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; and 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 $67.8 million and $76.2 million at December 31, 2021 and 2020, respectively. Included in commercial non-real estate loans at December 31, 2021 and 2020 was $531.1 million and $2.0 billion, respectively, of Paycheck Protection Program loans. The following table presents loans, net of unearned income, by portfolio class at December 31, 2021 and 2020:

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 Bank makes loans in the normal course of business to directors and executive officers of the Company and the Bank and to their associates. Loans to such related parties are made on substantially the same terms, including interest rates and collateral requirements, as those prevailing at the time for comparable transactions with unrelated parties and do not involve more than normal risk of collectability when originated. Balances of loans to the Company’s directors, executive officers and their associates at December 31, 2021 and 2020 were approximately $62.9 million and $11.6 million, respectively. Related party loan activity in 2021 reflect new loans of $3.1 million, repayments of $3.0 million and the addition of an existing $51.0 million loan whose borrower is a director appointed in 2021.

The Bank has a line of credit with the Federal Home Loan Bank of Dallas that is secured by blanket pledges of certain qualifying loan types. The Bank had borrowings on this line of $1.1 billion at both December 31, 2021 and 2020.

The following schedules show activity in the allowance for credit losses by portfolio class for the years ended December 31, 2021 and 2020, as well as the corresponding recorded investment in loans at December 31, 2021 and 2020. Effective January 1, 2020, the Company adopted the provisions of ASC 326 (CECL) using a modified retrospective basis. The difference between the December 31, 2019 incurred allowance and the CECL allowance is reflected as a cumulative effect of change in accounting principle in the table below. For further discussion of the day one impact of the CECL adoption, refer to Note 1 – Summary of Significant Accounting Policies and Recent Accounting Pronouncements.

	Commercial Non-Real Estate			Commercial Real Estate- Owner Occupied			Total Commercial and Industrial			Commercial Real Estate- Income Producing			Construction and Land Development			Residential Mortgages			Consumer			Total
(in thousands)	Year Ended December 31, 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		(33,523	)		(3,179	)		(36,702	)		(425	)		(274	)		(713	)		(12,722	)		(50,836	)
Recoveries		8,985			642			9,627			105			2,172			1,459			6,282			19,645
Net provision for loan losses		(29,267	)		(13,164	)		(42,431	)		(1,096	)		(6,258	)		(18,965	)		(8,171	)		(76,921	)
Ending balance - allowance for loan losses	$	95,888		$	53,433		$	149,321		$	108,058		$	22,102		$	30,623		$	31,961		$	342,065
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		(7	)		(58	)		(65	)		595			(787	)		3			(319	)		(573	)
Ending balance - reserve for unfunded lending commitments	$	4,522		$	323		$	4,845		$	1,694		$	21,907		$	22		$	866		$	29,334
Total allowance for credit losses	$	100,410		$	53,756		$	154,166		$	109,752		$	44,009		$	30,645		$	32,827		$	371,399
Allowance for loan losses:
Individually evaluated	$	177		$	94		$	271		$	20		$	20		$	408		$	184		$	903
Collectively evaluated		95,711			53,339			149,050			108,038			22,082			30,215			31,777			341,162
Allowance for loan losses	$	95,888		$	53,433		$	149,321		$	108,058		$	22,102		$	30,623		$	31,961		$	342,065
Reserve for unfunded lending commitments:
Individually evaluated	$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	—
Collectively evaluated		4,522			323			4,845			1,694			21,907			22			866			29,334
Reserve for unfunded lending commitments:	$	4,522		$	323		$	4,845		$	1,694		$	21,907		$	22		$	866		$	29,334
Total allowance for credit losses	$	100,410		$	53,756		$	154,166		$	109,752		$	44,009		$	30,645		$	32,827		$	371,399
Loans:
Individually evaluated for impairment	$	3,431		$	2,546		$	5,977		$	5,288		$	125		$	5,260		$	1,232		$	17,882
Collectively evaluated for impairment		9,609,029			2,818,700			12,427,729			3,459,338			1,228,545			2,418,630			1,582,158			21,116,400
Total loans	$	9,612,460		$	2,821,246		$	12,433,706		$	3,464,626		$	1,228,670		$	2,423,890		$	1,583,390		$	21,134,282

