The table below shows the Company’s deposit market share ranking by state in which the Company operates based on deposits of FDIC-insured institutions as of June 30, ~~2015,~~2016, the last date such information is available from the FDIC:

Table 1 Deposit Market Share Ranking

		Deposit Market
State		Share Rank*
Alabama		2nd
Arizona		~~4th~~5th
California		~~26th~~29th
Colorado		~~10th~~11th
Florida		19th
New Mexico		11th
Texas		4th

*Source: SNL Financial

Employees

At December 31, ~~2015,~~2016, the Company had approximately ~~10,553~~10,336 full-time equivalent employees.

Supervision, Regulation and Other Factors

Like all bank holding companies, the Company is regulated extensively under federal and state law. In addition, certain of the Company's non-bank subsidiaries are subject to regulation under federal and state law. The following discussion sets forth some of the elements of the bank regulatory framework applicable to the Company and certain of its subsidiaries. The bank regulatory framework is intended primarily for the protection of depositors and the DIF and not for the protection of security holders and creditors. To the extent that the following information describes statutory and regulatory provisions, it is qualified in its entirety by reference to the particular statutory and regulatory provisions.

General

Bank holding companies are subject to supervision and regulation by the Federal Reserve Board under the Bank Holding Company Act. In addition, the Alabama Banking Department regulates holding companies, like the Company, that own Alabama-chartered banks, like the Bank, under the bank holding company laws of the State of Alabama. The Company is subject to primary regulation and examination by the Federal Reserve Board, through the Federal Reserve Bank of Atlanta, and by the Alabama Banking Department. Numerous other federal and state laws, as well as regulations promulgated by the Federal Reserve Board and the state banking regulator, govern almost all aspects of the operations of the ~~Company.~~Company and the Bank. The Company and the Bank are also subject to supervision and regulation by the CFPB. Various federal and state bodies regulate and supervise the Company's non-bank subsidiaries including its brokerage, investment advisory, insurance agency and processing operations. These include, but are not limited to, the SEC, FINRA, federal and state banking regulators and various state regulators of insurance and brokerage activities. BBVA Securities Inc., a subsidiary of the Company, is permitted to underwrite and deal in bank-ineligible securities subject to certain terms and conditions pursuant to an authorizing order issued by the Federal Reserve Board.

The legislative, regulatory and supervisory framework governing the financial services sector has undergone significant and rapid change since the financial crisis. Moreover, the intensity of supervisory and regulatory scrutiny has also increased. While most of the changes required by the Dodd-Frank Act which is discussed in greater detail below, altered the authority and duties of the federal banking and securities regulatory agencies and requires the issuance of many implementing regulations which will take effect over several years, making it difficult to anticipate the overallthat impact to the Company ~~its customers~~have been implemented or are expected to follow a known trajectory, new changes under the ~~financial industry more generally. While the overall~~Trump administration, including their nature and impact, cannot yet be ~~predicted~~determined with any degree of ~~certainty, the Company is affected by the Dodd-Frank Act in a wide range of areas.~~certainty.

Permitted Activities

Under the Bank Holding Company Act, a bank holding company is generally permitted to engage in, or acquire direct or indirect control of more than five percent of the voting shares of, any company engaged in the following activities:

banking or managing or controlling banks;

furnishing services to or performing services for its subsidiaries; and

~~Table of Contents~~

engaging in activities that the Federal Reserve Board determines to be so closely related to banking as to be a proper incident to the business of banking, including:

factoring accounts receivable;

making, acquiring, brokering or servicing loans and usual related activities;

leasing personal or real property;

operating a non-bank depository institution, such as a savings association;

performing trust company functions;

providing financial and investment advisory activities;

conducting discount securities brokerage activities;

underwriting and dealing in government obligations and money market instruments;

providing specified management consulting and counseling activities;

performing selected data processing services and support services;

acting as agent or broker in selling credit life insurance and other types of insurance in connection with credit transactions;

performing selected insurance underwriting activities;

providing certain community development activities (such as making investments in projects designed primarily to promote community welfare); and

issuing and selling money orders and similar consumer-type payment instruments.

The Federal Reserve Board has the authority to order a bank holding company or its subsidiaries to terminate any of these activities or to terminate its ownership or control of any subsidiary when it has reasonable cause to believe that the bank holding company's continued ownership, activity or control constitutes a serious risk to the financial safety, soundness or stability of it or any of its bank subsidiaries.

Actions by Federal and State Regulators

~~Like all bank holding companies, the Company is regulated extensively under federal and state law.~~ Under federal and state laws and regulations pertaining to the safety and soundness of insured depository institutions, state banking regulators, the Federal Reserve Board, and separately the FDIC as the insurer of bank deposits, have the authority to compel or restrict certain actions on the Company's part if they determine that it has insufficient capital or other resources, or is otherwise operating in a manner that may be deemed to be inconsistent with safe and sound banking practices. Under this authority, the Company's bank regulators can require it to enter into informal or formal supervisory agreements, including board resolutions, memoranda of understanding, written agreements and consents or cease and desist orders, pursuant to which the Company would be required to take identified corrective actions to address cited concerns and to refrain from taking certain actions.

Standards for Safety and Soundness

The Federal Deposit Insurance Act requires the federal bank regulatory agencies to prescribe, by regulation or guideline, operational and managerial standards for all insured depository institutions relating to: internal controls; information systems and audit systems; loan documentation; credit underwriting; interest rate risk exposure; and asset quality. The agencies also must prescribe standards for asset quality, earnings, and stock valuation, as well as standards for compensation, fees and benefits. The federal banking regulators have adopted regulations and interagency guidelines prescribing standards for safety and soundness to implement these required standards. These guidelines set forth the safety and soundness standards used to identify and address problems at insured depository institutions before capital becomes impaired. Under the regulations, if a regulator determines that a bank fails to meet any standards prescribed

~~Table of Contents~~

by the guidelines, the regulator may require the bank to submit an acceptable plan to achieve compliance, consistent with deadlines for the submission and review of such safety and soundness compliance plans.

Dividends

The Federal Reserve Board has issued policy statements that provide that insured banks and bank holding companies should generally only pay dividends out of current operating earnings.

The primary sources of funds for the Company's interest and principal payments on its debt are cash on hand and dividends from its bank and non-bank subsidiaries. Various federal and state statutory provisions and regulations limit the amount of dividends that the Bank and its non-banking subsidiaries may pay. Under Alabama law, the Bank may not pay a dividend in excess of 90 percent of its net earnings until its surplus is equal to at least 20 percent of capital. The Bank is also required by Alabama law to seek the approval of the Alabama Superintendent of Banking prior to the payment of dividends if the total of all dividends declared by the Bank in any calendar year will exceed the total of (a) the Bank's net earnings for that year, plus (b) its retained net earnings for the preceding two years, less any required transfers to surplus. The statute defines net earnings as the remainder of all earnings from current operations plus actual recoveries on loans and investments and other assets, after deducting from the total thereof all current operating expenses, actual losses, accrued dividends on preferred stock, if any, and all federal, state and local taxes. The Bank cannot, without approval from the Federal Reserve Board and the Alabama Superintendent of Banking, declare or pay a dividend to the Company unless the Bank is able to satisfy the criteria discussed above.

The Federal Deposit Insurance Corporation Improvement Act generally prohibits a depository institution from making any capital distribution, including payment of a dividend, or paying any management fee to its holding company if the institution would thereafter be undercapitalized. In addition, federal banking regulations applicable to the Company and its bank subsidiary require minimum levels of capital that limit the amounts available for payment of dividends. In addition, many regulators have a policy, but not a requirement, that a dividend payment should not exceed net income to date in the current year. The ability of banks and bank holding companies to pay dividends and make other forms of capital distribution also depends on their ability to maintain a sufficient capital conservation buffer under the U.S. Basel III capital framework. The ~~capital conservation buffer is being phased in for the Company and the Bank beginning on January 1, 2016. The~~ Parent's ability to pay dividends is also subject to the Federal Reserve Board's review of the Parent's annual capital plan and supervisory stress tests of the Company conducted by the Federal Reserve Board as a part of its annual CCAR process, as discussed below under "Large bank holding companies are required to submit annual capital plans to the Federal Reserve Board and are subject to stress testing requirements."

Enhanced Prudential Standards

In the past few years, the Federal Reserve Board has imposed greater risk-based and leverage capital requirements, liquidity requirements, single counterparty credit limits, capital planning and stress testing requirements, risk management requirements and other enhanced prudential standards for bank holding companies with $50 billion or more in total consolidated assets, including the Company. The capital, liquidity and capital planning and stress testing requirements of these enhanced prudential standards are discussed under the relevant topic areas below. The Federal Reserve Board has proposed but not yet finalized the single-counterparty credit limits requirements and an early remediation framework for large bank holding companies.

Under the enhanced prudential standard applicable to Large FBOs, BBVA designated the Parent as its IHC. BBVA’s combined U.S. operations (including its U.S. branches, agencies and subsidiaries) are also subject to liquidity, risk management, stress testing, asset maintenance and other enhanced prudential standards.

Capital

The Federal Reserve Board has adopted guidelines pursuant to which it assesses the adequacy of capital in examining and supervising a bank holding company and in reviewing applications submitted to it under the Bank Holding Company Act. These guidelines include quantitative measures that assign risk weights to a bank holding company's assets, exposures and off-balance sheet items to determine its risk-weighted assets and that define and set minimum risk-based capital and leverage requirements. Under the capital framework currently in effect, bank holding companies are required to maintain a CET1 Risk-Based Capital Ratio of at least 4.5 percent, a Tier 1 Risk-Based Capital Ratio of at least 6 percent, a Total Risk-Based Capital Ratio of at least 8 percent and a Leverage Ratio of at least 4 percent.

CET1 capital consists principally of common stock and related surplus, plus retained earnings, less any amounts of goodwill, other intangible assets, and other items required to be deducted. Tier 1 capital consists principally of CET1 capital plus certain eligible forms of preferred stock and trust preferred securities and minority interests which are includible subject to phase-out transition provisions. Tier 2 capital primarily includes qualifying subordinated debt instruments, permitted trust preferred securities phased-out of Tier 1 capital, and allowance for loan losses. Total capital is Tier 1 capital plus Tier 2 capital. The denominator of the risk-based capital ratios is risk-weighted assets, a measure of assets and other exposures weighted to take into account different risk characteristics. For purpose of the Leverage Ratio, the denominator is quarterly average assets excluding goodwill, other intangible assets and certain other items deducted from capital.

Capital Requirements Applicable to the Company

~~On January 1, 2015, the capital adequacy standards applicable to the~~The Company and the Bank ~~transitioned from a framework based on the 1988 Basel I capital accord~~are subject to the U.S. Basel III capital ~~framework. The U.S. Basel III capital~~

~~Table of Contents~~

~~framework reflects the implementation~~rule, which implements in the United States ~~under the Dodd-Frank Act and rules established by the federal banking regulators,~~ of a set of internationally agreed-upon bank capital standards known as ~~“Basel~~Basel III,” which isare published by the Basel Committee, a committee of central bank and regulatory officials from 27 countries. ~~These~~The Basel III standards ~~which are aimed at increasing~~were developed after the ~~quality and quantity of regulatory capital, seek~~2008 financial crisis to further strengthen financial institutions' capital positions by requiring banking organizations to maintain higher minimum levels of capital and by implementing capital buffers above these minimum levels to help withstand future periods of stress.

~~In July 2013, the federal banking regulators issued~~Certain aspects of the U.S. Basel III ~~final rule. The final rule implements the Basel III~~ capital ~~framework and certain provisions of the Dodd-Frank Act, including the Collins Amendment. Certain aspects of the final~~ rule, such as the ~~new~~ minimum capital ratios and the ~~revised~~ methodology for calculating risk-weighted assets, became effective on January 1, 2015 for the Bank and the Company. Other aspects of the ~~final~~ rule, such as the capital conservation buffer and the ~~new~~certain regulatory deductions from and adjustments to capital, are being phased in over several ~~years beginning on January 1, 2016~~years. The phase in period for the capital conservation buffer ~~and~~began on January 1, ~~2015 for the new~~2016, with an initial phase-in amount of greater than 0.625%, rising to greater than 2.5% beginning on January 1, 2019. The required capital ~~deductions and adjustments.~~conservation buffer is greater than 1.25% in 2017.

~~Consistent with the Basel Committee's Basel III~~Compared to previously effective capital ~~framework,~~rules, the U.S. Basel III ~~final~~capital rule ~~includes~~focuses regulatory capital on CET1 capital, narrows the eligibility criteria for regulatory capital instruments, revises the methodology for calculating risk-weighted assets for certain types of assets and exposures and introduces regulatory adjustments and deductions from capital. The U.S. Basel III capital rule requires certain U.S. banking organizations, including the Bank and the Company, to maintain a ~~new~~ minimum ratio of CET1 capital to risk-weighted assets of 4.5 percent and, when fully phased in, a CET1 capital conservation buffer of greater than 2.5 percent of risk-weighted ~~assets that will apply to all U.S. banking organizations, including the Bank and the Company.~~assets. Failure to maintain the capital conservation buffer will result in increasingly stringent restrictions on a banking organization's ability to make dividend payments and other capital distributions and pay discretionary bonuses to executive officers. The ~~final~~U.S. Basel III capital rule also ~~increases the~~requires a minimum Tier 1 Risk-Based Capital Ratio ~~from 4 percent to~~of 6 percent ~~while maintaining the current~~and a minimum Total Risk-Based Capital Ratio of 8 percent. In addition, for the largest and most internationally active U.S. banking organizations, which do not include the Bank and the Company, the final rule includes a new minimum supplementary Leverage Ratio that takes into account certain off-balance sheet exposures.

The U.S. Basel III final rule focuses regulatory capital on CET1 capital, and introduces new regulatory adjustments and deductions from capital as well as narrower eligibility criteria for regulatory capital instruments. The new eligibility criteria for regulatory capital instruments ~~results in,~~under the U.S. Basel III capital rule required, among other things, that trust preferred securities no longer qualifying as Tier 1 capital for bank holding companies such as the Company, an outcome that is also required by the Collins Amendment provision of the Dodd-Frank Act. Trust preferred securities were required to be phased out of the ~~Company's~~Company’s Tier 1 capital by January 1, 2016. The final rule also revises the methodology for calculating risk-weighted assets for certain types of assets and exposures. Additionally, under the final rule, the effects of certain changes in accumulated other comprehensive income are generally reflected in capital measures. However, standardized approach banking organizations, including the Company and the Bank, were permitted a one-time election to permanently exclude these items, which reduces volatility in capital for the effect of these items. The Company and the Bank made this election in the first quarter of 2015.

Under the U.S. Basel I capital framework in effect for the Company prior to January 1, 2015, to be well-capitalized the Company generally must have maintained a Total Risk-Based Capital Ratio of 10 percent or greater, a Tier 1 Risk-Based Capital Ratio of 6 percent or greater, and a Leverage Ratio of 5 percent or greater. Under the U.S. Basel III capital framework in effect for the Company since January 1, 2015, the Federal Reserve Board has not yet revised the quantitative guidelines, above the regulatory minimum requirements, for bank holding companies to be considered well-capitalized. Under the U.S. Basel III capital rule, ~~in effect for the Bank since January 1, 2015,~~ to be well-capitalized, the Bank must maintain a Total Risk-Based Capital Ratio of 10 percent or greater, a Tier 1 Risk-Based Capital Ratio of 8 percent or greater, a CET1 Risk-Based Capital Ratio of 6.5 percent or greater, and a Tier 1 Leverage Ratio of 5 percent or ~~greater~~

~~Table~~greater. For a bank holding company such as the Company to be well capitalized, it generally must maintain a Total Risk-Based Capital Ratio of ~~Contents~~10 percent or greater and a Tier 1 Risk Based Capital Ratio of 6 percent or greater.

Capital Ratios as of December 31, ~~2015~~2016

The table below shows certain regulatory capital ratios for the Company and the Bank as of December 31, ~~2015~~2016 using the Transitional Basel III regulatory capital methodology applicable to the Company during ~~2015.~~2016.

Table 2 Capital Ratios	Table 2 Capital Ratios								Table 2 Capital Ratios

	Regulatory Minimum for Company and Bank		Well-Capitalized Minimum for the Bank		The Company		The Bank		Regulatory Minimum for Company and Bank (1)		Well-Capitalized Minimum for the Bank		The Company		The Bank
CET 1 Risk-Based Capital Ratio	4.5	%	6.5	%	10.70	%	10.39	%	4.5	%	6.5	%	11.49	%	10.93	%
Tier 1 Risk-Based Capital Ratio	6.0	%	8.0	%	11.08	%	10.41	%	6.0	%	8.0	%	11.85	%	10.95	%
Total Risk-Based Capital Ratio	8.0	%	10.0	%	13.68	%	13.14	%	8.0	%	10.0	%	14.31	%	13.56	%
Leverage Ratio	4.0	%	5.0	%	8.95	%	8.89	%	4.0	%	5.0	%	9.46	%	9.14	%

(1) Regulatory minimum requirements do not include the capital conservation buffer, which must be maintained in addition to meeting regulatory minimum requirements in order to avoid automatic restrictions on capital distributions and certain discretionary bonus payments.

See Note 17, Regulatory Capital Requirements and Dividends from Subsidiaries, in the Notes to the Consolidated Financial Statements, for additional information on the calculation of capital ratios for the Company and the Bank.

Prompt Corrective Action for Undercapitalization

The FDICIA established a system of prompt corrective action to resolve the problems of undercapitalized insured depository institutions. Under this system, the federal banking regulators are required to rate insured depository institutions on the basis of five capital categories as described below. The federal banking regulators are also required to take mandatory supervisory actions and are authorized to take other discretionary actions, with respect to insured depository institutions in the three undercapitalized categories, the severity of which will depend upon the capital category to which the insured depository institution is assigned. Generally, subject to a narrow exception, the FDICIA requires the banking regulator to appoint a receiver or conservator for an insured depository institution that is critically undercapitalized. The federal banking regulators have specified by regulation the relevant capital level for each category. Under the prompt corrective action regulations that are currently in effect under the U.S. Basel III framework, all insured depository institutions are assigned to one of the following capital categories:

Well-capitalized - The insured depository institution exceeds the required minimum level for each relevant capital measure. A well-capitalized insured depository institution is one (1) having a Total Risk-Based Capital Ratio of 10 percent or greater, (2) having a Tier 1 Risk-Based Capital Ratio of 8 percent or greater, (3) having a CET1 Risk-Based Capital Ratio of 6.5 percent or greater (4) having a Leverage Ratio of 5 percent or greater, and (5) that is not subject to any order or written directive to meet and maintain a specific capital level for any capital measure.

Adequately Capitalized - The insured depository institution meets the required minimum level for each relevant capital measure. An adequately capitalized insured depository institution is one (1) having a Total Risk-Based Capital Ratio of 8 percent or greater, (2) having a Tier 1 Risk-Based Capital Ratio of 6 percent or greater, and (3) having a CET1 Risk-Based Capital Ratio of 4.5 percent or greater (4) having a Leverage Ratio of 4 percent or greater, and (5) failing to meet the definition of a well-capitalized bank.

Undercapitalized - The insured depository institution fails to meet the required minimum level for any relevant capital measure. An undercapitalized insured depository institution is one (1) having a Total Risk-Based Capital Ratio of less than 8 percent, (2) having a Tier 1 Risk-Based Capital Ratio of less than 6 percent, (3) having a CET1 Risk-Based Capital Ratio of less than 4.5 percent, or (4) a Leverage Ratio of less than 4 percent.

Significantly Undercapitalized - The insured depository institution is significantly below the required minimum level for any relevant capital measure. A significantly undercapitalized insured depository

institution is one (1) having a Total Risk-Based Capital Ratio of less than 6 percent, (2) having a Tier 1 Risk-Based Capital Ratio of less than 4 percent, (3) a CET 1 Risk Based-Capital Ratio of less than 3 percent, or (4) a Leverage Ratio of less than 3 percent.

~~Table of Contents~~

Critically Undercapitalized - The insured depository institution fails to meet a critical capital level set by the appropriate federal banking agency. A critically undercapitalized institution is one having a ratio of tangible equity to total assets that is equal to or less than 2 percent.

The regulations permit the appropriate federal banking regulator to downgrade an institution to the next lower category if the regulator determines after notice and opportunity for hearing or response that the institution (1) is in an unsafe or unsound condition or (2) has received and not corrected a less-than-satisfactory rating for any of the categories of asset quality, management, earnings or liquidity in its most recent examination. Supervisory actions by the appropriate federal banking regulator depend upon an institution's classification within the five categories. The Company's management believes that the Company and the Bank have the requisite capital levels to qualify as well-capitalized institutions under the FDICIA. See Note 17,, Regulatory Capital Requirements and Dividends from Subsidiaries, in the Notes to the Consolidated Financial Statements.

If an institution fails to remain well-capitalized, it will be subject to a variety of enforcement remedies that increase as the capital condition worsens. For instance, the FDICIA generally prohibits a depository institution from making any capital distribution, including payment of a dividend, or paying any management fee to its holding company if the depository institution would thereafter be undercapitalized as a result. Undercapitalized depository institutions are subject to restrictions on borrowing from the Federal Reserve System. In addition, undercapitalized depository institutions may not accept brokered deposits absent a waiver from the FDIC, are subject to growth limitations and are required to submit capital restoration plans for regulatory approval. A depository institution's holding company must guarantee any required capital restoration plan, up to an amount equal to the lesser of 5 percent of the depository institution's assets at the time it becomes undercapitalized or the amount of the capital deficiency when the institution fails to comply with the plan. Federal banking regulators may not accept a capital restoration plan without determining, among other things, that the plan is based on realistic assumptions and is likely to succeed in restoring the depository institution's capital. If a depository institution fails to submit an acceptable plan, it is treated as if it is significantly undercapitalized.

Significantly undercapitalized depository institutions may be subject to a number of requirements and restrictions, including orders to sell sufficient voting stock to become adequately capitalized, requirements to reduce total assets and cessation of receipt of deposits from correspondent banks. Critically undercapitalized depository institutions are subject to appointment of a receiver or conservator.

Total Loss-Absorbing Capital and Long-Term Debt Requirements

~~Although~~The Federal Reserve Board's final rule on the total loss-absorbing capacity of U.S. G-SIBs and the U.S. intermediate holding companies of non-U.S. G-SIBs does not ~~yet final,~~apply since neither the ~~regulations being developed for globally significant financial institutions~~Parent nor BBVA are G-SIBs and are therefore not ~~currently expected to apply~~subject to the ~~Company or BBVA.~~rule.

Annual Capital Plans and Stress Testing

~~In November 2011, the Federal Reserve Board issued a final rule~~Under enhanced prudential standards applicable to ~~require large~~ bank holding companies with $50 billion or more of total consolidated assets, the Company is required to submit annual capital plans to the Federal Reserve Board and to generally obtain approval from the Federal Reserve Board before making a dividend payment or other capital distribution. The capital plan rule applies to the Company and all other bank holding companies with $50 billion or more of total consolidated assets. The Company participated in the CapPR program in 2012 and 2013, submitting its first annual capital plan on January 9, 2012. In 2014, the Company began participating in the Federal Reserve Board’s annual CCAR ~~program.~~program, pursuant to which it reviewed qualitative and quantitative aspects of the Company’s internal capital planning process. In January 2017, the Federal Reserve Board issued a final rule exempting large and noncomplex firms, including the Company, from the qualitative component of CCAR. Under CCAR, ~~a large bank holding company's~~the Company's capital plan must include an assessment of the expected uses and sources of capital over a forward-looking planning horizon of at least nine quarters, a detailed description of the ~~company's~~Company's process for assessing capital adequacy, the ~~company's~~Company's capital policy, and a discussion of any expected changes to the ~~company's~~Company's business plan that are likely to have a material impact on its capital adequacy or liquidity. Based on a ~~qualitative and~~ quantitative assessment, including a supervisory stress test conducted as part of the CCAR process, the Federal Reserve Board will either object to ~~a large bank holding company's~~the Company's capital plan, in whole or in part, or provide a notice of ~~non-objection~~non-

objection to the ~~company.~~Company. If the Federal Reserve Board objects to a capital plan, the ~~bank holding company~~Company may not make any capital distribution other than those with respect to which the Federal Reserve Board has indicated its non-objection.

In addition ~~the Dodd-Frank Act and implementing rules issued by the Federal Reserve Board impose stress test~~to capital planning requirements ~~on both~~ the Company and the ~~Bank.~~Bank are subject to stress testing requirements under the Federal Reserve Board’s enhanced prudential standards rule and the Dodd-Frank Act. The Company must conduct semi-annual company-run stress tests and is subject to an annual supervisory stress test conducted by the Federal Reserve Board.

~~Table of Contents~~

The Dodd-Frank Act requires the Federal Reserve Board to impose greater risk-based and leverage capital, liquidity, single counterparty credit limits, stress testing, risk management and other enhanced prudential standards for bank holding companies with $50 billion or more in total consolidated assets, including the Company. In February 2014, the Federal Reserve Board adopted a final rule pursuant to its enhanced prudential standards authority under the Dodd-Frank Act. One part of the rule is applicable to top-tier U.S.-based bank holding companies with total consolidated assets of $50 billion or more. Another part of the rule will apply to Large FBOs, such as BBVA, and their U.S. branches and subsidiaries, such as the Company and the Bank. Large FBOs must comply with the enhanced prudential standards by July 1, 2016.

Under the enhanced prudential standards final rule, Large FBOs with $50 billion or more in U.S. assets held outside of their U.S. branches and agencies, such as BBVA, will be required to create a separately-capitalized top-tier U.S. IHC that will hold all of the Large FBO's U.S. bank and nonbank subsidiaries, such as the Bank and the Company. The Federal Reserve has stated that it will issue, at a later date, final rules to implement certain other enhanced prudential standards under the Dodd-Frank Act for large bank holding companies and Large FBOs, including single counterparty credit limits and an early remediation framework.

Under the Federal Reserve Board's final rule, a Large FBO’s combined U.S. operations (including its U.S. branches, agencies and subsidiaries) will be subject to U.S. risk-based and leverage capital, liquidity, risk management, stress testing and other enhanced prudential standards on a consolidated basis, and the Federal Reserve Board will have the authority to examine any IHC and any subsidiary of an IHC. Although U.S. branches and agencies of Large FBOs will not be required to be held beneath an IHC, such branches and agencies will be subject to liquidity, and, in certain circumstances, asset maintenance requirements. As a U.S.-based bank holding company with more than $50 billion in assets, the Company is required to comply with the prudential standards applicable to U.S.-based bank holding companies. When BBVA designates an IHC, the IHC will be required to comply with the enhanced prudential standards applicable to U.S. IHCs. BBVA must establish or designate an IHC by July 1, 2016 and transfer all ownership interests in U.S. subsidiaries to the IHC by July 1, 2017.

On October 27, 2014, The Federal Reserve Board modified the start date of the capital plan and stress test cycles from October 1 of a calendar year to January 1 of the following calendar year. For the capital plan and stress test cycle beginning October 1, 2014, the Company was required to submit its capital plan to the Federal Reserve Board by January 5, 2015 and the Federal Reserve Board was required to publish summary results by March 31, 2015. For the capital plan and stress test cycle beginning January 1, 2016, the Company submitted its capital plan to the Federal Reserve Board by April 5, 2016 and the Federal Reserve Board published summary results by June 30, 2016. The Federal Reserve Board did not object to the Company’s 2016 capital plan on either qualitative or quantitative grounds. For the capital plan and stress test cycle beginning January 1, 2017, the Company is required to submit its capital plan to the Federal Reserve Board by April 5, ~~2016~~2017 and the Federal Reserve Board is required to publish summary results by June 30, ~~2016.~~2017. Although management believes that the capital plan that the Company plans to submit is reasonable and fiscally sound, the Company can make no assurances that the Federal Reserve Board will not object to the Company’s capital ~~plan on a qualitative and/or a quantitative basis.~~plan.

Deposit Insurance and Assessments

Deposits at the Bank are insured by the DIF as administered by the FDIC, up to the applicable limits established by law. The ~~Dodd-Frank Act amended~~DIF is funded through assessments on banks, such as the ~~statutory regime governing~~Bank. Changes in the ~~DIF. Among other things,~~methodology used to calculate these assessments, resulting from the Dodd-Frank Act ~~established a minimum DRR of 1.35 percent of estimated insured deposits, required~~increased the assessments that the ~~fund reserve ratio reach 1.35 percent by September 30, 2020 and directed the FDIC~~Bank is required to ~~amend its regulations to redefine the assessment base used for calculating deposit insurance assessments. Specifically, the Dodd-Frank Act requires the assessment base to be an amount equal~~pay to the average consolidated total assets of the insured depository institution during the assessment period, minus the sum of the average tangible equity of the insured depository institution during the assessment period and an amount the FDIC determines is necessary to establish assessments consistent with the risk-based assessment system foundFDIC. In addition, in ~~the Federal Deposit Insurance Act.~~

~~In December of 2010, the FDIC adopted a final rule setting the DRR at 2.0 percent. Furthermore, in February 2011~~March 2016, the FDIC issued a final rule changing its assessment system from one based on domestic deposits to one based on the average consolidated total assets of a bank minus its average tangible equity during each quarter. The February 2011, final rule modifies two adjustments added to the risk-based pricing system in 2009 (an unsecured debt adjustment and a brokered deposit adjustment), discontinues a third adjustment added in 2009 (the secured liability adjustment) and adds an adjustment for long-term debt held by an insured depository institution where the debt is issued by another insured depository institution. Under the February 2011 final rule, the total base assessment rates will vary depending on the DIF reserve ratio. For example, for banks in the best risk category, the total base assessment rates will be between

~~Table of Contents~~

2.5 and 9 basis points when the DIF reserve ratio is below 1.15 percent, between 1.5 and 7 basis points when the DIF reserve ratio is between 1.15 percent and 2 percent, between 1 and 6 basis points when the DIF reserve ratio is between 2 percent and 2.5 percent and between 0.5 and 5 basis points when the DIF reserve ratio is 2.5 percent or higher. In November 2015, the FDIC issued a proposed rule which would, if adopted, imposeimposing a surcharge on the ~~quarterly~~ assessments of insured depository institutions with total consolidated assets of $10 billion or more, such as the Bank, ~~when~~to raise the ~~DIF~~DIF's reserve ~~ratio is between 1.15 percent and 1.35 percent.~~

ratio. These surcharges will cease on December 31, 2018. The FDIC also collects Financing Corporation deposit assessments, which are calculated off of the ~~new~~ assessment base established by the Dodd-Frank Act. ~~These deposit assessments are set quarterly.~~ The ~~Company~~Bank pays the ~~deposit insurance~~DIF assessment, less offset available by means of prepaid assessment credits, ~~and pays~~as well as the ~~quarterly~~ Financing Corporation assessments.

In February 2011, the FDIC adopted regulations that were effective for the 2011 second quarter assessment and payable in September 2011, which outlined significant changes in the risk-based premiums approach for banks with over $10 billion of assets and created a scorecard system. The scorecard system uses a performance score and loss severity score, which aggregate to an initial base assessment rate. The assessment base also changed from deposits to an institution's average total assets minus its average tangible equity. The 2011 FDIC assessment impact on the Company's Consolidated Financial Statements from these assessment changes was not materially different than the prior period.

With respect to brokered deposits, an insured depository institution must be well-capitalized in order to accept, renew or roll over such deposits without FDIC clearance. An adequately capitalized insured depository institution must obtain a waiver from the FDIC in order to accept, renew or roll over brokered deposits. Undercapitalized insured depository institutions generally may not accept, renew or roll over brokered deposits. See the Deposits section in Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations of this Annual Report on Form 10-K.

~~Continuing Impact of the Dodd-Frank Act on Legal Framework~~

In July 2010, President Obama signed into law the Dodd-Frank Act, which substantially changed the regulatory framework under which the Company operates. The Dodd-Frank Act represents a significant overhaul of many aspects of the regulation of the financial-services industry, addressing, among other things, systemic risk, capital adequacy, deposit insurance assessments, consumer financial protection, interchange fees, derivatives, lending limits, mortgage lending practices, registration of investment advisors and changes among the bank regulatory agencies. Among the provisions that have affected or may in the future affect the operations of the Company or the Bank are the following:

~~Creation of the CFPB with centralized authority, including examination and enforcement authority, for consumer protection in the banking industry;~~

~~New limitations on federal preemption;~~

~~New prohibitions and restrictions on the ability of a banking entity and non-bank financial company to have certain interests in, or relationships with, a hedge fund or private equity fund;~~

Application of heightened capital, liquidity, single counterparty credit limits, stress testing, risk management and other enhanced prudential standards to the U.S. operations of BBVA, including the Company and the Bank;

~~Requirement that the Company and the Bank be well-capitalized;~~

~~Changes to the assessment base for deposit insurance premiums;~~

~~Permanent increase of the FDIC's standard maximum insurance amount to $250,000;~~

~~Imposition of limits on interchange fees;~~

Repeal of the prohibition on the payment of interest on demand deposits, effective July 21, 2011, thereby permitting depository institutions to pay interest on business transaction and other accounts;

~~Table of Contents~~

Restrictions on compensation, including a prohibition on incentive-based compensation arrangements that encourage inappropriate risk taking by covered financial institutions and are deemed to be excessive, or that may lead to material losses;

~~Requirement that sponsors of asset-backed securities retain a percentage of the credit risk underlying the securities; and~~

Requirement that banking regulators remove references to and requirements of reliance upon credit ratings from their regulations and replace them with appropriate alternatives for evaluating creditworthiness.

Some of these and other major changes could materially impact the profitability of the Company's business, the value of its assets or the collateral available for its loans, require changes to business practices or force the Company to discontinue businesses and expose it to additional costs, taxes, liabilities, enforcement actions and reputational risk. Many of these provisions became effective upon enactment of the Dodd-Frank Act or have been implemented by regulation, while others are subject to further study, rule-making, and the discretion of regulatory bodies. In light of these significant changes and the discretion afforded to federal regulators, the Company cannot fully predict the effect that compliance with the Dodd-Frank Act or any implementing regulations will continue to have on the Company's businesses or its ability to pursue future business opportunities. Additional regulations resulting from the Dodd-Frank Act may materially adversely affect the Company's business, financial condition or results of operations. See Item 1A. Risk Factors - The Company is subject to legislation and regulation, including the Dodd-Frank Act, and future legislation or regulation could require it to change certain business practices, reduce its revenue, impose additional costs on the Company or otherwise adversely affect its business operations and competitive position.

Additional changes to the laws and regulations applicable to the Company are frequently proposed at both the federal and state levels. The likelihood, timing and scope of any such change and the impact any such change may have on the Company are impossible to determine with any certainty.

Volcker Rule

~~On December 10, 2013, the CFTC, FDIC, Federal Reserve Board, OCC and the SEC issued final rules to implement the Volcker Rule required by the Dodd-Frank Act.~~ The Volcker Rule prohibits an insured depository institution, such as the Bank, and its affiliates from (1) engaging in “proprietary trading” and (2) investing in or sponsoring certain types of funds (covered funds) subject to certain limited exceptions. The final rules contain exemptions for market-making, hedging, underwriting, trading in USU.S. government and agency obligations and also permit certain ownership interests in certain types of funds to be retained. They also permit the offering and sponsoring of funds under certain conditions. The final rules extend the conformance period to July 21, 2015, and in December of 2014 the Federal Reserve Board issued an extension order to extend the relevant conformance date for certain covered funds activities to July 21, 2016. The final Volcker Rule regulations impose significant compliance and reporting obligations on banking entities. The Company ~~will be~~is subject to the enhanced compliance program under the Volcker Rule but does not expect to be required to report metrics to the regulators. The Company is of the view that the impact of the Volcker Rule ~~will~~is not be material to its business operations.

Durbin Amendment's Rules Affecting Debit Card Interchange Fees

~~The~~Under the Durbin Amendment required the Federal Reserve Board to establish a cap on the rate merchants pay banks for electronic clearing of debit transactions (i.e., the interchange rate). The Federal Reserve Board issued final rules, effective October of 2011, for establishing standards, including a cap, for debit card interchange fees and prohibiting network exclusivity arrangements and routing restrictions. The final rule established standards for assessing whether debit card interchange fees received by debit card issuers were reasonable and proportional to the costs incurred by issuers for electronic debit transactions. Under the final rule, the maximum permissible interchange fee that an issuer may receive for an electronic debit transaction is the sum of 21 cents per transaction, a 1 cent fraud prevention adjustment, and 5 basis points multiplied by the value of the transaction.

~~Table of Contents~~

Consumer Protection Regulations

Retail activities of banks are subject to a variety of statutes and regulations designed to protect consumers. Interest and other charges collected or contracted for by banks are subject to state usury laws and federal laws concerning interest rates. Loan operations are also subject to federal laws applicable to credit transactions, such as:

the federal Truth-In-Lending Act and Regulation Z issued by the CFPB, governing disclosures of credit terms to consumer borrowers;

the Home Mortgage Disclosure Act and Regulation C issued by the CFPB, requiring financial institutions to provide information to enable the public and public officials to determine whether a financial institution is fulfilling its obligation to help meet the housing needs of the community it serves;

the Equal Credit Opportunity Act and Regulation B issued by the CFPB, prohibiting discrimination on the basis of various prohibited factors in extending credit;

the Fair Credit Reporting Act and Regulation V issued by the CFPB, governing the use and provision of information to consumer reporting agencies;

the Fair Debt Collection Practices Act and Regulation F issued by the CFPB, governing the manner in which consumer debts may be collected by collection agencies;

the Service Members Civil Relief Act, applying to all debts incurred prior to commencement of active military service (including credit card and other open-end debt) and limiting the amount of interest, including service and renewal charges and any other fees or charges (other than bona fide insurance) that is related to the obligation or liability; and

the guidance of the various federal agencies charged with the responsibility of implementing such federal laws.

