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 $82.5 million and $67.8 million at September 30, 2022 and December 31, 2021, respectively. Included in commercial non-real estate loans at September 30, 2022 and December 31, 2021 was $75.7 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 September 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 nine months ended September 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
	Nine Months Ended September 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		(6,366	)		(946	)		(7,312	)		(1,066	)		(3	)		(102	)		(9,464	)		(17,947	)
Recoveries		9,460			606			10,066			878			132			1,463			4,479			17,018
Net provision for loan losses		(4,176	)		(5,076	)		(9,252	)		(30,458	)		4,516			(1,037	)		1,211			(35,020	)
Ending balance - allowance for loan losses	$	94,806		$	48,017		$	142,823		$	77,412		$	26,747		$	30,947		$	28,187		$	306,116
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		238			10			248			(205	)		3,602			(5	)		494			4,134
Ending balance - reserve for unfunded lending commitments		4,760			333			5,093			1,489			25,509			17			1,360			33,468
Total allowance for credit losses	$	99,566		$	48,350		$	147,916		$	78,901		$	52,256		$	30,964		$	29,547		$	339,584
Allowance for loan losses:
Individually evaluated	$	71		$	31		$	102		$	17		$	19		$	276		$	102		$	516
Collectively evaluated		94,735			47,986			142,721			77,395			26,728			30,671			28,085			305,600
Allowance for loan losses	$	94,806		$	48,017		$	142,823		$	77,412		$	26,747		$	30,947		$	28,187		$	306,116
Reserve for unfunded lending commitments:
Individually evaluated	$	3		$	—		$	3		$	—		$	—		$	—		$	—		$	3
Collectively evaluated		4,757			333			5,090			1,489			25,509			17			1,360			33,465
Reserve for unfunded lending commitments:	$	4,760		$	333		$	5,093		$	1,489		$	25,509		$	17		$	1,360		$	33,468
Total allowance for credit losses	$	99,566		$	48,350		$	147,916		$	78,901		$	52,256		$	30,964		$	29,547		$	339,584
Loans:
Individually evaluated	$	1,282		$	929		$	2,211		$	1,270		$	118		$	3,680		$	527		$	7,806
Collectively evaluated		9,904,145			3,032,204			12,936,349			3,685,270			1,541,139			2,840,043			1,574,978			22,577,779
Total loans	$	9,905,427		$	3,033,133		$	12,938,560		$	3,686,540		$	1,541,257		$	2,843,723		$	1,575,505		$	22,585,585

In arriving at the September 30, 2022 allowance for credit losses, the Company weighted the September 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 September 2022 baseline forecast include the following: (1) the global oil market remains mostly balanced in 2023, allowing oil prices to gradually drop; (2) the return to 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%, is expected to be achieved in the coming months; (3) GDP is expected to grow in the second half of the year, with forecasted annual growth of 1.6% in 2022, 1.4% in 2023 and 2.6% in 2024; (4) the Federal Funds rate will reach a target rate of 3.5% by the end of 2022, with the possibility of future rate increases; rate cuts not forecasted to begin until 2025; and (5) future surges in COVID-19 infections will not have a significant negative impact on economic conditions. Consistent with the prior quarter, management determined that assumptions provided for in the downside slower near-term growth/mild recessionary scenario (S-2) to be more likely than the baseline scenario; as such, the S-2 scenario was given a 75% probability weighting in our allowance for credit losses calculation at September 30, 2022. The S-2 scenario assumes that the conflict between Russia and Ukraine spans longer than anticipated in the baseline scenario 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. The Federal Reserve would react with a more aggressive approach than assumed in the baseline scenario, generating greater corrections in equity and housing markets and declines in spending. As such, the S-2 scenario incorporates a mild recession beginning in the fourth quarter of 2022, spanning three quarters, with a peak-to-trough decline in GDP of about 1.4%. Further, the S-2 scenario assumes that unemployment rate averages 4.0% in 2022, 6.1% in 2023 and 4.9% in 2024, with the return to full employment not occurring until the third quarter of 2024 and that an increase in the number of COVID-19 cases, hospitalizations and deaths will impede 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 improved since year-end, at which time we were still experiencing lingering effects of the pandemic and uncertainty related to the Omicron variant of the coronavirus. Positive economic indicators of growth within the Company's footprint, relatively stable asset quality metrics and minimal credit losses in recent periods allowed for a modest release of credit loss reserves during the nine months ended September 30, 2022.


