UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark one)


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September 30, 2018~~March 31, 2019


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: ~~001-36827~~

001-36872

HANCOCK WHITNEY CORPORATION

(Exact name of registrant as specified in its charter)

Mississippi
~~Mississippi~~	64-0693170
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

Hancock Whitney Plaza, 2510 14^thStreet, Gulfport, Mississippi		39501
(Address of principal executive offices)		(Zip Code)

(228) 868-4000

(Registrant’s telephone number, including area code)

NOT APPLICABLE

(Former name, address and fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the ~~definitions~~definition s of “large accelerated ~~filer”,~~filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange ~~Act. (Check one):~~Act:


Large accelerated filer	☒	Accelerated filer	☐

Non-accelerated filer	☐	Smaller reporting company	☐
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading symbol(s)	Name of each exchange on which registered
Common stock, par value $3.33 per share	HWC	Nasdaq

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

~~85,166,404~~85,720,238 common shares were outstanding as of ~~October 31, 2018.~~April 30, 2019.

Table of Contents

Ha~~ncock~~Hancock Whitney Corporation

Index


Part I. Financial Information		Page Number
ITEM 1.	Financial Statements	4
	Consolidated Balance Sheets (unaudited) – ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017~~2018	5 4
	Consolidated Statements of Income (unaudited) – Three ~~and Nine~~ Months Ended ~~September 30,~~March 31, 2019 and 2018 ~~and 2017~~	6 5
	Consolidated Statements of Comprehensive Income (unaudited) – Three ~~and Nine~~ Months Ended ~~September 30,~~March 31, 2019 and 2018 ~~and 2017~~	7 6
	Consolidated Statements of Changes in Stockholders’ Equity (unaudited) – ~~Nine~~Three Months Ended ~~September 30,~~March 31, 2019 and 2018 ~~and 2017~~	8 7
	Consolidated Statements of Cash Flows (unaudited) – ~~Nine~~Three Months Ended ~~September 30,~~March 31, 2019 and 2018 ~~and 201~~7	9 8
	Notes to Consolidated Financial Statements (unaudited) – ~~September 30,~~March 31, 2019 and 2018 ~~and 2017~~	10 9
ITEM 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	38 35
ITEM 3.	Quantitative and Qualitative Disclosures about Market Risk	62 57
ITEM 4.	Controls and Procedures	62 57
Part II. Other Information
ITEM 1.	Legal Proceedings	63 59
ITEM 1A.	Risk Factors	63 59
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	64 59
ITEM 3.	Default on Senior Securities	N/A
ITEM 4.	Mine Safety Disclosures	N/A
ITEM 5.	Other Information	N/A
ITEM 6.	Exhibits	64 59
Signatures		60

Table of Contents

Hancock Whitney Corporation

Glossary of Defined Terms

Entities:

Hancock Whitney Corporation*Corporation –a financial holding companyregistered with the Securities and Exchange Commission

Hancock Whitney Bank*Bank –a wholly-owned subsidiary of Hancock Whitney Corporation through which Hancock Whitney Corporation conducts its banking operations

Company –Hancock Whitney Corporation and its wholly-owned subsidiaries

Parent –Hancock Whitney Corporation, exclusive of its subsidiaries

Bank –Hancock Whitney Bank

*On May 25, 2018, Hancock Whitney Corporation changed its name from Hancock Holding Company, and Hancock Whitney Bank changed its name from Whitney Bank.

Other Terms:

AFS –available for sale securities

AOCI – accumulated other comprehensive income or loss

ALLL – allowance for loan and lease losses

ASC – Accounting Standards Codification

ASU – Accounting Standards Update

ATM - automated teller machine

~~Basel II -~~ ~~Basel Committee's 2004 Regulatory Capital Framework (Second Accord)~~

Basel III -Basel Committee's 2010 Regulatory Capital Framework (Third Accord)

Beta – ~~Basel Committee -~~ ~~Basel Committee on Banking Supervision~~amount by which deposit or loan costs change in response to movement in short-term interest rates

Beige Book - Federal Reserve’s Summary of Commentary on Current Economic Conditions

BOLI – Bank-owned life insurance

bp(s) –Basis point(s)

C&I – commercial and industrial loans

Capital One – Capital One, National Association, from which the Company acquired a trust and asset management business in July 2018.

CECL – Current Expected Credit Losses, the Accounting Standards Update effective for the Company on January 1, 2020

CD –certificate of deposit

CDE – Community Development Entity

CMO – Collateralized Mortgage Obligation

~~CRE~~ ~~– commercial real estate~~

~~Dodd-Frank Act~~ ~~– The Dodd-Frank Wall Street Reform and Consumer Protection Act~~

FASB – Financial Accounting Standards Board

FDIC – Federal Deposit Insurance Corporation

Federal Reserve Bank – The 12 banks that are the operating arms of the U.S. central bank. They implement the

policies of the Federal Reserve Board and also conduct economic research.

~~Federal Reserve Board~~ ~~– The 7-member Board of Governors that oversees the Federal Reserve System, establishes~~

~~monetary policy (interest rates, credit, etc.), and monitors the economic health of the country. Its members are appointed~~

~~by the President subject to Senate confirmation, and serve 14-year terms.~~

~~Federal Reserve System~~ ~~– The 12 Federal Reserve Banks, with each one serving member banks in its own district.~~

~~This system, supervised by the Federal Reserve Board, has broad regulatory powers over the money supply and the~~

~~credit structure.~~

FHLB – Federal Home Loan Bank

~~FNBC~~ ~~– The former New Orleans, Louisiana based First NBC Bank that failed on April 28, 2017~~

~~FNBC I~~ ~~– acquired selected assets and liabilities from FNBC under agreement dated March 10, 2017~~

~~FNBC II~~ ~~– acquired selected assets and liabilities from the FDIC as receiver for FNBC under agreement dated April 28, 2017~~

GAAP – Generally Accepted Accounting Principles in the United States of America

HFC – Harrison Finance Company, a former consumer finance subsidiary

HTM – held to maturity securities

~~Table of Contents~~

LIBOR – London Interbank Offered Rate

LIHTC – Low Income Housing Tax Credit

MD&A –management’s discussion and analysis of financial condition and results of operations

MidSouth – MidSouth Bancorp, Inc., an entity the Company has agreed to acquire under an Agreement and Plan of Merger dated April 30, 2019

NAICS – North American Industry Classification System

NII – Net interest income

n/m – not meaningful

OCI~~OCI~~ – other comprehensive income

OFI – Louisiana Office of Financial Institutions

ORE – other real estate defined as foreclosed and surplus real estate

PCI – purchased credit impaired loans

Repos – securities sold under agreements to repurchase

SEC – U.S. Securities and Exchange Commission

Securities Act – Securities Act of 1933, as amended

Tax Act – Tax Cuts and Jobs Act of 2017

tete – taxable equivalent adjustment, or the term used to indicate that a financial measure is presented on a fully taxable equivalent basis

TDR – troubled debt restructuring (as defined in ASC 310-40)

TSR – total shareholder return

U.S. Treasury– The United States Department of the Treasury

Table of Contents

Part I.Financi~~Financial~~al Information

Item 1.1. Financial Statements

Hancock Whitney Corporation and Subsidiaries

Consolidated Balance Sheets

(Unaudited)

September 30,

December 31,
(in thousands, except per share data)

2018

2017
ASSETS

Cash and due from banks

$
339,609

$
386,948
Interest-bearing bank deposits

107,635

92,157
Federal funds sold

439

227
Securities available for sale, at fair value (amortized cost of $3,048,851 and $2,949,057)

2,918,185

2,910,869
Securities held to maturity (fair value of $2,975,455 and $2,962,010)

3,069,262

2,977,511
Loans held for sale

29,043

39,865
Loans

19,543,717

19,004,163
Less: allowance for loan losses

(214,550)

(217,308)
Loans, net

19,329,167

18,786,855
Property and equipment, net of accumulated depreciation of $221,295 and $214,998

343,833

333,663
Prepaid expenses

35,470

28,015
Other real estate and foreclosed assets, net

27,475

27,542
Accrued interest receivable

87,567

82,191
Goodwill

791,157

745,523
Other intangible assets, net

101,438

90,640
Life insurance contracts

550,261

541,081
Deferred tax asset, net

59,570

53,979
Other assets

308,064

239,020
Total assets

$
28,098,175

$
27,336,086
LIABILITIES AND STOCKHOLDERS' EQUITY

Liabilities:

Deposits

Noninterest-bearing

$
8,140,530

$
8,307,497
Interest-bearing

14,277,277

13,945,705
Total deposits

22,417,807

22,253,202
Short-term borrowings

2,276,647

1,703,890
Long-term debt

215,912

305,513
Accrued interest payable

15,986

8,680
Other liabilities

192,945

179,852
Total liabilities

25,119,297

24,451,137
Stockholders' equity:

Common stock

292,716

292,716
Capital surplus

1,735,444

1,718,117
Retained earnings

1,170,897

1,008,518
Accumulated other comprehensive loss, net

(220,179)

(134,402)
Total stockholders' equity

2,978,878

2,884,949
Total liabilities and stockholders' equity

$
28,098,175

$
27,336,086
Common shares authorized (par value of $3.33 per share)

350,000

350,000
Common shares issued

87,903

87,903
Common shares outstanding

85,364

85,200

~~See notes to unaudited consolidated financial statements.~~

~~Table of Contents~~

~~Hancock Whitney Corporation and Subsidiaries~~

~~Consolidated Statements of Income~~

~~(Unaudited)~~

Three Months Ended

Nine Months Ended

September 30,

September 30,
(in thousands, except per share data)

2018

2017

2018

2017
Interest income:

Loans, including fees

$
224,332

$
199,702

$
645,340

$
566,663
Loans held for sale

268

216

784

669
Securities-taxable

32,482

26,616

92,566

74,385
Securities-tax exempt

5,461

5,608

16,488

16,643
Short-term investments

669

574

1,733

3,048
Total interest income

263,212

232,716

756,911

661,408
Interest expense:

Deposits

34,190

21,789

91,019

52,972
Short-term borrowings

11,780

4,425

24,547

11,598
Long-term debt

3,048

3,645

9,940

12,573
Total interest expense

49,018

29,859

125,506

77,143
Net interest income

214,194

202,857

631,405

584,265
Provision for loan losses

6,872

13,040

28,016

43,982
Net interest income after provision for loan losses

207,322

189,817

603,389

540,283
Noninterest income:

Service charges on deposit accounts

21,377

21,444

63,806

60,711
Trust fees

16,738

10,742

39,726

33,459
Bank card and ATM fees

14,862

13,390

44,784

39,545
Investment and annuity fees and insurance commissions

6,652

6,230

19,041

17,939
Secondary mortgage market operations

4,333

4,157

11,699

11,965
Other income

11,556

11,152

31,546

34,474
Total noninterest income

75,518

67,115

210,602

198,093
Noninterest expense:

Compensation expense

84,389

82,242

244,374

237,486
Employee benefits

18,084

16,901

55,316

54,869
Personnel expense

102,473

99,143

299,690

292,355
Net occupancy expense

11,895

12,448

35,221

36,285
Equipment expense

4,520

3,779

12,328

11,457
Data processing expense

20,492

16,798

55,214

48,993
Professional services expense

9,555

10,062

32,191

31,691
Amortization of intangible assets

5,638

6,070

16,578

16,532
Telecommunications and postage

3,598

3,876

11,063

11,081
Deposit insurance and regulatory fees

8,345

7,883

24,669

21,356
Other real estate (income) expense

16

199

(63)

(2,329)
Other expense

14,655

17,358

49,489

57,207
Total noninterest expense

181,187

177,616

536,380

524,628
Income before income taxes

101,653

79,316

277,611

213,748
Income taxes

17,775

20,414

50,081

53,565
Net income

$
83,878

$
58,902

$
227,530

$
160,183
Earnings per common share-basic

$
0.96

$
0.68

$
2.62

$
1.85
Earnings per common share-diluted

$
0.96

$
0.68

$
2.61

$
1.85
Dividends paid per share

$
0.27

$
0.24

$
0.75

$
0.72
Weighted average shares outstanding-basic

85,348

84,749

85,298

84,577
Weighted average shares outstanding-diluted

85,539

84,980

85,482

84,818

~~See notes to unaudited consolidated financial statements.~~

~~Table of Contents~~

~~Hancock Whitney Corporation and Subsidiaries~~

~~Consolidated Statements of Comprehensive Income~~

~~(Unaudited)~~

Three Months Ended

Nine Months Ended

September 30,

September 30,
(in thousands)

2018

2017

2018

2017
Net income

$
83,878

$
58,902

$
227,530

$
160,183
Other comprehensive income/loss before income taxes:

Net change in unrealized gain/loss on securities available for sale and cash flow hedges

(25,242)

5,949

(110,895)

19,794
Reclassification of net losses realized and included in earnings

2,547

1,374

6,560

4,479
Valuation adjustment for pension plan amendment

—

—

—

17,315
Other valuation adjustments for employee benefit plans

—

1,597

(9,039)

(9,185)
Amortization of unrealized net loss on securities transferred to held to maturity

747

977

2,427

2,726
Other comprehensive income/loss before income taxes

(21,948)

9,897

(110,947)

35,129
Income tax expense (benefit)

(4,978)

3,609

(25,170)

12,748
Other comprehensive income/loss net of income taxes

(16,970)

6,288

(85,777)

22,381
Comprehensive income

$
66,908

$
65,190

$
141,753

$
182,564

	March 31,			December 31,
(in thousands, except per share data)	2019			2018
ASSETS
Cash and due from banks	$	360,194		$	383,372
Interest-bearing bank deposits		163,232			110,579
Federal funds sold		530			515
Securities available for sale, at fair value (amortized cost of $2,698,865 and $2,755,806)		2,681,080			2,691,037
Securities held to maturity (fair value of $2,892,910 and $2,935,856)		2,896,442			2,979,547
Loans held for sale		27,437			28,150
Loans		20,112,838			20,026,411
Less: allowance for loan losses		(194,688	)		(194,514	)
Loans, net		19,918,150			19,831,897
Property and equipment, net of accumulated depreciation of $233,078 and $225,969		358,205			353,668
Right of use assets, net of accumulated amortization of $3,064		113,447			—
Prepaid expenses		39,153			35,047
Other real estate and foreclosed assets, net		27,148			26,270
Accrued interest receivable		94,404			86,681
Goodwill		792,084			790,972
Other intangible assets, net		91,013			96,151
Life insurance contracts		553,893			549,300
Deferred tax asset, net		—			22,967
Funded pension assets, net		168,910			65,125
Other assets		204,909			184,629
Total assets	$	28,490,231		$	28,235,907
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits
Noninterest-bearing	$	8,158,658		$	8,499,027
Interest-bearing		15,221,636			14,651,158
Total deposits		23,380,294			23,150,185
Short-term borrowings		1,388,735			1,589,128
Long-term debt		224,962			224,993
Accrued interest payable		18,031			12,267
Lease liabilities		128,494			—
Deferred tax liability, net		19,065			—
Other liabilities		140,075			177,994
Total liabilities		25,299,656			25,154,567
Stockholders' equity:
Common stock		292,716			292,716
Capital surplus		1,731,148			1,725,741
Retained earnings		1,299,220			1,243,592
Accumulated other comprehensive loss, net		(132,509	)		(180,709	)
Total stockholders' equity		3,190,575			3,081,340
Total liabilities and stockholders' equity	$	28,490,231		$	28,235,907
Preferred shares authorized (par value of $20.00 per share)		50,000			50,000
Preferred shares issued and outstanding		—			—
Common shares authorized (par value of $3.33 per share)		350,000			350,000
Common shares issued		87,903			87,903
Common shares outstanding		85,710			85,643

See notes to unaudited consolidated financial statements.

Table of Contents

Hancock Whitney Corporationand Subsidiaries

Consolidated Statements of ~~Changes in Stockholders’ Equity~~

~~(Unaudited)~~

Accumulated

Other

Common Stock

Capital

Retained

Comprehensive

(in thousands, except per share data)

Shares Issued

Amount

Surplus

Earnings

Loss, Net

Total
Balance, December 31, 2016

87,495

$
291,358

$
1,698,253

$
850,689

$
(120,532)

$
2,719,768
Net income

—

—

—

160,183

—

160,183
Other comprehensive income

—

—

—

—

22,381

22,381
Comprehensive income

—

—

—

160,183

22,381

182,564
Cash dividends declared ($0.72 per common share)

—

—

—

(62,400)

—

(62,400)
Common stock activity, long-term incentive plan

—

—

20,910

119

—

21,029
Issuance of stock from dividend reinvestment

—

—

2,314

—

—

2,314
Balance, September 30, 2017

87,495

$
291,358

$
1,721,477

$
948,591

$
(98,151)

$
2,863,275

Balance, December 31, 2017

87,903

$
292,716

$
1,718,117

$
1,008,518

$
(134,402)

$
2,884,949
Net income

—

—

—

227,530

—

227,530
Other comprehensive income

—

—

—

—

(85,777)

(85,777)
Comprehensive income

—

—

—

227,530

(85,777)

141,753
Cash dividends declared ($0.75 per common share)

—

—

—

(65,287)

—

(65,287)
Common stock activity, long-term incentive plan

—

—

14,832

136

—

14,968
Issuance of stock from dividend reinvestment and stock purchase plan

—

—

2,495

—

—

2,495
Balance, September 30, 2018

87,903

$
292,716

$
1,735,444

$
1,170,897

$
(220,179)

$
2,978,878

~~See notes to unaudited consolidated financial statements.~~

~~Table of Contents~~

~~Hancock Whitney Corporation and Subsidiaries~~

~~Consolidated Statements of Cash Flows~~Income

(Unaudited)

Nine Months Ended

September 30,
(in thousands)

2018

2017
CASH FLOWS FROM OPERATING ACTIVITIES:

Net income

$
227,530

$
160,183
Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

19,740

20,942
Provision for loan losses

28,016

43,982
Gain on other real estate owned

(313)

(1,865)
Deferred tax expense

20,342

8,072
Increase in cash surrender value of life insurance contracts

(6,714)

(10,855)
Loss on disposal of other assets

1,748

1,662
Loss on sale of business

1,145

—
Net decrease in loans held for sale

10,942

11,583
Net amortization of securities premium/discount

25,440

24,119
Amortization of intangible assets

16,578

16,532
Amortization of FDIC indemnification asset

—

2,427
Stock-based compensation expense

14,868

12,370
Decrease in interest payable and other liabilities

(2,662)

(5,038)
Net cash receipts from FDIC for loss share claims

—

2,300
Decrease in FDIC loss share receivable

—

8,613
Increase (decrease) in payable to FDIC for loan servicing

(11,113)

180,882
(Increase) decrease in other assets

(15,748)

11,446
Other, net

299

17,723
Net cash provided by operating activities

330,098

505,078
CASH FLOWS FROM INVESTING ACTIVITIES:

Proceeds from sales of securities available for sale

—

213,877
Proceeds from maturities of securities available for sale

253,755

249,270
Purchases of securities available for sale

(365,529)

(578,690)
Proceeds from maturities of securities held to maturity

272,986

276,073
Purchases of securities held to maturity

(375,770)

(554,442)
Net (increase) decrease in short-term investments

(15,690)

331,746
Proceeds from sales of loans and leases

47,481

44,823
Net increase in loans

(706,989)

(770,051)
Purchase of life insurance contracts

(1,601)

(50,000)
Purchases of property and equipment

(32,583)

(16,086)
Proceeds from sales of property and equipment

52

389
Proceeds from sales of other real estate

10,114

15,357
Cash received in excess of cash paid for acquisitions

141,769

476,801
Proceeds from the sale of business, net of cash sold

77,648

—
Other, net

(50,987)

(28,976)
Net cash used in investing activities

(745,344)

(389,909)
CASH FLOWS FROM FINANCING ACTIVITIES:

Net increase (decrease) in deposits

(52,709)

181,084
Net increase (decrease) in short-term borrowings

572,757

(84,890)
Repayments of long-term debt

(90,142)

(198,690)
Net proceeds from issuance of long-term debt

124

124
Dividends paid

(65,287)

(62,400)
Payroll tax remitted on net share settlement of equity awards

(563)

(3,235)
Proceeds from exercise of stock options

1,232

11,610
Proceeds from dividend reinvestment and stock purchase plans

2,495

2,314
Net cash provided by (used in) financing activities

367,907

(154,083)
NET DECREASE IN CASH AND DUE FROM BANKS

(47,339)

(38,914)
CASH AND DUE FROM BANKS, BEGINNING

386,948

372,689
CASH AND DUE FROM BANKS, ENDING

$
339,609

$
333,775
SUPPLEMENTAL INFORMATION FOR NON-CASH

INVESTING AND FINANCING ACTIVITIES

Assets acquired in settlement of loans

$
19,542

$
4,770

	Three Months Ended
	March 31,
(in thousands, except per share data)	2019			2018
Interest income:
Loans, including fees	$	238,282		$	205,847
Loans held for sale		253			221
Securities-taxable		31,139			29,301
Securities-tax exempt		5,446			5,537
Short-term investments		1,163			489
Total interest income		276,283			241,395
Interest expense:
Deposits		46,138			26,959
Short-term borrowings		8,082			5,351
Long-term debt		2,809			3,421
Total interest expense		57,029			35,731
Net interest income		219,254			205,664
Provision for loan losses		18,043			12,253
Net interest income after provision for loan losses		201,211			193,411
Noninterest income:
Service charges on deposit accounts		20,367			21,448
Trust fees		15,124			11,335
Bank card and ATM fees		15,290			14,458
Investment and annuity fees and insurance commissions		6,528			6,125
Secondary mortgage market operations		3,726			3,401
Other income		9,468			9,485
Total noninterest income		70,503			66,252
Noninterest expense:
Compensation expense		83,968			80,100
Employee benefits		19,730			19,874
Personnel expense		103,698			99,974
Net occupancy expense		11,984			11,010
Equipment expense		4,679			3,546
Data processing expense		19,331			16,449
Professional services expense		8,168			9,255
Amortization of intangible assets		5,138			5,618
Deposit insurance and regulatory fees		5,406			7,948
Other real estate (income) expense		(991	)		210
Other expense		18,287			16,781
Total noninterest expense		175,700			170,791
Income before income taxes		96,014			88,872
Income taxes		16,850			16,397
Net income	$	79,164		$	72,475
Earnings per common share-basic	$	0.91		$	0.83
Earnings per common share-diluted	$	0.91		$	0.83
Dividends paid per share	$	0.27		$	0.24
Weighted average shares outstanding-basic		85,688			85,241
Weighted average shares outstanding-diluted		85,800			85,423

See notes to unaudited consolidated financial statements.

Table of Contents

Hancock Whitney Corporationand Subsidiaries

Consolidated Statements of Comprehensive Income

(Unaudited)

	Three Months Ended
	March 31,
(in thousands)	2019		2018
Net income	$	79,164	$	72,475
Other comprehensive income/loss before income taxes:
Net change in unrealized gain/loss on securities available for sale and cash flow hedges		57,243		(62,244	)
Reclassification of net losses realized and included in earnings		4,219		1,796
Amortization of unrealized net loss on securities transferred to held to maturity		591		755
Other comprehensive income/loss before income taxes		62,053		(59,693	)
Income tax expense (benefit)		13,853		(13,546	)
Other comprehensive income/loss net of income taxes		48,200		(46,147	)
Comprehensive income	$	127,364	$	26,328

See notes to unaudited consolidated financial statements.

Table of Contents

Hancock Whitney Corporationand Subsidiaries

Consolidated Statements of Changes in Stockholders’ Equity

(Unaudited)

										Accumulated
	Common Stock									Other
(in thousands, except per share data)	Shares Issued		Amount		Capital Surplus		Retained Earnings			Comprehensive Loss, Net			Total
Balance, December 31, 2017		87,903	$	292,716	$	1,718,117	$	1,008,518		$	(134,402	)	$	2,884,949
Net income		—		—		—		72,475			—			72,475
Other comprehensive loss		—		—		—		—			(46,147	)		(46,147	)
Comprehensive income		—		—		—		72,475			(46,147	)		26,328
Cash dividends declared ($0.24 per common share)		—		—		—		(20,881	)		—			(20,881	)
Common stock activity, long-term incentive plan		—		—		4,735		70			—			4,805
Issuance of stock from dividend reinvestment and stock purchase plans		—		—		837		—			—			837
Balance, March 31, 2018		87,903	$	292,716	$	1,723,689	$	1,060,182		$	(180,549	)	$	2,896,038

Balance, December 31, 2018		87,903	$	292,716	$	1,725,741	$	1,243,592		$	(180,709	)	$	3,081,340
Net income		—		—		—		79,164			—			79,164
Other comprehensive income		—		—		—		—			48,200			48,200
Comprehensive income		—		—		—		79,164			48,200			127,364
Cash dividends declared ($0.27 per common share)		—		—		—		(23,581	)		—			(23,581	)
Common stock activity, long-term incentive plan		—		—		4,528		45			—			4,573
Issuance of stock from dividend reinvestment and stock purchase plans		—		—		879		—			—			879
Balance, March 31, 2019		87,903	$	292,716	$	1,731,148	$	1,299,220		$	(132,509	)	$	3,190,575

See notes to unaudited consolidated financial statements.