Deposit operations also are subject to, among others:

the Truth in Savings Act and Regulation DD issued by the CFPB, which require disclosure of deposit terms to consumers;

Regulation CC issued by the Federal Reserve Board, which relates to the availability of deposit funds to consumers;

the Right to Financial Privacy Act, which imposes a duty to maintain the confidentiality of consumer financial records and prescribes procedures for complying with administrative subpoenas of financial records; and

the Electronic Fund Transfer Act and Regulation E issued by the CFPB, which governs automatic deposits to and withdrawals from deposit accounts and customers' rights and liabilities arising from the use of automated teller machines and other electronic banking services.

In addition, there are ~~a number of significant~~ consumer protection standards that apply to functional areas of operation (rather than applying only to loan or deposit products). The ~~Federal Reserve Board~~Company and the FDIC also enacted consumer protection regulations related to automated overdraft payment programs offered by financial institutions. The FDIC has issued rules aimed at protecting consumers in connection with retail foreign exchange transactions. In addition, the Federal Reserve Board and, more recently, the CFPB have been actively revising Regulation E, which governs electronic transactions. Among the finalized changes made to Regulation E is the November 2009 amendment by the Federal Reserve Board, which became effective on August 1, 2010 and which prohibits financial institutions, including the Company, from charging consumers fees for paying overdrafts on automated teller machine and one-time debit card transactions, unless a consumer consents, or opts in, to the overdraft service for those types of transactions. These amendments also require financial institutions to provide consumers with a notice that explains the financial institution's overdraft services, including the fees associated with the service and the consumer's choices. The CFPB also amended

~~Table of Contents~~

Regulation E, effective October 28, 2013, to require financial institutions to provide detailed disclosures and to meet other requirements when transferring funds to an overseas recipient at the request of a U.S. consumer.

In 2013 and 2014, the CFPB finalized a number of significant rules that will impact nearly every aspect of the lifecycle of a residential mortgage. These rules implement the Dodd-Frank Act amendments to the Equal Credit Opportunity Act, the Truth in Lending Act and the Real Estate Settlement Procedures Act. The final rules require banks to, among other things: (i) develop and implement procedures to ensure compliance with a new “reasonable ability to repay” test and identify whether a loan meets a new definition for a “qualified mortgage,” (ii) implement new or revised disclosures, policies and procedures for servicing mortgages including, but not limited to, early intervention with delinquent borrowers and specific loss mitigation procedures for loans secured by a borrower's principal residence, (iii) comply with additional restrictions on mortgage loan originator compensation, and (iv) comply with new disclosure requirements and standards for appraisals and escrow accounts maintained for “higher priced mortgage loans.” These rules create operational and strategic challenges for the Company, as it is both a mortgage originator and a servicer. These rules and any other new regulatory requirements promulgated by the CFPB could require changes to the Company's business, result in increased compliance costs and affect the streams of revenue of such business.

~~Many of the foregoing laws and regulations~~Bank are subject to change resulting from the provisions in the Dodd-Frank Act, which in many cases calls for revisions to implementing regulations. In addition, oversight responsibilities of these and other consumer protection laws and regulations transferred from the bank's primary federal regulator to the CFPB. It is anticipated that the CFPB will continue to make substantive changes to the transferred consumer protection regulations and associated disclosures. The Company cannot predict the effect that being regulated by a new, additional regulatory authority focused on consumer financial protection, or any new implementing regulations or revisions to existing regulations that may result from the establishment of this new authority, will have on its businesses. Additional regulations resulting from the Dodd-Frank Act may materially adversely affect the Company's business, financial condition or results of operations. See Item 1A. Risk Factors - The Company is subject to legislation and regulation, including the Dodd-Frank Act, and future legislation or regulation could require it to change certain business practices, reduce its revenue, impose additional costs on the Company or otherwise adversely affect its business operations and competitive position.

~~In addition, the Company is~~ also subject to certain state laws and regulations designed to protect consumers.

The CFPB has promulgated many mortgage-related rules since it was established under the Dodd-Frank Act including rules related to the ability to repay and qualified mortgage standards, mortgage servicing standards, loan originator compensation standards, high-cost mortgage requirements, Home Mortgage Disclosure Act requirements and appraisal and escrow standards for higher priced mortgages.

Changes to consumer protection regulations, including those promulgated by the CFPB could affect the Company's business but the likelihood, timing and scope of any such changes and the impact any such change may have on the

Company cannot be determined with any certainty. See Item 1A. Risk Factors. The Company is also subject to legislation and regulation and future legislation or regulation or changes to existing legislation or regulation could affect its business.

Annual Resolution Plans for the Company and the Bank

~~The Federal Reserve Board~~Each of the Company and the ~~FDIC have issued final regulations as~~Bank are required ~~by Section 165 of the Dodd-Frank Act regarding~~to prepare and submit resolution plans, also referred to as living wills. The Federal Reserve Board and the FDIC issued final rules applicable to covered companies with assets of $50 billion or more, which became effective November of 2011. The FDIC issued final rules applicable to insured depository institutions with assets of $50 billion or more, which became effective April of 2012. Insured depository institutions with $50 billion or more in total assets, like the Bank, must submit to the FDIC a plan whereby the institution can be resolved by the FDIC, in the event of failure, in a manner that ensures depositors will receive access to insured funds within the required timeframes and generally ensures an orderly liquidation of the institution. ~~Additionally, covered companies, like BBVA and the~~The Company ~~with assets of $50 billion or more are~~is required to submit to the Federal Reserve Board and the FDIC a plan that, in the event of material financial distress or failure, provides for the rapid and orderly liquidation of the company under the bankruptcy code and in a way that would not pose systemic risk to the financial system of the United States. ~~The regulations allow for a tiered approach for complying with the requirements based on materiality of the institution.~~ If the Federal Reserve Board and the FDIC determine that a company’s plan is not credible and the company fails to cure the deficiencies in a timely manner, then the Federal Reserve Board and the FDIC may jointly impose on the company, or on any of its subsidiaries, more stringent capital, leverage or liquidity requirements or restrictions on growth, activities, or operations.

U.S. Liquidity Standards

The Federal Reserve Board evaluates the Company’s liquidity as part of the supervisory process. In addition, the Basel Committee has developed a set of internationally-agreed upon quantitative liquidity metrics: the LCR and the NSFR. The LCR was developed to ensure that covered banking organizations have sufficient high-quality liquid assets to cover expected net cash outflows over a 30-day liquidity stress period. This standard’s objective is to promote the short-term resilience of the liquidity risk profile of banking organizations. The ~~NSFR has a time horizon~~objective of ~~one year and has been developed to provide a sustainable maturity structure of assets and liabilities. The Basel Committee~~

~~Table of Contents~~

~~contemplated that major jurisdictions would begin to phase in the LCR requirement on January 1, 2015. It contemplates that~~ the NSFR ~~including any revisions, will be implemented as~~is to reduce funding risk over a ~~minimum standard~~one-year horizon by ~~January 1, 2018.~~requiring banking organizations to fund their activities with sufficiently stable sources of funding in order to mitigate the risk of future funding stress.

~~In September 2014, the~~The federal banking regulators ~~adopted a final rule implementing~~implemented the LCR in the United ~~States.~~States in 2014. A more stringent version of the LCR applies to financial institutions with $250 billion or more in total assets. A more moderate version of the LCR applies to financial institutions with $50 billion but less than $250 billion of total assets, such as the Company. This version differs in certain respects from the Basel Committee’s version of the LCR, including a narrower definition of high-quality liquid assets, different prescribed cash inflow and outflow assumptions for certain types of instruments and transactions and a shorter phase-in schedule ~~beginning on January 1, 2016 and ending~~which ended on January 1, 2017. ~~The~~In December 2016, the Federal Reserve Board issued a final rule requiring that banking organizations holding more than $50 billion in assets, such as the Company, make certain public disclosures related to the LCR. Required disclosures include quarterly disclosure of the consolidated LCR, based on averages over the prior quarter, as well as consolidated HQLA amounts broken down by each HQLA category. In April 2016, the federal banking regulators ~~have not yet~~ proposed rules to implement the NSFR in the United ~~States.~~States, including a more moderate version of the NSFR that would apply to institutions with $50 billion or more but less than $250 billion of total assets, such as the Company. In addition, the Federal Reserve Board has adopted liquidity risk management, stress testing and liquidity buffer requirements as part of the enhanced prudential standards applicable to the U.S. operations of Large FBOs such as BBVA. The Company and the Bank are part of BBVA’s U.S. operations.

Anti-Money Laundering; USA PATRIOT Act; Office of Foreign Assets Control

~~Financial~~A major focus of U.S. governmental policy relating to financial institutions in recent years has been fighting money laundering and terrorist financing. Failure of a financial institution to maintain and implement adequate programs to combat money laundering and terrorist financing could have serious legal and reputational consequences for that financial institution.

Under laws applicable to the Company, including the Bank Secrecy Act, as amended by the USA PATRIOT Act, and implementing regulations, U.S. financial institutions must maintain anti-money laundering programs that include established internal policies, procedures, and controls; a designated compliance officer; an ongoing employee training program; and testing of the program by an independent audit function. The Company is prohibited from entering into specified financial transactions and account relationships and must meet enhanced standards for due diligence in dealings with foreign financial institutions and foreign customers. The Company also must take reasonable steps to conduct enhanced scrutiny of account relationships to guard against money laundering and to report any suspicious transactions. Recent laws provide law enforcement authorities with increased access to financial information maintained by banks. Anti-money laundering obligations have been substantially strengthened as a result of the USA PATRIOT Act, enacted in 2001. Bank regulators routinely examine institutions for compliance with these obligations and are required to consider compliance in connection with the regulatory review of applications.

The Company is prohibited from entering into specified financial transactions and account relationships. The Company also must take reasonable steps to conduct enhanced scrutiny of account relationships, as appropriate, to

guard against money laundering and to report any suspicious transactions. Pursuant to the USA PATRIOT Act, law enforcement authorities have been granted increased access to financial information maintained by banks, and anti-money laundering obligations have been substantially strengthened.

The USA PATRIOT Act amended, in part, the Bank Secrecy Act and provides for, among other things, the facilitation of information sharing among governmental entities and financial institutions for the purpose of combating terrorism and money laundering. The statute also ~~creates enhanced information collection tools and enforcement mechanics for the U.S. government, including:~~provides for: (1) ~~requiring standards~~regulations that set minimum requirements for verifying customer identification at account opening; (2) ~~promulgating~~ rules to promote cooperation among financial institutions, regulators and law enforcement entities in identifying parties that may be involved in terrorism or money laundering; ~~(3) requiring reports by nonfinancial trades~~ and businesses filed with the Treasury's Financial Crimes Enforcement Network for transactions exceeding $10,000; and (4) mandating the filing of suspicious activities reports if a bank believes a customer may be violating U.S. laws and regulations. The statute also requires(3) enhanced due diligence requirements for financial institutions that administer, maintain or manage private bank accounts or correspondent accounts for non-U.S. persons.

Federal, state, and local law enforcement may, through FinCEN, request that the Bank search its records for any relationships or transactions with persons reasonably suspected to be involved in terrorist activity or money laundering. Upon receiving such a request, the Bank must search its records and timely report to FinCEN any identified relationships or transactions.

Furthermore, OFAC is responsible for helping to ensure that U.S. entities do not engage in transactions with certain prohibited parties, as defined by various Executive Orders and ~~Acts~~acts of Congress. OFAC publishes, and routinely updates, lists of names, ~~of persons and organizations suspected of aiding, financing, harboring or engaging in terrorist acts, including~~such as the Specially Designated Nationals and Blocked ~~Persons.~~Persons List, of individuals and entities with whom U.S. persons, as defined by OFAC, are generally prohibited from conducting transactions or dealings. Persons on these lists include persons suspected of aiding, financing, or engaging in terrorist acts, narcotics trafficking, or the proliferation of weapons of mass destruction, among other targeted activities. OFAC also administers sanctions programs against certain ~~countries.~~countries or territories. If the Bank finds a name on any transaction, account or wire transfer instruction that is on an OFAC list or determines that processing a transaction or maintaining or servicing an account would violate a sanctions program administered by OFAC, it must, depending on the regulation, freeze such account, reject such transaction, file a suspicious activity report ~~and~~and/or notify the appropriate authorities.

Commitments to the Bank

Under the Dodd-Frank Act, both BBVA and the Parent are required to serve as a source of financial strength to the Bank and to commit resources to support the Bank in circumstances when BBVA and the Parent might not do so absent the statutory requirement. Under the Bank Holding Company Act, the Federal Reserve Board may require a bank holding company to terminate any activity or relinquish control of a non-bank subsidiary, other than a non-bank

~~Table of Contents~~

subsidiary of a bank, upon the Federal Reserve Board's determination that such activity or control constitutes a serious risk to the financial soundness or stability of any depository institution subsidiary. Further, the Federal Reserve Board has discretion to require a bank holding company to divest itself of any bank or non-bank subsidiaries if the agency determines that any such divestiture may aid the depository institution's financial condition. In addition, any loans by the Parent to the Bank would be subordinate in right of payment to depositors and to certain other indebtedness of the Bank.

Transactions with Affiliates and Insiders

A variety of legal limitations restrict the Bank from lending or otherwise supplying funds or in some cases transacting business with the Company or the Company's non-bank subsidiaries. The Company is subject to Sections 23A and 23B of the Federal Reserve Act and Federal Reserve Regulation W. Section 23A places limits on the amount of “covered transactions,” which include loans or extensions of credit to, investments in or certain other transactions with, affiliates as well as the amount of advances to third parties collateralized by the securities or obligations of affiliates. The aggregate of all covered transactions is limited to 10 percent of a bank's capital and surplus for any one affiliate and 20 percent for all affiliates. Furthermore, within the foregoing limitations as to amount, certain covered transactions must meet specified collateral requirements ranging from 100 to 130 percent. Also, a bank is prohibited from purchasing low quality assets from any of its affiliates. Section 608 of the Dodd-Frank Act broadens the definition of “covered transactions” to include derivative transactions and the borrowing or lending of securities if the transaction will cause a bank to have credit exposure to an affiliate. The revised definition also includes the acceptance of debt obligations of an affiliate as collateral for a loan or extension of credit to a third party. Furthermore, reverse repurchase transactions are viewed as extensions of credit (instead of asset purchases) and thus become subject to collateral requirements.

Section 23B prohibits an institution from engaging in certain transactions with affiliates unless the transactions are on terms substantially the same, or at least as favorable to the bank, as those prevailing at the time for comparable transactions with nonaffiliated companies. Except for limitations on low quality asset purchases and transactions that are deemed to be unsafe or unsound, Regulation W generally excludes affiliated depository institutions from treatment as affiliates. Transactions between a bank and any of its subsidiaries that are engaged in certain financial activities may be subject to the affiliated transaction limits. The Federal Reserve Board also may designate bank subsidiaries as affiliates.

Banks are also subject to quantitative restrictions on extensions of credit to executive officers, directors, principal shareholders and their related interests. In general, such extensions of credit (1) may not exceed certain dollar limitations, (2) must be made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with third parties, and (3) must not involve more than the normal risk of repayment or present other unfavorable features. Certain extensions of credit also require the approval of a bank's board of directors.

Regulatory Examinations

Federal and state banking agencies require the Company and the Bank to prepare annual reports on financial condition and to conduct an annual audit of financial affairs in compliance with minimum standards and procedures. The Bank, and in some cases the Company and the Company's non-bank affiliates, must undergo regular on-site examinations by the appropriate regulatory agency, which will examine for adherence to a range of legal and regulatory compliance responsibilities. A bank regulator conducting an examination has complete access to the books and records of the examined institution. The results of the examination are confidential. The cost of examinations may be assessed against the examined institution as the agency deems necessary or appropriate.

Community Reinvestment Act

The ~~Community Reinvestment Act~~CRA requires the Federal Reserve Board to evaluate the record of the Company in meeting the credit needs of its local community, including low and moderate income neighborhoods. These evaluations are considered in evaluating mergers, acquisitions and applications to open a branch or facility. Failure to adequately meet these criteria could result in additional requirements and limitations on the Bank.

In February 2015, the Federal Reserve Board announced the results of its regularly scheduled examination covering 2011 and 2012 to determine the Bank’s compliance with the CRA. The Bank received a rating of “needs to improve". The Bank’s rating in this CRA examination resulted in restrictions on certain activities, including certain mergers and acquisitions and applications to open branches or certain other facilities. ~~Such restrictions will last at least until the~~

~~Table of Contents~~

~~results of the Bank’s next CRA examination are known.~~ The Bank underwent an additional CRA examination that began in the fourth quarter of 2015. ~~The~~In March 2016, the Federal Reserve Bank ~~expects~~of Atlanta notified the Bank that its CRA rating had been improved to ~~receive~~“Satisfactory,” and the ~~results of that examination in~~aforementioned restrictions were removed from the ~~next few months.~~Bank.

Commercial Real Estate Lending

Lending operations that involve concentrations of commercial real estate loans are subject to enhanced scrutiny by federal banking regulators. The regulators have advised financial institutions of the risks posed by commercial real estate lending concentrations. Such loans generally include land development, construction loans and loans secured by multifamily property, and nonfarm, nonresidential real property where the primary source of repayment is derived from rental income associated with the property. The guidance prescribes the following guidelines for examiners to help identify institutions that are potentially exposed to concentration risk and may warrant greater supervisory scrutiny:

total reported loans for construction, land development and other land represent 100 percent or more of the institution's total capital, or

total commercial real estate loans represent 300 percent or more of the institution's total capital, and the outstanding balance of the institution's commercial real estate loan portfolio has increased by 50 percent or more during the prior 36 months.

In October 2009, the federal banking regulators issued additional guidance on commercial real estate lending that emphasizes these considerations.

In addition, the Dodd-Frank Act contains provisions that may impact the Company's business by reducing the amount of its commercial real estate lending and increasing the cost of borrowing, including rules relating to risk retention of securitized assets. Section 941 of the Dodd-Frank Act requires, among other things, a loan originator or a securitizer of asset-backed securities to retain a percentage of the credit risk of securitized assets. In October 2014, the banking agencies issued final rules to implement the credit risk retention requirements of Section 941 of Dodd-Frank. The regulations became effective on February 23, 2015. Compliance with the rules with respect to new securitization transactions backed by residential mortgages ~~was~~have been required ~~beginning~~since December 24, 2015 and compliance with respect to new securitization transactions backed by other types of assets ~~will be~~have been required ~~beginning~~since December 24, 2016. The Company continues to evaluate the final rules and assess their impact on its securitization activities.

Branching

The Dodd-Frank Act substantially amended the legal framework that had previously governed interstate branching activities. Formerly, under the ~~Reigle-Neal~~Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994, a bank's ability to branch into a particular state was largely dependent upon whether the state “opted in” to de novo interstate branching. Many states did not “opt-in,” which resulted in branching restrictions in those states. The Dodd-Frank Act removed the “opt-in” concept and permits banks to engage in de novo branching outside of their home states, provided that the laws of the target state permit banks chartered in that state to branch within that state. Accordingly, de novo interstate branching by the Company is subject to these ~~new~~ standards. All branching in which the Company may engage remains subject to regulatory approval and adherence to applicable legal and regulatory requirements.

Anti-Tying Restrictions

In general, a bank may not extend credit, lease, sell property, or furnish any services or fix or vary the consideration for them on the condition that (1) the customer obtain or provide some additional credit, property or services from or to said bank or bank holding company or their subsidiaries, or (2) the customer not obtain some other credit, property or services from a competitor, except to the extent reasonable conditions are imposed to assure the soundness of the credit extended. A bank may, however, offer combined-balance products and may otherwise offer more favorable terms if a customer obtains two or more traditional bank products. Also, certain foreign transactions are exempt from the general rule.

Privacy and Credit Reporting

Financial institutions are required to disclose their policies for collecting and protecting confidential customer information. Customers generally may prevent financial institutions from sharing nonpublic personal financial information with nonaffiliated third parties, with some exceptions, such as the processing of transactions requested by

~~Table of Contents~~

the consumer. Financial institutions generally may not disclose certain consumer or account information to any nonaffiliated third-party for use in telemarketing, direct mail marketing or other marketing. Federal and state banking agencies have prescribed standards for maintaining the security and confidentiality of consumer information, and the Company is subject to such standards, as well as certain federal and state laws or standards for notifying consumers in the event of a security breach.

The Bank utilizes credit bureau data in underwriting activities. Use of such data is regulated under the Fair Credit Reporting Act and Regulation V on a uniform, nationwide basis, including credit reporting, prescreening and sharing of information between affiliates and the use of credit data. The Fair and Accurate Credit Transactions Act, which amended the Fair Credit Reporting Act, permits states to enact identity theft laws that are not inconsistent with the conduct required by the provisions of that Act.

Enforcement Powers

The Bank and its “institution-affiliated parties,” including management, employees, agents, independent contractors and consultants, such as attorneys and accountants and others who participate in the conduct of the institution's affairs, are subject to potential civil and criminal penalties for violations of law, regulations or written orders of a government agency. Violations can include failure to timely file required reports, filing false or misleading information or submitting inaccurate reports. Civil penalties may be as high as $1,000,000 a day for such violations and criminal penalties for some financial institution crimes may include imprisonment for 20 years. Regulators have flexibility to commence enforcement actions against institutions and institution-affiliated parties, and the FDIC has the authority to terminate deposit insurance. When issued by a banking agency, cease-and-desist and similar orders may, among other things,

require affirmative action to correct any harm resulting from a violation or practice, including restitution, reimbursement, indemnifications or guarantees against loss. A financial institution may also be ordered to restrict its growth, dispose of certain assets, rescind agreements or contracts or take other actions determined to be appropriate by the ordering agency. The federal banking regulators also may remove a director or officer from an insured depository institution (and bar them from the industry) if a violation is willful or reckless.

Monetary Policy and Economic Controls

The Bank's earnings, and therefore the Company's earnings, are affected by the policies of regulatory authorities, including the monetary policy of the Federal Reserve Board. An important function of the Federal Reserve Board is to promote orderly economic growth by influencing interest rates and the supply of money and credit. Among the methods that have been used to achieve this objective are open market operations in U.S. government securities, changes in the discount rate for bank borrowings, expanded access to funds for non-banks and changes in reserve requirements against bank deposits. These methods are used in varying combinations to influence overall growth and distribution of bank loans, investments and deposits, interest rates on loans and securities, and rates paid for deposits.

The effects of the various Federal Reserve Board policies on the Company's future business and earnings cannot be predicted. The Company cannot predict the nature or extent of any affects that possible future governmental controls or legislation might have on its business and earnings.

Depositor Preference Statute

Federal law provides that deposits and certain claims for administrative expenses and employee compensation against an insured depository institution are afforded priority over other general unsecured claims against such institution, including federal funds and letters of credit, in the liquidation or other resolution of the institution by any receiver.

FDIC Recordkeeping Requirements

In November 2016, the FDIC issued a final rule establishing recordkeeping requirements for FDIC-insured institutions with 2 million or more deposit accounts, which includes the Bank. The rule generally requires each covered institution to maintain complete and accurate information needed to determine deposit insurance coverage with respect to each deposit account. In addition, each covered institution must ensure that its information technology system is able to calculate the insured amount for most depositors within 24 hours of failure. Compliance is required by April 1, 2020.

Cybersecurity

In October 2016, the federal banking regulators issued an advance notice of proposed rulemaking regarding enhanced cyber risk management standards, which would apply to a wide range of large financial institutions and their third-party service providers, including us and our U.S. Bank Subsidiaries. The proposed standards would expand existing cybersecurity regulations and guidance to focus on cyber risk governance and management; management of internal and external dependencies; and incident response, cyber resilience and situational awareness. In addition, the proposal contemplates more stringent standards for institutions with systems that are critical to the financial sector.

Other Regulatory Matters

The Company and its subsidiaries and affiliates are subject to numerous examinations by federal and state banking regulators, as well as the SEC, FINRA and various state insurance and securities regulators. The Company and its subsidiaries have from time to time received requests for information from regulatory authorities at the federal level or in various states, including state insurance commissions, state attorneys general, federal agencies or law enforcement authorities, securities regulators and other regulatory authorities, concerning their business practices. Such requests are considered incidental to the normal conduct of business.

~~Table of Contents~~

Disclosure Pursuant to Section 219 of the Iran Threat Reduction and Syria Human Rights Act

The Company discloses the following information pursuant to Section 13(r) of the Exchange Act, which requires an issuer to disclose whether it or any of its affiliates knowingly engaged in certain activities, transactions or dealings relating to Iran or with natural persons or entities designated by the U.S. government under specified executive orders,

including activities not prohibited by U.S. law and conducted outside the United States by non-U.S. affiliates in compliance with local law. In order to comply with this requirement, the Company has requested relevant information from its affiliates globally.

~~The~~During the year ended December 31, 2016, the Company ~~has~~did not knowingly ~~engaged~~engage in activities, transactions or dealings relating to Iran or with natural persons or entities designated by the U.S. government under the specified executive orders.

Because the Company is controlled by BBVA, ~~a Spanish corporation,~~ the Company's disclosure includes activities, transactions or dealings conducted outside the United States by non-U.S. affiliates of BBVA and its consolidated subsidiaries that are not controlled by the Company. ~~The~~During the year ended December 31, 2016, the BBVA Group ~~has~~had the following activities, transactions and dealings ~~with Iran~~ requiring ~~disclosure.~~disclosure under Section 13(r) of the Exchange Act.

Legacy contractual obligations related to counter indemnities. Before 2007, the BBVA Group issued certain counter indemnities to its non-Iranian customers in Europe for various business activities relating to Iran in support of guarantees provided by Bank Melli, ~~three~~two of which remained outstanding during ~~2015.~~the year ended December 31, 2016. For ~~2015, no payments or~~2016, revenues of $641 (including fees and/or commissions) have been recorded in connection with these counter indemnities. The BBVA Group does not allocate direct costs to fees and commissions and therefore has not disclosed a separate profit measure. In addition, during 2016 the BBVA Group incurred cancellation, enforcement and postage expenses of $214,405 related to these counter guarantees. In addition, in accordance with Council Regulation (EU) Nr. 267/2012 of March 23, 2012, payments of any amounts due to Bank Melli under these counter indemnities were initially blocked and thereafter released upon authorization by the relevant Spanish authorities. The BBVA Group is committed to terminating these business relationships as soon as contractually possible and does not intend to enter into new business relationships involving Bank Melli.

~~Letters~~Refund of ~~credit~~funds from Bank Sepah. . During ~~2015,~~ the ~~BBVA Group had credit exposure to~~year ended December 31, 2016, Bank Sepah ~~arising from a letter~~returned to BBVA funds in the amount of ~~credit issued~~$4,624 originally transferred by BBVA in March 2007 to an account at Bank Sepah ~~to a non-Iranian client~~in the name of ~~the BBVA Group~~BBVA’s representative office in Europe. This letter of credit, which was granted before 2004, was used to secure a loan granted by the BBVA Group to a client in order to finance certain Iran-related activities. This loan was supported by the CESCE. The loan related to the client’s exportation of goods to Iran (consisting of goods relating to apelletizing plant for iron concentration and equipment). Interest charged by the BBVA Group for 2015 in connection with this letter of credit totaled $15,536. However, this amount was initially blocked and is pending release upon authorization by the relevant Spanish authorities. Before year end, the release of $2,845 was authorized by the relevant Spanish authorities. Accordingly, for 2015, gross revenues (including fees and/or commissions) recorded in connection with this letter of credit totaled $2,845. The BBVA Group does not allocate direct costs to fees and commissions and, therefore, has not disclosed a separate profit measure in connection with the letter of credit referred to above. The BBVA Group is committed to terminating the outstanding business relationship with Bank Sepah as soon as contractually possible and does not intend to enter into new business relationships involving Bank Sepah.Tehran.

Iranian embassy-related activity. The BBVA Group maintains bank accounts in Spain for two employees of the Iranian embassy in Spain. The ~~bank accounts of one additional employee were closed on March 20, 2015. The~~ two employees are Spanish citizens, and one of them has retired. Estimated gross revenues for ~~2015,~~the year ended December 31, 2016, from embassy-related activity, which include fees and/or commissions, did not exceed ~~$1,094.~~$2,490. The BBVA Group does not allocate direct costs to fees and commissions and, therefore, has not disclosed a separate profit measure. The BBVA Group is committed to terminating these business relationships as soon as legally possible.

Additional Information

The Company’s corporate headquarters are located at 2200 Post Oak Blvd., Houston, Texas, 77056, and the Company’s telephone number is (205) 297-3000. The Company maintains an Investor Relations website on the Internet at www.bbvacompass.com. This reference to the Company's website is an inactive textual reference only, and is not a hyperlink. The contents of the Company's website shall not be deemed to be incorporated by reference into this Annual Report on Form 10-K.

The Company files annual, quarterly and current reports and other information with the SEC. You may read and copy any materials the Company files with the SEC at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. You may obtain information about the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet website that contains reports and information statements

~~Table of Contents~~

and other information that the Company files electronically with the SEC at www.sec.gov. The Company also makes available free of charge, on or through its website, these reports and other information as soon as reasonably practicable following the time they are electronically filed with or furnished to the SEC.

~~Table of Contents~~


Item 1A.	Risk Factors

This section highlights the material risks that the Company currently faces. Any of the risks described below could materially adversely affect the Company's business, financial condition, or results of operations.

Any deterioration in national, regional and local economic conditions, particularly unemployment levels and home prices, could materially affect the Company's business, financial condition or results of operations.

The Company's business is subject to periodic fluctuations based on national, regional and local economic conditions. These fluctuations are not predictable, cannot be controlled, and may have a material adverse impact on its financial condition and operations even if other favorable events occur. The Company's banking operations are locally-oriented and community-based. Accordingly, the Company expects to continue to be dependent upon local business conditions as well as conditions in the local residential and commercial real estate markets it serves, including Alabama, Arizona, California, Colorado, Florida, New Mexico and Texas. These economic conditions could require the Company to charge-off a higher percentage of loans or increase provisions for credit losses, which would reduce its net income.

Significant declines in the housing market from 2007 through 2010, with falling home prices and increasing foreclosures and unemployment, resulted in significant write-downs of asset values by many financial institutions, including government-sponsored entities and major commercial and investment banks. These write-downs, initially of mortgage-backed securities, but spreading to credit default swaps and other derivative securities, caused many financial institutions to seek additional capital, to merge with larger and stronger institutions and, in some cases, to fail. Although the U.S. economy has shown modest improvement since then, economic conditions continue to pose a risk to the financial system. The Company is part of the financial system and a systemic lack of available credit, a lack of confidence in the financial sector, continued volatility in the financial markets and/or reduced business activity could materially adversely affect its business, financial condition or results of operations.

A return of the volatile economic conditions experienced in the U.S. during 2008-2009, including the adverse conditions in the fixed income debt markets, for an extended period of time, particularly if left unmitigated by policy measures, may materially and adversely affect the Company.

Declining oil prices could adversely affect the Company's performance.

As of December 31, ~~2015,~~2016, energy-related loan balances represented approximately 65 percent of the Bank’s total loan portfolio. This amount is comprised of loans directly related to energy, such as exploration and production, pipeline transportation of natural gas, crude oil and other refined petroleum products, oil field services, and refining and support. In late 2014, oil prices began to decline and continued to decline ~~throughout 2015,~~through the first half of 2016, which has had an adverse effect on some of the Bank’s borrowers in this portfolio and on the value of the collateral securing some of these loans. If oil prices ~~remain low,~~decline in a material way, the cash flows of the Bank’s customers in this industry ~~will~~could be adversely impacted which could impair their ability to service any loans outstanding to them and/or reduce demand for loans. These factors could result in higher delinquencies and greater charge-offs in future periods, which could adversely affect the Company's business, financial condition or results of operations.

Furthermore, energy production and related industries represent a significant part of the economies in some of the Bank’s primary markets. A prolonged period of low or volatile oil prices could have a negative impact on the economies and real estate markets of states such as Texas, which could adversely affect the Company's business, financial condition or results of operations.

The failure of the European Union to stabilize the fiscal condition of member countries, especially in Spain, could have an adverse impact on global financial markets, the current U.S. economic recovery and the Company.

Certain European Union member countries have fiscal obligations greater than their fiscal revenue, which has caused investor concern over such countries' ability to continue to service their debt and foster economic growth. Fiscal austerity measures such as raising taxes and reducing entitlements have improved the ability of some member countries to service their debt, but have challenged economic growth and efforts to lower unemployment rates in the region.

The Company is a ~~wholly-owned~~wholly owned subsidiary of BBVA, which is based in Spain and serves as a source of strength and capital to the Company. Accordingly, European Union weakness, particularly in Spain, could directly impact BBVA and could have an adverse impact on the Company's business or financial condition.

~~Table of Contents~~

A weaker European economy may transcend Europe, cause investors to lose confidence in the safety and soundness of European financial institutions and the stability of European member economies, and likewise affect U.S.-based financial institutions, the stability of the global financial markets and the economic recovery underway in the U.S. Should the U.S. economic recovery be adversely impacted by these factors, loan and asset growth at U.S. financial institutions, like the Company, could be affected.

Weakness in the real estate market, including the secondary residential mortgage loan market, has adversely affected the Company in the past and may continue to adversely affect it.

Weakness in the non-agency secondary market for residential mortgage loans has limited the market for and liquidity of many nonconforming mortgage loans. The effects of ongoing mortgage market challenges, combined with the past corrections in residential real estate market prices and reduced levels of home sales, could result in price reductions in single family home values, adversely affecting the value of collateral securing mortgage loans that the Company holds, and mortgage loan originations and profits on sales of mortgage loans. Declining real estate prices have historically caused cyclically higher delinquencies and losses on mortgage loans and home equity lines of credit. These conditions have resulted in losses, write-downs and impairment charges in the Company's mortgage and other business units.

Future declines in real estate values, low home sales volumes, financial stress on borrowers as a result of unemployment, interest rate resets on ARMs or other factors could have adverse effects on borrowers that could result in higher delinquencies and greater charge-offs in future periods, which would adversely affect the Company's financial condition or results of operations. Additionally, counterparties to insurance arrangements used to mitigate risk associated with increased defaults in the real estate market have been stressed by weaknesses in the real estate market and a commensurate increase in the number of claims. Further, decreases in real estate values might adversely affect the creditworthiness of state and local governments, and this might result in decreased profitability or credit losses from loans made to such governments. In markets dependent on energy production, falling energy prices may adversely affect real estate values. A decline in home values or overall economic weakness could also have an adverse impact upon the value of real estate or other assets which the Company owns as a result of foreclosing a loan and its ability to realize value on such assets.

The Company is subject to legislation and regulation, ~~including the Dodd-Frank Act,~~ and future legislation or regulation ~~could require it~~or changes to ~~change certain business practices, reduce its revenue, impose additional costs on the Company~~existing legislation or ~~otherwise adversely~~regulation could affect its ~~business operations~~business.

The legislative, regulatory and ~~competitive position.~~

~~On July 21, 2010, President Obama signed into law~~supervisory framework governing the financial sectors has undergone significant and rapid change since the financial crisis. The Dodd-Frank Act as well as other post-financial crisis regulatory reforms in the United States have increased costs, imposed limitations on activities and resulted in an increased intensity in regulatory enforcement. While most of the changes required by the Dodd-Frank Act ~~which has changed and will continue to change substantially the legal and regulatory framework under which~~that impact the Company ~~operates. The Dodd-Frank Act represents~~have been implemented or are expected to follow a ~~significant overhaul~~known trajectory, new changes under the Trump administration, including their nature and impact, cannot yet be determined with any degree of ~~many aspects of~~certainty.

Changes to laws and regulations at both the ~~regulation of~~state or federal level applicable to the financial-services industry, addressing, among other things, systemic risk, capital adequacy, deposit insurance assessments, consumer financial protection, interchange fees, derivatives, lending limits, mortgage lending practices, registration of investment advisorsCompany are frequently proposed and ~~changes among the bank regulatory agencies.~~

~~Some of these and other major changes~~ could materially impact the profitability of the Company's business, the value of assets it holds or the collateral available for its loans, require changes to business practices or ~~force the Company to discontinue businesses and~~ expose it to additional costs, taxes, liabilities, enforcement actions and reputational risk.

~~Many~~ The likelihood, timing and scope of these provisions became effective upon enactment of the Dodd-Frank Act or have been implemented by regulation, while others are subject to further study, rule-making and the discretion of regulatory bodies. In light of these significantany such changes and the ~~discretion afforded to federal regulators,~~impact any such change may have on the Company cannot ~~fully predict the effect that compliance~~be determined with ~~the Dodd-Frank Act or~~ any implementing regulations will continue to have on the Company's businesses or its ability to pursue future business opportunities. Additional regulations resulting from the Dodd-Frank Act may materially adversely affect the Company's business, financial condition or results of operations.certainty

The CFPB's residential mortgage regulations could adversely affect the Company's business, financial condition or results of operations.

~~In 2013~~The Company and ~~2014~~ the Bank are regulated and supervised by the CFPB. The CFPB ~~finalized a number of significant~~has promulgated many mortgage-related rules ~~which will impact nearly every aspect of the life cycle of a residential mortgage. These rules implement~~since it was established under the Dodd-Frank Act, ~~amendments~~including rules related to the ~~Equal Credit Opportunity Act, the Truth in Lending Act and the Real Estate Settlement Procedures Act. The final rules require banks~~

~~Table of Contents~~

~~to, among other things: (i) develop and implement procedures to ensure compliance with a new “reasonable~~ ability to ~~repay” test~~repay and ~~identify whether a loan meets a new definition for a “qualified~~qualified mortgage~~” (ii) implement new or revised disclosures, policies and procedures for~~ standards, mortgage servicing mortgages including, but not limited to, early intervention with delinquent borrowers and specific loss mitigation procedures for loans secured by a borrower's principal residence, (iii) comply with additional restrictions on mortgagestandards, loan originator compensation ~~and (iv) comply with new disclosure~~standards, high-cost mortgage requirements, Home Mortgage Disclosure Act requirements and appraisal and escrow standards for appraisals and escrow accounts maintained for “higher priced mortgage loans.” These rules create operational and strategic challenges for the Company, as it is both a mortgage originator and a servicer. These rules and any other new regulatory requirements promulgated by the CFPB could require changes to the Company's business, result in increased compliance costs and affect the streams of revenue of such business.higher-priced mortgages.

