The Company generally makes loans in its market areas of south and central Mississippi; southern and central Alabama; northwest, central and south Louisiana; the northern, central and panhandle regions of Florida; certain areas of east and northeast Texas, including Houston, Beaumont, Dallas, and San Antonio; and Nashville, Tennessee.

Loans, net of unearned income, by portfolio are presented at amortized cost basis in the table below. Amortized cost does not include accrued interest, which is reflected in the accrued interest line item in the Consolidated Balance Sheets, totaling $72.1 million and $67.8 million at June 30, 2022 and December 31, 2021, respectively. Included in commercial non-real estate loans at June 30, 2022 and December 31, 2021 was $151.3 million and $531.1 million, respectively, of Paycheck Protection Program loans, described in more detail below. The following table presents loans, net of unearned income, by portfolio class at June 30, 2022 and December 31, 2021.

The following briefly describes the composition of each loan category and portfolio class.

Commercial and industrial loans are made available to businesses for working capital (including financing of inventory and receivables), business expansion, to facilitate the acquisition of a business, and the purchase of equipment and machinery, including equipment leasing. These loans are primarily made based on the identified cash flows of the borrower and, when secured, have the added strength of the underlying collateral.

Commercial non-real estate loans may be secured by the assets being financed or other tangible or intangible business assets such as accounts receivable, inventory, ownership, enterprise value or commodity interests, and may incorporate a personal or corporate guarantee; however, some short-term loans may be made on an unsecured basis, including a small portfolio of corporate credit cards, generally issued as a part of overall customer relationships.

Commercial non-real estate loans also include loans made under the Small Business Administration’s (SBA) Paycheck Protection Program (PPP). PPP loans are guaranteed by the SBA and are forgivable to the debtor upon satisfaction of certain criteria. The loans bear interest at 1% per annum and have two or five year terms, depending on the date of origination. These loans also earn an origination fee of 1%, 3%, or 5%, depending on the loan size, which is deferred and amortized over the estimated life of the loan using the effective yield method.

Commercial real estate – owner occupied loans consist of commercial mortgages on properties where repayment is generally dependent on the cash flow from the ongoing operations and activities of the borrower. Like commercial non-real estate, these loans are primarily made based on the identified cash flows of the borrower, but also have the added strength of the value of underlying real estate collateral.

Commercial real estate – income producing loans consist of loans secured by commercial mortgages on properties where the loan is made to real estate developers or investors and repayment is dependent on the sale, refinance, or income generated from the operation of the property. Properties financed include retail, office, multifamily, senior housing, hotel/motel, skilled nursing facilities and other commercial properties.

Construction and land development loans are made to facilitate the acquisition, development, improvement and construction of both commercial and residential-purpose properties. Such loans are made to builders and investors where repayment is expected to be made from the sale, refinance or operation of the property or to businesses to be used in their business operations. This portfolio also includes residential construction loans and loans secured by raw land not yet under development.

Residential mortgages consist of closed-end loans secured by first liens on 1- 4 family residential properties. The portfolio includes both fixed and adjustable rate loans, although most longer term, fixed rate loans originated are sold in the secondary mortgage market.

Consumer loans include second lien mortgage home loans, home equity lines of credit and nonresidential consumer purpose loans. Nonresidential consumer loans include both direct and indirect loans. Direct nonresidential consumer loans are made to finance the purchase of personal property, including automobiles, recreational vehicles and boats, and for other personal purposes (secured and unsecured), and deposit account secured loans. Indirect nonresidential consumer loans include automobile financing provided to the consumer through an agreement with automobile dealerships, though the Company is no longer engaged in this type of lending and the remaining portfolio is in runoff. Consumer loans also include a small portfolio of credit card receivables issued on the basis of applications received through referrals from the Bank’s branches, online and other marketing efforts.

The calculation of the allowance for credit losses is performed using two primary approaches: a collective approach for pools of loans that have similar risk characteristics using a loss rate analysis, and a specific reserve analysis for credits individually evaluated. The allowance for credit losses was developed using multiple Moody’s Analytics (“Moody’s") macroeconomic forecasts applied to internally developed credit models for a two year reasonable and supportable period. The following tables present activity in the allowance for credit losses (ACL) by portfolio class for the six months ended June 30, 2022 and 2021, as well as the corresponding recorded investment in loans at the end of each period.


