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Loans Held for Investment (LHFI) and Allowance for Loan Losses, LHFI | 12 Months Ended
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Dec. 31, 2014
Loans Held for Investment (LHFI) and Allowance for Loan Losses, LHFI [Abstract] |
Loans Held for Investment (LHFI) and Allowance for Loan Losses, LHFI | Note 5 – LHFI and Allowance for Loan Losses, LHFI At December 31, 2014 and 2013, LHFI consisted of the following ($ in thousands):
|  | 2014 |  |  | 2013 |
Loans secured by real estate: |  |  |  |  |  |
Construction, land development and other land |  | $ | 619,877 |  |  | $ | 596,889 |
Secured by 1-4 family residential properties |  |  | 1,634,397 |  |  |  | 1,485,564 |
Secured by nonfarm, nonresidential properties |  |  | 1,553,193 |  |  |  | 1,415,139 |
Other |  |  | 253,787 |  |  |  | 189,362 |
Commercial and industrial loans |  |  | 1,270,350 |  |  |  | 1,157,614 |
Consumer loans |  |  | 167,964 |  |  |  | 165,308 |
Other loans |  |  | 949,901 |  |  |  | 789,005 |
LHFI |  |  | 6,449,469 |  |  |  | 5,798,881 |
Less allowance for loan losses, LHFI |  |  | 69,616 |  |  |  | 66,448 |
Net LHFI |  | $ | 6,379,853 |  |  | $ | 5,732,433 |
Loan Concentrations Trustmark does not have any loan concentrations other than those reflected in the preceding table, which exceed 10% of total LHFI. At December 31, 2014, 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 and the recovery of a substantial portion of the carrying amount of other real estate are susceptible to changes in market conditions in these areas. Related Party Loans Trustmark makes loans in the normal course of business to certain executive officers and directors, including their immediate families and companies in which they are principal owners. Such loans are made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with unrelated persons and do not involve more than the normal risk of collectability at the time of the transaction. At December 31, 2014 and 2013, total loans to these borrowers were $95.2 million and $89.0 million, respectively. During 2014, $643.1 million of new loan advances were made, while repayments were $636.5 million. In addition, decreases in loans due to changes in executive officers and directors totaled $372 thousand. Nonaccrual/Impaired LHFI At December 31, 2014 and December 31, 2013, the carrying amounts of nonaccrual LHFI, which are individually evaluated for impairment, were $79.3 million and $65.2 million, respectively. Of this total, all commercial nonaccrual LHFI over $500 thousand were specifically evaluated for impairment (specifically evaluated impaired LHFI) using a fair value approach. The remaining nonaccrual LHFI were not specifically reviewed and not written down to fair value less cost to sell. No material interest income was recognized in the income statement on impaired or nonaccrual LHFI for each of the years in the three-year period ended December 31, 2014. All of Trustmark’s specifically evaluated impaired LHFI are collateral dependent loans. At December 31, 2014 and December 31, 2013, specifically evaluated impaired LHFI totaled $47.1 million and $31.6 million, respectively. These specifically evaluated impaired LHFI had a related allowance of $11.3 million and $2.2 million at the end of the respective periods. For collateral dependent loans, when a loan is deemed impaired the full difference between the carrying amount of the loan and the most likely estimate of the collateral’s fair value less cost to sell is charged off. Charge-offs related to specifically evaluated impaired LHFI totaled $137 thousand, $2.5 million and $13.1 million for 2014, 2013 and 2012, respectively. Provision expense on specifically evaluated impaired LHFI totaled $3.5 million for 2014, compared to provision recapture of $2.9 million for 2013 and provision expense of $1.1 million for 2012. Fair value estimates for specifically evaluated impaired LHFI are derived from appraised values based on the current market value or as is value of the collateral, normally from recently received and reviewed appraisals. Current appraisals are ordered on an annual basis based on the inspection date. Appraisals are obtained from state-certified appraisers and are based on certain assumptions, which may include construction or development status and the highest and best use of the property. These appraisals are reviewed by Trustmark’s Appraisal Review Department to ensure they are acceptable, and values are adjusted down for costs associated with asset disposal. Once this estimated net realizable value has been determined, the value used in the impairment assessment is updated. At the time a specifically evaluated impaired LHFI is deemed to be impaired, the full difference between book value and the most likely estimate of the collateral’s net realizable value is charged off. As subsequent events dictate and estimated net realizable values decline, required reserves may be established or further adjustments recorded. At December 31, 2014 and December 31, 2013, nonaccrual LHFI not specifically reviewed for impairment and not written down to fair value less cost to sell, totaled $32.2 million and $33.7 million, respectively. In addition, these nonaccrual LHFI had allocated allowance for loan losses of $1.5 million and $3.0 million at the end of the respective periods. The following table details LHFI individually and collectively evaluated for impairment at December 31, 2014 and 2013 ($ in thousands):
|  | December 31, 2014 |
|  | LHFI Evaluated for Impairment |