Table of Contents

Hancock Whitney Corporationand Subsidiaries

Consolidated Statements of Cash Flows

(Unaudited)

	Three Months Ended
	March 31,
(in thousands)	2019			2018
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	79,164		$	72,475
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		7,516			6,551
Provision for loan losses		18,043			12,253
(Gain) loss on other real estate owned		(991	)		210
Deferred tax expense		30,829			14,790
Increase in cash surrender value of life insurance contracts		(3,772	)		(3,346	)
Loss on sale of business		—			1,145
Net decrease in loans held for sale		5,714			18,172
Net amortization of securities premium/discount		7,009			8,453
Amortization of intangible assets		5,138			5,618
Stock-based compensation expense		5,181			4,883
Contribution to pension plan		(100,000	)		—
Decrease in interest payable and other liabilities		(15,478	)		(32,568	)
Decrease in payable to FDIC for loan servicing		—			(11,107	)
(Increase) decrease in other assets		(23,335	)		6,821
Other, net		(1,595	)		144
Net cash provided by operating activities		13,423			104,494
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturities of securities available for sale		55,596			80,155
Purchases of securities available for sale		(1,502	)		(142,052	)
Proceeds from maturities of securities held to maturity		79,533			93,408
Purchases of securities held to maturity		—			(134,020	)
Net (increase) decrease in short-term investments		(52,668	)		30,843
Proceeds from sales of loans and leases		42,059			12,211
Net increase in loans		(148,073	)		(196,328	)
Purchases of property and equipment		(12,435	)		(7,904	)
Proceeds from sales of property and equipment		115			42
Proceeds from sales of other real estate		4,613			1,641
Final cash settlement for acquisition of business		(1,112	)		—
Proceeds from the sale of business, net of cash sold		—			77,081
Other, net		(8,978	)		(8,915	)
Net cash used in investing activities		(42,852	)		(193,838	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposits		230,109			232,638
Net decrease in short-term borrowings		(200,393	)		(251,793	)
Repayments of long-term debt		(75	)		(5,268	)
Net proceeds from issuance of long-term debt		—			83
Dividends paid		(23,581	)		(20,881	)
Payroll tax remitted on net share settlement of equity awards		(688	)		(142	)
Proceeds from exercise of stock options		—			782
Proceeds from dividend reinvestment and stock purchase plans		879			837
Net cash provided by (used in) financing activities		6,251			(43,744	)
NET DECREASE IN CASH AND DUE FROM BANKS		(23,178	)		(133,088	)
CASH AND DUE FROM BANKS, BEGINNING		383,372			386,948
CASH AND DUE FROM BANKS, ENDING	$	360,194		$	253,860
SUPPLEMENTAL INFORMATION FOR NON-CASH
INVESTING AND FINANCING ACTIVITIES
Assets acquired in settlement of loans	$	4,273		$	1,305

See notes to unaudited consolidated financial statements.

Table of Contents

HANCOCK WHITNEY CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1. Basis of Presentation

The consolidated financial statements include the accounts of Hancock Whitney Corporation and all other entities in which it has a controlling interest (the “Company”). The financial statements include all adjustments that are, in the opinion of management, necessary to fairly state the Company’s financial condition, results of operations, changes in stockholders’ equity and cash flows for the interim periods presented. The Company has also evaluated all subsequent events for potential recognition and disclosure through the date of the filing of this Quarterly Report on Form 10-Q. Some financial information and disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the U.S. (“GAAP”) have been condensed or omitted in this Quarterly Report on Form 10-Q pursuant to Securities and Exchange Commission rules and regulations. These financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2017.~~2018. Financial information reported in these financial statements is not necessarily indicative of the Company’s financial condition, results of operations, or cash flows for any other interim or annual period.

Certain prior period amounts have been reclassified to conform to the current period presentation. These changes in presentation did not have a material impact on the Company’s financial condition or operating results.

On May 25, 2018, the Company changed its name from Hancock Holding Company to Hancock Whitney Corporation, and its wholly- owned banking subsidiary changed its name from Whitney Bank to Hancock Whitney Bank. In connection with the name change, the Company changed its stock ticker symbol from “HBHC” to “HWC” on the NASDAQ Global Select Market.

Use of Estimates

The accounting principles the Company follows and the methods for applying these principles conform to GAAP and general practices followed by the banking industry. These accounting principles require management to make estimates and assumptions about future events that affect the amounts reported in the consolidated financial statements and the accompanying notes. Actual results could differ from those estimates.

Critical Accounting Policies and Estimates

There were no material changes or developments during the reporting period with respect to methodologies that the Company uses when applying what management believes are critical accounting policies and developing critical accounting estimates as disclosed in its Annual Report on Form 10-K for the year ended December 31, ~~2017.~~2018. Refer to Note 16 – Recent Accounting Pronouncements for a discussion of accounting standards adopted during the ~~nine~~three months ended ~~September 30, 2018.~~

March 31, 2019.

2. ~~Acquisitions and Divestiture~~

Acquisition

On July 13, 2018, the Company acquired the bank-managed high net worth individual and institutional investment management and trust business of Capital One, National Association (“Capital One”). The transaction added assets under management of $4 billion and assets under management and administration of $10.4 billion to the Company’s existing trust and asset management business. In addition, the Company assumed approximately $217 million of customer deposit liabilities. The ~~net consideration received is subject to final settlement, which is expected to occur during the first quarter of 2019. The~~ following table sets forth the ~~preliminary~~ acquisition date fair value of the assets acquired and the liabilities assumed, the consideration received, and the resulting goodwill.


~~(in thousands)~~
~~ASSETS~~
~~Accounts receivable~~	$	~~2,803~~
~~Identifiable intangible assets~~		~~27,377~~
~~Total identifiable assets~~		~~30,180~~

~~LIABILITIES~~
~~Deposit liabilities~~		~~217,432~~
~~Other liabilities~~		~~151~~
~~Total liabilities~~		~~217,583~~
~~Net liabilities assumed~~		~~(187,403)~~
~~Consideration received~~		~~141,769~~
~~Goodwill~~	$	~~45,634~~

(in thousands)
ASSETS
Accounts receivable	$	2,803
Identifiable intangible assets		27,562
Total identifiable assets		30,365
LIABILITIES
Deposit liabilities		217,432
Other liabilities		151
Total liabilities		217,583
Net liabilities assumed		(187,218	)
Consideration received		140,657
Goodwill	$	46,561

~~Table of Contents~~

Identifiable intangible assets include customer relationships that are being amortized using an accelerated method based on forecasted cash flows over a useful life of approximately 17 years. Goodwill represents the excess of the fair value of net liabilities assumed over the consideration received. It is comprised of estimated future economic benefits arising from the transaction that cannot be individually identified or do not qualify for separate recognition. These benefits include expanded presence in existing markets and entry into new

Table of Contents

markets, and expected earnings streams and operational efficiencies that the Company believes will result from this business combination. The tax basis of the goodwill is ~~expected to be~~ deductible for federal income tax purposes.

The following table presents the change in the Company’s goodwill during the ~~nine~~year ended December 31, 2018 and the three months ended ~~September 30, 2018.~~

~~(in thousands)~~March 31, 2019.


~~Goodwill balance at December 31, 2017~~	$	~~745,523~~
~~Initial goodwill recorded in acquisition of trust and asset management business~~		~~45,634~~
~~Goodwill balance at September 30, 2018~~	$	~~791,157~~

(in thousands)
Goodwill balance at December 31, 2017	$	745,523
Intital goodwill recorded - acquisition of trust and asset management business		45,634
Measurement period adjustments - acquisition of trust and asset management business		(185	)
Goodwill balance at December 31, 2018	$	790,972
Final settlement of cash consideration - acquisition of trust and asset management business		1,112
Goodwill balance at March 31, 2019	$	792,084

The acquired trust and asset management business added $4.9 million in trust fee revenue and $4.8 million of expense to the Company’s results of ~~acquired business~~operations for the three months ended March 31, 2019. The results are not material to the Company’s results of ~~operations. As~~operations and, as such, supplemental proforma financial information for the ~~nine~~three months ended ~~September 30,~~March 31, 2018 ~~and 2017~~ is not presented. During the ~~nine~~three months ended ~~September 30,~~March 31, 2018, the Company incurred acquisition related costs of approximately ~~$5.7~~$0.3 million.

On March 10, 2017, the Company, through its banking subsidiary, Hancock Whitney Bank (“Hancock Whitney”), acquired certain assets and assumed certain liabilities, including nine branches, from First NBC Bank (“FNBC”), referred to as the FNBC I transaction. Hancock Whitney paid approximately $323 million in cash consideration ($326 million cash paid net of $3 million in branch cash acquired), including a $41.6 million transaction premium for the earnings stream acquired.

On April 28, 2017, the Louisiana Office of Financial Institutions (“OFI”) closed FNBC and appointed the FDIC as receiver. Hancock Whitney entered into a purchase and assumption agreement with the FDIC, referred to as the FNBC II transaction. Pursuant to the agreement, Hancock Whitney acquired selected assets and assumed selected liabilities of the former FNBC, including substantially all of the transaction and savings deposits. Hancock Whitney paid a premium of $35 million to the FDIC for the earnings stream acquired and received approximately $800 million in cash ($642 million from the FDIC for the net liabilities assumed and $158 million in branch cash acquired). The terms of the agreement require the FDIC to indemnify Hancock Whitney against certain liabilities of FNBC and its affiliates not assumed or otherwise purchased by Hancock Whitney. Neither the Company nor Hancock Whitney acquired any assets, common stock, preferred stock or debt, or assumed any other obligations, of First NBC Bank Holding Company.

On March 9, 2018, the Company sold its consumer finance subsidiary, Harrison Finance Company (“HFC”). The Company received cash of approximately $78.9 million and recorded a loss on the sale of $1.1 million.

3. Securities

The amortized cost, gross unrealized gains and losses, and estimated fair value of securities classified as available for sale and held to maturity at March 31, 2019 and December 31, 2018 follow.

Securities Available for Sale
(in thousands)	March 31, 2019								December 31, 2018
			Gross		Gross						Gross
	Amortized		Unrealized		Unrealized		Fair		Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value		Cost		Gains		Losses		Value
U.S. Treasury and government agency securities	$	73,426		—		1,283	$	72,143	$	74,339	$	—	$	2,633	$	71,706
Municipal obligations		245,707		1,833		1,600		245,940		246,713		360		6,646		240,427
Residential mortgage-backed securities		1,418,881		9,964		15,813		1,413,032		1,468,912		4,284		29,794		1,443,402
Commercial mortgage-backed securities		798,447		4,594		15,207		787,834		799,060		1,953		30,936		770,077
Collateralized mortgage obligations		158,904		1,212		1,485		158,631		163,282		903		2,260		161,925
Corporate debt securities		3,500		—		—		3,500		3,500		—		—		3,500
	$	2,698,865	$	17,603	$	35,388	$	2,681,080	$	2,755,806	$	7,500	$	72,269	$	2,691,037

																	March 31, 2019								December 31, 2018
																			Gross		Gross						Gross
Securities Available for Sale
Securities Held to Maturity																	Amortized		Unrealized		Unrealized		Fair		Amortized		Unrealized		Unrealized		Fair
(in thousands)	September 30, 2018								December 31, 2017								Cost		Gains		Losses		Value		Cost		Gains		Losses		Value
			Gross		Gross						Gross		Gross
	Amortized		Unrealized		Unrealized		Fair		Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value		Cost		Gains		Losses		Value
U.S. Treasury and government agency securities	$	94,366		—		5,054		89,312	$	99,535	$	—	$	2,263	$	97,272	$	50,000		—		317	$	49,683	$	50,000	$	—	$	478	$	49,522
Municipal obligations		243,546		95		10,928		232,713		245,997		1,135		3,346		243,786		676,651		11,247		1,726		686,172		688,201		2,347		9,503		681,045
Residential mortgage-backed securities		1,793,698		1,969		64,392		1,731,275		1,729,989		5,611		20,387		1,715,213		613,964		3,701		3,148		614,517		640,393		1,461		6,117		635,737
Commercial mortgage-backed securities		770,245		—		47,363		722,882		704,518		480		17,863		687,135		356,919		1,233		3,780		354,372		357,175		376		10,882		346,669
Collateralized mortgage obligations		143,496		—		4,993		138,503		165,518		4		1,559		163,963		1,198,908		3,285		14,027		1,188,166		1,243,778		1,598		22,493		1,222,883
Corporate debt securities		3,500		—		—		3,500		3,500		—		—		3,500
	$	3,048,851	$	2,064	$	132,730	$	2,918,185	$	2,949,057	$	7,230	$	45,418	$	2,910,869	$	2,896,442	$	19,466	$	22,998	$	2,892,910	$	2,979,547	$	5,782	$	49,473	$	2,935,856

Table of Contents

Securities Held to Maturity

(in thousands)

September 30, 2018

December 31, 2017

Gross

Gross

Gross

Gross

Amortized

Unrealized

Unrealized

Fair

Amortized

Unrealized

Unrealized

Fair

Cost

Gains

Losses

Value

Cost

Gains

Losses

Value
U.S. Treasury and government agency securities

$
50,000

—

708

49,292

$
50,000

$
—

$
289

$
49,711
Municipal obligations

699,470

355

17,809

682,016

723,094

8,323

4,245

727,172
Residential mortgage-backed securities

668,320

—

15,501

652,819

725,748

4,175

2,690

727,233
Commercial mortgage-backed securities

357,428

—

17,429

339,999

317,185

40

3,915

313,310
Collateralized mortgage obligations

1,294,044

—

42,715

1,251,329

1,161,484

572

17,472

1,144,584

$
3,069,262

$
355

$
94,162

$
2,975,455

$
2,977,511

$
13,110

$
28,611

$
2,962,010

The following tables present the amortized cost and estimated fair value of debt securities available for sale and held to maturity at ~~September 30, 2018~~March 31, 2019 by contractual maturity. Actual maturities will differ from contractual maturities because of rights to call or repay obligations with or without penalties and scheduled and unscheduled principal payments on mortgage-backed securities and collateralized mortgage obligations.



Debt Securities Available for Sale	Amortized		Fair		Amortized		Fair
(in thousands)	Cost		Value		Cost		Value
Due in one year or less	$	4,814	$	4,820	$	368	$	374
Due after one year through five years		54,339		54,077		107,225		108,866
Due after five years through ten years		1,259,696		1,196,235		1,184,905		1,175,070
Due after ten years		1,730,002		1,663,053		1,406,367		1,396,770
Total available for sale debt securities	$	3,048,851	$	2,918,185	$	2,698,865	$	2,681,080

Debt Securities Held to Maturity	Amortized		Fair
(in thousands)	Cost		Value
Due in one year or less	$	24,832	$	24,909
Due after one year through five years		130,348		127,950
Due after five years through ten years		1,452,690		1,407,279
Due after ten years		1,461,392		1,415,317
Total held to maturity securities	$	3,069,262	$	2,975,455

Debt Securities Held to Maturity	Amortized		Fair
(in thousands)	Cost		Value
Due in one year or less	$	80,915	$	80,716
Due after one year through five years		67,617		67,418
Due after five years through ten years		1,392,654		1,398,880
Due after ten years		1,355,256		1,345,896
Total held to maturity securities	$	2,896,442	$	2,892,910

The Company held no securities classified as trading at ~~September 30, 2018 or~~March 31, 2019 and December 31, ~~2017.~~2018.

The fair value and gross unrealized losses for securities classified as available for sale with unrealized losses for the periods indicated follow.



Available for Sale
September 30, 2018	Losses < 12 months				Losses 12 months or >				Total
			Gross				Gross				Gross
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
March 31, 2019													Losses < 12 months				Losses 12 months or >				Total
(in thousands)	Value		Losses		Value		Losses		Value		Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
U.S. Treasury and government agency securities	$	41,765		2,027		47,547		3,027	$	89,312	$	5,054	$	-		-		72,143		1,283	$	72,143	$	1,283
Municipal obligations		53,337		1,568		165,732		9,360		219,069		10,928		2,270		40		106,042		1,560		108,312		1,600
Residential mortgage-backed securities		652,504		11,892		1,029,004		52,500		1,681,508		64,392		640		6		852,716		15,807		853,356		15,813
Commercial mortgage-backed securities		247,504		8,368		475,379		38,995		722,883		47,363		-		-		583,978		15,207		583,978		15,207
Collateralized mortgage obligations		82,853		2,836		55,650		2,157		138,503		4,993		-		-		108,798		1,485		108,798		1,485
	$	1,077,963	$	26,691	$	1,773,312	$	106,039	$	2,851,275	$	132,730	$	2,910	$	46	$	1,723,677	$	35,342	$	1,726,587	$	35,388

Available for Sale
December 31, 2018	Losses < 12 months				Losses 12 months or >				Total
			Gross				Gross		Gross
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
(in thousands)	Value		Losses		Value		Losses		Value		Losses
U.S. Treasury and government agency securities	$	—		—	$	71,706	$	2,633	$	71,706	$	2,633
Municipal obligations		41,203		591		170,883		6,054		212,086		6,645
Residential mortgage-backed securities		305,090		2,485		762,826		27,309		1,067,916		29,794
Commercial mortgage-backed securities		96,226		1,851		570,485		29,085		666,711		30,936
Collateralized mortgage obligations		254		1		111,804		2,259		112,058		2,260
	$	442,773	$	4,928	$	1,687,704	$	67,340	$	2,130,477	$	72,268

Table of Contents

Available for Sale

December 31, 2017

Losses < 12 months

Losses 12 months or >

Total

Gross

Gross

Gross

Fair

Unrealized

Fair

Unrealized

Fair

Unrealized
(in thousands)

Value

Losses

Value

Losses

Value

Losses
U.S. Treasury and government agency securities

$
45,616

$
42

$
51,157

$
2,221

$
96,773

$
2,263
Municipal obligations

2,768

11

173,530

3,335

176,298

3,346
Residential mortgage-backed securities

461,835

4,195

898,099

16,192

1,359,934

20,387
Commercial mortgage-backed securities

203,618

995

411,046

16,868

614,664

17,863
Collateralized mortgage obligations

128,174

1,076

35,488

483

163,662

1,559

$
842,011

$
6,319

$
1,569,320

$
39,099

$
2,411,331

$
45,418

The fair value and gross unrealized losses for securities classified as held to maturity with unrealized losses for the periods indicated follow.

Held to maturity

September 30, 2018

Losses < 12 months

Losses 12 months or >

Total

Gross

Gross

Gross

Fair

Unrealized

Fair

Unrealized

Fair

Unrealized
(in thousands)

Value

Losses

Value

Losses

Value

Losses
U.S. Treasury and government agency securities

$
—

—

49,292

708

$
49,292

$
708
Municipal obligations

378,622

7,288

217,955

10,521

596,577

17,809
Residential mortgage-backed securities

454,003

6,996

198,816

8,505

652,819

15,501
Commercial mortgage-backed securities

270,664

11,146

69,335

6,283

339,999

17,429
Collateralized mortgage obligations

572,469

11,263

678,860

31,452

1,251,329

42,715

$
1,675,758

$
36,693

$
1,214,258

$
57,469

$
2,890,016

$
94,162



Held to maturity
December 31, 2017	Losses < 12 months				Losses 12 months or >				Total
Held to Maturity
March 31, 2019													Losses < 12 months				Losses 12 months or >				Total
			Gross				Gross				Gross				Gross				Gross				Gross
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized		Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
(in thousands)	Value		Losses		Value		Losses		Value		Losses		Value		Losses		Value		Losses		Value		Losses
U.S. Treasury and government agency securities	$	—	$	—	$	49,711	$	289	$	49,711	$	289	$	—		—	$	49,682	$	317	$	49,682	$	317
Municipal obligations		14,603		19		230,960		4,226		245,563		4,245		8,750		63		169,931		1,663		178,681		1,726
Residential mortgage-backed securities		8,815		99		230,277		2,591		239,092		2,690		—		—		186,221		3,148		186,221		3,148
Commercial mortgage-backed securities		174,882		744		72,499		3,171		247,381		3,915		—		—		312,296		3,780		312,296		3,780
Collateralized mortgage obligations		570,289		5,653		472,536		11,819		1,042,825		17,472		—		—		860,183		14,027		860,183		14,027
	$	768,589	$	6,515	$	1,055,983	$	22,096	$	1,824,572		28,611	$	8,750	$	63	$	1,578,313	$	22,935	$	1,587,063	$	22,998
Held to Maturity
December 31, 2018													Losses < 12 months				Losses 12 months or >				Total
															Gross		Gross				Gross
													Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
(in thousands)													Value		Losses		Value		Losses		Value		Losses
U.S. Treasury and government agency securities													$	—	$	—	$	49,521	$	478	$	49,521	$	478
Municipal obligations														233,469		2,256		233,280		7,247		466,749		9,503
Residential mortgage-backed securities														90,730		123		235,251		5,994		325,981		6,117
Commercial mortgage-backed securities														—		—		305,419		10,882		305,419		10,882
Collateralized mortgage obligations														77,394		281		897,153		22,212		974,547		22,493
													$	401,593	$	2,660	$	1,720,624	$	46,813	$	2,122,217	$	49,473

The unrealized losses relate primarily to changes in market rates on fixed rate debt securities since the respective purchase dates. In all cases, the indicated impairment on these debt securities would be recovered no later than the security’s maturity date or possibly earlier if the market price for the security increases with a reduction in the yield required by the market. None of the unrealized losses relate to the marketability of the securities or the issuers’ abilities to meet contractual obligations. The Company had adequate liquidity as of ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017~~2018 and did not intend to nor believe that it would be required to sell these securities before recovery of the indicated impairment. Accordingly, the unrealized losses on these securities were determined to be temporary. Should the Company’s intent to sell these securities change, the difference between the amortized cost and the fair value will be recognized into earnings at that time.

There were no sales of securities during the ~~nine~~three months ended ~~September 30,~~March 31, 2019 and 2018. ~~Proceeds from the sales of securities were approximately $213.9 million with no gain or loss for the nine months ended September 30, 2017.~~

Securities with carrying values totaling ~~$3.1~~$3.7 billion and ~~$3.3~~$3.4 billion at ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, respectively, were pledged as collateral, primarily to secure public deposits or securities sold under agreements to repurchase.

~~Table of Contents~~

4. Loans and Allowance for Loan Losses

The Company generally makes loans in its market areas of south Mississippi, southern and central Alabama, south Louisiana, the Houston, Texas area, the northern, central, and panhandle regions of Florida, and Nashville, Tennessee. Loans, net of unearned income, by portfolio are presented in the table below.



	September 30,		December 31,		March 31,		December 31,
(in thousands)	2018		2017		2019		2018
Commercial non-real estate	$	8,438,884	$	8,297,937	$	8,656,326	$	8,620,601
Commercial real estate - owner occupied		2,300,271		2,142,439		2,515,428		2,457,748
Total commercial and industrial		10,739,155		10,440,376		11,171,754		11,078,349
Commercial real estate - income producing		2,311,699		2,384,599		2,563,394		2,341,779
Construction and land development		1,523,419		1,373,421		1,340,067		1,548,335
Residential mortgages		2,846,916		2,690,472		2,933,251		2,910,081
Consumer		2,122,528		2,115,295		2,104,372		2,147,867
Total loans	$	19,543,717	$	19,004,163	$	20,112,838	$	20,026,411

Table of Contents

The following briefly describes the composition of each loan category.

Commercial and industrial

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

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

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

Commercial real estate – income producing

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

Construction and land development

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

Residential mortgages

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

Consumer

Consumer loans include second lien mortgage home loans, home equity lines of credit and nonresidential consumer purpose loans. Nonresidential consumer loans include both direct and indirect loans. Direct nonresidential consumer loans are made to finance the purchase of personal property, including automobiles, recreational vehicles and boats, and for other personal purposes (secured and unsecured), and deposit account secured loans. Indirect nonresidential consumer loans include automobile financing provided to the consumer through an agreement with automobile dealerships. Consumer loans also include a small portfolio of credit card receivables issued on the basis of applications received through referrals from the Bank’s branches, online and other marketing efforts.

