Acquired Loans

9 Months Ended

Sep. 30, 2020

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

Acquired Loans

Note 4 – Acquired Loans

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

Upon adoption of FASB ASC Topic 326, which was effective for Trustmark on January 1, 2020 in accordance with the amendments in FASB ASU 2016-13, Trustmark elected to account for its existing acquired loans as purchased credit deteriorated (PCD) loans included within the LHFI portfolio. Trustmark elected to maintain pools of loans that were previously accounted for under FASB ASC Subtopic 310-30, “Receivables – Loans and Debt Securities Acquired with Deteriorated Credit Quality,” and will continue to account for these pools as a unit of account.  Loans are only removed from the existing loan pools if they are written off, paid off or sold.  Upon adoption of FASB ASC Topic 326, the ACL was determined for each pool and added to the pool’s carrying value to establish a new amortized cost basis.  The difference between the unpaid principal balance of the pool and the new amortized cost basis is the noncredit premium or discount which will be amortized into interest income over the remaining life of the pool.  Changes to the allowance for credit losses after adoption of FASB ASC Topic 326 are recorded through the PCL.  Consequently, acquired loans of $72.6 million, as well as the allowance for loan losses, acquired loans of $815 thousand, were transferred on January 1, 2020.  

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

	December 31, 2019
Loans secured by real estate:
Construction, land development and other land	$	4,771
Secured by 1-4 family residential properties		17,525
Secured by nonfarm, nonresidential properties		38,206
Other real estate secured		3,946
Commercial and industrial loans		5,035
Consumer loans		520
Other loans		2,598
Acquired loans		72,601
Less allowance for loan losses, acquired loans		815
Net acquired loans	$	71,786

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, 2019	$	102,890		$	2,811
Transfers (2)		—			(2,926	)
Accretion to interest income		5,532			115
Payments received, net		(37,230	)		—
Other (3)		178			—
Change in allowance for loan losses, acquired loans		416			—
Carrying value, net at December 31, 2019		71,786			—
FASB ASU 2016-13 adoption adjustment		(71,786	)		—
Accretion to interest income		—			—
Payments received, net		—			—
Other (3)		—			—
Change in allowance for loan losses, acquired loans		—			—
Carrying value, net at September 30, 2020	$	—		$	—

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

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

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

Under FASB ASC Subtopic 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):

	Nine Months Ended September 30,
	2020			2019
Accretable yield at beginning of period	$	(14,816	)	$	(17,722	)
FASB ASU 2016-13 adoption adjustment		14,816			—
Accretion to interest income		—			4,290
Disposals, net		—			1,903
Reclassification from nonaccretable difference (1)		—			(3,596	)
Accretable yield at end of period	$	—		$	(15,125	)

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

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

	Three Months Ended September 30,					Nine Months Ended September 30,
	2020		2019			2020			2019
Balance at beginning of period	$	—	$	1,398		$	815		$	1,231
FASB ASU 2016-13 adoption adjustment		—		—			(815	)		—
Net (charge-offs) recoveries		—		(9	)		—			(26	)
Provision for loan losses, acquired loans		—		(140	)		—			44
Balance at end of period	$	—	$	1,249		$	—		$	1,249

The table below presents the acquired loans by loan class and credit quality indicator at December 31, 2019 ($ in thousands):

	December 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			$	4,022	$	—	$	192	$	—	$	4,214
Secured by 1-4 family    residential properties				3,164		42		580		—		3,786
Secured by nonfarm,    nonresidential properties				27,848		—		9,972		386		38,206
Other real estate secured				3,878		—		68		0		3,946
Commercial and industrial loans				3,419		—		—		1,616		5,035
Consumer loans				—		—		—		—		—
Other loans				2,591		—		7		—		2,598
Total acquired loans			$	44,922	$	42	$	10,819	$	2,002	$	57,785
	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	$	463	$	94	$	—	$	—	$	557	$	4,771
Secured by 1-4 family    residential properties		12,843		615		281		—		13,739		17,525
Secured by nonfarm,    nonresidential properties		—		—		—		—		—		38,206
Other real estate secured		—		—		—		—		—		3,946
Commercial and industrial loans		—		—		—		—		—		5,035
Consumer loans		489		31		—		—		520		520
Other loans		—		—		—		—		—		2,598
Total acquired loans	$	13,795	$	740	$	281	$	—	$	14,816	$	72,601

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

The following table provides an aging analysis of contractually past due and nonaccrual acquired loans at December 31, 2019 ($ in thousands):

	December 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	$	94	$	—	$	38	$	132	$	—	$	4,639	$	4,771
Secured by 1-4 family residential    properties		696		131		366		1,193		—		16,332		17,525
Secured by nonfarm, nonresidential    properties		36		—		851		887		—		37,319		38,206
Other real estate secured		1		—		52		53		—		3,893		3,946
Commercial and industrial loans		—		—		—		—		—		5,035		5,035
Consumer loans		16		15		—		31		—		489		520
Other loans		—		—		—		—		—		2,598		2,598
Total acquired loans	$	843	$	146	$	1,307	$	2,296	$	—	$	70,305	$	72,601

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

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