				Commercial			Total			Commercial
	Commercial			real estate-			commercial			real estate-			Construction
	non-real			owner			and			income			and land			Residential
(in thousands)	estate			occupied			industrial			producing			development			mortgages			Consumer			Total
	Six Months Ended June 30, 2022
Allowance for credit losses
Allowance for loan losses:
Beginning balance	$	95,888		$	53,433		$	149,321		$	108,058		$	22,102		$	30,623		$	31,961		$	342,065
Charge-offs		(3,747	)		(857	)		(4,604	)		(1,066	)		(3	)		(60	)		(5,627	)		(11,360	)
Recoveries		6,603			491			7,094			878			126			527			3,102			11,727
Net provision for loan losses		(5,925	)		(3,452	)		(9,377	)		(24,919	)		2,478			(2,506	)		67			(34,257	)
Ending balance - allowance for loan losses	$	92,819		$	49,615		$	142,434		$	82,951		$	24,703		$	28,584		$	29,503		$	308,175
Reserve for unfunded lending commitments:
Beginning balance	$	4,522		$	323		$	4,845		$	1,694		$	21,907		$	22		$	866		$	29,334
Provision for losses on unfunded commitments		51			40			91			(274	)		1,598			2			552			1,969
Ending balance - reserve for unfunded lending commitments		4,573			363			4,936			1,420			23,505			24			1,418			31,303
Total allowance for credit losses	$	97,392		$	49,978		$	147,370		$	84,371		$	48,208		$	28,608		$	30,921		$	339,478
Allowance for loan losses:
Individually evaluated	$	76		$	31		$	107		$	18		$	19		$	322		$	170		$	636
Collectively evaluated		92,743			49,584			142,327			82,933			24,684			28,262			29,333			307,539
Allowance for loan losses	$	92,819		$	49,615		$	142,434		$	82,951		$	24,703		$	28,584		$	29,503		$	308,175
Reserve for unfunded lending commitments:
Individually evaluated	$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	—
Collectively evaluated		4,573			363			4,936			1,420			23,505			24			1,418			31,303
Reserve for unfunded lending commitments:	$	4,573		$	363		$	4,936		$	1,420		$	23,505		$	24		$	1,418		$	31,303
Total allowance for credit losses	$	97,392		$	49,978		$	147,370		$	84,371		$	48,208		$	28,608		$	30,921		$	339,478
Loans:
Individually evaluated	$	1,559		$	937		$	2,496		$	1,289		$	120		$	3,991		$	905		$	8,801
Collectively evaluated		9,643,533			2,963,537			12,607,070			3,639,954			1,408,607			2,611,816			1,569,820			21,837,267
Total loans	$	9,645,092		$	2,964,474		$	12,609,566		$	3,641,243		$	1,408,727		$	2,615,807		$	1,570,725		$	21,846,068

In arriving at the June 30, 2022 allowance, the Company weighted the June 2022 baseline economic forecast, which Moody’s defines as the “most likely outcome” based on current conditions and its view of where the economy is headed, with a 25% probability. Key assumptions within the June 2022 baseline forecast include the following: (1) Russian military action will go no further than Ukraine and, as such, disruption to the U.S. economy will be limited and temporary; (2) the return to a full-employment, defined as an unemployment rate of 3.5%, labor force participation of approximately 62.5% and a prime age employment to population ratio above 80%, expected to be achieved this summer; (3) forecasted GDP growth of 2.7% in 2022 and 2.6% in 2023; (4) the Federal Funds rate will reach a target of 2.25% or 2.50% by the end of 2022; and (5) each future surge in COVID-19 infections having a diminishing threat to economic conditions. Management determined the assumptions provided for in the downside slower near-term growth (S-2) to be more likely than the baseline scenario; as such, the S-2 scenario was given a 75% probability weighting in the allowance for credit losses calculation at June 30, 2022. The S-2 scenario assumes that, when compared to baseline, the conflict between Russia and Ukraine spans longer than anticipated and results in longer and larger interruption of global commodity supply; in turn, supply chain issues worsen, increasing shortages of affected goods and further boosting inflation. As a result, the Federal Reserve would react by raising interest rates more than anticipated in the baseline scenario, generating greater corrections in equity markets and declines in spending. As such, the S-2 scenario incorporates a mild two quarter recession in the second half of 2022. Further, the scenario assumes that unemployment rate peaks at 6.5% in mid-2023, with the return to full employment not occurring until the third quarter of 2024 and that the number of COVID-19 cases, hospitalizations and deaths will rise again, slowing growth in spending on air travel, retail and hotels.