Table of Contents

Allowance for Loan Losses

The following tables show activity in the allowance for loan losses by portfolio class for the ~~nine~~three months ended ~~September 30,~~March 31, 2019 and 2018, ~~and 2017,~~ as well as the corresponding recorded investment in loans at the end of each period. Charge-off, recovery and provision activity in the purchased credit impaired portfolio previously segregated has been collapsed into the remainder of the portfolio’s activity as it is no longer material, and ~~the respective reclassifications have been made to the prior period to conform to the current presentation.~~



			Commercial				Commercial													Commercial		Total			Commercial
	Commercial		real estate-		Total		real estate-		Construction								Commercial			real estate-		commercial			real estate-			Construction
		non-real	owner		commercial		income		and land		Residential						non-real			owner		and			income			and land			Residential
(in thousands)	estate		occupied		and industrial		producing		development		mortgages		Consumer		Total		estate			occupied		industrial			producing			development			mortgages			Consumer			Total
	Nine Months Ended September 30, 2018																Three Months Ended March 31, 2019
Allowance for loan losses:
Beginning balance	$	127,918	$	12,962	$	140,880	$	13,709	$	7,372	$	24,844	$	30,503	$	217,308	$	97,752		$	13,757	$	111,509		$	17,638		$	15,647		$	23,782		$	25,938		$	194,514
Charge-offs		(15,401)		(7,330)		(22,731)		(1,633)		(265)		(585)		(18,599)		(43,813)		(16,344	)		—		(16,344	)		(10	)		—			(406	)		(4,231	)		(20,991	)
Recoveries		13,234		282		13,516		221		68		1,854		4,028		19,687		1,926			17		1,943			2			11			162			1,004			3,122
Net provision for loan losses		(5,073)		7,203		2,130		6,288		6,248		(1,803)		15,153		28,016		14,186			33		14,219			3,173			(1,631	)		(3	)		2,285			18,043
Reduction as a result of sale of subsidiary		—		—		—		—		—		—		(6,648)		(6,648)
Ending balance	$	120,678	$	13,117	$	133,795	$	18,585	$	13,423	$	24,310	$	24,437	$	214,550	$	97,520		$	13,807	$	111,327		$	20,803		$	14,027		$	23,535		$	24,996		$	194,688
Ending balance:
Allowance:	September 30, 2018
Individually evaluated for impairment	$	23,101	$	225	$	23,326	$	285	$	1	$	163	$	131	$	23,906	$	1,775		$	205	$	1,980		$	143		$	1		$	219		$	347		$	2,690
Amounts related to purchased credit impaired loans		327		403		730		45		91		10,109		433		11,408		288			185		473			35			78			9,162			341			10,089
Collectively evaluated for impairment		97,250		12,489		109,739		18,255		13,331		14,038		23,873		179,236		95,457			13,417		108,874			20,625			13,948			14,154			24,308			181,909
Total allowance	$	120,678	$	13,117	$	133,795	$	18,585	$	13,423	$	24,310	$	24,437	$	214,550	$	97,520		$	13,807	$	111,327		$	20,803		$	14,027		$	23,535		$	24,996		$	194,688
Loans:
Individually evaluated for impairment	$	275,966	$	22,437	$	298,403	$	4,615	$	112	$	3,061	$	890	$	307,081	$	231,506		$	16,974	$	248,480		$	2,668		$	19		$	5,397		$	1,508		$	258,072
Purchased credit impaired loans		7,907		7,113		15,020		3,790		4,232		107,535		4,458		135,035		6,445			5,472		11,917			4,267			2,897			102,199			3,615			124,895
Collectively evaluated for impairment		8,155,011		2,270,721		10,425,732		2,303,294		1,519,075		2,736,320		2,117,180		19,101,601		8,418,375			2,492,982		10,911,357			2,556,459			1,337,151			2,825,655			2,099,249			19,729,871
Total loans	$	8,438,884	$	2,300,271	$	10,739,155	$	2,311,699	$	1,523,419	$	2,846,916	$	2,122,528	$	19,543,717	$	8,656,326		$	2,515,428	$	11,171,754		$	2,563,394		$	1,340,067		$	2,933,251		$	2,104,372		$	20,112,838

				Commercial			Total			Commercial
	Commercial			real estate-			commercial			real estate-			Construction
	non-real			owner			and			income			and land			Residential
(in thousands)	estate			occupied			industrial			producing			development			mortgages			Consumer			Total
	Three Months Ended March 31, 2018
Allowance for loan losses:
Beginning balance	$	127,918		$	12,962		$	140,880		$	13,709		$	7,372		$	24,844		$	30,503		$	217,308
Charge-offs		(9,335	)		(851	)		(10,186	)		—			(10	)		(192	)		(8,048	)		(18,436	)
Recoveries		4,146			88			4,234			63			29			116			1,794			6,236
Net provision for loan losses		3,877			1,421			5,298			(787	)		2,533			150			5,059			12,253
Reduction as a result of sale of subsidiary		—			—			—			—			—			—			(6,648	)		(6,648	)
Ending balance	$	126,606		$	13,620		$	140,226		$	12,985		$	9,924		$	24,918		$	22,660		$	210,713
Ending balance:
Allowance:
Individually evaluated for impairment	$	20,356		$	2,475		$	22,831		$	1,261		$	1		$	276		$	232		$	24,601
Amounts related to purchased credit impaired loans		471			495			966			576			173			11,720			612			14,047
Collectively evaluated for impairment		105,779			10,650			116,429			11,148			9,750			12,922			21,816			172,065
Total allowance	$	126,606		$	13,620		$	140,226		$	12,985		$	9,924		$	24,918		$	22,660		$	210,713
Loans:
Individually evaluated for impairment	$	323,913		$	30,318		$	354,231		$	14,071		$	113		$	8,338		$	617		$	377,370
Purchased credit impaired loans		8,510			8,384			16,894			4,361			5,843			116,409			5,876			149,383
Collectively evaluated for impairment		8,003,799			2,146,841			10,150,640			2,376,430			1,407,922			2,608,074			2,022,685			18,565,751
Total loans	$	8,336,222		$	2,185,543		$	10,521,765		$	2,394,862		$	1,413,878		$	2,732,821		$	2,029,178		$	19,092,504

Commercial

Commercial

Commercial

real estate-

Total

real estate-

Construction

non-real

owner

commercial

income

and land

Residential

(in thousands)

estate

occupied

and industrial

producing

development

mortgages

Consumer

Total

Nine Months Ended September 30, 2017
Allowance for loan losses:

Beginning balance

$
147,052

$
11,083

$
158,135

$
13,509

$
6,271

$
25,361

$
26,142

$
229,418
Charge-offs

(35,247)

(527)

(35,774)

(160)

(670)

(2,485)

(22,844)

(61,933)
Recoveries

6,442

447

6,889

655

1,050

339

5,248

14,181
Net provision for loan losses

15,895

2,556

18,451

486

(70)

4,163

20,952

43,982
Decrease in FDIC loss share receivable

(47)

—

(47)

—

—

(2,344)

(135)

(2,526)
Ending balance

$
134,095

$
13,559

$
147,654

$
14,490

$
6,581

$
25,034

$
29,363

$
223,122
Ending balance:

Allowance:

Individually evaluated for impairment

$
20,880

$
477

$
21,357

$
1,321

$
1

$
406

$
405

$
23,490
Amounts related to purchased credit impaired loans

417

784

1,201

199

254

12,795

863

15,312
Collectively evaluated for impairment

112,798

12,298

125,096

12,970

6,326

11,833

28,095

184,320
Total allowance

$
134,095

$
13,559

$
147,654

$
14,490

$
6,581

$
25,034

$
29,363

$
223,122
Loans:

Individually evaluated for impairment

$
271,024

$
6,351

$
277,375

$
14,295

$
480

$
8,942

$
1,306

$
302,398
Purchased credit impaired loans

20,186

13,021

33,207

5,353

6,670

123,244

7,637

176,111
Collectively evaluated for impairment

7,838,219

2,056,642

9,894,861

2,492,160

1,365,898

2,464,506

2,090,351

18,307,776
Total loans

$
8,129,429

$
2,076,014

$
10,205,443

$
2,511,808

$
1,373,048

$
2,596,692

$
2,099,294

$
18,786,285

Table of Contents

Impaired Loans

The following table shows the composition of nonaccrual loans by portfolio class. Purchased credit impaired loans accounted for in pools with an accretable yield are considered to be performing and are excluded from the table.



	September 30,		December 31,		March 31,		December 31,
(in thousands)	2018		2017		2019		2018
Commercial non-real estate	$	126,429	$	152,863	$	126,992	$	110,653
Commercial real estate - owner occupied		20,719		25,989		14,466		16,895
Total commercial and industrial		147,148		178,852		141,458		127,548
Commercial real estate - income producing		3,941		14,574		4,205		4,991
Construction and land development		3,249		3,807		2,013		2,146
Residential mortgages		31,732		40,480		39,275		35,866
Consumer		15,576		15,087		17,880		16,744
Total loans	$	201,646	$	252,800	$	204,831	$	187,295

Nonaccrual loans include nonaccruing loans modified in troubled debt restructurings (“TDRs”) of ~~$92.7~~$105.9 million and ~~$99.2~~$85.5 million at ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, respectively. Total TDRs, both accruing and nonaccruing, were ~~$254.9~~$223.4 million at ~~September 30, 2018~~March 31, 2019 and ~~$219.7~~$224.6 million at December 31, ~~2017.~~2018. All TDRs are individually evaluated for impairment. At ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, the Company had unfunded commitments of ~~$8.2~~$8.5 million and ~~$7.3~~$2.1 million, respectively, to borrowers whose loan terms have been modified in a TDR.

The tables below detail by portfolio class TDRs that were modified during the three ~~and nine~~ months ended ~~September 30, 2018~~March 31, 2019 and ~~2017:~~

2018:

Three Months Ended
($ in thousands)

September 30, 2018

September 30, 2017

Pre-Modification

Post-Modification

Pre-Modification

Post-Modification

Number

Outstanding

Outstanding

Number

Outstanding

Outstanding

of

Recorded

Recorded

of

Recorded

Recorded
Troubled Debt Restructurings:

Contracts

Investment

Investment

Contracts

Investment

Investment
Commercial non-real estate

11

$
23,347

$
23,347

13

42,148

42,148

Commercial real estate - owner occupied

1

229

229

—

—

—

Total commercial and industrial

12

23,576

23,576

13

42,148

42,148

Commercial real estate - income producing

—

—

—

—

—

—

Construction and land development

—

—

—

—

—

—

Residential mortgages

8

930

930

7

970

970

Consumer

6

89

89

—

—

—

Total loans

26

$
24,595

$
24,595

20

43,118

43,118



	Nine Months Ended												Three Months Ended
($ in thousands)		September 30, 2018						September 30, 2017					March 31, 2019						March 31, 2018
			Pre-Modification		Post-Modification				Pre-Modification		Post-Modification				Pre- Modification		Post- Modification				Pre- Modification		Post- Modification
		Number	Outstanding		Outstanding			Number	Outstanding		Outstanding		Number		Outstanding		Outstanding		Number		Outstanding		Outstanding
		of	Recorded		Recorded			of	Recorded		Recorded		of		Recorded		Recorded		of		Recorded		Recorded
Troubled Debt Restructurings:		Contracts	Investment		Investment		Contracts		Investment		Investment		Contracts		Investment		Investment		Contracts		Investment		Investment
Commercial non-real estate		29	$	85,306	$	85,306		50	$	135,926	$	135,926		7	$	13,803	$	13,803		13	$	55,482	$	55,482
Commercial real estate - owner occupied		2		6,138		6,138		4		3,734		3,734		1		167		167		1		5,909		5,909
Total commercial and industrial		31		91,444		91,444		54		139,660		139,660		8		13,970		13,970		14		61,391		61,391
Commercial real estate - income producing		1		1,564		1,564		5		5,684		5,684		—		—		—		1		1,564		1,564
Construction and land development		—		—		—		—		—		—		—		—		—		1		43		43
Residential mortgages		11		1,048		1,048		13		2,068		2,068		5		1,264		1,264		—		—		—
Consumer		7		311		311		1		40		42		2		46		46		1		222		222
Total loans		50	$	94,367	$	94,367		73	$	147,452	$	147,454		15	$	15,280	$	15,280		17	$	63,220	$	63,220

The TDRs modified during the ~~nine~~three months ended ~~September 30, 2018~~March 31, 2019 reflected in the table above include ~~$50.7~~$0.1 million of loans with extended amortization terms or other payment concessions, $8.8 million with significant covenant waivers and $6.4 million with other modifications. The TDRs modified during the three months ended March 31, 2018 include $48.4 million of loans with extended amortization terms or other payment concessions, $14.6 million with significant covenant waivers and $29.1 million with other modifications. The TDRs modified during the nine months ended September 30, 2017 include $96.1 million of loans with extended amortization terms or other payment concessions, $50.1 million with significant covenant waivers and $1.3$0.2 million with other modifications.

~~Table of Contents~~

One residential mortgage totaling $0.2 million and one owner-occupied commercial real estate loan totaling $1.9 million that defaulted during the nine months ended September 30, 2018 were modified in TDRs during the twelve months prior to default. There were no defaults on loans during the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2019 or 2018 that had been modified in a TDR during the prior twelve months.

Table of Contents

The tables below present loans that are individually evaluated for impairment disaggregated by portfolio class at ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017.~~2018. Loans individually evaluated for impairment include TDRs and loans that are determined to be impaired and have aggregate relationship balances of $1 million or more.



	September 30, 2018
		Recorded investment		Recorded investment		Unpaid			March 31, 2019
(in thousands)		without an allowance		with an allowance		principal balance		Related allowance	Recorded investment without an allowance		Recorded investment with an allowance		Unpaid principal balance		Related allowance
Commercial non-real estate	$	140,504	$	135,462	$	293,012	$	23,101	$	158,767	$	72,739	$	278,392	$	1,775
Commercial real estate - owner occupied		13,259		9,178		26,787		225		10,442		6,532		20,888		205
Total commercial and industrial		153,763		144,640		319,799		23,326		169,209		79,271		299,280		1,980
Commercial real estate - income producing		2,977		1,638		5,474		285		1,130		1,538		3,403		143
Construction and land development		100		12		112		1		-		19		20		1
Residential mortgages		1,482		1,579		3,609		163		3,630		1,767		5,942		219
Consumer		279		611		1,136		131		471		1,037		1,753		347
Total loans	$	158,601	$	148,480	$	330,130	$	23,906	$	174,440	$	83,632	$	310,398	$	2,690


	December 31, 2017
		Recorded investment		Recorded investment		Unpaid
(in thousands)		without an allowance		with an allowance		principal balance		Related allowance
Commercial non-real estate	$	116,682	$	151,199	$	285,685	$	16,129
Commercial real estate - owner occupied		16,927		4,564		24,829		793
Total commercial and industrial		133,609		155,763		310,514		16,922
Commercial real estate - income producing		5,101		10,429		15,687		1,326
Construction and land development		100		263		363		11
Residential mortgages		8,245		2,395		13,855		189
Consumer		—		1,292		1,294		118
Total loans	$	147,055	$	170,142	$	341,713	$	18,566

	December 31, 2018
(in thousands)	Recorded investment without an allowance		Recorded investment with an allowance		Unpaid principal balance		Related allowance
Commercial non-real estate	$	144,625	$	94,759	$	273,290	$	3,636
Commercial real estate - owner occupied		13,027		8,639		25,888		607
Total commercial and industrial		157,652		103,398		299,178		4,243
Commercial real estate - income producing		1,138		1,563		3,428		210
Construction and land development		100		21		121		1
Residential mortgages		2,058		1,818		4,421		444
Consumer		279		728		1,253		216
Total loans	$	161,227	$	107,528	$	308,401	$	5,114

~~Table of Contents~~

The tables below present the average balances and interest income for total impaired loans for the three ~~and nine~~ months ended ~~September 30, 2018~~March 31, 2019 and ~~2017.~~2018. Interest income recognized represents interest on accruing loans modified in a TDR.

Three Months Ended

September 30, 2018

September 30, 2017
(in thousands)

Average
Recorded
Investment

Interest
Income
Recognized

Average
Recorded
Investment

Interest
Income
Recognized
Commercial non-real estate

$
283,519

$
2,275

$
260,640

$
872
Commercial real estate - owner occupied

24,702

90

6,916

24
Total commercial and industrial

308,221

2,365

267,556

896
Commercial real estate - income producing

6,718

15

14,604

35
Construction and land development

113

—

663

1
Residential mortgages

3,397

4

6,204

7
Consumer

745

10

1,179

4
Total loans

$
319,194

$
2,394

$
290,206

$
943



	Nine Months Ended								Three Months Ended
	September 30, 2018				September 30, 2017				March 31, 2019				March 31, 2018
(in thousands)	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
Commercial non-real estate	$	295,636	$	5,863	$	251,129	$	1,806	$	235,445	$	1,696	$	295,897	$	1,586
Commercial real estate - owner occupied		26,416		258		5,895		46		19,320		80		25,905		66
Total commercial and industrial		322,052		6,121		257,024		1,852		254,765		1,776		321,802		1,652
Commercial real estate - income producing		10,988		64		14,449		112		2,685		7		14,801		25
Construction and land development		155		—		1,216		1		70		—		238		—
Residential mortgages		6,307		14		4,449		12		4,637		5		9,489		5
Consumer		769		28		1,644		9		1,258		16		955		9
Total loans	$	340,271	$	6,227	$	278,782	$	1,986	$	263,415	$	1,804	$	347,285	$	1,691

Table of Contents

Aging Analysis

The tables below present the age analysis of past due loans by portfolio class at ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017.~~2018. Purchased credit impaired loans accounted for in pools with an accretable yield are considered to be current.

March 31, 2019	30-59 days past due		60-89 days past due		Greater than 90 days past due		Total past due		Current		Total Loans		Recorded investment > 90 days and still accruing
(in thousands)
Commercial non-real estate	$	19,036	$	2,527	$	69,249	$	90,812	$	8,565,514	$	8,656,326	$	13,920
Commercial real estate - owner occupied		4,543		561		16,336		21,440		2,493,988		2,515,428		3,937
Total commercial and industrial		23,579		3,088		85,585		112,252		11,059,502		11,171,754		17,857
Commercial real estate - income producing		6,124		-		5,854		11,978		2,551,416		2,563,394		1,876
Construction and land development		8,328		186		1,757		10,271		1,329,796		1,340,067		721
Residential mortgages		39,534		8,045		19,299		66,878		2,866,373		2,933,251		679
Consumer		15,738		4,120		9,225		29,083		2,075,289		2,104,372		660
Total	$	93,303	$	15,439	$	121,720	$	230,462	$	19,882,376	$	20,112,838	$	21,793

Recorded

Greater than

investment

30-59 days

60-89 days

90 days

Total

Total

> 90 days and
September 30, 2018

past due

past due

past due

past due

Current

Loans

still accruing
(in thousands)

Commercial non-real estate

$
10,752

$
26,454

$
116,791

$
153,997

$
8,284,887

$
8,438,884

$
27,606
Commercial real estate - owner occupied

2,001

459

16,377

18,837

2,281,434

2,300,271

641
Total commercial and industrial

12,753

26,913

133,168

172,834

10,566,321

10,739,155

28,247
Commercial real estate - income producing

1,541

198

6,371

8,110

2,303,589

2,311,699

1,830
Construction and land development

11,976

1,532

2,044

15,552

1,507,867

1,523,419

78
Residential mortgages

36,632

11,976

18,006

66,614

2,780,302

2,846,916

—
Consumer

14,582

4,919

9,162

28,663

2,093,865

2,122,528

371
Total

$
77,484

$
45,538

$
168,751

$
291,773

$
19,251,944

$
19,543,717

$
30,526

~~Table of Contents~~



													Recorded
					Greater than								investment
	30-59 days		60-89 days		90 days		Total				Total		> 90 days and
December 31, 2017	past due		past due		past due		past due		Current		Loans		still accruing
December 31, 2018															30-59 days past due		60-89 days past due		Greater than 90 days past due		Total past due		Current		Total Loans		Recorded investment > 90 days and still accruing
(in thousands)
Commercial non-real estate	$	62,766	$	10,761	$	92,982	$	166,509	$	8,131,428	$	8,297,937	$	21,989	$	12,257	$	3,895	$	77,551	$	93,703	$	8,526,898		8,620,601	$	10,823
Commercial real estate - owner occupied		8,493		648		15,517		24,658		2,117,781		2,142,439		2,032		2,394		1,570		14,542		18,506		2,439,242		2,457,748		380
Total commercial and industrial		71,259		11,409		108,499		191,167		10,249,209		10,440,376		24,021		14,651		5,465		92,093		112,209		10,966,140		11,078,349		11,203
Commercial real estate - income producing		5,315		2,165		6,081		13,561		2,371,038		2,384,599		489		2,371		772		5,495		8,638		2,333,141		2,341,779		1,844
Construction and land development		4,113		1,056		3,412		8,581		1,364,840		1,373,421		477		7,397		1,129		2,165		10,691		1,537,644		1,548,335		644
Residential mortgages		33,621		10,554		30,537		74,712		2,615,760		2,690,472		2,208		32,869		14,706		23,175		70,750		2,839,331		2,910,081		—
Consumer		22,959		7,816		8,553		39,328		2,075,967		2,115,295		571		20,402		4,695		9,665		34,762		2,113,105		2,147,867		618
Total	$	137,267	$	33,000	$	157,082	$	327,349	$	18,676,814	$	19,004,163	$	27,766	$	77,690	$	26,767	$	132,593	$	237,050	$	19,789,361	$	20,026,411	$	14,309

Credit Quality Indicators

The following tables present the credit quality indicators by segments and portfolio class of loans at ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017.~~ 2018.

	March 31, 2019
(in thousands)	Commercial non-real estate		Commercial real estate - owner- occupied		Total commercial and industrial		Commercial real estate - income producing		Construction and land development		Total commercial
Grade:
Pass	$	8,028,706	$	2,342,948	$	10,371,654	$	2,450,517	$	1,319,519	$	14,141,690
Pass-Watch		166,406		91,434		257,840		81,718		9,743		349,301
Special Mention		62,830		16,159		78,989		10,760		890		90,639
Substandard		398,384		64,887		463,271		20,399		9,915		493,585
Doubtful		—		—		—		—		—		—
Total	$	8,656,326	$	2,515,428	$	11,171,754	$	2,563,394	$	1,340,067	$	15,075,215

Table of Contents



	September 30, 2018												December 31, 2018
(in thousands)	Commercial non-real estate		Commercial real estate - owner-occupied		Total commercial and industrial		Commercial real estate - income producing		Construction and land development		Total commercial		Commercial non-real estate		Commercial real estate - owner- occupied		Total commercial and industrial		Commercial real estate - income producing		Construction and land development		Total commercial
Grade:
Pass	$	7,593,629	$	2,106,568	$	9,700,197	$	2,211,829	$	1,473,080	$	13,385,106	$	7,875,588	$	2,274,211	$	10,149,799		2,265,087	$	1,487,599	$	13,902,485
Pass-Watch		201,226		70,831		272,057		46,155		37,100		355,312		260,510		84,271		344,781		46,535		49,099		440,415
Special Mention		89,825		34,133		123,958		26,086		952		150,996		75,752		23,149		98,901		5,510		816		105,227
Substandard		554,184		88,739		642,923		27,629		12,287		682,839		408,751		76,117		484,868		24,647		10,821		520,336
Doubtful		20		—		20		—		—		20		—		—		—		—		—		—
Total	$	8,438,884	$	2,300,271	$	10,739,155	$	2,311,699	$	1,523,419	$	14,574,273	$	8,620,601	$	2,457,748	$	11,078,349	$	2,341,779	$	1,548,335	$	14,968,463

	December 31, 2017
(in thousands)	Commercial non-real estate		Commercial real estate - owner-occupied		Total commercial and industrial		Commercial real estate - income producing		Construction and land development		Total commercial
Grade:
Pass	$	7,190,604	$	1,896,366	$	9,086,970	$	2,223,245	$	1,291,638	$	12,601,853
Pass-Watch		293,069		82,913		375,982		83,444		60,804		520,230
Special Mention		80,649		27,456		108,105		13,244		4,788		126,137
Substandard		733,558		135,704		869,262		64,658		16,191		950,111
Doubtful		57		—		57		8		—		65
Total	$	8,297,937	$	2,142,439	$	10,440,376	$	2,384,599	$	1,373,421	$	14,198,396



	September 30, 2018						December 31, 2017						March 31, 2019						December 31, 2018
(in thousands)	Residential mortgage		Consumer		Total		Residential mortgage		Consumer		Total		Residential mortgage		Consumer		Total		Residential mortgage		Consumer		Total
Performing	$	2,815,184	$	2,106,581	$	4,921,765	$	2,647,784	$	2,099,637	$	4,747,421	$	2,893,635	$	2,085,456	$	4,979,091	$	2,873,669	$	2,130,395	$	5,004,064
Nonperforming		31,732		15,947		47,679		42,688		15,658		58,346		39,616		18,916		58,532		36,412		17,472		53,884
Total	$	2,846,916	$	2,122,528	$	4,969,444	$	2,690,472	$	2,115,295	$	4,805,767	$	2,933,251	$	2,104,372	$	5,037,623	$	2,910,081	$	2,147,867	$	5,057,948

Below are the definitions of the Company’s internally assigned grades:

Commercial:

~~Pass – loans properly approved, documented, collateralized, and performing which do not reflect an abnormal credit risk.~~

Pass – loans properly approved, documented, collateralized, and performing which do not reflect an abnormal credit risk.

Pass-Watch – credits in this category are of sufficient risk to cause concern. This category is reserved for credits that display negative performance trends. The “Watch” grade should be regarded as a transition category.

Special Mention – a criticized asset category defined as having potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may, at some future date, result in the deterioration of the repayment prospects for the credit or the institution’s credit position. Special mention credits are not considered part of the Classified credit categories and do not expose the institution to sufficient risk to warrant adverse classification.

Substandard – an asset that is inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any. Assets so classified must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

Doubtful – an asset that has all the weaknesses inherent in one classified Substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

Loss – credits classified as Loss are considered uncollectable and are charged off promptly once so classified.

Residential and Consumer:

19Performing – accruing loans that have not been modified in a troubled debt restructuring.

Nonperforming – loans for which there are good reasons to doubt that payments will be made in full. All loans with nonaccrual status and all loans that have been modified in a troubled debt restructuring are classified as nonperforming.

Table of Contents

~~Loss – credits classified as Loss are considered uncollectable and are charged off promptly once so classified.~~

~~Residential and Consumer:~~

~~Performing – loans on which payments of principal and interest are less than 90 days past due.~~

Nonperforming – a nonperforming loan is a loan that is in default or close to being in default and there are good reasons to doubt that payments will be made in full. All loans rated as nonaccrual loans are also classified as nonperforming.

Purchased Credit Impaired Loans

Changes in the carrying amount of purchased credit impaired loans and related accretable yield are presented in the following table for the ~~nine~~three months ended ~~September 30, 2018~~March 31, 2019 and the year ended December 31, ~~2017.~~

2018.



	September 30, 2018				December 31, 2017
	Carrying				Carrying
	Amount		Accretable		Amount		Accretable		March 31, 2019						December 31, 2018
(in thousands)	of Loans		Yield		of Loans		Yield		Carrying Amount of Loans			Accretable Yield			Carrying Amount of Loans			Accretable Yield
Balance at beginning of period	$	153,403	$	62,517	$	190,915	$	113,686	$	129,596		$	37,294		$	153,403		$	62,517
Addition of cost recovery loans - FNBC I		—		—		15,000		—
Payments received, net		(30,448)		(4,564)		(69,591)		(7,412)		(8,286	)		(1,100	)		(39,556	)		(5,779	)
Accretion		12,080		(12,080)		17,079		(17,079)		3,584			(3,584	)		15,749			(15,749	)
Decrease in expected cash flows based on actual cash flows and changes in cash flow assumptions		—		(2,801)		—		(30,379)		—			(872	)		—			(3,695	)
Net transfers from nonaccretable difference to accretable yield		—		—		—		3,701
Balance at end of period	$	135,035	$	43,072	$	153,403	$	62,517	$	124,894		$	31,738		$	129,596		$	37,294

Certain of the Company’s purchased credit impaired loans were covered by a loss share agreement with the FDIC. The agreement was terminated by the Company during the third quarter of 2017. Prior to termination, the Company carried a receivable from the FDIC representing an indemnification asset arising from the agreement. The receivable was accounted for separately from the covered loans as the agreement was not contractually part of the loans and were not transferrable should the Company have disposed of the loans.

