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 and Dallas; 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 $86.0 million and $67.7 million at September 30, 2020 and December 31, 2019, respectively.

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% to 5%, depending on the loan size, that 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 a small amount of 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. 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 following tables show activity in the allowance for credit losses by portfolio class for the nine months ended September 30, 2020 and 2019, as well as the corresponding recorded investment in loans at the end of each period. 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 16 – Recent Accounting Pronouncements.

				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, 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		(364,123	)		(1,828	)	$	(365,951	)		(2,211	)		(7	)		(170	)		(13,640	)		(381,979	)
Recoveries		4,831			659		$	5,490			46			549			1,078			4,360			11,523
Net provision for loan losses		401,155			41,336		$	442,491			78,661			12,325			17,613			27,378			578,468
Ending balance - allowance for loan losses	$	148,051		$	66,021		$	214,072		$	104,652		$	29,695		$	51,773		$	48,482		$	448,674
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		(3,786	)		187			(3,599	)		1,599			6,046			(11	)		(3,813	)		222
Ending balance - reserve for unfunded lending commitments		5,960			475			6,435			2,048			21,704			6			1,333			31,526
Total allowance for credit losses	$	154,011		$	66,496		$	220,507		$	106,700		$	51,399		$	51,779		$	49,815		$	480,200
Allowance for loan losses:
Individually evaluated	$	27,304		$	1,344		$	28,648		$	24		$	169		$	416		$	456		$	29,713
Collectively evaluated		120,747			64,677			185,424			104,628			29,526			51,357			48,026			418,961
Allowance for loan losses	$	148,051		$	66,021		$	214,072		$	104,652		$	29,695		$	51,773		$	48,482		$	448,674
Reserve for unfunded lending commitments:
Individually evaluated	$	992		$	—		$	992		$	—		$	—		$	—		$	5		$	997
Collectively evaluated		4,968			475			5,443			2,048			21,704			6			1,328			30,529
Reserve for unfunded lending commitments:	$	5,960		$	475		$	6,435		$	2,048		$	21,704		$	6		$	1,333		$	31,526
Total allowance for credit losses	$	154,011		$	66,496		$	220,507		$	106,700		$	51,399		$	51,779		$	49,815		$	480,200
Loans:
Individually evaluated	$	73,139		$	11,124		$	84,263		$	5,549		$	1,837		$	6,064		$	3,924		$	101,637
Collectively evaluated		10,184,649			2,768,283			12,952,932			3,401,005			1,094,312			2,748,324			1,941,994			22,138,567
Total loans	$	10,257,788		$	2,779,407		$	13,037,195		$	3,406,554		$	1,096,149		$	2,754,388		$	1,945,918		$	22,240,204

				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, 2019
Allowance for loan losses:
Beginning balance	$	97,752		$	13,757		$	111,509		$	17,638		$	15,647		$	23,782		$	25,938		$	194,514
Charge-offs		(33,382	)		(137	)		(33,519	)		(10	)		(7	)		(660	)		(13,169	)		(47,365	)
Recoveries		5,662			284			5,946			518			108			433			2,866			9,871
Net provision for loan losses		29,267			545			29,812			7,604			(5,982	)		(2,076	)		9,194			38,552
Ending balance	$	99,299		$	14,449		$	113,748		$	25,750		$	9,766		$	21,479		$	24,829		$	195,572
Ending balance:
Allowance:
Individually evaluated for impairment	$	11,535		$	57		$	11,592		$	49		$	29		$	183		$	365		$	12,218
Amounts related to purchased credit impaired loans		135			172			307			40			144			8,032			300			8,823
Collectively evaluated for impairment		87,629			14,220			101,849			25,661			9,593			13,264			24,164			174,531
Total allowance	$	99,299		$	14,449		$	113,748		$	25,750		$	9,766		$	21,479		$	24,829		$	195,572
Loans:
Individually evaluated for impairment	$	201,979		$	11,109		$	213,088		$	2,781		$	3,385		$	4,301		$	1,583		$	225,138
Purchased credit impaired loans		33,040			45,124			78,164			27,281			23,431			93,450			6,294			228,620
Collectively evaluated for impairment		8,657,985			2,678,146			11,336,131			3,030,506			1,163,902			2,907,207			2,144,448			20,582,194
Total loans	$	8,893,004		$	2,734,379		$	11,627,383		$	3,060,568		$	1,190,718		$	3,004,958		$	2,152,325		$	21,035,952

