Acquired Loans

3 Months Ended

Mar. 31, 2019

Certain Loans Acquired In Transfer Not Accounted For As Debt Securities [Abstract]

Note 4 – Acquired Loans

Trustmark’s loss-share agreement with the FDIC covering the acquired covered loans secured by 1-4 family residential properties will expire in 2021.

At March 31, 2019 and December 31, 2018, acquired loans consisted of the following ($ in thousands):

	March 31, 2019		December 31, 2018
Loans secured by real estate:
Construction, land development and other land	$	5,728	$	5,878
Secured by 1-4 family residential properties		21,441		22,556
Secured by nonfarm, nonresidential properties		46,492		47,979
Other real estate secured		8,026		8,253
Commercial and industrial loans		6,359		15,267
Consumer loans		1,033		1,356
Other loans		4,122		5,643
Acquired loans		93,201		106,932
Less allowance for loan losses, acquired loans		1,297		1,231
Net acquired loans	$	91,904	$	105,701

The following table presents changes in the net carrying value of the acquired loans for the periods presented ($ in thousands):

	Acquired Impaired			Acquired Not ASC 310-30 (1)
Carrying value, net at January 1, 2018	$	179,570		$	77,868
Transfers (3)(2)		(26,497	)		(59,916	)
Accretion to interest income		9,514			1,019
Payments received, net		(62,519	)		(16,234	)
Other (4)		(26	)		74
Change in allowance for loan losses, acquired loans		2,848			—
Carrying value, net at December 31, 2018		102,890			2,811
Transfers (2)		—			(2,926	)
Accretion to interest income		1,563			115
Payments received, net		(12,548	)		—
Other (4)		65			—
Change in allowance for loan losses, acquired loans		(66	)		—
Carrying value, net at March 31, 2019	$	91,904		$	—

(1)	“Acquired Not ASC 310-30” loans consist of loans that are not in scope for FASB ASC Topic 310-30.

(2)	“Acquired Not ASC 310-30” loans transferred to LHFI due to the discount on these loans being fully amortized.

(3)	During 2018, Trustmark transferred the remaining loans acquired in the Heritage, Bay Bank and Reliance acquisitions from acquired impaired loans to LHFI.

(4)	Includes miscellaneous timing adjustments as well as acquired loan terminations through foreclosure, charge-off and other terminations.

Under FASB ASC Topic 310-30, the accretable yield is the excess of expected cash flows at acquisition over the initial fair value of acquired impaired loans and is recorded as interest income over the estimated life of the loans using the effective yield method if the timing and amount of the future cash flows is reasonably estimable. The following table presents changes in the accretable yield for the periods presented ($ in thousands):

	Three Months Ended March 31,
	2019			2018
Accretable yield at beginning of period	$	(17,722	)	$	(31,426	)
Accretion to interest income		1,563			3,268
Disposals, net		469			543
Reclassification from nonaccretable difference (1)		(1,725	)		(1,353	)
Accretable yield at end of period	$	(17,415	)	$	(28,968	)

(1)	Reclassifications from nonaccretable difference are due to lower loss expectations and improvements in expected cash flows.

The following tables present the components of the allowance for loan losses on acquired loans for the periods presented ($ in thousands):

	Three Months Ended March 31,
	2019			2018
Balance at beginning of period	$	1,231		$	4,079
Net (charge-offs) recoveries		(12	)		65
Provision for loan losses, acquired loans		78			150
Balance at end of period	$	1,297		$	4,294

As discussed in Note 3 - LHFI and Allowance for Loan Losses, LHFI, 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 segregate the level of risk across the ten unique risk ratings. These credit quality measures are unique to commercial loans. Credit quality for consumer loans is based on individual credit scores, aging status of the loan and payment activity.

The tables below present the acquired loans by loan type and credit quality indicator at March 31, 2019 and December 31, 2018 ($ in thousands):

	March 31, 2019
			Commercial Loans
			Pass - Categories 1-6		Special Mention - Category 7		Substandard - Category 8		Doubtful - Category 9		Subtotal
Loans secured by real estate:
Construction, land development and other land			$	4,777	$	26	$	259	$	—	$	5,062
Secured by 1-4 family residential properties				4,118		44		566		448		5,176
Secured by nonfarm, nonresidential properties				34,345		—		11,724		423		46,492
Other real estate secured				7,633		—		187		206		8,026
Commercial and industrial loans				4,457		—		165		1,737		6,359
Consumer loans				—		—		—		—		—
Other loans				2,730		—		1,392		—		4,122
Total acquired loans			$	58,060	$	70	$	14,293	$	2,814	$	75,237

