneous		Total
Loans secured by real estate:
Construction, land development and    other land	$	1,540	$	—	$	—	$	1,540
Other secured by 1-4 family    residential properties		473		—		—		473
Secured by nonfarm, nonresidential    properties		4,168		—		—		4,168
Other loans secured by real estate:
Other construction		7,620		—		—		7,620
Secured by 1-4 family residential    properties		1,672		—		—		1,672
Commercial and industrial loans		39		70		23,392		23,501
Other commercial loans		—		—		879		879
Total	$	15,512	$	70	$	24,271	$	39,853

	December 31, 2022
	Real Estate		Inventory and Receivables		Vehicles		Miscellaneous		Total
Loans secured by real estate:
Construction, land development and    other land	$	1,558	$	—	$	—	$	—	$	1,558
Other secured by 1-4 family    residential properties		482		—		—		—		482
Secured by nonfarm, nonresidential    properties		4,841		—		—		—		4,841
Other loans secured by real estate:
Other construction		7,620		—		—		—		7,620
Secured by 1-4 family residential    properties		1,193		—		—		—		1,193
Commercial and industrial loans		40		233		395		23,926		24,594
Total	$	15,734	$	233	$	395	$	23,926	$	40,288

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. One loan relationship experienced a decline in fair value to the collateral that secures the relationship due to general deterioration during the quarter. There have been no other 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 an 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 modified loan to a borrower experiencing financial difficulty 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 modified status. 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 Enterprise Risk 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 March 31, 2023 and December 31, 2022 ($ in thousands):

	Term Loans by Origination Year
	2023		2022		2021		2020		2019		Prior		Revolving Loans		Total
As of March 31, 2023	Commercial LHFI
Loans secured by real estate:
Construction, land    development and other    land:
Pass - RR 1 through RR 6	$	108,703	$	289,271	$	96,128	$	17,647	$	3,056	$	2,923	$	59,432	$	577,160
Special Mention - RR 7		—		—		—		—		—		—		—		—
Substandard - RR 8		2,380		1,113		—		—		1,413		—		40		4,946
Doubtful - RR 9		—		—		—		—		—		42		—		42
Total		111,083		290,384		96,128		17,647		4,469		2,965		59,472		582,148
Current period gross    charge-offs		—		4		10		—		—		—		—		14
Other secured by 1-4 family    residential properties:
Pass - RR 1 through RR 6	$	6,593	$	40,253	$	30,862	$	16,462	$	8,893	$	7,370	$	15,077	$	125,510
Special Mention - RR 7		—		29		62		15		—		—		—		106
Substandard - RR 8		271		351		70		71		86		480		62		1,391
Doubtful - RR 9		—		13		—		—		—		—		—		13
Total		6,864		40,646		30,994		16,548		8,979		7,850		15,139		127,020
Current period gross    charge-offs		—		—		—		—		—		—		—		—
Secured by nonfarm,    nonresidential properties:
Pass - RR 1 through RR 6	$	160,322	$	857,606	$	635,982	$	654,501	$	431,127	$	459,016	$	128,726	$	3,327,280
Special Mention - RR 7		926		—		—		—		—		—		—		926
Substandard - RR 8		384		14,017		1,627		9,592		9,140		11,805		673		47,238
Doubtful - RR 9		31		—		—		—		73		16		—		120
Total		161,663		871,623		637,609		664,093		440,340		470,837		129,399		3,375,564
Current period gross    charge-offs		—		—		—		—		—		28		—		28
Other real estate secured:
Pass - RR 1 through RR 6	$	31,331	$	268,530	$	184,909	$	231,161	$	93,685	$	25,637	$	11,065	$	846,318
Special Mention - RR 7		—		—		—		—		—		—		—		—
Substandard - RR 8		—		180		408		304		—		65		82		1,039
Doubtful - RR 9		—		—		—		—		—		—		—		—
Total		31,331		268,710		185,317		231,465		93,685		25,702		11,147		847,357
Current period gross    charge-offs		—		—		—		—		—		—		—		—