The Company is subject to capital adequacy and liquidity standards, and if it fails to meet these standards its financial condition and operations would be adversely affected.

The U.S. Basel III ~~final~~capital rule and provisions in the Dodd-Frank Act ~~will increase~~increased capital requirements for banking organizations such as the Company and the ~~Bank.~~Bank and will continue to increase such requirements as they are phased in. Consistent with the Basel Committee's Basel III capital framework, the U.S. Basel III ~~final~~capital rule includes a ~~new~~ minimum ratio of CET1 capital to risk weighted assets of 4.5 percent and a CET1 capital conservation buffer of greater than 2.5 percent of risk-weighted assets that will apply to all U.S. banking organizations, including the Bank and the Company. Failure to maintain the capital conservation buffer would result in increasingly stringent restrictions on a banking organization's ability to make dividend payments and other capital distributions and pay discretionary bonuses to

executive officers. Under the U.S. Basel III final rule, trust preferred securities no longer qualify as Tier 1 capital for bank holding companies such as the Company.

The Company is also required to submit an annual capital plan to the Federal Reserve Board under the CCAR process. The capital plan must include an assessment of the Company's expected uses and sources of capital over a forward-looking planning horizon of at least nine quarters, a detailed description of the Company's process for assessing capital adequacy, the Company's capital policy, and a discussion of any expected changes to the Company's business plan that are likely to have a material impact on its capital adequacy or liquidity. Based on a ~~qualitative and~~ quantitative assessment, including a supervisory stress test conducted as part of the CCAR process, the Federal Reserve Board will either object to the Company's capital plan, in whole or in part, or provide a notice of non-objection to the Company. If the Federal Reserve Board objects to a capital plan, the Company may not make any capital distribution other than those with respect to which the Federal Reserve Board has indicated its non-objection. In addition to capital planning, the Company and the Bank are subject to capital stress testing requirements imposed by the Dodd-Frank Act.

~~While the Company can give no assurances as to the outcome of the annual CCAR process in subsequent years or specific interactions with the regulators, it believes it has a strong capital position.~~

The Federal Reserve Board evaluates the Company's liquidity as part of the supervisory ~~process. In addition,~~process and adopted a final LCR rule, which is being phased in for the ~~Basel Committee has developed a set of internationally-agreed upon quantitative liquidity metrics: the LCR and the NSFR. The LCR was developed~~Company. Failure to ensure that covered banking organizations have sufficient high-quality liquid assets to cover expected net cash outflows over a 30-day liquidity stress period. The NSFR has a time horizon of one year and has been developed to provide a sustainable maturity structure of assets and liabilities. The Basel Committee contemplated that major jurisdictions would begin to phase in the LCR requirement on January 1, 2015. It contemplates that the NSFR, includingcomply with these regulatory standards or any ~~revisions, will be implemented~~new rules, such as ~~a minimum standard by January 1, 2018.~~

~~In September 2014, the federal banking regulators adopted~~ a final rule implementing NSFR, could affect the LCR in the United States. The rule introduces a version of the LCR applicable to certain large bank holding companies such as the Company, which is not as stringent as the version of LCR that applies to financial institutions with $250 billion or more of total assets. This version differs in certain respects from the Basel Committee’s version of the LCR, including a narrower definition of high-quality liquid assets, different prescribed cash inflow and outflow assumptions for certain types of instruments and transactions and a shorter phase-in schedule beginning on January 1, 2015 and ending on January 1, 2017. The federal banking regulators have not yet proposed rules to implement the NSFR in the United States. Company's business.

In addition, BBVA designated the Parent as its IHC to comply with the Federal Reserve Board has adopted liquidity risk management, stress testing and liquidity buffer requirements as part of the enhanced prudential standards applicable to the U.S. operations of Large FBOs such as BBVA. The Company and the Bank are part of BBVA’s U.S. operations.

~~In February 2014, the Federal Reserve Board adopted a~~Board's final rule to enhance its supervision and regulation of the U.S. operations of Large ~~FBOs such as BBVA. BBVA's U.S. operations are conducted primarily through the Company~~

~~Table of Contents~~

and the Bank. Under the Federal Reserve Board's rule, Large FBOs with $50 billion or more in U.S. assets held outside of their U.S. branches and agencies, such as BBVA, will be required to create a separately-capitalized top-tier U.S. IHC that will hold all of the Large FBO's U.S. bank and nonbank subsidiaries, such as the Bank and the Company.FBOs. The ~~Large FBO’s combined U.S. operations (including its U.S. branches, agencies and subsidiaries) will be~~Parent is subject to U.S. risk-based and leverage capital, liquidity, risk management, stress testing and other enhanced prudential standards on a consolidated ~~basis. Large FBOs must comply with the~~basis under this rule. BBVA's combined U.S. operations (including its U.S. branches, agencies and subsidiaries) are also subject to certain enhanced prudential standards by July 1, 2016. Large FBOs with non-branch/agency U.S. assets of $50 billion or more must also establish an IHC by July 1, 2016 and transfer all ownership interests in U.S. subsidiaries to the IHC by July 1, 2017. Large FBOs with $50 billion or more in non-branch/agency U.S. assets were required to submit an implementation plan to the Federal Reserve Board by January 1, 2015 describing how the FBO planned to comply with the IHC requirement and certain other enhanced prudential standards. ~~The Company submitted its implementation plan in December 2014.~~

BBVA established the Parent in 2007 to serve as a holding company for its U.S. subsidiaries and intends to designate the Parent as its IHC. As a U.S.-based bank holding company with more than $50 billion in assets, the Parent is required to comply with the prudential standards applicable to U.S.-based bank holding companies. When BBVA designates an IHC, the IHC will be required to comply with the enhanced prudential standards applicable to U.S. IHCs. These enhanced prudential standards could affect the Company’s operations.

Please refer to Item 1. Business - Supervision and Regulation for more information.

The Parent is a holding company and depends on its subsidiaries for liquidity in the form of dividends, distributions and other payments.

The Parent is a legal entity separate and distinct from its subsidiaries, including the Bank. The principal source of cash flow for the Parent is dividends from the Bank. There are statutory and regulatory limitations on the payment of dividends by the Bank. Regulations of both the Federal Reserve and the State of Alabama affect the ability of the Bank to pay dividends and other distributions to the Company and to make loans to the Company. Also, the Company’s right to participate in a distribution of assets upon a subsidiary's liquidation or reorganization is subject to the prior claims of the subsidiary's creditors. Limitations on the Parent’s ability to receive dividends and distributions from its subsidiaries could have a material adverse effect on the Company’s liquidity and on its ability to pay dividends on common stock. For additional information regarding these limitations see Item 1. Business - Supervision, Regulation and Other Factors - Dividends.

The Company is subject to credit risk.

When the Company loans money, commits to loan money or enters into a letter of credit or other contract with a counterparty, it incurs credit risk, which is the risk of losses if its borrowers do not repay their loans or its counterparties fail to perform according to the terms of their contracts. Many of the Company's products expose it to credit risk, including loans, leases and lending commitments.

Further downgrades to the U.S. government's credit rating, or the credit rating of its securities, by one or more of the credit ratings agencies could have a material adverse effect on general economic conditions, as well as the Company's operations, earnings and financial condition.

On August 5, 2011, S&P downgraded the U.S. government's sovereign credit rating of long-term U.S. federal debt from AAA to AA+ while also keeping its outlook negative. Moody's also lowered its outlook to “Negative” on June 2, 2011, and Fitch lowered its outlook to “Negative” on November 28, 2011. During 2013 and 2014, the three credit rating agencies revised their outlook from "Negative" to "Stable." It is foreseeable that the ratings and perceived creditworthiness of instruments issued, insured or guaranteed by institutions, agencies or instrumentalities directly linked to the U.S. government could be correspondingly affected by any downgrade to the U.S. government's sovereign credit rating, including the rating of U.S. Treasury securities. Instruments of this nature are key assets on the balance sheets of financial institutions, including the Company, and are widely used as collateral by financial institutions to meet their day-to-day cash flows in the short-term debt market.

Further downgrades of the U.S. government's sovereign credit rating, and the perceived creditworthiness of U.S. government-related obligations, could impact the Company's ability to obtain funding that is collateralized by affected instruments, as well as affecting the pricing of that funding when it is available. A downgrade may also adversely affect the market value of such instruments. The Company cannot predict if, when or how any changes to the credit ratings or perceived creditworthiness of these organizations will affect economic conditions. Such ratings actions could result

~~Table of Contents~~

in a significant adverse impact on the Company. A downgrade of the sovereign credit ratings of the U.S. government or the credit ratings of related institutions, agencies or instrumentalities would significantly exacerbate the other risks to which the Company is subject and any related adverse effects on its business, financial condition and results of operations.

A reduction in the Company's own credit rating could have a material adverse effect on the Company's liquidity and increase the cost of its capital markets funding.

Adequate liquidity is essential to the Company's businesses. A reduction to the Company's credit rating could have a material adverse effect on the Company's business, financial condition and results of operations.

The rating agencies regularly evaluate the Company and their ratings are based on a number of factors, including the Company's financial strength as well as factors not entirely within its control, such as conditions affecting the financial services industry generally. Adverse changes in the credit ratings of the Kingdom of Spain, which subsequently could impact BBVA, could also adversely impact the Company's credit rating. ~~In light of the difficulties in the financial services industry and the housing and financial markets, there~~There can be no assurance that the Company will maintain its current ratings. The Company's failure to maintain those ratings could increase its borrowing costs, require the Company to replace funding lost due to the downgrade, which may include the loss of customer deposits, and may also limit the Company's access to capital and money markets and trigger additional collateral requirements in derivatives contracts and other secured funding arrangements.

The Company's ability to access the capital markets is important to its overall funding profile. This access is affected by its credit rating. The interest rates that the Company pays on its securities are also influenced by, among other things, the credit ratings that it receives from recognized rating agencies. A downgrade to the Company's credit rating could affect its ability to access the capital markets, increase its borrowing costs and negatively impact its profitability. A ratings downgrade to the Company's credit rating could also create obligations or liabilities for it under the terms of its outstanding securities that could increase its costs or otherwise have a negative effect on the Company's results of operations or financial condition. Additionally, a downgrade of the credit rating of any particular security issued by the Company could negatively affect the ability of the holders of that security to sell the securities and the prices at which any such securities may be sold.

Changes in interest rates could affect the Company's income and cash flows.

The Company's earnings and financial condition are largely dependent on net interest income, which is the difference between interest earned from loans and investments and interest paid on deposits and borrowings. The narrowing of interest rate spreads, meaning the difference between interest rates earned on loans and investments and the interest rates paid on deposits and borrowings, could adversely affect the Company's earnings and financial condition. The Company cannot control or predict with certainty changes in interest rates.

Regional and local economic conditions, competitive pressures and the policies of regulatory authorities, including monetary policies of the Federal Reserve Board, affect interest income and interest expense. The Company has policies and procedures designed to manage the risks associated with changes in market interest rates. Changes in interest rates, however, may still have an adverse effect on the Company's profitability. While the Company actively manages against these risks, if its assumptions regarding borrower behavior are wrong or overall economic conditions are significantly different than planned for, then its risk mitigation techniques may be insufficient to protect against the risk.

The costs and effects of litigation, regulatory investigations, examinations or similar matters, or adverse facts and developments relating thereto, could materially affect the Company's business, operating results and financial condition.

The Company faces legal risks in its business, and the volume of claims and amount of damages and penalties claimed in litigation and regulatory proceedings against financial institutions remain high and are escalating. Substantial

legal liability or significant regulatory action against the Company may have material adverse financial effects or cause significant reputational harm, which in turn could seriously harm its business prospects.

The Company and its operations are subject to increasing regulatory oversight and scrutiny, which may lead to additional regulatory investigations or enforcement actions, thereby increasing the Company’s costs associated with responding to or defending such actions. In particular, inquiries could develop into administrative, civil or criminal

~~Table of Contents~~

proceedings or enforcement actions and may increase the Company's compliance costs, require changes in the Company's business practices, affect the Company's competitiveness, impair the Company's profitability, harm the Company's reputation or otherwise adversely affect the Company's business.

In February 2015, the Federal Reserve Board announced the results of its regularly scheduled examination covering 2011 and 2012 to determine the Bank’s compliance with the CRA. The CRA requires the Federal Reserve Board to evaluate the record of the Bank in meeting the credit needs of its local community, including low and moderate income neighborhoods. The Bank received a rating of “needs to improve." The Bank’s rating in this CRA examination ~~has~~ resulted in restrictions on certain activities, including certain mergers and acquisitions and applications to open branches or certain other facilities. ~~Such restrictions will last at least until~~However, the ~~results of the Bank’s next~~Bank received a “Satisfactory” CRA rating in its most recent CRA examination ~~are known. The Bank was subject to another CRA examination that began in the fourth quarter of 2015. The Bank expects to receive the results of this examination in the next few months.~~and those restrictions have been removed.

The Company's insurance may not cover all claims that may be asserted against it and indemnification rights to which it is entitled may not be honored. Any claims asserted against the Company, regardless of merit or eventual outcome, may harm its reputation. Should the ultimate judgments or settlements in any litigation or investigation significantly exceed the Company's insurance coverage, they could have a material adverse effect on its business, financial condition and results of operations. In addition, premiums for insurance covering the financial and banking sectors are rising. The Company may not be able to obtain appropriate types or levels of insurance in the future, nor may it be able to obtain adequate replacement policies with acceptable terms or at historic rates, if at all.

Disruptions in the Company's ability to access capital markets may adversely affect its capital resources and liquidity.

The Company may access capital markets to provide it with sufficient capital resources and liquidity to meet its commitments and business needs, and to accommodate the transaction and cash management needs of its clients. Other sources of contingent funding available to the Company include inter-bank borrowings, brokered deposits, repurchase agreements, FHLB capacity and borrowings from the Federal Reserve discount window. Any occurrence that may limit the Company's access to the capital markets, such as a decline in the confidence of debt investors, its depositors or counterparties participating in the capital markets, or a downgrade of its debt rating, may adversely affect the Company's capital costs and its ability to raise capital and, in turn, its liquidity.

~~Starting in mid-2007, significant turmoil and volatility in global financial markets increased, though current volatility has declined. Such disruptions~~Disruptions in the liquidity of financial markets may directly impact the Company to the extent it needs to access capital markets to raise funds to support its business and overall liquidity position. This situation could adversely affect the cost of such funds or the Company's ability to raise such funds. If the Company were unable to access any of these funding sources when needed, it might be unable to meet customers' needs, which could adversely impact its financial condition, results of operations, cash flows and level of regulatory-qualifying capital.

The Company may suffer increased losses in its loan portfolio despite enhancement of its underwriting policies and practices, and the Company's allowances for credit losses may not be adequate to cover such eventual losses.

The Company seeks to mitigate risks inherent in its loan portfolio by adhering to specific underwriting policies and practices, which often include analysis of (1) a borrower's credit history, financial statements, tax returns and cash flow projections; (2) valuation of collateral based on reports of independent appraisers; and (3) verification of liquid assets. The Company's underwriting policies, practices and standards are periodically reviewed and, if appropriate, enhanced in response to changing market conditions and/or corporate strategies.

Like other financial institutions, the Company maintains allowances for credit losses to provide for loan defaults and nonperformance. The Company's allowances for credit losses may not be adequate to cover eventual loan losses, and future provisions for credit losses could materially and adversely affect the Company's financial condition and results of operations. In addition, the FASB's ~~Proposed~~ Accounting Standards Update, Financial Instruments-Credit Losses (Subtopic 825-15), that would substantially change the accounting for credit losses under current U.S. GAAP standards. Under current U.S. GAAP standards, credit losses are not reflected in financial statements until it is probable that the credit loss has been incurred. Under the new Credit Loss ~~Proposal,~~ASU, an entity would reflect in its financial statements its

current estimate of credit losses on financial assets over the expected life of each financial asset. The Credit Loss ~~Proposal, if adopted as proposed,~~ASU, may have a negative impact on the Company's reported earnings, capital, regulatory

~~Table of Contents~~

capital ratios, as well as on regulatory limits which are based on capital (e.g., loans to affiliates) since it would accelerate the recognition of estimated credit losses.

The value of the Company’s goodwill may decline in the future.

A significant decline in the Company’s expected future cash flows, a significant adverse change in the business climate, or slower growth rates, any or all of which could be materially impacted by many of the risk factors discussed herein, may require that the Company take charges in the future related to the impairment of goodwill. Future regulatory actions could also have a material impact on assessments of goodwill for impairment. If the Company were to conclude that a future write-down of its goodwill and other intangible assets is necessary, the Company would record the appropriate charge which could have a material adverse effect on its results of operations.

The financial services market is undergoing rapid technological changes, and the Company may be unable to effectively compete or may experience heightened cyber-security risks as a result of these changes.

The financial services market, including banking services, is undergoing rapid changes with frequent introductions of new technology-driven products and services. In addition to better serving customers, the effective use of technology increases efficiency and may enable us to reduce costs. The Company's future success may depend, in part, on its ability to use technology to provide products and services that provide convenience to customers and to create additional efficiencies in its operations. Some of the Company's competitors have substantially greater resources to invest in technological improvements. The Company may not be able to effectively implement new technology-driven products and services or be successful in marketing these products and services to its customers. As a result, the Company's ability to effectively compete to retain or acquire new business may be impaired, and its business, financial condition or results of operations may be adversely affected.

The Company is under continuous threat of loss due to cyber-attacks, especially as it continues to expand customer capabilities to utilize internet and other remote channels to transact business. Two of the most significant cyber-attack risks that it faces are e-fraud and breach of sensitive customer data. Loss from e-fraud occurs when cybercriminals breach and extract funds directly from customers' or the Company's accounts. The attempts to breach sensitive customer data, such as account numbers and social security numbers, are less frequent, but could present significant reputational, legal and/or regulatory costs to the Company if successful.

~~Recently,~~Over the past few years, there ~~has~~have been a series of distributed denial of service attacks on financial services companies. Distributed denial of service attacks are designed to saturate the targeted online network with excessive amounts of network traffic, resulting in slow response times, or in some cases, causing the site to be temporarily unavailable. Generally, these attacks have not been conducted to steal financial data, but meant to interrupt or suspend a company's internet service. While these events may not result in a breach of client data and account information, the attacks can adversely affect the performance of a company’s website and in some instances prevented customers from accessing a company’s website. Distributed denial of service attacks, hacking and identity theft risks could cause serious reputational harm. Cyber threats are rapidly evolving and the Company may not be able to anticipate or prevent all such attacks. The Company's risk and exposure to these matters remains heightened because of the evolving nature and complexity of these threats from cybercriminals and hackers, its plans to continue to provide internet banking and mobile banking channels, and its plans to develop additional remote connectivity solutions to serve its customers. The Company may incur increasing costs in an effort to minimize these risks and could be held liable for any security breach or loss.

The Company relies heavily on communications and information systems to conduct its business and relies on third parties and affiliates to provide key components of its business infrastructure.

The Company relies heavily on communications and information systems to conduct its business. This includes the utilization of a data center in Mexico. Any failure, interruption or breach in security of these systems could result in failures or disruptions in the Company's customer relationship management, general ledger, deposit, loan and other systems. While the Company has policies and procedures designed to prevent or limit the effect of the possible failure, interruption or security breach of its information systems, there can be no assurance that any such failure, interruption or security breach will not occur or, if they do occur, that they will be adequately addressed. The occurrence of any

failure, interruption or security breach of the Company's information systems could damage its reputation, result in a loss of customer business, subject it to additional regulatory scrutiny, or expose it to civil litigation and possible financial liability.

~~Table of Contents~~

Third parties and affiliates provide key components of the Company's business infrastructure such as banking services, processing, and internet connections and network access. Any disruption in such services provided by these third parties or affiliates or any failure of these third parties or affiliates to handle current or higher volumes of use could adversely affect the Company's ability to deliver products and services to clients, its reputation and its ability to otherwise conduct business. Beginning in 2011, the Bank began converting to a new core banking system. Implementation and continuing improvement of this new core banking system relies heavily on third parties to develop software.

Technological or financial difficulties of a third party or affiliate service provider, including security breaches, could adversely affect the Company's business to the extent those difficulties result in the interruption or discontinuation of services provided by that party or the loss of sensitive customer data. Further, in some instances the Company may be responsible for failures of such third parties or affiliates to comply with government regulations. The Company may not be insured against all types of losses as a result of third party or affiliate failures and the Company's insurance coverage may be inadequate to cover all losses resulting from system failures or other disruptions. Failures in the Company business infrastructure could interrupt operations or increase the costs of doing business.

The Company is subject to a variety of operational risks, including reputational risk, legal risk and regulatory and compliance risk, and the risk of fraud or theft by employees or outsiders, which may adversely affect its business and results of operations.

The Company is exposed to many types of operational risks, including reputational risk, legal, regulatory and compliance risk, the risk of fraud or theft by employees or outsiders, including unauthorized transactions by employees, or operational errors, such as clerical or record-keeping errors or those resulting from faulty or disabled computer or telecommunications systems. Negative public opinion can result from the Company's actual or alleged conduct in any number of activities, including lending practices, corporate governance and acquisitions, and from actions taken by government regulators and community organizations in response to those activities. In addition, negative public opinion can adversely affect the Company's ability to attract and keep customers and can expose it to litigation and regulatory action. Actual or alleged conduct by the Company can result in negative public opinion about its other business. Negative public opinion could also affect the Company's credit ratings, which are important to its access to unsecured wholesale borrowings.

The Company's business involves storing and processing sensitive consumer and business customer data. If personal, non-public, confidential or proprietary information of customers in its possession were to be mishandled or misused, the Company could suffer significant regulatory consequences, reputational damage and financial loss. Such mishandling or misuse could include, for example, if such information were erroneously provided to parties who are not permitted to have the information, either by fault of the Company's systems, employees or counterparties, or where such information is intercepted or otherwise inappropriately taken by third parties.

Because the financial services business involves a high volume of transactions, certain errors may be repeated or compounded before they are discovered and successfully rectified. The Company's necessary dependence upon automated systems to record and process transactions and its large transaction volume may further increase the risk that technical flaws or employee tampering or manipulation of those systems will result in losses that are difficult to detect. The Company also may be subject to disruptions of its operating systems arising from events that are wholly or partially beyond its control, such as computer viruses, electrical or telecommunications outages, natural disasters, or other damage to property or physical assets which may give rise to disruption of service to customers and to financial loss or liability. The Company is further exposed to the risk that its external vendors may be unable to fulfill their contractual obligations, or will be subject to the same risk of fraud or operational errors by their respective employees as it is, and to the risk that the Company's, or its vendors', business continuity and data security systems prove to be inadequate. The occurrence of any of these risks could result in a diminished ability of the Company to operate its business, as well as potential liability to clients, reputational damage and regulatory intervention, which could adversely affect the Company's business, financial condition or results of operations.

The Company depends on the expertise of key personnel, and its operations may suffer if it fails to attract and retain skilled personnel.

The Company's success depends, in large part, on its ability to attract and retain key individuals. Competition for qualified candidates in the activities and markets that the Company serves is great and it may not be able to hire these

~~Table of Contents~~

candidates and retain them. If the Company is not able to hire or retain these key individuals, it may be unable to execute its business strategies and may suffer adverse consequences to its business, operations and financial condition.

In June 2010, the federal banking regulators issued joint guidance on executive compensation designed to help ensure that a banking organization's incentive compensation policies do not encourage imprudent risk taking and are consistent with the safety and soundness of the organization. In addition, the Dodd-Frank Act requires those agencies, along with the SEC, to adopt rules ~~to require~~affecting the structure and reporting of incentive ~~compensation and to prohibit certain compensation arrangements.~~compensation. The federal banking regulators and SEC proposed such rules in ~~April 2011.~~ 2011 and issued revised proposed rules in 2016.

As a wholly owned subsidiary of BBVA, the Company is also required to comply with the European Union’s CRD-IV, which, among other things, impacts the variable compensation of certain risk-takers and highly compensated individuals in the Company or its subsidiaries. In accordance with CRD-IV, the Bank pays variable compensation of certain employees half in stock and half in cash. Additionally, in accordance with CRD-IV, from 40% to 50% (depending on the classification of the employee), of such payment is deferred for three years. The deferred amounts are subject to performance indicators and a malus clause, which could result in the reduction or forfeiture of the deferred amounts. The equity awards are subject to an additional one-year holding period after delivery. Most of the Company’s competitors are not subject to CRD-IV.

If the Company is unable to attract and retain qualified employees, or do so at rates necessary to maintain its competitive position, or if compensation costs required to attract and retain employees become more expensive, the Company's performance, including its competitive position, could be materially adversely affected.

The Company's framework for managing risks may not be effective in mitigating risk and loss to the company.

The Company's risk management framework is made up of various processes and strategies to manage its risk exposure. The framework to manage risk, including the framework's underlying assumptions, may not be effective under all conditions and circumstances. If the risk management framework proves ineffective, the Company could suffer unexpected losses and could be materially adversely affected.

The Company's financial reporting controls and procedures may not prevent or detect all errors or fraud.

Financial reporting disclosure controls and procedures are designed to reasonably assure that information required to be disclosed by the Company in reports filed or submitted under the Exchange Act is accumulated and communicated to management, and recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms. Any disclosure controls and procedures over financial reporting or internal controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.

These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by an unauthorized override of the controls. Accordingly, because of the inherent limitations in the control system, misstatements due to error or fraud may occur and not be detected.

The Company is subject to certain risks related to originating and selling mortgages. It may be required to repurchase mortgage loans or indemnify mortgage loan purchasers as a result of breaches of representations and warranties, borrower fraud or certain breaches of its servicing agreements, and this could harm the Company's liquidity, results of operations and financial condition.

The Company originates and often sells mortgage loans. When it sells mortgage loans, whether as whole loans or pursuant to a securitization, the Company is required to make customary representations and warranties to the purchaser about the mortgage loans and the manner in which they were originated. The Company's whole loan sale agreements require it to repurchase or substitute mortgage loans in the event that it breaches certain of these representations or warranties. In addition, the Company may be required to repurchase mortgage loans as a result of borrower fraud or

in the event of early payment default of the borrower on a mortgage loan. Likewise, the Company is required to repurchase or substitute mortgage loans if it breaches a representation or warranty in connection with its securitizations, whether or not it was the originator of the loan. While in many cases it may have a remedy available against certain parties, often these may not be as broad as the remedies available to a purchaser of mortgage loans against it, and the Company faces the further risk that such parties may not have the financial capacity to satisfy remedies that may be available to it. Therefore, if a purchaser enforces its remedies against it, the Company may not be able to recover its losses from third parties. The Company has received repurchase and indemnity demands from purchasers. These have resulted in an increase in the amount of losses for repurchases. While the Company has taken steps to enhance its underwriting policies and procedures, these steps will not reduce risk associated with loans sold in the past. If repurchase and indemnity demands increase materially, the Company's results of operations may be adversely affected.

~~Table of Contents~~

The Company is subject to intense competition in the financial services industry, particularly in its market area, which could result in losing business or margin declines.

The Company operates in a highly competitive industry that could become even more competitive as a result of reform of the financial services industry resulting from the Dodd-Frank Act and other legislative, regulatory and technological changes, as well as continued consolidation. The Company faces aggressive competition from other domestic and foreign lending institutions and from numerous other providers of financial services. The ability of non-banking financial institutions to provide services previously limited to commercial banks has intensified competition. Because non-banking financial institutions are not subject to the same regulatory restrictions as banks and bank holding companies, they can often operate with greater flexibility and lower cost structures. Securities firms and insurance companies that elect to become financial holding companies can offer virtually any type of financial service, including banking, securities underwriting, insurance (both agency and underwriting) and merchant banking, and may acquire banks and other financial institutions. This may significantly change the competitive environment in which the Company conducts business. Some of the Company's competitors have greater financial resources and/or face fewer regulatory constraints. As a result of these various sources of competition, the Company could lose business to competitors or be forced to price products and services on less advantageous terms to retain or attract clients, either of which would adversely affect its profitability.

Some of the Company's larger competitors, including certain national banks that have a significant presence in its market area, may have greater capital and resources than the Company, may have higher lending limits and may offer products and services not offered by the Company. Although the Company remains strong, stable and well capitalized, management cannot predict the reaction of customers and other third parties with which it conducts business with respect to the strength of the Company relative to its competitors, including its larger competitors. Any potential adverse reactions to the Company's financial condition or status in the marketplace, as compared to its competitors, could limit its ability to attract and retain customers and to compete for new business opportunities. The inability to attract and retain customers or to effectively compete for new business may have a material and adverse effect on the Company's financial condition and results of operations.

The Company also experiences competition from a variety of institutions outside of its market area. Some of these institutions conduct business primarily over the internet and may thus be able to realize certain cost savings and offer products and services at more favorable rates and with greater convenience to the customer who can pay bills and transfer funds directly without going through a bank. This “disintermediation” could result in the loss of fee income, as well as the loss of customer deposits and income generated from those deposits. In addition, changes in consumer spending and saving habits could adversely affect the Company's operations, and the Company may be unable to timely develop competitive new products and services in response to these changes.

Unpredictable catastrophic events could have a material adverse effect on the Company.

The occurrence of catastrophic events such as hurricanes, tropical storms, tornados, terrorist attacks and other large scale catastrophes could adversely affect the Company's consolidated financial condition or results of operations. The Company has operations and customers in the southern United States, which could be adversely impacted by hurricanes and other severe weather in those regions. Unpredictable natural and other disasters could have an adverse effect on the Company in that such events could materially disrupt its operations or the ability or willingness of its customers to access the financial services it offers. The incidence and severity of catastrophes are inherently unpredictable. Although the Company carries insurance to mitigate its exposure to certain catastrophic events, these events could nevertheless

reduce its earnings and cause volatility in its financial results for any fiscal quarter or year and have a material adverse effect on its financial condition and/or results of operations.

Customers could pursue alternatives to bank deposits, causing the Company to lose a relatively inexpensive source of funding.

Checking and savings account balances and other forms of client deposits could decrease if customers perceive alternative investments, such as the stock market, provide superior expected returns. When clients move money out of bank deposits in favor of alternative investments, the Company can lose a relatively inexpensive source of funds, increasing its funding costs.

~~Table of Contents~~

Negative public opinion could damage the Company's reputation and adversely impact business and revenues.

As a financial institution, the Company's earnings and capital are subject to risks associated with negative public opinion. The reputation of the financial services industry in general has been damaged as a result of the financial crisis and other matters affecting the financial services industry, including mortgage foreclosure issues. Negative public opinion regarding the Company could result from its actual or alleged conduct in any number of activities, including lending practices, the failure of any product or service sold by it to meet its clients' expectations or applicable regulatory requirements, breach of sensitive customer information, corporate governance and acquisitions, or from actions taken by government regulators and community organizations in response to those activities. The Company could also be adversely affected by negative public opinion involving BBVA. Negative public opinion can adversely affect the Company's ability to keep, attract and/or retain clients and personnel, and can expose it to litigation and regulatory action. Actual or alleged conduct by one of the Company's businesses can result in negative public opinion about its other businesses. Negative public opinion could also affect the Company's credit ratings, which are important to accessing unsecured wholesale borrowings. Significant changes in these ratings could change the cost and availability of these sources of funding.

The Company depends on the accuracy and completeness of information about clients and counterparties.

In deciding whether to extend credit or enter into other transactions with clients and counterparties, the Company may rely on information furnished by or on behalf of clients and counterparties, including financial statements and other financial information. The Company also may rely on representations of clients and counterparties as to the accuracy and completeness of that information and, with respect to financial statements, on reports of independent auditors.

Compliance with anti-money laundering and anti-terrorism financing rules involves significant cost and effort.

The Company is subject to rules and regulations regarding money laundering and the financing of terrorism. Monitoring compliance with anti-money laundering and anti-terrorism financing rules and regulations can put a significant financial burden on banks and other financial institutions and poses significant technical problems. Although we ~~believe that our current~~have internal policies and procedures ~~are sufficient~~designed to ~~comply~~ensure compliance with applicable anti-money laundering and anti-terrorism financing rules and regulations, we cannot guarantee that our ~~anti-money laundering and anti-terrorism financing~~ policies and procedures completely prevent ~~situations of money laundering or terrorism financing. Any~~violations of such ~~events~~rules and regulations. Any such violations may have severe consequences, including sanctions, fines and reputational consequences, which could have a material adverse effect on the Company's business, financial condition or results of operations.

The Company is exposed to risks in relation to compliance with anti-corruption laws and regulations and economic sanctions programs.

The Company is required to comply with various anti-corruption laws, including the U.S. Foreign Corrupt Practices Act of 1977, and economic sanctions programs, including those administered by the United Nations Security Council and the United States, including OFAC. The anti-corruption laws generally prohibit providing anything of value to government officials for the purposes of obtaining or retaining business or securing any improper business advantage. As part of its business, the Company may deal with entities, the employees of which are considered government officials. In addition, as noted above in Part I, Item 1 (“Anti-Money Laundering; USA PATRIOT Act; Office of Foreign Assets Control”) above, economic sanctions programs restrict the Company from conducting certain transactions or dealings involving certain sanctioned countries or persons.

Although the Company has internal policies and procedures designed to ensure compliance with applicable anti-corruption laws and sanctions regulations, there can be no assurance that such policies and procedures will be sufficient or that the Company’s employees, directors, officers, partners, agents and service providers will not take actions in violation of the Company’s policies and procedures (or otherwise in violation of the relevant anti-corruption laws and sanctions regulations) for which they or the Company may ultimately be held responsible. Violations of anti-corruption laws and sanctions regulations could lead to financial penalties being imposed on the Company, limits being placed on the Company’s activities, authorizations or licenses being revoked, damage to the Company’s reputation and other consequences that could have a material adverse effect on the Company’s business, results of operations and financial condition. Further, litigation or investigations relating to alleged or suspected violations of anti-corruption laws or sanctions regulations could be costly.

Changes in accounting standards could impact reported earnings.

The entities that set accounting standards and other regulatory bodies periodically change the financial accounting and reporting standards that govern the preparation of the Company’s consolidated financial statements. These changes can materially impact how management records and reports the Company’s financial condition and results of operations. In some cases, the Company could be required to apply a new or revised accounting standard retroactively, resulting in a possible restatement of prior period financial statements.

~~Table of Contents~~


Item 1B.	Unresolved Staff Comments

Not Applicable.


Item 2.	Properties

The Company occupies various facilities principally located in Alabama, Arizona, California, Colorado, Florida, New Mexico and Texas and in states where it operates loan production offices that are used in the normal course of the financial services business. The properties consist of both owned and leased properties and include land for future banking center sites. The leased properties include both land and buildings that are generally under long-term leases. The Company leases office space used as the Company's principal executive offices in Houston, Texas. The Bank has significant operations in Birmingham, Alabama. The Company owns the land and building where the Bank is headquartered. See Note 6,, Premises and Equipment,, in the Notes to the Consolidated Financial Statements, for additional disclosures related to the Company’s properties.


Item 3.	Legal Proceedings

See under “Legal and Regulatory Proceedings” in Note 16, Commitments, Contingencies and Guarantees, in the Notes to the Consolidated Financial Statements.


Item 4.	Mine Safety Disclosures

Not Applicable.

Part II


Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Market Information

The Parent's common stock is not traded on any exchange or other interdealer electronic trading facility and there is no established public trading market for the Parent's common stock.

Holders

As of the date of this filing, BBVA was the sole holder of the Parent's common stock.

Dividends

The payment of dividends on the Parent's common stock is subject to determination and declaration by the Board of Directors of the Parent and regulatory limitations on the payment of dividends. There is no assurance that dividends will be declared or, if declared, what the amount of dividends will be, or whether such dividends will continue. The following table sets forth the common dividends the Parent paid to its sole shareholder, BBVA, for each of the last eight quarters.


	2015		2014		2016		2015
	(In Thousands)				(In Thousands)
Quarter Ended:
March 31	$	—	$	—	$	—	$	—
June 30	35,000		—		60,000		35,000
September 30	—		51,000		—		—
December 31	60,000		51,000		32,864		60,000
Year	$	95,000	$	102,000	$	92,864	$	95,000

~~Table of Contents~~

Any future dividends paid from the Parent must be set forth as capital actions in the Company's capital plans and not objected to by the Federal Reserve Board before any dividends can be paid. A discussion of dividend restrictions is provided in Item 1. Business - Overview - Supervision, Regulation, and Other Factors - Dividends and in Note 17,, Regulatory Capital Requirements and Dividends from Subsidiaries,, in the Notes to the Consolidated Financial ~~Statements~~.Statements.

Recent Sales of Unregistered Securities

On April 8, 2013, BBVA contributed all of the outstanding shares of BSI to the Parent, and the Parent issued 1,482,239 shares of common stock to BBVA. The shares were issued in reliance upon the exemption from registration for transactions not involving a public offering under Section 4(a)(2) of the Securities Act.

On April 9, 2013, BBVA contributed $100 million to the Parent, and the Parent issued an additional 1,961,554 shares of common stock to BBVA. The shares were issued in reliance upon the exemption from registration for transactions not involving a public offering under Section 4(a)(2) of the Securities Act.

On March 17, 2014, BBVA contributed $117 million to the Parent, and the Parent issued 2,226,875 shares of its common stock to BBVA. The shares were issued in reliance upon the exemption from registration for transactions not involving a public offering under Section 4(a)(2) of the Securities Act.

On December 3, 2015, BBVA contributed $230 million to the Parent, and the Parent issued 1,150 shares of its Floating Non-Cumulative Perpetual Preferred Stock, Series A. The shares were issued in reliance upon the exemption from registration for transactions not involving a public offering under Section 4(a)(2) of the Securities Act.