The calculation of the allowance for credit losses under CECL 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 increase in the allowance for credit losses for the nine months ended September 30, 2020 reflects the impact of the economic shutdown in response to the pandemic and the significant drop in oil prices. The allowance for credit losses was developed using multiple Moody’s macroeconomic forecasts applied to internally developed credit models for a two year reasonable and supportable period. The Company weighted the 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, at 50%. Following the sharp recession in the first half of 2020, the baseline scenario assumes a gradual recovery beginning in the second half of 2020, with the most meaningful growth occurring after a vaccine for the coronavirus becomes widely available in the second quarter of 2021. The upside scenario S-1 and the downside scenario S-2 were each weighted 25% to incorporate reasonably possible alternative outcomes. The S-1 scenario reflects reasonably possible improving conditions and a quicker recovery in 2020 and in 2021 compared to the baseline. The S-2 scenario reflects reasonably possible slower economic recovery, with higher instances of infection and death, and restrictions on travel and business winding down somewhat more slowly as compared to the baseline. The degradation in economic conditions during the nine months ended September 30, 2020 created the need for an increased allowance across all portfolios. The allowance for credit loss activity for the nine months ended September 30, 2020 also reflects the impact the sale of $497 million of energy-related loans. The write-down to loans’ observable market value 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. Detail of the individually evaluated allowance is provided in the impaired loans section that follows.

The following table shows the composition of nonaccrual loans by portfolio class. Prior to the adoption of CECL, purchased credit impaired loans accounted for in pools with an accretable yield were considered to be performing. Such loans totaled $17.5 million at December 31, 2019.

For the nine months ended September 30, 2020 and 2019, the estimated amount of interest income that would have been recorded had the loans not been assigned nonaccrual status was $10.6 million and $9.9 million, respectively.

Nonaccrual loans include nonaccruing loans modified in troubled debt restructurings (“TDRs”) of $39.9 million and $132.5 million at September 30, 2020 and December 31, 2019, respectively. Total TDRs, both accruing and nonaccruing, were $49.1 million at September 30, 2020 and $193.7 million at December 31, 2019. All TDRs are individually evaluated for credit loss. At September 30, 2020 and December 31, 2019, the Company had unfunded commitments of $1.0 million and $2.4 million, respectively, to borrowers whose loan terms have been modified in a TDR.

The tables below detail by portfolio class TDRs that were modified during the three and nine months ended September 30, 2020 and 2019:

	Three Months Ended
($ in thousands)	September 30, 2020						September 30, 2019
			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		—	$	—	$	—		2	$	13,083	$	6,271
Commercial real estate - owner occupied		—		—		—		—		—		—
Total commercial and industrial		—		—		—		2		13,083		6,271
Commercial real estate - income producing		—		—		—		1		123		123
Construction and land development		—		—		—		3		323		323
Residential mortgages		5		1,358		1,358		3		297		297
Consumer		2		25		25		4		70		70
Total loans		7	$	1,383	$	1,383		13	$	13,896	$	7,084

	Nine Months Ended
($ in thousands)	September 30, 2020						September 30, 2019
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		3	$	745	$	745		10	$	27,220	$	20,408
Commercial real estate - owner occupied		—		—		—		1		167		167
Total commercial and industrial		3		745		745		11		27,387		20,575
Commercial real estate - income producing		—		—		—		1		123		123
Construction and land development		1		15		15		3		323		323
Residential mortgages		14		3,424		3,424		10		2,199		2,199
Consumer		7		89		89		6		116		116
Total loans		25		4,273		4,273		31	$	30,148	$	23,336

The TDRs modified during the nine months ended September 30, 2020 reflected in the table above include $0.7 million of loans with extended amortization terms or other payment concessions, $1.1 million with reduced interest rates, $0.4 million with significant covenant waivers and $2.1 million with other modifications. The TDRs modified during the nine months ended September 30, 2019 include $0.6 million of loans with extended amortization terms or other payment concessions, $22.1 million with significant covenant waivers and $7.4 million with other modifications.