Residential Mortgage Loans in Process of Foreclosure

Included in loans are ~~$6.9~~$7.3 million and ~~$7.5~~$7.1 million of consumer loans secured by single family residential real estate that are in process of foreclosure as of ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, respectively. Loans in process of foreclosure include those for which formal foreclosure proceedings are in process according to local requirements of the applicable jurisdiction. In addition to the single family residential real estate loans in process of foreclosure, the Company also held ~~$1.9~~$2.2 million and ~~$3.4~~$1.8 million of foreclosed single family residential properties in other real estate owned ~~as of September 30, 2018~~at March 31, 2019 and December 31, ~~2017,~~2018, respectively.

5. Operating Leases

Effective January 1, 2019, the Company adopted the amended provisions of Financial Accounting Standards Codification Topic 842, “Leases,” using the modified retrospective approach, impacting the reporting and disclosures for operating leases. The core principle of Topic 842 is that a lessee should recognize in the statement of financial position a liability representing the present value of future lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset over the lease term, as well as the disclosure of key information about operating leasing arrangements.

The Company has amended its accounting policy related to leases to comply with the new standard as follows. The Company determines if an arrangement is a lease at inception of the contract and assesses the appropriate classification as finance or operating. Operating leases with terms greater than one year are included in right-of-use lease assets and lease obligations on the Company’s balance sheets. The lease term includes payments to be made in optional or renewal periods only if the lessee is reasonably certain to exercise an option to extend the lease or not to exercise an option to terminate the lease. Right-of-use assets represent the right to use an underlying asset for the lease term and lease liabilities represent the obligation to make lease payments arising from the lease. Operating lease right-of-use assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term using the interest rate implicit in the contract, when available, or the Company’s incremental collateralized borrowing rate with similar terms. Agreements with both lease and non-lease components are accounted for separately, with only the lease component capitalized. The right-of-use asset is the amount of the lease liability adjusted for prepaid or accrued lease payments, remaining balance of any lease incentives received, unamortized initial direct costs, and impairment. Lease expense is recorded on a straight-line basis over the lease term through amortization of the right-of-use asset plus implicit interest accreted on the operating lease liability obligation, and is reflected in Net Occupancy Expense in the Consolidated Statement of Income.

Some of the Company’s leases contain variable components, such as annual changes to rent based on the consumer price index. Operating lease liabilities are not re-measured as a result of changes to variable components unless the lease must be re-measured for some other reason such as a renewal that was not reasonably certain of being exercised. Changes to the variable components are treated as variable lease payments and recognized in the period in which the obligation for those payments was incurred.

The standard provides several practical expedients available for use in transition. The Company elected to use the standard’s “package of practical expedients,” which allows the use of previous conclusions about lease identification, lease classification and the accounting treatment for initial direct costs. The Company also elected the short-term lease recognition exemption for all leases with lease terms of one year or less; as such, the Company will not recognize right-of-use assets or lease liabilities on the consolidated balance sheet for such leases. The Company valued its lease obligation using incremental collateralized borrowing rates as of January 1, 2019 for the remaining term of each identified lease. At adoption, the Company recorded a right-of-use asset totaling $115.9 million and a liability for lease payment obligations totaling $130.7 million, offset by the elimination of $14.8 million of existing lease incentive and other deferred rent liabilities. Accounting for leases in accordance with Topic 842 has not had a material impact upon the consolidated results of operations, and is not expected to in future periods.

Table of Contents

5.The Company has operating leases on a number of its branches, certain regional headquarters and other properties to limit its exposure to ownership risks such as fluctuations in real estate prices and obsolescence. The Company leases real estate with lease terms generally from five to 20 years, some of which have renewal options from one to 20 years. As these extension options are not generally considered reasonably certain of renewal, they are not included in the lease term. The Company is not a lessee in any contracts classified as finance leases.

Supplemental balance sheet information pertaining to operating leases:

(dollars in thousands)	Three months ended March 31, 2019
Cash paid for amounts included in the measurement of lease liabilities for operating leases	$	4,007
Right of use assets obtained in exchange for lease liabilities	$	116,618

	March 31, 2019
Weighted average remaining lease term (in years)		13.12
Weighted average discount rate		3.56	%

The following table sets forth the maturities of the Company’s lease liabilities and the present value discount at March 31, 2019.

(in thousands)
2019	$	12,198
2020		15,421
2021		14,587
2022		14,391
2023		13,109
Thereafter		95,414
Total	$	165,120
Present value discount		(36,626	)
Lease liability	$	128,494

The following table sets forth the components of the Company’s lease expense for the three months ended March 31, 2019.

(in thousands)
Operating lease expense	$	4,253
Short-term lease expense		19
Variable lease expense		12
Sublease income		(116	)
Total	$	4,168

6. Securities Sold under Agreements to Repurchase

Included in short-term borrowings are customer securities sold under agreements to repurchase (“repurchase agreements”) that mature daily and are secured by U.S. agency securities totaling ~~$416.0~~$478.3 million and ~~$430.6~~$428.6 million at ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, respectively. The Company borrows funds on a secured basis by selling securities under agreements to repurchase, mainly in connection with treasury management services offered to its deposit customers. As the Company maintains effective control over assets sold under agreements to repurchase, the securities continue to be carried on the consolidated statements of financial condition. Because the Company acts as borrower transferring assets to the counterparty, and the agreements mature daily, the Company’s risk is limited.

~~Table of Contents~~

6.7. Derivatives

On January 1, 2018, the Company adopted the provisions of Accounting Standards Update (ASU) 2017-12, “Derivatives and Hedging,” using the modified retrospective transition approach. As a result of adoption of the update, the Company has made certain adjustments to its existing designation documentation for active hedging relationships to take advantage of specific provisions of the update. Adoption of this guidance did not have a material impact on the Company’s financial condition or results of operations. Following is a discussion of the provisions of the guidance relevant to the Company:

~~Ineffectiveness measurement and presentation~~

The provisions of the update eliminate the concept of ineffectiveness from an accounting perspective. The guidance provides that, as long as a hedging instrument is designated and the results of the effectiveness testing support that the instrument qualifies for hedge accounting treatment, there will be no periodic measurement or recognition of ineffectiveness. Rather, the full impact of hedge gains and losses will be recognized in the period in which the hedged transactions impact the entity’s earnings.

~~Presentation of reclassifications from Accumulated Other Comprehensive Income~~

The update provides that amounts in Accumulated Other Comprehensive Income that are included in the assessment of effectiveness should be reclassified into earnings in the same period in which the hedged forecasted transactions impact earnings. As such, the Company will recognize all reclassifications out of Other Comprehensive Income in the same statement of income line item in which the earnings effect of the hedged item is presented.

~~Changes to hedged risk~~

The update also states that if the designated hedged risk changes during the life of the hedging relationship, an entity may continue to apply hedge accounting as long as the hedging instrument is highly effective at achieving offsetting cash flows attributable to the revised hedged risk. Regardless of the description of the hedged transactions contained in the initial designation documentation, the Company intends to utilize this provision in the updated guidance to the extent possible.

~~Risk component hedging in fair value hedges~~

The update allows an entity to make a one-time transition election regarding the fair value measurement methodology applied to fair value hedges in place at adoption. The Company did not elect either of the one-time transition options; rather, it will continue to measure the hedged items as documented in the initial hedge documentation.

Risk Management Objective of Using Derivatives

The Company enters into derivative financial instruments to manage risks related to differences in the amount, timing, and duration of the Company’s known or expected cash receipts and its known or expected cash payments, currently related to select pools of variable rate loans and fixed rate brokered deposits. The Bank also enters into interest rate derivative agreements as a service to certain qualifying customers. The Bank manages a matched book with respect to these customer derivatives in order to minimize its net risk exposure resulting from such agreements. The Bank also enters into risk participation agreements under which it may either sell or buy

Table of Contents

credit risk associated with a customer’s performance under certain interest rate derivative contracts related to loans in which participation interests have been sold to or purchased from other banks.

~~Table of Contents~~

Fair Values of Derivative Instruments on the Balance Sheet

The table below presents the notional or contractual amounts and fair values of the Company’s derivative financial instruments as well as their classification on the consolidated balance sheets ~~as of September 30, 2018~~at March 31, 2019 and December 31, ~~2017.~~2018.

		March 31, 2019								December 31, 2018
				Derivative ⁽¹⁾								Derivative ⁽¹⁾
(in thousands)	Type of Hedge	Notional or Contractual Amount		Assets			Liabilities			Notional or Contractual Amount		Assets			Liabilities
Derivatives designated as hedging instruments:
Interest rate swaps	Cash Flow	$	975,000	$	9,765		$	4,899		$	875,000	$	3,954		$	9,173
Interest rate swaps	Fair Value		388,110		—			960			483,110		—			2,089
			1,363,110		9,765			5,859			1,358,110		3,954			11,262
Derivatives not designated as hedging instruments:
Interest rate swaps ⁽²⁾	N/A		1,373,378		28,570			30,506			1,277,404		23,670			24,669
Risk participation agreements	N/A		169,317		10			162			171,222		10			131
Forward commitments to sell residential mortgage loans	N/A		82,845		21			607			77,208		110			664
Interest rate-lock commitments on residential mortgage loans	N/A		69,931		493			1			59,119		464			67
Foreign exchange forward contracts	N/A		39,029		482			448			37,749		751			718
Visa Class B derivative contract	N/A		43,753		—			6,953			43,753		—			7,304
			1,778,253		29,576			38,677			1,666,455		25,005			33,553
Total derivatives		$	3,141,363	$	39,341		$	44,536		$	3,024,565	$	28,959		$	44,815
Less: netting adjustment ⁽³⁾					(13,514	)		(26,407	)				(11,979	)		(22,588	)
Total derivative assets/liabilities				$	25,827		$	18,129				$	16,980		$	22,227

September 30, 2018

December 31, 2017

Derivative (1)

Derivative (1)
(in thousands)

Type of Hedge

Notional or Contractual Amount

Assets

Liabilities

Notional or Contractual Amount

Assets

Liabilities
Derivatives designated as hedging instruments:

Interest rate swaps

Cash Flow

$
875,000

$
—

$
23,131

$
875,000

$
—

$
14,020
Interest rate swaps

Fair Value

483,110

—

3,408

483,110

—

2,475

1,358,110

—

26,539

1,358,110

—

16,495
Derivatives not designated as hedging instruments:

Interest rate swaps (2)

N/A

1,223,626

28,397

28,239

1,144,789

15,408

15,857
Risk participation agreements

N/A

173,066

5

56

119,951

23

109
Forward commitments to sell residential mortgage loans

N/A

79,432

882

330

80,462

1,000

290
Interest rate-lock commitments on residential mortgage loans

N/A

55,502

227

784

53,724

186

782
Foreign exchange forward contracts

N/A

38,742

1,457

1,429

42,260

2,453

2,419

1,570,368

30,968

30,838

1,441,186

19,070

19,457
Total derivatives

$
2,928,478

$
30,968

$
57,377

$
2,799,296

$
19,070

$
35,952
Less: netting adjustment (3)

(19,557)

(28,586)

(4,913)

(21,563)
Total derivative assets/liabilities

$
11,411

$
28,791

$
14,157

$
14,389

(1)

Derivative assets and liabilities are reported at fair value in other assets or other liabilities, respectively, in the consolidated balance sheets.

(2)

The notional amount represents both the customer accommodation agreements and offsetting agreements with unrelated financial ~~institutions.~~institutions

(3)

Represents balance sheet netting of derivative assets and liabilities for variation margin collateral held or placed with the same central clearing counterparty. See offsetting assets and liabilities for further information.

Cash Flow Hedges of Interest Rate Risk

The Company is party to various interest rate swap agreements designated and qualifying as cash flow hedges of the Company’s forecasted variable cash flows for pools of variable rate loans. For each agreement, the Company receives interest at a fixed rate and pays at a variable rate. During the ~~nine~~three months ended ~~September 30,~~March 31, 2018, the Company terminated five of its shorter-term swap agreements with notional amounts totaling $450 million and entered into five longer-term agreements with notional amounts totaling $450 million. The Company paid termination fees of approximately $10.6 million to settle the interest rate swap liabilities, and the resulting accumulated other comprehensive loss is being amortized over the remaining maturities of the designated instruments. Amortization of other comprehensive loss on terminated cash flow hedges totaled ~~$1.6~~$1.4 million and ~~$4.1~~$1.0 million for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2019 and 2018, respectively. The notional amounts of the swap agreements in place at ~~September 30, 2018~~March 31, 2019 expire as follows: ~~$425~~$50 million in 2021; $475 million in 2022; $350 million in 2023; and $100 million in 2024.

Fair Value Hedges of Interest Rate Risk

The Company enters into interest rate swap agreements that modify the Company’s exposure to interest rate risk by effectively converting a portion of the Company’s brokered certificates of deposit from fixed rates to variable rates. The maturities and call features of these interest rate swaps match the features of the hedged deposits. As interest rates fall, the decline in the value of the certificates of deposit is offset by the increase in the value of the interest rate swaps. Conversely, as interest rates rise, the value of the underlying hedged deposits increases, but the value of the interest rate swaps decreases, resulting in no impact on earnings. Interest expense is adjusted by the difference between the fixed and floating rates for the period the swaps are in effect.

Table of Contents

Derivatives Not Designated as Hedges

Customer interest rate derivative program

The Bank enters into interest rate derivative agreements, primarily rate swaps, with commercial banking customers to facilitate their risk management strategies. The Bank enters into offsetting agreements with unrelated financial institutions, thereby mitigating its net risk exposure resulting from such transactions. Because the interest rate derivatives associated with this program do not meet hedge accounting requirements, changes in the fair value of both the customer derivatives and the offsetting derivatives are recognized directly in earnings.

Risk participation agreements

The Bank also enters into risk participation agreements under which it may either assume or sell credit risk associated with a borrower’s performance under certain interest rate derivative contracts. In those instances where the Bank has assumed credit risk, it is not a direct counterparty to the derivative contract with the borrower and has entered into the risk participation agreement because it is a party to the related loan agreement with the borrower. In those instances in which the Bank has sold credit risk, it is the sole counterparty to the derivative contract with the borrower and has entered into the risk participation agreement because other banks participate in the related loan agreement. The Bank manages its credit risk under risk participation agreements by monitoring the creditworthiness of the borrower, based on the Bank’s normal credit review process.

Mortgage banking derivatives

The Bank also enters into certain derivative agreements as part of its mortgage banking activities. These agreements include interest rate lock commitments on prospective residential mortgage loans and forward commitments to sell these loans to investors on a best efforts delivery basis.

Customer foreign exchange forward contract derivatives

The Bank enters into foreign exchange forward derivative agreements, primarily forward foreign currency contracts, with commercial banking customers to facilitate their risk management strategies. The Bank manages its risk exposure from such transactions by entering into offsetting agreements with unrelated financial institutions. Because the foreign exchange forward contract derivatives associated with this program do not meet hedge accounting requirements, changes in the fair value of both the customer derivatives and the offsetting derivatives are recognized directly in earnings.

Visa Class B derivative contract

The Company is a member of Visa USA. During the fourth quarter of 2018, the Company sold the majority of its Visa Class B holdings, at which time it entered into a derivative agreement with the purchaser whereby the Company will make or receive cash payments whenever the conversion ratio of the Visa Class B shares into Visa Class A shares is adjusted. The conversion ratio changes when Visa deposits funds to a litigation escrow established by Visa to pay settlements for certain litigation, for which Visa is indemnified by Visa USA members. The Company is also required to make periodic financing payments to the purchaser until all of Visa’s covered litigation matters are resolved. Thus, the derivative contract extends until the end of Visa’s covered litigation matters, the timing of which is uncertain.

The contract includes a contingent accelerated termination clause based on the credit ratings of the Company. At March 31, 2019 and December 31, 2018 the fair value of the liability associated with this contract was $6.9 million and $7.3 million, respectively. Refer to Note 15 – Fair Value of Financial Instruments for discussion of the valuation inputs for this derivative liability.

Table of Contents

Effect of Derivative Instruments on the Statement of Income

The effects of derivative instruments on the consolidated statements of income for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2019 and 2018 ~~and 2017~~ are presented in the table below. For the three ~~and nine~~ months ended ~~September 30,~~March 31, 2019 and 2018, the reduction of interest income attributable to cash flow hedges includes amortization of accumulated other comprehensive loss that resulted from termination of five interest rate swap contracts.


		Three Months Ended				Nine Months Ended					Three Months Ended
		September 30,				September 30,					March 31,
Derivative Instruments:	Location of Gain (Loss) Recognized in the Statement of Income:		2018		2017		2018		2017	Location of Gain (Loss) Recognized in the Statement of Income:	2019			2018
Interest rate swaps - cash flow hedges	Interest income	$	(1,276)	$	(126)	$	(2,841)	$	(222)	Interest income	$	(2,016	)	$	(618	)
Interest rate swaps - fair value hedges	Interest expense		(725)		176		(1,371)		620	Interest expense		(988	)		(126	)
All other instruments	Other noninterest income		1,363		1,339		4,474		4,484	Other noninterest income		809			1,523
Total		$	(638)	$	1,389	$	262	$	4,882		$	(2,195	)	$	779

Credit Risk-Related Contingent Features

Certain of the Bank’s derivative instruments contain provisions allowing the financial institution counterparty to terminate the contracts in certain circumstances, such as a downgrade of the Bank’s credit ratings below specified levels, a default by the Bank on its indebtedness, or the failure of the Bank to maintain specified minimum regulatory capital ratios or its regulatory status as a well-capitalized institution. These derivative agreements also contain provisions regarding the posting of collateral by each party. ~~As of September 30, 2018,~~At March 31, 2019, the Company was not in violation of any such provisions.

~~Table of Contents~~

Offsetting Assets and Liabilities

The Bank’s derivative instruments with certain counterparties contain legally enforceable netting provisions that allow for net settlement of multiple transactions to a single amount, which may be positive, negative, or zero. Agreements with certain bilateral counterparties require both parties to maintain collateral in the event that the fair values of derivative instruments exceed established exposure thresholds. For centrally cleared derivatives, the Company is subject to initial margin posting and daily variation margin exchange with the central clearinghouses. Offsetting information in regards to all derivative assets and liabilities, including accrued interest, subject to these master netting agreements at ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017~~2018 is presented in the following tables.

(in thousands)			Gross Amounts			Net Amounts		Gross Amounts Not Offset in the Statement of Income
Description	Gross Amounts Recognized		Offset in the Statement of Income			Presented in the Statement of Income		Financial Instruments		Cash Collateral		Net Amount
As of March 31, 2019
Derivative Assets	$	17,165	$	(15,439	)	$	1,726	$	1,726	$	—	$	—
Derivative Liabilities	$	30,630	$	(26,032	)	$	4,598	$	1,726	$	6,986	$	(4,114	)

(in thousands)

Gross
Amounts

Net Amounts

Gross Amounts Not Offset in the Statement
of Income
Description

Gross
Amounts
Recognized

Offset in
the Statement
of Income

Presented in
the Statement
of Income

Financial
Instruments

Cash
Collateral

Net
Amount
As of September 30, 2018

Derivative Assets

$
26,648

$
(19,897)

$
6,751

$
309

$
—

$
6,442

Derivative Liabilities

$
26,437

$
(26,128)

$
309

$
309

$
2,263

$
(2,263)



(in thousands)			Gross Amounts		Net Amounts		Gross Amounts Not Offset in the Statement of Income								Gross Amounts			Net Amounts		Gross Amounts Not Offset in the Statement of Income
Description	Gross Amounts Recognized		Offset in the Statement of Income		Presented in the Statement of Income		Financial Instruments		Cash Collateral		Net Amount		Gross Amounts Recognized		Offset in the Statement of Income			Presented in the Statement of Income		Financial Instruments		Cash Collateral		Net Amount
As of December 31, 2017
As of December 31, 2018
Derivative Assets	$	7,155	$	(5,007)	$	2,148	$	2,148	$	—	$	—	$	16,167	$	(12,842	)	$	3,325	$	1,846	$	—	$	1,479

Derivative Liabilities	$	24,015	$	(20,077)	$	3,938	$	2,148	$	4,099	$	(2,309)	$	23,811	$	(21,651	)	$	2,160	$	1,846	$	2,871	$	(2,557	)

The Company has excess collateral compared to total exposure due to initial margin requirements for day-to-day rate volatility.

Table of Contents

8. Stockholders’ Equity

Common Shares Outstanding

Common shares outstanding excludes treasury shares totaling ~~1.1 million and 1.2~~0.9 million at ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017, respectively,~~2018, with a first-in-first-out cost basis of ~~$23.8~~$16.6 million and ~~$25.5~~$18.5 million at ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017,~~2018, respectively. Shares outstanding also excludes unvested restricted share awards totaling ~~1.5~~1.3 million at ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017.~~2018.

Stock Buyback Program

On May 24, 2018, the Company’s board of directors approved a stock buyback program that authorized the repurchase of up to 5%, or approximately 4.3 million shares, of its outstanding common stock. The approved program allows the Company to repurchase its common shares either in the open market in compliance with Rule 10b-18 promulgated under the Securities Exchange Act of 1934, as amended, or in privately negotiated transactions with non-affiliated sellers or as otherwise determined by the Company in one or more transactions, from time to time until December 31, 2019. The Company is not obligated to purchase any shares under this program, and the board of directors may terminate or amend the program at any time prior to the expiration date. As of ~~September 30, 2018, no~~March 31, 2019, 200,000 shares of the Company’s common stock had been purchased at an average price of $41.30 per share under this program.

~~Table of Contents~~

Accumulated Other Comprehensive Loss

The components of Accumulated Other Comprehensive Loss and changes in those components are presented in the following table.



	Available		HTM Securities
	for Sale		Transferred		Employee		Cash				Available for Sale Securities			HTM Securities Transferred from AFS			Employee Benefit Plans			Cash Flow Hedges			Equity Method Investment		Total
(in thousands)	Securities		from AFS		Benefit Plans		Flow Hedges		Total
Balance, December 31, 2016	$	(28,679)	$	(14,392)	$	(72,501)	$	(4,960)	$	(120,532)
Other comprehensive income (loss) before income taxes:
Net change in unrealized gain (loss)		21,026		—		—		(1,232)		19,794
Balance, December 31, 2017											$	(29,512	)	$	(14,585	)	$	(79,078	)	$	(11,227	)	$	—	$	(134,402	)
Other comprehensive income/loss before income taxes:
Net change in unrealized loss												(55,114	)		—			—			(7,130	)		—		(62,244	)
Reclassification of net loss realized and included in earnings		—		—		4,144		335		4,479		—			—			1,177			619			—		1,796
Valuation adjustment for pension plan amendment		—		—		17,315		—		17,315
Other valuation adjustments for employee benefit plan		—		—		(9,185)		—		(9,185)
Amortization of unrealized net loss on securities transferred to HTM		—		2,726		—		—		2,726		—			755			—			—			—		755
Income tax expense (benefit)		7,649		1,012		4,416		(329)		12,748		(12,508	)		171			267			(1,476	)		—		(13,546	)
Balance, September 30, 2017	$	(15,302)	$	(12,678)	$	(64,643)	$	(5,528)	$	(98,151)
Balance, December 31, 2017	$	(29,512)	$	(14,585)	$	(79,078)	$	(11,227)	$	(134,402)
Balance, March 31, 2018											$	(72,118	)	$	(14,001	)	$	(78,168	)	$	(16,262	)	$	—	$	(180,549	)
Balance, December 31, 2018											$	(50,125	)	$	(12,044	)	$	(110,247	)	$	(8,293	)	$	—	$	(180,709	)
Other comprehensive income (loss) before income taxes:
Net change in unrealized losses		(92,477)		—		—		(18,418)		(110,895)
Reclassification of net losses realized and included in earnings		—		—		3,719		2,841		6,560
Other valuation adjustments for employee benefit plan		—		—		(9,039)		—		(9,039)
Net change in unrealized gain or loss												46,984			—			—			9,475			784		57,243
Reclassification of net loss realized and included in earnings												—			—			2,203			2,016			—		4,219
Amortization of unrealized net loss on securities transferred to HTM		—		2,427		—		—		2,427		—			591			—			—			—		591
Income tax expense (benefit)		(20,985)		550		(1,205)		(3,530)		(25,170)
Balance, September 30, 2018	$	(101,004)	$	(12,708)	$	(83,193)	$	(23,274)	$	(220,179)
Income tax expense												10,623			134			498			2,598			—		13,853
Balance, March 31, 2019											$	(13,764	)	$	(11,587	)	$	(108,542	)	$	600		$	784	$	(132,509	)

Accumulated Other Comprehensive Income or Loss (“AOCI”) is reported as a component of stockholders’ equity. AOCI can include, among other items, unrealized holding gains and losses on securities available for sale (“AFS”), including the Company’s share of unrealized gains and losses reported by a partnership accounted for under the equity method, gains and losses associated with pension or other post-retirement benefits that are not recognized immediately as a component of net periodic benefit cost, and gains and losses on derivative instruments that are designated as, and qualify as, cash flow hedges. Net unrealized gains and losses on AFS securities reclassified as securities held to maturity (“HTM”) also continue to be reported as a component of AOCI and will be amortized over the estimated remaining life of the securities as an adjustment to interest income. Subject to certain thresholds, unrealized losses on employee benefit plans will be reclassified into income as pension and post-retirement costs are recognized over the remaining service period of plan participants. Accumulated gains or losses on the cash flow hedge of the variable rate loans described in Note 67 will be reclassified into income over the life of the hedge. Accumulated other comprehensive loss resulting from the terminated interest rate

Table of Contents

swaps will be amortized over the remaining maturities of the designated instruments. Gains and losses within AOCI are net of deferred income ~~taxes.~~taxes, where applicable.