	Commercial Non-Real Estate		Commercial Real Estate- Owner Occupied		Total Commercial and Industrial		Commercial Real Estate- Income Producing		Construction and Land Development		Residential Mortgages		Consumer		Total
(in thousands)	Year Ended December 31, 2020
Allowance for credit losses
Allowance for loan losses:
Beginning balance	$	106,432	$	10,977	$	117,409	$	20,869	$	9,350	$	20,331	$	23,292	$	191,251
Cumulative effect of change in accounting principle		(244)		14,877		14,633		7,287		7,478		12,921		7,092		49,411
Charge-offs		(387,172)		(1,828)		(389,000)		(2,512)		(400)		(326)		(17,219)		(409,457)
Recoveries		6,032		763		6,795		46		846		1,400		5,584		14,671
Net provision for loan losses		424,645		44,345		468,990		83,784		9,188		14,516		27,823		604,301
Ending balance - allowance for loan losses	$	149,693	$	69,134	$	218,827	$	109,474	$	26,462	$	48,842	$	46,572	$	450,177
Reserve for unfunded lending commitments:
Beginning balance	$	3,974	$	—	$	3,974	$	—	$	—	$	—	$	—	$	3,974
Cumulative effect of change in accounting principle		5,772		288		6,060		449		15,658		17		5,146		27,330
Provision for losses on unfunded commitments		(5,217)		93		(5,124)		650		7,036		2		(3,961)		(1,397)
Ending balance - reserve for unfunded lending commitments	$	4,529	$	381	$	4,910	$	1,099	$	22,694	$	19	$	1,185	$	29,907
Total allowance for credit losses	$	154,222	$	69,515	$	223,737	$	110,573	$	49,156	$	48,861	$	47,757	$	480,084
Allowance for loan losses:
Individually evaluated	$	11,517	$	1,236	$	12,753	$	44	$	22	$	546	$	515	$	13,880
Collectively evaluated		138,176		67,898		206,074		109,430		26,440		48,296		46,057		436,297
Allowance for loan losses	$	149,693	$	69,134	$	218,827	$	109,474	$	26,462	$	48,842	$	46,572	$	450,177
Reserve for unfunded lending commitments:
Individually evaluated	$	241	$	—	$	241	$	—	$	—	$	—	$	—	$	241
Collectively evaluated		4,288		381		4,669		1,099		22,694		19		1,185		29,666
Reserve for unfunded lending commitments:	$	4,529	$	381	$	4,910	$	1,099	$	22,694	$	19	$	1,185	$	29,907
Total allowance for credit losses	$	154,222	$	69,515	$	223,737	$	110,573	$	49,156	$	48,861	$	47,757	$	480,084
Loans:
Individually evaluated for impairment	$	43,775	$	10,206	$	53,981	$	4,542	$	1,250	$	5,850	$	2,521	$	68,144
Collectively evaluated for impairment		9,943,208		2,847,239		12,790,447		3,353,397		1,063,807		2,659,362		1,854,774		21,721,787
Total loans	$	9,986,983	$	2,857,445	$	12,844,428	$	3,357,939	$	1,065,057	$	2,665,212	$	1,857,295	$	21,789,931

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 for collectively evaluated portfolios is developed using multiple Moody’s Analytics (“Moody’s”) macroeconomic forecasts applied to internally developed credit models for a two year reasonable and supportable period. These forecasts are anchored on a 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. The baseline scenario is positioned at the 50th percentile of possible outcomes. Several upside and downside alternative scenarios are also derived from that baseline scenario and considered when assessing reasonably possible outcomes.

In arriving at the allowance for credit losses at December 31, 2021, the Company weighted Moody’s December 2021 baseline economic forecast at 40% and the slower near-term growth S-2 scenario at 60%. The outlook reflected in the December 2021 economic scenarios have improved significantly compared to 2020, with widely available vaccines, lifting of most restrictions on movement and general improvement across most economic variables. The S-2 scenario assumes a more subdued growth compared to the baseline, primarily as a result of lesser efficacy of vaccines against variants of the coronavirus, prolonged labor shortages and global supply chain disruption and reduction or delay stimulus due to disagreements in Congress. The weighting of the S-2 scenario more heavily than the baseline scenario reflects the emergence of the Omicron variant of the coronavirus and the delay of the stimulus bill, both of which were not reflected in the baseline scenario. The decrease in the allowance for credit loss was across all portfolios at December 31, 2021 compared to December 31, 2020, and reflects the improvements in current and forecasted economic conditions and in the Company’s credit quality metrics.