	Term Loans by Origination Year
	2023		2022		2021		2020		2019		Prior		Revolving Loans		Total
As of March 31, 2023	Commercial LHFI
Other loans secured by real    estate:
Other construction:
Pass - RR 1 through RR 6	$	98,787	$	387,849	$	331,813	$	214,664	$	825	$	—	$	—	$	1,033,938
Special Mention - RR 7		—		—		—		—		—		—		—		—
Substandard - RR 8		—		—		7,620		—		—		—		—		7,620
Doubtful - RR 9		—		—		—		—		—		—		—		—
Total		98,787		387,849		339,433		214,664		825		—		—		1,041,558
Current period gross    charge-offs		—		—		—		—		—		—		—		—
Commercial and industrial    loans:
Pass - RR 1 through RR 6	$	174,523	$	723,562	$	214,009	$	89,717	$	41,429	$	56,865	$	556,025	$	1,856,130
Special Mention - RR 7		—		11		225		12,005		25		—		6,489		18,755
Substandard - RR 8		—		6,646		9,803		1,826		175		55		20,485		38,990
Doubtful - RR 9		—		162		50		5		—		32		13		262
Total		174,523		730,381		224,087		103,553		41,629		56,952		583,012		1,914,137
Current period gross    charge-offs		—		204		191		58		—		11		7		471
State and other political    subdivision loans:
Pass - RR 1 through RR 6	$	14,837	$	354,676	$	222,697	$	121,049	$	38,350	$	432,774	$	9,344	$	1,193,727
Special Mention - RR 7		—		—		—		—		—		—		—		—
Substandard - RR 8		—		—		—		—		—		—		—		—
Doubtful - RR 9		—		—		—		—		—		—		—		—
Total		14,837		354,676		222,697		121,049		38,350		432,774		9,344		1,193,727
Current period gross    charge-offs		—		—		—		—		—		—		—		—
Other commercial loans:
Pass - RR 1 through RR 6	$	16,001	$	76,463	$	34,515	$	26,447	$	34,269	$	13,591	$	237,774	$	439,060
Special Mention - RR 7		—		—		—		—		—		—		—		—
Substandard - RR 8		16		4,507		89		—		—		1,104		9,141		14,857
Doubtful - RR 9		—		24		—		—		—		—		—		24
Total		16,017		80,994		34,604		26,447		34,269		14,695		246,915		453,941
Current period gross    charge-offs		—		—		—		—		—		—		—		—
Total commercial    LHFI	$	615,105	$	3,025,263	$	1,770,869	$	1,395,466	$	662,546	$	1,011,775	$	1,054,428	$	9,535,452
Total commercial LHFI    gross charge-offs	$	—	$	208	$	201	$	58	$	—	$	39	$	7	$	513

	Term Loans by Origination Year
	2023		2022		2021		2020		2019		Prior		Revolving Loans		Total
As of March 31, 2023	Consumer LHFI
Loans secured by real estate:
Construction, land    development and other    land:
Current	$	5,155	$	65,076	$	21,925	$	3,287	$	1,636	$	2,854	$	—	$	99,933
Past due 30-89 days		—		—		—		—		7		28		—		35
Past due 90 days or more		—		—		—		—		—		—		—		—
Nonaccrual		—		—		56		—		35		7		—		98
Total		5,155		65,076		21,981		3,287		1,678		2,889		—		100,066
Current period gross    charge-offs		—		—		—		—		—		—		—		—
Other secured by 1-4 family    residential properties:
Current	$	6,358	$	22,887	$	7,127	$	5,271	$	4,798	$	10,367	$	404,022	$	460,830
Past due 30-89 days		—		152		135		2		42		593		2,046		2,970
Past due 90 days or more		—		—		—		—		12		472		304		788
Nonaccrual		—		149		24		4		18		841		2,876		3,912
Total		6,358		23,188		7,286		5,277		4,870		12,273		409,248		468,500
Current period gross    charge-offs		—		—		5		—		1		6		22		34
Secured by nonfarm,    nonresidential properties:
Current	$	—	$	—	$	15	$	—	$	—	$	—	$	—	$	15
Past due 30-89 days		—		—		—		—		—		—		—		—
Past due 90 days or more		—		—		—		—		—		—		—		—
Nonaccrual		—		—		—		—		—		—		—		—
Total		—		—		15		—		—		—		—		15
Current period gross    charge-offs		—		—		—		—		—		—		—		—
Other real estate secured:
Current	$	—	$	—	$	—	$	86	$	—	$	84	$	—	$	170
Past due 30-89 days		—		—		—		—		—		—		—		—
Past due 90 days or more		—		—		—		—		—		—		—		—
Nonaccrual		—		—		—		—		—		—		—		—
Total		—		—		—		86		—		84		—		170
Current period gross    charge-offs		—		—		—		—		—		—		—		—