The following table shows the line items of the consolidated statements of income affected by amounts reclassified from AOCI.



	Nine Months Ended					Three Months Ended
Amount reclassified from AOCI (a)	September 30,				Affected line item on	March 31,						Affected line item on
(in thousands)		2018		2017	the statement of income	2019			2018			the statement of income
Amortization of unrealized net loss on securities transferred to HTM	$	(2,427)	$	(2,726)	Interest income	$	(591	)	$	(755	)	Interest income
Tax effect		550		1,012	Income taxes		134			171		Income taxes
Net of tax		(1,877)		(1,714)	Net income		(457	)		(584	)	Net income
Amortization of defined benefit pension and post-retirement items		(3,719)		(4,144)	Other noninterest expense (b)		(2,203	)		(1,177	)	Other noninterest expense (b)
Tax effect		842		1,491	Income taxes		498			267		Income taxes
Net of tax		(2,877)		(2,653)	Net income		(1,705	)		(910	)	Net income
Reclassification of unrealized gain on cash flow hedges		1,264		—	Interest income
Reclassification of unrealized gain (loss) on cash flow hedges							(610	)		336		Interest income
Tax effect		(286)		—	Income taxes		138			(76	)	Income taxes
Net of tax		978		—	Net income		(472	)		260		Net income
Amortization of loss on terminated cash flow hedges		(4,105)		(335)	Interest income		(1,406	)		(954	)	Interest income
Tax effect		930		123	Income taxes		318			216		Income taxes
Net of tax		(3,175)		(212)	Net income		(1,088	)		(738	)	Net income
Total reclassifications, net of tax	$	(6,951)	$	(4,579)	Net income	$	(3,722	)	$	(1,972	)	Net income

(a)

Amounts in parentheses indicate reduction in net income.

(b)

These AOCI components are included in the computation of net periodic pension and post-retirement cost that is reported with employee benefits expense (see Note 12 – Retirement Plans for additional details).

~~Table of Contents~~

~~8. Revenue Recognition~~

Effective January 1, 2018, the Company adopted the amended provisions of the Financial Accounting Standards Codification Topic 606, “Revenue from Contracts with Customers,” using the modified retrospective approach. The standard applies to most of the Company’s noninterest income, with a significant portion of the Company’s revenue excluded from the scope of the standard, including interest and loan origination fees associated with financial instruments, gains and losses on investment securities, derivatives and sales of financial instruments.

The Company’s evaluation of contracts for compliance with the standard did not identify any material changes to the timing of revenue recognition as the standard was largely consistent with the existing guidance and current practices. Therefore, the adoption of this guidance did not have a material impact on the Company’s financial condition or results of operations and there was no cumulative effect adjustment to opening retained earnings. However, upon adoption the Company has begun presenting certain underwriting costs (previously offset against Investment and Annuity Fees), as well as certain subadvisor costs (previously offset against Trust Fees) gross as noninterest expense, neither of which are material to operating results.

Due to the nature of the Company’s primary sources of revenue, there are no significant receivables, contract assets or contract liabilities not otherwise disclosed. The Company has assessed that its current disclosures are consistent with the requirements of the standard to present revenue disaggregated into categories that depict how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors. The following provides additional qualitative disclosures about the Company’s noninterest income and revenue recognition policies.

~~Service Charges on Deposit Accounts~~

~~Service charges on deposit accounts include transaction based fees for~~ ~~non-sufficient funds~~, account analysis fees, and other service charges on deposits, including monthly account service fees. Non-sufficient funds fees are recognized at the time when the account overdraft occurs in accordance with regulatory guidelines. Account analysis fees consist of fees charged on certain business deposit accounts based upon account activity as well as other monthly account fees, and are recorded under the accrual method of accounting as services are performed.

Other service charges are earned by providing depositors safeguard and remittance of funds as well as by providing other elective services for depositors that are performed upon the depositor’s request. Charges for deposit services for the safeguard and remittance of funds are recognized at the end of the statement cycle, after services are provided, as the customer retains funds in the account. Revenue for other elective services is earned at the point in time the customer uses the service.

~~Trust Fees~~

Trust fee income represents revenue generated from asset management services provided to individuals, businesses, and institutions. The Company has a fiduciary responsibility to the beneficiary of the trust to perform agreed upon services which can include investing assets, periodic reporting, and providing tax information regarding the trust. In exchange for these trust and custodial services, the Company collects fee income from beneficiaries as contractually determined via fee schedules. The Company’s performance obligation is primarily satisfied over time as the services are performed and provided to the customer. These fees are recorded under the accrual method of accounting as the services are performed. The Company generally acts as the principal in these transactions and records revenue and expenses on a gross basis.

~~Bank Card and Automated Teller Machine (“ATM”) Fees~~

Bank card and ATM fees include credit card, debit card and ATM transaction revenue. The majority of this revenue is card interchange fees earned through a third party network. Performance obligations are satisfied for each transaction when the card is used and the funds are remitted. The network establishes interchange fees that the merchant remits for each transaction, and costs are incurred from the network for facilitating the interchange with the merchant. Card fees also include merchant services fees earned for providing merchants with card processing capabilities.

ATM income is generated from allowing customers to withdraw funds from other banks’ machines and from allowing a non-customer cardholder to withdraw funds from the Company’s machines. The Company satisfies its performance obligations for each transaction at the point in time that the withdrawal is processed.

~~Bank card and ATM fee income is recorded on accrual basis as services are provided with the related expense reflected in data processing expense.~~

~~Table of Contents~~

~~Investment and Annuity Fees and Insurance Commissions~~

Investment and annuity services fee income represents income earned from investment and advisory services. The Company provides its customers with access to investment products through the use of third party carriers to meet their financial needs and investment objectives. Upon selection of an investment product, the customer enters into a policy with the carrier. The performance obligation is satisfied by fulfilling its responsibility to acquire the investment for which a commission fee is earned from the carrier based on agreed-upon fee percentages on a trade date basis. The Company has a contractual relationship with a third party broker dealer to provide full service brokerage and investment advisory activities. As the agent in the arrangement, the Company recognizes the investment services commissions on a net basis. Investment revenue also includes portfolio management fees, which represent monthly fees charged on a contractual basis to customers for the management of their investment portfolios and are recorded under the accrual method of accounting on a gross basis, with expenses recorded in the appropriate expense line item.

This revenue line item includes investment banking income, which includes fees for services arising from securities offerings or placements in which the Company acts as a principal. Revenue is recognized at the time the underwriting is completed and the revenue is reasonably determinable.

Insurance commission revenue is recognized, net of cost, as of the effective date of the insurance policy as the Company’s performance obligation is connecting the customer to the insurance products. The Company also receives contingent commissions from insurance companies as additional incentive for achieving specified premium volume goals and/or the loss experience of the insurance placed. Contingent commissions from insurance companies are recognized when determinable, which is generally when such commissions are received or when we receive data from the insurance companies that allows the reasonable estimation of these amounts.

~~Secondary Mortgage Market Operations~~

Secondary mortgage market operations revenue is primarily comprised of service release premiums earned on the sale of closed-end mortgage loans to other financial institutions or government agencies that are recognized in revenue as each sales transaction occurs.

~~Income from Bank-Owned Life Insurance~~

Bank-owned life insurance income primarily represents income earned from the appreciation of the cash surrender value of insurance contracts held and the proceeds of insurance benefits. Revenue from the proceeds of insurance benefits is recognized at the time a claim is confirmed.

~~Credit Related Fee Income~~

Credit-related fee income includes letters of credit fees and unused commercial commitment fees. Revenue for letters of credit fees is recognized over time. Revenue for unused commercial commitment fees are recognized based on contractual terms, generally when collected.

~~Income from Derivatives~~

Income from derivatives consists primarily of interest rate swap fees, net of fair value adjustments for customer derivatives and the related offsetting agreements with unrelated financial institutions for which the derivative instruments are not designated as hedges. This line item also includes the resulting gain or loss from ineffectiveness on derivatives that are designated as hedged items.

~~Gain (Loss) on Sales of Assets~~

Gain (loss) on sales of assets reflects the excess (deficiency) of proceeds received over the carrying amount of assets sold plus cost to sell for various assets other than foreclosed real estate. Gain or loss on the sale of assets are recognized as each transaction occurs.

~~Other Miscellaneous Income~~

Other miscellaneous income represents a variety of revenue streams, including safe deposit box income, wire transfer fees, syndication fees and any other income not reflected above. Income is recorded once the performance obligation is satisfied, generally on the accrual basis or on a cash basis if not material and/or considered constrained.

~~Table of Contents~~

9. Other Noninterest Income

Components of other noninterest income are as follows:



	Three Months Ended				Nine Months Ended				Three Months Ended
	September 30,				September 30,				March 31,
(in thousands)	2018		2017		2018		2017		2019		2018
Income from bank-owned life insurance	$	3,100	$	3,097	$	9,283	$	8,632	$	3,265	$	3,070
Credit related fees		2,762		2,521		7,900		8,297		2,595		2,722
Income from derivatives		1,363		1,339		4,474		4,484		809		1,523
Gain (loss) on sales of assets		989		400		(177)		4,465		397		(1,207	)
Amortization of FDIC loss share receivable		—		—		—		(2,427)
Other miscellaneous		3,342		3,795		10,066		11,023		2,402		3,377
Total other noninterest income	$	11,556	$	11,152	$	31,546	$	34,474	$	9,468	$	9,485

10. Other Noninterest Expense

Components of other noninterest expense are as follows:



	Three Months Ended				Nine Months Ended				Three Months Ended
	September 30,				September 30,				March 31,
(in thousands)	2018		2017		2018		2017		2019			2018
Advertising	$	2,553	$	3,910	$	8,596	$	11,971	$	3,080		$	2,526
Corporate value and franchise taxes		3,718		3,387		10,735		9,942		4,042			3,440
Printing and supplies		1,287		1,421		4,261		3,929		1,169			1,286
Telecommunications and postage										3,466			3,850
Travel expense		1,365		1,226		3,872		3,635		1,098			1,066
Entertainment and contributions		2,539		2,322		8,250		6,087		2,708			2,518
Tax credit investment amortization		1,560		1,212		3,309		3,637		1,138			874
FDIC loss share agreement termination		—		—		—		6,603
Other retirement expense		(4,664)		(4,402)		(13,585)		(10,850)		(4,105	)		(4,463	)
Loss on restructuring of bank-owned life insurance contracts		—		—		3,240		—
Other miscellaneous		6,297		8,282		20,811		22,253		5,691			5,684
Total other noninterest expense	$	14,655	$	17,358	$	49,489	$	57,207	$	18,287		$	16,781

Table of Contents

11. Earnings Per Common Share

The Company calculates earnings per share using the two-class method. The two-class method allocates net income to each class of common stock and participating security according to common dividends declared and participation rights in undistributed earnings. Participating securities consist of nonvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents.

A summary of the information used in the computation of earnings per common share follows.



	Three Months Ended				Nine Months Ended				Three Months Ended
	September 30,				September 30,				March 31,
(in thousands, except per share data)	2018		2017		2018		2017		2019		2018
Numerator:
Net income to common shareholders	$	83,878	$	58,902	$	227,530	$	160,183	$	79,164	$	72,475
Net income allocated to participating securities - basic and diluted		1,544		1,244		4,238		3,566		1,337		1,366
Net income allocated to common shareholders - basic and diluted	$	82,334	$	57,658	$	223,292	$	156,617	$	77,827	$	71,109
Denominator:
Weighted-average common shares - basic	$	85,348	$	84,749	$	85,298	$	84,577		85,688		85,241
Dilutive potential common shares		191		231		184		241		112		182
Weighted-average common shares - diluted	$	85,539	$	84,980	$	85,482	$	84,818		85,800		85,423
Earnings per common share:
Basic	$	0.96	$	0.68	$	2.62	$	1.85	$	0.91	$	0.83
Diluted	$	0.96	$	0.68	$	2.61	$	1.85	$	0.91	$	0.83

~~Table of Contents~~

Potential common shares consist of stock options, nonvested performance-based awards, and nonvested restricted share awards deferred under the Company’s nonqualified deferred compensation plan. These potential common shares do not enter into the calculation of diluted earnings per share if the impact would be antidilutive, i.e., increase earnings per share or reduce a loss per share. Weighted average antidilutive potential common shares totaled ~~14,904 and 18,257, respectively,~~1,281 for the three ~~and nine~~ months ended ~~September 30, 2018. Weighted average~~March 31, 2019. There were no antidilutive potential common shares ~~totaled 1,380 and 11,057, respectively,~~excluded from the calculation of diluted earnings per share for the three ~~and nine~~ months ended ~~September 30, 2017.~~

March 31, 2018.

12. Retirement Plans

The Company sponsors a qualified defined benefit pension plan, the Hancock Whitney Corporation Pension Plan (“Pension Plan”), covering certain eligible associates. ~~Eligibility is based on minimum age and service-related requirements. During the second quarter of 2017, the Pension Plan was amended to exclude any individual~~Those hired or rehired by the Company ~~after~~prior to June 30, 2017 ~~from eligibility~~are eligible to ~~participate. The Pension Plan amendment further provided that~~participate; however, the accrued benefits of each participant in the Pension Plan whose combined age plus years of service as of January 1, 2018 ~~totals~~totaled less than 55 were ~~to be~~ frozen as of January 1, 2018 and will not thereafter ~~not~~ increase. The Company makes contributions to the Pension Plan in amounts sufficient to meet funding requirements set forth in federal employee benefit and tax laws, plus such additional amounts as the Company may determine to be appropriate. During the first quarter of 2019, the Company made a discretionary contribution of $100 million to the Pension Plan. During the third quarter of 2018, the Company made a discretionary contribution of $39 million to the Pension Plan designated to the 2017 plan year.

The Company also offers a defined contribution retirement benefit plan, the Hancock Whitney Corporation 401(k) Savings Plan (“401(k) Plan”), that covers substantially all associates who have been employed 60 days and meet a minimum age requirement and employment classification criteria. The Company matches 100% of the first 1% of compensation saved by a participant, and 50% of the next 5% of compensation saved. Newly eligible associates are automatically enrolled at an initial 3% savings rate unless the associate actively opts out of participation in the plan. ~~The 401(k)~~Beginning January 1, 2018, the Company makes an additional basic contribution to associates hired or rehired after June 30, 2017 in an amount equal to 2% of the associate’s eligible compensation. For Pension Plan ~~was also amended during the second quarter of 2017 for~~ participants whose benefits ~~are~~were frozen ~~under~~as of January 1, 2018, the ~~Pension~~401(k) Plan ~~to add~~provides an enhanced Company contribution ~~beginning January 1, 2018,~~ in the amount of 2%, 4% or 6% of such participant’s eligible compensation, based on the participant’s age and years of service with the Company. The 401(k) Plan’s amendment further provided that the Company will contribute to the benefit of those associates of the Company hired or rehired after June 30, 2017 and those associates of the Company never enrolled in the Pension Plan an additional basic contribution in an amount equal to 2% of the associate’s eligible compensation beginning January 1, 2018. Participants ~~will~~ vest in ~~the new~~ basic and enhanced Company contributions upon completion of three years of service.

The Company sponsors a nonqualified defined benefit plan covering certain legacy Whitney employees that was frozen as of December 31, 2012 and no future benefits are accrued under this plan.

The Company sponsors defined benefit postretirement plans for both legacy Hancock and legacy Whitney employees that provide health care and life insurance benefits. Benefits under the Hancock plan are not available to employees hired on or after January 1, 2000. Benefits under the Whitney plan are restricted to retirees who were already receiving benefits at the time of plan amendments in 2007 or active participants who were eligible to receive benefits as of December 31, 2007.

Table of Contents

The following tables show the components of net periodic benefits cost included in expense for the plans for the periods indicated.

							Other Post-
(in thousands)	Pension Benefits						Retirement Benefits
For the Three Months Ended March 31,	2019			2018			2019			2018
Service cost	$	2,775		$	2,925		$	29		$	35
Interest cost		4,863			3,923			128			137
Expected return on plan assets		(11,300	)		(9,700	)		—			—
Amortization of net loss and prior service costs		2,430			1,326			(227	)		(149	)
Net periodic benefit cost (reduction of cost)	$	(1,232	)	$	(1,526	)	$	(70	)	$	23

Other Post-
(in thousands)

Pension Benefits

Retirement Benefits
Three Months Ended September 30, 2018

2018

2017

2018

2017
Service cost

$
3,163

$
3,769

$
28

$
17
Interest cost

4,279

4,056

161

155
Expected return on plan assets

(10,375)

(9,652)

—

—
Amortization of net loss and prior service costs

1,366

1,167

(95)

(128)
Net periodic benefit cost (reduction of cost)

$
(1,567)

$
(660)

$
94

$
44

Other Post-
(in thousands)

Pension Benefits

Retirement Benefits
Nine Months Ended September 30, 2018

2018

2017

2018

2017
Service cost

$
9,251

11,612

$
91

112
Interest cost

12,481

12,470

459

514
Expected return on plan assets

(30,244)

(27,978)

—

—
Amortization of net loss and prior service costs

4,057

4,368

(338)

(224)
Net periodic benefit cost (reduction of cost)

$
(4,455)

$
472

$
212

$
402

Effective January 1, 2018, the Company adopted ASU 2017-07, “Compensation – Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Costs.” In accordance with the Update, only the service component of net periodic benefit cost is included in the Employee Benefits line item on the Company’s Consolidated Statements of Income. All other components have been included in Other Noninterest Expense. Prior period amounts have been reclassified to conform to current presentation.

~~Table of Contents~~

13. Share-Based Payment Arrangements

The Company maintains incentive compensation plans that provide for awards of share-based compensation to employees and directors. These plans have been approved by the Company’s shareholders. Detailed descriptions of these plans were included in Note 17 to the consolidated financial statements in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2017.~~ 2018.

A summary of stock option activity for the ~~nine~~three months ended ~~September 30, 2018~~March 31, 2019 is presented below:



				Weighted
				Average							Weighted
		Weighted		Remaining					Weighted		Average
		Average		Contractual	Aggregate				Average		Remaining		Aggregate
	Number of	Exercise		Term	Intrinsic		Number of		Exercise		Contractual		Intrinsic
Options	Shares	Price		(Years)	Value ($000)		Shares		Price		Term (Years)		Value ($000)
Outstanding at January 1, 2018	88,301	$	34.84	2.8	$	1,294
Outstanding at January 1, 2019								46,865	$	31.88		2.6	$	164
Exercised/Released	(35,317)		37.39			592		—		—				—
Cancelled/Forfeited	—		—			—		—		—				—
Expired	(2,298)		44.91			10		—		—				—
Outstanding at September 30, 2018	50,686	$	32.61	2.6	$	757
Exercisable at September 30, 2018	50,686	$	32.61	2.6	$	757
Outstanding at March 31, 2019								46,865	$	31.88		2.3	$	399
Exercisable at March 31, 2019								46,865	$	31.88		2.3	$	399

There were no exercises of stock options during the three months ended March 31, 2019. The total intrinsic value of options exercised ~~for~~during the ~~nine~~three months ended ~~September 30,~~March 31, 2018 ~~and 2017~~ was ~~$0.6 million and $4.1 million, respectively.~~ $0.5 million.

The Company’s restricted and performance-based share awards to certain employees and directors are subject to service requirements. A summary of the status of the Company’s nonvested restricted and performance-based share awards ~~as of September 30, 2018~~at March 31, 2019 and changes during the ~~nine~~three months ended ~~September 30, 2018,~~March 31, 2019, are presented in the following table.

							Weighted
							Average
			Weighted	Number of			Grant Date
			Average	Shares			Fair Value
	Number of		Grant Date
	Shares		Fair Value
Nonvested at January 1, 2018	1,708,942	$	37.05
Nonvested at January 1, 2019					1,494,041		$	39.89
Granted	94,958		49.57		72,081			34.20
Vested	(41,502)		31.85		(8,028	)		47.17
Forfeited	(60,859)		36.79		(20,499	)		38.92
Nonvested at September 30, 2018	1,701,539	$	37.88
Nonvested at March 31, 2019					1,537,595		$	39.60

~~As of September 30, 2018,~~At March 31, 2019, there was ~~$39.0~~$51.0 million of total unrecognized compensation expense related to nonvested restricted and performance shares expected to vest. This compensation is expected to be recognized in expense over a weighted average period of ~~2.97~~3.3 years. The total fair value of shares which vested during the ~~nine~~three months ended ~~September 30,~~March 31, 2019 and 2018 ~~and 2017~~ was ~~$2.0~~$0.1 million and ~~$10.1~~$0.3 million, respectively.

During the ~~nine~~three months ended ~~September 30, 2018,~~March 31, 2019, the Company granted ~~26,147~~33,691 performance share awards subject to a total shareholder return (“TSR”) performance metric with a grant date fair value of ~~$51.13~~$35.27 per share and ~~26,147~~33,691 performance shares subject to an operating earnings per share performance metric with a grant date fair value of ~~$44.84~~$32.15 per share to key members of executive management. The number of performance shares subject to TSR that ultimately vest at the end of the three-year performance period, if any, will be based on the relative rank of the Company’s three-year TSR among the TSRs of a peer group of 4342 regional banks. The fair

Table of Contents

value of the performance shares subject to TSR at the grant date was determined using a Monte Carlo simulation method. The number of performance shares subject to core earnings per share that ultimately vest will be based on the Company’s attainment of certain ~~core~~operating earnings per share goals over the two-year performance period. The maximum number of performance shares that could vest is 200% of the target award. Compensation expense for these performance shares is recognized on a straight line basis over the three-year service period.

~~Table of Contents~~

14. Commitments and Contingencies

In the normal course of business, the Bank enters into financial instruments, such as commitments to extend credit and letters of credit, to meet the financing needs of its customers. Such instruments are not reflected in the accompanying consolidated financial statements until they are funded, although they expose the Bank to varying degrees of credit risk and interest rate risk in much the same way as funded loans. Under regulatory capital guidelines, the Company and Bank must include unfunded commitments meeting certain criteria in risk-weighted capital calculations.

Commitments to extend credit include revolving commercial credit lines, nonrevolving loan commitments issued mainly to finance the acquisition and development or construction of real property or equipment, and credit card and personal credit lines. The availability of funds under commercial credit lines and loan commitments generally depends on whether the borrower continues to meet credit standards established in the underlying contract and has not violated other contractual conditions. Loan commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee by the borrower. Credit card and personal credit lines are generally subject to cancellation if the borrower’s credit quality deteriorates. A number of commercial and personal credit lines are used only partially or, in some cases, not at all before they expire, and the total commitment amounts do not necessarily represent future cash requirements of the Company.

A substantial majority of the letters of credit are standby agreements that obligate the Bank to fulfill a customer’s financial commitments to a third party if the customer is unable to perform. The Bank issues standby letters of credit primarily to provide credit enhancement to its customers’ other commercial or public financing arrangements and to help them demonstrate financial capacity to vendors of essential goods and services.

The contract amounts of these instruments reflect the Company’s exposure to credit risk. The Company undertakes the same credit evaluation in making loan commitments and assuming conditional obligations as it does for on-balance sheet instruments and may require collateral or other credit support. The following table presents a summary of the Company’s off-balance sheet financial instruments as of ~~September 30, 2018~~March 31, 2019 and December 31, ~~2017:~~

2018:


		September 30,		December 31,	March 31,		December 31,
(in thousands)		2018		2017	2019		2018
Commitments to extend credit	$	7,212,886	$	6,689,033	$	7,198,032	$	7,234,528
Letters of credit		353,490		348,377		336,419		365,498

Legal Proceedings

The Company is party to various legal proceedings arising in the ordinary course of business. Management does not believe that loss contingencies, if any, arising from pending litigation and regulatory matters will have a material adverse effect on the consolidated financial position or liquidity of the Company.

15. Fair Value Measurements

The Financial Accounting Standards Board (“FASB”) defines fair value as the exchange price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The FASB’s guidance also establishes a fair value hierarchy that prioritizes the inputs to these valuation techniques used to measure fair value, giving preference to quoted prices in active markets for identical assets or liabilities (“level 1”) and the lowest priority to unobservable inputs such as a reporting entity’s own data (“level 3”).Level 2inputs includequoted prices for similar assets or liabilities in active markets, quoted prices for identical assets or liabilities in markets that are not active, observable inputs other than quoted prices, such as interest rates and yield curves, and inputs that are derived principally from or corroborated by observable market data by correlation or other means.