				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
	Nine Months Ended September 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		(32,369	)		(1,722	)		(34,091	)		(231	)		(267	)		(218	)		(9,874	)		(44,681	)
Recoveries		6,579			363			6,942			100			1,548			933			4,636			14,159
Net provision for loan losses		(17,594	)		(10,642	)		(28,236	)		11,752			(5,167	)		(18,484	)		(7,999	)		(48,134	)
Ending balance - allowance for loan losses	$	106,309		$	57,133		$	163,442		$	121,095		$	22,576		$	31,073		$	33,335		$	371,521
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		(176	)		(131	)		(307	)		124			(383	)		(8	)		(387	)		(961	)
Ending balance - reserve for unfunded lending commitments		4,353			250			4,603			1,223			22,311			11			798			28,946
Total allowance for credit losses	$	110,662		$	57,383		$	168,045		$	122,318		$	44,887		$	31,084		$	34,133		$	400,467

Allowance for loan losses:
Individually evaluated	$	113		$	33		$	146		$	20		$	20		$	447		$	202		$	835
Collectively evaluated		106,196			57,100			163,296			121,075			22,556			30,626			33,133			370,686
Allowance for loan losses	$	106,309		$	57,133		$	163,442		$	121,095		$	22,576		$	31,073		$	33,335		$	371,521
Reserve for unfunded lending commitments:
Individually evaluated	$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	—
Collectively evaluated		4,353			250			4,603			1,223			22,311			11			798			28,946
Reserve for unfunded lending commitments:	$	4,353		$	250		$	4,603		$	1,223		$	22,311		$	11		$	798		$	28,946
Total allowance for credit losses	$	110,662		$	57,383		$	168,045		$	122,318		$	44,887		$	31,084		$	34,133		$	400,467
Loans:
Individually evaluated	$	5,929		$	5,618		$	11,547		$	4,004		$	127		$	5,083		$	1,315		$	22,076
Collectively evaluated		9,411,061			2,807,308			12,218,369			3,463,935			1,213,864			2,345,970			1,621,801			20,863,939
Total loans	$	9,416,990		$	2,812,926		$	12,229,916		$	3,467,939		$	1,213,991		$	2,351,053		$	1,623,116		$	20,886,015

The release of credit reserves across most portfolios during the nine months ended September 30, 2021 reflects improvements in economic indicators and forecasted conditions and in asset quality metrics following the economic disruption brought on in 2020 by the COVID-19 pandemic. However, the allowance for credit losses remained elevated compared to historical levels as a result of uncertainty surrounding future performance as the impact of stimulus diminished and pandemic-related payment deferral and other modifications expired. In arriving at the allowance for credit losses at September 30, 2021, the Company weighted the baseline economic forecast at 50% and the downside slower near-term growth scenario S-2 at 50%.

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



		September 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	$		4,528	$		965	$		6,974	$		1,264
Commercial real estate - owner occupied			2,237			701			4,921			729
Total commercial and industrial			6,765			1,666			11,895			1,993
Commercial real estate - income producing			1,883			1,200			5,458			5,207
Construction and land development			353			—			844			—
Residential mortgages			24,283			1,890			25,439			1,997
Consumer			6,523			—			11,887			48
Total loans	$		39,807	$		4,756	$		55,523	$		9,245

Nonaccrual loans include nonaccruing loans modified in troubled debt restructurings (“TDRs”) of $2.8 million and $6.8 million at September 30, 2022 and December 31, 2021, respectively. Total TDRs, both accruing and nonaccruing, were $4.8 million at September 30, 2022 and $10.6 million at December 31, 2021. All TDRs are individually evaluated for credit loss. At September 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 nine months ended September 30, 2022 and 2021.