	Term Loans by Origination Year
	2023		2022		2021		2020		2019		Prior		Revolving Loans		Total
As of March 31, 2023	Consumer LHFI
Other loans secured by real    estate:
Secured by 1-4 family    residential properties
Current	$	97,917	$	908,617	$	553,441	$	195,241	$	107,846	$	328,376	$	—	$	2,191,438
Past due 30-89 days		—		2,997		3,303		1,131		239		1,219		—		8,889
Past due 90 days or more		—		380		225		60		114		173		—		952
Nonaccrual		—		3,798		6,291		3,466		2,111		9,583		—		25,249
Total		97,917		915,792		563,260		199,898		110,310		339,351		—		2,226,528
Current period gross    charge-offs		294		—		—		—		—		—		—		294
Consumer loans:
Current	$	19,717	$	56,948	$	21,458	$	7,526	$	2,028	$	1,216	$	55,435	$	164,328
Past due 30-89 days		467		376		179		23		25		9		533		1,612
Past due 90 days or more		18		20		5		—		—		—		243		286
Nonaccrual		—		125		48		21		—		—		44		238
Total		20,202		57,469		21,690		7,570		2,053		1,225		56,255		166,464
Current period gross    charge-offs		1,373		177		75		32		1		1		496		2,155
Total consumer LHFI	$	129,632	$	1,061,525	$	614,232	$	216,118	$	118,911	$	355,822	$	465,503	$	2,961,743
Total consumer LHFI    gross charge-offs	$	1,667	$	177	$	80	$	32	$	2	$	7	$	518	$	2,483
Total LHFI	$	744,737	$	4,086,788	$	2,385,101	$	1,611,584	$	781,457	$	1,367,597	$	1,519,931	$	12,497,195
Total current period    gross charge-offs	$	1,667	$	385	$	281	$	90	$	2	$	46	$	525	$	2,996

	Term Loans by Origination Year
	2022		2021		2020		2019		2018		Prior		Revolving Loans		Total
As of December 31, 2022	Commercial LHFI
Loans secured by real estate:
Construction, land    development and other    land:
Pass - RR 1 through RR 6	$	363,824	$	119,727	$	29,632	$	3,405	$	1,016	$	2,364	$	64,953	$	584,921
Special Mention - RR 7		—		—		—		—		—		—		—		—
Substandard - RR 8		146		199		—		1,415		—		—		44		1,804
Doubtful - RR 9		—		—		—		—		—		42		—		42
Total		363,970		119,926		29,632		4,820		1,016		2,406		64,997		586,767
Other secured by 1-4 family    residential properties:
Pass - RR 1 through RR 6	$	41,996	$	33,346	$	17,215	$	9,341	$	6,798	$	2,870	$	12,209	$	123,775
Special Mention - RR 7		29		64		17		—		—		—		—		110
Substandard - RR 8		686		31		75		88		220		285		—		1,385
Doubtful - RR 9		15		—		—		—		—		—		—		15
Total		42,726		33,441		17,307		9,429		7,018		3,155		12,209		125,285
Secured by nonfarm,    nonresidential properties:
Pass - RR 1 through RR 6	$	889,556	$	657,242	$	603,515	$	457,163	$	205,425	$	281,828	$	130,052	$	3,224,781
Special Mention - RR 7		10,284		—		—		271		—		—		—		10,555
Substandard - RR 8		12,034		1,066		9,457		905		706		18,488		693		43,349
Doubtful - RR 9		34		—		—		77		—		18		—		129
Total		911,908		658,308		612,972		458,416		206,131		300,334		130,745		3,278,814
Other real estate secured:
Pass - RR 1 through RR 6	$	293,051	$	156,386	$	143,114	$	107,827	$	11,297	$	17,626	$	12,516	$	741,817
Special Mention - RR 7		—		—		—		—		—		—		—		—
Substandard - RR 8		30		—		309		—		5		68		126		538
Doubtful - RR 9		—		—		—		—		—		—		—		—
Total		293,081		156,386		143,423		107,827		11,302		17,694		12,642		742,355