The increase in the allowance for credit losses at December 31, 2020 as compared to December 31, 2019 reflects both the $76.7 million cumulative effect adjustment recorded upon adoption of CECL, and the impact of the economic shutdown in response to the COVID-19 pandemic and the sustained volatility of oil prices. In arriving at the allowance for credit losses at December 31, 2020, the Company weighted the baseline economic forecast at 65%, the downside slower near-term growth scenario S-2 at 25%, and the recessionary scenario S-3 at 10%.

The activity in the allowance for credit losses for the year ended December 31, 2020 also reflects the impact the sale of $497 million of energy-related loans. The write-down to loans’ observable market values plus cost to sell resulted in charge-offs of $242.6 million and a reserve release of $82.5 million, for a net provision for credit losses impact of $160.1 million, which is mostly reflected in the commercial non-real estate portfolio.

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

Nonaccrual loans include nonaccruing loans modified in troubled debt restructurings (TDRs) of $6.8 million and $21.6 million, at December 31, 2021 and 2020, respectively. Total TDRs, both accruing and nonaccruing, were $10.6 million at December 31, 2021 and $25.8 million at December 31, 2020. All TDRs are individually evaluated for credit loss.

The table below presents detail by portfolio class TDRs that were modified during the years ended December 31, 2021, 2020 and 2019. All such loans are individually evaluated for credit loss.

	Years Ended
($ in thousands)	2021						2020						2018
			Outstanding Recorded Investment						Outstanding Recorded Investment						Outstanding Recorded Investment
Troubled Debt Restructurings:	Number of Contracts		Pre- Modification		Post- Modification		Number of Contracts		Pre- Modification		Post- Modification		Number of Contracts		Pre- Modification		Post- Modification
Commercial non-real estate		4	$	7,232	$	7,232		3	$	745	$	745		13	$	64,051	$	57,240
Commercial real estate - owner occupied		—		—		—		1		297		297		1		167		167
Total commercial and industrial		4		7,232		7,232		4		1,042		1,042		14		64,218		57,407
Commercial real estate - income producing		—		—		—		—		—		—		1		123		123
Construction and land development		—		—		—		1		15		15		3		323		323
Residential mortgages		6		1,489		1,512		15		3,424		3,424		21		3,286		3,286
Consumer		4		86		86		6		89		89		10		168		168
Total loans		14	$	8,807	$	8,830		26	$	4,570	$	4,570		49	$	68,118	$	61,307

The TDRs modified during the year ended December 31, 2021 reflected in the table above include $7.1 million of loans with extended amortization terms or other payment concessions, $0.5 million with reduced interest rates, and $1.2 million with other modifications. The TDRs modified during the year ended December 31, 2020 include $1.0 million of loans with extended amortization terms or other payment concessions, $1.1 million with reduced interest rate, $0.4 million of loans with significant covenant waivers, and $2.1 million with other modifications. The TDRs modified during the year ended December 31, 2019 include $18.7 million of loans with extended terms or other payment concessions, $41.3 million of loans with significant covenant waivers, and $8.1 million of other modifications. In addition, the Company received approximately $6.8 million of equity securities of one commercial non-real estate borrower in satisfaction of a portion of its debt.

At December 31, 2021, the Company had no unfunded commitments to borrowers whose loan terms had been modified in TDRs and approximately $4.6 million at December 31, 2020.

During the year ended December 31, 2021, one residential mortgage loan totaling $0.6 million that was defaulted upon had been modified in a TDR in the preceding twelve months. During the year ended December 31, 2020, loans defaulted upon that had been modified in a TDR in the preceding twelve months were as follows: two commercial non real estate loans totaling $13.4 million, two residential mortgage loans totaling $0.8 million and one consumer loan totaling less than $0.1 million. During the year ended December 31, 2019, there were no loans defaulted upon that had been modified in a TDR in the preceding twelve months.