~~Table of Contents~~


Item 6.	Selected Financial Data

The following table sets forth summarized historical consolidated financial information for each of the periods indicated. This information should be read together with Management's Discussion and Analysis of Financial Condition and Results of Operations below and with the accompanying Consolidated Financial Statements included in this Annual Report on Form 10-K. The historical information indicated as of and for the years ended December 31, ~~2015~~2016 through ~~2011,~~2012, has been derived from the Company's audited Consolidated Financial Statements for the years ended December 31, ~~2015~~2016 through ~~2011.~~2012. Historical results set forth below and elsewhere in this Annual Report on Form 10-K are not necessarily indicative of future performance.


	Years Ended December 31,															Years Ended December 31,
	2015			2014			2013			2012			2011			2016			2015			2014			2013			2012 (1)
	(Dollars in Thousands)															(Dollars in Thousands)
Summary of Operations:
Interest income	$	2,438,261		$	2,313,985		$	2,323,256		$	2,491,536		$	2,609,774		$	2,530,459		$	2,438,275		$	2,313,996		$	2,323,279		$	2,491,536
Interest expense	425,298			328,491			280,575			261,554			280,725			462,778			425,298			328,491			280,575			261,554
Net interest income	2,012,963			1,985,494			2,042,681			2,229,982			2,329,049			2,067,681			2,012,977			1,985,505			2,042,704			2,229,982
Provision for loan losses	193,638			106,301			107,546			29,471			428,633			302,589			193,638			106,301			107,546			29,471
Net interest income after provision for loan losses	1,819,325			1,879,193			1,935,135			2,200,511			1,900,416			1,765,092			1,819,339			1,879,204			1,935,158			2,200,511
Noninterest income	976,473			917,422			854,790			850,048			853,213			1,055,974			1,079,374			1,007,812			940,129			850,048
Noninterest expense, including goodwill impairment ~~(1)~~(2)	2,136,490			2,180,752			2,199,175			2,351,847			4,392,818			2,303,522			2,214,853			2,246,877			2,260,906			2,351,847
Net income (loss) before income tax expense	659,308			615,863			590,750			698,712			(1,639,189		)
Net income before income tax expense																517,544			683,860			640,139			614,381			698,712
Income tax expense	167,513			147,331			170,820			219,701			98,175			146,021			176,502			155,763			179,242			219,701
Net income (loss)	491,795			468,532			419,930			479,011			(1,737,364		)
Net income																371,523			507,358			484,376			435,139			479,011
Noncontrolling interest	2,228			1,976			2,094			2,138			2,011			2,010			2,228			1,976			2,094			2,138
Net income (loss) available to shareholder	$	489,567		$	466,556		$	417,836		$	476,873		$	(1,739,375	)
Net income attributable to BBVA Compass Bancshares, Inc.																$	369,513		$	505,130		$	482,400		$	433,045		$	476,873

Summary of Balance Sheet:
Period-End Balances:
Investment securities	$	12,373,196		$	11,585,629		$	9,832,281		$	9,496,359		$	9,328,854		$	12,868,272		$	12,373,196		$	11,585,629		$	9,832,281		$	9,496,359
Loans ~~(2)~~(3)	61,394,666			57,526,600			50,814,125			45,333,608			42,112,678			60,223,112			61,394,666			57,526,600			50,814,125			45,333,608
Allowance for loan losses	(762,673		)	(685,041		)	(700,719		)	(802,853		)	(1,051,796		)	(838,293		)	(762,673		)	(685,041		)	(700,719		)	(802,853		)
Total assets	89,965,080			83,152,427			71,965,476			69,236,695			63,319,367			87,079,953			90,068,538			83,244,726			72,090,642			69,236,695
Deposits	65,980,530			61,189,716			54,437,490			51,642,778			46,057,193			67,279,533			65,981,766			61,189,810			54,437,454			51,642,778
FHLB and other borrowings	5,438,620			4,809,843			4,298,707			4,273,279			4,168,434			3,001,551			5,438,620			4,809,843			4,298,707			4,273,279
Shareholder's equity	12,577,284			12,003,574			11,487,759			11,083,573			10,617,064			12,750,707			12,624,709			12,054,922			11,545,813			11,083,573
Average Balances:
Loans ~~(2)~~(3)	$	60,176,687		$	54,423,885		$	47,959,849		$	44,118,556		$	40,998,782		$	61,505,935		$	60,176,687		$	54,423,885		$	47,959,849		$	44,118,556
Total assets	88,282,486			77,520,755			70,309,637			66,468,815			63,734,477			91,064,360			88,389,179			77,610,420			70,320,268			66,468,815
Deposits	63,541,384			58,407,635			52,553,744			48,549,780			45,516,065			67,904,564			63,538,900			58,407,270			52,553,741			48,549,780
FHLB and other borrowings	5,701,974			4,254,352			4,269,521			4,478,136			3,249,709			4,226,225			5,701,974			4,254,352			4,269,521			4,478,136
Shareholder's equity	12,311,963			11,841,999			11,337,388			10,906,123			12,265,322			12,818,572			12,368,866			11,889,993			11,342,319			10,906,123
Selected Ratios:
Return on average total assets	0.56		%	0.60		%	0.60		%	0.72		%	(2.73		)%	0.41		%	0.57		%	0.62		%	0.62		%	0.72		%
Return on average total equity	3.99			3.96			3.70			4.39			(14.16		)	2.90			4.10			4.07			3.84			4.39
Average equity to average assets	13.95			15.28			16.12			16.41			19.24			14.08			13.99			15.32			16.13			16.41


(1)	2012 financial information has not been retrospectively adjusted to include the historical activity of the money transmission and foreign exchange services subsidiaries due to immateriality.


(2)	Noninterest expense for the years ended December 31, 2016, 2015 ~~2014~~ and ~~2011~~2014 includes goodwill impairment of $59.9 million, $17.0 million and $12.5 million, ~~and $2.0 billion,~~ respectively.


~~(2)~~(3)	Includes loans held for sale.

~~Table of Contents~~


Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations

The purpose of this discussion is to focus on significant changes in the financial condition and results of operations of the Company during the years ended December 31, 2016, 2015~~, 2014~~ and ~~2013.~~2014. The Executive Overview summarizes information management believes is important for an understanding of the financial condition and results of operations of the Company. Topics presented in the Executive Overview are discussed in more detail within, and should be read in conjunction with, this Management’s Discussion and Analysis of Financial Condition and Results of Operations and the accompanying Consolidated Financial Statements included in this Annual Report on Form 10-K. The discussion of the critical accounting policies and analysis set forth below is intended to supplement and highlight information contained in the accompanying Consolidated Financial Statements and the selected financial data presented elsewhere in this Annual Report on Form 10-K.

Executive Overview

~~General~~Financial Performance

~~Notable accomplishments for~~Consolidated net income attributable to the Company for 2016 was $369.5 million compared to $505.1 million earned during 2015. The decrease in net income attributable to the Company reflected lower net income before income tax expense primarily as a result of higher provisions for loan losses and noninterest expense and lower noninterest income offset in part by higher net interest income.

Net interest income increased $54.7 million to $2.1 billion in 2016 compared to 2015 ~~included~~due in part to an increase in interest and fees on loans offset by an increase in interest on deposits. The net interest margin for 2016 remained flat at 2.64% compared to 2015.

The provision for loan losses was $302.6 million for 2016 compared to $193.6 million for 2015. Provision for loan losses for 2016 was impacted by a decline in credit quality indicators driven by downgrades during 2016 in the ~~following:~~commercial loan portfolio, primarily related to energy loans as well as an increase in charge-offs related to energy loans as well as consumer direct and indirect loans during 2016. Net charge-offs for 2016 totaled $227.0 million compared to $116.0 million for 2015.

~~Balance sheet growth remained strong as~~Noninterest income was $1.1 billion for 2016, a decrease of $23.4 million compared to 2015. The decrease in noninterest income was largely attributable to a decrease of $51.6 million in investment securities gains. This decrease was offset by a $10.9 million increase in card and merchant processing fees, and an $11.2 million increase in money transfer income. Additionally, other noninterest income increased $15.7 million driven by higher levels of syndication fee income.

Noninterest expense increased $88.7 million to $2.3 billion for 2016 compared to 2015. The higher level of noninterest expense was primarily attributable to a $42.9 million increase in goodwill impairment charges related to the write-off of goodwill associated with the Simple reporting unit. Additionally, salaries, benefits and commissions increased $38.2 million and professional services increased $23.6 million. Offsetting these increases was a $51.1 million decrease in FDIC indemnification expense

Income tax expense was $146.0 million for 2016 compared to $176.5 million for 2015. This resulted in an effective tax rate of 28.2% for 2016 and a 25.8% effective tax rate for 2015. The increase in the effective tax rate for 2016 was primarily driven by the increased goodwill impairment recognized in 2016.

The Company's total assets at December 31, 2016 were ~~$90.0~~$87.1 billion, a decrease of $3.0 billion from December 31, 2015 levels. Total loans excluding loans held for sale were $60.1 billion at December 31, 2016, a decrease of $1.3 billion or 2.1% from December 31, 2015 levels. The decrease in total loans was primarily driven by decreases in the commercial, financial and agricultural and the residential real estate-mortgage portfolios due in part to strategic sales from these loan portfolios. Deposits increased $1.3 billion or 2.0% compared to December 31, 2015, driven by transaction accounts which increased 3.7% fueled by savings and money market growth. Noninterest bearing demand deposits increased 5.4%. Certificates and other time deposits decreased 3.9% at December 31, 2016 compared to December 31, 2015, due in part to a decrease in brokered deposits offset by growth in CDs due to certain product promotions.

Total shareholders' equity at December 31, 2016 was $12.8 billion, an increase of ~~8% from~~$126 million compared to December 31, ~~2014.~~

Total end of period loans increased 7%. This growth reflects management's strategy to grow the Company's commercial and consumer portfolios while further diversifying the risk profile of the overall loan portfolio.

~~Credit quality - While there was an increase from December 31, 2014, nonperforming assets ratio of 0.82% remained at historically low levels at December 31,~~ 2015. ~~Net charge-offs were 0.19% of average loans for 2015 compared to 0.22% of average loans for 2014.~~

~~In April, the Bank issued $700 million aggregate principal amount of its 3.875% unsecured subordinated notes due 2025.~~

~~In December, the Company sold to BBVA 1,150 shares of its Floating Non-Cumulative Perpetual Preferred Stock, Series A at a per share prices of $200,000.~~

~~Economic and Regulatory~~

Moderate economic growth continued during 2015. Unemployment levels remained above historical averages, despite the overall unemployment rate continuing to show gradual improvement, ending 2015 at 5.0%. Geopolitical concerns and uncertainty about economic growth in Europe and China weighed on the U.S. economy.

In December 2015, the Federal Reserve Board raised the federal funds rate by 25 basis points stating that the labor market had improved enough to meet the conditions the Federal Reserve Board had set and were confident that inflation will move towards its target of 2% over the next few years. This was the first change to the fed funds rate in nine years.

Capital

Beginning January 1, 2015, the Company began the transition period for the Basel III capital rules. As such the Company will report Basel III capital ratios under the phase-in provisions for regulatory reporting purposes until fully phased in at January 1, 2019. Under these new provisions, theThe Company's Tier 1 and CET1 ratios were 11.85% and 11.49%, respectively at December 31, 2016, compared to 11.08% and 10.70%, respectively at December 31, 2015, under the ~~phase~~U.S. Basel III transitional provisions. In June 2016, the Company was informed that the Federal Reserve Board did not object to the Company's capital plan and the capital actions proposed in ~~provisions.~~the capital plan as part of its annual CCAR process. While the Company can give no assurances as to the outcome of the CCAR process in subsequent years or specific interactions with the regulators, it believes it has a strong capital position.

For more information see “Capital” in this Management’s Discussion and Analysis of Financial Condition and Results of Operations, Item 1. Business - Supervision, Regulation and Other Factors - Capital, and Note 17, Regulatory Capital Requirements and Dividends from Subsidiaries, in the Notes to the Consolidated Financial Statements in this Annual Report on Form 10-K.

~~Table of Contents~~

Liquidity

The Company’s sources of liquidity include customers’ interest-bearing and noninterest-bearing deposit accounts, loan principal and interest payments, investment securities, and borrowings. As a bank holding company, the Parent’s primary source of liquidity is the Bank. Due to the net earnings restrictions on dividend distributions, the Bank was not permitted to pay any dividends at December 31, ~~2015~~2016 and ~~2014~~2015 without regulatory approval.

The Parent paid common dividends totaling ~~$95~~$92.9 million to its sole shareholder, BBVA, during ~~2015.~~2016. Any future dividends paid from the Parent must be set forth as capital actions in the Company's capital plans and not objected to by the Federal Reserve Board before any dividends can be paid.

~~During September 2014,~~In January 2016, the ~~Bank established a Global Bank Note Program under which~~minimum phased-in LCR requirement was 90 percent, followed by 100 percent in January 2017. At December 31, 2016, the ~~Bank~~Company was fully compliant with the minimum phased-in LCR requirements in effect. However, should the Company's cash position or investment mix change in the future, the Company's ability to meet the LCR requirement may from time to time issue senior notes due seven days or more from the date of issue and subordinated notes due five years or more from the date of issue. In 2015, the Bank completed the sale of $700 million aggregate principal amount of its 3.875% unsecured subordinated notes due 2025 under the Global Bank Note Program.be impacted.

Management believes that the current sources of liquidity are adequate to meet the Company’s requirements and plans for continued growth. For more information see below under “Liquidity Management” in this Management’s Discussion and Analysis of Financial Condition and Results of Operations, and Note 11, FHLB and Other Borrowings, Note 12, Shareholder's Equity, and Note 16, Commitments, Contingencies and Guarantees, in the Notes to the Consolidated Financial Statements.

~~Financial Performance~~Digital Transformation

~~Consolidated net income attributable~~As technology advances continue to ~~shareholder for 2015 was $489.6 million compared~~change the landscape of the financial services industry, customer behaviors are rapidly adapting and adjusting to ~~$466.6 million earned during 2014.~~take advantage of digital and mobile advances. The ~~increase in net income attributable~~Company is focused on enhancing its digital capabilities to ~~shareholder was primarily due to~~ensure its products, services and distribution network align with the evolving preferences of its customers. During 2016, the Company has experienced an increase in ~~noninterest income~~number of customers utilizing its digital and ~~net interest income as well as a decrease in noninterest expense offset by increases in provision for loan losses and income tax expense.~~

Net interest income increased $27.5 million to $2.0 billion in 2015 compared to 2014. The net interest margin for 2015 was 2.74%, a decline of 40 basis points compared to 3.14% for 2014. The decrease in net interest margin for 2015 was driven by lower yields on earning assets.mobile capabilities. In addition, ~~net interest margin was negatively impacted by~~ the ~~increase in the average balance of trading account securities and the increase in the average balance of other short term borrowings primarily due to~~Company has also seen an increase in ~~U.S. Treasury long~~products sold through its digital channels as a percentage of products sold through all channels.

Noteworthy items related to the Company’s digital transformation announced during 2016 included the following:

In January 2016, the Company announced an alliance with industry disrupter FutureAdvisor, a subsidiary of BlackRock, the world’s largest asset manager. The alliance makes sophisticated tools and ~~short positions held by BSI.~~guidance available to the Company’s digital savvy clients who are not currently taking advantage of its investment services.

~~The provision~~In April 2016, Univision Enterprises, the products and services division of Univision Communications Inc., in partnership with Bancomer Transfer Services, Inc. announced the launch of Univision Remesas, an international digital money transfer service.

In May 2016, the Company announced it had expanded its suite of mobile payment solutions for ~~loan losses was $193.6 million~~its cardholders with the integration of Android Pay and Samsung Pay. These releases underscore the Company’s drive to provide more and varied ways for ~~2015 compared~~customers to ~~$106.3 million for 2014. Net charge-offs for 2015 totaled $116.0 million compared to $122.0 million for 2014. Provision for loan losses for 2015 was impacted by loan growth during 2015~~bank digitally. They join Apple Pay and the proprietary BBVA Wallet in the ~~commercial loan portfolios~~Company’s suite of mobile wallet and ~~consumer direct~~payment solutions.

In the second quarter of 2016, BBVA Compass began onboarding new customers from Simple onto the Bank’s platform. Previously new accounts from Simple were held at a third party financial institution. In the next few quarters, customer accounts and ~~indirect portfolio as well as a decline in credit quality indicators most notably driven by downgrades in~~deposits opened prior to this milestone will be migrated from the ~~energy portfolio during 2015.~~third party financial institution to BBVA Compass.

Noninterest income was $976.5 million for 2015, an increase of $59.1 million compared to 2014. The increase in noninterest income was largely attributable to an increase of $28.6 million in investment securities gains, a $17.8 million increase in investment banking and advisory fees and a $35.2 million increase in other noninterest income due to a $21.1 million gain on the sale of mortgage loans not initially originated for sale in the secondary market as well as a $5.6 million increase in servicing fee income. These increases were offset by a $9.6 million decrease in asset management fees, a $7.7 million increase in net losses on prepayment of FHLB and other borrowings and a $6.9 million decrease in retail investment sales.

Noninterest expense decreased $44.3 million to $2.1 billion for 2015 compared to 2014. The lower level of noninterest expense was primarily attributable to a $59.9 million decrease in FDIC indemnification expense and an $11.6 million decrease in amortization of intangibles offset by a $7.0 million increase in equipment expense, an $8.6 million increase in professional services and a $5.8 million increase in marketing.

Income tax expense was $167.5 million for 2015 compared to $147.3 million for 2014. This resulted in an effective tax rate of 25.4% for 2015 and a 23.9% effective tax rate for 2014. The increase in the effective tax rate for 2015 was primarily driven by higher net income before income tax expense relative to permanent income tax differences in 2015 as compared to 2014 and the release of a valuation allowance on net operating losses of BSI during 2014.

~~Table of Contents~~

While certain key credit quality metrics continue to remain at historically low levels they did indicate some decline during 2015 due to the impact of downgrades in the energy lending portfolio. Specifically, nonperforming assets were $506.2 million or 0.82% of total loans and loans held for sale and other real estate, at December 31, 2015, an increase of $85.8 million compared to December 31, 2014.

The Company's total assets at December 31, 2015 were $90.0 billion, an increase of $6.8 billion from December 31, 2014 levels. Total loans excluding loans held for sale were $61.3 billion at December 31, 2015, an increase of $4.0 billion or 6.9% from December 31, 2014 levels. The growth in loans was primarily due to increases in commercial loans and consumer direct and indirect loans. Deposits increased $4.8 billion or 7.8% compared to December 31, 2014, driven by transaction accounts which increased 7.4% fueled by savings and money market growth. Noninterest bearing demand deposits increased 12.4%. Certificates and other time deposits increased 10.3% at December 31, 2015 compared to December 31, 2014 primarily related to growth in CDs due to certain product promotions.

~~Total shareholders' equity at December 31, 2015 was $12.6 billion, an increase of $574 million compared to December 31, 2014.~~

Critical Accounting Policies

The accounting principles followed by the Company and the methods of applying these principles conform with accounting principles generally accepted in the United States of America and with general practices within the banking industry. The Company’s critical accounting policies relate to (1) the allowance for loan losses, (2) fair value of financial instruments, (3) income taxes and (4) goodwill impairment. These critical accounting policies require the use of estimates, assumptions and judgments which are based on information available as of the date of the financial statements. Accordingly, as this information changes, future financial statements could reflect the use of different estimates, assumptions and judgments. Certain determinations inherently have a greater reliance on the use of estimates, assumptions and judgments and, as such, have a greater possibility of producing results that could be materially different than originally reported.

Allowance for Loan Losses: Management’s policy is to maintain the allowance for loan losses at a level sufficient to absorb estimated probable incurred losses in the loan portfolio. Management performs periodic and systematic detailed reviews of its loan portfolio to identify trends and to assess the overall collectability of the loan portfolio. Accounting standards require that loan losses be recorded when management determines it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated.

Estimates for the allowance for loan losses are determined by analyzing historical losses, historical migration to charge-off experience, current trends in delinquencies and charge-offs, the results of regulatory examinations and changes in the size, composition and risk assessment of the loan portfolio. Also included in management’s estimate for the allowance for loan losses are considerations with respect to the impact of current economic events. These events may include, but are not limited to, fluctuations in overall interest rates, political conditions, legislation that may directly or indirectly affect the banking industry and economic conditions affecting specific geographical areas and industries in which the Company conducts business.

While management uses the best information available to establish the allowance for loan losses, future adjustments to the allowance for loan losses and methodology may be necessary if economic or other conditions differ substantially from the assumptions used in making the estimates. Such adjustments to original estimates, as necessary, are made in the period in which these factors and other relevant considerations indicate that loss levels vary from previous estimates.

A detailed discussion of the methodology used in determining the allowance for loan losses is included in Note 1, Summary of Significant Accounting Policies, in the Notes to the Consolidated Financial Statements.

Fair Value of Financial Instruments: A portion of the Company’s assets and liabilities is carried at fair value, with changes in fair value recorded either in earnings or accumulated other comprehensive income (loss). These include investment securities available for sale, trading account assets and liabilities, loans held for sale, mortgage servicing assets, and derivative assets and liabilities. Periodically, the estimation of fair value also affects investment securities held to maturity when it is determined that an impairment write-down is other than temporary. Fair value determination is also relevant for certain other assets such as other real estate owned, which isare recorded at the lower of the recorded

~~Table of Contents~~

balance or fair value, less estimated costs to sell. The determination of fair value also impacts certain other assets that are periodically evaluated for impairment using fair value estimates, including goodwill and impaired loans.

Fair value is generally based upon quoted market prices, when available. If such quoted market prices are not available, fair value is based upon internally developed models that primarily use observable market based parameters as inputs. Valuation adjustments may be made to ensure that financial instruments are recorded at fair value. These adjustments may include amounts to reflect counterparty credit quality and the Company’s own creditworthiness, among

other things, as well as ~~other~~potentially unobservable parameters. Any such valuation adjustments are applied consistently over time. While management believes the Company’s valuation methodologies are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date.

See Note 21, Fair Value of Financial Instruments, in the Notes to the Consolidated Financial Statements for a detailed discussion of determining fair value, including pricing validation processes.

Income Taxes: The Company’s income tax expense, deferred tax assets and liabilities, and reserves for unrecognized tax benefits reflect management’s best assessment of estimated taxes due. The calculation of each component of the Company’s income tax provision is complex and requires the use of estimates and judgments in its determination. As part of the Company’s evaluation and implementation of business strategies, consideration is given to the regulations and tax laws that apply to the specific facts and circumstances for any tax positions under evaluation. Management closely monitors tax developments on both the federal and state level in order to evaluate the effect they may have on the Company’s overall tax position and the estimates and judgments used in determining the income tax provision and records adjustments as necessary.

Deferred income taxes arise from temporary differences between the tax and financial statement recognition of revenue and expenses. In evaluating the Company’s ability to recover its deferred tax assets within the jurisdiction from which they arise, the Company must consider all available evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies and the results of recent operations. A valuation allowance is recognized for a deferred tax asset if, based on the available evidence, it is more likely than not that some portion or all of a deferred tax asset will not be realized. See Note 20, Income Taxes, in the Notes to the Consolidated Financial Statements for additional information.

Goodwill Impairment: It is the Company’s policy to assess goodwill for impairment at the reporting unit level on an annual basis or between annual assessments if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. Impairment is the condition that exists when the carrying amount of goodwill exceeds its implied fair value.

Accounting standards require management to estimate the fair value of each reporting unit in assessing impairment at least annually. As such, the Company engages an independent valuation expert to assist in the computation of the fair value estimates of each reporting unit as part of its annual assessment. This assessment utilizes a blend of income and market based valuation methodologies.

The impairment testing process conducted by the Company begins by assigning net assets and goodwill to each reporting unit. The Company then completes step one of the impairment test by comparing the fair value of each reporting unit with the recorded book value of its net assets, with goodwill included in the computation of the carrying amount. If the fair value of a reporting unit exceeds its carrying amount, goodwill of that reporting unit is not considered impaired, and step two of the impairment test is not necessary. If the carrying amount of a reporting unit exceeds its fair value, step two of the impairment test is performed to determine the amount of impairment. Step two of the impairment test compares the implied fair value of goodwill attributable to each reporting unit to the carrying amount of that goodwill. The implied fair value of goodwill is determined in the same manner as the amount of goodwill recognized in a business combination; an entity allocates the fair value determined in step one for the reporting unit to all of the assets and liabilities of that unit as if the reporting unit had been acquired in a business combination. If the carrying amount of the reporting unit goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized in an amount equal to that excess.

The computation of the fair value estimate is based upon management’s estimates and assumptions. Although management has used the estimates and assumptions it believes to be most appropriate in the circumstances, it should

~~Table of Contents~~

be noted that even relatively minor changes in certain valuation assumptions used in management’s calculation would result in significant differences in the results of the impairment test. See “Goodwill” in this Management’s Discussion and Analysis of Financial Condition and Results of Operations and see Note 8, Goodwill and Other Acquired Intangible Assets, in the Notes to the Consolidated Financial Statements for a detailed discussion of the impairment testing process.

Analysis of Results of Operations

Consolidated net income attributable to ~~shareholder~~the Company totaled ~~$489.6~~$369.5 million,, ~~$466.6~~ $505.1 million,, and ~~$417.8~~$482.4 million for 2016, 2015, ~~2014~~ and ~~2013~~,2014, respectively. The Company's ~~2015~~2016 results reflected ~~an increase in~~lower net ~~interest~~ income ~~driven by an increase in earning assets and an increase in noninterest~~before income ~~as well~~tax expense primarily as a ~~decrease in noninterest expense. The Company's 2015 results reflect an increase in provision~~result of higher provisions for loan losses ~~driven~~and noninterest expense and lower noninterest income offset in part by ~~loan growth and the impact of downgrades in the Company's energy portfolio.~~higher net interest income.

Net Interest Income and Net Interest Margin

Net interest income is the principal component of the Company’s income stream and represents the difference, or spread, between interest and fee income generated from earning assets and the interest expense paid on deposits and borrowed funds. Fluctuations in interest rates as well as changes in the volume and mix of earning assets and interest bearing liabilities can impact net interest income. The following discussion of net interest income is presented on a fully taxable equivalent basis, unless otherwise noted, to facilitate performance comparisons among various taxable and tax-exempt assets.

2016 compared to 2015

Net interest income totaled $2.1 billion and $2.0 in 2016 and 2015, respectively. Net interest income on a fully taxable equivalent basis totaled $2.1 billion in both 2016 and 2015. Net interest margin was 2.64% in both 2016 and 2015.

The fully taxable equivalent yield for 2016 for the loan portfolio was 3.74% compared to 3.69% for the prior year. The 5 basis point increase was primarily driven by the origination of higher yielding loans as well as the impact of the higher benchmark interest rates, which increased in December 2015 and 2016.

The fully taxable equivalent yield on the total investment securities portfolio was 1.83% for 2016, compared to 2.01% for the prior year. The 18 basis point decrease was primarily driven by proceeds from the sale of higher yielding investment securities and from prepayments, maturities and calls of investment securities that have been reinvested into investment securities with lower market rates.

The yield on trading account securities increased to 1.45% in 2016 compared to 1.35% in 2015 due primarily to the impact of the FRB raising the federal funds rate by 25 basis points in December 2015 and 2016.

The yield on other earning assets for 2016 was 0.60 % compared to 0.17 % for the prior year. The 43 basis point increase between years was primarily due to the impact of the FRB raising the federal funds rate by 25 basis points in December 2015 and 2016.

The average rate paid on interest bearing deposits remained relatively flat at 0.64% for 2016 compared to 0.62% for 2015.

The average rate on FHLB and other borrowings during 2016 was 1.96% compared to 1.58% for the prior year. The 38 basis point increase was primarily driven by changes in the value of the interest rate contracts hedging the value of the FHLB and other borrowings as well as the impact of the $700 million issuance of subordinated notes in April 2015 under the Global Bank Note program.

The average rate on other short-term borrowings was 1.44% for 2016 compared to 1.31% for 2015 due to the impact of the FRB raising the federal funds rate by 25 basis points in December 2015 and 2016.

2015 compared to 2014

Net interest income totaled $2.0 billion in both 2015 and 2014. Net interest income on a fully taxable equivalent basis totaled $2.1 billion in both 2015 and 2014.

Net interest margin was ~~2.74%~~2.64% in 2015 compared to ~~3.14%~~3.01% in 2014. The 4037 basis point decrease in net interest margin primarily reflects the runoff of higher yielding covered loans as well as the impact of lower yields in the AFS investment securities portfolio. In addition, net interest margin was negatively impacted by the increase in the average balance of trading account securities and the increase in the average balance of other short term borrowings primarily due to an increase in U.S. Treasury long and short positions held by BSI.

The fully taxable equivalent yield for 2015 for the loan portfolio was 3.69% compared to 3.93% for the prior year. The yield on non-covered loans for 2015 was 3.63% compared to 3.72% for 2014. The 9 basis point decrease was primarily due to a higher volume of new loans originated at lower yields. The yield on covered loans for 2015 was 10.87% compared to 22.67% for 2014. The loss sharing agreement for commercial loans expired in the fourth quarter of 2014. Upon expiration, the income associated with these commercial loans is now included in non-covered loans interest income. The decrease ~~in yield on covered loans~~ was primarily due to the impact of the quarterly reassessment of expected future cash flows.

The fully taxable equivalent yield on the total investment securities portfolio was 2.01% for the year ended December 31, 2015, compared to 2.28% for the prior year. The 27 basis point decrease was primarily driven by proceeds from the sale of higher yielding investment securities and from prepayments, maturities and calls of investment securities that have been reinvested into investment securities with lower market rates.

The yield on trading account securities was 1.35% in 2015 compared to 1.73% in 2014 due to an increase in U.S. Treasury securities held by BSI in 2015.

The average rate paid on interest bearing deposits was 0.62% for 2015 compared to 0.60% for 2014.

The average rate on FHLB and other borrowings during 2015 was 1.58%, compared to ~~1.62%~~1.62 % for the prior year.

The average rate on other short-term borrowings was 1.31% for 2015 compared to 1.38% for 2014 due to the effect of the increase in U.S. Treasury short positions held by BSI in 2015.

~~Table of Contents~~

~~2014 compared to 2013~~

~~Net interest income totaled $2.0 billion in both 2014 and 2013. Net interest income on a fully taxable equivalent basis totaled $2.1 billion in both 2014 and 2013.~~

Net interest margin was 3.14% in 2014 compared to 3.62% in 2013. The 48 basis point decrease in net interest margin primarily reflects the runoff of higher yielding covered loans and lower yields on new loans.

The fully taxable equivalent yield for 2014 for the loan portfolio was 3.93% compared to 4.48% for the prior year. The yield on non-covered loans for 2014 was 3.72% compared to 3.88% for 2013. The 16 basis point decrease was primarily due to a higher volume of new loans originated at lower yields. The yield on covered loans for 2014 was 22.67% compared to 34.01% for 2013. The decrease was primarily due to the impact of the quarterly reassessment of expected future cash flows.

~~The fully taxable equivalent yield on the total investment securities portfolio was 2.28% for the year ended December 31, 2014, compared to 2.29% for the prior year.~~

~~The average rate paid on interest bearing deposits was 0.60% for 2014 compared to 0.56% for 2013.~~

The average rate on FHLB and other borrowings during 2014 was 1.62%, compared to 1.55 % for the prior year. This increase was primarily due to higher rates paid on new FHLB advances that have replaced FHLB advances as they matured or were terminated.

~~Table of Contents~~

The following tables set forth the major components of net interest income and the related annualized yields and rates, as well as the variances between the periods caused by changes in interest rates versus changes in volumes.

Table 3 Consolidated Average Balance and Yield/ Rate Analysis	Table 3 Consolidated Average Balance and Yield/ Rate Analysis																					Table 3 Consolidated Average Balance and Yield/ Rate Analysis

	December 31, 2015							December 31, 2014							December 31, 2013							December 31, 2016							December 31, 2015							December 31, 2014
	Average Balance			Income/Expense		Yield/ Rate		Average Balance			Income/ Expense		Yield/Rate		Average Balance			Income/ Expense		Yield/Rate		Average Balance			Income/Expense		Yield/ Rate		Average Balance			Income/ Expense		Yield/Rate		Average Balance			Income/ Expense		Yield/Rate
	(Dollars in Thousands)																					(Dollars in Thousands)
Assets:
Interest earning assets:
Non-covered loans	$	59,709,039		$	2,170,243	3.63	%	$	53,810,100		$	2,000,310	3.72	%	$	47,004,185		$	1,824,747	3.88	%
Covered loans	467,648			50,850		10.87		613,785			139,119		22.67		955,664			324,984		34.01
Total loans (1) (2) (3)	60,176,687			2,221,093		3.69		54,423,885			2,139,429		3.93		47,959,849			2,149,731		4.48
Loans (1) (2) (3)																						61,505,935			2,303,017		3.74		60,176,687			2,221,093		3.69		54,423,885			2,139,429		3.93
Investment securities – AFS (tax exempt) (3)	253,547			10,446		4.12		492,306			20,745		4.21		467,361			20,994		4.49		10,728			846		7.89		253,547			10,446		4.12		492,306			20,745		4.21
Investment securities – AFS (taxable)	10,105,217			185,323		1.83		8,560,090			177,987		2.08		7,994,863			164,630		2.06		11,345,365			191,337		1.69		10,105,217			185,323		1.83		8,560,090			177,987		2.08
Total investment securities – AFS	10,358,764			195,769		1.89		9,052,396			198,732		2.20		8,462,224			185,624		2.19		11,356,093			192,183		1.69		10,358,764			195,769		1.89		9,052,396			198,732		2.20
Investment securities – HTM (tax exempt) (3)	1,128,080			35,352		3.13		1,162,674			34,881		3.00		1,195,738			36,767		3.07		1,062,391			34,535		3.25		1,128,080			35,352		3.13		1,162,674			34,881		3.00
Investment securities – HTM (taxable)	230,933			4,433		1.92		284,962			5,264		1.85		344,207			6,700		1.95		194,296			4,408		2.27		230,933			4,433		1.92		284,962			5,264		1.85
Total investment securities - HTM	1,359,013			39,785		2.93		1,447,636			40,145		2.77		1,539,945			43,467		2.82		1,256,687			38,943		3.10		1,359,013			39,785		2.93		1,447,636			40,145		2.77
Trading account securities (3)	3,784,410			50,936		1.35		446,131			7,732		1.73		108,037			2,979		2.76		3,714,155			53,816		1.45		3,784,410			50,936		1.35		446,131			7,732		1.73
Other (4) (5)	576,063			5,608		0.97		162,923			702		0.43		29,326			192		0.65
Other (4) (5) (6)																						3,508,368			20,939		0.60		3,330,793			5,622		0.17		2,973,165			713		0.02
Total earning assets	76,254,937			2,513,191		3.30		65,532,971			2,386,740		3.64		58,099,381			2,381,993		4.10		81,341,238			2,608,898		3.21		79,009,667			2,513,205		3.18		68,343,213			2,386,751		3.49
Noninterest earning assets:
Cash and due from banks	3,674,721							3,642,916							4,094,403
Cash and due from banks (6)																						964,281							974,956							878,930
Allowance for loan losses	(714,157		)					(703,902		)					(752,801		)					(834,310		)					(714,157		)					(703,902		)
Net unrealized gain (loss) on investment securities available for sale	33,207							41,316							98,432							(5,749		)					33,207							41,316
Other noninterest earning assets	9,033,778							9,007,454							8,770,222							9,598,900							9,085,506							9,050,863
Total assets	$	88,282,486						$	77,520,755						$	70,309,637						$	91,064,360						$	88,389,179						$	77,610,420
Liabilities:
Interest bearing liabilities:
Interest bearing demand deposits	$	7,218,956		12,011		0.17		$	7,280,418		11,986		0.16		$	6,824,450		11,377		0.17		$	7,042,165		16,639		0.24		$	7,218,956		12,011		0.17		$	7,280,418		11,986		0.16
Savings and money market accounts	24,155,771			94,336		0.39		21,616,078			87,672		0.41		19,137,539			71,860		0.38		25,747,220			99,567		0.39		24,155,771			94,336		0.39		21,616,078			87,672		0.41
Certificates and other time deposits	12,989,789			167,809		1.29		12,745,974			151,997		1.19		11,886,386			128,600		1.08		14,454,532			188,209		1.30		12,989,759			167,809		1.29		12,745,944			151,997		1.19
Foreign office deposits	161,066			322		0.20		131,925			259		0.20		118,644			263		0.22		104,039			210		0.20		158,202			322		0.20		131,510			259		0.20
Total interest bearing deposits	44,525,582			274,478		0.62		41,774,395			251,914		0.60		37,967,019			212,100		0.56		47,347,956			304,625		0.64		44,522,688			274,478		0.62		41,773,950			251,914		0.60
FHLB and other borrowings	5,701,974			89,988		1.58		4,254,352			68,957		1.62		4,269,521			66,275		1.55		4,226,225			82,744		1.96		5,701,974			89,988		1.58		4,254,352			68,957		1.62
Federal funds purchased and securities sold under agreements to repurchase (5)	807,677			8,390		1.04		935,439			2,302		0.25		979,759			2,082		0.21		451,980			21,165		4.68		807,677			8,390		1.04		935,439			2,302		0.25
Other short-term borrowings	4,006,716			52,442		1.31		385,461			5,318		1.38		12,739			118		0.93		3,778,752			54,244		1.44		4,006,716			52,442		1.31		385,461			5,318		1.38
Total interest bearing liabilities	55,041,949			425,298		0.77		47,349,647			328,491		0.69		43,229,038			280,575		0.65		55,804,913			462,778		0.83		55,039,055			425,298		0.77		47,349,202			328,491		0.69
Noninterest bearing deposits	19,015,802							16,633,240							14,586,725							20,556,608							19,016,212							16,633,320
Other noninterest bearing liabilities	1,912,772							1,695,869							1,156,486							1,884,267							1,965,046							1,737,905
Total liabilities	75,970,523							65,678,756							58,972,249							78,245,788							76,020,313							65,720,427
Shareholder’s equity	12,311,963							11,841,999							11,337,388							12,818,572							12,368,866							11,889,993
Total liabilities and shareholder’s equity	$	88,282,486						$	77,520,755						$	70,309,637						$	91,064,360						$	88,389,179						$	77,610,420
Net interest income/net interest spread				$	2,087,893	2.53	%				$	2,058,249	2.95	%				$	2,101,418	3.45	%				$	2,146,120	2.38	%				$	2,087,907	2.41	%				$	2,058,260	2.80	%
Net interest margin						2.74	%						3.14	%						3.62	%						2.64	%						2.64	%						3.01	%
Taxable equivalent adjustment				$	74,930						$	72,755						$	58,737						78,439							74,930							72,755
Net interest income				$	2,012,963						$	1,985,494						$	2,042,681						$	2,067,681						$	2,012,977						$	1,985,505


(1)	Loans include loans held for sale and nonaccrual loans.