|  | Individually |  |  | Collectively |  |  | Total |
Loans secured by real estate: |  |  |  |  |  |  |  |  |
Construction, land development and other land |  | $ | 13,867 |  |  | $ | 606,010 |  |  | $ | 619,877 |
Secured by 1-4 family residential properties |  |  | 25,621 |  |  |  | 1,608,776 |  |  |  | 1,634,397 |
Secured by nonfarm, nonresidential properties |  |  | 25,717 |  |  |  | 1,527,476 |  |  |  | 1,553,193 |
Other |  |  | 1,318 |  |  |  | 252,469 |  |  |  | 253,787 |
Commercial and industrial loans |  |  | 12,104 |  |  |  | 1,258,246 |  |  |  | 1,270,350 |
Consumer loans |  |  | 88 |  |  |  | 167,876 |  |  |  | 167,964 |
Other loans |  |  | 628 |  |  |  | 949,273 |  |  |  | 949,901 |
Total |  | $ | 79,343 |  |  | $ | 6,370,126 |  |  | $ | 6,449,469 |
|  | December 31, 2013 |
|  | LHFI Evaluated for Impairment |
|  | Individually |  |  | Collectively |  |  | Total |
Loans secured by real estate: |  |  |  |  |  |  |  |  |
Construction, land development and other land |  | $ | 13,327 |  |  | $ | 583,562 |  |  | $ | 596,889 |
Secured by 1-4 family residential properties |  |  | 21,603 |  |  |  | 1,463,961 |  |  |  | 1,485,564 |
Secured by nonfarm, nonresidential properties |  |  | 21,809 |  |  |  | 1,393,330 |  |  |  | 1,415,139 |
Other |  |  | 1,327 |  |  |  | 188,035 |  |  |  | 189,362 |
Commercial and industrial loans |  |  | 6,286 |  |  |  | 1,151,328 |  |  |  | 1,157,614 |
Consumer loans |  |  | 151 |  |  |  | 165,157 |  |  |  | 165,308 |
Other loans |  |  | 735 |  |  |  | 788,270 |  |  |  | 789,005 |
Total |  | $ | 65,238 |  |  | $ | 5,733,643 |  |  | $ | 5,798,881 |
At December 31, 2014 and 2013, the carrying amount of LHFI individually evaluated for impairment consisted of the following ($ in thousands):
|  | December 31, 2014 |
|  | LHFI |  |  |  |  |  |  |
|  | Unpaid |  |  | With No Related |  |  | With an |  |  | Total |  |  |  |  |  | Average |
|  | Principal |  |  | Allowance |  |  | Allowance |  |  | Carrying |  |  | Related |  |  | Recorded |
|  | Balance |  |  | Recorded |  |  | Recorded |  |  | Amount |  |  | Allowance |  |  | Investment |
Loans secured by real estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Construction, land development and other land |  | $ | 20,849 |  |  | $ | 7,411 |  |  | $ | 6,456 |  |  | $ | 13,867 |  |  | $ | 2,767 |  |  | $ | 13,597 |
Secured by 1-4 family residential properties |  |  | 31,151 |  |  |  | 1,650 |  |  |  | 23,971 |  |  |  | 25,621 |  |  |  | 450 |  |  |  | 23,612 |
Secured by nonfarm, nonresidential properties |  |  | 27,969 |  |  |  | 12,868 |  |  |  | 12,849 |  |  |  | 25,717 |  |  |  | 2,787 |  |  |  | 23,763 |
Other |  |  | 1,594 |  |  |  | - |  |  |  | 1,318 |  |  |  | 1,318 |  |  |  | 52 |  |  |  | 1,322 |
Commercial and industrial loans |  |  | 13,916 |  |  |  | 1,206 |  |  |  | 10,898 |  |  |  | 12,104 |  |  |  | 6,449 |  |  |  | 9,195 |
Consumer loans |  |  | 152 |  |  |  | - |  |  |  | 88 |  |  |  | 88 |  |  |  | - |  |  |  | 120 |
Other loans |  |  | 734 |  |  |  | - |  |  |  | 628 |  |  |  | 628 |  |  |  | 259 |  |  |  | 682 |
Total |  | $ | 96,365 |  |  | $ | 23,135 |  |  | $ | 56,208 |  |  | $ | 79,343 |  |  | $ | 12,764 |  |  | $ | 72,291 |
|  | December 31, 2013 |
|  | LHFI |  |  |  |  |  |  |
|  | Unpaid |  |  | With No Related |  |  | With an |  |  | Total |  |  |  |  |  | Average |
|  | Principal |  |  | Allowance |  |  | Allowance |  |  | Carrying |  |  | Related |  |  | Recorded |
|  | Balance |  |  | Recorded |  |  | Recorded |  |  | Amount |  |  | Allowance |  |  | Investment |
Loans secured by real estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Construction, land development and other land |  | $ | 24,350 |  |  | $ | 9,817 |  |  | $ | 3,510 |  |  | $ | 13,327 |  |  | $ | 989 |  |  | $ | 20,216 |
Secured by 1-4 family residential properties |  |  | 26,541 |  |  |  | 3,095 |  |  |  | 18,508 |  |  |  | 21,603 |  |  |  | 191 |  |  |  | 24,359 |
Secured by nonfarm, nonresidential properties |  |  | 24,879 |  |  |  | 10,225 |  |  |  | 11,584 |  |  |  | 21,809 |  |  |  | 2,307 |  |  |  | 20,049 |
Other |  |  | 1,375 |  |  |  | - |  |  |  | 1,327 |  |  |  | 1,327 |  |  |  | 122 |  |  |  | 2,641 |
Commercial and industrial loans |  |  | 8,702 |  |  |  | 2,506 |  |  |  | 3,780 |  |  |  | 6,286 |  |  |  | 1,253 |  |  |  | 5,513 |
Consumer loans |  |  | 286 |  |  |  | - |  |  |  | 151 |  |  |  | 151 |  |  |  | 2 |  |  |  | 255 |
Other loans |  |  | 849 |  |  |  | - |  |  |  | 735 |  |  |  | 735 |  |  |  | 317 |  |  |  | 767 |
Total |  | $ | 86,982 |  |  | $ | 25,643 |  |  | $ | 39,595 |  |  | $ | 65,238 |  |  | $ | 5,181 |  |  | $ | 73,800 |
A troubled debt restructuring (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 collectibility 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. A formal TDR may include, but is not necessarily limited to, one or a combination of the following situations:
| · | Trustmark accepts a third-party receivable or other asset(s) of the borrower, in lieu of the receivable from the borrower.
| · | Trustmark accepts an equity interest in the borrower in lieu of the receivable.
| · | Trustmark accepts modification of the terms of the debt including but not limited to:
| o | Reduction of (absolute or contingent) the stated interest rate to below the current market rate.
| o | Extension of the maturity date or dates at a stated interest rate lower than the current market rate for new debt with similar risk.
| o | Reduction (absolute or contingent) of the face amount or maturity amount of the debt as stated in the note or other agreement.
| o | Reduction (absolute or contingent) of accrued interest.