One commercial non-real estate loan totaling $0.4 million, one residential mortgage loan totaling $0.6 million, and two consumer loans totaling $0.2 million that defaulted during the nine months ended September 30, 2020 had been modified in a TDR during the twelve months prior to default. No loans that defaulted during the nine months ended September 30, 2019 had been modified in a TDR during the twelve months prior to default.

The tables below present loans that are individually evaluated by portfolio class at September 30, 2020 and December 31, 2019. Loans individually evaluated include nonaccrual loans, TDRs and other loans that do not share common characteristics with loans evaluated on a collective basis that have aggregate relationship balances of $1 million or more.

The tables below present the average balances and interest income for individually evaluated loans for the three and nine months ended September 30, 2020 and 2019. Interest income recognized represents interest on accruing loans modified in a TDR.

The TDR disclosure above does not include loans modified under Section 4013 of the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) signed into law on March 27, 2020, which allows financial institutions to exclude eligible modifications from TDR assessment. Eligible modification must be (1) related to COVID-19, (2) executed on a loan that was not more than 30 days past due as of December 31, 2019 and (3) executed between March 1, 2020 and the earlier of 60 days after the date of the termination of the national emergency or December 31, 2020. At September 30, 2020, there were 817 loans totaling $564.8 million with active short-term payment deferrals of principal, interest or both, or other qualifying CARES Act modifications. 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 September 30, 2020 and December 31, 2019. Prior to the adoption of CECL, purchased credit impaired loans accounted for in pools under ASC 310-30 with an accretable yield were considered to be current in the table below as of December 31, 2019. These loans totaled $6.1 million for 30-59 days past due, $2.0 million for 60-89 days past due and $8.3 million for both greater than 90 days past due and greater than 90 days past due and still accruing at December 31, 2019.

September 30, 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 still accruing
(in thousands)
Commercial non-real estate	$	6,026	$	14,277	$	65,705	$	86,008	$	10,171,780	$	10,257,788	$	5,110
Commercial real estate - owner occupied		535		2,276		11,708		14,519		2,764,888		2,779,407		113
Total commercial and industrial		6,561		16,553		77,413		100,527		12,936,668		13,037,195		5,223
Commercial real estate - income producing		165		30,238		8,701		39,104		3,367,450		3,406,554		2,490
Construction and land development		1,076		237		3,178		4,491		1,091,658		1,096,149		393
Residential mortgages		3,164		11,779		32,908		47,851		2,706,537		2,754,388		1,818
Consumer		9,451		4,621		12,920		26,992		1,918,926		1,945,918		515
Total	$	20,417	$	63,428	$	135,120	$	218,965	$	22,021,239	$	22,240,204	$	10,439

December 31, 2019	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	$	20,893	$	13,445	$	100,806	$	135,144	$	9,031,803		9,166,947	$	1,537
Commercial real estate - owner occupied		4,862		556		7,268		12,686		2,725,774		2,738,460		830
Total commercial and industrial		25,755		14,001		108,074		147,830		11,757,577		11,905,407		2,367
Commercial real estate - income producing		738		703		2,910		4,351		2,990,097		2,994,448		450
Construction and land development		5,747		680		2,480		8,907		1,148,544		1,157,451		2,042
Residential mortgages		32,867		8,584		23,577		65,028		2,925,603		2,990,631		85
Consumer		18,586		6,215		9,901		34,702		2,130,116		2,164,818		1,638
Total	$	83,693	$	30,183	$	146,942	$	260,818	$	20,951,937	$	21,212,755	$	6,582

The following tables present the credit quality indicators by segments and portfolio class of loans held for investment at September 30, 2020 and December 31, 2019. The Company routinely assesses the ratings of loans in its portfolio through an established and comprehensive portfolio management process. In addition, the Company often examines portfolios of loans to determine if there are areas of risk not specifically identified in its loan by loan approach. As a result, several loans were downgraded to pass-watch in 2020 in reaction to the economic downturn caused by the pandemic and other environmental factors. In alignment with regulatory guidance, the Company has been working with its customers to manage through this period of severe uncertainty and economic stress, including providing various types of loan deferrals. While a significant number of these deferrals have expired, our ability to predict future cash flow is limited due to the economic uncertainty, and we expect that further risk rating adjustments may be required.