Table of Contents

Fair Value of Assets and Liabilities Measured on a Recurring Basis

The following tables present for each of the fair value hierarchy levels the Company’s assets and liabilities that are measured at fair value on a recurring basis in the consolidated balance ~~sheets.~~

sheets at March 31, 2019 and December 31, 2018:



	September 30, 2018								March 31, 2019
(in thousands)	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets
Available for sale debt securities:
U.S. Treasury and government agency securities	$	—	$	89,312	$	—	$	89,312	$	—	$	72,143	$	—	$	72,143
Municipal obligations		—		232,713		—		232,713		—		245,940		—		245,940
Corporate debt securities		—		3,500		—		3,500		—		3,500		—		3,500
Residential mortgage-backed securities		—		1,731,275		—		1,731,275		—		1,413,032		—		1,413,032
Commercial mortgage-backed securities		—		722,882		—		722,882		—		787,834		—		787,834
Collateralized mortgage obligations		—		138,503		—		138,503		—		158,631		—		158,631
Total available for sale securities		—		2,918,185		—		2,918,185		—		2,681,080		—		2,681,080
Derivative assets (1)		—		11,411		—		11,411		—		25,827		—		25,827
Total recurring fair value measurements - assets	$	—	$	2,929,596	$	—	$	2,929,596		—	$	2,706,907		—	$	2,706,907
Liabilities
Derivative liabilities (1)	$	—	$	28,791	$	—	$	28,791	$	—	$	11,176	$	6,953	$	18,129
Total recurring fair value measurements - liabilities	$	—	$	28,791	$	—	$	28,791	$	—	$	11,176	$	6,953	$	18,129



	December 31, 2017								December 31, 2018
(in thousands)	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets
Available for sale debt securities:
U.S. Treasury and government agency securities	$	—	$	97,272	$	—	$	97,272	$	—	$	71,706	$	—	$	71,706
Municipal obligations		—		243,786		—		243,786		—		240,427		—		240,427
Corporate debt securities		—		3,500		—		3,500		—		3,500		—		3,500
Residential mortgage-backed securities		—		1,715,213		—		1,715,213		—		1,443,402		—		1,443,402
Commercial mortgage-backed securities		—		687,135		—		687,135		—		770,077		—		770,077
Collateralized mortgage obligations		—		163,963		—		163,963		—		161,925		—		161,925
Total available for sale securities		—		2,910,869		—		2,910,869		—		2,691,037		—		2,691,037
Derivative assets (1)		—		14,157		—		14,157		—		16,980		—		16,980
Total recurring fair value measurements - assets	$	—	$	2,925,026	$	—	$	2,925,026		—	$	2,708,017		—	$	2,708,017
Liabilities
Derivative liabilities (1)	$	—	$	14,389	$	—	$	14,389	$	—	$	14,923	$	7,304	$	22,227
Total recurring fair value measurements - liabilities	$	—	$	14,389	$	—	$	14,389	$	—	$	14,923	$	7,304	$	22,227

(1)

For further disaggregation of derivative assets and liabilities, see Note 67 - Derivatives.

Securities classified as level 2 include obligations of U.S. Government agencies and U.S. Government-sponsored agencies, residential and commercial mortgage-backed securities and collateralized mortgage obligations that are issued or guaranteed by U.S. government agencies, and state and municipal bonds. The level 2 fair value measurements for investment securities are obtained quarterly from a third-party pricing service that uses industry-standard pricing models. Substantially all of the model inputs are observable in the marketplace or can be supported by observable data.

The Company invests only in securities of investment grade quality with a targeted duration, for the overall portfolio, generally between two and five and a half years. Company policies generally limit investments to U.S. agency securities and municipal securities determined to be investment grade according to an internally generated score which generally includes a rating of not less than “Baa” or its equivalent by a nationally recognized statistical rating agency.

~~The fair value~~29

Table of Contents

For the Company’s derivative financial instruments ~~which are predominantly~~designated as hedges and those under the customer interest rate ~~swaps,~~program, the fair value is obtained from a third-party pricing service that uses an industry-standard discounted cash flow model that relies on inputs, LIBOR swap curves, ~~and~~ Overnight Index swap rate curves, observable in the marketplace. To comply with the accounting guidance, credit valuation adjustments are incorporated in the fair values to appropriately reflect nonperformance risk for both the Company and the counterparties. Although the Company has determined that the majority of the inputs used to value ~~the~~these derivative instruments fall within level 2 of the fair value hierarchy, the credit value adjustments utilize level 3 inputs, such as estimates of current credit spreads. The Company has determined that the impact of the credit valuation adjustments is not significant to the overall valuation of these derivatives. As a result, the Company has classified its derivative valuations ~~in their entirety~~for these instruments in level 2 of the fair value hierarchy. The Company’s policy is to

~~Table of Contents~~

measure counterparty credit risk quarterly for all derivative instruments ~~including those~~ subject to master netting arrangements consistent with how market participants would price the net risk exposure at the measurement date.

The Company also has certain derivative instruments associated with the Bank’s ~~mortgage banking~~mortgage-banking activities. These derivative instruments include interest rate lock commitments on prospective residential mortgage loans and forward commitments to sell these loans to investors on a best efforts delivery basis. The fair value of these derivative instruments is measured using observable market prices for similar instruments and is classified as a level 2 measurement.

The Company’s Level 3 liability consists of a derivative contract with the purchaser of 192,163 shares of Visa Class B common stock. Pursuant to the agreement, the Company retains the risks associated with the ultimate conversion of the Visa Class B common shares into shares of Visa Class A common stock, such that the counterparty will be compensated for any dilutive adjustments to the conversion ratio and the Company will be compensated for any anti-dilutive adjustments to the ratio. The agreement also requires periodic payments by the Company to the counterparty calculated by reference to the market price of Visa Class A common shares at the time of sale and a fixed rate of interest that steps up once after the eighth scheduled quarterly payment. The fair value of the liability is determined using a discounted cash flow methodology. The significant unobservable inputs used in the fair value measurement are the Company’s own assumptions about estimated changes in the conversion rate of the Visa Class B common shares into Visa Class A common shares, the date on which such conversion is expected to occur and the estimated growth rate of the Visa Class A common share price. Refer to Note 7 – Derivatives for information about the derivative contract with the counterparty.

The Company believes its valuation methods for its assets and liabilities carried at fair value are appropriate; however, the use of different methodologies or assumptions, particularly as applied to Level 3 assets and liabilities, could have a material effect on the computation of their estimated fair values.

Changes in Level 3 Fair Value Measurements and Quantitative Information about Level 3 Fair Value Measurements

The table below presents a rollforward of the amounts on the consolidated balance sheets for the three months ended March 31, 2019 and the year ended December 31, 2018 for financial instruments of a material nature that are classified within Level 3 of the fair value hierarchy and are measured at fair value on a recurring basis:

(in thousands)
Liability balance at December 31, 2017	$	—
Entry into derivative contract		7,304
Liability balance at December 31, 2018		7,304
Cash settlement		(414	)
Losses included in earnings		63
Liability balance at March 31, 2019	$	6,953

The table below provides an overview of the valuation techniques and significant unobservable inputs used in those techniques to measure the financial instrument measured on a recurring basis and classified within Level 3 of the valuation. The range of sensitivities that management utilized in its fair value calculations is deemed acceptable in the industry with respect to the identified financial instrument.

($ in thousands)

Fair Value

Level 3 Class

March 31, 2019

December 31, 2018

Valuation Technique

Unobservable Input

Values Utilized

Visa Class A appreciation

6% - 18%

Derivative liability

6,953

7,304

Discounted cash flow

Conversion rate

1.62x - 1.59x

Time until resolution

24-48 months

Table of Contents

The Company’s policy is to recognize transfers between valuation hierarchy levels as of the end of a reporting period. There were no transfers between levels during the periods presented.

Fair Value of Assets Measured on a Nonrecurring Basis

Certain assets and liabilities are measured at fair value on a nonrecurring basis. Collateral-dependent impaired loans are level 2 assets measured at the fair value of the underlying collateral based on independent third-party appraisals that take into consideration market-based information such as recent sales activity for similar assets in the property’s market.

Other real estate owned and foreclosed assets, including both foreclosed property and surplus banking property, are level 3 assets that are adjusted to fair value, less estimated selling costs, upon transfer to other real estate owned. Subsequently, other real estate owned is carried at the lower of carrying value or fair value less estimated selling costs. Fair values are determined by sales agreement or third-party appraisals as discounted for estimated selling costs, information from comparable sales, and marketability of the property.

The fair value information presented below is not as of the period end, rather it was as of the date the fair value adjustment was recorded during the twelve months for each of the dates presented below, and excludes nonrecurring fair value measurements of assets no longer on the balance sheet.

The following tables present the Company’s financial assets that are measured at fair value on a nonrecurring basis for each of the fair value hierarchy levels.

	March 31, 2019
(in thousands)	Level 1		Level 2		Level 3		Total
Collateral-dependent impaired loans	$	—	$	163,781	$	—	$	163,781
Other real estate owned and foreclosed assets, net		—		—		7,688		7,688
Total nonrecurring fair value measurements	$	—	$	163,781	$	7,688	$	171,469



	September 30, 2018								December 31, 2018
(in thousands)	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Collateral-dependent impaired loans	$	—	$	180,730	$	—	$	180,730	$	—	$	170,918	$	—	$	170,918
Other real estate owned and foreclosed assets, net		—		—		24,900		24,900		—		—		14,594		14,594
Total nonrecurring fair value measurements	$	—	$	180,730	$	24,900	$	205,630	$	—	$	170,918	$	14,594	$	185,512

December 31, 2017
(in thousands)

Level 1

Level 2

Level 3

Total
Collateral-dependent impaired loans

$
—

$
184,205

$
—

$
184,205
Other real estate owned and foreclosed assets, net

—

—

19,595

19,595
Total nonrecurring fair value measurements

$
—

$
184,205

$
19,595

$
203,800

Accounting guidance from the FASB requires the disclosure of estimated fair value information about certain on- and off-balance sheet financial instruments, including those financial instruments that are not measured and reported at fair value on a recurring basis. The significant methods and assumptions used by the Company to estimate the fair value of financial instruments are discussed below.

Cash, ~~Short‑Term~~Short-Term Investments and Federal Funds Sold –For these ~~short‑term~~short-term instruments, the carrying amount is a reasonable estimate of fair value.

Securities~~Securities~~ – The fair value measurement for securities available for sale was discussed earlier in the note. The same measurement techniques were applied to the valuation of securities held to maturity.

Loans, Net–The fair value measurement for certain impaired loans was discussed earlier in the note. For the remaining portfolio, fair values were generally determined by discounting scheduled cash flows using discount rates determined with reference to current market rates at which loans with similar terms would be made to borrowers of similar credit quality.

Loans Held for Sale – These loans are recorded at fair value and carried at the lower of cost or market. The carrying amount is considered a reasonable estimate of fair value.

Deposits~~Deposits~~ – The accounting guidance requires that the fair value of deposits with no stated maturity, such as noninterest-bearing demand deposits, interest-bearing checking and savings accounts, be assigned fair values equal to amounts payable upon demand (“carrying amounts”). The fair value of fixed maturity certificates of deposit is estimated using the rates currently offered for deposits of similar remaining maturities.

~~Table of Contents~~

Securities Sold under Agreements to Repurchase, Federal Funds Purchased, and FHLB Borrowings – For these short-term liabilities, the carrying amount is a reasonable estimate of fair value.

Table of Contents

Long-Term Debt – The fair value is estimated by discounting the future contractual cash flows using current market rates at which debt with similar terms could be obtained.

Derivative Financial Instruments – The fair value measurement for derivative financial instruments was discussed earlier in the note.

The following tables present the estimated fair values of the Company’s financial instruments by fair value hierarchy levels and the corresponding carrying ~~amount at September 30, 2018 and December 31, 2017.~~

amounts:



	September 30, 2018										March 31, 2019
							Total Fair		Carrying								Total Fair		Carrying
(in thousands)	Level 1		Level 2		Level 3		Value		Amount		Level 1		Level 2		Level 3		Value		Amount
Financial assets:
Cash, interest-bearing bank deposits, and federal funds sold	$	447,683	$	—	$	—	$	447,683	$	447,683	$	523,956	$	—	$	—	$	523,956	$	523,956
Available for sale securities		—		2,918,185		—		2,918,185		2,918,185		—		2,681,080		—		2,681,080		2,681,080
Held to maturity securities		—		2,975,455		—		2,975,455		3,069,262		—		2,892,910		—		2,892,910		2,896,442
Loans, net		—		180,730		18,843,738		19,024,468		19,329,167		—		163,781		19,646,070		19,809,851		19,918,150
Loans held for sale		—		29,043		—		29,043		29,043		—		27,437		—		27,437		27,437
Derivative financial instruments		—		11,411		—		11,411		11,411		—		25,827		—		25,827		25,827

Financial liabilities:
Deposits	$	—	$	—	$	22,373,052	$	22,373,052	$	22,417,807	$	—	$	—	$	23,351,829	$	23,351,829	$	23,380,294
Federal funds purchased		50,325		—		—		50,325		50,325		450		—		—		450		450
Securities sold under agreements to repurchase		415,960		—		—		415,960		415,960		478,285		—		—		478,285		478,285
FHLB short-term borrowings		1,810,362		—		—		1,810,362		1,810,362		910,000		—		—		910,000		910,000
Long-term debt		—		213,076		—		213,076		215,912		—		227,206		—		227,206		224,962
Derivative financial instruments		—		28,791		—		28,791		28,791		—		11,176		6,953		18,129		18,129



	December 31, 2017
							Total Fair		Carrying		December 31, 2018
(in thousands)	Level 1		Level 2		Level 3		Value		Amount		Level 1		Level 2		Level 3		Total Fair Value		Carrying Amount
Financial assets:
Cash, interest-bearing bank deposits, and federal funds sold	$	479,332	$	—	$	—	$	479,332	$	479,332	$	494,466	$	—	$	—	$	494,466	$	494,466
Available for sale securities		—		2,910,869		—		2,910,869		2,910,869		—		2,691,037		—		2,691,037		2,691,037
Held to maturity securities		—		2,962,010		—		2,962,010		2,977,511		—		2,935,856		—		2,935,856		2,979,547
Loans, net		—		184,205		18,403,303		18,587,508		18,786,855		—		170,918		19,555,969		19,726,887		19,831,897
Loans held for sale		—		39,865		—		39,865		39,865		—		28,150		—		28,150		28,150
Derivative financial instruments		—		14,157		—		14,157		14,157		—		16,980		—		16,980		16,980

Financial liabilities:
Deposits	$	—	$	—	$	22,238,847	$	22,238,847	$	22,253,202	$	—	$	—	$	23,129,574	$	23,129,574	$	23,150,185
Federal funds purchased		140,754		—		—		140,754		140,754		425		—		—		425		425
Securities sold under agreements to repurchase		430,569		—		—		430,569		430,569		428,599		—		—		428,599		428,599
FHLB short-term borrowings		1,132,567		—		—		1,132,567		1,132,567		1,160,104		—		—		1,160,104		1,160,104
Long-term debt		—		303,631		—		303,631		305,513		—		223,135		—		223,135		224,993
Derivative financial instruments		—		14,389		—		14,389		14,389		—		14,923		7,304		22,227		22,227

~~Table of Contents~~

16. Recent Accounting Pronouncements

Accounting Standards Adopted in ~~2018~~2019

In ~~August 2018,~~February 2016, the FASB issued ASU ~~2018-15, “Intangibles – Goodwill~~2016-02, “Leases (Topic 842),” to increase transparency and ~~Other – Internal-Use Software (Subtopic 350-40): Customer’s~~comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. With the exception of short-term leases, lessees are required to recognize a lease liability representing the lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis, and a right-of-use asset representing the lessee’s right to use, or control the use of, a specified asset for the lease term upon adoption. Lessor accounting was largely unchanged under the new guidance, except for clarification of the definition of initial direct costs which provided additional guidance on the timing of recognition of those costs. Subsequent to the issuance of this update, the FASB issued three additional ASUs that provide codification improvements and certain transition elections, including ASU 2018-11, which permits an additional transition method whereby an entity may elect to record a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. The Company was required to and did adopt the standard effective January 1, 2019, using the modified retrospective transition method permitted by

Table of Contents

ASU 2018-11. Thus, the Company’s reporting for the comparative period presented in the financial statements and disclosures continues to be in accordance with GAAP Topic 840. Upon adoption, the Company recorded a gross-up of assets and liabilities in its Consolidated Balance Sheet, with approximately $116 million for right of use assets and $131 million of lease payment obligations offset by the elimination of $15 million of existing lease incentive and other deferred rent liabilities. Accounting for ~~Implementation Costs Incurred~~leases in a Cloud Computing Arrangement That Is a Service Contract.” The amendments in this Update improve current GAAP by clarifying the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract, which alignsaccordance with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal use software license). The amendments in this Update are effective for public business entities for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Early adoption is permitted. The Company early adopted this standard during the third quarter of 2018. Adoption of this standard didTopic 842 has not ~~have~~had a material impact upon the ~~Company’s financial condition or~~consolidated results of ~~operations.~~

~~In March 2018, the FASB issued ASU 2018-05, “Income Taxes (Topic 740): Amendments~~operations, and is not expected to ~~SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118.” The ASU amends Topic 740 to incorporate SEC guidance issued~~ in its Staff Bulletin No. 118 (SAB 118). SAB 118 addressed the application of GAAP in situations when a registrant does not have the necessary information available, prepared or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the Tax Cuts and Jobs Act. The amendments in this update were effective upon issuance, at which time the Company adopted the standard. Adoption of this standard did not have a material impact on the Company’s financial condition or results of operations.

In August 2017, the FASB issued ASU 2017-12, “Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities,” with the objective of improving financial reporting of hedging relationships to better portray the economic results of an entity’s risk management activities in its financial statements. The update provides changes to both the designation and measurement guidance for qualifying hedging relationships and the presentation of hedge results. The amendments in this update are effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early application is permitted in any interim period after issuance of the update. All transition requirements and elections are to be applied to hedging relationships existing on the date of adoption, and the effect of the adoption should be reflected as of the beginning of the fiscal year of adoption. The Company early adopted this standard effective January 1, 2018 and has made certain adjustments to its existing designation documentation for active hedging relationships in order to take advantage of specific provisions in the new guidance and to fully align its documentation with the ASU. The adoption of this standard did not have a material impact on the Company’s financial condition or results of operations. See further discussion in Note 6 – Derivatives.

In March 2017, the FASB issued ASU 2017-07, “Compensation – Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Costs,” to improve the presentation of net periodic pension cost and net periodic postretirement benefit cost. The amendments require that an employer report the service cost component in the same line item or items as other compensation costs arising from services rendered by the pertinent employees during the period. The other components of net benefit cost are required to be presented in the income statement separately from the service cost component and outside a subtotal of income from operations, if one is presented. The amendments also allow only the service cost component to be eligible for capitalization when applicable. These amendments are effective for public business entities for annual periods beginning after December 15, 2017, including interim periods within those annualfuture periods. Disclosures of the nature of and reason for the change in accounting principle are required in the first interim and annual periods of adoption. The Company adopted the standard effective January 1, 2018 and the amendments were applied retrospectively for the presentation of the service cost component and the other components of net periodic pension and postretirement benefit costs in the statement of income. Refer to Note 125 – ~~Retirement Plans –~~Operating Leases for ~~detail on the components~~further information related to operating lease accounting policy, practical expedient elections for adoption and operating leasing information at adoption and as of net periodic pension and post-retirement benefit costs that were reclassified for each reporting period. The provisions of this update apply only to presentation and therefore did not have a material impact on the Company’s financial condition or results of operations.

In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers (Topic 606),” affecting any entity that enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets unless those contracts are within the scope of other standards. The core principle of this standard is that an entity should recognize revenue to depict 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. Most revenue associated with financial instruments, including interest and loan origination fees, is outside the scope of the guidance. Gains and losses on investment securities, derivatives, and sales of financial instruments are also excluded from the scope. Subsequent to issuance of the revenue recognition guidance, the FASB has issued several updates that deferred by one year the effective date for revenue recognition guidance; clarified its guidance for performing the principal-versus-agent analysis; clarified guidance for identifying performance obligations allowing entities to ignore immaterial promised goods and services in the context of a contract with a customer and other clarifying guidance and technical corrections. Entities could elect to adopt the guidance either on a full or modified retrospective basis. The standard was effective and the Company adopted this guidance on January 1, 2018, using the modified retrospective approach. The Company inventoried and evaluated its contracts with customers for compliance with the standard. The Company did not identify material changes to the timing of revenue recognition and the adoption of

35March 31, 2019.

~~Table of Contents~~

this guidance did not have a material impact on its financial condition or results of operations. See Note 8 - Revenue Recognition for additional information regarding the implementation of this standard.

~~Additionally, the following ASUs were adopted by the Company on January 1, 2018, but did not have a significant impact on the Company’s consolidated financial statements:~~

~~ASU 2018-03,Technical Corrections and Improvements to Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities;~~

~~ASU 2017-09, Compensation – Stock Compensation (Topic 718): Scope of Modification Accounting;~~

~~ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business;~~

~~ASU 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other than Inventory;~~

~~ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments; and~~

~~ASU 2016-01, Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities~~

Issued but Not Yet Adopted Accounting Standards

In August 2018, the FASB issued ASU 2018-14, “Compensation – Retirement Benefits – Defined Benefit Plans – General (Subtopic 715-20): Disclosure Framework – Changes to the Disclosure Requirements for Defined Benefit Plans.” The amendments in this Update modify certain disclosure requirements by removing disclosures that are no longer considered cost beneficial, clarifying specific requirements of disclosures, and adding disclosure requirements identified as relevant. The amendments in this Update are effective for fiscal years ending after December 15, 2020 for public business entities, and early adoption is permitted. The Company is currently assessing the impact of adoption of this guidance upon its pension and postretirement plan disclosures. Adoption of this guidance will have no impact upon the Company’s results of operations or financial condition.

In August 2018, the FASB issued ASU 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement.” The amendments in this Update modify certain disclosure requirements on fair value measurements set forth in Topic 820, Fair Value Measurements. In addition, the amendments in this Update eliminate the phrase “an entity shall disclose at a minimum” to promote the appropriate exercise of discretion by entities when considering fair value measurement disclosures to clarify that materiality is an appropriate consideration of entities and their auditors when evaluating disclosure requirements. The amendments in this Update are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 31, 2019, and early adoption is permitted. The Company is currently assessing the impact of adoption of this guidance upon its fair value measurements disclosures. Adoption of this guidance will have no impact upon the Company’s results of operations or financial condition.

In July 2018, the FASB issued ASU 2018-09, “Codification Improvements,” that clarifies certain topics within the Accounting Standards Codification (“ASC”) in an effort to correct unintended application of guidance. The amendments in this Update affect a wide variety of Topics in the Codification, some topics of which are applicable to the Company. The amendments apply to all reporting entities within the scope of the affected accounting guidance. The transition and effective date guidance is based on the facts and circumstances of each amendment, with some of the amendments effective upon issuance of this Update and with other transition guidance effective for annual periods beginning after December 15, 2018 for public business entities. The Company is currently assessing the impact of adoption of this guidance, but does not expect it to have a material impact upon its financial condition or results of operations.

In June 2018, the FASB issued ASU 2018-07, “Compensation – Stock Compensation – (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting,” to expand the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. The amendments specify that Topic 718 applies to all share-based payment transactions in which a grantor acquires goods and services to be used or consumed in a grantor’s own operations by issuing share-based payment awards. The amendments also clarify that Topic 718 does not apply to share-based payments used to effectively provide financing to the issuer or awards granted in conjunction with the selling of goods or services to customers as part of a contract accounted for under Topic 606, “Revenue from Contracts with Customers.” The amendments in this Update are effective for public business entities for fiscal years beginning after December 15, 2018, including interim periods within that fiscal year. Early adoption is permitted, but no earlier than an entity’s adoption date of Topic 606. The Company does not expect the adoption of this guidance to have a material impact upon its financial condition or results of operations.

~~Table of Contents~~

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments,” to improve financial reporting by requiring timelier recording of credit losses on loans and other financial instruments held by financial institutions and other organizations. The ASU, more commonly referred to as Current Expected Credit Losses, or CECL, requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Financial institutions and other organizations will now use forward-looking information to better inform their credit loss estimates. Many of the loss estimation techniques currently applied will still be permitted, although the inputs to those techniques will change to reflect the full amount of expected credit losses. Organizations will continue to use judgment to determine which loss estimation method is appropriate for their circumstances. In addition, the ASU amends the accounting for credit losses on debt securities and purchased financial assets with credit deterioration. The ASU is effective for SEC filers for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019, with a cumulative-effect adjustment to retained earnings as of the beginning of the year of adoption. Early application is permitted for all organizations for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The Company is not planning to early adopt this guidance. The Company has engaged third party consultants and formed cross-functional working groups comprised of individuals from various areas including credit, finance, treasury, risk management and information technology for implementation. Five work streams have been created to develop the expected credit loss models; execute system implementation; complete balance sheet scoping; ensure the design of effective internal controls surrounding new processes; and provide executive oversight of the project. ~~Balance sheet scoping is largely complete.~~ The Company has ~~contracted with~~completed the configuration of a vendor ~~for a~~provided software solution for which testing and ~~has begun configuration for an~~ implementation is expected to be complete in second quarter of 2019. ~~An internal analytics team~~Validation of models began in the first quarter of 2019 and is ~~developing and testing credit loss models~~ expected to be ~~used in~~completed during the ~~calculation.~~second quarter of 2019. While the Company has not yet quantified the financial impact of adoption, the expectation is that application of this guidance will result in an increase in the allowance for loan losses given the change in methodology from covering losses inherent in the portfolio to covering losses over the remaining expected life of the ~~portfolio, and the reclassification of nonaccretable difference on purchased credit impaired loans to allowance (offset by an increase in the carrying value of the related loans).~~portfolio. Application of the guidance is also expected to result in the establishment of an allowance for credit loss on held to maturity debt securities. The amount of the increase in these allowances will be impacted by the portfolio composition and quality at the adoption date as well as economic conditions and forecasts at that time.

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842),” to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. With the exception of short-term leases, lessees will be required to recognize a lease liability representing the lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis, and a right-of-use asset representing the lessee’s right to use, or control the use of, a specified asset for the lease term. Consequently, lessees will no longer be able to utilize leases as a source of off-balance sheet financing. Lessor accounting is largely unchanged under the new guidance, except for clarification of the definition of initial direct costs which may impact the timing of recognition of those costs. Subsequent to the issuance of this Update, the FASB issued three additional ASUs that provide codification improvements and certain transition elections, including ASU 2018-11, which permits an additional transition method whereby an entity may elect to record a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. Consequently, the entity’s reporting for the comparative periods presented in the financial statements in which the entity adopts the new lease requirements would continue to be in accordance with current GAAP (Topic 840), including disclosures. The Company plans to elect this transition method. Public business entities are required to apply the amendments for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company has preliminarily determined the practical expedients expected to be applied and continues to review existing service contracts that may include embedded leases. The Company has completed the upgrade of its existing third-party leasing software and has tested the capitalization functionality of the platform. The Company will record a gross-up of its Consolidated Balance Sheets as a result of recognizing lease liabilities and right of use assets upon adoption. The impact upon the Company’s consolidated financial statements will be based on the present value of future minimum lease payments as adjusted for lease incentives for the population of leases on the date of adoption and interest rates on the date of adoption. As such, the amount is not yet known. The Company does not expect material changes to its consolidated results of operations as a result of the application of this guidance.