Troubled debt restructurings are addressed in Trustmark’s loan policy, and in accordance with that policy, any modifications or concessions that may result in a TDR are subject to a special approval process which allows for control, identification, and monitoring of these arrangements. Prior to granting a concession, a revised borrowing arrangement is proposed which is structured so as to improve collectability of the loan in accordance with a reasonable repayment schedule with any loss promptly identified. It is supported by a thorough evaluation of the borrower’s financial condition and prospects for repayment under those revised terms. Other TDRs arising from renewals or extensions of existing debt are routinely identified through the processes utilized in the Problem Loan Committees and in the Credit Quality Review Committee. All TDRs are subsequently reported to the Director Credit Policy Committee on a quarterly basis and are disclosed in Trustmark’s consolidated financial statements in accordance with GAAP and regulatory reporting guidance. All loans whose terms have been modified in a troubled debt restructuring are evaluated for impairment under FASB ASC Topic 310. Accordingly, Trustmark measures any loss on the restructuring in accordance with that guidance. A TDR in which Trustmark receives physical possession of the borrower’s assets, regardless of whether formal foreclosure or repossession proceedings take place, is accounted for in accordance with FASB ASC Subtopic 310-40, “Troubled Debt Restructurings by Creditors.” Thus, the loan is treated as if assets have been received in satisfaction of the loan and reported as a foreclosed asset. A TDR may be returned to accrual status if Trustmark is reasonably assured of repayment of principal and interest under the modified terms and the borrower has demonstrated sustained performance under those terms for a period of at least six months. Otherwise, the restructured loan must remain on nonaccrual. At December 31, 2014, 2013 and 2012, LHFI classified as TDRs totaled $11.3 million, $14.8 million and $24.3 million, respectively, and were primarily comprised of credits with interest-only payments for an extended period of time which totaled $7.4 million, $11.1 million and $21.6 million, respectively. The remaining TDRs at December 31, 2014, 2013 and 2012 resulted from real estate loans discharged through Chapter 7 bankruptcy that were not reaffirmed or from payment or maturity extensions. For TDRs, Trustmark had a related loan loss allowance of $1.7 million at December 31, 2014, $1.6 million at December 31, 2013 and $4.3 million at December 31, 2012. LHFI classified as TDRs are charged down to the most likely fair value estimate less an estimated cost to sell for collateral dependent loans, which would approximate net realizable value. Specific charge-offs related to TDRs totaled $75 thousand, $816 thousand and $6.0 million for the years ended December 31, 2014, 2013 and 2012, respectively. The following table illustrates the impact of modifications classified as TDRs as well as those TDRs modified within the last 12 months for which there was a payment default during the period for the years ended December 31, 2014, 2013 and 2012 ($ in thousands):
|  | Year Ended December 31, 2014 |
Troubled Debt Restructurings |  | Number of Contracts |  |  | Pre-Modification Outstanding Recorded Investment |  |  | Post-Modification Outstanding Recorded Investment |
Loans secured by 1-4 family residential properties |  |  | 17 |  |  | $ | 1,248 |  |  | $ | 1,234 |
|  | Year Ended December 31, 2013 |
Troubled Debt Restructurings |  | Number of Contracts |  |  | Pre-Modification Outstanding Recorded Investment |  |  | Post-Modification Outstanding Recorded Investment |
Loans secured by 1-4 family residential properties |  |  | 10 |  |  | $ | 498 |  |  | $ | 441 |
Loans secured by nonfarm, nonresidential properties |  |  | 1 |  |  |  | 952 |  |  |  | 952 |
Commercial and industrial loans |  |  | 2 |  |  |  | 944 |  |  |  | 937 |
Other loans |  |  | 1 |  |  |  | 2,490 |  |  |  | 2,490 |
Total |  |  | 14 |  |  | $ | 4,884 |  |  | $ | 4,820 |
|  | Year Ended December 31, 2012 |
Troubled Debt Restructurings |  | Number of Contracts |  |  | Pre-Modification Outstanding Recorded Investment |  |  | Post-Modification Outstanding Recorded Investment |
Construction, land development and other land loans |  |  | 12 |  |  | $ | 4,092 |  |  | $ | 4,092 |
Loans secured by 1-4 family residential properties |  |  | 48 |  |  |  | 5,399 |  |  |  | 5,383 |
Loans secured by nonfarm, nonresidential properties |  |  | 2 |  |  |  | 1,210 |  |  |  | 1,210 |
Other loans secured by real estate |  |  | 1 |  |  |  | 199 |  |  |  | 199 |
Commercial and industrial loans |  |  | 1 |  |  |  | 148 |  |  |  | - |
Total |  |  | 64 |  |  | $ | 11,048 |  |  | $ | 10,884 |
|  | Years Ended December 31, |
|  | 2014 |  |  | 2013 |  |  | 2012 |
Troubled Debt Restructurings that Subsequently Defaulted |  | Number of Contracts |  |  | Recorded Investment |  |  | Number of Contracts |  |  | Recorded Investment |  |  | Number of Contracts |  |  | Recorded Investment |
Construction, land development and other land loans |  |  | - |  |  | $ | - |  |  |  | - |  |  | $ | - |  |  |  | 7 |  |  | $ | 1,881 |
Loans secured by 1-4 family residential properties |  |  | 1 |  |  |  | 103 |  |  |  | 5 |  |  |  | 345 |  |  |  | 16 |  |  |  | 1,469 |
Loans secured by nonfarm, nonresidential properties |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 1 |  |  |  | 862 |
Total |  |  | 1 |  |  | $ | 103 |  |  |  | 5 |  |  | $ | 345 |  |  |  | 24 |  |  | $ | 4,212 |
Trustmark’s TDRs have resulted primarily from allowing the borrower to pay interest-only for an extended period of time rather than from forgiveness. Accordingly, as shown above, these TDRs have a similar recorded investment for both the pre-modification and post-modification disclosure. Trustmark has utilized loans 90 days or more past due to define payment default in determining TDRs that have subsequently defaulted. The following tables detail LHFI classified as TDRs by loan type at December 31, 2014, 2013 and 2012 ($ in thousands):
|  | December 31, 2014 |
|  | Accruing |  |  | Nonaccrual |  |  | Total |
Construction, land development and other land loans |  | $ | - |  |  | $ | 3,665 |  |  | $ | 3,665 |
Loans secured by 1-4 family residential properties |  |  | 1,385 |  |  |  | 3,733 |  |  |  | 5,118 |
Loans secured by nonfarm, nonresidential properties |  |  | - |  |  |  | 1,854 |  |  |  | 1,854 |
Other loans secured by real estate |  |  | - |  |  |  | 149 |  |  |  | 149 |
Commercial and industrial loans |  |  | - |  |  |  | 509 |  |  |  | 509 |
Total TDRs by type |  | $ | 1,385 |  |  | $ | 9,910 |  |  | $ | 11,295 |
|  | December 31, 2013 |
|  | Accruing |  |  | Nonaccrual |  |  | Total |
Construction, land development and other land loans |  | $ | - |  |  | $ | 6,247 |  |  | $ | 6,247 |
Loans secured by 1-4 family residential properties |  |  | 1,320 |  |  |  | 4,201 |  |  |  | 5,521 |
Loans secured by nonfarm, nonresidential properties |  |  | - |  |  |  | 2,292 |  |  |  | 2,292 |
Other loans secured by real estate |  |  | - |  |  |  | 167 |  |  |  | 167 |
Commercial and industrial loans |  |  | - |  |  |  | 549 |  |  |  | 549 |
Total TDRs by type |  | $ | 1,320 |  |  | $ | 13,456 |  |  | $ | 14,776 |
|  | December 31, 2012 |
|  | Accruing |  |  | Nonaccrual |  |  | Total |
Construction, land development and other land loans |  | $ | 233 |  |  | $ | 12,073 |  |  | $ | 12,306 |
Loans secured by 1-4 family residential properties |  |  | 1,280 |  |  |  | 5,908 |  |  |  | 7,188 |
Loans secured by nonfarm, nonresidential properties |  |  | - |  |  |  | 4,582 |  |  |  | 4,582 |
Other loans secured by real estate |  |  | - |  |  |  | 197 |  |  |  | 197 |
Total TDRs by type |  | $ | 1,513 |  |  | $ | 22,760 |  |  | $ | 24,273 |
Credit Quality Indicators Trustmark’s loan portfolio credit quality indicators focus on six key quality ratios that are compared against bank tolerances. The loan indicators are total classified outstanding, total criticized outstanding, nonperforming loans, nonperforming assets, delinquencies and net loan losses. Due to the homogenous nature of consumer loans, Trustmark does not assign a formal internal risk rating to each credit and therefore the criticized and classified measures are unique to 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 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, completeness and organization and focuses on efforts to obtain and document sufficient information to determine the quality and status of credits. Also included is an evaluation of the systems/procedures used to insure compliance with policy such as financial statements, review memos and loan agreements.