The TDR disclosures above do not include loans eligible for exclusion from TDR assessment under Section 4013 of the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”). Eligible modification must be related to COVID-19, executed on a loan that was not more than 30 days past due as of December 31, 2019 and executed between March 1, 2020 and December 31, 2020. This exclusion relief was extended to January 1, 2022 by the Consolidated Appropriations Act, 2021. These loans are 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 December 31, 2021 and 2020.

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 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 loans	$	42,102	$	12,348	$	37,284	$	91,734	$	21,042,548	$	21,134,282	$	5,524

December 31, 2020	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 Accruing
(in thousands)
Commercial non-real estate	$	7,963	$	2,564	$	39,530	$	50,057	$	9,936,926	$	9,986,983	$	583
Commercial real estate - owner occupied		1,525		753		13,663		15,941		2,841,504		2,857,445		955
Total commercial and industrial		9,488		3,317		53,193		65,998		12,778,430		12,844,428		1,538
Commercial real estate - income producing		1,494		798		5,744		8,036		3,349,903		3,357,939		182
Construction and land development		4,168		284		2,001		6,453		1,058,604		1,065,057		—
Residential mortgages		29,319		9,858		27,886		67,063		2,598,149		2,665,212		912
Consumer		12,215		5,012		11,714		28,941		1,828,354		1,857,295		729
Total loans	$	56,684	$	19,269	$	100,538	$	176,491	$	21,613,440	$	21,789,931	$	3,361

The following tables present the credit quality indicators by segment and portfolio class of loans at December 31, 2021 and December 31, 2020.

	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

	December 31, 2020
(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	$	9,439,264	$	2,641,423	$	12,080,687	$	3,219,155	$	1,033,060	$	16,332,902
Pass-Watch		314,739		114,358		429,097		89,968		22,820		541,885
Special Mention		79,613		46,239		125,852		5,989		5,751		137,592
Substandard		153,367		55,425		208,792		42,827		3,426		255,045
Doubtful		—		—		—		—		—		—
Total	$	9,986,983	$	2,857,445	$	12,844,428	$	3,357,939	$	1,065,057	$	17,267,424

The Company routinely assesses the ratings of loans in its portfolio through an established and comprehensive portfolio management process. Below are the definitions of the Company’s internally assigned grades:

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 December 31, 2021 and 2020. The Company defines vintage as the later of origination, renewal or restructure date.

	Term Loans
	Amortized Cost Basis by Origination Year
		2021	2020	2019	2018	2017	Prior	Revolving Loans	Revolving Loans Converted to Term Loans	Total
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

	Term Loans
	Amortized Cost Basis by Origination Year
		2020	2019	2018	2017	2016	Prior	Revolving Loans	Revolving Loans Converted to Term Loans	Total
Commercial Loans:
Pass		$5,673,370	$2,819,696	$1,740,784	$1,391,140	$960,094	$1,231,913	$2,420,058	$95,847	$16,332,902
Pass-Watch		115,555	96,473	50,475	42,877	58,331	84,363	74,629	19,182	541,885
Special Mention		3,196	27,157	21,074	30,872	28,933	4,146	18,626	3,588	137,592
Substandard		75,461	33,844	20,527	35,383	15,071	36,589	30,162	8,008	255,045
Doubtful		—	—	—	—	—	—	—	—	—
Total Commercial Loans		$5,867,582	$2,977,170	$1,832,860	$1,500,272	$1,062,429	$1,357,011	$2,543,475	$126,625	$17,267,424
Residential Mortgage and Consumer Loans:
Performing		$438,831	$504,124	$437,518	$560,347	$501,018	$816,567	$1,190,775	$6,127	4,455,307
Nonperforming		1,466	3,781	5,881	8,380	3,981	35,500	3,652	4,559	67,200
Total Consumer Loans		$440,297	$507,905	$443,399	$568,727	$504,999	$852,067	$1,194,427	$10,686	$4,522,507

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 are $4.4 million and $17.2 million of consumer loans secured by single family residential mortgage real estate that are in process of foreclosure as of December 31, 2021 and 2020, respectively. In addition to the

single family residential real estate loans in process of foreclosure, the Company also held $2.4 million and $3.4 million of foreclosed single family residential properties in other real estate owned as of December 31, 2021 and 2020, respectively.

Loans held for sale totaled $93.1 million and $136.1 million, respectively, at December 31, 2021 and 2020. 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.