	September 30, 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	$	9,617,743	$	2,562,635	$	12,180,378	$	3,278,116	$	1,062,252	$	16,520,746
Pass-Watch		368,292		127,688		495,980		83,736		27,851		607,567
Special Mention		85,096		37,299		122,395		2,021		210		124,626
Substandard		186,657		51,785		238,442		42,681		5,836		286,959
Doubtful		—		—		—		—		—		—
Total	$	10,257,788	$	2,779,407	$	13,037,195	$	3,406,554	$	1,096,149	$	17,539,898

	December 31, 2019
(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	$	8,492,113	$	2,517,448	$	11,009,561		2,883,553	$	1,120,997	$	15,014,111
Pass-Watch		220,850		146,266		367,116		69,765		25,621		462,502
Special Mention		71,654		14,651		86,305		14,995		283		101,583
Substandard		382,330		60,095		442,425		26,135		10,550		479,110
Doubtful		—		—		—		—		—		—
Total	$	9,166,947	$	2,738,460	$	11,905,407	$	2,994,448	$	1,157,451	$	16,057,306

The following table presents credit quality disclosures of amortized cost by class and vintage for term loans and by revolving and revolving converted to amortizing at September 30, 2020. The Company defines vintage as the later of origination, renewal or restructure date.

	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		$	4,980,953	$	3,098,996	$	1,979,152	$	1,508,213	$	1,067,144	$	1,417,583	$	2,385,763	$	82,942	$	16,520,746
Pass-Watch			70,389		101,741		56,681		78,598		53,259		116,413		125,134		5,352		607,567
Special Mention			5,687		13,763		24,805		17,888		31,355		2,268		25,960		2,900		124,626
Substandard			76,243		21,552		24,505		37,104		18,231		50,571		48,004		10,749		286,959
Doubtful			—		—		—		—		—		—		—		—		—
Total Commercial Loans		$	5,133,272	$	3,236,052	$	2,085,143	$	1,641,803	$	1,169,989	$	1,586,835	$	2,584,861	$	101,943	$	17,539,898
Residential Mortgage and Consumer Loans:
Performing		$	351,828	$	501,172	$	489,007	$	629,621	$	536,380	$	901,979	$	1,212,937	$	5,609		4,628,533
Nonperforming			1,244		4,540		6,181		10,422		5,178		35,169		3,039		6,000		71,773
Total Consumer Loans		$	353,072	$	505,712	$	495,188	$	640,043	$	541,558	$	937,148	$	1,215,976	$	11,609	$	4,700,306

Under the transition provisions for the application of CECL, the Company has classified all loans previously accounted for as purchased credit impaired under ASC 310-30 to be classified as purchased credit deteriorated. The application of these provisions resulted in an increase of $19.8 million to the amortized cost basis of the financial asset and the allowance for credit losses at the date of adoption, representing the remaining credit portion of the purchased discount. The Company elected not to maintain pools of loans accounted for under Subtopic 310-30 with the adoption of CECL. The remaining noncredit discount was allocated to the individual loans and will be accreted to interest income using the interest method based on the effective interest rate. Changes in the carrying amount of purchased credit impaired loans and related accretable yield are presented in the following table for the year ended December 31, 2019.

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, 2020 and December 31, 2019 was $11.2 million and $8.6 million of consumer loans secured by single family residential real estate that were in process of foreclosure. In March 2020, in light of the economic deterioration stemming from the COVID-19 pandemic, the Company placed all active residential mortgage foreclosures on hold and suspended the filing of new foreclosures. On September 1, 2020 the Company resumed foreclosure activity in all states except Florida, where the moratorium expired on September 30 and foreclosure activity resumed October 1, 2020. In addition to the single family residential real estate loans in process of foreclosure, the Company also held $3.6 million and $6.3 million of foreclosed single family residential properties in other real estate owned at September 30, 2020 and December 31, 2019, respectively.

At September 30, 2020 and December 31, 2019, loans held for sale was comprised only of mortgage loans originated for sale in the secondary market.