| · | Underwriting – evaluates whether credits are adequately analyzed, appropriately structured and properly approved within requirements of bank loan policy. 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 loan portfolio.
| · | Collateral Documentation – focuses on the adequacy of documentation to support the obligation, perfect Trustmark’s collateral position and protect collateral value. There are two parts to this measure:
| ✓ | Collateral exceptions are where certain collateral documentation is either not present, is not considered current or has expired.
| ✓ | 90 days and over collateral exceptions are where certain collateral documentation is either not present, is not considered current or has expired and the exception has been identified in excess of 90 days.
| · | 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) and Regulation O requirements.
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 adverse criticism as defined in regulatory guidance. Loans in these groups exhibit characteristics that represent low to moderate risk measured by using a variety of credit risk criteria such as cash flow coverage, debt service coverage, balance sheet leverage, liquidity, management experience, industry position, prevailing economic conditions, support from secondary sources of repayment and other credit factors that may be relevant to a specific loan. In general, these loans are supported by properly margined collateral and guarantees of principal parties.
| · | Other Assets Especially Mentioned (special mention) - (RR 7) – a loan that has a potential weakness that if not corrected will lead to a more severe rating. This rating is for credits that are currently protected but potentially weak because of an adverse feature or condition that if not corrected will lead to a further downgrade.
| · | Substandard (RR 8) – a loan that has at least one identified weakness that is well defined. This rating is for credits where the primary sources of repayment are not viable at the time of evaluation or where either the capital or collateral is not adequate to support the loan and the secondary means of repayment do not provide a sufficient level of support to offset the identified weakness. Loss potential exists in the aggregate amount of substandard loans but does not necessarily exist in individual loans.
| · | Doubtful (RR 9) – a loan with an identified weakness that does not have a valid secondary source of repayment. Generally these credits have an impaired primary source of repayment and secondary sources are not sufficient to prevent a loss in the credit. The exact amount of the loss has not been determined at this time.
| · | Loss (RR 10) – a loan or a portion of a loan that is deemed to be uncollectible.
By definition, credit risk grades special mention (RR 7), substandard (RR 8), doubtful (RR 9) and loss (RR 10) are criticized loans while substandard (RR 8), doubtful (RR 9) and loss (RR 10) are classified loans. These definitions are standardized by all bank regulatory agencies and are generally equally applied to each individual lending institution. The remaining credit risk grades are considered pass credits and are solely defined by Trustmark. Each commercial loan is assigned a credit risk grade that is an indication for the likelihood of default and is not a direct indication of loss at default. The loss at default aspect of the subject risk ratings is neither uniform across the nine primary commercial loan groups or constant between the geographic areas. To account for the variance in the loss at default aspects of the risk rate system, the loss expectations for each risk rating is integrated into the allowance for loan loss methodology where the calculated loss at default is allotted for each individual risk rating with respect to the individual loan group and unique geographic area. The loss at default aspect of the reserve methodology is calculated each quarter as a component of the overall reserve factor for each risk grade by loan group and geographic area. To enhance this process, loans of a certain size that are rated in one of the criticized categories are routinely reviewed to establish an expectation of loss, if any, and if such examination indicates that the level of reserve is not adequate to cover the expectation of loss, a special reserve or impairment is generally applied. The distribution of the losses is accomplished by means of a loss distribution model that assigns a loss factor to each risk rating (1 to 9) in each commercial loan pool. A factor is not applied to risk rate 10 as loans classified as Losses are not carried on Trustmark’s books over quarter-end as they are charged off within the period that the loss is determined. The expected loss distribution is spread across the various risk ratings by the perceived level of risk for loss. The nine grade scale described above ranges from a negligible risk of loss to an identified loss across its breadth. The loss distribution factors are graduated through the scale on a basis proportional to the degree of risk that appears manifest in each individual rating and assumes that migration through the loan grading system will occur. 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 concentrations both on the underlying credit quality of each individual loan portfolio as well as the adherence to Trustmark’s loan policy and the loan administration process. In general, Asset Review conducts reviews of each lending area within a six to eighteen month window depending on the overall credit quality results of the individual area. In addition to the ongoing internal risk rate monitoring described above, Trustmark’s Credit Quality Review Committee meets monthly and performs a review of all loans of $100 thousand or more that are either delinquent thirty days or more or on nonaccrual. This review includes recommendations regarding risk ratings, accrual status, charge-offs and appropriate servicing officer as well as evaluation of problem credits for determination of TDRs. Quarterly, the Credit Quality Review Committee reviews and modifies continuous action plans for all credits risk rated seven or worse for relationships of $100 thousand or more. In addition, the Credit Quality Review Committee performs the following reviews on an annual basis:
| · | Residential real estate developments - a development project analysis is performed on all projects regardless of size. Performance of the development is assessed through an evaluation of the number of lots remaining, payout ratios, and loan-to-value ratios. Results are stress tested as to absorption and price of lots. This analysis is reviewed by each senior credit officer for the respective market to determine the need for any risk rate or accrual status changes.
| · | Non-owner occupied commercial real estate - a cash flow analysis is performed on all projects with an outstanding balance of $1.0 million or more. In addition, credits are stress tested for vacancies and rate sensitivity. Confirmation is obtained that guarantor financial statements are current, taxes have been paid and there are no other issues that need to be addressed. This analysis is reviewed by each senior credit officer in the respective market to determine the need for any risk rate or accrual status changes.