	Three Months Ended
	September 30, 2022								September 30, 2021
($ in thousands) 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		196		196
Consumer		—			—			—		—		—		—
Total loans		—	$		—	$		—		1	$	196	$	196


	Nine Months Ended
	September 30, 2022						September 30, 2021
			Pre- Modification		Post- Modification				Pre- Modification		Post- Modification
	Number		Outstanding		Outstanding		Number		Outstanding		Outstanding
($ in thousands)	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		3		515		538
Consumer		3		76		76		4		86		86
Total loans		6	$	224	$	229		10	$	7,536	$	7,559

The TDRs modified during the nine months ended September 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 nine months ended September 30, 2021 include $7.1 million of loans with extended amortization terms or other payment concessions, and $0.5 million with other modifications.

Three commercial non-real estate loans totaling $3.1 million and four consumer and one residential mortgage loan totaling $0.2 million defaulted during the nine month period ended September 30, 2022 that had been modified in a TDR during the twelve months prior to default. One residential loan totaling $0.6 million that defaulted during the nine months ended September 30, 2021 had been modified in a TDR during the twelve months prior to default.

The TDR disclosures for the three and nine months ended September 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 September 30, 2022 and December 31, 2021.


September 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	$	26,101	$	5,828	$	4,367	$	36,296	$	9,869,131	$	9,905,427	$	540
Commercial real estate - owner occupied		8,626		756		910		10,292		3,022,841		3,033,133		540
Total commercial and industrial		34,727		6,584		5,277		46,588		12,891,972		12,938,560		1,080
Commercial real estate - income producing		111		—		1,308		1,419		3,685,121		3,686,540		—
Construction and land development		136		496		195		827		1,540,430		1,541,257		176
Residential mortgages		5,855		8,762		17,051		31,668		2,812,055		2,843,723		112
Consumer		5,365		2,640		3,545		11,550		1,563,955		1,575,505		1,232
Total	$	46,194	$	18,482	$	27,376	$	92,052	$	22,493,533	$	22,585,585	$	2,600


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 September 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.


	September 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	$	9,367,084	$	2,894,509	$	12,261,593	$	3,637,570	$	1,521,543	$	17,420,706
Pass-Watch		323,459		59,855		383,314		38,968		18,975		441,257
Special Mention		75,801		5,945		81,746		5,916		166		87,828
Substandard		139,083		72,824		211,907		4,086		573		216,566
Doubtful		—		—		—		—		—		—
Total	$	9,905,427	$	3,033,133	$	12,938,560	$	3,686,540	$	1,541,257	$	18,166,357


	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 September 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
September 30, 2022		2022		2021		2020		2019		2018		Prior		Revolving Loans		Revolving Loans Converted to Term Loans		Total
(in thousands)
Commercial Loans:
Pass		$	3,769,590	$	3,810,862	$	2,297,865	$	1,537,650	$	854,345	$	1,695,383	$	3,355,846	$	99,165	$	17,420,706
Pass-Watch			42,903		94,955		52,211		48,653		37,491		71,871		73,217		19,956		441,257
Special Mention			32,940		11,387		26,631		3,732		1,507		5,787		5,814		30		87,828
Substandard			48,755		21,437		14,430		30,482		23,389		25,043		48,842		4,188		216,566
Doubtful			—		—		—		—		—		—		—		—		—
Total Commercial Loans		$	3,894,188	$	3,938,641	$	2,391,137	$	1,620,517	$	916,732	$	1,798,084	$	3,483,719	$	123,339	$	18,166,357
Residential Mortgage and Consumer Loans:
Performing		$	549,415	$	662,455	$	543,996	$	272,160	$	161,093	$	997,873	$	1,195,933	$	4,002	$	4,386,927
Nonperforming			835		2,109		901		1,836		2,346		22,644		588		1,042		32,301
Total Consumer Loans		$	550,250	$	664,564	$	544,897	$	273,996	$	163,439	$	1,020,517	$	1,196,521	$	5,044	$	4,419,228


	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 September 30, 2022 and December 31, 2021 were $4.5 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 $0.5 million and $2.4 million of foreclosed single family residential properties in other real estate owned at September 30, 2022 and December 31, 2021, respectively.

Loans held for sale totaled $33.0 million and $93.1 million at September 30, 2022 and December 31, 2021, respectively. Loans held for sale is composed primarily of residential mortgage loans originated for sale in the secondary market. At September 30, 2022, residential mortgage loans carried at the fair value option totaled $15.1 million with an unpaid principal balance of $15.3 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.