	Term Loans by Origination Year
	2022		2021		2020		2019		2018		Prior		Revolving Loans		Total
As of December 31, 2022	Commercial LHFI
Other loans secured by real    estate:
Other construction
Pass - RR 1 through RR 6	$	372,981	$	306,904	$	340,388	$	833	$	—	$	—	$	200	$	1,021,306
Special Mention - RR 7		—		—		—		—		—		—		—		—
Substandard - RR 8		—		7,620		—		—		—		—		—		7,620
Doubtful - RR 9		—		—		—		—		—		—		—		—
Total		372,981		314,524		340,388		833		—		—		200		1,028,926
Commercial and industrial    loans:
Pass - RR 1 through RR 6	$	673,848	$	261,962	$	120,123	$	44,994	$	14,265	$	69,078	$	577,749	$	1,762,019
Special Mention - RR 7		—		—		12,421		—		—		—		6,454		18,875
Substandard - RR 8		6,973		9,845		2,170		312		74		—		20,625		39,999
Doubtful - RR 9		240		53		10		4		35		—		24		366
Total		681,061		271,860		134,724		45,310		14,374		69,078		604,852		1,821,259
State and other political    subdivision loans:
Pass - RR 1 through RR 6	$	393,345	$	223,302	$	123,350	$	39,031	$	18,876	$	421,588	$	1,671	$	1,221,163
Special Mention - RR 7		—		—		—		—		—		2,700		—		2,700
Substandard - RR 8		—		—		—		—		—		—		—		—
Doubtful - RR 9		—		—		—		—		—		—		—		—
Total		393,345		223,302		123,350		39,031		18,876		424,288		1,671		1,223,863
Other commercial loans:
Pass - RR 1 through RR 6	$	88,763	$	40,006	$	28,239	$	37,607	$	6,424	$	10,829	$	244,882	$	456,750
Special Mention - RR 7		879		—		—		—		—		—		—		879
Substandard - RR 8		3,728		98		—		—		16		1,134		9,301		14,277
Doubtful - RR 9		24		—		—		—		—		—		—		24
Total		93,394		40,104		28,239		37,607		6,440		11,963		254,183		471,930
Total commercial    LHFI	$	3,152,466	$	1,817,851	$	1,430,035	$	703,273	$	265,157	$	828,918	$	1,081,499	$	9,279,199