(2)	Interest income includes loan fees for rate calculation purposes.


(3)	Yields are stated on a fully taxable equivalent basis assuming the tax rate in effect for each period presented.


(4)	Includes federal funds sold, securities purchased under agreements to resell, interest bearing deposits, interest bearing deposits with the Federal Reserve and other earning assets.


(5)	Yield/rate reflects impact of balance sheet offsetting. See Note 15, Securities Financing ~~Activities~~. Activities.


(6)	Beginning in 2016, interest bearing deposits with the Federal Reserve are included in earning assets. In prior periods, these balances were included as noninterest earning assets within cash and due from banks. Prior periods have been reclassified to conform to current period presentation.

~~Table of Contents~~

Table 4 Volume and Yield/ Rate Variances (1)	Table 4 Volume and Yield/ Rate Variances (1)																		Table 4 Volume and Yield/ Rate Variances (1)

	2015 compared to 2014									2014 compared to 2013									2016 compared to 2015									2015 compared to 2014
	Change due to									Change due to									Change due to									Change due to
	Volume			Yield/Rate			Total			Volume			Yield/Rate			Total			Volume			Yield/Rate			Total			Volume			Yield/Rate			Total
	(Dollars in Thousands, yields on a fully taxable equivalent basis)																		(Dollars in Thousands, yields on a fully taxable equivalent basis)
Interest income on:
Non-covered loans	$	215,231		$	(45,298	)	$	169,933		$	255,541		$	(79,978	)	$	175,563
Covered loans	(27,713		)	(60,556		)	(88,269		)	(96,194		)	(89,671		)	(185,865		)
Total loans	187,518			(105,854		)	81,664			159,347			(169,649		)	(10,302		)	49,491			32,433			81,924			187,518			(105,854		)	81,664
Total investment securities available for sale	19,989			(22,951		)	(2,962		)	12,956			152			13,108			17,903			(21,489		)	(3,586		)	19,989			(22,951		)	(2,962		)
Total investment securities held to maturity	(2,086		)	1,726			(360		)	(2,570		)	(752		)	(3,322		)	(3,094		)	2,252			(842		)	(2,086		)	1,726			(360		)
Trading account securities	45,306			(2,102		)	43,204			6,228			(1,475		)	4,753			(960		)	3,840			2,880			45,306			(2,102		)	43,204
Other (2)	3,278			1,628			4,906			597			(87		)	510
Other (2) (3)																			316			15,001			15,317			96			4,812			4,908
Total earning assets	$	254,005		$	(127,553	)	$	126,452		$	176,558		$	(171,811	)	$	4,747		$	63,656		$	32,037		$	95,693		$	250,823		$	(124,369	)	$	126,454

Interest expense on:
Interest bearing demand deposits	$	(101	)	$	126		$	25		$	752		$	(143	)	$	609		$	(301	)	$	4,929		$	4,628		$	(101	)	$	126		$	25
Savings and money market accounts	10,010			(3,346		)	6,664			9,768			6,044			15,812			6,162			(931		)	5,231			10,010			(3,346		)	6,664
Certificates and other time deposits	2,948			12,864			15,812			9,646			13,751			23,397			19,062			1,338			20,400			2,948			12,864			15,812
Foreign office deposits	58			5			63			28			(32		)	(4		)	(109		)	(3		)	(112		)	54			9			63
Total interest bearing deposits	12,915			9,649			22,564			20,194			19,620			39,814			24,814			5,333			30,147			12,911			9,653			22,564
FHLB and other borrowings	22,890			(1,859		)	21,031			(234		)	2,916			2,682			(26,194		)	18,950			(7,244		)	22,890			(1,859		)	21,031
Federal funds purchased and securities sold under agreements to repurchase	(355		)	6,443			6,088			(97		)	317			220			(5,141		)	17,916			12,775			(355		)	6,443			6,088
Other short-term borrowings	47,411			(287		)	47,124			5,114			86			5,200			(3,091		)	4,893			1,802			47,411			(287		)	47,124
Total interest bearing liabilities	82,861			13,946			96,807			24,977			22,939			47,916			(9,612		)	47,092			37,480			82,857			13,950			96,807
Increase (decrease) in net interest income	$	171,144		$	(141,499	)	$	29,645		$	151,581		$	(194,750	)	$	(43,169	)	$	73,268		$	(15,055	)	$	58,213		$	167,966		$	(138,319	)	$	29,647


(1)	The change in interest not solely due to volume or yield/rate is allocated to the volume column and yield/rate column in proportion to their relationship of the absolute dollar amounts of the change in each.


(2)	Includes federal funds sold, securities purchased under agreement to resell, interest bearing deposits, interest bearing deposits with the Federal Reserve and other earning assets.


(3)	Beginning in 2016, interest bearing deposits with the Federal Reserve are included in earning assets. In prior periods, these balances were included as noninterest earning assets within cash and due from banks in the cash and cash equivalents line, consistent with the Consolidated Balance Sheet presentation. Prior periods have been reclassified to conform to current period presentation.

Provision for Loan Losses

The provision for loan losses is the charge to earnings that management determines to be necessary to maintain the allowance for loan losses at a sufficient level reflecting management's estimate of probable incurred losses in the loan portfolio.

~~2015~~2016 compared to 2015

Provision for loan losses was $302.6 million for 2016 compared to $193.6 million of provision for loan losses for 2015. Provision for loan losses for 2016 was impacted by a decline in credit quality indicators driven by downgrades during 2016 in the commercial loan portfolio, primarily related to energy loans as well as an increase in charge-offs related to energy loans as well as consumer direct and indirect loans during 2016. The Company recorded net charge-offs of $227.0 million during 2016 compared to $116.0 million during 2015. Net charge-offs were 0.37% (or 0.31% excluding net charge-offs on energy loans) of average loans for 2016 compared to 0.19% (or 0.20% excluding net charge-offs on energy loans) of average loans for 2015.

2015 compared to 2014

Provision for loan losses was $193.6 million for 2015 compared to $106.3 million of provision for loan losses for 2014. Provision for loan losses for 2015 was impacted by loan growth during 2015 in the commercial loan portfolios and consumer direct and indirect portfolio as well as a decline in credit quality indicators primarily driven by downgrades in the energy portfolio during 2015. The Company recorded net charge-offs of $116.0 million during 2015 compared to $122.0 million during 2014. Net charge-offs were 0.19% of average loans for 2015 compared to 0.22% of average loans for 2014.

~~2014~~ ~~compared to~~ ~~2013~~

~~Provision for loan losses was $106.3 million for 2014 compared to~~ ~~$107.5 million~~ ~~of provision for loan losses for~~ ~~2013. Provision for loan losses for 2014 was impacted by loan growth during 2014~~ in the commercial, financial and agricultural, residential real estate, and consumer portfolios. Offsetting the increase attributable to loan growth was improving credit quality in the commercial, financial and agricultural, real estate-construction and commercial real estate-mortgage portfolios. The Company recorded net charge-offs of $116.0 million during 2015 compared to $122.0 million during ~~2014 compared to $209.7~~

~~Table of Contents~~

~~million during 2013.~~2014. Net charge-offs were 0.19% of average loans for 2015 compared to 0.22% of average loans for ~~2014 compared to 0.44% of average loans for 2013.~~2014.

For further discussion and analysis of the allowance for loan losses, refer to the discussion of lending activities found later in this section. Also, refer to Note 4, Loans and Allowance for Loan Losses, in the Notes to the Consolidated Financial Statements for additional disclosures.

Noninterest Income

The following table presents the components of noninterest income.

Table 5 Noninterest Income	Table 5 Noninterest Income								Table 5 Noninterest Income

	Years Ended December 31,								Years Ended December 31,
	2015			2014			2013		2016		2015		2014
	(In Thousands)								(In Thousands)
Service charges on deposit accounts	$	216,248		$	222,685		$	221,413	$	214,294	$	216,248	$	222,686
Card and merchant processing fees	112,818			107,891			102,189		123,668		112,818		107,891
Investment banking and advisory fees	105,235			87,454			47,604		107,116		105,235		87,454
Money transfer income									104,592		93,437		81,409
Retail investment sales	101,614			108,477			97,276		102,982		101,614		108,477
Asset management fees	33,194			42,772			40,939		34,875		33,194		42,772
Corporate and correspondent investment sales	30,000			29,635			35,674		24,689		30,000		29,635
Mortgage banking income	27,258			24,551			35,399		21,496		27,258		24,551
Bank owned life insurance	18,662			18,616			17,747		17,243		18,662		18,616
Investment securities gains, net	81,656			53,042			31,371		30,037		81,656		53,042
Gain (loss) on prepayment of FHLB and other borrowings, net	(8,016		)	(315		)	21,775
Other	257,804			222,614			203,403		274,982		259,252		231,279
Total noninterest income	$	976,473		$	917,422		$	854,790	$	1,055,974	$	1,079,374	$	1,007,812

~~2015~~2016 compared to 2015

Noninterest income was $1.1 billion for both 2016 and 2015, a slight decrease of $23.4 million. The decrease in total noninterest income was driven by decreases in corporate and correspondent investment sales, mortgage banking income and investment securities gains which were partially offset by increases in card and merchant processing fees, money transfer income, and other noninterest income

Service charges on deposit accounts represent the Company's largest category of noninterest revenue. Service charges on deposit accounts were $214.3 million in 2016, compared to $216.2 million in 2015.

Card and merchant processing fees represent income related to customers’ utilization of their debit and credit cards, as well as interchange income and merchants’ discounts. Card and merchant processing fees were $123.7 million in 2016, an increase of $10.9 million compared to 2015 driven by a $4.1 million increase related to Simple and a $5.9 million increase in debit card interchange and merchant services.

Investment banking and advisory fees primarily represent income from BSI. Income from investment banking and advisory fees increased to $107.1 million in 2016 compared to $105.2 million in 2015.

Money transfer income represents income from the Parent's wholly owned subsidiary, BBVA Compass Payments, Inc., which engages in money transfer services, including money transmission and foreign exchange services. Income from money transfer services increased to $104.6 million in 2016 compared to $93.4 million in 2015 due to higher transaction volume.

Retail investment sales income is comprised of mutual fund and annuity sales income and insurance sales fees. Income from retail investment sales increased to $103.0 million in 2016, compared to $101.6 million in 2015.

Asset management fees are fees generated from money management transactions executed with the Company through trusts, higher net worth customers and other long-term clients. Asset management fees increased to $34.9 million in 2016, compared to $33.2 million in 2015.

Corporate and correspondent investment sales represents income generated through the sales of interest rate protection contracts to corporate customers and the sale of bonds and other services to the Company's correspondent banking clients. Income from corporate and correspondent investment sales decreased to $24.7 million in 2016 from $30.0 million in 2015. The primary drivers of the decrease include a $4.0 million decrease in income related to a decline in the sales of interest rate contracts due to the economic environment during the year and a $2.8 million decrease related to the valuation changes in U.S. Treasury securities held to hedge market movements in the MSR asset.

Mortgage banking income for the year ended December 31, 2016 was $21.5 million compared to $27.3 million in 2015. Mortgage banking income in 2016 included $25.3 million of origination fees and gains on sales of mortgage loans as well as losses of $3.8 million related to fair value adjustments on mortgage loans held for sale, mortgage related derivatives and MSRs. Mortgage banking income in 2015 included $35.5 million of origination fees and gains on sales of mortgage loans and losses of $7.0 million related to fair value adjustments on mortgage loans held for sale, mortgage related derivatives and MSRs. The decrease in mortgage banking income in 2016 compared to 2015 was primarily driven by decreased mortgage production volume during 2016 compared to 2015.

BOLI represents income generated by the underlying investments maintained within each of the Company’s life insurance policies on certain key executives and employees. BOLI was $17.2 million in 2016 compared to $18.7 million in 2015.

Investment securities gains, net decreased to $30.0 million in 2016 compared to $81.7 million in 2015. See “—Investment Securities” for more information related to the investment securities sales.

Other income is comprised of income recognized that does not typically fit into one of the other noninterest income categories and includes primarily various fees associated with letters of credit, syndication, ATMs, investment services and foreign exchange fees. The gain (loss) associated with the sale of fixed assets is also included in other income. For 2016, other income increased by $15.7 million due to an increase of approximately $11.2 million in syndication fees. The increase was also attributable to a $7.7 million increase related to the prepayment of FHLB advances and other borrowings. During 2016, the Company terminated approximately $605 million FHLB advances resulting in a $295 thousand net loss compared to an $8.0 million net loss in 2015 related to the prepayment of approximately $1.1 billion FHLB advances.

2015 compared to 2014

Noninterest income was ~~$976.5 million~~$1.1 billion for 2015, an increase of ~~$59.1~~$71.6 million compared to ~~$917.4 million~~$1.0 billion reported for 2014. The increase in total noninterest income was driven by increases in investment banking and advisory fees, investment securities gains and other noninterest income which were partially offset by decreases in retail investment sales, asset management fees, and gain (loss) on prepayment of FHLB and other borrowings.

Service charges on deposit accounts ~~represent the Company's largest category of noninterest revenue. Service charges on deposit accounts~~ were $216.2 million in 2015, compared to $222.7 million in 2014.

~~Card and merchant processing fees represent income related to customers’ utilization of their debit and credit cards, as well as interchange income and merchants’ discounts.~~ Card and merchant processing fees were $112.8 million in 2015, an increase of $4.9 million compared to 2014.

~~Investment banking and advisory fees primarily represent income from BSI, the Company's broker-dealer subsidiary.~~ Income from investment banking and advisory fees increased to $105.2 million in 2015 compared to $87.5 million in 2014 due to a $7.5 million increase in structuring and advisory fees and an $8.5 million increase in fees due to higher bond issuances during 2015 compared to 2014.

~~Retail investment sales income is comprised of mutual fund and annuity sales income and insurance sales fees.~~ Income from retail investment sales decreased to $101.6 million in 2015, compared to $108.5 million in 2014. The primary driver of the decrease was due to a shift in product mix to structured products and managed money which resulted in a smaller percentage of fees for the Company.

~~Table of Contents~~

million in 2015, compared to $42.8 million in 2014 primarily driven by a decrease in assets under management due to the divestiture of one of the Bank's wealth management subsidiaries during 2015.

Mortgage banking income for the year ended December 31, 2015 was $27.3 million compared to $24.6 million in 2014. Mortgage banking income in 2015 included $35.5 million of origination fees and gains on sales of mortgage loans as well as losses of $7.0 million related to fair value adjustments on mortgage loans held for sale, mortgage related derivatives and MSRs. Mortgage banking income in 2014 included $28.5 million of origination fees and gains on sales of mortgage loans and losses of $3.3 million related to fair value adjustments on mortgage loans held for sale, mortgage related derivatives and MSRs. The increase in mortgage banking income in 2015 compared to 2014 was primarily driven by the lower interest rate environment in 2015 which allowed for wider profit margins, offset by the decrease in the fair value of the MSRs.

~~BOLI represents income generated by the underlying investments maintained within each of the Company’s life insurance policies on certain key executives and employees.~~ BOLI was $18.7 million in 2015 compared to $18.6 million in 2014.

Investment securities gains, net increased to $81.7 million in 2015 compared to $53.0 million in 2014. See “—Investment Securities” for more information related to the investment securities sales.

The Company recognized a loss on prepayment of FHLB and other borrowings of $8.0 million in 2015 compared to a loss of $315 thousand in 2014. During 2015, the Company prepaid approximately $1.1 billion of FHLB advances resulting in an $8.0 million net loss on the prepayment of FHLB advances and other borrowings. During 2014, the Company prepaid approximately $935 million of FHLB advances resulting in a $315 thousand net loss on the prepayment of FHLB advances and other borrowings.

Other income is comprised of income recognized that does not typically fit into one of the other noninterest income categories and includes primarily various fees associated with letters of credit, syndication, ATMs, investment services and foreign exchange fees. The gain (loss) associated with the sale of fixed assets is also included in other income. For 2015, other income increased by ~~$35.2~~$28.0 million due to a gain of $22.0 million on the sale of mortgage loans not initially originated for sale in the secondary market. Servicing fees also increased $5.6 million due to an increase in loans sold to FNMA where the Company retained the servicing in 2015 compared to 2014. The Company also recorded $6.5 million of income from Spring Studios, which was acquired by the Company in 2015.

~~2014~~ ~~compared to~~ ~~2013~~

~~Noninterest income was~~ ~~$917.4 million~~ ~~for~~ ~~2014, an increase of $62.6 million compared to~~ ~~$854.8 million~~ ~~reported for~~ ~~2013~~. The increase in total noninterest income was driven by increases in retail investment sales, investment banking and advisory fees, investment securities gains and other noninterest income which were partially offset by decreases in mortgage banking income and gain (loss) on prepayment of FHLB and other borrowings.

~~Service charges on deposit accounts were $222.7 million in 2014, compared to $221.4 million in 2013.~~

~~Card and merchant processing fees were $107.9 million in~~ ~~2014, an increase of $5.7 million compared to~~ ~~2013~~.

~~Income from investment banking and advisory fees increased to $87.5 million in 2014 compared to $47.6 million in~~ ~~2013~~ ~~due primarily to an increase in underwriting activity during the year.~~

~~Income from retail investment sales increased to $108.5 million in 2014, compared to $97.3 million in 2013. The primary drivers of~~ Partially offsetting the increase ~~related to~~is an ~~increase of approximately $6.6~~$8.0 million ~~in fixed income due to higher demand for fixed annuities during 2014 and an increase of approximately $3.9 million in life and disability insurance fees.~~

~~Table of Contents~~

~~Income from corporate and correspondent investment sales decreased to $29.6 million in 2014 from $35.7 million in 2013.~~

~~Mortgage banking income for the year ended~~ ~~December 31, 2014~~ ~~was $24.6 million compared to $35.4 million in~~ ~~2013. Mortgage banking income in~~ ~~2014~~ included $28.5 million of origination fees and gains on sales of mortgage loans as well as losses of $3.3 million related to fair value adjustments on mortgage loans held for sale, mortgage related derivatives and MSRs. Mortgage banking income in ~~2013~~ included $48.3 million of origination fees and gains on sales of mortgage loans and losses of $12.8 million related to fair value adjustments on mortgage loans held for sale, mortgage related derivatives and MSRs. The decrease in mortgage banking income in ~~2014~~ ~~compared to~~ ~~2013~~ ~~was primarily driven by decreased mortgage production volume of approximately 23% compared to 2013, due to declines in refinancing activities.~~

~~BOLI was $18.6 million in~~ ~~2014~~ ~~compared to $17.7 million in~~ ~~2013~~.

~~Investment securities gains, net increased to~~ ~~$53.0 million~~ in ~~2014~~ ~~compared to~~ ~~$31.4 million~~ in ~~2013. See “—Investment Securities” for more information related to the investment securities sales.~~

~~The Company recognized a~~ loss on prepayment of FHLB and other borrowings ~~of $315 thousand~~ in ~~2014~~ ~~compared to a gain of $21.8 million in 2013.~~2015. During ~~2014,~~2015, the Company prepaid approximately ~~$935 million~~$1.1 billion of FHLB advances resulting in ~~a $315 thousand~~an $8.0 million net loss on the prepayment of FHLB advances and other borrowings. During 2013, the Company repurchased subordinated debentures totaling $126 million and prepaid approximately $200 million of FHLB advances which resulted in a $21.8 million net gain on prepayment of FHLB and other borrowings.

~~For~~ ~~2014~~, other income increased by $19.2 million principally from the change in net gain (loss) associated with the sale of fixed assets which increased $11.3 million due to lower levels of losses in 2014 than 2013. Increases in syndication and interchange fees increased other income by approximately $7.2 million.

Noninterest Expense

The following table presents the components of noninterest expense.

Table 6 Noninterest Expense	Table 6 Noninterest Expense						Table 6 Noninterest Expense

	Years Ended December 31,						Years Ended December 31,
	2015		2014		2013		2016		2015		2014
	(In Thousands)						(In Thousands)
Salaries, benefits and commissions	$	1,071,196	$	1,072,269	$	1,005,244	$	1,119,676	$	1,081,475	$	1,080,364
Equipment	230,960		223,963		208,059		242,273		232,050		225,175
Professional services	216,325		207,679		191,402		242,206		218,584		209,943
Net occupancy	160,309		158,379		157,737		160,997		161,035		159,174
FDIC insurance	64,072		64,260		41,421		80,070		64,072		64,260
Money transfer expense							67,474		60,350		51,214
Marketing							50,549		41,778		36,061
Communications							21,046		22,527		24,987
Amortization of intangibles							16,373		39,208		50,856
FDIC indemnification expense	55,129		115,049		267,159		3,984		55,129		115,049
Marketing	41,770		35,991		37,352
Amortization of intangibles	39,208		50,856		60,691
Communications	21,980		24,608		25,965
Goodwill impairment	17,000		12,500		—		59,901		17,000		12,500
Total securities impairment	1,660		180		3,864		130		1,660		180
Other	216,881		215,018		200,281		238,843		219,985		217,114
Total noninterest expense	$	2,136,490	$	2,180,752	$	2,199,175	$	2,303,522	$	2,214,853	$	2,246,877

~~Table of Contents~~

available sources of contingent liquidity to prepare for unexpected liquidity needs and to cover unanticipated events that could affect liquidity.

The asset portion of the balance sheet provides liquidity primarily through unencumbered securities available for sale, loan principal and interest payments, maturities and prepayments of investment securities held to maturity and, to a lesser extent, sales of investment securities available for sale and trading account assets. Other short-term investments such as federal funds sold, securities purchased under agreements to resell ~~and maturing interest bearing deposits with other banks,~~ are additional sources of liquidity due to their short-term maturities.

The liability portion of the balance sheet provides liquidity through various customers’ interest-bearing and noninterest-bearing deposit accounts and through FHLB and other borrowings. Brokered deposits, federal funds purchased, securities sold under agreements to repurchase and other short-term borrowings as well as excess borrowing capacity with the FHLB and access to debt capital markets are additional sources of liquidity and, basically, represent the Company’s incremental borrowing capacity. These sources of liquidity are used as necessary to fund asset growth and meet short-term liquidity needs.

In 2014, the Bank established a Global Bank Note program under which the Bank may from time to time subject to market conditions, issue senior notes due seven days or more from the date of issue and subordinated notes due five years or more from the date of issue. During 2014, the Bank issued $400 million aggregate principal amount of its 1.85% unsecured notes due 2017 and $600 million aggregate principal amount of its 2.75% unsecured notes due 2019. In 2015, the Bank issued $700 million aggregate principal amount of its 3.875% unsecured subordinated notes due 2025.

In addition to the Company’s financial performance and condition, liquidity may be impacted by the Parent’s structure as a bank holding company that is a separate legal entity from the Bank. The Parent requires cash for various operating needs including payment of dividends to its shareholder, the servicing of debt, and the payment of general corporate expenses. The primary source of liquidity for the Parent is dividends paid by the Bank. Applicable federal and state statutes and regulations impose restrictions on the amount of dividends that may be paid by the Bank. In addition to the formal statutes and regulations, regulatory authorities also consider the adequacy of the Bank’s total capital in relation to its assets, deposits and other such items. Due to the net earnings restrictions on dividend distributions, the Bank was not permitted to pay dividends at December 31, ~~2015~~2016 or December 31, ~~2014~~2015 without regulatory approval. Appropriate limits and guidelines are in place to ensure the Parent has sufficient cash to meet operating expenses and other commitments over the next 18 months without relying on subsidiaries or capital markets for funding.

During ~~2015,~~2016, the Parent paid common dividends of ~~$95~~$92.9 million to its sole shareholder, BBVA. Any future dividends paid from the Parent must be set forth as capital actions in the Company's capital plans and not objected to by the Federal Reserve Board before any dividends can be paid.

The Company’s ability to raise funding at competitive prices is affected by the rating agencies’ views of the Company’s credit quality, liquidity, capital and earnings. Management meets with the rating agencies on a routine basis to discuss the current outlook for the Company.

In 2014, the Federal Reserve Board, the OCC, and the FDIC approved a final rule implementing a minimum liquidity coverage ratio requirement for certain large bank holding companies, savings and loan holding companies and depository institutions with $250 billion or more in total consolidated assets, and a less stringent LCR requirement for other banking organizations, such as the Company, with $50 billion or more in total consolidated assets. The final rule imposes a monthly reporting requirement. In January 2016, the minimum phased-in LCR requirement will be 90 percent, followed by 100 percent in January 2017. The Company was fully compliant with the LCR requirements upon implementation without having to make any significant changes to its current balance sheet. However, should the Company's cash position or investment mix change in the future, the Company's ability to meet the LCR requirement may be impacted.

Management believes that the current sources of liquidity are adequate to meet the Company’s requirements and plans for continued growth. See Note 11,, FHLB and Other Borrowings,, Note 12,, Shareholder's Equity,, and Note 16,, Commitments, Contingencies and Guarantees,, in the Notes to the Consolidated Financial Statements for additional information regarding outstanding balances of sources of liquidity and contractual commitments and obligations.

~~Table of Contents~~

The following tables present information about the Company’s contractual obligations.

Table 36 Contractual Obligations (1)	Table 36 Contractual Obligations (1)												Table 36 Contractual Obligations (1)

	December 31, 2015												December 31, 2016
	Payments Due by Period												Payments Due by Period
	Total		Less than 1 year		1-3 Years		3-5 Years		More than 5 Years		Indeterminable Maturity		Total		Less than 1 year		1-3 Years		3-5 Years		More than 5 Years		Indeterminable Maturity
	(In Thousands)												(In Thousands)
FHLB and other borrowings	$	5,438,620	$	2,412,211	$	814,360	$	1,169,223	$	1,042,826	$	—	$	3,001,551	$	786,332	$	948,121	$	343,193	$	923,905	$	—
Short-term borrowings(2)	4,782,798		4,782,798		—		—		—		—		2,842,029		2,842,029		—		—		—		—
Capital lease obligations	25,379		2,188		4,608		4,780		13,803		—		23,192		2,272		4,708		4,725		11,487		—
Operating leases	431,473		63,614		111,398		86,824		169,637		—		447,137		67,034		118,365		91,207		170,531		—
Deposits (3)	65,980,530		6,649,191		5,933,971		1,310,123		83,884		52,003,361		67,279,533		8,975,395		3,891,989		498,409		62,077		53,851,663
Unrecognized income tax benefits	16,552		3,861		10,218		2,367		106		—		13,615		9,695		2,042		1,878		—		—
Total	$	76,675,352	$	13,913,863	$	6,874,555	$	2,573,317	$	1,310,256	$	52,003,361	$	73,607,057	$	12,682,757	$	4,965,225	$	939,412	$	1,168,000	$	53,851,663


(1)	Amounts do not include associated interest payments.


(2)	Includes federal funds purchased and borrowings with an original maturity of less than one year. For more information, see Note 10, Short-Term Borrowings, in the Notes to the Consolidated Financial Statements.


(3)	Deposits with indeterminable maturity include noninterest bearing demand, savings, interest-bearing transaction accounts and money market accounts.

Off Balance Sheet Arrangements

The Company's off balance sheet credit risk includes obligations for loans sold with recourse, unfunded commitments, and letters of credit. Additionally, the Company periodically invests in various limited partnerships that sponsor affordable housing projects. See Note 16, Commitments, Contingencies and Guarantees, in the Notes to the Consolidated Financial Statements for further discussion.

Capital

The Company and the Bank are subject to various regulatory capital requirements administered by federal and state banking regulators. Failure to meet minimum risk-based and leverage capital requirements can subject the Company and the Bank to a series of increasingly restrictive regulatory actions.

The U.S. Basel III final rule revised the minimum regulatory capital ratio thresholds for the Company and the Bank and the well-capitalized thresholds for the Bank. The Federal Reserve Board has not yet adopted well-capitalized standards for bank holding companies under the U.S. Basel III capital framework. The U.S. Basel III capital rule introduces a new capital measure called CET1 capital, specifies that Tier 1 capital consist of CET1 and "Additional Tier 1 capital" instruments meeting specified requirements and expands the scope of the deductions from and adjustments to capital as compared to previously existing regulations.

~~Under the U.S. Basel III capital rule, the minimum regulatory capital ratios effective as of January 1, 2015 are as follows:~~

•~~4.5% CET1 Risk-Based Capital Ratio~~

•~~6.0% Tier 1 Risk-Based Capital Ratio~~

•~~8.0% Total Risk-Based Capital Ratio~~

•~~4.0% Tier 1 Leverage Ratio~~

The U.S. Basel III capital rule also requires a capital conservation buffer that is designed to absorb losses during periods of economic stress and that must be maintained on top of these minimum risk-based capital ratios. When U.S. Basel III is fully phased-in on January 1, 2019, the Company and Bank will be required to maintain a capital conservation buffer greater than 2.5% of CET1 to risk-weighted assets, effectively resulting in a requirement to maintain a CET1 Risk-Based Capital Ratio of greater than 7.0%, a Tier 1 Risk-Based Capital Ratio of greater than 8.5%, and a Total

~~Table of Contents~~

Risk-Based Capital Ratio of greater than 10.5%. Failure of the Company or the Bank to maintain the buffer will result in restrictions on the ability to make dividend payments, repurchase shares, and pay discretionary bonuses.

The Company regularly performs stress testing on its capital levels and is required annually to submit the Company’s capital plan to the banking regulators. In November 2015, the Federal Reserve released a final amendment to the capital plan and stress test rules that, among other things, requires large bank holding companies such as the Company to reflect capital issuances associated with certain planned acquisitions and dividends related to expensed employee compensation in its company-run stress test assumptions. The amendments are effective beginning with the 2016 capital planning and stress testing cycle.

~~Please refer to Item 1. Business - Supervision and Regulation - Capital Requirements and Item 1A. - Risk Factors for more information regarding regulatory capital requirements. Also, see Note 17,~~ ~~Regulatory Capital Requirements and Dividends from Subsidiaries, in the~~ ~~Notes to the Consolidated Financial Statements~~ ~~for further details.~~

The following table sets forth the Company's U.S. Basel III regulatory capital ratios ~~at December 31, 2015~~ subject to transitional provisions ~~and its Basel I regulatory capital ratios~~ at December 31, ~~2014.~~2016 and 2015.

Table 37
Capital Ratios
December 31,
2015 (1) 2014 (2)
(Dollars in Thousands)
Capital:
CET1 Capital $ 7,363,961
N/A
Tier 1 Capital 7,631,561
$ 7,046,902
Total Qualifying Capital 9,417,750
8,254,184
Assets:
Total risk-adjusted assets (regulatory) $ 68,846,585
$ 64,417,765
Ratios:
CET1 Risk-Based Capital Ratio 10.70 % N/A
Tier 1 Risk-Based Capital Ratio 11.08 % 10.94 %
Total Risk-Based Capital Ratio 13.68 % 12.81 %
Leverage Ratio 8.95 % 9.09 %


~~(1)~~	~~Calculated using the Transitional Basel III regulatory capital methodology applicable to the Company during 2015.~~


~~(2)~~	~~Calculated using the Basel I regulatory capital methodology applicable to the Company during 2014.~~

~~N/A = not applicable~~

Table 37 Capital Ratios

	December 31,
	2016			2015
	(Dollars in Thousands)
Capital:
CET1 Capital	$	7,669,118		$	7,363,961
Tier 1 Capital	7,907,518			7,631,561
Total Qualifying Capital	9,550,482			9,417,750
Assets:
Total risk-adjusted assets (regulatory)	$	66,719,395		$	68,846,585
Ratios:
CET1 Risk-Based Capital Ratio	11.49		%	10.70		%
Tier 1 Risk-Based Capital Ratio	11.85		%	11.08		%
Total Risk-Based Capital Ratio	14.31		%	13.68		%
Leverage Ratio	9.46		%	8.95		%

At December 31, ~~2015,~~2016, the regulatory capital ratios of the Bank also remain well above current regulatory requirements for banks based on applicable U.S. regulatory capital requirements. The Company continually monitors these ratios to ensure that the Bank exceeds this standard.

The Company also regularly performs stress testing on its capital levels and is required annually to submit the Company’s capital plan to the Federal Reserve Board as part of the CCAR process. In June 2016, the Company was informed that the Federal Reserve Board did not object to the Company's capital plan and the capital actions proposed in the capital plan. The Company's capital plan included common dividends of $120 million, subject to approval by the Company's board of directors. The Company submitted its capital plan, which was approved by its board of directors, to the Federal Reserve in April 2016 as part of the Comprehensive Capital Analysis and Review of the 33 largest U.S. bank holding companies. The capital plan includes proposed potential capital actions covering the period from July 1, 2016 through June 30, 2017.

Please refer to Item 1. Business - Supervision and Regulation - Capital Requirements and Item 1A. - Risk Factors for more information regarding regulatory capital requirements. Also, see Note 17, Regulatory Capital Requirements and Dividends from Subsidiaries, in the Notes to the Consolidated Financial Statements for further details.

Effects of Inflation

The majority of assets and liabilities of a financial institution are monetary in nature; therefore, a financial institution differs greatly from most commercial and industrial companies, which have significant investments in fixed assets or inventories that are greatly impacted by inflation. However, inflation does have an important impact on the growth of total assets in the banking industry and the resulting need to increase equity capital at higher than normal rates in order to maintain an appropriate equity-to-assets ratio. Inflation also affects other expenses that tend to rise during periods of general inflation.

Management believes the most significant potential impact of inflation on financial results is a direct result of the Company’s ability to manage the impact of changes in interest rates. Management attempts to minimize the impact of interest rate fluctuations on net interest income. However, this goal can be difficult to completely achieve in times of rapidly changing interest rates and is one of many factors considered in determining the Company’s interest rate

~~Table of Contents~~

positioning. The Company is asset sensitive as of December 31, ~~2015.~~2016. Refer to Table 34, Net Interest Income Sensitivity, for additional details on the Company’s interest rate sensitivity.

Effects of Deflation

A period of deflation would affect all industries, including financial institutions. Potentially, deflation could lead to lower profits, higher unemployment, lower production and deterioration in overall economic conditions. In addition, deflation could depress economic activity and impair earnings through increasing the value of debt while decreasing the value of collateral for loans. If the economy experienced a severe period of deflation, then it could depress loan demand, impair the ability of borrowers to repay loans and sharply reduce earnings.

Management believes the most significant potential impact of deflation on financial results relates to the Company’s ability to maintain a high amount of capital to cushion against future losses. In addition, the Company can utilize certain risk management tools to help it maintain its balance sheet strength even if a deflationary scenario were to develop.

~~Table of Contents~~

Quarterly Financial Results

The accompanying table presents condensed information relating to quarterly periods.