Consumer Credits Consumer LHFI that do not meet a minimum custom credit score are reviewed quarterly by Management. The Retail Credit Review Committee reviews the volume and percentage of approvals that did not meet the minimum passing custom score by region, individual location, and officer. To assure that Trustmark continues to originate quality loans, this process allows Management to make necessary changes such as revisions to underwriting procedures and credit policies, or changes in loan authority to Trustmark personnel. Trustmark monitors the levels and severity of past due consumer LHFI on a daily basis through its collection activities. A detailed assessment of consumer LHFI delinquencies is performed monthly at both a product and market level by delivery channel, which incorporates the perceived level of risk at time of underwriting. Trustmark also monitors its consumer LHFI delinquency trends by comparing them to quarterly industry averages. The table below illustrates the carrying amount of LHFI by credit quality indicator at December 31, 2014 and 2013 ($ in thousands):
|  |  |  |  | December 31, 2014 |
|  |  |  |  | Commercial LHFI |
|  |  |  |  | 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 |  |  |  |  |  | $ | 518,944 |  |  | $ | 479 |  |  | $ | 37,022 |  |  | $ | 196 |  |  | $ | 556,641 |
Secured by 1-4 family residential properties |  |  |  |  |  |  | 125,203 |  |  |  | 1,652 |  |  |  | 7,483 |  |  |  | 213 |  |  |  | 134,551 |
Secured by nonfarm, nonresidential properties |  |  |  |  |  |  | 1,462,226 |  |  |  | 8,431 |  |  |  | 81,661 |  |  |  | - |  |  |  | 1,552,318 |
Other |  |  |  |  |  |  | 246,099 |  |  |  | 306 |  |  |  | 4,975 |  |  |  | - |  |  |  | 251,380 |
Commercial and industrial loans |  |  |  |  |  |  | 1,239,247 |  |  |  | 4,245 |  |  |  | 26,133 |  |  |  | 719 |  |  |  | 1,270,344 |
Consumer loans |  |  |  |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Other loans |  |  |  |  |  |  | 928,251 |  |  |  | 7,550 |  |  |  | 6,779 |  |  |  | 564 |  |  |  | 943,144 |
|  |  |  |  |  | $ | 4,519,970 |  |  | $ | 22,663 |  |  | $ | 164,053 |  |  | $ | 1,692 |  |  | $ | 4,708,378 |
|  | Consumer LHFI |  |  |  |
|  | Current |  |  | Past Due 30-89 Days |  |  | Past Due 90 Days or More |  |  | Nonaccrual |  |  | Subtotal |  |  | Total LHFI |
Loans secured by real estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Construction, land development and other land |  | $ | 62,897 |  |  | $ | 199 |  |  | $ | 59 |  |  | $ | 81 |  |  | $ | 63,236 |  |  | $ | 619,877 |
Secured by 1-4 family residential properties |  |  | 1,465,355 |  |  |  | 10,429 |  |  |  | 2,367 |  |  |  | 21,695 |  |  |  | 1,499,846 |  |  |  | 1,634,397 |
Secured by nonfarm, nonresidential properties |  |  | 875 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 875 |  |  |  | 1,553,193 |
Other |  |  | 2,407 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 2,407 |  |  |  | 253,787 |
Commercial and industrial loans |  |  | - |  |  |  | 5 |  |  |  | 1 |  |  |  | - |  |  |  | 6 |  |  |  | 1,270,350 |
Consumer loans |  |  | 165,504 |  |  |  | 2,162 |  |  |  | 211 |  |  |  | 87 |  |  |  | 167,964 |  |  |  | 167,964 |
Other loans |  |  | 6,757 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 6,757 |  |  |  | 949,901 |
|  | $ | 1,703,795 |  |  | $ | 12,795 |  |  | $ | 2,638 |  |  | $ | 21,863 |  |  | $ | 1,741,091 |  |  | $ | 6,449,469 |
|  |  |  |  | December 31, 2013 |
|  |  |  |  | Commercial LHFI |
|  |  |  |  | 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 |  |  |  |  |  | $ | 493,380 |  |  | $ | 4,383 |  |  | $ | 47,610 |  |  | $ | 318 |  |  | $ | 545,691 |
Secured by 1-4 family residential properties |  |  |  |  |  |  | 119,640 |  |  |  | 479 |  |  |  | 7,839 |  |  |  | 110 |  |  |  | 128,068 |
Secured by nonfarm, nonresidential properties |  |  |  |  |  |  | 1,313,470 |  |  |  | 12,620 |  |  |  | 87,203 |  |  |  | 399 |  |  |  | 1,413,692 |
Other |  |  |  |  |  |  | 178,951 |  |  |  | - |  |  |  | 6,756 |  |  |  | 235 |  |  |  | 185,942 |
Commercial and industrial loans |  |  |  |  |  |  | 1,099,429 |  |  |  | 18,771 |  |  |  | 37,209 |  |  |  | 2,187 |  |  |  | 1,157,596 |
Consumer loans |  |  |  |  |  |  | 496 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 496 |
Other loans |  |  |  |  |  |  | 777,395 |  |  |  | 60 |  |  |  | 4,126 |  |  |  | 669 |  |  |  | 782,250 |
|  |  |  |  |  | $ | 3,982,761 |  |  | $ | 36,313 |  |  | $ | 190,743 |  |  | $ | 3,918 |  |  | $ | 4,213,735 |
|  | Consumer LHFI |  |  |  |
|  | Current |  |  | Past Due 30-89 Days |  |  | Past Due 90 Days or More |  |  | Nonaccrual |  |  | Subtotal |  |  | Total LHFI |
Loans secured by real estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Construction, land development and other land |  | $ | 50,850 |  |  | $ | 131 |  |  | $ | - |  |  | $ | 217 |  |  | $ | 51,198 |  |  | $ | 596,889 |
Secured by 1-4 family residential properties |  |  | 1,327,624 |  |  |  | 8,937 |  |  |  | 2,996 |  |  |  | 17,939 |  |  |  | 1,357,496 |  |  |  | 1,485,564 |
Secured by nonfarm, nonresidential properties |  |  | 1,439 |  |  |  | 8 |  |  |  | - |  |  |  | - |  |  |  | 1,447 |  |  |  | 1,415,139 |
Other |  |  | 3,418 |  |  |  | 2 |  |  |  | - |  |  |  | - |  |  |  | 3,420 |  |  |  | 189,362 |
Commercial and industrial loans |  |  | 13 |  |  |  | 5 |  |  |  | - |  |  |  | - |  |  |  | 18 |  |  |  | 1,157,614 |
Consumer loans |  |  | 162,348 |  |  |  | 2,012 |  |  |  | 302 |  |  |  | 150 |  |  |  | 164,812 |  |  |  | 165,308 |
Other loans |  |  | 6,755 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 6,755 |  |  |  | 789,005 |
|  | $ | 1,552,447 |  |  | $ | 11,095 |  |  | $ | 3,298 |  |  | $ | 18,306 |  |  | $ | 1,585,146 |  |  | $ | 5,798,881 |
Past Due LHFI LHFI past due 90 days or more totaled $2.8 million and $3.3 million at December 31, 2014 and 2013, respectively. The following table provides an aging analysis of past due and nonaccrual LHFI by class at December 31, 2014 and 2013 ($ in thousands):