	Consumer Loans
	Current		Past Due 30-89 Days		Past Due 90 Days or More		Nonaccrual (1)		Subtotal		Total Acquired Loans
Loans secured by real estate:
Construction, land development and other land	$	666	$	—	$	—	$	—	$	666	$	5,728
Secured by 1-4 family residential properties		15,258		508		499		—		16,265		21,441
Secured by nonfarm, nonresidential properties		—		—		—		—		—		46,492
Other real estate secured		—		—		—		—		—		8,026
Commercial and industrial loans		—		—		—		—		—		6,359
Consumer loans		934		99		—		—		1,033		1,033
Other loans		—		—		—		—		—		4,122
Total acquired loans	$	16,858	$	607	$	499	$	—	$	17,964	$	93,201

(1)	Acquired loans not accounted for under FASB ASC Topic 310-30.

	December 31, 2018
			Commercial Loans
			Pass - Categories 1-6		Special Mention - Category 7		Substandard - Category 8		Doubtful - Category 9		Subtotal
Loans secured by real estate:
Construction, land development and other land			$	4,923	$	26	$	278	$	—	$	5,227
Secured by 1-4 family residential properties				4,341		45		534		451		5,371
Secured by nonfarm, nonresidential properties				34,933		—		12,614		432		47,979
Other real estate secured				7,653		—		190		410		8,253
Commercial and industrial loans				6,560		—		6,942		1,765		15,267
Consumer loans				—		—		—		—		—
Other loans				4,027		—		1,616		—		5,643
Total acquired loans			$	62,437	$	71	$	22,174	$	3,058	$	87,740

	Consumer Loans
	Current		Past Due 30-89 Days		Past Due 90 Days or More		Nonaccrual (1)		Subtotal		Total Acquired Loans
Loans secured by real estate:
Construction, land development and other land	$	642	$	5	$	4	$	—	$	651	$	5,878
Secured by 1-4 family residential properties		16,133		571		481		—		17,185		22,556
Secured by nonfarm, nonresidential properties		—		—		—		—		—		47,979
Other real estate secured		—		—		—		—		—		8,253
Commercial and industrial loans		—		—		—		—		—		15,267
Consumer loans		1,346		10		—		—		1,356		1,356
Other loans		—		—		—		—		—		5,643
Total acquired loans	$	18,121	$	586	$	485	$	—	$	19,192	$	106,932

(1)	Acquired loans not accounted for under FASB ASC Topic 310-30.

The following tables provide an aging analysis of contractually past due and nonaccrual acquired loans by loan type at March 31, 2019 and December 31, 2018 ($ in thousands):

	March 31, 2019
	Past Due
	30-59 Days		60-89 Days		90 Days or More (1)		Total		Nonaccrual (2)		Current Loans		Total Acquired Loans
Loans secured by real estate:
Construction, land development and other land	$	—	$	10	$	85	$	95	$	—	$	5,633	$	5,728
Secured by 1-4 family residential properties		479		52		510		1,041		—		20,400		21,441
Secured by nonfarm, nonresidential properties		100		—		861		961		—		45,531		46,492
Other real estate secured		—		—		113		113		—		7,913		8,026
Commercial and industrial loans		—		—		—		—		—		6,359		6,359
Consumer loans		99		—		—		99		—		934		1,033
Other loans		14		—		1,382		1,396		—		2,726		4,122
Total acquired loans	$	692	$	62	$	2,951	$	3,705	$	—	$	89,496	$	93,201

(1)	Past due 90 days or more but still accruing interest.

(2)	Acquired loans not accounted for under FASB ASC Topic 310-30.

	December 31, 2018
	Past Due
	30-59 Days		60-89 Days		90 Days or More (1)		Total		Nonaccrual (2)		Current Loans		Total Acquired Loans
Loans secured by real estate:
Construction, land development and other land	$	5	$	0	$	87	$	92	$	—	$	5,786	$	5,878
Secured by 1-4 family residential properties		664		108		481		1,253		—		21,303		22,556
Secured by nonfarm, nonresidential properties		206		0		978		1,184		—		46,795		47,979
Other real estate secured		2		14		—		16		—		8,237		8,253
Commercial and industrial loans		—		—		—		—		—		15,267		15,267
Consumer loans		1		9		—		10		—		1,346		1,356
Other loans		—		—		—		—		—		5,643		5,643
Total acquired loans	$	878	$	131	$	1,546	$	2,555	$	—	$	104,377	$	106,932

(1)	Past due 90 days or more but still accruing interest.

(2)	Acquired loans not accounted for under FASB ASC Topic 310-30.