Despite economic volatility and uncertainty, including the possibility of a recession in the near-term, the credit loss outlook on the loan portfolio as a whole has not changed significantly. Positive economic indicators of growth within the Company's footprint, continued improvements in asset quality metrics and minimal credit losses in recent periods allowed for a modest release of credit loss reserves during the period.


				Commercial			Total			Commercial
	Commercial			real estate-			commercial			real estate-			Construction
	non-real			owner			and			income			and land			Residential
(in thousands)	estate			occupied			industrial			producing			development			mortgages			Consumer			Total
	Six Months Ended June 30, 2021
Allowance for credit losses
Allowance for loan losses:
Beginning balance	$	149,693		$	69,134		$	218,827		$	109,474		$	26,462		$	48,842		$	46,572		$	450,177
Charge-offs		(28,932	)		(1,682	)		(30,614	)		(231	)		(256	)		(207	)		(6,618	)		(37,926	)
Recoveries		4,187			287			4,474			—			1,164			437			3,099			9,174
Net provision for loan losses		(12,425	)		(5,967	)		(18,392	)		14,537			(642	)		(12,607	)		(4,653	)		(21,757	)
Ending balance - allowance for loan losses	$	112,523		$	61,772		$	174,295		$	123,780		$	26,728		$	36,465		$	38,400		$	399,668
Reserve for unfunded lending commitments:
Beginning balance	$	4,529		$	381		$	4,910		$	1,099		$	22,694		$	19		$	1,185		$	29,907
Provision for losses on unfunded commitments		1,174			(73	)		1,101			244			(1,470	)		(6	)		(252	)		(383	)
Ending balance - reserve for unfunded lending commitments		5,703			308			6,011			1,343			21,224			13			933			29,524
Total allowance for credit losses	$	118,226		$	62,080		$	180,306		$	125,123		$	47,952		$	36,478		$	39,333		$	429,192

Allowance for loan losses:
Individually evaluated	$	2,675		$	669		$	3,344		$	21		$	21		$	437		$	204		$	4,027
Collectively evaluated		109,848			61,103			170,951			123,759			26,707			36,028			38,196			395,641
Allowance for loan losses	$	112,523		$	61,772		$	174,295		$	123,780		$	26,728		$	36,465		$	38,400		$	399,668
Reserve for unfunded lending commitments:
Individually evaluated	$	241		$	—		$	241		$	—		$	—		$	—		$	—		$	241
Collectively evaluated		5,462			308			5,770			1,343			21,224			13			933			29,283
Reserve for unfunded lending commitments:	$	5,703		$	308		$	6,011		$	1,343		$	21,224		$	13		$	933		$	29,524
Total allowance for credit losses	$	118,226		$	62,080		$	180,306		$	125,123		$	47,952		$	36,478		$	39,333		$	429,192
Loans:
Individually evaluated	$	13,642		$	7,079		$	20,721		$	4,018		$	129		$	6,347		$	2,663		$	33,878
Collectively evaluated		9,519,068			2,802,789			12,321,857			3,415,010			1,294,907			2,406,112			1,676,766			21,114,652
Total loans	$	9,532,710		$	2,809,868		$	12,342,578		$	3,419,028		$	1,295,036		$	2,412,459		$	1,679,429		$	21,148,530

The modest release of credit reserves across most portfolios during the first six months of 2021 reflects improvements in economic indicators and economic forecasts. The continued elevated allowance level was a result of uncertainty surrounding future performance as the impact of stimulus diminishes and modifications expire. In arriving at the allowance for credit losses at June 30, 2021, the Company weighted the baseline economic forecast at 65% and the downside slower near-term growth scenario S-2 at 35%.