|  | December 31, 2014 |
|  | Past Due |  |  |  |  |  |  |  |  |  |
|  | 30-59 Days |  |  | 60-89 Days |  |  | 90 Days or More (1) |  |  | Total |  |  | Nonaccrual |  |  | Current Loans |  |  | Total LHFI |
Loans secured by real estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Construction, land development and other land |  | $ | 248 |  |  | $ | 17 |  |  | $ | 60 |  |  | $ | 325 |  |  | $ | 13,867 |  |  | $ | 605,685 |  |  | $ | 619,877 |
Secured by 1-4 family residential properties |  |  | 8,424 |  |  |  | 2,428 |  |  |  | 2,367 |  |  |  | 13,219 |  |  |  | 25,621 |  |  |  | 1,595,557 |  |  |  | 1,634,397 |
Secured by nonfarm, nonresidential properties |  |  | 1,960 |  |  |  | 34 |  |  |  | - |  |  |  | 1,994 |  |  |  | 25,717 |  |  |  | 1,525,482 |  |  |  | 1,553,193 |
Other |  |  | 80 |  |  |  | - |  |  |  | - |  |  |  | 80 |  |  |  | 1,318 |  |  |  | 252,389 |  |  |  | 253,787 |
Commercial and industrial loans |  |  | 2,491 |  |  |  | 306 |  |  |  | 126 |  |  |  | 2,923 |  |  |  | 12,104 |  |  |  | 1,255,323 |  |  |  | 1,270,350 |
Consumer loans |  |  | 1,811 |  |  |  | 351 |  |  |  | 211 |  |  |  | 2,373 |  |  |  | 88 |  |  |  | 165,503 |  |  |  | 167,964 |
Other loans |  |  | 132 |  |  |  | 9 |  |  |  | - |  |  |  | 141 |  |  |  | 628 |  |  |  | 949,132 |  |  |  | 949,901 |
Total |  | $ | 15,146 |  |  | $ | 3,145 |  |  | $ | 2,764 |  |  | $ | 21,055 |  |  | $ | 79,343 |  |  | $ | 6,349,071 |  |  | $ | 6,449,469 |
(1) Past due 90 days or more but still accruing interest.
|  | December 31, 2013 |
|  | Past Due |  |  |  |  |  |  |  |  |  |
|  | 30-59 Days |  |  | 60-89 Days |  |  | 90 Days or More (1) |  |  | Total |  |  | Nonaccrual |  |  | Current Loans |  |  | Total LHFI |
Loans secured by real estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Construction, land development and other land |  | $ | 656 |  |  | $ | 267 |  |  | $ | - |  |  | $ | 923 |  |  | $ | 13,327 |  |  | $ | 582,639 |  |  | $ | 596,889 |
Secured by 1-4 family residential properties |  |  | 7,322 |  |  |  | 2,115 |  |  |  | 2,996 |  |  |  | 12,433 |  |  |  | 21,603 |  |  |  | 1,451,528 |  |  |  | 1,485,564 |
Secured by nonfarm, nonresidential properties |  |  | 1,934 |  |  |  | 110 |  |  |  | - |  |  |  | 2,044 |  |  |  | 21,809 |  |  |  | 1,391,286 |  |  |  | 1,415,139 |
Other |  |  | 2 |  |  |  | 3 |  |  |  | - |  |  |  | 5 |  |  |  | 1,327 |  |  |  | 188,030 |  |  |  | 189,362 |
Commercial and industrial loans |  |  | 809 |  |  |  | 198 |  |  |  | - |  |  |  | 1,007 |  |  |  | 6,286 |  |  |  | 1,150,321 |  |  |  | 1,157,614 |
Consumer loans |  |  | 1,866 |  |  |  | 146 |  |  |  | 302 |  |  |  | 2,314 |  |  |  | 151 |  |  |  | 162,843 |  |  |  | 165,308 |
Other loans |  |  | 17 |  |  |  | - |  |  |  | - |  |  |  | 17 |  |  |  | 735 |  |  |  | 788,253 |  |  |  | 789,005 |
Total |  | $ | 12,606 |  |  | $ | 2,839 |  |  | $ | 3,298 |  |  | $ | 18,743 |  |  | $ | 65,238 |  |  | $ | 5,714,900 |  |  | $ | 5,798,881 |
(1) Past due 90 days or more but still accruing interest. Past Due LHFS LHFS past due 90 days or more totaled $25.9 million and $21.5 million at December 31, 2014 and 2013, respectively. LHFS past due 90 days or more are serviced loans eligible for repurchase, which are fully guaranteed by the 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 percent 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 2014. During 2013, Trustmark exercised its option to repurchase approximately $57.4 million delinquent loans serviced for GNMA. These loans were subsequently sold to a third party under different repurchase provisions. Trustmark retained the servicing for these loans, which are fully guaranteed by FHA/VA. As a result of this repurchase and sale, the loans were no longer carried as LHFS. The transaction resulted in a gain of $534 thousand, which was included in mortgage banking, net for 2013. Allowance for Loan Losses, LHFI Trustmark’s allowance for loan loss methodology for commercial LHFI is based upon regulatory guidance from its primary regulator and GAAP. The methodology segregates the commercial purpose and commercial construction LHFI portfolios into nine separate loan types (or pools) which have similar characteristics such as repayment, collateral and risk profiles. The nine basic loan pools are further segregated into Trustmark’s five key market regions, Alabama, Florida, Mississippi, Tennessee and Texas, to take into consideration the uniqueness of each market. A 10-point risk rating system is utilized for each separate loan pool to apply a reserve factor consisting of quantitative and qualitative components to determine the needed allowance by each loan type. As a result, there are 450 risk rate factors for commercial loan types. The nine separate pools are shown below: Commercial Purpose LHFI
| · | Real Estate – Owner-Occupied
| · | Real Estate – Non-Owner Occupied
| · | Working Capital
| · | Non-Working Capital
| · | Land
| · | Lots and Development
| · | Political Subdivisions
Commercial Construction LHFI
| · | 1 to 4 Family
| · | Non-1 to 4 Family
The quantitative factors of the allowance methodology reflect a twelve-quarter rolling average of net charge-offs by loan type within each key market region. This allows for a greater sensitivity to current trends, such as economic changes, as well as current loss profiles and creates a more accurate depiction of historical losses. Qualitative factors used in the allowance methodology include the following:
| · | National and regional economic trends and conditions
| · | Impact of recent performance trends
| · | Experience, ability and effectiveness of management
| · | Adherence to Trustmark’s loan policies, procedures and internal controls
| · | Collateral, financial and underwriting exception trends
| · | Credit concentrations
| · | Acquisitions
| · | Catastrophe