Table of Contents

17. Subsequent Event

On April 30, 2019, the Company announced its entry to an Agreement and Plan of Merger providing for, among other things, the acquisition of MidSouth Bancorp, Inc. (“MidSouth”) (NYSE: MSL), parent company of MidSouth Bank, N.A. At March 31, 2019, MidSouth had approximately $1.7 billion in assets, including $0.9 billion of loans, and $1.4 billion of deposits. Under the terms of the agreement, each share of MidSouth common stock outstanding will convert, pursuant to a fixed conversion ratio, into the right to receive 0.2952 shares of the Company’s common stock. In addition, the merger agreement allows for the redemption of all of MidSouth’s outstanding preferred stock at closing, subject to receipt of applicable governmental approvals. The value of the stock-based consideration will be determined at the time of closing based on the fixed conversion ratio. The approximate transaction value based on an average of the Company’s share price at the date of the agreement, April 30, 2019, was $213 million. The acquisition is subject to the satisfaction of customary closing conditions, including the receipt of regulatory approvals and approval by the shareholders of MidSouth. The transaction is expected to close late in the third quarter of 2019.

Table of Contents

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

FORWARD-LOOKING STATEMENTS

This report contains forward-looking statements within the meaning and protections of section 27A of the Securities Act of 1933, as amended, and section 21E of the Securities Exchange Act of 1934, as amended. Important factors that could cause actual results to differ materially from the forward-looking statements we make in this Quarterly Report on Form 10-Q and in other reports or documents that we file from time to time with the SEC and include, but are not limited to, the following:

~~balance sheet and revenue growth expectations;~~

balance sheet and revenue growth expectations may differ from actual results;

~~the provision for loans losses;~~

the risk that our provision for loan losses may be inadequate or may be negatively affected by credit risk exposure;

~~loan growth expectations;~~

loan growth expectations;

management’s predictions about charge-offs of loans, including energy related credits, the impact of changes in oil and gas prices on our energy portfolio, and the downstream impact on businesses that support the energy sector, especially in the Gulf Coast region;

management’s predictions about charge-offs, including energy-related credits, the impact of changes in oil and gas prices on our energy portfolio, and the downstream impact on businesses that support that sector, especially in the Gulf Coast Region;

~~the impact of the sale of Harrison Finance Company upon our performance and financial condition;~~

the risk that our enterprise risk management framework may not identify or address risks adequately, which may result in unexpected losses;

~~the impact of the transaction with Capital One or future business combinations upon our performance and financial condition, including our ability to successfully integrate the business;~~

the impact of the trust and asset management transaction, the proposed MidSouth acquisition, or future business combinations on our performance and financial condition including our ability to successfully integrate the businesses;

~~deposit trends;~~

deposit trends;

~~credit quality trends;~~

credit quality trends;

~~changes in interest rates and net interest margin trends;~~

changes in interest rates;

~~future expense levels;~~

net interest margin trends;

~~success of revenue-generating initiatives;~~

future expense levels;

~~the effectiveness of derivative financial instruments and hedging activities to manage risks;~~

success of revenue-generating initiatives;

~~projected tax rates;~~

the effectiveness of derivative financial instruments and hedging activities to manage risks;

~~future profitability;~~

risks related to our reliance on third parties to provide key components of our business infrastructure, including the risks related to disruptions in services or financial difficulties of a third-party vendor;

~~improvements in expense to revenue (efficiency) ratio;~~

risks related to the ability of our operational framework to manage risks associated with our business such as credit risk and operation risk, including third-party vendors and other service providers, which could among other things, result in a breach of operating or security systems as a result of a cyber-attack or similar act;

~~purchase accounting impacts such as accretion levels;~~

projected tax rates;

~~potential cyber-security incidents, including potential business disruptions or financial losses;~~

future profitability;

~~possible repurchases of shares under stock buyback programs;~~

purchase accounting impacts, such as accretion levels;

~~the financial impact of tax reform legislation; and,~~

our ability to identify and address potential cybersecurity risks, including data security breaches, credential stuffing, malware, “denial-of-service” attacks, “hacking” and identify theft, a failure of which could disrupt our business and result in the disclosure of and/or misuse or misappropriation of confidential or proprietary information, disruption or damage to our systems, increased costs, losses, or adverse effects to our reputation;

our ability to receive dividends from Hancock Whitney Bank could affect our liquidity, including our ability to pay dividends or take other capital actions;

~~the financial impact of regulatory requirements.~~

the impact on our financial results, reputation, and business if we are unable to comply with all applicable federal and state regulations or other supervisory actions or directives and any necessary capital initiatives;

our ability to effectively compete with other traditional and non-traditional financial services companies, some of whom possess greater financial resources than we do or are subject to different regulatory standards than we are;

our ability to maintain adequate internal controls over financial reporting;

potential claims, damages, penalties, fines and reputational damage resulting from pending or future litigation, regulatory proceedings and enforcement actions;

the financial impact of future tax legislation; and

changes in laws and regulations affecting our businesses, including legislation and regulations relating to bank products and services, as well as changes in the enforcement and interpretation of such laws and regulations by applicable governmental and self-regulatory agencies, which could require us to change certain business practices, increase compliance risk, reduce our revenue, impose additional costs on us, or otherwise negatively affect our businesses.

Also, any statement that does not describe historical or current facts is a forward-looking statement. These statements often include the words “believes,” “expects,” “anticipates,” “estimates,” “intends,” “plans,” “forecast,” “goals,” “targets,” “initiatives,” “focus,” “potentially,” “probably,” “projects,” “outlook,” or similar expressions or future conditional verbs such as “may,” “will,” “should,” “would,” and “could.” Forward-looking statements are based upon the current beliefs and expectations of management and on information currently available to management. Our statements speak as of the date hereof, and we do not assume any obligation to update these statements or to update the reasons why actual results could differ from those contained in such statements in light of new information or future events.

Table of Contents

Forward-looking statements are subject to significant risks and uncertainties. Investors are cautioned against placing undue reliance on such statements. Actual results may differ materially from those set forth in the forward looking statements. Additional factors that could cause actual results to differ materially from those described in the forward-looking statements can be found in Part I, Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, ~~2017~~2018 and in other periodic reports that we file with the SEC.

You are cautioned not to place undue reliance on these forward-looking statements. We do not intend, and undertake no obligation, to update or revise any forward-looking statements, whether as a result of differences in actual results, changes in assumptions or changes in other factors affecting such statements, except as required by law.

OVERVIEW

Non-GAAP Financial Measures

Management’s Discussion and Analysis of Financial Condition and Results of Operations include non-GAAP measures used to describe our performance. These non-GAAP financial measures have inherent limitations as analytical tools and should not be considered on a standalone basis or as a substitute for analyses of financial condition and results as reported under GAAP. Non-GAAP financial measures are not standardized and therefore, it may not be possible to compare these measures with other companies that present measures having the same or similar names. These disclosures should not be considered an alternative to GAAP.

A reconciliation of those measures to GAAP measures are provided within the Selected Financial Data section ~~on page 48 of~~that appears later in this ~~report.~~item. The following is a summary of these non-GAAP measures and an explanation as to why they are deemed useful.

Consistent with Securities and Exchange Commission Industry Guide 3, we present net interest income, net interest margin and efficiency ratios on a fully taxable equivalent (“te”) basis. The te basis adjusts for the tax-favored status of net interest income from certain loans and investments using a statutory federal tax ~~rates~~rate of 21% ~~and 35% for 2018 and 2017, respectively,~~ to increase tax-exempt interest income to a taxable equivalent basis. We believe this measure to be the preferred industry measurement of net interest income, and that it enhances comparability of net interest income arising from taxable and tax-exempt sources.

~~Table of Contents~~

We present certain additional non-GAAP financial measures to assist the reader with a better understanding of the Company’s performance period over period, as well as to provide investors with assistance in understanding the success management has experienced in executing its strategic initiatives. These non-GAAP measures may reference the ~~concepts “core” or~~concept “operating.” ~~We use the term “core” to describe a financial measure that excludes income or expense arising from accretion or amortization of fair value adjustments recorded as part of purchase accounting.~~ We use the term “operating” to describe a financial measure that excludes income or expense considered to be nonoperating in nature. Items identified as nonoperating are those that, when excluded from a reported financial measure, provide management or the reader with a measure that may be more indicative of forward-looking trends in our business.

We define ~~Core Net Interest Income~~ ~~as net interest income (te) excluding net purchase accounting accretion and amortization. We define~~ ~~Core Net Interest Margin~~ as core net interest income expressed as a percentage of average earning assets. Management believes that core net interest income and core net interest margin provide investors with meaningful financial measures of the Company’s performance over time.

~~We define~~ Operating Revenue as net interest income (te) and noninterest income less nonoperating revenue. We define Operating Pre-Provision Net Revenue as operating revenue (te) less noninterest expense, excluding nonoperating items. Management believes that operating pre-provision net revenue is a useful financial measure because it enables investors and others to assess the Company’s ability to generate capital to cover credit losses through a credit cycle.

We define Operating Earnings as reported net income excluding nonoperating items net of income tax. We define Operating Earnings per Share as operating earnings expressed as an amount available to each common shareholder on a diluted basis.

~~Rebranding~~

Pending Acquisition

On ~~May 24, 2018,~~April 30, 2019, we announced our ~~shareholders approved~~entry into an agreement to acquire MidSouth Bancorp, Inc. (“MidSouth”) (NYSE: MSL) in a stock-for-stock transaction. MidSouth Bank N.A., the ~~Company’s proposal to change~~wholly-owned banking subsidiary of MidSouth, operates 42 locations in Louisiana and Texas and had approximately $1.7 billion of assets, including $0.9 billion of loans, and $1.4 billion of deposits at March 31, 2019. At the ~~name~~closing, each share of ~~the organization from “Hancock Holding Company” to “Hancock Whitney Corporation.” Related~~MidSouth’s common stock will convert to the ~~name change,~~right to receive 0.2952 shares of our common stock. The merger agreement also allows for the redemption of MidSouth’s outstanding preferred stock at closing, subject to the receipt of applicable governmental approvals. The Company ~~also changed its common stock ticker from “HBHC”~~expects acquisition-related expenses to ~~“HWC.” Both changes were effective May 25, 2018.~~

~~Additional corporate changes resulting from rebranding are as follows:~~

~~“Whitney Bank” became “Hancock Whitney Bank.”~~

~~“Hancock Investment Services, Inc.” became “Hancock Whitney Investment Services, Inc.”~~

~~The Company’s ticker for its exchange-traded debt (subordinated notes) changed from “HBHCL” to “HWCPL.”~~

~~Acquisitions~~

~~On July 13, 2018, we completed~~approximate $38 million in 2019 and expects the ~~acquisition~~transaction to be accretive to income beginning in the first quarter of the bank-managed high net worth individual and institutional investment management and trust business of Capital One, National Association (“Capital One”). In addition, we assumed approximately $217 million of customer deposit liabilities.2020. The ~~combination brings assets under administration and assets under management to approximately $26 billion and $10 billion, respectively, and~~transaction is expected to ~~provide~~add approximately $0.13 to $0.15 to earnings once fully phased-in. The transaction provides the opportunity for both enhanced growth in several of our current markets, such as MidSouth’s home market of Lafayette, Louisiana, as well as opportunities for expansion into new markets in Louisiana and Texas. The acquisition is subject to ~~develop relationships for other private, wholesale~~the satisfaction of customary closing conditions, including the receipt of regulatory approvals and ~~retail services.~~

On March 10, 2017, our wholly-owned subsidiary, Hancock Whitney Bank (“Hancock Whitney”), completed a transaction with First NBC Bank (“FNBC”), whereby Hancock Whitney acquired approximately $1.2 billion in loans (netapproval by the shareholders of ~~fair value discount or “loan mark”), nine branch locations with $398 million in deposits, and assumed $604 million in FHLB borrowings.~~MidSouth. The ~~operational conversion of the branch locations occurred in the second quarter of 2017, along with the simultaneous closure of 10 overlapping branches. This~~ transaction is ~~referred~~expected to ~~as the FNBC I transaction throughout this document.~~

~~On April 28, 2017, Hancock Whitney entered into~~close with a purchase and assumption agreement with the FDIC (“Agreement”), which acted as the receiver for the Louisiana Office of Financial Institutions (OFI) following the OFI’s closure of FNBC. This transaction is referred to as the FNBC II transaction throughout this document. Pursuant to the Agreement, Hancock Whitney acquired selected assets and liabilities of FNBC from the FDIC and continued to operate the 29 former FNBC branch locations untilsimultaneous systems conversion ~~which occurred~~late in ~~July 2017. In~~ the third quarter of ~~2017, Hancock Whitney exercised its option to acquire seven former FNBC locations and closed and consolidated 25 overlapping branch locations.~~2019.

Under the Agreement, Hancock Whitney assumed approximately $1.6 billion in deposits and customer repurchase agreements and acquired $165 million in performing loans, and $791 million in other assets. Hancock Whitney paid a premium of $35 million to the FDIC for the earnings stream acquired and received approximately $800 million in cash ($642 million from the FDIC for the net liabilities assumed and $158 million in branch cash acquired).

The terms of the Agreement require the FDIC to indemnify Hancock Whitney against certain liabilities of FNBC and its affiliates not assumed or otherwise purchased by Hancock Whitney. Neither the Company nor Hancock Whitney acquired any assets, common stock, preferred stock or debt, or assumed any other obligations, of First NBC Bank Holding Company.

Table of Contents

~~Divestiture~~

On March 9, 2018, we sold our consumer finance subsidiary, Harrison Finance Company (“HFC”), due to a change in corporate strategy. The subsidiary operated in 35 branches with 137 employees and had $95 million in loans as of December 31, 2017. The transaction resulted in a loss on sale totaling $1.1 million.

Current Economic Environment

Most of our market area experienced a ~~solid~~modest to moderate expansion in economic activity during the ~~third~~first quarter of ~~2018,~~2019, according to the Federal Reserve’s Summary of Commentary on Current Economic Conditions (“Beige Book”). Overall, the economic outlook remains ~~positive, with some uncertainty on~~positive. Activity in the ~~impact of tariffs on trade. Drilling~~energy sector expanded and outlooks improved compared to the prior quarter. Oil and gas production rose at a slow pace; however, spending for drilling activity ~~leveled off for energy related businesses operating mainly in our south Louisiana and Houston, Texas markets due to pipeline capacity constraints. However, outlooks remained positive~~declined as ~~additional pipeline capacity is expected in 2019.~~ firms invested less into new equipment.

~~The commercial~~Commercial real estate ~~market maintained strong demand~~conditions continued to advance in most of our ~~footprint, with the pace of nonresidential construction activity at least matched with the year-ago level except for retail construction, which was unchanged to down.~~markets. In ~~the~~our Houston market, ~~a large number of new apartments continued to suppress rent growth~~apartment rents were flat and ~~office space net absorption remained weak in part due to the broader national trend among firms to move out of larger spaces into more efficient, smaller ones.~~industrial leasing slowed.

The residential real estate market has a ~~varied~~positive outlook with ~~most of~~ our markets reporting ~~modest~~that lower mortgage rates are helping to boost growth from the prior report, but ~~ongoing growth, with an increase in construction activity. However, constraints on~~flat to the ~~availability of lots~~prior year and ~~land as well~~optimistic as the construction labor market may affect growth in the short term. In our Houston market, new home sales were slower than expected and existing home sales were flat but remained near recent highs. There was also some concern regarding higher interest rates, rising building costs, and uncertainty surrounding trade and immigration policies on future sales, with some expectation that sales will start to flatten in the near term.spring selling season gets underway.

Retail sales activity and consumer spending ~~outlook was positive with an increase~~grew slightly in most of our markets. The Houston market reported flat sales ~~levels.~~and slower demand. Auto sales were updown in all of our markets. The labor market remained tight ~~citing low availability of quality labor as a growing challenge.~~in our markets with an increase in wages for hard-to-fill or in-demand positions.

Economic ~~reports indicate~~data indicates that loan growth ~~slowed~~was stable in most of our markets, ~~as higher interest rates and savings from tax reform impacted~~with an increase in loan ~~demand.~~volumes in our Houston market, primarily with construction real estate lending. Reports also indicated that financial institutions were ~~relying more on borrowings and noncore deposits~~able to fund ~~asset growth,~~the majority of lending with ~~the~~their deposit base, although competition for ~~core~~ deposits ~~fueling an increase in mergers and acquisitions. However,~~continues to increase. Our total loan ~~demand expanded in our Houston market, with broad based growth. Our loan production in~~balance increased $86.4 million, or 2% annualized, during the ~~third~~first quarter of ~~2018 was up $173 million, or 4% annualized.~~2019.

Highlights of ~~Third~~First Quarter ~~2018~~

2019

Net income for the ~~third~~first quarter of ~~2018~~2019 was ~~$83.9~~$79.2 million, or ~~$.96~~$.91 per diluted common share (EPS), compared to ~~$71.2~~$96.2 million, or ~~$.82~~$1.10 EPS in the ~~second~~fourth quarter of 2018 and ~~$58.9~~$72.5 million, or ~~$.68~~$.83 EPS, in the ~~third~~first quarter of ~~2017.~~2018. The ~~third~~first quarter of 2019 included a $10.1 million ($.09 per share after-tax impact) provision for loan losses related to the previously disclosed potential fraud associated with DC Solar (further discussion of this matter appears in the Provision for Loan Losses section later in this Item). The fourth quarter of 2018 included ~~$4.8~~$1.9 million ($~~.05 per share after-tax impact) of nonoperating items. The second quarter of 2018 included $15.8 million ($.14~~.02 per share impact) of nonoperating items and the ~~third~~first quarter of ~~2017~~2018 included ~~nonoperating items of $11.4~~$7.0 million ($~~.08~~.07 per share impact).

of nonoperating items.

Highlights of our ~~third~~first quarter 2019 results (compared to fourth quarter 2018):

Net income was $79.2 million, or $.91 per diluted share, a decrease of $17.1 million, or $.19 per share. Excluding nonoperating items, net income was $87.1 million, a decrease of $10.6 million, or $.12 per share.

The first quarter results were impacted by a charge-off to the provision taken related to potential fraud on an equipment finance lease with DC Solar ($.09). Fourth quarter 2018 results ~~(compared~~were impacted by benefits realized on tax reform-related initiatives ($.11).

Net interest margin expanded 7 bps to ~~second~~3.46%.

Criticized commercial loans declined $41 million, or 7% ($15 million energy and $26 million nonenergy).

Improved mix within the energy portfolio of 55% in exploration & production, transportation and storage, and 45% in onshore and offshore support services.

The first quarter ~~2018):~~

Closed the trust & asset management acquisition July 13, 2018; added $5.5 million in fee income (trust), $4.1 million in expenses (operating) and approximately $229 million in interest-bearing deposits in 3Q18; nonoperating items totaled $4.8 million and are primarily related to the acquisition

~~EPS increased $.14 linked quarter to $.96; excluding nonoperating items EPS increased $.05 to $1.01~~

~~Net income increased $12.7 million, or 18% linked-quarter; excluding nonoperating items, earnings increased $4.0 million, or 5%~~

~~Return on average assets improved 15 bps to 1.19%; excluding nonoperating items, return on average assets increased 2 bps to 1.24%~~

~~Operating leverage increased approximately $1.5 million linked-quarter; revenue up $9.3 million, operating expense up $7.8 million~~

~~Criticized commercial loans declined $63 million, or 7%, linked-quarter; $51 million energy, $12 million nonenergy~~

~~Loans increased $173 million linked-quarter (includes approximately $90 million in payoffs at quarter end)~~

~~Energy portfolio less than 5% of total loans (4.7%); no energy charge offs during the quarter~~

~~Table~~ of ~~Contents~~

~~Results~~2019 reflects improvements in the net interest margin and asset quality, two key areas of focus. During the ~~third~~fourth quarter reflect steady progress towards achieving our goals and enhancing shareholder value. We achieved our corporate strategic objective (“CSO”) for operating EPS this quarter at $1.01, and our operating return of ~~average asset ratio of 1.24% is just below the top end~~2018, we restructured a portion of our ~~targeted range.~~investment and loan portfolios whereby we sold certain lower yielding securities and loans and reinvested in higher yielding assets. The portfolio restructuring and other improvements in our earning asset mix, along with the December 2018 interest rate increase, contributed to the expansion in the net interest margin. Asset quality improved with criticized commercial loans down in both the energy and nonenergy down compared to prior quarter. Loan growth was positive despite the continued decline of the energy portfolio, which is now below 5% of total loans, and more balanced among upstream reserve-based lending, midstream and support services. We completed the trust and asset management acquisition, which contributed to the quarter’s improved operating leverage.portfolios.

RESULTS OF OPERATIONS

Net Interest Income

Net interest income (te) for the ~~third~~first quarter of ~~2018~~2019 was ~~$218.3~~$223.1 million, a ~~$2.7~~$1.6 million, or 1%, increase from the ~~second~~fourth quarter of 2018. ~~Over the same period, core net interest income increased $3.6 million.~~ Net interest income (te) for the ~~third~~first quarter of ~~2018~~2019 increased ~~$6.9~~$13.5 million, or 3%6%, compared to the ~~third~~first quarter of ~~2017, while core net interest income was up $9.0 million, or 4%, over the same period.~~2018. The linked quarter increase is primarily attributable to ~~one additional accrual day~~a full quarter impact of the fourth quarter portfolio restructure and ~~a higher level of average earning assets,~~the December 2018 rate increase, partially offset by ~~a lower net interest margin.~~two fewer accrual days.

Table of Contents

The net interest margin (te) was ~~3.36%~~3.46 % for the ~~third~~first quarter of ~~2018, down 4 basis points (bps)~~2019, up 7 bps from the ~~second~~fourth quarter of 2018. ~~The decrease in the net~~Net interest margin (te) ~~from~~was favorably impacted by the ~~prior quarter reflects an 11 bp increase~~late 2018 portfolio restructuring. The restructuring and other improvements in the ~~cost of funds, partially offset by~~earning asset mix and the recent interest rate increase resulted in a ~~positive impact from a 6~~14 bp ~~increase~~improvement in the ~~average~~ earning asset yield, ~~(an 8 bp increase~~including increases in the loan yield of 13 bps, bond portfolio yield of 7 bps, and ~~a 5 bp increase in~~short term investments yield onof 17 bps. Partially offsetting the ~~securities portfolio. The core net interest margin for the third~~linked quarter ~~of 2018 was 3.28%, down 3 bps from the second quarter of 2018. Contributing to the decline~~improvement in the ~~margin~~earning asset yield was ~~an increase in~~the movement of our deposit ~~beta from 17% in the second quarter of 2018 to 35% this quarter while our~~and loan ~~beta increased to 52% from 44% in the second quarter.~~betas at differing intervals. The deposit and loan betas are defined as the amount by which deposit and loan costs change in response to the movement in short-term interest rates. ~~The~~Our deposit beta ~~increased partly due~~moved from 31% to ~~the higher-cost deposits that we assumed~~50% in the ~~trust and asset management acquisition,~~first quarter of 2019, while our loan beta moved from 40% to 54% over the same period. The movement in the deposit beta was influenced by a 2420 bp increase in the cost of brokered CDs, and a 1420 bp increase in the rate paid on public fund deposits. ~~Also contributing~~

Compared to the ~~decline in~~first quarter of 2018, the net interest margin was the impact from narrowing of the spread of the 30 day LIBOR to federal funds had on the loan yield and a shift in funding mix to higher cost Federal Home Loan Bank advances. We expect some improvement in funding mix in the fourth quarter of 2018 with the usual inflow of seasonal deposits and expect loan yields to improve with the full quarter impact of the September rate increase.

~~Compared to the third quarter of 2017, the net interest margin decreased 8~~increased 9 bps, and the core net interest margin was down 4 bps. The net interest margin was negatively impacted by 8 bps from lower taxable equivalent adjustment as a result of a lower statutory income tax rate. Excluding the tax rate change, the margin was flat to the third quarter of 2017, primarily due to an improvement in the ~~benefits from the increased average~~ earning asset ~~yield being offset by~~mix and the ~~increased rates paid on interest bearing liabilities along with unfavorable changes to the funding mix.~~

~~Net interest income (te) for the nine months ended September 30, 2018 totaled $643.5 million, up $33.8 million, or 6%,~~net benefit from the nine months ended September 30 2017. Core net interest income was up $36.0 million, which is net of a decline in the taxable equivalent adjustment of $13.3 million. Interest earned on loans, excluding purchase accounting accretion, increased $72.5 million as average total loans grew $1.1 billion, or 6%, due to the FNBC transactions and organic loan growth and a 26 bp increase in loan yield. The securities yield of 2.50% was flat compared to the same period in 2017, which reflects a negative impact of 10 bps from tax reform. The cost of funds was up 23 bps to .66%, due in part to interest rate ~~hikes, promotional pricing campaigns aimed at attracting and retaining deposits, and a less favorable mix in funding sources.~~increases during 2018.

~~Table of Contents~~

The following tables detail the components of our net interest income (te) and net interest margin.