The following table shows the composition of nonaccrual loans and those without an allowance for loan loss, by portfolio class.



		June 30, 2022						December 31, 2021
(in thousands)		Total nonaccrual			Nonaccrual without allowance for loan loss			Total nonaccrual			Nonaccrual without allowance for loan loss
Commercial non-real estate	$		4,829	$		1,230	$		6,974	$		1,264
Commercial real estate - owner occupied			2,394			709			4,921			729
Total commercial and industrial			7,223			1,939			11,895			1,993
Commercial real estate - income producing			1,916			1,215			5,458			5,207
Construction and land development			680			—			844			—
Residential mortgages			20,362			1,900			25,439			1,997
Consumer			7,885			—			11,887			48
Total loans	$		38,066	$		5,054	$		55,523	$		9,245

Nonaccrual loans include nonaccruing loans modified in troubled debt restructurings (“TDRs”) of $3.2 million and $6.8 million at June 30, 2022 and December 31, 2021, respectively. Total TDRs, both accruing and nonaccruing, were $5.7 million at June 30, 2022 and $10.6 million at December 31, 2021. All TDRs are individually evaluated for credit loss. At June 30, 2022 and December 31, 2021, the Company had no unfunded commitments to borrowers whose loan terms have been modified in a TDR.

The tables below provide detail by portfolio class TDRs that were modified during the three and six months ended June 30, 2022 and 2021.


	Three Months Ended
($ in thousands)	June 30, 2022						June 30, 2021
Troubled Debt Restructurings:	Number of Contracts		Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment		Number of Contracts		Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment
Commercial non-real estate		—	$	—	$	—		—	$	—	$	—
Commercial real estate - owner occupied		—		—		—		—		—		—
Total commercial and industrial		—		—		—		—		—		—
Commercial real estate - income producing		—		—		—		—		—		—
Construction and land development		—		—		—		—		—		—
Residential mortgages		1		38		38		1		109		132
Consumer		1		3		3		3		32		32
Total loans		2	$	41	$	41		4	$	141	$	164


	Six Months Ended
($ in thousands)	June 30, 2022						June 30, 2021
			Pre- Modification		Post- Modification				Pre- Modification		Post- Modification
	Number		Outstanding		Outstanding		Number		Outstanding		Outstanding
	of		Recorded		Recorded		of		Recorded		Recorded
Troubled Debt Restructurings:	Contracts		Investment		Investment		Contracts		Investment		Investment
Commercial non-real estate		—	$	—	$	—		3	$	6,935	$	6,935
Commercial real estate - owner occupied		—		—		—		—		—		—
Total commercial and industrial		—		—		—		3		6,935		6,935
Commercial real estate - income producing		—		—		—		—		—		—
Construction and land development		—		—		—		—		—		—
Residential mortgages		3		148		153		2		319		342
Consumer		3		76		76		4		86		86
Total loans		6	$	224	$	229		9	$	7,340	$	7,363

The TDRs modified during the six months ended June 30, 2022 reflected in the table above include $0.1 million of loans with interest rate reduction and $0.1 million with other modifications. The TDRs modified during the six months ended June 30, 2021 include $7.1 million of loans with extended amortization terms or other payment concessions, and $0.3 million with other modifications.

Three commercial non-real estate loans and one consumer loan totaling $3.1 million that defaulted during the six month period ended June 30, 2022 had been modified in a TDR during the twelve months prior to default. One residential loan totaling $0.6 million that defaulted during the six months ended June 30, 2021 had been modified in a TDR during the twelve months prior to default.

The TDR disclosures for the three and six months ended June 30, 2021 do not include loans eligible for exclusion from TDR assessment under Section 4013 of the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), which expired on December 31, 2021. Any such loan having an eligible modification was reported in the aging analysis that follows based on the modified terms.