Table 38 Quarterly Financial Summary (Unaudited)	Table 38 Quarterly Financial Summary (Unaudited)																Table 38 Quarterly Financial Summary (Unaudited)

	December 31,																December 31,
	2015								2014								2016								2015
	Fourth Quarter		Third Quarter		Second Quarter		First Quarter		Fourth Quarter		Third Quarter		Second Quarter		First Quarter		Fourth Quarter		Third Quarter		Second Quarter		First Quarter		Fourth Quarter		Third Quarter		Second Quarter		First Quarter
	(In Thousands)																(In Thousands)
Summary of Operations:
Interest income	$	616,977	$	610,206	$	601,716	$	609,362	$	606,217	$	565,971	$	576,392	$	565,405	$	647,026	$	630,542	$	620,129	$	632,762	$	616,981	$	610,213	$	601,717	$	609,364
Interest expense	112,892		102,339		109,734		100,333		96,764		84,003		77,618		70,106		115,274		115,733		115,891		115,880		112,892		102,339		109,734		100,333
Net interest income	504,085		507,867		491,982		509,029		509,453		481,968		498,774		495,299		531,752		514,809		504,238		516,882		504,089		507,874		491,983		509,031
Provision for loan losses	76,307		29,151		46,149		42,031		19,914		3,869		45,252		37,266		37,564		65,107		86,673		113,245		76,307		29,151		46,149		42,031
Net interest income after provision for loan losses	427,778		478,716		445,833		466,998		489,539		478,099		453,522		458,033		494,188		449,702		417,565		403,637		427,782		478,723		445,834		467,000
Noninterest income	235,258		233,376		258,569		249,270		236,218		226,431		235,445		219,328		260,758		263,765		278,246		253,205		262,198		260,720		284,382		272,074
Noninterest expense	557,885		536,250		519,636		522,719		583,481		533,142		545,262		518,867		614,070		556,271		541,037		592,144		578,695		557,375		539,487		539,296
Income before income tax expense	105,151		175,842		184,766		193,549		142,276		171,388		143,705		158,494		140,876		157,196		154,774		64,698		111,285		182,068		190,729		199,778
Income tax expense	17,505		50,110		48,116		51,782		39,864		27,770		36,130		43,567		51,473		36,845		32,272		25,431		19,637		52,428		50,335		54,102
Net income	$	87,646	$	125,732	$	136,650	$	141,767	$	102,412	$	143,618	$	107,575	$	114,927	89,403		120,351		122,502		39,267		91,648		129,640		140,394		145,676
Noncontrolling interest	490		491		590		657		204		815		504		453
Net income attributable to shareholder	$	87,156	$	125,241	$	136,060	$	141,110	$	102,208	$	142,803	$	107,071	$	114,474
Less: noncontrolling interest																	441		523		518		528		490		491		590		657
Net income attributable to BBVA Compass Bancshares, Inc.																	88,962		119,828		121,984		38,739		91,158		129,149		139,804		145,019
Less: preferred stock dividends																	3,536		3,476		3,453		3,219		—		—		—		—
Net income attributable to common shareholder																	$	85,426	$	116,352	$	118,531	$	35,520	$	91,158	$	129,149	$	139,804	$	145,019
Selected Average Balances:
Average Balances:
Loans (1)	$	61,480,854	$	60,632,304	$	59,746,217	$	58,813,049	$	56,419,150	$	55,349,649	$	53,924,258	$	51,943,121	$	60,428,830	$	61,060,433	$	62,355,245	$	62,195,963	$	61,480,854	$	60,632,304	$	59,746,217	$	58,813,049
Total assets	90,341,119		89,761,730		87,865,950		85,087,155		82,702,903		77,909,087		76,004,941		73,359,144		88,639,855		90,900,339		92,440,585		92,305,106		90,441,599		89,886,097		87,978,092		85,176,623
Deposits	65,368,720		64,012,429		62,622,309		62,121,217		61,116,755		59,675,681		57,549,565		55,209,690		67,718,213		67,979,739		68,441,915		67,479,613		65,369,958		64,001,250		62,622,304		62,121,309
FHLB and other borrowings	5,580,514		6,331,187		6,000,934		4,880,657		4,799,343		3,827,684		4,100,456		4,289,004		3,281,743		4,121,742		4,448,139		5,064,803		5,580,514		6,331,187		6,000,934		4,880,657
Shareholder’s equity	12,576,042		12,317,150		12,233,122		12,116,432		12,005,933		11,917,267		11,823,834		11,615,847		12,982,707		12,810,740		12,751,155		12,727,970		12,628,872		12,379,303		12,291,532		12,170,606


(1)	Includes loans held for sale.


Item 7A.	Quantitative and Qualitative Disclosures about Market Risk

See “Market Risk Management” in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations, which is incorporated herein by reference.

~~Table of Contents~~


Item 8.	Financial Statements and Supplementary Data



BBVA Compass Bancshares, Inc. and Subsidiaries Financial Statements
Audited Consolidated Financial Statements:
Report of Independent Registered Public Accounting Firm	9189
Consolidated Balance Sheets as of December 31, ~~2015~~2016 and ~~2014~~2015	9290
Consolidated Statements of Income for the years ended December 31, 2016, 2015 ~~2014~~ and ~~2013~~2014	9391
Consolidated Statements of Comprehensive Income for the years ended December 31, 2016, 2015 ~~2014~~ and ~~2013~~2014	9492
Consolidated Statements of Shareholder’s Equity for the years ended December 31, 2016, 2015 ~~2014~~ and ~~2013~~2014	9593
Consolidated Statements of Cash Flows for the years ended December 31, 2016, 2015 ~~2014~~ and ~~2013~~2014	9694
Notes to the December 31, ~~2015~~2016 Consolidated Financial Statements	9795

~~Table of Contents~~

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholder of

BBVA Compass Bancshares, Inc.

Houston, TX

We have audited the accompanying consolidated balance sheets of BBVA Compass Bancshares, Inc. and its subsidiaries (the "Company") as of December 31, ~~2015~~2016 and ~~2014,~~2015, and the related consolidated statements of income, comprehensive income, shareholder’s equity, and cash flows for each of the three years in the period ended December 31, ~~2015.~~2016. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of BBVA Compass Bancshares, Inc. and its subsidiaries as of December 31, ~~2015~~2016 and ~~2014,~~2015, and the results of their operations and their cash flows for each of the three years in the period ended December 31, ~~2015,~~2016, in conformity with accounting principles generally accepted in the United States of America.

/s/ Deloitte & Touche LLP

Birmingham, AL

March ~~2, 2016~~1, 2017

~~Table of Contents~~

BBVA COMPASS BANCSHARES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS	BBVA COMPASS BANCSHARES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS						BBVA COMPASS BANCSHARES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS

	December 31,						December 31,
	2015			2014			2016			2015
	(In Thousands)						(In Thousands)
Assets:
Cash and due from banks	$	4,121,944		$	2,764,345		$	1,284,261		$	1,125,673
Interest bearing deposits with the Federal Reserve							1,830,078			3,040,207
Federal funds sold, securities purchased under agreements to resell and interest bearing deposits	330,948			624,060			137,447			330,948
Cash and cash equivalents	4,452,892			3,388,405			3,251,786			4,496,828
Trading account assets	4,138,132			2,834,397			3,144,600			4,138,132
Investment securities available for sale	11,050,520			10,237,275			11,665,055			11,050,520
Investment securities held to maturity (fair value of $1,244,121 and $1,275,963 for 2015 and 2014, respectively)	1,322,676			1,348,354
Loans held for sale, at fair value	70,582			154,816
Investment securities held to maturity (fair value of $1,182,009 and $1,244,121 for 2016 and 2015, respectively)							1,203,217			1,322,676
Loans held for sale (includes $105,257 and $70,582 measured at fair value for 2016 and 2015, respectively)							161,849			70,582
Loans	61,324,084			57,371,784			60,061,263			61,324,084
Allowance for loan losses	(762,673		)	(685,041		)	(838,293		)	(762,673		)
Net loans	60,561,411			56,686,743			59,222,970			60,561,411
Premises and equipment, net	1,320,163			1,351,479			1,300,054			1,322,378
Bank owned life insurance	700,285			694,335			711,939			700,285
Goodwill	5,043,197			5,046,847			4,983,296			5,043,197
Other intangible assets	31,576			70,784			15,203			31,576
Other real estate owned	20,862			20,600
Other assets	1,252,784			1,318,392			1,419,984			1,330,953
Total assets	$	89,965,080		$	83,152,427		$	87,079,953		$	90,068,538
Liabilities:
Deposits:
Noninterest bearing	$	19,290,266		$	17,169,412		$	20,332,792		$	19,291,533
Interest bearing	46,690,264			44,020,304			46,946,741			46,690,233
Total deposits	65,980,530			61,189,716			67,279,533			65,981,766
FHLB and other borrowings	5,438,620			4,809,843			3,001,551			5,438,620
Federal funds purchased and securities sold under agreements to repurchase	750,154			1,129,503			39,052			750,154
Other short-term borrowings	4,032,644			2,545,724			2,802,977			4,032,644
Accrued expenses and other liabilities	1,185,848			1,474,067			1,206,133			1,240,645
Total liabilities	77,387,796			71,148,853			74,329,246			77,443,829
Shareholder’s Equity:
Series A Preferred stock — $0.01 par value, liquidation preference $200,000 per share
Authorized — 30,000,000 shares for 2015 and none for 2014
Issued — 1,150 shares for 2015 and none for 2014	229,475			—
Authorized — 30,000,000 shares
Issued — 1,150 shares							229,475			229,475
Common stock — $0.01 par value:
Authorized — 300,000,000 shares
Issued — 222,950,751 shares for both 2015 and 2014	2,230			2,230
Issued — 222,950,751 shares							2,230			2,230
Surplus	15,188,474			15,285,991			14,985,673			15,160,267
Accumulated deficit	(2,772,614		)	(3,262,181		)	(2,327,440		)	(2,696,953		)
Accumulated other comprehensive loss	(99,307		)	(51,357		)	(168,252		)	(99,336		)
Total BBVA Compass Bancshares, Inc. shareholder’s equity	12,548,258			11,974,683			12,721,686			12,595,683
Noncontrolling interests	29,026			28,891			29,021			29,026
Total shareholder’s equity	12,577,284			12,003,574			12,750,707			12,624,709
Total liabilities and shareholder’s equity	$	89,965,080		$	83,152,427		$	87,079,953		$	90,068,538

See accompanying Notes to Consolidated Financial Statements.

~~Table of Contents~~

BBVA COMPASS BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME

Years Ended December 31,
2015 2014 2013
(In Thousands)
Interest income:
Interest and fees on loans $ 2,162,145
$ 2,086,097
$ 2,111,160
Interest on investment securities available for sale 192,124
191,492
178,301
Interest on investment securities held to maturity 27,449
27,971
30,632
Interest on federal funds sold, securities purchased under agreements to resell and interest bearing deposits 5,608
702
192
Interest on trading account assets 50,935
7,723
2,971
Total interest income 2,438,261
2,313,985
2,323,256
Interest expense:
Interest on deposits 274,478
251,914
212,100
Interest on FHLB and other borrowings 89,988
68,957
66,275
Interest on federal funds purchased and securities sold under agreements to repurchase 8,390
2,302
2,082
Interest on other short-term borrowings 52,442
5,318
118
Total interest expense 425,298
328,491
280,575
Net interest income 2,012,963
1,985,494
2,042,681
Provision for loan losses 193,638
106,301
107,546
Net interest income after provision for loan losses 1,819,325
1,879,193
1,935,135
Noninterest income:
Service charges on deposit accounts 216,248
222,685
221,413
Card and merchant processing fees 112,818
107,891
102,189
Investment banking and advisory fees 105,235

87,454

47,604
Retail investment sales 101,614
108,477
97,276
Asset management fees 33,194
42,772
40,939
Corporate and correspondent investment sales 30,000
29,635
35,674
Mortgage banking income 27,258
24,551
35,399
Bank owned life insurance 18,662
18,616
17,747
Investment securities gains, net 81,656
53,042
31,371
Gain (loss) on prepayment of FHLB and other borrowings, net (8,016 ) (315 ) 21,775
Other 257,804
222,614
203,403
Total noninterest income 976,473
917,422
854,790
Noninterest expense:
Salaries, benefits and commissions 1,071,196
1,072,269
1,005,244
Equipment 230,960
223,963
208,059
Professional services 216,325
207,679
191,402
Net occupancy 160,309
158,379
157,737
FDIC insurance 64,072
64,260
41,421
FDIC indemnification expense 55,129
115,049
267,159
Marketing 41,770
35,991
37,352
Amortization of intangibles 39,208
50,856
60,691
Communications 21,980
24,608
25,965
Goodwill impairment 17,000
12,500
—
Securities impairment:
Other-than-temporary impairment 1,747
415
7,107
Less: non-credit portion recognized in other comprehensive income 87
235
3,243
Total securities impairment 1,660
180
3,864
Other 216,881
215,018
200,281
Total noninterest expense 2,136,490
2,180,752
2,199,175
Net income before income tax expense 659,308
615,863
590,750
Income tax expense 167,513
147,331
170,820
Net income 491,795
468,532
419,930
Less: net income attributable to noncontrolling interests 2,228
1,976
2,094
Net income attributable to shareholder $ 489,567
$ 466,556
$ 417,836

~~See accompanying Notes to Consolidated Financial Statements.~~

~~Table of Contents~~

BBVA COMPASS BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Years Ended December 31,
2015 2014 2013
(In Thousands)
Net income $ 491,795
$ 468,532
$ 419,930
Other comprehensive income (loss), net of tax:
Unrealized holding gains (losses) arising during period from securities available for sale (16,635 ) 61,284
(108,490 )
Less: reclassification adjustment for net gains on sale of securities available for sale in net income 52,065
34,352
19,970
Net change in unrealized holding gains (losses) on securities available for sale (68,700 ) 26,932
(128,460 )
Change in unamortized net holding losses on investment securities held to maturity 7,905
9,027
10,591
Less: non-credit related impairment on investment securities held to maturity 55
151
2,065
Change in unamortized non-credit related impairment on investment securities held to maturity 134
1,871
1,520
Net change in unamortized holding losses on securities held to maturity 7,984
10,747
10,046
Unrealized holding gains (losses) arising during period from cash flow hedge instruments 811
(1,900 ) 8,098
Change in defined benefit plans 11,955
800
(3,678 )
Other comprehensive income (loss), net of tax (47,950 ) 36,579
(113,994 )
Comprehensive income 443,845
505,111
305,936
Less: comprehensive income attributable to noncontrolling interests 2,228
1,976
2,094
Comprehensive income attributable to shareholder $ 441,617
$ 503,135
$ 303,842

~~See accompanying Notes to Consolidated Financial Statements.~~

~~Table of Contents~~

BBVA COMPASS BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY

Preferred Stock Common Stock Surplus Accumulated Deficit Accumulated Other Comprehensive Income (Loss) Non-controlling Interests Total Shareholder’s Equity
(In Thousands)
Balance, January 1, 2013 $ —
$ 2,173
$ 15,172,910
$ (4,146,573 ) $ 26,058
$ 29,005
$ 11,083,573
Net income —
—
—
417,836
—
2,094
419,930
Other comprehensive loss, net of tax —
—
—
—
(113,994 ) —
(113,994 )
Issuance of common stock —
34
99,966
—
—
—
100,000
Dividends —
—
—
—
—
(2,092 ) (2,092 )
Vesting of restricted stock —
—
(5,741 ) —
—
—
(5,741 )
Restricted stock retained to cover taxes —
—
(2,228 ) —
—
—
(2,228 )
Amortization of stock-based deferred compensation —
—
8,311
—
—
—
8,311
Balance, December 31, 2013 $ —
$ 2,207
$ 15,273,218
$ (3,728,737 ) $ (87,936 ) $ 29,007
$ 11,487,759
Net income —
—
—
466,556
—
1,976
468,532
Other comprehensive income, net of tax —
—
—
—
36,579
—
36,579
Issuance of common stock —
23
116,977
—
—
—
117,000
Dividends —
—
(102,000 ) —
—
(2,092 ) (104,092 )
Vesting of restricted stock —
—
(4,702 ) —
—
—
(4,702 )
Restricted stock retained to cover taxes —
—
(2,507 ) —
—
—
(2,507 )
Restricted stock tax benefit —
—
490
—
—
—
490
Amortization of stock-based deferred compensation —
—
4,515
—
—
—
4,515
Balance, December 31, 2014 $ —
$ 2,230
$ 15,285,991
$ (3,262,181 ) $ (51,357 ) $ 28,891
$ 12,003,574
Net income —
—
—
489,567
—
2,228
491,795
Other comprehensive loss, net of tax —
—
—
—
(47,950 ) —
(47,950 )
Issuance of preferred stock 229,475
—
—
—
—
—
229,475
Dividends —
—
(95,000 ) —
—
(2,093 ) (97,093 )
Vesting of restricted stock —
—
(3,720 ) —
—
—
(3,720 )
Restricted stock retained to cover taxes —
—
(2,984 ) —
—
—
(2,984 )
Restricted stock tax benefit —
—
12
—
—
—
12
Amortization of stock-based deferred compensation —
—
4,175
—
—
—
4,175
Balance, December 31, 2015 $ 229,475
$ 2,230
$ 15,188,474
$ (2,772,614 ) $ (99,307 ) $ 29,026
$ 12,577,284

BBVA COMPASS BANCSHARES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME

	Years Ended December 31,
	2016		2015		2014
	(In Thousands)
Interest income:
Interest and fees on loans	$	2,236,929	$	2,162,145	$	2,086,097
Interest on investment securities available for sale	191,889		192,124		191,492
Interest on investment securities held to maturity	26,893		27,449		27,971
Interest on federal funds sold, securities purchased under agreements to resell and interest bearing deposits	20,939		5,622		713
Interest on trading account assets	53,809		50,935		7,723
Total interest income	2,530,459		2,438,275		2,313,996
Interest expense:
Interest on deposits	304,625		274,478		251,914
Interest on FHLB and other borrowings	82,744		89,988		68,957
Interest on federal funds purchased and securities sold under agreements to repurchase	21,165		8,390		2,302
Interest on other short-term borrowings	54,244		52,442		5,318
Total interest expense	462,778		425,298		328,491
Net interest income	2,067,681		2,012,977		1,985,505
Provision for loan losses	302,589		193,638		106,301
Net interest income after provision for loan losses	1,765,092		1,819,339		1,879,204
Noninterest income:
Service charges on deposit accounts	214,294		216,248		222,686
Card and merchant processing fees	123,668		112,818		107,891
Investment banking and advisory fees	107,116		105,235		87,454
Money transfer income	104,592		93,437		81,409
Retail investment sales	102,982		101,614		108,477
Asset management fees	34,875		33,194		42,772
Corporate and correspondent investment sales	24,689		30,000		29,635
Mortgage banking income	21,496		27,258		24,551
Bank owned life insurance	17,243		18,662		18,616
Investment securities gains, net	30,037		81,656		53,042
Other	274,982		259,252		231,279
Total noninterest income	1,055,974		1,079,374		1,007,812
Noninterest expense:
Salaries, benefits and commissions	1,119,676		1,081,475		1,080,364
Equipment	242,273		232,050		225,175
Professional services	242,206		218,584		209,943
Net occupancy	160,997		161,035		159,174
FDIC insurance	80,070		64,072		64,260
Money transfer expense	67,474		60,350		51,214
Marketing	50,549		41,778		36,061
Communications	21,046		22,527		24,987
Amortization of intangibles	16,373		39,208		50,856
FDIC indemnification expense	3,984		55,129		115,049
Goodwill impairment	59,901		17,000		12,500
Securities impairment:
Other-than-temporary impairment	281		1,747		415
Less: non-credit portion recognized in other comprehensive income	151		87		235
Total securities impairment	130		1,660		180
Other	238,843		219,985		217,114
Total noninterest expense	2,303,522		2,214,853		2,246,877
Net income before income tax expense	517,544		683,860		640,139
Income tax expense	146,021		176,502		155,763
Net income	371,523		507,358		484,376
Less: net income attributable to noncontrolling interests	2,010		2,228		1,976
Net income attributable to BBVA Compass Bancshares, Inc.	369,513		505,130		482,400
Less: preferred stock dividends	13,684		—		—
Net income attributable to common shareholder	$	355,829	$	505,130	$	482,400

See accompanying Notes to Consolidated Financial Statements.

~~Table of Contents~~

BBVA COMPASS BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS

Years Ended December 31,
2015 2014 2013
(In Thousands)
Operating Activities:
Net income $ 491,795
$ 468,532
$ 419,930
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 275,098
273,600
298,996
Goodwill impairment 17,000
12,500
—
Securities impairment 1,660
180
3,864
Amortization of intangibles 39,208
50,856
60,691
Accretion of discount, loan fees and purchase market adjustments, net (128,170 ) (176,114 ) (299,018 )
FDIC indemnification expense 55,129
115,049
267,159
Provision for loan losses 193,638
106,301
107,546
Amortization of stock based compensation 4,175
4,515
8,311
Net change in trading account assets (20,180 ) (42,258 ) 225,850
Net change in trading account liabilities (8,440 ) 46,573
(233,745 )
Net change in loans held for sale 84,234
13,428
266,356
Deferred tax (benefit) expense (110,902 ) (9,081 ) 34,130
Investment securities gains, net (81,656 ) (53,042 ) (31,371 )
(Gain) loss on prepayment of FHLB and other borrowings 8,016
315
(21,775 )
Loss on sale of premises and equipment 868
5,906
11,661
(Gain) loss on sale of loans (22,091 ) 82
—
Net (gain) loss on sale of other real estate and other assets 508
(1,511 ) (8,458 )
Loss on disposition —
981
—
(Increase) decrease in other assets 190,261
(459,288 ) 18,402
Increase (decrease) in other liabilities (320,949 ) 443,712
6,864
Net cash provided by operating activities 669,202
801,236
1,135,393
Investing Activities:
Proceeds from sales of investment securities available for sale 3,369,062
1,114,215
1,126,609
Proceeds from prepayments, maturities and calls of investment securities available for sale 1,564,910
1,382,949
1,968,803
Purchases of investment securities available for sale (5,856,808 ) (4,409,991 ) (3,719,792 )
Proceeds from prepayments, maturities and calls of investment securities held to maturity 123,188
195,276
212,483
Purchases of investment securities held to maturity (85,929 ) (7,312 ) (210,830 )
Purchases of trading securities (4,831,626 ) (2,472,209 ) —
Proceeds from sales of trading securities 3,548,071
—
—
Net change in loan portfolio (4,426,260 ) (6,799,260 ) (5,907,928 )
Purchase of premises and equipment (160,526 ) (127,060 ) (167,231 )
Proceeds from sale of premises and equipment 8,138
19,238
233
Net cash paid in acquisition (12,567 ) (97,566 ) —
Proceeds from sales of loans 488,550
107,936
203,958
Payments to FDIC for covered assets (1,924 ) (12,709 ) (19,546 )
Proceeds from sales of other real estate owned 20,011
25,895
101,677
Net cash used in investing activities (6,253,710 ) (11,080,598 ) (6,411,564 )
Financing Activities:
Net increase in demand deposits, NOW accounts and savings accounts 3,564,104
5,998,569
2,921,046
Net increase (decrease) in time deposits 1,216,583
741,352
(126,256 )
Net increase (decrease) in federal funds purchased and securities sold under agreements to repurchase (379,349 ) 276,933
(249,021 )
Net increase in other short-term borrowings 1,486,920
2,540,133
1,828
Proceeds from FHLB and other borrowings 5,300,000
2,195,418
425,000
Repayment of FHLB and other borrowings (4,664,941 ) (1,688,797 ) (346,347 )
Vesting of restricted stock (3,720 ) (4,702 ) (5,741 )
Restricted stock grants retained to cover taxes (2,984 ) (2,507 ) (2,228 )
Issuance of preferred stock 229,475
—
—
Issuance of common stock —
117,000
100,000
Common dividends paid (95,000 ) (102,000 ) —
Preferred dividends paid (2,093 ) (2,092 ) (2,092 )
Net cash provided by financing activities 6,648,995
10,069,307
2,716,189
Net increase (decrease) in cash and cash equivalents 1,064,487
(210,055 ) (2,559,982 )
Cash and cash equivalents, January 1 3,388,405
3,598,460
6,158,442
Cash and cash equivalents, December 31 $ 4,452,892
$ 3,388,405
$ 3,598,460

BBVA COMPASS BANCSHARES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

	Years Ended December 31,
	2016			2015			2014
	(In Thousands)
Net income	$	371,523		$	507,358		$	484,376
Other comprehensive income (loss), net of tax:
Unrealized holding gains (losses) arising during period from securities available for sale	(48,038		)	(16,635		)	61,284
Less: reclassification adjustment for net gains on sale of securities available for sale in net income	18,811			52,065			34,352
Net change in unrealized holding gains (losses) on securities available for sale	(66,849		)	(68,700		)	26,932
Change in unamortized net holding losses on investment securities held to maturity	3,613			7,905			9,027
Less: non-credit related impairment on investment securities held to maturity	96			55			151
Change in unamortized non-credit related impairment on investment securities held to maturity	951			134			1,871
Net change in unamortized holding losses on securities held to maturity	4,468			7,984			10,747
Unrealized holding gains (losses) arising during period from cash flow hedge instruments	(3,673		)	1,287			(2,405		)
Change in defined benefit plans	(2,862		)	11,955			800
Other comprehensive income (loss), net of tax	(68,916		)	(47,474		)	36,074
Comprehensive income	302,607			459,884			520,450
Less: comprehensive income attributable to noncontrolling interests	2,010			2,228			1,976
Comprehensive income attributable to BBVA Compass Bancshares, Inc.	$	300,597		$	457,656		$	518,474

See accompanying Notes to Consolidated Financial Statements.

BBVA COMPASS BANCSHARES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY

	Preferred Stock		Common Stock		Surplus			Accumulated Deficit			Accumulated Other Comprehensive Income (Loss)			Non-controlling Interests			Total Shareholder’s Equity
	(In Thousands)
Balance, January 1, 2014	$	—	$	2,207	$	15,287,018		$	(3,684,483	)	$	(87,936	)	$	29,007		$	11,545,813
Net income	—		—		—			482,400			—			1,976			484,376
Other comprehensive income, net of tax	—		—		—			—			36,074			—			36,074
Preferred stock dividends	—		—		—			—			—			(2,092		)	(2,092		)
Issuance of common stock	—		23		116,977			—			—			—			117,000
Common stock dividends	—		—		(102,000		)	—			—			—			(102,000		)
Dividend to BBVA Bancomer USA, Inc.	—		—		(22,000		)	—			—			—			(22,000		)
Vesting of restricted stock	—		—		(4,702		)	—			—			—			(4,702		)
Restricted stock retained to cover taxes	—		—		(2,507		)	—			—			—			(2,507		)
Restricted stock tax benefit	—		—		490			—			—			—			490
Amortization of stock-based deferred compensation	—		—		4,470			—			—			—			4,470
Balance, December 31, 2014	$	—	$	2,230	$	15,277,746		$	(3,202,083	)	$	(51,862	)	$	28,891		$	12,054,922
Net income	—		—		—			505,130			—			2,228			507,358
Other comprehensive loss, net of tax	—		—		—			—			(47,474		)	—			(47,474		)
Issuance of preferred stock	229,475		—		—			—			—			—			229,475
Preferred stock dividends	—		—		—			—			—			(2,093		)	(2,093		)
Common stock dividends	—		—		(95,000		)	—			—			—			(95,000		)
Dividend to BBVA Bancomer USA, Inc.	—		—		(20,000		)	—			—			—			(20,000		)
Vesting of restricted stock	—		—		(3,603		)	—			—			—			(3,603		)
Restricted stock retained to cover taxes	—		—		(3,016		)	—			—			—			(3,016		)
Restricted stock tax benefit	—		—		12			—			—			—			12
Amortization of stock-based deferred compensation	—		—		4,128			—			—			—			4,128
Balance, December 31, 2015	$	229,475	$	2,230	$	15,160,267		$	(2,696,953	)	$	(99,336	)	$	29,026		$	12,624,709
Net income	—		—		—			369,513			—			2,010			371,523
Other comprehensive loss, net of tax	—		—		—			—			(68,916		)	—			(68,916		)
Preferred stock dividends	—		—		(13,684		)	—			—			(2,093		)	(15,777		)
Common stock dividends	—		—		(92,864		)	—			—			—			(92,864		)
Dividend to BBVA Bancomer USA, Inc.	—		—		(69,151		)	—			—			—			(69,151		)
Capital contribution	—		—		—			—			—			78			78
Vesting of restricted stock	—		—		(1,744		)	—			—			—			(1,744		)
Restricted stock retained to cover taxes	—		—		(630		)	—			—			—			(630		)
Restricted stock tax deficiency	—		—		(468		)	—			—			—			(468		)
Amortization of stock-based deferred compensation	—		—		3,947			—			—			—			3,947
Balance, December 31, 2016	$	229,475	$	2,230	$	14,985,673		$	(2,327,440	)	$	(168,252	)	$	29,021		$	12,750,707

See accompanying Notes to Consolidated Financial Statements.

BBVA COMPASS BANCSHARES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS

	Years Ended December 31,
	2016			2015			2014
	(In Thousands)
Operating Activities:
Net income	$	371,523		$	507,358		$	484,376
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	286,159			275,529			273,600
Goodwill impairment	59,901			17,000			12,500
Securities impairment	130			1,660			180
Amortization of intangibles	16,373			39,208			50,856
Accretion of discount, loan fees and purchase market adjustments, net	(19,614		)	(128,170		)	(176,114		)
FDIC indemnification expense	3,984			55,129			115,049
Provision for loan losses	302,589			193,638			106,301
Amortization of stock based compensation	3,947			4,128			4,470
Net change in trading account assets	(2,503		)	(20,180		)	(42,258		)
Net change in trading account liabilities	(6,234		)	(8,440		)	46,573
Net change in loans held for sale	(22,654		)	84,234			13,428
Deferred tax benefit	(21,873		)	(111,042		)	(8,868		)
Investment securities gains, net	(30,037		)	(81,656		)	(53,042		)
Loss on prepayment of FHLB and other borrowings	295			8,016			315
Loss on sale of premises and equipment	2,220			873			5,906
(Gain) loss on sale of loans	(15,551		)	(22,091		)	82
Net (gain) loss on sale of other real estate and other assets	(501		)	508			(1,511		)
Loss on disposition	—			—			981
(Increase) decrease in other assets	(60,503		)	179,190			(458,755		)
(Decrease) increase in other liabilities	(52,212		)	(306,546		)	416,916
Net cash provided by operating activities	815,439			688,346			790,985
Investing Activities:
Proceeds from sales of investment securities available for sale	1,849,517			3,369,062			1,114,215
Proceeds from prepayments, maturities and calls of investment securities available for sale	2,149,427			1,564,910			1,382,949
Purchases of investment securities available for sale	(4,773,027		)	(5,856,808		)	(4,409,991		)
Proceeds from prepayments, maturities and calls of investment securities held to maturity	155,037			123,188			195,276
Purchases of investment securities held to maturity	(28,071		)	(85,929		)	(7,312		)
Purchases of trading securities	(331,171		)	(4,831,626		)	(2,472,209		)
Proceeds from sales of trading securities	1,327,206			3,548,071			—
Net change in loan portfolio	(83,049		)	(4,426,260		)	(6,799,260		)
Purchase of premises and equipment	(177,084		)	(161,499		)	(127,229		)
Proceeds from sale of premises and equipment	12,701			8,133			19,238
Net cash paid in acquisition	—			(12,567		)	(97,566		)
Proceeds from sales of loans	1,060,351			488,550			107,936
Reimbursements from (payments to) FDIC for covered assets	978			(1,924		)	(12,709		)
Proceeds from sales of other real estate owned	26,486			20,011			25,895
Net cash provided by (used in) investing activities	1,189,301			(6,254,688		)	(11,080,767		)
Financing Activities:
Net increase in demand deposits, NOW accounts and savings accounts	1,940,034			3,565,248			5,998,697
Net (decrease) increase in time deposits	(656,122		)	1,216,581			741,354
Net (decrease) increase in federal funds purchased and securities sold under agreements to repurchase	(711,102		)	(379,349		)	276,933
Net (decrease) increase in other short-term borrowings	(1,229,667		)	1,486,920			2,540,133
Proceeds from FHLB and other borrowings	2,630,000			5,300,000			2,195,418
Repayment of FHLB and other borrowings	(5,042,837		)	(4,664,941		)	(1,688,797		)
Vesting of restricted stock	(1,744		)	(3,603		)	(4,702		)
Restricted stock grants retained to cover taxes	(630		)	(3,016		)	(2,507		)
Capital contribution for non-controlling interest	78			—			—
Issuance of preferred stock	—			229,475			—
Preferred dividends paid	(15,777		)	(2,093		)	(2,092		)
Issuance of common stock	—			—			117,000
Common dividends paid	(92,864		)	(95,000		)	(102,000		)
Dividend paid to BBVA Bancomer USA, Inc.	(69,151		)	(20,000		)	(22,000		)
Net cash (used in) provided by financing activities	(3,249,782		)	6,630,222			10,047,437
Net (decrease) increase in cash and cash equivalents	(1,245,042		)	1,063,880			(242,345		)
Cash and cash equivalents, January 1	4,496,828			3,432,948			3,675,293
Cash and cash equivalents, December 31	$	3,251,786		$	4,496,828		$	3,432,948

See accompanying Notes to Consolidated Financial Statements.

BBVA COMPASS BANCSHARES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) Summary of Significant Accounting Policies

Nature of Operations

BBVA Compass Bancshares, Inc. is a wholly owned subsidiary of BBVA.

The Bank, headquartered in Birmingham, Alabama, operates banking centers in Alabama, Arizona, California, Colorado, Florida, New Mexico and Texas. The Bank operates under the brand name BBVA Compass, which is a trade name and trademark of BBVA Compass Bancshares, Inc.

The Bank performs banking services customary for full service banks of similar size and character. Such services include receiving demand and time deposits, making personal and commercial loans and furnishing personal and commercial checking accounts. The Bank offers, either directly or through its subsidiaries and affiliates, a variety of services, including portfolio management and administration and investment services to estates and trusts; term life insurance, variable annuities, property and casualty insurance and other insurance products; investment advisory services; a variety of investment services and products to institutional and individual investors; discount brokerage services, mutual funds and fixed-rate annuities; and lease financing services.

Basis of Presentation

The accompanying Consolidated Financial Statements include the accounts of the Company and its subsidiaries for the years ended December 31, ~~2015~~2016, ~~2014~~2015 and ~~2013~~2014. All intercompany accounts and transactions and balances have been eliminated in consolidation.

The Company has evaluated subsequent events through the filing date of this Annual Report on Form 10-K, to determine if either recognition or disclosure of significant events or transactions is required.

The accounting policies followed by the Company and its subsidiaries and the methods of applying these policies conform with U.S. GAAP and with practices generally accepted within the banking industry. Certain policies that significantly affect the determination of financial position, results of operations and cash flows are summarized below.

Use of Estimates

The preparation of the Consolidated Financial Statements in conformity with generally accepted accounting principles in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period, the most significant of which relate to the allowance for loan losses, goodwill impairment, fair value measurements and income taxes. Actual results could differ from those estimates.

Cash and cash equivalents

The Company classifies cash on hand, amounts due from banks, federal funds sold, securities purchased under agreements to resell and interest bearing deposits as cash and cash equivalents. These instruments have original maturities of three months or less.

Securities Purchased Under Agreements to Resell and Securities Sold Under Agreements to Repurchase

Securities purchased under agreements to resell and securities sold under agreements to repurchase are generally accounted for as collateralized financing transactions and are recorded at the amounts at which the securities were acquired or sold plus accrued interest. The securities pledged or received as collateral are generally U.S. government and federal agency securities. The Company's policy is to take possession of securities purchased under agreements to resell. The fair value of collateral either received from or provided to a third party is continually monitored and adjusted as deemed appropriate.

~~Table of Contents~~

Securities

The Company classifies its investment securities into one of three categories based upon management’s intent and ability to hold the investment securities: (i) trading account assets and liabilities, (ii) investment securities held to maturity or (iii) investment securities available for sale. Investment securities held in a trading account are required to be reported at fair value, with unrealized gains and losses included in earnings. The Company classifies purchases, sales, and maturities of trading securities held for investment purposes as cash flows from investing activities. Cash flows related to trading securities held for trading purposes are reported as cash flows from operating activities. Investment securities held to maturity are stated at cost adjusted for amortization of premiums and accretion of discounts. The related amortization and accretion is determined by the interest method and is included as a noncash adjustment in the net cash provided by operating activities in the Company’s Consolidated Statements of Cash Flows. The Company has the ability, and it is management’s intention, to hold such securities to maturity. Investment securities available for sale are recorded at fair value. Increases and decreases in the net unrealized gain or loss on the portfolio of investment securities available for sale are reflected as adjustments to the carrying value of the portfolio and as an adjustment, net of tax, to accumulated other comprehensive income. See Note 21, Fair Value of Financial Instruments, for information on the determination of fair value.

Interest earned on trading account assets, investment securities available for sale and investment securities held to maturity is included in interest income in the Company’s Consolidated Statements of Income. Net realized gains and losses on the sale of investment securities available for sale, computed principally on the specific identification method, are shown separately in noninterest income in the Company’s Consolidated Statements of Income. Net gains and losses on the sale of trading account assets and liabilities are recognized as a component of other noninterest income in the Company’s Consolidated Statements of Income.

The Company regularly evaluates each held to maturity and available for sale security in an unrealized loss position for OTTI. The Company evaluates for OTTI on a specific identification basis. In its evaluation, the Company considers such factors as the length of time and the extent to which the fair value has been below cost, the financial condition of the issuer, the Company’s intent to hold the security to an expected recovery in fair value and whether it is more likely than not that the Company will have to sell the security before its fair value recovers. The credit loss component of the OTTI on debt and equity securities is recognized in earnings. For debt securities, the portion of OTTI related to all other factors is recognized in other comprehensive income. See Note 3, Investment Securities Available for Sale and Investment Securities Held to Maturity, for details of OTTI.

Loans Held for Sale

Loans held for sale ~~include single-family real estate mortgage loans, real estate construction loans and commercial real estate mortgage loans.~~are recorded at either estimated fair value, if the fair value option is elected, or the lower of cost or estimated fair value. The Company applies the fair value option accounting guidance codified under the FASB's ASC Topic 825, Financial Instruments, for single family real estate mortgage loans originated for sale in the secondary market. Under the fair value option, all changes in the applicable loans’ fair value are recorded in earnings. Loans classified as held for sale that were not originated for resale in the secondary market are accounted for under the lower of cost or fair value method and are evaluated on an individual basis.

Loans

Loans that management has the intent and ability to hold for the foreseeable future or until maturity or pay-off are considered held for investment. Loans are stated at principal outstanding adjusted for charge-offs, deferred loan fees and direct costs on originated loans and unamortized premiums or discounts on purchased loans. Interest income on loans is recognized on the interest method. Loan fees, net of direct costs, and unamortized premiums and discounts are deferred and amortized as an adjustment to the yield of the related loan over the term of the loan and are included as a noncash adjustment in the net cash provided by operating activities in the Company’s Consolidated Statements of Cash Flows. For additional information related to the Company’s loan portfolio by type, refer to Note 4, Loans and Allowance for Loan Losses.

It is the general policy of the Company to stop accruing interest income and apply subsequent interest payments as principal reductions when any commercial, industrial, commercial real estate or construction loan is 90 days or more past due as to principal or interest and/or the ultimate collection of either is in doubt, unless collection of both principal and interest is assured by way of collateralization, guarantees or other security, or the loan is accounted for under ASC

~~Table of Contents~~

Subtopic 310-30. Accrual of interest income on consumer loans, including residential real estate loans, is generally suspended when any payment of principal or interest is more than 120 days delinquent or when foreclosure proceedings have been initiated or repossession of the underlying collateral has occurred. When a loan is placed on a nonaccrual status, any interest previously accrued but not collected is reversed against current interest income unless the fair value of the collateral for the loan is sufficient to cover the accrued interest.