	Term Loans by Origination Year
	2022		2021		2020		2019		2018		Prior		Revolving Loans		Total
As of December 31, 2022	Consumer LHFI
Loans secured by real estate:
Construction, land    development and other    land:
Current	$	62,049	$	32,867	$	3,304	$	1,759	$	1,679	$	1,915	$	—	$	103,573
Past due 30-89 days		—		150		—		36		15		9		—		210
Past due 90 days or more		—		—		—		—		—		—		—		—
Nonaccrual		—		58		—		—		—		8		—		66
Total		62,049		33,075		3,304		1,795		1,694		1,932		—		103,849
Other secured by 1-4 family    residential properties:
Current	$	25,402	$	7,983	$	5,389	$	4,894	$	3,701	$	7,252	$	403,123	$	457,744
Past due 30-89 days		19		35		15		134		5		286		3,197		3,691
Past due 90 days or more		—		—		—		1		—		—		452		453
Nonaccrual		88		24		4		20		7		454		3,020		3,617
Total		25,509		8,042		5,408		5,049		3,713		7,992		409,792		465,505
Secured by nonfarm,    nonresidential properties:
Current	$	—	$	16	$	—	$	—	$	—	$	—	$	—	$	16
Past due 30-89 days		—		—		—		—		—		—		—		—
Past due 90 days or more		—		—		—		—		—		—		—		—
Nonaccrual		—		—		—		—		—		—		—		—
Total		—		16		—		—		—		—		—		16
Other real estate secured:
Current	$	—	$	—	$	89	$	—	$	5	$	89	$	—	$	183
Past due 30-89 days		—		—		—		—		—		—		—		—
Past due 90 days or more		—		—		—		—		—		—		—		—
Nonaccrual		—		—		—		—		—		—		—		—
Total		—		—		89		—		5		89		—		183
Other loans secured by real    estate:
Secured by 1-4 family    residential properties
Current	$	939,511	$	559,804	$	198,769	$	109,466	$	80,249	$	262,196	$	—	$	2,149,995
Past due 30-89 days		3,967		3,752		2,119		425		—		1,906		—		12,169
Past due 90 days or more		835		777		272		—		134		1,100		—		3,118
Nonaccrual		2,363		4,180		3,275		1,896		2,028		6,033		—		19,775
Total		946,676		568,513		204,435		111,787		82,411		271,235		—		2,185,057
Consumer loans:
Current	$	70,858	$	25,771	$	9,514	$	2,509	$	1,513	$	295	$	56,508	$	166,968
Past due 30-89 days		1,431		238		159		8		23		10		946		2,815
Past due 90 days or more		28		12		7		1		2		—		216		266
Nonaccrual		79		41		19		17		4		—		21		181
Total		72,396		26,062		9,699		2,535		1,542		305		57,691		170,230
Total consumer LHFI	$	1,106,630	$	635,708	$	222,935	$	121,166	$	89,365	$	281,553	$	467,483	$	2,924,840
Total LHFI	$	4,259,096	$	2,453,559	$	1,652,970	$	824,439	$	354,522	$	1,110,471	$	1,548,982	$	12,204,039

Past Due LHFS

LHFS past due 90 days or more totaled $41.5 million and $49.3 million at March 31, 2023 and December 31, 2022, 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 three months of 2023 or 2022.

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 LHFI. 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
		Equipment finance loans	WARM	Southern Unemployment, Southern GDP
		Credit cards	WARM	Trustmark call report data
		Equipment finance leases	WARM	Southern Unemployment, Southern GDP
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 consumer loans and other commercial loans.

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 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 fourth quarter of 2022, Management noted that all pass rated loans (RR 5 & RR 6) related to the External Factor-Pandemic qualitative factor either did not experience significant stress related to the pandemic or have since recovered and does not expect future stresses attributed to the pandemic that may affect these loans. As a result, Management decided to accelerate the release of the additional pandemic reserves on all pass rated loans.

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. During the fourth quarter of 2022, Management determined that the likelihood of a stagflation scenario had sufficiently diminished. Management identified that the potential had already been reduced and effectively captured within a nominally more negative baseline economic forecast. As a result, Management elected to resolve the External Factor - Stagflation and fully release the reserves.

The following tables disaggregate the ACL and the amortized cost basis of the loans by the measurement methodology used at March 31, 2023 and December 31, 2022 ($ in thousands):

	March 31, 2023
	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	$	113	$	13,147	$	13,260	$	1,540		680,674	$	682,214
Other secured by 1-4 family residential    properties		—		11,918		11,918		473		595,047		595,520
Secured by nonfarm, nonresidential    properties		—		18,640		18,640		4,168		3,371,411		3,375,579
Other real estate secured		—		2,362		2,362		—		847,527		847,527
Other loans secured by real estate:
Other construction		7,620		6,850		14,470		7,620		1,033,938		1,041,558
Secured by 1-4 family residential    properties		—		26,156		26,156		1,672		2,224,856		2,226,528
Commercial and industrial loans		9,290		14,172		23,462		23,501		1,890,636		1,914,137
Consumer loans		—		5,532		5,532		—		166,464		166,464
State and other political subdivision loans		—		729		729		—		1,193,727		1,193,727
Other commercial loans		879		4,831		5,710		879		453,062		453,941
Total	$	17,902	$	104,337	$	122,239	$	39,853	$	12,457,342	$	12,497,195