Each qualitative factor is converted to a scale ranging from 0 (No risk) to 100 (High Risk), other than the last two factors, which are applied on a dollar-for-dollar basis to ensure that the combination of such factors is proportional. The resulting ratings from the individual factors are weighted and summed to establish the weighted-average qualitative factor of a specific loan portfolio within each key market region. This weighted-average qualitative factor is then distributed over the nine primary loan pools within each key market region based on the ranking by risk of each. During 2014, Trustmark revised the qualitative portion of the allowance for loan loss methodology for commercial LHFI to incorporate an additional reserve component for commercial nonaccrual loans under $500 thousand. A LHFI is considered impaired when, based on current information and events, it is probable that Trustmark will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. A formal impairment analysis is performed on all commercial nonaccrual LHFI with an outstanding balance of $500 thousand or more, and based upon this analysis LHFI are written down to net realizable value. The implementation of this commercial qualitative factor will allow Trustmark to address additional credit risk and loss potential due to inadequate source of repayment and collateral for commercial nonaccrual LHFI below the $500 thousand threshold for a formal analysis. For such loans, it is currently unlikely that full repayment of both principal and interest will be realized. An additional provision of approximately $822 thousand was recorded in 2014 as result of this revision to the qualitative portion of the allowance for loan loss methodology for commercial LHFI. During 2013, Trustmark revised the qualitative portion of the allowance for loan loss methodology for commercial LHFI to incorporate a loan facility risk component. Loan facility risk embodies the nature, frequency and duration of the repayment structure as it pertains to the actual source of loan repayment. The underlying loan structure and nature of the credit either is risk neutral for standard structure or adds risk to the credit for any variance that represents additional credit risk from the standard structure. If the facility structure adds additional credit risk, qualitative reserves are added to individual loans based on their respective commercial loan pools. Factors considered in assigning facility risk include whether the principal is amortizing or not amortizing, revolving or not revolving, the payment frequency and the duration of the payment structure. An additional provision of approximately $1.6 million was recorded in 2013 as a result of this revision to the qualitative portion of the allowance for loan loss methodology for commercial LHFI. For each commercial loan portfolio, the loan facility risk factor’s percentage of the balances are summed and weighted based on commercial loan portfolio rankings. This weighted-average facility factor is then distributed over the nine primary loan pools within each key market region based on the ranking by risk of each. During 2012, Trustmark revised the quantitative portion of the allowance for loan loss methodology for consumer and residential LHFI. Trustmark converted the historical loss factor from a 20-quarter net charge-off rolling average to a 12-quarter rolling average and developed a separate reserve for junior liens on 1-4 family LHFI. The change in quantitative methodology allowed Trustmark to more readily correlate portfolio risk to the current market environment as the impact of more recent experience is emphasized. This change also allowed for a greater sensitivity to current trends such as economic and performance changes, which included current loss profiles, and created a more accurate depiction of historical losses. Loans and lines of credit secured by junior liens on 1-4 family residential properties were being reserved for separately in light of continued uncertainty in the economy and the housing market in particular. An additional provision of approximately $1.4 million was recorded in 2012 as a result of this revision to the quantitative portion of the allowance for loan loss methodology for consumer and residential LHFI. The allowance for loan loss methodology segregates the consumer LHFI portfolio into homogeneous pools of loans that contain similar structure, repayment, collateral and risk profiles. These homogeneous pools of loans are shown below:
| · | Residential Mortgage
| · | Direct Consumer
| · | Auto Finance
| · | Junior Lien on 1-4 Family Residential Properties
| · | Credit Cards
| · | Overdrafts
The historical loss experience for these pools is determined by calculating a 12-quarter rolling average of net charge-offs, which is applied to each pool to establish the quantitative aspect of the methodology. Where, in Management’s estimation, the calculated loss experience does not fully cover the anticipated loss for a pool, an estimate is also applied to each pool to establish the qualitative aspect of the methodology, which represents the perceived risks across the loan portfolio at the current point in time. This qualitative methodology utilizes five separate factors made up of unique components that when weighted and combined produce an estimated level of reserve for each of the loan pools. The five qualitative factors include the following:
| · | Economic indicators
| · | Performance trends
| · | Management experience
| · | Lending policy measures
| · | Credit concentrations