In general, a loan is returned to accrual status when none of its principal and interest is due and unpaid and the Company expects repayments of the remaining contractual principal and interest or when it is determined to be well secured and in the process of collection. Charge-offs on commercial loans are recognized when available information confirms that some or all of the balance is uncollectible. Consumer loans are subject to mandatory charge-off at a specified delinquency date consistent with regulatory guidelines. In general, charge-offs on consumer loans are recognized at the earlier of the month of liquidation or the month the loan becomes 120 days past due; residential loan deficiencies are charged off in the month the loan becomes 180 days past due; and credit card loans are charged off before the end of the month when the loan becomes 180 days past due with the related interest accrued but not collected reversed against current income. The Company determines past due or delinquency status of a loan based on contractual payment terms.

All nonaccrual loans and loans modified in a troubled debt restructuring are considered impaired, excluding Purchased Impaired Loans. Purchased Impaired Loans are classified as impaired only if there is evidence of credit deterioration subsequent to acquisition. The Company’s policy for recognizing interest income on impaired loans classified as nonaccrual is consistent with its nonaccrual policy. The Company’s policy for recognizing interest income on accruing impaired loans is consistent with its interest recognition policy for accruing loans.

Troubled Debt Restructurings

A loan is accounted for as a TDR if the Company, for economic or legal reasons related to the borrower’s financial difficulties, grants a concession to the borrower that it would not otherwise consider. A TDR typically involves a modification of terms such as establishment of a below market interest rate, a reduction in the ~~face~~principal amount of the loan, a reduction of accrued interest or an extension of the maturity date at a stated interest rate lower than the current market rate for a new loan with similar risk. The Company’s policy for measuring impairment on TDRs, including TDRs that have defaulted, is consistent with its impairment measurement process for all impaired loans. The Company’s policy for returning nonaccrual TDRs to accrual status is consistent with its return to accrual policy for all other loans.

Allowance for Loan Losses

The amount of the provision for loan losses charged to income is determined on the basis of numerous factors including actual loss experience, identified loan impairment, current economic conditions and periodic examinations and appraisals of the loan portfolio. Such provisions, less net loan charge-offs, comprise the allowance for loan losses which is deducted from loans and is maintained at a level management considers to be adequate to absorb losses inherent in the portfolio.

The Company monitors the entire loan portfolio ~~including loans acquired in business combinations,~~ in an effort to identify problem loans so that risks in the portfolio can be identified on a timely basis and an appropriate allowance maintained. Loan review procedures, including loan grading, periodic credit rescoring and trend analysis of portfolio performance, are utilized by the Company in order to ensure that potential problem loans are identified. Management’s involvement continues throughout the process and includes participation in the work-out process and recovery activity. These formalized procedures are monitored internally and by regulatory agencies.

The allowance for loan losses is established as follows:

Loans with outstanding balances greater than $1 million that are nonaccrual and all TDRs are evaluated individually with specific reserves allocated based on the present value of the loan’s expected future cash flows, discounted at the loan’s original effective interest rate, except where foreclosure or liquidation is probable or when the primary source of repayment is provided by real estate collateral. In these circumstances, impairment is measured based upon the fair value less cost to sell of the collateral. In addition, in certain rare circumstances, impairment may be based on the loan’s observable fair value.

~~Table of Contents~~

Loans in the remainder of the portfolio, including nonaccrual loans with balances of less than $1 million, are collectively evaluated for impairment with the allowance based on historical loss experience which uses historical average net charge-off percentages. In the event the Company believes a specific portfolio's historical loss experience does not adequately capture current inherent losses, the historical loss experience is adjusted. This adjustment to the historical loss experience can be positive or negative and will take into consideration relevant factors to the allowance such as changes in the portfolio composition, the volume and severity of past due loans, the volume of nonaccrual loans, and the volume and severity of adversely classified or graded loans. The assessment for whether to adjust takes place individually for each loan product.

The historical loss methodology uses historical annualized average net charge-off percentage to calculate the provision for loan and lease losses. The factor is calculated by taking the average of the net charge-offs over the life cycle available, currently 78 years.

For commercial loans, where management has determined to adjust the historical loss experience, the estimate of loss based on pools of loans with similar characteristics is made by applying a PD factor and a LGD factor to each individual loan based on loan grade, using a standardized loan grading system. The PD factor and LGD factor are determined for each loan grade using statistical models based on historical performance data. The PD factor considers on-going reviews of the financial performance of the specific borrower, including cash flow, debt-service coverage ratio, earnings power, debt level and equity position, in conjunction with an assessment of the borrower’s industry and future prospects. The PD factor considers current rating unless the account is delinquent over 60 days, in which case a higher PD factor is used. The LGD factor considers analysis of the type of collateral and the relative LTV ratio. These reserve factors are developed based on credit migration models that track historical movements of loans between loan ratings over time and long-term average loss experience. The historical time frame currently used for both PDs and LGDs is 78 years.

For consumer loans, where management has determined to adjust the historical loss experience, the estimate of loss based on pools of loans with similar characteristics is also made by applying a PD and a LGD factor. The PD factor considers current credit scores unless the account is delinquent over 60 days, in which case a higher PD factor is used. The credit score provides a basis for understanding the borrower’s past and current payment performance. The LGD factor considers analysis of the type of collateral and the relative LTV ratio. Credit scores, models, analyses, and other factors used to determine both the PD and LGD factors are updated frequently to capture the recent behavioral characteristics of the subject portfolios, as well as any changes in loss mitigation or credit origination strategies, and adjustments to the reserve factors are made as required. The historical time frame currently used for both PDs and LGDs is 78 years.

Additionally, a portion of the allowance is for inherent losses which are probable to exist as of the valuation date even though they may not have been identified by the objective processes used for the allocated portion of the allowance. This portion of the allowance is particularly subjective and requires judgment based upon qualitative factors. Some of the factors considered are changes in credit concentrations, loan mix, changes in underwriting practices, including the extent of portfolios of acquired institutions, historical loss experience and the general economic environment in the Company’s markets. While the total allowance is described as consisting of separate portions, these terms are primarily used to describe a process. All portions of the allowance are available to support inherent losses in the loan portfolio.

In order to estimate a reserve for unfunded commitments, the Company uses a process consistent with that used in developing the allowance for loan losses. The Company estimates the future funding of current unfunded commitments based on historical funding experience of these commitments before default. Allowance for loan loss factors, which are based on product and loan grade and are consistent with the factors used for portfolio loans, are applied to these funding estimates to arrive at the reserve balance. This reserve for unfunded commitments is recognized in accrued expenses and other liabilities on the Company’s Consolidated Balance Sheets with changes recognized in other noninterest expense in the Company’s Consolidated Statements of Income.

~~100~~

~~Table of Contents~~

Premises and Equipment

Premises, furniture, fixtures, equipment, assets under capital leases and leasehold improvements are stated at cost less accumulated depreciation or amortization. Land is stated at cost. In addition, purchased software and costs of computer software developed for internal use are capitalized provided certain criteria are met. Depreciation is computed principally using the straight-line method over the estimated useful lives of the related assets, which ranges between 1 and 40 years. Leasehold improvements are amortized on a straight-line basis over the lesser of the lease terms or the estimated useful lives of the improvements.

Bank Owned Life Insurance

The Company maintains life insurance policies on certain of its executives and employees and is the owner and beneficiary of the policies. The Company invests in these policies, known as BOLI, to provide an efficient form of funding for long-term retirement and other employee benefits costs. The Company records these BOLI policies within bank owned life insurance on the Company’s Consolidated Balance Sheets at each policy’s respective cash surrender value, with changes recorded in noninterest income in the Company’s Consolidated Statements of Income.

Goodwill

Goodwill represents the excess of the purchase price over the estimated fair value of identifiable net assets associated with acquisition transactions. Goodwill is assigned to each of the Company’s reporting units and tested for impairment annually or on an interim basis if events or circumstances change that would more likely than not reduce the fair value of the reporting unit below its carrying value.

The Company has defined its reporting unit structure to include: Consumer and Commercial Banking, Corporate and Investment Banking, and Simple. The fair value of each reporting unit is estimated using a combination of the present value of future expected cash flows and hypothetical market prices of similar entities and like transactions.

Each of the defined reporting units was tested for impairment as of October 31, ~~2015.~~2016. See Note 8, Goodwill and Other Acquired Intangible Assets, for a further discussion.

Other Intangible Assets

Other intangible assets represent purchased assets that lack physical substance but can be distinguished from goodwill because of contractual or other legal rights or because the asset is capable of being sold or exchanged either on its own or in a combination with a related contract, asset or liability. Generally, other intangible assets are deemed to have finite lives. Accordingly, other intangible assets are amortized over their anticipated estimated useful lives and are subject to impairment testing if events or changes in circumstances warrant an evaluation. Other intangible assets are amortized over a period based on the expected life of the intangible, generally 8-10 years for core deposits and up to 20 years for other intangible assets.

Other Real Estate Owned

Assets acquired through, or in lieu of, loan foreclosure are held for sale and are initially recorded at the lower of recorded balance of the loan or fair value less costs to sell of the collateral assets at the date of foreclosure, establishing a new cost basis. Subsequent to foreclosure, OREO is carried at the lower of carrying amount or fair value less costs to ~~sell.~~sell and is included in other assets on the Consolidated Balance Sheets. Gains and losses on the sales and write-downs on such properties and operating expenses from these OREO properties are included in other noninterest ~~expense.~~

~~101~~

~~Table~~expense in the Company’s Consolidated Statements of ~~Contents~~Income.

Accounting for Transfers and Servicing of Financial Assets

The Company accounts for transfers of financial assets as sales when control over the transferred assets is surrendered. Control is generally considered to have been surrendered when (1) the transferred assets are legally isolated from the Company, even in bankruptcy or other receivership, (2) the transferee has the right to pledge or exchange the assets with no conditions that constrain the transferee and provide more than a trivial benefit to the Company, and (3) the Company does not maintain the obligation or unilateral ability to reclaim or repurchase the assets. If these sale criteria are met, the transferred assets are removed from the Company's balance sheet and a gain or loss on sale is recognized. If not met, the transfer is recorded as a secured borrowing, and the assets remain on the Company's balance sheet, the proceeds from the transaction are recognized as a liability, and gain or loss on sale is deferred until the sale criterion are achieved.

The Company has one primary class of MSR related to residential real estate mortgages. These mortgage servicing rights are recorded in other assets on the Consolidated Balance Sheets at fair value with changes in fair value recorded as a component of mortgage banking income in the Company’s Consolidated Statements of Income. See Note 5, Loan Sales and Servicing, for a further discussion.

Advertising Costs

Advertising costs are generally expensed as incurred and recorded as marketing expense, a component of noninterest expense in the Company’s Consolidated Statements of Income.

Income Taxes

The Company and its eligible subsidiaries file a consolidated federal income tax return. The Company files separate tax returns for subsidiaries that are not eligible to be included in the consolidated federal income tax return. Based on the laws of the respective states where it conducts business operations, the Company either files consolidated, combined or separate tax returns.

Deferred tax assets and liabilities are determined based on temporary differences between financial reporting and tax bases of assets and liabilities and are measured using the tax rates and laws that are expected to be in effect when the differences are anticipated to reverse. The effect on deferred tax assets and liabilities of a change in tax rates is recognized as income or expense in the period the change is incurred. In evaluating the Company's ability to recover its deferred tax assets within the jurisdiction from which they arise, the Company must consider all available evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies, and the results of recent operations. A valuation allowance is recognized for a deferred tax asset, if based on the available evidence, it is more likely than not that some portion or all of a deferred tax asset will not be realized.

The Company recognizes income tax benefits associated with uncertain tax positions, when, in its judgment, it is more likely than not of being sustained on the basis of the technical merits. For a tax position that meets the more-likely-than-not recognition threshold, the Company initially and subsequently measures the tax benefit as the largest amount that the Company judges to have a greater than 50% likelihood of being realized upon ultimate settlement with the taxing authority.

The Company recognizes interest and penalties related to unrecognized tax benefits as a component of other noninterest expense in the Company’s Consolidated Statements of Income. Accrued interest and penalties are included within accrued expenses and other liabilities on the Company’s Consolidated Balance Sheets.

Noncontrolling Interests

The Company applies the accounting guidance codified in ASC Topic 810, Consolidation, related to the treatment of noncontrolling interests. This guidance requires the amount of consolidated net income attributable to the parent and to the noncontrolling interests be clearly identified and presented on the face of the consolidated financial statements.

The noncontrolling interests attributable to the Company's REIT preferred securities and mezzanine investment fund (see Note ~~11, FHLB and Other Borrowings,~~12, Shareholder's Equity, for a discussion of the preferred securities) are reported within shareholder’s equity, separately from the equity attributable to the Company’s shareholder. The dividends paid to the REIT preferred shareholders and other mezzanine investment fund investors are reported as reductions in shareholder’s

~~102~~

~~Table of Contents~~

equity in the

Consolidated Statements of Shareholder’s Equity, separately from changes in the equity attributable to the Company’s shareholder.

Accounting for Derivatives and Hedging Activities

A derivative is a financial instrument that derives its cash flows, and therefore its value, by reference to an underlying instrument, index or referenced interest rate. These instruments include interest rate swaps, caps, floors, financial forwards and futures contracts, foreign exchange contracts, options written and purchased, and commodity contracts. The Company mainly uses derivatives to manage economic risk related to commercial loans, long-term debt and other funding sources. The Company also uses derivatives to facilitate transactions on behalf of its customers.

All derivative instruments are recognized on the Company’s Consolidated Balance Sheets at their fair value. The Company does not offset fair value amounts under master netting agreements. Fair values are estimated using pricing models and current market data. On the date the derivative instrument contract is entered into, the Company designates the derivative as (1) a fair value hedge, (2) a cash flow hedge, or (3) a free-standing derivative. Changes in the fair value of a derivative instrument that is highly effective and that is designated and qualifies as a fair value hedge, along with the loss or gain on the hedged asset or liability that is attributable to the hedged risk (including losses or gains on firm commitments), are recorded in earnings. Changes in the fair value of a derivative instrument that is highly effective and that is designated and qualifies as a cash flow hedge are recorded in accumulated other comprehensive income, until earnings are affected by the variability of cash flows (e.g., when periodic settlements on a variable-rate asset or liability are recorded in earnings). Changes in the fair value of a free-standing derivative and settlements on the instruments are reported in earnings.

The Company formally documents all relationships between hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking various hedge transactions. This process includes linking all derivative instruments that are designated as fair value or cash flow hedges to specific assets and liabilities on the Company’s Consolidated Balance Sheets or to specific firm commitments or forecasted transactions. The Company also formally assesses, both at the hedge’s inception and on an ongoing basis, whether the derivative instruments that are used in hedging transactions are highly effective in offsetting changes in fair values or cash flows of hedged items.

The Company discontinues hedge accounting prospectively when: (1) it is determined that the derivative instrument is no longer highly effective in offsetting changes in the fair value or cash flows of a hedged item (including firm commitments or forecasted transactions); (2) the derivative instrument expires or is sold, terminated or exercised; (3) the derivative instrument is de-designated as a hedge instrument because it is unlikely that a forecasted transaction will occur; (4) a hedged firm commitment no longer meets the definition of a firm commitment; or (5) management determines that designation of the derivative instrument as a hedge instrument is no longer appropriate.

When hedge accounting is discontinued because it is determined that the derivative instrument no longer qualifies as an effective fair value or cash flow hedge, the derivative instrument continues to be carried on the Company’s Consolidated Balance Sheets at its fair value, with changes in the fair value included in earnings. Additionally, for fair value hedges, the hedged asset or liability is no longer adjusted for changes in fair value and the existing basis adjustment is amortized or accreted as an adjustment to the yield over the remaining life of the asset or liability. For cash flow hedges, when hedge accounting is discontinued, but the hedged cash flows or forecasted transaction are still expected to occur, the unrealized gains and losses that were accumulated in other comprehensive income are recognized in earnings in the same period when the earnings are affected by the hedged cash flows or forecasted transaction. When a cash flow hedge is discontinued, because the hedged cash flows or forecasted transactions are not expected to occur, unrealized gains and losses that were accumulated in other comprehensive income are recognized in earnings immediately.

Recently ~~Issued~~Adopted Accounting Standards

~~Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure~~Consolidation

In ~~January 2014,~~February 2015, the FASB ~~released~~issued ASU ~~2014-04,~~2015-02, ~~Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure~~Amendments to the Consolidation Analysis. . The amendments in this ASU ~~clarify~~modify the evaluation of whether limited partnerships and similar legal entities are variable interest entities or voting interest entities, eliminate the presumption that ~~an in substance repossession or foreclosure occurs,~~a general partner should consolidate a limited partnership, affect the consolidation analysis of reporting entities that are involved with variable interest entities and provide a creditor is considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan, upon either the creditor obtaining legal title to the residential real estate property upon completion of a foreclosure or the borrower conveying allscope exception from consolidation guidance for reporting entities with interest in ~~the residential real estate property~~

~~103~~

~~Table of Contents~~

to the creditor to satisfy that loan through completion of a deed in lieu of foreclosure or through a similar legal agreement. Additionally, the amendments require interim and annual disclosure of both the amount of foreclosed residential real estate property held by the creditor and the recordedcertain investment ~~in consumer mortgage loans collateralized by residential real estate property that are in the process of foreclosure according to local requirements of the applicable jurisdiction.~~funds. The amendments in this ASU ~~are~~were effective for annual periods, and interim periods within those annual periods, beginning after December 15, ~~2014. The Company elected to adopt the amendments in this ASU using the prospective transition method.~~2015. The adoption of this standard did not have a material impact on the financial condition or results of operations of the Company. ~~See Note 4, Loans~~

Simplifying the Presentation of Debt Issuance Costs

In April 2015, the FASB issued ASU 2015-03, Simplifying the Presentation of Debt Issuance Costs. To simplify presentation of debt issuance costs, the amendments in this ASU require debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The amendments in this ASU were effective for annual periods, and ~~Allowance~~interim periods within those annual periods, beginning after December 15, 2015. The adoption of this standard did not have a material impact on the financial condition or results of operations of the Company.

Customer's Accounting for ~~Loan Losses~~Fees Paid in a Cloud Computing Arrangement

In April 2015, the FASB issued ASU 2015-05, .Customer's Accounting for Fees Paid in a Cloud Computing Arrangement. The amendments in this ASU provide guidance to customers about whether a cloud computing arrangement includes a software license. If a cloud computing arrangement includes a software license, then the customer should account for the software license element of the arrangement consistent with the acquisition of other software licenses. If a cloud computing arrangement does not include a software license, the customer should account for the arrangement as a service contract. The amendments in this ASU were effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2015. The adoption of this standard did not have a material impact on the financial condition or results of operations of the Company.

Recently Issued Accounting Standards Not Yet Adopted

Revenue from Contracts with Customers

In May 2014, the FASB released ASU 2014-09, Revenue from Contracts with Customers. The core principle of this codified guidance requires an entity to recognize revenue upon the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ~~The guidance provides five steps to be analyzed to accomplish the core principle.~~ The amendments in this ASU were originally effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2016. Subsequently, the FASB issued a one-year deferral for implementation, which results in the new guidance being effective for annual and interim reporting periods beginning after December 15, 2017. The FASB, however, permitted adoption of the new guidance on the original effective date. The Company is currently assessing the impact that the adoption of this standard will have on the financial condition and results of operations of the ~~Company.~~

~~Repurchase-to-Maturity Transactions, Repurchase Financings,~~Company and ~~Disclosures~~

~~In June 2014,~~its selection of transition method. Because the ~~FASB issued ASU 2014-11,~~ ~~Repurchase-to-Maturity Transactions, Repurchase Financings,~~guidance does not apply to revenue associated with financial instruments, including loans and ~~Disclosures~~. The amendments in this ASU change the accounting for repurchase-to-maturity transactions to secured borrowing accounting. In addition, for repurchase financing arrangements, the amendments require separate accounting for a transfer of a financial asset executed contemporaneously with a repurchase agreement with the same counterparty, which will result in secured borrowing accounting for the repurchase agreement. The amendments in this ASU also require disclosures on transferssecurities accounted for ~~as sales in transactions that are economically similar to repurchase agreements, and provide increased transparency about~~under other U.S. GAAP, the types of collateral pledged in repurchase agreements and similar transactions accounted for as secured borrowings. The accounting changes in this ASU and disclosures for certain transactions accounted for as a sale are effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2014. The disclosures for repurchase agreements, securities lending transactions, and repurchase-to-maturity transactions accounted for as secured borrowings is required to be presented for annual periods beginning after December 15, 2014 and for interim periods beginning after March 15, 2015. The adoption of this standard didCompany does not ~~have a material impact on~~expect the ~~financial condition or results of operations of the Company. See Note 15,~~ ~~Securities Financing Activities~~.

~~Classification of Certain Government-Guaranteed Mortgage Loans upon Foreclosure~~

~~In August 2014, the FASB issued ASU 2014-14,~~ ~~Classification of Certain Government-Guaranteed Mortgage Loans upon Foreclosure~~. The amendments in this ASU address the classification and measurement of foreclosed loans which were part of a government-sponsored loan guarantee program. If certain criteria are met, the loan should be derecognized and a separate other receivable should be recorded upon foreclosure at the amount of the loan balance expected to be recovered from the guarantor. The amendments in this ASU are effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2014. The adoption of this standard did not have a material impact on the financial condition or results of operations of the Company.

~~104~~

~~Table of Contents~~

~~Consolidation~~

~~In February 2015, the FASB issued ASU 2015-02,~~ ~~Amendments to the Consolidation Analysis.~~ The amendments in this ASU modify the evaluation of whether limited partnerships and similar legal entities are variable interest entities or voting interest entities, eliminate the presumption that a general partner should consolidate a limited partnership, affect the consolidation analysis of reporting entities that are involved with variable interest entities and provide a scope exception from consolidationnew revenue recognition guidance for reporting entities with interest in certain investment funds. The amendments in this ASU are effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2015. The adoption of this standard is not expected to have a material impact on the elements of its statement of income most closely associated with financial ~~condition or results of operations of the Company.~~

~~Simplifying the Presentation of Debt Issuance Costs~~

~~In April 2015, the FASB issued ASU 2015-03,~~ ~~Simplifying the Presentation of Debt Issuance Costs.~~ ~~To simplify presentation of debt issuance costs, the amendments in~~instruments, including securities gains, interest income and interest expense. The Company plans to adopt this ~~ASU require debt issuance costs related to~~standard utilizing a ~~recognized debt liability be presented~~modified retrospective transition method in the ~~balance sheet as a direct deduction from the carrying amount~~first quarter of that debt liability, consistent with debt discounts. The amendments in this ASU are effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2015. The adoption of this standard is not expected to have a material impact on the financial condition or results of operations of the Company.2018.

~~Customer's Accounting for Fees Paid in a Cloud Computing Arrangement~~

~~In April 2015, the FASB issued ASU 2015-05,~~ ~~Customer's Accounting for Fees Paid in a Cloud Computing Arrangement.~~ The amendments in this ASU provide guidance to customers about whether a cloud computing arrangement includes a software license. If a cloud computing arrangement includes a software license, then the customer should account for the software license element of the arrangement consistent with the acquisition of other software licenses. If a cloud computing arrangement does not include a software license, the customer should account for the arrangement as a service contract. The amendments in this ASU are effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2015. The adoption of this standard is not expected to have a material impact on the financial condition or results of operations of the Company.

Recognition and Measurement of Financial Assets and Liabilities

In January 2016, the FASB issued ASU 2016-01, Recognition and Measurement of Financial Assets and Liabilities. The amendments in this ASU revise an entity's accounting related to the classification and measurement of investments in equity securities and the presentation of certain fair value changes for financial liabilities measured at fair value. The ASU also amends certain disclosure requirements associated with the fair value of financial instruments. The amendments in this ASU are effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2017. Early adoption is permitted for the presentation of certain fair value changes for financial liabilities measured at fair value. The adoption of this standard is not expected to have a material impact on the financial condition or results of operations of the Company.

Leases

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). The FASB issued this ASU to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet by lessees for those leases classified as operating leases under current U.S. GAAP and disclosing key information about leasing arrangements. The amendments in this ASU are effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2018. Early application of this ASU is permitted for all entities. The Company is currently assessing the impact that the adoption of this standard will have on the financial condition and results of operations of the Company.

Stock Compensation

In March 2016, the FASB issued ASU 2016-09, Improvements to Employee Share-Based Payment Accounting. The FASB issued this ASU to improve the accounting for share-based payment transactions as part of its simplification initiative. The areas for simplification in this ASU involve several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The amendments in this ASU are effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2016. Early adoption is permitted. The adoption of this standard is not expected to have a material impact on the financial condition or results of operations of the Company.

Credit Losses

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses, which introduces new guidance for the accounting for credit losses on instruments within its scope. The new guidance introduces an approach based on expected losses to estimate credit losses on certain types of financial instruments. It also modifies the impairment model for AFS debt securities and provides for a simplified accounting model for purchased financial assets with credit deterioration since their origination. The amendments in this ASU are effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2019. Early application of this ASU is permitted. The Company is currently assessing the impact that the adoption of this standard will have on the financial condition and results of operations of the Company.

Statement of Cash Flows

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows - Classification of Certain Cash Receipts and Cash Payments, which provides guidance on eight specific cash flow issues with the objective of reducing the existing diversity in practice. The amendments in this ASU are effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2017. Early application of this ASU is permitted. The Company is currently assessing the impact that the adoption of this standard will have on the Statements of Cash Flows of the Company.

In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows - Restricted Cash. The amendments in this ASU require that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. The amendments in this ASU are effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2017. Early application of this ASU is permitted. The Company is currently assessing the impact that the adoption of this standard will have on the Statement of Cash Flows of the Company.

~~105~~Goodwill

In January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, which simplifies the manner in which an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test. Under the amendments in this ASU, an entity should (1) perform its annual or interim goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount, and (2) recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value, with the understanding that the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. Additionally, ASU No. 2017-04 removes the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment and, if it fails such qualitative test, to perform Step 2 of the goodwill impairment test. This ASU is effective for fiscal years beginning after December 15, 2019, and for interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. The ASU should be applied using a prospective method. The Company is currently assessing this pronouncement and the impact of adoption.

~~Table of Contents~~

(2)Acquisition Activities

On June 6, 2016, the Parent completed the purchase of four subsidiaries (Bancomer Transfer Services, Bancomer Payment Services, Bancomer Foreign Exchange, and Bancomer Financial Services) from BBVA Bancomer USA, Inc. BBVA Bancomer USA, Inc. was a wholly owned subsidiary of BBVA Bancomer, S.A., Mexico City, Mexico and ultimately a wholly owned subsidiary of BBVA. These four subsidiaries engage in money transfer services, including money transmission and foreign exchange services and are subsidiaries of BBVA Compass Payments, Inc., a wholly owned subsidiary of the Parent.

The transaction was structured as a cash purchase totaling $69.2 million. At December 31, 2015, the four subsidiaries had total assets of approximately $103 million. Because the Company and the acquired subsidiaries were under common control of the ultimate parent, BBVA, this transaction was accounted for in a manner similar to the pooling-of-interest method, which requires the merged entities be combined at their historical cost. The difference between the net carrying amount of the four subsidiaries and the total consideration paid to BBVA Bancomer USA, Inc. was recorded as a capital transaction and is reflected as a dividend to BBVA Bancomer USA, Inc. in the Consolidated Statements of Shareholder's Equity. The Company's consolidated financial statements and related footnotes are presented as if the transaction occurred at the beginning of the earliest date presented and the prior periods have been retrospectively adjusted.

The following table summarizes the impact of the acquisition to certain captions within the Company's Consolidated Balance Sheet as of December 31, 2015 and the Company's Consolidated Income Statement for the years ended December 31, 2015 and 2014.



Balance Sheet		As Previously Reported		Retrospective Adjustments		As Retrospectively Adjusted
	(In Thousands)
December 31, 2015
Assets:
Cash and cash equivalents		$	4,452,892	$	43,936	$	4,496,828
Premises and equipment, net		1,320,163		2,215		1,322,378
Other assets		1,273,646		57,307		1,330,953
Total assets		89,965,080		103,458		90,068,538
Liabilities:
Deposits		$	65,980,530	$	1,236	$	65,981,766
Accrued expenses and other liabilities		1,185,848		54,797		1,240,645
Total liabilities		77,387,796		56,033		77,443,829
Shareholder’s equity		12,577,284		47,425		12,624,709
Total liabilities and shareholder’s equity		89,965,080		103,458		90,068,538



Income Statement	As Previously Reported		Retrospective Adjustments		As Retrospectively Adjusted
	(In Thousands)
Year Ended December 31, 2015
Interest income	$	2,438,261	$	14	$	2,438,275
Noninterest income	976,473		102,901		1,079,374
Noninterest expense	2,136,490		78,363		2,214,853
Income tax expense	167,513		8,989		176,502
Net income	491,795		15,563		507,358

Year Ended December 31, 2014
Interest income	$	2,313,985	$	11	$	2,313,996
Noninterest income	917,422		90,390		1,007,812
Noninterest expense	2,180,752		66,125		2,246,877
Income tax expense	147,331		8,432		155,763
Net income	468,532		15,844		484,376

Additionally, the Consolidated Statements of Comprehensive Income, Shareholder's Equity and Cash Flows along with Footnotes 6, 13, 14, 18, 20, 21, 22, 24 and 25 have been adjusted to reflect these retrospective adjustments.

Spring Studio

On April 15, 2015, the Bank acquired all of the voting equity interest of 4D Internet Solutions, Inc. d/b/a Spring Studio, a San Francisco based user experience and design firm. The Bank acquired assets of approximately $14 million, assumed liabilities of approximately $1 million, and recorded goodwill of approximately $13 million. The revenues and earnings of Spring Studio were not material for the year ended December 31, 2015. Net cash paid for this acquisition was $13 million.

~~Simple Finance Technology Corp~~

On March 20, 2014, the Bank acquired all of the voting equity interest of Simple, a U.S. based digital banking services firm. The Bank acquired assets of approximately $17 million (including cash, premises and equipment, and other assets), assumed liabilities of approximately $2 million (including accounts payable, accrued payroll and other liabilities), and recorded goodwill of $89 million and other intangible assets of $13 million. Consideration for the acquisition included $98 million in cash as well as $16 million of contingent consideration. The Bank recognized $3.5 million of acquisition-related costs in noninterest expense in the Company's Consolidated Statement of Income for the year ended December 31, 2014. The revenues and earnings of Simple were not material for the year ended December 31, 2014.

This acquisition was accounted for under the acquisition method in accordance with FASB ASC Topic 805. Accordingly, the assets and liabilities, both tangible and intangible, were recorded at their estimated fair values as of the acquisition date. The purchase price allocation was finalized during the fourth quarter of 2014. See Note 8, Goodwill and Other Acquired Intangible Assets, for additional information.

(3) Investment Securities Available for Sale and Investment Securities Held to Maturity

The following table presents the adjusted cost and approximate fair value of investment securities available for sale and investment securities held to maturity.


	December 31, 2015								December 31, 2016
			Gross Unrealized								Gross Unrealized
	Amortized Cost		Gains		Losses		Fair Value		Amortized Cost		Gains		Losses		Fair Value
	(In Thousands)								(In Thousands)
Investment securities available for sale:
Debt securities:
U.S. Treasury and other U.S. government agencies	$	3,232,238	$	4,076	$	24,822	$	3,211,492	$	2,409,141	$	2,390	$	37,200	$	2,374,331
Mortgage-backed securities	4,624,441		16,548		50,727		4,590,262		3,796,270		12,869		45,801		3,763,338
Collateralized mortgage obligations	2,713,075		8,200		16,019		2,705,256		5,200,241		5,292		106,605		5,098,928
States and political subdivisions	15,492		395		—		15,887		8,457		184		—		8,641
Other	23,914		175		44		24,045		16,321		6		142		16,185
Equity securities	503,540		38		—		503,578		403,548		84		—		403,632
Total	$	11,112,700	$	29,432	$	91,612	$	11,050,520	$	11,833,978	$	20,825	$	189,748	$	11,665,055
Investment securities held to maturity:
Collateralized mortgage obligations	$	103,947	$	6,022	$	4,634	$	105,335	$	83,087	$	5,265	$	3,278	$	85,074
Asset-backed securities	24,011		3,002		1,574		25,439		15,118		1,982		1,081		16,019
States and political subdivisions	1,128,240		729		82,632		1,046,337		1,040,716		2,309		25,518		1,017,507
Other	66,478		2,644		2,112		67,010		64,296		1,143		2,030		63,409
Total	$	1,322,676	$	12,397	$	90,952	$	1,244,121	$	1,203,217	$	10,699	$	31,907	$	1,182,009

~~106~~

~~Table of Contents~~


	December 31, 2014								December 31, 2015
			Gross Unrealized								Gross Unrealized
	Amortized Cost		Gains		Losses		Fair Value		Amortized Cost		Gains		Losses		Fair Value
	(In Thousands)								(In Thousands)
Investment securities available for sale:
Debt securities:
U.S. Treasury and other U.S. government agencies	$	2,312,572	$	10,360	$	9,390	$	2,313,542	$	3,232,238	$	4,076	$	24,822	$	3,211,492
Mortgage-backed securities	4,399,706		64,371		40,242		4,423,835		4,624,441		16,548		50,727		4,590,262
Collateralized mortgage obligations	2,475,115		19,385		5,921		2,488,579		2,713,075		8,200		16,019		2,705,256
States and political subdivisions	460,569		8,008		1,262		467,315		15,492		395		—		15,887
Other	44,225		238		22		44,441		23,914		175		44		24,045
Equity securities	499,522		41		—		499,563		503,540		38		—		503,578
Total	$	10,191,709	$	102,403	$	56,837	$	10,237,275	$	11,112,700	$	29,432	$	91,612	$	11,050,520
Investment securities held to maturity:
Collateralized mortgage obligations	$	124,051	$	5,878	$	5,452	$	124,477	$	103,947	$	6,022	$	4,634	$	105,335
Asset-backed securities	39,187		3,568		2,011		40,744		24,011		3,002		1,574		25,439
States and political subdivisions	1,112,415		2,143		79,246		1,035,312		1,128,240		729		82,632		1,046,337
Other	72,701		4,920		2,191		75,430		66,478		2,644		2,112		67,010
Total	$	1,348,354	$	16,509	$	88,900	$	1,275,963	$	1,322,676	$	12,397	$	90,952	$	1,244,121

In the above table, equity securities include $~~503~~403 million and $~~500~~503 million at December 31, ~~2015~~2016 and ~~2014~~2015, respectively, of FHLB and Federal Reserve stock carried at par.

At December 31, ~~2015,~~2016, approximately $~~1.7 billion~~528 million of investment securities available for sale were pledged to secure public deposits, securities sold under agreements to repurchase and FHLB advances and for other purposes as required or permitted by law.

The investments held within the states and political subdivision caption of investment securities held to maturity relate to private placement transactions underwritten as loans by the Company but that meet the definition of a security within ASC Topic 320, Investments – Debt and Equity Securities.

At December 31, ~~2015~~2016, approximately ~~99.7%~~99.8% of the debt securities classified within available for sale are rated “AAA,” the highest possible rating by nationally recognized rating agencies. The remainder of the investment securities classified within available for sale are either Federal Reserve stock, FHLB stock or money market funds.

~~107~~

~~Table of Contents~~

The following table discloses the fair value and the gross unrealized losses of the Company’s available for sale securities and held to maturity securities that were in a loss position at December 31, ~~2015~~2016 and ~~2014~~2015. This information is aggregated by investment category and the length of time the individual securities have been in an unrealized loss position.


	December 31, 2015													December 31, 2016
	Securities in a loss position for less than 12 months					Securities in a loss position for 12 months or longer				Total				Securities in a loss position for less than 12 months				Securities in a loss position for 12 months or longer				Total
	Fair Value			Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
	(In Thousands)													(In Thousands)
Investment securities available for sale:
Debt securities:
U.S. Treasury and other U.S. government agencies	$	2,081,528	��	$	16,523	$	460,160	$	8,299	$	2,541,688	$	24,822	$	1,277,341	$	23,862	$	609,078	$	13,338	$	1,886,419	$	37,200
Mortgage-backed securities	2,623,761			20,380		1,408,069		30,347		4,031,830		50,727		1,425,743		15,235		1,368,957		30,566		2,794,700		45,801
Collateralized mortgage obligations	1,321,121			10,378		393,210		5,641		1,714,331		16,019		3,527,757		99,477		782,849		7,128		4,310,606		106,605
Other	—			—		1,078		44		1,078		44		3,849		77		1,057		65		4,906		142
Total	$	6,026,410		$	47,281	$	2,262,517	$	44,331	$	8,288,927	$	91,612	$	6,234,690	$	138,651	$	2,761,941	$	51,097	$	8,996,631	$	189,748

Investment securities held to maturity:
Collateralized mortgage obligations	$	11,066		$	326	$	52,601	$	4,308	$	63,667	$	4,634	$	3,847	$	527	$	40,083	$	2,751	$	43,930	$	3,278
Asset-backed securities	—			—		15,790		1,574		15,790		1,574		343		1		9,238		1,080		9,581		1,081
States and political subdivisions	73,302			6,533		794,489		76,099		867,791		82,632		532,090		13,043		313,803		12,475		845,893		25,518
Other	—			—		4,015		2,112		4,015		2,112		16,578		174		3,587		1,856		20,165		2,030
Total	$	84,368		$	6,859	$	866,895	$	84,093	$	951,263	$	90,952	$	552,858	$	13,745	$	366,711	$	18,162	$	919,569	$	31,907


	December 31, 2014												December 31, 2015
	Securities in a loss position for less than 12 months				Securities in a loss position for 12 months or longer				Total				Securities in a loss position for less than 12 months				Securities in a loss position for 12 months or longer				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
	(In Thousands)												(In Thousands)
Investment securities available for sale:
Debt securities:
U.S. Treasury and other U.S. government agencies	$	620,794	$	8,220	$	37,220	$	1,170	$	658,014	$	9,390	$	2,081,528	$	16,523	$	460,160	$	8,299	$	2,541,688	$	24,822
Mortgage-backed securities	308,734		862		1,915,494		39,380		2,224,228		40,242		2,623,761		20,380		1,408,069		30,347		4,031,830		50,727
Collateralized mortgage obligations	714,173		3,829		146,806		2,092		860,979		5,921		1,321,121		10,378		393,210		5,641		1,714,331		16,019
States and political subdivisions	—		—		135,825		1,262		135,825		1,262
Other	—		—		1,099		22		1,099		22		—		—		1,078		44		1,078		44
Total	$	1,643,701	$	12,911	$	2,236,444	$	43,926	$	3,880,145	$	56,837	$	6,026,410	$	47,281	$	2,262,517	$	44,331	$	8,288,927	$	91,612

Investment securities held to maturity:
Collateralized mortgage obligations	$	34,400	$	1,099	$	27,389	$	4,353	$	61,789	$	5,452	$	11,066	$	326	$	52,601	$	4,308	$	63,667	$	4,634
Asset-backed securities	—		—		23,374		2,011		23,374		2,011		—		—		15,790		1,574		15,790		1,574
States and political subdivisions	21,688		768		817,570		78,478		839,258		79,246		73,302		6,533		794,489		76,099		867,791		82,632
Other	4,061		2,191		—		—		4,061		2,191		—		—		4,015		2,112		4,015		2,112
Total	$	60,149	$	4,058	$	868,333	$	84,842	$	928,482	$	88,900	$	84,368	$	6,859	$	866,895	$	84,093	$	951,263	$	90,952

~~108~~

~~Table of Contents~~

As indicated in the previous table, at December 31, ~~2015~~2016, the Company held certain investment securities in unrealized loss positions. The Company does not have the intent to sell these securities and believes it is not more likely than not that it will be required to sell these securities before their anticipated recovery.