The tables below present the aging analysis of past due loans by portfolio class at June 30, 2022 and December 31, 2021.


June 30, 2022	30-59 days past due		60-89 days past due		Greater than 90 days past due		Total past due		Current		Total Loans		Recorded investment > 90 days and still accruing
(in thousands)
Commercial non-real estate	$	13,203	$	8,585	$	5,735	$	27,523	$	9,617,569	$	9,645,092	$	1,779
Commercial real estate - owner occupied		7,111		1,036		1,078		9,225		2,955,249		2,964,474		360
Total commercial and industrial		20,314		9,621		6,813		36,748		12,572,818		12,609,566		2,139
Commercial real estate - income producing		1,440		—		2,567		4,007		3,637,236		3,641,243		1,244
Construction and land development		214		656		346		1,216		1,407,511		1,408,727		53
Residential mortgages		4,366		5,489		14,175		24,030		2,591,777		2,615,807		150
Consumer		6,475		2,327		4,406		13,208		1,557,517		1,570,725		1,159
Total	$	32,809	$	18,093	$	28,307	$	79,209	$	21,766,859	$	21,846,068	$	4,745


December 31, 2021	30-59 days past due		60-89 days past due		Greater than 90 days past due		Total past due		Current		Total Loans		Recorded investment > 90 days and still accruing
(in thousands)
Commercial non-real estate	$	8,381	$	3,123	$	7,041	$	18,545	$	9,593,915	$	9,612,460	$	2,818
Commercial real estate - owner occupied		704		653		1,563		2,920		2,818,326		2,821,246		142
Total commercial and industrial		9,085		3,776		8,604		21,465		12,412,241		12,433,706		2,960
Commercial real estate - income producing		281		107		5,307		5,695		3,458,931		3,464,626		—
Construction and land development		2,624		1,022		587		4,233		1,224,437		1,228,670		83
Residential mortgages		23,306		4,638		15,339		43,283		2,380,607		2,423,890		310
Consumer		6,806		2,805		7,447		17,058		1,566,332		1,583,390		2,171
Total	$	42,102	$	12,348	$	37,284	$	91,734	$	21,042,548	$	21,134,282	$	5,524

The following tables present the credit quality indicators by segment and portfolio class of loans at June 30, 2022 and December 31, 2021. The Company routinely assesses the ratings of loans in its portfolio through an established and comprehensive portfolio management process.


	June 30, 2022
(in thousands)	Commercial non-real estate		Commercial real estate - owner- occupied		Total commercial and industrial		Commercial real estate - income producing		Construction and land development		Total commercial
Grade:
Pass	$	9,217,960	$	2,822,983	$	12,040,943	$	3,587,148	$	1,398,235	$	17,026,326
Pass-Watch		241,164		58,694		299,858		43,089		9,235		352,182
Special Mention		79,575		15,405		94,980		4,563		166		99,709
Substandard		106,393		67,392		173,785		6,443		1,091		181,319
Doubtful		—		—		—		—		—		—
Total	$	9,645,092	$	2,964,474	$	12,609,566	$	3,641,243	$	1,408,727	$	17,659,536


	December 31, 2021
(in thousands)	Commercial non-real estate		Commercial real estate - owner- occupied		Total commercial and industrial		Commercial real estate - income producing		Construction and land development		Total commercial
Grade:
Pass	$	9,279,719	$	2,650,399	$	11,930,118	$	3,373,099	$	1,216,177	$	16,519,394
Pass-Watch		157,815		86,133		243,948		67,157		9,289		320,394
Special Mention		43,344		23,377		66,721		4,466		1,909		73,096
Substandard		131,582		61,337		192,919		19,904		1,295		214,118
Doubtful		—		—		—		—		—		—
Total	$	9,612,460	$	2,821,246	$	12,433,706	$	3,464,626	$	1,228,670	$	17,127,002

The following tables present credit quality disclosures of amortized cost by segment and vintage for term loans and by revolving and revolving converted to amortizing at June 30, 2022 and December 31, 2021. The Company defines vintage as the later of origination, renewal or restructure date.