	December 31, 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	$	121	$	12,707	$	12,828	$	1,558	$	689,058	$	690,616
Other secured by 1-4 family residential    properties		—		12,374		12,374		482		590,308		590,790
Secured by nonfarm, nonresidential    properties		—		19,488		19,488		4,841		3,273,989		3,278,830
Other real estate secured		—		4,743		4,743		—		742,538		742,538
Other loans secured by real estate:
Other construction		7,620		7,512		15,132		7,620		1,021,306		1,028,926
Secured by 1-4 family residential    properties		—		21,185		21,185		1,193		2,183,864		2,185,057
Commercial and industrial loans		9,946		13,194		23,140		24,594		1,796,665		1,821,259
Consumer loans		—		5,792		5,792		—		170,230		170,230
State and other political subdivision loans		—		885		885		—		1,223,863		1,223,863
Other commercial loans		—		4,647		4,647		—		471,930		471,930
Total	$	17,687	$	102,527	$	120,214	$	40,288	$	12,163,751	$	12,204,039

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

	Three Months Ended March 31,
	2023			2022
Balance at beginning of period	$	120,214		$	99,457
Loans charged-off		(2,996	)		(2,242	)
Recoveries		1,777			2,379
Net (charge-offs) recoveries		(1,219	)		137
PCL, LHFI		3,244			(860	)
Balance at end of period	$	122,239		$	98,734

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

	Three Months Ended March 31, 2023
	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	$	12,828	$	(14	)	$	8	$	438		$	13,260
Other secured by 1-4 family residential properties		12,374		(34	)		47		(469	)		11,918
Secured by nonfarm, nonresidential properties		19,488		(28	)		96		(916	)		18,640
Other real estate secured		4,743		—			3		(2,384	)		2,362
Other loans secured by real estate:
Other construction		15,132		—			30		(692	)		14,470
Secured by 1-4 family residential properties		21,185		(294	)		6		5,259			26,156
Commercial and industrial loans		23,140		(471	)		270		523			23,462
Consumer loans		5,792		(2,155	)		1,317		578			5,532
State and other political subdivision loans		885		—			—		(156	)		729
Other commercial loans		4,647		—			—		1,063			5,710
Total	$	120,214	$	(2,996	)	$	1,777	$	3,244		$	122,239

The increases in the PCL, LHFI for the three months ended March 31, 2023 were primarily attributable to loan growth and the Nature and Volume of Portfolio qualitative factor.

The PCL, LHFI for the secured by nonfarm, nonresidential properties portfolio and the other real estate secured portfolio decreased $3.3 million during the three months ended March 31, 2023 primarily due to improvements in the macroeconomic forecast 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.

	Three Months Ended March 31, 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	$	(28	)	$	843	$	457		$	7,351
Other secured by 1-4 family residential properties		10,310		(13	)		89		(519	)		9,867
Secured by nonfarm, nonresidential properties		37,912		—			27		(5,909	)		32,030
Other real estate secured		4,713		—			3		(1,076	)		3,640
Other loans secured by real estate:
Other construction		5,968		—			3		7,976			13,947
Secured by 1-4 family residential properties		2,706		—			6		2,916			5,628
Commercial and industrial loans		18,939		(285	)		100		(3,803	)		14,951
Consumer loans		4,774		(579	)		379		298			4,872
State and other political subdivision loans		2,708		—			—		(337	)		2,371
Other commercial loans		5,348		(1,337	)		929		(863	)		4,077
Total	$	99,457	$	(2,242	)	$	2,379	$	(860	)	$	98,734

The decreases in the PCL, LHFI for the three months ended March 31, 2022 were primarily due to improvements in credit quality and 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.

For the three months ended March 31, 2022, the PCL, LHFI for the other construction loan portfolio increased $8.0 million primarily due to specific reserves on individually analyzed credits. The PCL, LHFI for the other loans secured by 1-4 family residential properties portfolio increased $2.9 million during the three months ended March 31, 2022 primarily due to a decrease in prepayment speeds which resulted from the rising interest-rate environment.