Management does not believe that any individual unrealized loss in the Company’s investment securities available for sale or held to maturity portfolios, presented in the preceding tables, represents an OTTI at either December 31, ~~2015~~2016 or ~~2014~~2015, other than those noted below.

The following table discloses activity related to credit losses for debt securities where a portion of the OTTI was recognized in other comprehensive income.


	Years Ended December 31,								Years Ended December 31,
	2015			2014		2013			2016		2015			2014
	(In Thousands)								(In Thousands)
Balance, January 1	$	21,123		$	20,943	$	17,318		$	22,452	$	21,123		$	20,943
Reductions for securities paid off during the period (realized)	(331		)	—		(239		)	—		(331		)	—
Additions for the credit component on debt securities in which OTTI was not previously recognized	1,013			—		270			—		1,013			—
Additions for the credit component on debt securities in which OTTI was previously recognized	647			180		3,594			130		647			180
Balance, December 31	$	22,452		$	21,123	$	20,943		$	22,582	$	22,452		$	21,123

During the years ended December 31, ~~2015~~2016, ~~2014~~2015 and ~~2013~~2014, OTTI recognized on held to maturity securities totaled $130 thousand, $1.7 million ~~$180~~and $180 thousand, ~~and $3.9 million,~~ respectively. The investment securities primarily impacted by credit impairment are held to maturity non-agency collateralized mortgage obligations and asset-backed ~~securities and debt securities of states and political subdivisions.~~securities.

The contractual maturities of the securities portfolios are presented in the following table.


	Amortized Cost		Fair Value		Amortized Cost		Fair Value
December 31, 2015	(In Thousands)
December 31, 2016					(In Thousands)
Investment securities available for sale:
Maturing within one year	$	136,615	$	136,532	$	189,423	$	189,490
Maturing after one but within five years	1,333,506		1,323,471		623,642		611,492
Maturing after five but within ten years	638,237		637,785		582,659		577,007
Maturing after ten years	1,163,286		1,153,636		1,038,195		1,021,168
	3,271,644		3,251,424		2,433,919		2,399,157
Mortgage-backed securities and collateralized mortgage obligations	7,337,516		7,295,518		8,996,511		8,862,266
Equity securities	503,540		503,578		403,548		403,632
Total	$	11,112,700	$	11,050,520	$	11,833,978	$	11,665,055

Investment securities held to maturity:
Maturing within one year	$	—	$	—	$	88,243	$	88,280
Maturing after one but within five years	348,793		335,406		250,916		245,002
Maturing after five but within ten years	245,003		220,384		214,634		210,525
Maturing after ten years	624,933		582,996		566,337		553,128
	1,218,729		1,138,786		1,120,130		1,096,935
Collateralized mortgage obligations	103,947		105,335		83,087		85,074
Total	$	1,322,676	$	1,244,121	$	1,203,217	$	1,182,009

~~109~~

~~Table of Contents~~

The gross realized gains and losses recognized on sales of investment securities available for sale are shown in the table below.


	Years Ended December 31,						Years Ended December 31,
	2015		2014		2013		2016		2015		2014
	(In Thousands)						(In Thousands)
Gross gains	$	83,488	$	53,042	$	34,264	$	30,037	$	83,488	$	53,042
Gross losses	1,832		—		2,893		—		1,832		—
Net realized gains	$	81,656	$	53,042	$	31,371	$	30,037	$	81,656	$	53,042



Texas		20-8948381
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

2200 Post Oak Blvd. Houston, Texas		77056
(Address of principal executive offices)		(Zip Code)
	(205) 297-3000
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.01 par value
(Title of class)



Large accelerated filer o	Accelerated filer o	Non-accelerated filer þ	Smaller reporting company o



		Page

Part I
Item 1.	Business	9
Item 1A.	Risk Factors	3027
Item 1B.	Unresolved Staff Comments	4138
Item 2.	Properties	4138
Item 3.	Legal Proceedings	4138
Item 4.	Mine Safety Disclosures	4138
Part II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	4138
Item 6.	Selected Financial Data	4340
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	4441
Item 7A.	Quantitative and Qualitative Disclosures about Market Risk	8987
Item 8.	Financial Statements and Supplementary Data	9088
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	166
Item 9A.	Controls and Procedures	166
Item 9B.	Other Information	167
Part III
Item 10.	Directors, Executive Officers and Corporate Governance	168
Item 11.	Executive Compensation	168
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	168
Item 13.	Certain Relationships and Related Transactions, and Director Independence	168
Item 14.	Principal Accounting Fees and Services	168
Part IV
Item 15.	Exhibits, Financial Statement Schedules	170
Item 16.	10-K Summary	170
Signatures		171



AFS	Available For Sale
ARMs	Adjustable rate mortgages
ASC	Accounting Standards Codification
ASU	Accounting Standards Update
Basel III	Global regulatory framework developed by the Basel Committee on Banking Supervision
Basel Committee	Basel Committee on Banking Supervision
Bank	Compass Bank
BBVA	Banco Bilbao Vizcaya Argentaria, S.A.
BBVA Compass	Registered trade name of Compass Bank
BBVA Group	BBVA and its consolidated subsidiaries
BOLI	Bank Owned Life Insurance
BSI	BBVA Securities Inc.
Capital Securities	Debentures issued by the Parent
~~CapPR~~	~~Federal Reserve Board's Capital Plan Review~~
CAPM	Capital Asset Pricing Model
Cash Flow Hedge	A hedge of a forecasted transaction or of the variability of cash flows to be received or paid related to a recognized asset or liability
CCAR	Comprehensive Capital Analysis and Review
CD	Certificate of Deposit or time deposit
~~CESCE~~	~~Spanish Export Credit Agency~~
CET1	Common Equity Tier 1
CFPB	Consumer Financial Protection Bureau
~~CFTC~~	~~Commodity Futures Trading Commission~~
CET1 Risk-Based Capital Ratio	Ratio of CET1 to risk-weighted assets
Company	BBVA Compass Bancshares, Inc. and its subsidiaries
Covered Assets	Loans and other real estate owned acquired from the FDIC subject to loss sharing agreements
Covered Loans	Loans acquired from the FDIC subject to loss sharing agreements
CQR	Credit Quality Review
CRA	Community Reinvestment Act
~~Credit Loss Proposal~~CRD-IV	~~Proposed Accounting Standards Update, Financial Instruments-Credit Losses (Subtopic 825-15)~~
~~DRR~~	~~Designated Reserve Ratio~~Capital Requirements Directive IV
DIF	Depository Insurance Fund
Dodd-Frank Act	Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010
ERM	Enterprise Risk Management
EVE	Economic Value of Equity
Exchange Act	Securities and Exchange Act of 1934, as amended
Fair Value Hedge	A hedge of the fair value of a recognized asset or liability or of an unrecognized firm commitment
FASB	Financial Accounting Standards Board
FBO	Foreign banking organization
FDIC	Federal Deposit Insurance Corporation
FDICIA	Federal Deposit Insurance Corporation Improvement Act
Federal Reserve Board	Board of Governors of the Federal Reserve System
FHLB	Federal Home Loan Bank



~~FHLMC~~	~~Federal Home Loan Mortgage Corporation~~
FICO	Fair Isaac Corporation
FinCEN	United States Department of Treasury Financial Crimes Enforcement Network
FINRA	Financial Industry Regulatory Authority
Fitch	Fitch Ratings



x	Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934



¨	Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934



FNMA	Federal National Mortgage Association
FTP	Funds transfer pricing
~~GNMA~~ G-SIB	~~Government National Mortgage Association~~Globally systemically important bank
Guaranty Bank	Collectively, certain assets and liabilities of Guaranty Bank, acquired by the Company in 2009
HTM	Held To Maturity
IHC	Top-tier U.S. intermediate holding company
~~IRS~~	~~Internal Revenue Service~~
Large FBOs	Foreign Banking Organizations with $50 billion or more in U.S. assets
LCR	Liquidity Coverage Ratio
Leverage Ratio	Ratio of Tier 1 capital to quarterly average on-balance sheet assets
LIBOR	London Interbank Offered Rate
LGD	Loss given default
LSA	Loss Sharing Agreement
LTV	Loan to Value
~~MBS~~	~~Mortgage Backed Security~~
Moody's	Moody's Investor Services, Inc.
MRA	Master Repurchase Agreement
MSR	Mortgage Servicing Rights
NSFR	Net Stable Funding Ratio
NYSE	NYSE Euronext, Inc.
OCC	Office of the Comptroller of the Currency
OFAC	United States Department of Treasury Office of Foreign Assets Control
OREO	Other Real Estate Owned
OTTI	Other-Than-Temporary Impairment
Parent	BBVA Compass Bancshares, Inc.
Potential Problem Loans	Commercial loans rated substandard or below, which do not meet the definition of nonaccrual, TDR, or 90 days past due and still accruing.
Preferred Stock	Class B Preferred Stock
PD	Probability of default
Purchased Impaired Loans	Acquired loans with evidence of credit deterioration since origination for which it is probable all contractual payments will not be received that are accounted for under ASC Subtopic 310-30, Loans and Debt Securities Acquired with Deteriorated Credit Quality.
Purchased Nonimpaired Loans	Acquired loans with a fair value that is lower than the contractual amounts due that are not required to be accounted for in accordance with ASC Subtopic 310-30
REIT	Real Estate Investment Trust
Repurchase Agreement	Securities sold under agreements to repurchase
Reverse Repurchase Agreement	Securities purchased under agreements to resell
SBA	Small Business Administration
SBIC	Small Business Investment Company
SEC	Securities and Exchange Commission
Securities Act	Securities Act of 1933, as amended
Series A Preferred Stock	Floating Non-Cumulative Perpetual Preferred Stock, Series A
Simple	Simple Finance Technology Corp



S&P	Standard and Poor's Rating Services
TBA	To be announced
TDR	Troubled Debt Restructuring
Tier 1 Risk-Based Capital Ratio	Ratio of Tier 1 capital to risk-weighted assets
Total Risk-Based Capital Ratio	Ratio of total capital (the sum of Tier 1 capital and Tier 2 capital) to risk-weighted assets
Trust Preferred Securities	Mandatorily redeemable preferred capital securities



U.S.	United States of America
U.S. Treasury	United States Department of the Treasury
U.S. Basel III final rule	Final rule to implement the Basel III capital framework in the United States
U.S. GAAP	Accounting principles generally accepted in the United States
USA PATRIOT Act	Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001



Alabama	89
Arizona	7375
California	6162
Colorado	38
Florida	45
New Mexico	2019
Texas	~~340~~344
Total	~~666~~672


	Unemployment Rate*			Unemployment Rate*
State	December 2015	December 2014	Change	December 2016	December 2015	Change
Alabama	6.2%	6.1%	0.1	6.2%	6.3%	(0.1)
Arizona	5.8%	6.6%	(0.8)	4.8%	5.9%	(1.1)
California	5.8%	7.1%	(1.3)	5.2%	5.9%	(0.7)
Colorado	3.5%	4.2%	(0.7)	3.0%	3.5%	(0.5)
Florida	5.0%	5.7%	(0.7)	4.9%	5.1%	(0.2)
New Mexico	6.7%	6.0%	0.7	6.6%	6.6%	—
Texas	4.7%	4.6%	0.1	4.6%	4.6%	—


	Nonfarm Payroll*			Nonfarm Payroll*
	December 2015	December 2014	Change	December 2016	December 2015	Change
State	(In Thousands)			(In Thousands)
Alabama	1,963.1	1,942.8	20.3	1,976.2	1,957.5	18.7
Arizona	2,671.8	2,607.3	64.5	2,717.0	2,681.6	35.4
California	16,320.1	15,860.7	459.4	16,606.6	16,274.1	332.5
Colorado	2,539.4	2,492.8	46.6	2,627.4	2,578.6	48.8
Florida	8,198.8	7,965.7	233.1	8,462.9	8,211.5	251.4
New Mexico	830.0	827.4	2.6	830.5	828.0	2.5
Texas	11,916.4	11,749.5	166.9	12,141.3	11,931.1	210.2


	Percentage Change in	Percentage change in	Percentage Change in	Percentage change in
State	Home Prices since 2007*	Home Prices during 2015*	Home Prices since 2007*	Home Prices during 2016*
Alabama	-3.9%	1.9%	-1.5%	3.5%
Arizona	-18.0%	5.8%	-13.4%	4.6%
California	-5.8%	6.5%	-0.1%	5.0%
Colorado	24.0%	10.8%	34.9%	8.2%
Florida	-19.0%	7.6%	-11.5%	7.7%
New Mexico	-9.8%	2.4%	-8.0%	3.0%
Texas	23.5%	7.0%	31.9%	6.2%
U.S. National Average	-2.4%	4.6%	2.7%	4.6%


Consumer and Commercial Banking	Years Ended December 31,						Years Ended December 31,
	2015		2014		2013		2016		2015		2014
	(In Thousands)						(In Thousands)
Net interest income	$	2,000,579	$	1,869,746	$	1,782,078	$	2,219,343	$	2,001,780	$	1,868,809
Allocated provision for loan losses	134,216		114,436		96,167		240,355		138,592		114,850
Noninterest income	743,510		701,525		680,070		825,881		825,417		776,451
Noninterest expense	1,734,889		1,734,367		1,727,347		1,891,396		1,829,591		1,806,060
Net income before income tax expense	874,984		722,468		638,634		913,473		859,014		724,350
Income tax expense	306,244		269,119		237,891		319,716		300,655		269,821
Net income	$	568,740	$	453,349	$	400,743	$	593,757	$	558,359	$	454,529


Corporate and Investment Banking	Years Ended December 31,						Years Ended December 31,
	2015		2014		2013		2016		2015		2014
	(In Thousands)						(In Thousands)
Net interest income	$	157,184	$	130,280	$	127,260	$	128,552	$	153,322	$	130,280
Allocated provision for loan losses	58,337		11,962		3,316		56,313		58,337		11,962
Noninterest income	169,009		197,586		148,881		177,211		156,679		197,585
Noninterest expense	161,050		146,319		140,639		180,642		158,300		143,924
Net income before income tax expense	106,806		169,585		132,186		68,808		93,364		171,979
Income tax expense	37,382		63,171		49,239		24,083		32,677		64,062
Net income	$	69,424	$	106,414	$	82,947	$	44,725	$	60,687	$	107,917


Treasury	Years Ended December 31,							Years Ended December 31,
	2015		2014		2013			2016			2015		2014
	(In Thousands)							(In Thousands)
Net interest income (expense)	$	32,013	$	13,644	$	(24,395	)	$	(3,408	)	$	32,013	$	13,644
Allocated provision for loan losses	—		—		—			—			—		—
Noninterest income	91,439		76,699		76,749			54,228			91,439		76,699
Noninterest expense	20,119		17,597		17,671			21,096			20,119		17,597
Net income before income tax expense	103,333		72,746		34,683			29,724			103,333		72,746
Income tax expense	36,167		27,098		12,919			10,404			36,167		27,098
Net income	$	67,166	$	45,648	$	21,764		$	19,320		$	67,166	$	45,648

Table 7 Trading Account Assets	Table 7 Trading Account Assets				Table 7 Trading Account Assets

	December 31,				December 31,
	2015		2014		2016		2015
	(In Thousands)				(In Thousands)
Trading account assets:
U.S. Treasury and other U.S. government agencies	$	3,805,269	$	2,502,308	$	2,820,797	$	3,805,269
State and political subdivisions	1,275		—		219		1,275
Other debt securities	2,501		—		4,120		2,501
Interest rate contracts	303,944		296,239		290,238		303,944
Commodity contracts	14,127		25,569		—		14,127
Foreign exchange contracts	9,899		8,268		28,367		9,899
Other trading assets	1,117		2,013		859		1,117
Total trading account assets	$	4,138,132	$	2,834,397	$	3,144,600	$	4,138,132

Table 8 Composition of Investment Securities Portfolio	Table 8 Composition of Investment Securities Portfolio						Table 8 Composition of Investment Securities Portfolio

	December 31,						December 31,
	2015		2014		2013		2016		2015		2014
	(In Thousands)						(In Thousands)
Investment securities available for sale (at fair value):
Debt securities:
U.S. Treasury and other U.S. government agencies	$	3,211,492	$	2,313,542	$	260,937	$	2,374,331	$	3,211,492	$	2,313,542
Mortgage-backed securities	4,590,262		4,423,835		5,233,791		3,763,338		4,590,262		4,423,835
Collateralized mortgage obligations	2,705,256		2,488,579		1,756,398		5,098,928		2,705,256		2,488,579
States and political subdivisions	15,887		467,315		509,436		8,641		15,887		467,315
Other	24,045		44,441		40,333		16,185		24,045		44,441
Equity securities (1)	503,578		499,563		512,190		403,632		503,578		499,563
Total securities available for sale	$	11,050,520	$	10,237,275	$	8,313,085	$	11,665,055	$	11,050,520	$	10,237,275
Investment securities held to maturity (at amortized cost):
Collateralized mortgage obligations	$	103,947	$	124,051	$	145,989	$	83,087	$	103,947	$	124,051
Asset-backed securities	24,011		39,187		67,590		15,118		24,011		39,187
States and political subdivisions (2)	1,128,240		1,112,415		1,225,977		1,040,716		1,128,240		1,112,415
Other	66,478		72,701		79,640		64,296		66,478		72,701
Total securities held to maturity	$	1,322,676	$	1,348,354	$	1,519,196	$	1,203,217	$	1,322,676	$	1,348,354
Total investment securities	$	12,373,196	$	11,585,629	$	9,832,281	$	12,868,272	$	12,373,196	$	11,585,629


(1)	Includes $~~503~~403 million, $~~500~~503 million and $~~512~~500 million at December 31, ~~2015~~2016, ~~2014~~2015 and ~~2013~~2014, respectively, of FHLB and Federal Reserve stock carried at par.


(2)	Represents private placement transactions underwritten as loans but meeting the definition of a security within ASC Topic 320, Investments – Debt and Equity Securities at origination.

Table 9 Investment Securities Maturity Schedule	Table 9 Investment Securities Maturity Schedule																Table 9 Investment Securities Maturity Schedule

	Maturing																Maturing
	Within One Year				After One But Within Five Years				After Five But Within Ten Years				After Ten Years				Within One Year				After One But Within Five Years				After Five But Within Ten Years				After Ten Years
	Amount		Yield		Amount		Yield		Amount		Yield		Amount		Yield		Amount		Yield		Amount		Yield		Amount		Yield		Amount		Yield
	(Dollars in Thousands)																(Dollars in Thousands)
Investment securities available for sale (at fair value):	Investment securities available for sale (at fair value):																Investment securities available for sale (at fair value):
U.S. Treasury and other U.S. government agencies	$	134,046	0.27	%	$	1,316,740	1.03	%	$	635,766	1.24	%	$	1,124,940	0.83	%	$	188,403	0.34	%	$	609,593	0.83	%	$	575,750	1.36	%	$	1,000,585	0.99	%
Mortgage-backed securities	4,266		2.33		56,546		2.27		145,812		1.75		4,383,638		1.10		591		2.17		80,206		1.79		108,247		1.78		3,574,294		1.24
Collateralized mortgage obligations	25		3.23		3,062		3.90		46,182		1.68		2,655,987		1.00		—		—		2,119		3.79		35,330		1.66		5,061,479		1.22
States and political subdivisions	2,486		6.30		6,731		6.55		2,019		4.70		4,651		9.80		1,087		6.21		1,900		7.24		1,257		3.87		4,397		9.74
Other	—		—		—		—		—		—		24,045		0.76		—		—		—		—		—		—		16,185		1.17
Equity securities (1)	—		—		—		—		—		—		503,578		3.68		—		—		—		—		—		—		403,632		2.07
Total	$	140,823	4.51	%	$	1,383,079	3.75	%	$	829,779	2.28	%	$	8,696,839	1.48	%	$	190,081			$	693,818			$	720,584			$	10,060,572

Investment securities held to maturity (at amortized cost):	Investment securities held to maturity (at amortized cost):																Investment securities held to maturity (at amortized cost):
Collateralized mortgage obligations	$	—	—	%	$	4,361	3.90	%	$	—	—	%	$	99,586	1.84	%	$	—	—	%	$	2,958	4.11	%	$	—	—	%	$	80,129	2.23	%
Asset-backed securities	—		—		—		—		—		—		24,011		0.63		—		—		—		—		25		0.79		15,093		1.00
States and political subdivisions	—		—		348,793		1.66		245,003		1.66		534,444		2.47		88,243		1.59		250,916		1.78		214,609		2.11		486,948		2.56
Other	—		—		—		—		—		—		66,478		0.71		—		—		—				—		—		64,296		1.02
Total	$	—	—	%	$	353,154	1.64	%	$	245,003	1.57	%	$	724,519	1.98	%	$	88,243	—	%	$	253,874			$	214,634			$	646,466
Total securities	$	140,823			$	1,736,233			$	1,074,782			$	9,421,358			$	278,324			$	947,692			$	935,218			$	10,707,038


(1)	Equity securities are included in the maturing after ten years category.

Table 10 Loan Portfolio	Table 10 Loan Portfolio										Table 10 Loan Portfolio

	December 31,										December 31,
	2015		2014		2013		2012		2011		2016		2015		2014		2013		2012
	(In Thousands)										(In Thousands)
Commercial loans:
Commercial, financial and agricultural	$	26,022,374	$	23,828,537	$	20,209,209	$	16,980,957	$	13,700,779	$	25,122,002	$	26,022,374	$	23,828,537	$	20,209,209	$	16,980,957
Real estate – construction	2,354,253		2,154,652		1,736,348		1,895,931		3,367,413		2,125,316		2,354,253		2,154,652		1,736,348		1,895,931
Commercial real estate – mortgage	10,453,280		9,877,206		9,106,329		7,707,548		7,235,458		11,210,660		10,453,280		9,877,206		9,106,329		7,707,548
Total commercial loans	$	38,829,907	$	35,860,395	$	31,051,886	$	26,584,436	$	24,303,650	$	38,457,978	$	38,829,907	$	35,860,395	$	31,051,886	$	26,584,436
Consumer loans:
Residential real estate – mortgage	$	13,993,285	$	13,922,656	$	12,706,879	$	11,443,973	$	9,669,114	$	13,259,994	$	13,993,285	$	13,922,656	$	12,706,879	$	11,443,973
Equity lines of credit	2,419,815		2,304,784		2,236,367		2,393,271		2,563,706		2,543,778		2,419,815		2,304,784		2,236,367		2,393,271
Equity loans	580,804		634,968		644,068		671,616		849,369		445,709		580,804		634,968		644,068		671,616
Credit card	627,359		630,456		660,073		625,395		582,244		604,881		627,359		630,456		660,073		625,395
Consumer direct	936,871		652,927		516,572		522,995		528,818		1,254,641		936,871		652,927		516,572		522,995
Consumer indirect	3,495,082		2,870,408		2,116,981		1,593,175		1,366,060		3,134,948		3,495,082		2,870,408		2,116,981		1,593,175
Total consumer loans	$	22,053,216	$	21,016,199	$	18,880,940	$	17,250,425	$	15,559,311	$	21,243,951	$	22,053,216	$	21,016,199	$	18,880,940	$	17,250,425
Covered loans	440,961		495,190		734,190		1,176,682		2,079,366		359,334		440,961		495,190		734,190		1,176,682
Total loans	$	61,324,084	$	57,371,784	$	50,667,016	$	45,011,543	$	41,942,327	$	60,061,263	$	61,324,084	$	57,371,784	$	50,667,016	$	45,011,543
Loans held for sale	70,582		154,816		147,109		322,065		170,351		161,849		70,582		154,816		147,109		322,065
Total loans and loans held for sale	$	61,394,666	$	57,526,600	$	50,814,125	$	45,333,608	$	42,112,678	$	60,223,112	$	61,394,666	$	57,526,600	$	50,814,125	$	45,333,608

Table 11 Selected Loan Maturity and Interest Rate Sensitivity	Table 11 Selected Loan Maturity and Interest Rate Sensitivity												Table 11 Selected Loan Maturity and Interest Rate Sensitivity

	Maturity								Rate Structure For Loans Maturing Over One Year				Maturity								Rate Structure For Loans Maturing Over One Year
	One Year or Less		Over One Year Through Five Years		Over Five Years		Total		Fixed Interest Rate		Floating or Adjustable Rate		One Year or Less		Over One Year Through Five Years		Over Five Years		Total		Fixed Interest Rate		Floating or Adjustable Rate
	(In Thousands)												(In Thousands)
Commercial, financial and agricultural	$	4,311,337	$	18,838,527	$	2,872,510	$	26,022,374	$	3,687,723	$	18,023,314	$	5,055,438	$	17,318,573	$	2,747,991	$	25,122,002	$	4,018,467	$	16,048,097
Real estate - construction	954,493		1,279,138		120,622		2,354,253		67,451		1,332,309		769,484		1,196,594		159,238		2,125,316		36,923		1,318,909
	$	5,265,830	$	20,117,665	$	2,993,132	$	28,376,627	$	3,755,174	$	19,355,623	$	5,824,922	$	18,515,167	$	2,907,229	$	27,247,318	$	4,055,390	$	17,367,006

Table 12 Potential Problem Loans	Table 12 Potential Problem Loans				Table 12 Potential Problem Loans

	December 31,				December 31,
	2015		2014		2016		2015
	(In Thousands)				(In Thousands)
Commercial, financial and agricultural	$	580,491	$	111,919	$	630,760	$	580,491
Real estate – construction	174		214		5,578		174
Commercial real estate – mortgage	74,373		55,517		57,108		74,373
	$	655,038	$	167,650	$	693,446	$	655,038

Table 13 Asset Quality	Table 13 Asset Quality										Table 13 Asset Quality

	December 31,										December 31,
	2015		2014		2013		2012		2011		2016		2015		2014		2013		2012
	(In Thousands)										(In Thousands)
Nonaccrual loans:
Commercial, financial and agricultural	$	161,591	$	61,157	$	128,231	$	112,135	$	185,629	$	596,454	$	161,591	$	61,157	$	128,231	$	112,135
Real estate – construction	5,908		7,964		14,183		104,683		415,629		1,239		5,908		7,964		14,183		104,683
Commercial real estate – mortgage	69,953		89,736		129,672		270,734		446,926		71,921		69,953		89,736		129,672		270,734
Residential real estate – mortgage	113,234		108,357		102,904		193,983		220,844		140,303		113,234		108,357		102,904		193,983
Equity lines of credit	35,023		32,874		31,431		20,143		23,570		33,453		35,023		32,874		31,431		20,143
Equity loans	15,614		19,029		20,447		16,943		30,309		13,635		15,614		19,029		20,447		16,943
Credit card	—		—		—		—		—		—		—		—		—		—
Consumer direct	561		799		540		337		1,217		789		561		799		540		337
Consumer indirect	5,027		2,624		1,523		—		—		5,926		5,027		2,624		1,523		—
Covered	134		114		5,428		1,235		16,555		730		134		114		5,428		1,235
Total nonaccrual loans	407,045		322,654		434,359		720,193		1,340,679		864,450		407,045		322,654		434,359		720,193
Nonaccrual loans held for sale	—		—		7,359		7,583		16,970		56,592		—		—		7,359		7,583
Total nonaccrual loans and loans held for sale	$	407,045	$	322,654	$	441,718	$	727,776	$	1,357,649	$	921,042	$	407,045	$	322,654	$	441,718	$	727,776
Accruing TDRs: (1)
Commercial, financial and agricultural	$	9,402	$	10,127	$	25,548	$	17,832	$	22,658	$	8,726	$	9,402	$	10,127	$	25,548	$	17,832
Real estate – construction	2,247		2,112		3,801		49,215		97,126		2,393		2,247		2,112		3,801		49,215
Commercial real estate – mortgage	33,904		39,841		59,727		56,520		59,690		4,860		33,904		39,841		59,727		56,520
Residential real estate – mortgage	67,343		69,408		74,236		91,384		75,170		59,893		67,343		69,408		74,236		91,384
Equity lines of credit	—		—		—		—		203		—		—		—		—		—
Equity loans	37,108		41,197		42,850		21,929		13,597		34,746		37,108		41,197		42,850		21,929
Credit card	—		—		—		—		—		—		—		—		—		—
Consumer direct	908		298		91		138		8		704		908		298		91		138
Consumer indirect	—		—		—		—		—		—		—		—		—		—
Covered	—		—		3,455		7,079		9,545		—		—		—		3,455		7,079
Total TDRs	150,912		162,983		209,708		244,097		277,997		111,322		150,912		162,983		209,708		244,097
TDRs classified as loans held for sale	—		—		—		—		—		—		—		—		—		—
Total TDRs (loans and loans held for sale)	$	150,912	$	162,983	$	209,708	$	244,097	$	277,997	$	111,322	$	150,912	$	162,983	$	209,708	$	244,097
Loans 90 days past due and accruing:
Commercial, financial and agricultural	$	3,567	$	1,610	$	2,212	$	1,853	$	2,501	$	2,891	$	3,567	$	1,610	$	2,212	$	1,853
Real estate – construction	421		477		240		1,907		502		2,007		421		477		240		1,907
Commercial real estate – mortgage	2,237		628		797		2,771		496		—		2,237		628		797		2,771
Residential real estate – mortgage	1,961		2,598		2,460		3,645		1,885		3,356		1,961		2,598		2,460		3,645
Equity lines of credit	2,883		2,679		5,109		4,661		6,917		2,950		2,883		2,679		5,109		4,661
Equity loans	704		997		1,167		2,335		2,276		467		704		997		1,167		2,335
Credit card	9,718		9,441		10,277		7,729		8,384		10,954		9,718		9,441		10,277		7,729
Consumer direct	3,537		2,296		2,402		2,065		1,798		4,482		3,537		2,296		2,402		2,065
Consumer indirect	5,629		2,771		1,540		1,138		1,496		7,197		5,629		2,771		1,540		1,138
Covered	37,972		47,957		56,610		112,748		157,022		27,238		37,972		47,957		56,610		112,748
Total loans 90 days past due and accruing	68,629		71,454		82,814		140,852		183,277		61,542		68,629		71,454		82,814		140,852
Loans held for sale 90 days past due and accruing	—		—		—		—		—		—		—		—		—		—
Total loans and loans held for sale 90 days past due and accruing	$	68,629	$	71,454	$	82,814	$	140,852	$	183,277	$	61,542	$	68,629	$	71,454	$	82,814	$	140,852
Other real estate	$	20,862	$	20,600	$	23,228	$	68,568	$	217,840	$	21,112	$	20,862	$	20,600	$	23,228	$	68,568
Other repossessed assets	$	8,774	$	3,920	$	3,360	$	3,890	$	4,285	$	7,587	$	8,774	$	3,920	$	3,360	$	3,890


(1)	TDR totals include accruing loans 90 days past due classified as TDR.

Table 14 Nonperforming Assets	Table 14 Nonperforming Assets										Table 14 Nonperforming Assets

	December 31,										December 31,
	2015		2014		2013		2012		2011		2016		2015		2014		2013		2012
	(In Thousands)										(In Thousands)
Nonaccrual loans	$	407,045	$	322,654	$	441,718	$	727,776	$	1,357,649	$	921,042	$	407,045	$	322,654	$	441,718	$	727,776
Loans 90 days or more past due and accruing (1)	68,629		71,454		82,814		140,852		183,277		61,542		68,629		71,454		82,814		140,852
TDRs 90 days or more past due and accruing	874		1,722		1,317		862		8,049		589		874		1,722		1,317		862
Nonperforming loans	476,548		395,830		525,849		869,490		1,548,975		983,173		476,548		395,830		525,849		869,490
OREO	20,862		20,600		23,228		68,568		217,840		21,112		20,862		20,600		23,228		68,568
Other repossessed assets	8,774		3,920		3,360		3,890		4,285		7,587		8,774		3,920		3,360		3,890
Total nonperforming assets	$	506,184	$	420,350	$	552,437	$	941,948	$	1,771,100	$	1,011,872	$	506,184	$	420,350	$	552,437	$	941,948

Table 15 Asset Quality Ratios	Table 15 Asset Quality Ratios										Table 15 Asset Quality Ratios

	December 31,										December 31,
	2015		2014		2013		2012		2011		2016		2015		2014		2013		2012
	(In Thousands)										(In Thousands)
Asset Quality Ratios:
Nonperforming loans and loans held for sale as a percentage of total loans and loans held for sale (1)	0.78	%	0.69	%	1.03	%	1.92	%	3.68	%	1.63	%	0.78	%	0.69	%	1.03	%	1.92	%
Nonperforming assets as a percentage of total loans and loans held for sale, other real estate, and other repossessed assets (2)	0.82	%	0.73	%	1.09	%	2.07	%	4.18	%	1.68	%	0.82	%	0.73	%	1.09	%	2.07	%
Allowance for loan losses as a percentage of loans	1.24	%	1.19	%	1.38	%	1.78	%	2.51	%	1.40	%	1.24	%	1.19	%	1.38	%	1.78	%
Allowance for loan losses as a percentage of nonperforming loans (3)	160.04	%	173.06	%	135.15	%	93.15	%	68.65	%	90.47	%	160.04	%	173.06	%	135.15	%	93.15	%


(1)	Nonperforming loans include nonaccrual loans and loans held for sale (including nonaccrual loans classified as TDR), accruing loans 90 days past due and accruing TDRs 90 days past due.


(2)	Nonperforming assets include nonperforming loans, other real estate and other repossessed assets.

Table 16 Rollforward of Other Real Estate Owned	Table 16 Rollforward of Other Real Estate Owned						Table 16 Rollforward of Other Real Estate Owned

	Years Ended December 31,						Years Ended December 31,
	2015			2014			2016			2015
	(In Thousands)						(In Thousands)
Balance at beginning of year	$	20,600		$	23,228		$	20,862		$	20,600
Transfer of loans and loans held for sale to OREO	20,781			22,176			26,235			20,781
Sales of OREO	(16,314		)	(22,101		)	(22,547		)	(16,314		)
Write-downs of OREO	(4,205		)	(2,703		)	(3,438		)	(4,205		)
Balance at end of year	$	20,862		$	20,600		$	21,112		$	20,862

Table 17 Rollforward of Nonaccrual Loans	Table 17 Rollforward of Nonaccrual Loans						Table 17 Rollforward of Nonaccrual Loans

	Years Ended December 31,						Years Ended December 31,
	2015			2014			2016			2015
	(In Thousands)						(In Thousands)
Balance at beginning of year	$	322,540		$	436,290		$	406,911		$	322,540
Additions	434,795			353,347			1,447,176			434,795
Additions - expiration of LSA	—			3,733
Returns to accrual	(76,330		)	(75,131		)	(183,974		)	(76,330		)
Loan sales	(7,150		)	(73,767		)	(150,412		)	(7,150		)
Payments and paydowns	(76,640		)	(118,449		)	(289,891		)	(76,640		)
Transfers to other real estate	(19,445		)	(20,070		)	(19,895		)	(19,445		)
Charge-offs	(170,859		)	(183,413		)	(289,603		)	(170,859		)
Balance at end of year	$	406,911		$	322,540		$	920,312		$	406,911

Table 18 Rollforward of TDR Activity	Table 18 Rollforward of TDR Activity						Table 18 Rollforward of TDR Activity

	Years Ended December 31,						Years Ended December 31,
	2015			2014			2016			2015
	(In Thousands)						(In Thousands)
Balance at beginning of year	$	243,374		$	310,282		$	227,817		$	243,374
New TDRs	26,147			47,362			70,136			26,147
Expiration of LSA	—			3,765
Payments/Payoffs	(33,510		)	(105,438		)	(80,712		)	(33,510		)
Charge-offs	(4,673		)	(6,380		)	(2,319		)	(4,673		)
Loan sales	(1,982		)	(2,321		)	—			(1,982		)
Transfer to ORE	(1,539		)	(3,896		)	(1,054		)	(1,539		)
Balance at end of year	$	227,817		$	243,374		$	213,868		$	227,817