	Term Loans
	Amortized Cost Basis by Origination Year
June 30, 2022		2022		2021		2020		2019		2018		Prior		Revolving Loans		Revolving Loans Converted to Term Loans		Total
(in thousands)
Commercial Loans:
Pass		$	2,647,233	$	4,097,352	$	2,496,832	$	1,688,087	$	930,288	$	1,882,405	$	3,151,983	$	132,146	$	17,026,326
Pass-Watch			32,871		39,597		41,917		37,494		38,875		62,750		92,695		5,983		352,182
Special Mention			29,654		11,833		8,346		4,411		10,083		15,097		18,722		1,563		99,709
Substandard			27,016		19,000		13,778		39,177		17,094		29,919		30,186		5,149		181,319
Doubtful			—		—		—		—		—		—		—		—		—
Total Commercial Loans		$	2,736,774	$	4,167,782	$	2,560,873	$	1,769,169	$	996,340	$	1,990,171	$	3,293,586	$	144,841	$	17,659,536
Residential Mortgage and Consumer Loans:
Performing		$	350,898	$	601,109	$	518,412	$	288,601	$	173,446	$	1,051,413	$	1,168,323	$	4,035	$	4,156,237
Nonperforming			70		1,453		520		2,069		2,652		22,003		835		693	$	30,295
Total Consumer Loans		$	350,968	$	602,562	$	518,932	$	290,670	$	176,098	$	1,073,416	$	1,169,158	$	4,728	$	4,186,532


	Term Loans
	Amortized Cost Basis by Origination Year
December 31, 2021		2021		2020		2019		2018		2017		Prior		Revolving Loans		Revolving Loans Converted to Term Loans		Total
(in thousands)
Commercial Loans:
Pass		$	4,946,459	$	3,008,160	$	2,035,849	$	1,212,306	$	937,639	$	1,296,382	$	3,002,064	$	80,535	$	16,519,394
Pass-Watch			68,421		19,467		31,598		45,846		27,188		69,310		52,850		5,714		320,394
Special Mention			17,536		2,683		10,296		12,410		10,669		3,656		9,603		6,243		73,096
Substandard			43,895		43,494		36,763		14,664		28,337		16,125		20,358		10,482		214,118
Doubtful			—		—		—		—		—		—		—		—		—
Total Commercial Loans		$	5,076,311	$	3,073,804	$	2,114,506	$	1,285,226	$	1,003,833	$	1,385,473	$	3,084,875	$	102,974	$	17,127,002
Residential Mortgage and Consumer Loans:
Performing		$	580,813	$	467,497	$	355,833	$	223,494	$	320,344	$	892,361	$	1,120,461	$	5,995	$	3,966,798
Nonperforming			565		951		2,018		4,465		4,719		24,365		1,432		1,967		40,482
Total Consumer Loans		$	581,378	$	468,448	$	357,851	$	227,959	$	325,063	$	916,726	$	1,121,893	$	7,962	$	4,007,280

Loans in process of foreclosure include those for which formal foreclosure proceedings are in process according to local requirements of the applicable jurisdiction. Included in loans at June 30, 2022 and December 31, 2021 were $4.7 million and $4.4 million, respectively, of consumer loans secured by single family residential real estate that were in process of foreclosure. In addition to the single family residential real estate loans in process of foreclosure, the Company also held $0.4 million and $2.4 million of foreclosed single family residential properties in other real estate owned at June 30, 2022 and December 31, 2021, respectively.

Loans held for sale totaled $44.3 million and $93.1 million at June 30, 2022 and December 31, 2021, respectively. Loans held for sale is composed primarily of mortgage loans originated for sale in the secondary market. At June 30, 2022, residential mortgage loans carried at the fair value option totaled $21.5 million with an unpaid principal balance of $21.1 million. At December 31, 2021, residential mortgage loans carried at the fair value option totaled $41.0 million with an unpaid principal balance of $40.1 million. All other loans held for sale are carried at lower of cost or market.