The risk measure for each factor is converted to a scale ranging from 0 (No risk) to 100 (High Risk) to ensure that the combination of such factors is proportional. The determination of the risk measurement for each qualitative factor is done for all markets combined. The resulting estimated reserve factor is then applied to each pool. During 2014, Trustmark revised the qualitative portion of the allowance for loan loss methodology for consumer LHFI to incorporate the use of consumer credit bureau scores developed and provided by an independent third party. The credit bureau scores reflect the customer’s historical willingness and ability to service their debt. These credit bureau scores are monitored on an ongoing basis and represent a consumer’s credit payment history with all of their creditors including their repayment performance with Trustmark. The implementation of this consumer qualitative factor will allow Trustmark to better monitor shifts in risk that are represented in the retail portfolio and ensure that it is reflective in the allowance for loan loss calculation. An additional provision of approximately $1.4 million was recorded in 2014 as a result of this revision to the qualitative portion of the allowance for loan loss methodology for consumer LHFI. The resulting ratings from the individual factors are weighted and summed to establish the weighted-average qualitative factor of a specific loan portfolio. This weighted-average qualitative factor is then applied over the six loan pools. Changes in the allowance for loan losses, LHFI were as follows for the periods presented ($ in thousands):
|  | Years Ended December31, |
|  | 2014 |  |  | 2013 |  |  | 2012 |
Balance at beginning of period |  | $ | 66,448 |  |  | $ | 78,738 |  |  | $ | 89,518 |
Loans charged-off |  |  | (13,226 | ) |  |  | (13,478 | ) |  |  | (31,376 | )
Recoveries |  |  | 15,183 |  |  |  | 14,609 |  |  |  | 13,830 |
Net recoveries (charge-offs) |  |  | 1,957 |  |  |  | 1,131 |  |  |  | (17,546 | )
Provision for loan losses, LHFI |  |  | 1,211 |  |  |  | (13,421 | ) |  |  | 6,766 |
Balance at end of period |  | $ | 69,616 |  |  | $ | 66,448 |  |  | $ | 78,738 |
The following tables detail the balance in the allowance for loan losses, LHFI by portfolio segment at December 31, 2014 and 2013, respectively ($ in thousands):
|  | 2014 |
|  | Balance |  |  |  |  |  |  |  |  | Provision for |  |  | Balance |
|  | January 1, |  |  | Charge-offs |  |  | Recoveries |  |  | Loan Losses |  |  | December 31, |
Loans secured by real estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Construction, land development and other land |  | $ | 13,165 |  |  | $ | (1,100 | ) |  | $ | 3,608 |  |  | $ | (2,600 | ) |  | $ | 13,073 |
Secured by 1-4 family residential properties |  |  | 9,633 |  |  |  | (2,505 | ) |  |  | 922 |  |  |  | 1,627 |  |  |  | 9,677 |
Secured by nonfarm, nonresidential properties |  |  | 19,672 |  |  |  | (390 | ) |  |  | 944 |  |  |  | (1,703 | ) |  |  | 18,523 |
Other |  |  | 2,080 |  |  |  | (277 | ) |  |  | - |  |  |  | 338 |  |  |  | 2,141 |
Commercial and industrial loans |  |  | 15,522 |  |  |  | (2,092 | ) |  |  | 2,657 |  |  |  | 3,830 |  |  |  | 19,917 |
Consumer loans |  |  | 2,405 |  |  |  | (1,965 | ) |  |  | 3,883 |  |  |  | (2,174 | ) |  |  | 2,149 |
Other loans |  |  | 3,971 |  |  |  | (4,897 | ) |  |  | 3,169 |  |  |  | 1,893 |  |  |  | 4,136 |
Total allowance for loan losses, LHFI |  | $ | 66,448 |  |  | $ | (13,226 | ) |  | $ | 15,183 |  |  | $ | 1,211 |  |  | $ | 69,616 |
|  | Disaggregated by Impairment Method |
|  | Individually |  |  | Collectively |  |  | Total |
Loans secured by real estate: |  |  |  |  |  |  |  |  |
Construction, land development and other land |  | $ | 2,767 |  |  | $ | 10,306 |  |  | $ | 13,073 |
Secured by 1-4 family residential properties |  |  | 450 |  |  |  | 9,227 |  |  |  | 9,677 |
Secured by nonfarm, nonresidential properties |  |  | 2,787 |  |  |  | 15,736 |  |  |  | 18,523 |
Other |  |  | 52 |  |  |  | 2,089 |  |  |  | 2,141 |
Commercial and industrial loans |  |  | 6,449 |  |  |  | 13,468 |  |  |  | 19,917 |
Consumer loans |  |  | - |  |  |  | 2,149 |  |  |  | 2,149 |
Other loans |  |  | 259 |  |  |  | 3,877 |  |  |  | 4,136 |
Total allowance for loan losses, LHFI |  | $ | 12,764 |  |  | $ | 56,852 |  |  | $ | 69,616 |
|  | 2013 |
|  | Balance |  |  |  |  |  |  |  |  | Provision for |  |  | Balance |
|  | January 1, |  |  | Charge-offs |  |  | Recoveries |  |  | Loan Losses |  |  | December 31, |
Loans secured by real estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Construction, land development and other land |  | $ | 21,838 |  |  | $ | (1,441 | ) |  | $ | 3,077 |  |  | $ | (10,309 | ) |  | $ | 13,165 |
Secured by 1-4 family residential properties |  |  | 12,957 |  |  |  | (1,298 | ) |  |  | 427 |  |  |  | (2,453 | ) |  |  | 9,633 |
Secured by nonfarm, nonresidential properties |  |  | 21,096 |  |  |  | (1,002 | ) |  |  | 225 |  |  |  | (647 | ) |  |  | 19,672 |
Other |  |  | 2,197 |  |  |  | (910 | ) |  |  | 229 |  |  |  | 564 |  |  |  | 2,080 |
Commercial and industrial loans |  |  | 14,319 |  |  |  | (1,371 | ) |  |  | 2,298 |  |  |  | 276 |  |  |  | 15,522 |
Consumer loans |  |  | 3,087 |  |  |  | (2,425 | ) |  |  | 4,798 |  |  |  | (3,055 | ) |  |  | 2,405 |
Other loans |  |  | 3,244 |  |  |  | (5,031 | ) |  |  | 3,555 |  |  |  | 2,203 |  |  |  | 3,971 |
Total allowance for loan losses, LHFI |  | $ | 78,738 |  |  | $ | (13,478 | ) |  | $ | 14,609 |  |  | $ | (13,421 | ) |  | $ | 66,448 |
|  | Disaggregated by Impairment Method |
|  | Individually |  |  | Collectively |  |  | Total |
Loans secured by real estate: |  |  |  |  |  |  |  |  |
Construction, land development and other land |  | $ | 988 |  |  | $ | 12,177 |  |  | $ | 13,165 |
Secured by 1-4 family residential properties |  |  | 191 |  |  |  | 9,442 |  |  |  | 9,633 |
Secured by nonfarm, nonresidential properties |  |  | 2,307 |  |  |  | 17,365 |  |  |  | 19,672 |
Other |  |  | 123 |  |  |  | 1,957 |  |  |  | 2,080 |
Commercial and industrial loans |  |  | 1,253 |  |  |  | 14,269 |  |  |  | 15,522 |
Consumer loans |  |  | 2 |  |  |  | 2,403 |  |  |  | 2,405 |
Other loans |  |  | 317 |  |  |  | 3,654 |  |  |  | 3,971 |
Total allowance for loan losses, LHFI |  | $ | 5,181 |  |  | $ | 61,267 |  |  | $ | 66,448 |

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