	Three Months Ended

	September 30, 2018						June 30, 2018						September 30, 2017							Three Months Ended
																				March 31, 2019								December 31, 2018							March 31, 2018
(dollars in millions)	Volume		Interest		Rate		Volume		Interest		Rate		Volume		Interest		Rate			Volume		Interest (d)			Rate			Volume		Interest (d)		Rate			Volume		Interest (d)		Rate
Average earning assets
Commercial & real estate loans (te) (a)	$	14,542.3	$	168.9	4.61	%	$	14,380.9	$	162.3	4.53	%	$	13,945.8	$	151.3		4.31	%	$	15,062.1	$	180.5			4.86	%	$	14,794.9	$	172.8		4.64	%	$	14,224.4	$	150.9		4.30	%
Residential mortgage loans		2,816.2		29.4	4.17			2,754.3		28.1	4.08			2,549.3		25.0		3.94			2,942.4		31.1			4.23	%		2,888.2		29.2		4.04	%		2,718.4		27.9		4.10	%
Consumer loans		2,106.2		28.6	5.39			2,058.0		27.2	5.30			2,096.1		29.4		5.57			2,122.4		29.9			5.72	%		2,134.6		32.5		6.04	%		2,085.7		29.0		5.64	%
Loan fees & late charges		—		—	—			—		0.2	—			—		(0.5)		—			—		(0.9	)		0.00	%		—		0.6		0.00	%		—		0.5		0.00	%
Total loans (te) (b)		19,464.7		226.9	4.63			19,193.2		217.8	4.55			18,591.2		205.2		4.39			20,126.9		240.6			4.84	%		19,817.7		235.1		4.71	%		19,028.5		208.3		4.43	%
Loans held for sale		26.0		0.3	3.60			22.6		0.3	5.22			21.7		0.2		3.97			20.6		0.3			4.92	%		22.2		0.2		2.91	%		32.2		0.2		2.75	%
US Treasury and government agency securities		144.7		0.8	2.21			145.6		0.8	2.22			125.6		0.7		2.08			123.8		0.7			2.25	%		131.8		0.8		2.23	%		148.4		0.8		2.21	%
Mortgage-backed securities and collateralized mortgage obligations		5,092.4		31.1	2.44			4,932.0		29.3	2.38			4,575.0		25.4		2.21			4,599.4		29.9			2.60	%		4,896.2		30.9		2.53	%		4,785.3		27.9		2.33	%
Municipals (te)		945.7		7.5	3.19			951.0		7.6	3.18			975.4		9.2		3.80			930.0		7.4			3.17	%		933.9		7.4		3.17	%		960.1		7.6		3.18	%
Other securities		3.6		—	2.81			3.5		—	2.84			3.8		—		1.94			3.5	0.0				3.09	%		3.6	0.0			2.77	%		3.5	0.0			2.06	%
Total securities (te) (c)		6,186.4		39.4	2.55			6,032.1		37.7	2.50			5,679.8		35.3		2.48			5,656.7		38.0			2.69	%		5,965.5		39.1		2.62	%		5,897.3		36.3		2.46	%
Total short-term investments		155.3		0.7	1.71			143.1		0.6	1.61			194.7		0.6		1.17			216.2		1.2			2.18	%		205.8		1.0		2.01	%		148.3		0.5		1.34	%
Total earning assets (te)	$	25,832.4	$	267.3	4.11	%	$	25,391.0	$	256.4	4.05	%	$	24,487.4	$	241.3		3.92	%	$	26,020.4	$	280.1			4.35	%	$	26,011.2	$	275.4		4.21	%	$	25,106.3	$	245.3		3.95	%
Average interest-bearing liabilities
Interest-bearing transaction and savings deposits	$	7,944.3	$	10.9	0.54	%	$	7,860.0	$	9.3	0.47	%	$	8,097.4	$	8.4		0.41	%	$	8,082.6	$	14.7			0.74	%	$	7,940.7	$	12.4		0.62	%	$	8,043.2	$	9.1		0.46	%
Time deposits		3,377.6		14.1	1.66			3,121.8		11.5	1.48			2,711.6		7.7		1.12			3,743.3		18.0			1.95	%		3,616.2		16.6		1.82	%		2,979.0		9.7		1.32	%
Public funds		2,682.3		9.2	1.36			2,970.1		9.1	1.22			2,764.9		5.7		0.82			3,060.5		13.4			1.78	%		2,680.8		10.7		1.58	%		3,070.1		8.1		1.07	%
Total interest-bearing deposits		14,004.2		34.2	0.97			13,951.9		29.9	0.86			13,573.9		21.8		0.64			14,886.4		46.1			1.26	%		14,237.7		39.7		1.11	%		14,092.3		26.9		0.78	%
Short-term borrowings		2,610.2		11.8	1.81			1,989.4		7.4	1.49			1,909.4		4.4		0.92			1,684.9		8.1			1.92	%		2,330.3		11.5		1.98	%		1,823.1		5.4		1.17	%
Long-term debt		241.5		3.0	5.05			299.7		3.5	4.63			339.5		3.6		4.29			225.0		2.8			4.99	%		222.3		2.7		4.82	%		305.1		3.4		4.48	%
Total borrowings		2,851.7		14.8	2.07			2,289.1		10.9	1.91			2,248.9		8.0		1.43			1,909.9		10.9			2.30	%		2,552.6		14.2		2.21	%		2,128.2		8.8		1.66	%
Total interest-bearing liabilities		16,855.9		49.0	1.15	%		16,241.0		40.8	1.01	%		15,822.8		29.8		0.75	%		16,796.3		57.0			1.38	%		16,790.3		53.9		1.27	%		16,220.5		35.7		0.89	%
Net interest-free funding sources		8,976.5						9,150.0						8,664.6							9,224.1								9,220.9							8,885.8
Total cost of funds	$	25,832.4	$	49.0	0.75	%	$	25,391.0	$	40.8	0.64	%	$	24,487.4	$	29.8		0.48	%	$	26,020.4	$	57.0			0.89	%	$	26,011.2	$	53.9		0.82	%	$	25,106.3	$	35.7		0.58	%
Net interest spread (te)			$	218.3	2.96	%			$	215.6	3.04	%			$	211.5		3.17	%			$	223.1			2.97	%			$	221.5		2.94	%			$	209.6		3.05	%
Net interest margin	$	25,832.4	$	218.3	3.36	%	$	25,391.0	$	215.6	3.40	%	$	24,487.4	$	211.5		3.44	%	$	26,020.4	$	223.1			3.46	%	$	26,011.2	$	221.5		3.39	%	$	25,106.3	$	209.6		3.37	%

(a)

Taxable equivalent (te) amounts were calculated using a federal income tax rate of 21% ~~for the three months ended September 30, 2018 and June 30, 2018, and 35% for the three months ended September 30, 2017.~~ .

(b)

Includes nonaccrual loans.

(c)

Average securities do not include unrealized holding gains/losses on available for sale securities.

(d) Included in interest income is net purchase accounting accretion of $5.0 million for the three months ended March 31, 2019 and December 31, 2018 and $6.8 million for the three months ended March 31, 2018.

Table of Contents

Nine Months Ended

September 30, 2018

September 30, 2017

(dollars in millions)

Volume

Interest

Rate

Volume

Interest

Rate
Average earning assets

Commercial & real estate loans (te) (a)

$
14,383.7

$
482.2

4.48
%

$
13,634.7

$
430.1

4.22
%
Residential mortgage loans

2,763.3

85.4

4.12

2,379.6

68.7

3.85

Consumer loans

2,083.4

84.8

5.44

2,078.3

85.3

5.49

Loan fees & late charges

—

0.7

—

—

(0.9)

—

Total loans (te) (b)

19,230.4

653.1

4.54

18,092.6

583.2

4.31

Loans held for sale

26.9

0.8

3.89

21.8

0.7

4.09

US Treasury and government agency securities

146.2

2.4

2.21

122.6

1.9

2.07

Mortgage-backed securities and collateralized mortgage obligations

4,937.7

88.2

2.38

4,208.4

70.1

2.22

Municipals (te)

952.2

22.7

3.18

967.0

27.7

3.82

Other securities

3.5

0.1

2.57

24.0

0.3

1.92

Total securities (te) (c)

6,039.6

113.4

2.50

5,322.0

100.0

2.50

Total short-term investments

149.0

1.7

1.56

435.1

3.0

0.94

Total earning assets (te)

$
25,445.9

$
769.0

4.04
%

$
23,871.5

$
686.9

3.84
%
Average interest-bearing liabilities

Interest-bearing transaction and savings deposits

$
7,948.8

$
29.3

0.49
%

$
7,685.2

$
21.0

0.37
%
Time deposits

3,160.9

35.4

1.50

2,543.9

19.3

1.01

Public funds

2,906.1

26.4

1.21

2,618.2

12.6

0.64

Total interest-bearing deposits

14,015.8

91.1

0.87

12,847.3

52.9

0.55

Short-term borrowings

2,143.8

24.5

1.53

2,089.0

11.7

0.75

Long-term debt

281.9

9.9

4.70

408.2

12.6

4.11

Total borrowings

2,425.7

34.4

1.90

2,497.2

24.3

1.29

Total interest-bearing liabilities

16,441.5

125.5

1.02
%

15,344.5

77.2

0.67
%
Net interest-free funding sources

9,004.4

8,527.0

Total cost of funds

$
25,445.9

$
125.5

0.66
%

$
23,871.5

$
77.2

0.43
%
Net interest spread (te)

$
643.5

3.02
%

$
609.7

3.17
%
Net interest margin

$
25,445.9

$
643.5

3.38
%

$
23,871.5

$
609.7

3.41
%

~~(a)~~

~~Taxable equivalent (te) amounts were calculated using a federal income tax rate of 21% for the nine months ended September 30, 2018 and 35% for the nine months ended September 30, 2017.~~

~~(b)~~

~~Includes nonaccrual loans.~~

~~(c)~~

~~Average securities do not include unrealized holding gains/losses on available for sale securities.~~

Provision for Loan Losses

During the ~~third~~first quarter of ~~2018,~~2019, we recorded a provision for loan losses of ~~$6.9~~$18.0 million, ~~down $2.0~~up $9.9 million from the ~~second~~fourth quarter of ~~2018~~2019 and ~~down $6.2~~up $5.8 million from the ~~third~~first quarter of ~~2017. For~~2018. Included in the ~~nine months ended September 30, 2018, we recorded~~current quarter’s provision is a ~~total provision for loan losses of $28.0~~$10.1 million charge-off related to the DC Solar credit discussed below and a relatively flat allowance compared to ~~$44.0~~the prior quarter.

The Company had a lease financing facility to DC Solar, a company that sold and managed mobile solar generators. In February 2019, the borrower filed for Chapter 11 bankruptcy protection and we became aware of an affidavit from a Federal Bureau of Investigation special agent that alleged that this borrower was operating a potentially fraudulent Ponzi-type scheme and that the majority of mobile solar generators sold to investors and managed by the borrower and the majority of the related lease revenues claimed to have been received by the borrower may not have existed. The $10.1 million charged-off taken in the quarter represents the majority of our exposure to this borrower. There could be potential for some recovery in the ~~nine months ended September 30, 2017.~~future depending on our ability to sell or re-lease the solar units.

The provision includes net charge-offs totaling ~~$6.9~~$17.9 million, which represents ~~0.14%~~0.36% of average total loans on an annualized basis in the ~~third~~first quarter of ~~2018,~~2019, or 0.16% when adjusted to exclude the DC Solar charge-off, compared to ~~$5.1~~net charge-offs of $28.1 million, or ~~0.11%~~0.56 % of average total loans in the ~~second~~fourth quarter of 2018. In the energy portfolio, there were no net charge offs in the third quarter of 2018, compared to a $1.9 million net recovery in the second quarter of 2018. The provision for the nine months ended September 30, 2018 included net charge-offs totaling $24.1 million compared to $47.8 million in the nine months ended September 30, 2017, with energy related net charge-offs down $24 million.

The provision for loan losses reflects a continued decline in energy allowance, with reduced exposure and an overall improvement in portfolio performance, and an increase in nonenergy allowance as that portfolio continues to grow. The discussion of Allowance for Loan Losses and Asset Quality later in this Item provides additional information on changes in the allowance for loan losses and general credit quality.

Noninterest Income

Noninterest income totaled ~~$75.5~~$70.5 million for the ~~third~~first quarter of ~~2018, up $6.7~~2019, down $4.0 million, or ~~10%,~~5% from the ~~second~~fourth quarter of 2018 and up ~~$8.4~~$4.3 million, or ~~13%~~6%, compared to the ~~third~~first quarter of ~~2017.~~2018. Excluding nonoperating items related to a portfolio restructure in the fourth quarter of 2018 and a loss on the sale of a subsidiary in the first quarter of 2018, noninterest income was down $3.4 million, or 5% from the fourth quarter of 2018 and up $3.1 million, or 5%, from the first quarter of 2018. The ~~increase over~~decrease from the prior quarter was primarily driven by decreases due to seasonality, market conditions and fewer business days in the quarter discussed in more detail below. The increase compared to the first quarter of 2018 was largely driven by an increase in trust fees ~~as a result of the~~following the trust and asset management ~~acquisition. The increase compared to the third quarter of 2017 was also largely driven by higher trust fees~~acquisition, as well as higher bank card and ATM ~~fees discussed in more detail below.~~fees.

~~Table of Contents~~

The components of operating and nonoperating noninterest income are presented in the following table for the indicated periods.

											Three Months Ended
											March 31,		December 31,			March 31,
	Three Months Ended						Nine Months Ended				2019		2018			2018
	September 30,		June 30,		September 30,		September 30,
(in thousands)	2018		2018		2017		2018		2017
Service charges on deposit accounts	$	21,377	$	20,981	$	21,444	$	63,806	$	60,711	$	20,367	$	21,466		$	21,448
Trust fees		16,738		11,653		10,742		39,726		33,459		15,124		15,762			11,335
Bank card and ATM fees		14,862		15,464		13,390		44,784		39,545		15,290		15,656			14,458
Investment and annuity fees and insurance commissions		6,652		6,264		6,230		19,041		17,939		6,528		6,307			6,125
Secondary mortgage market operations		4,333		3,965		4,157		11,699		11,965		3,726		3,933			3,401
Amortization of FDIC loss share receivable		—		—		—		—		(2,427)
Income from bank-owned life insurance		3,100		3,113		3,097		9,283		8,632		3,265		3,141			3,070
Credit related fees		2,762		2,416		2,521		7,900		8,297		2,595		3,165			2,722
Income from derivatives		1,363		1,588		1,339		4,474		4,484		809		893			1,523
Gain (loss) on sales of assets		989		41		400		968		113		397		(151	)		(62	)
Other miscellaneous		3,342		3,347		3,795		10,066		11,023		2,402		3,762			3,377
Total noninterest operating income	$	75,518	$	68,832	$	67,115	$	211,747	$	193,741	$	70,503	$	73,934		$	67,397
Nonoperating income items		—		—		—		(1,145)		4,352		—		604			(1,145	)
Total noninterest income	$	75,518	$	68,832	$	67,115	$	210,602	$	198,093	$	70,503	$	74,538		$	66,252

Table of Contents

	Three Months Ended
	March 31,		December 31,			March 31,
(in thousands)	2019		2018			2018
Gain (loss) on portfolio restructure:
Gain on sale of Visa Class B common shares	$	-	$	33,229		$	-
Loss on sale of investment securities		-		(25,480	)		-
Loss on sale of loans		-		(7,145	)		-
Total net gain on portfolio restructure	$	-	$	604		$	-
Loss on sale of subsidiary		-		-			(1,145	)
Total nonoperating income	$	-	$	604		$	(1,145	)

Service charges on deposits totaled ~~$21.4~~$20.4 million for the ~~third~~first quarter of ~~2018, up $0.4~~2019, down $1.1 million, or 2%5%, from both the ~~second~~fourth quarter of 2018 and ~~down $0.1 million, or less than 1%, from~~ the ~~third~~first quarter of ~~2017.~~2018. The ~~increase~~decrease from the prior quarter was primarily due to afewer business days and seasonal ~~increase~~decrease in consumer overdraft fees. The decrease from the ~~third~~first quarter of ~~2017 is~~2018 was due to lower consumer overdraft fees and service charges, partially offset by increased check printing fees.

Trust fees ~~increased $5.1~~decreased $0.6 million, or ~~44%~~4%, linked quarter largely as a result of market conditions, which began to decline towards the ~~acquisition~~end of ~~a trust~~fourth quarter 2018 and ~~asset management business on July 13, 2018. Trust fee income in~~gradually recovered over the ~~third~~current quarter. Compared to the first quarter of 2018, ~~attributable to the acquired business was approximately $5.5 million. Compared to the third quarter of 2017,~~ trust fees increased ~~$6.0~~$3.8 million, or ~~56%~~33%, ~~also~~ largely due to the July 2018 trust and asset management acquisition.

Bank card and ATM fees totaled ~~$14.9~~$15.3 million for the ~~third~~first quarter of ~~2018,~~2019, down ~~$0.6~~$0.4 million, or 4%2%, from the ~~second~~fourth quarter of 2018, due to ~~seasonally lower activity~~fewer days in the ~~third~~first quarter. Compared to the ~~third~~first quarter of ~~2017,~~2018, bank card and ATM fees were up ~~$1.5~~$0.8 million, or ~~11%~~6%, primarily due to increased card activity.

Investment and annuity fees and insurance commissions increased ~~$0.4~~$0.2 million, or 6%4%, compared to ~~second~~fourth quarter 2018 primarily due to bond trading fees attributable to a higher ~~annuity~~volume of institutional brokerage sales ~~volume~~ and underwriting activity, partially offset by a decrease in insurance and annuity sales. Investment and annuity fees and insurance commissions increased $0.4 million, or 7%, compared to ~~third~~first quarter ~~2017.~~2018.

Fee income from secondary mortgage market operations was ~~up $0.4~~down $0.2 million, or 9%5%, from ~~second~~fourth quarter of 2018 ~~with seasonally higher sales activity,~~and up $0.3 million, or 10%, from the first quarter of 2018. These fees will vary based on origination volume and the timing of subsequent sales.

Income from bank-owned life insurance was $3.3 million in the first quarter of 2019, up $0.1 million, or 4%, from the fourth quarter of 2018 and up $0.2 million, or 4%6%, from the first quarter of 2018. The increase from the prior quarter is related to a mortality gain and the increase from the first quarter of 2018 is related to the restructure of a portion of our bank owned life insurance contracts during the third quarter of ~~2017.~~ 2018.

Credit related fees were $2.6 million for the first quarter of 2019, down $0.6 million, or 18%, from the fourth quarter of 2018 and down $0.1 million, or 5%, from the first quarter of 2018. The linked-quarter decline was due to lower letter of credit and unused commitment fees, primarily attributable to fewer energy-related participation relationships.

Income from our customer interest rate derivative program resulted in a ~~$1.4~~$0.8 million net gain for the ~~third~~first quarter of ~~2018~~2019 compared to ~~net gains of $1.6~~$0.9 million in the ~~second~~fourth quarter of 2018 and ~~$1.3~~$1.5 million for the ~~third~~first quarter of ~~2017.~~2018. Derivative income can be volatile and is dependent upon both customer sales activity ~~as well as~~and market value adjustments due to market interest rate movement.

~~Noninterest income~~Gain on disposal of assets was ~~$210.6~~$0.4 million ~~for~~in the ~~nine months ended September 30, 2018, up $12.5 million, or 6%, from the same period in 2017. Excluding nonoperating items, which include a loss related~~first quarter of 2019, primarily attributable to the sale of ~~Harrison Finance in~~mortgage loans. In the fourth quarter of 2018, ~~and~~we recorded a ~~gain related to the sale~~loss of select Hancock Horizon funds in 2017, noninterest income was $211.7 million, up $18.0 million, or 9%, from the first nine months of 2017. Trust fees were up $6.3 million, or 19%, at $39.7 million, due primarily to the July 13, 2018 trust and asset management acquisition. Bank card and ATM fees were up $5.2 million, or 13%, at $44.8 million due to increased card activity. Service charges were up $3.1 million, or 5%, at $63.8$0.2 million, primarily ~~due~~attributable to an increase in check printing fees and overdraft fees driven from the sustained overdraft fee introduced in the third quarter of 2017. The loss share agreements with the FDIC were terminated in July 2017, resulting in an increase infixed asset retirements.

Other miscellaneous income ~~from the prior year~~ of $2.4 million ~~due~~was down $1.4 million, or 36%, compared to the ~~elimination~~fourth quarter of ~~amortization~~2018 and $1.0 million, or 29%, compared to the first quarter of ~~the FDIC loss share receivable. Investment and annuity~~2018. The decrease compared to both periods was due largely to lower syndication fees and insurance commissions totaled $19.0 million, an increase of $1.1 million, or 6%, mostly due to increased annuity income partially offset by lower insurance commissions due to the sale of Harrison Finance on March 9, 2018.earnings from community development entities and other investments.

~~Table of Contents~~

Noninterest Expense

Noninterest expense for the ~~third~~first quarter of ~~2018~~2019 was ~~$181.2~~$175.7 million, down ~~$3.2~~$3.7 million, or 2%, from the ~~second~~fourth quarter of 2018, and up ~~$3.6~~$4.9 million, or 2%3%, from the ~~third~~first quarter of ~~2017.~~2018. Excluding nonoperating expenses, operating expense for the ~~third~~first quarter of 2019 was down $1.2 million, or less than 1%, and up $10.9 million, or 7%, from the first quarter of 2018.

There were no nonoperating noninterest expenses in the first quarter of 2019. Nonoperating noninterest expenses in the fourth quarter of 2018 totaled $176.4 million, an increase of $7.8 million, or 5%, linked quarter and up $10.1 million, or 6%, from the third quarter of 2017. For the nine months ended September 30, 2018, total noninterest expense was $536.4 million, an $11.8 million, or 2%, increase over the same period in 2017. Excluding nonoperating expenses, operating expense for the nine months ended September 30, 2018 totaled $509.9 million, up $13.7 million, or 3%, over the same period in 2017.

~~Nonoperating expenses in the third quarter of 2018 totaled $4.8~~$2.5 million and primarily included costs associated with ~~the trust and asset management acquisition. Nonoperating expenses in the second quarter of 2018 were $15.8 million and included costs associated with the brand consolidation project,~~Hurricane Michael damage, the trust and asset management acquisition and ~~a charge related to~~ the ~~restructuring~~move of the New Orleans Main regional headquarters. Nonoperating noninterest expenses for the first quarter of

Table of Contents

2018 included costs of a ~~portion~~one-time bonus, the brand consolidation project, the sale of ~~our bank-owned life insurance contracts. The year-to-date 2018 nonoperating expenses of $26.5 million also includes a one-time all hands bonus. The nonoperating expenses in~~ the ~~third quarter of 2017~~consumer finance company, and the nine months ended September 30, 2017 of $11.4 million and $28.5 million, respectively, included costs associated with the FNBC transactions. The nine months ended September 30, 2017 also included costs associated with terminationacquisition of the ~~FDIC loss share agreements.~~trust and asset management business. The components of noninterest operating and nonoperating expense are presented in the following tables for the indicated periods.

	Three Months Ended
	March 31,			December 31,			March 31,
(in thousands)	2019			2018			2018
Operating expense
Compensation expense	$	83,968		$	86,508		$	76,743
Employee benefits		19,730			18,400			19,623
Personnel expense		103,698			104,908			96,366
Net occupancy expense		11,984			12,153			10,943
Equipment expense		4,679			3,827			3,493
Data processing expense		19,331			18,492			16,368
Professional services expense		8,168			9,390			7,847
Amortization of intangible assets		5,138			5,472			5,618
Deposit insurance and regulatory fees		5,406			6,754			7,948
Other real estate (income) expense		(991	)		(2,924	)		210
Advertising		3,080			3,934			2,341
Corporate value and franchise taxes		4,042			2,860			3,440
Printing and supplies		1,169			1,209			1,031
Telecommunications and postage		3,466			3,555			3,850
Travel expense		1,098			1,462			1,064
Entertainment and contributions		2,708			2,899			2,509
Tax credit investment expense		1,138			1,857			874
Other retirement expense		(4,105	)		(5,076	)		(4,463	)
Other miscellaneous		5,691			6,136			5,499
Total operating expense	$	175,700		$	176,908		$	164,938
Nonoperating expense items		-			2,458			5,853
Total noninterest expense	$	175,700		$	179,366		$	170,791

Three Months Ended

Nine Months Ended

September 30,

June 30,

September 30,

September 30,
(in thousands)

2018

2018

2017

2018

2017
Operating expense

Compensation expense

$
83,212

$
79,670

$
80,358

$
239,625

$
234,239
Employee benefits

17,961

17,165

16,665

54,749

54,454
Personnel expense

101,173

96,835

97,023

294,374

288,693
Net occupancy expense

11,829

11,698

12,101

34,470

35,832
Equipment expense

3,624

3,641

3,626

10,758

11,133
Data processing expense

18,418

17,279

15,869

52,065

48,019
Professional services expense

8,917

8,189

7,208

24,953

22,010
Amortization of intangible assets

5,638

5,322

6,070

16,578

16,532
Telecommunications and postage

3,567

3,250

3,848

10,667

11,013
Deposit insurance and regulatory fees

8,345

8,376

7,563

24,669

21,036
Other real estate (income) expense

16

(289)

199

(63)

(818)
Advertising

2,913

2,390

3,552

7,644

10,582
Corporate value and franchise taxes

3,718

3,577

3,387

10,735

9,942
Printing and supplies

1,282

842

1,248

3,155

3,746
Travel expense

1,333

1,436

1,188

3,833

3,438
Entertainment and contributions

2,448

2,950

2,016

7,907

5,757
Tax credit investment amortization

1,560

875

1,212

3,309

3,637
Other retirement expense

(4,664)

(4,458)

(4,402)

(13,585)

(10,850)
Other miscellaneous

6,243

6,684

4,515

18,426

16,453
Total operating expense

$
176,360

$
168,597

$
166,223

$
509,895

$
496,155
Nonoperating expense items

4,827

15,805

11,393

26,485

28,473
Total noninterest expense

$
181,187

$
184,402

$
177,616

$
536,380

$
524,628

	Three Months Ended
	March 31,		December 31,			March 31,
(in thousands)	2019		2018			2018
Nonoperating expense
Personnel expense	$	—	$	97		$	3,608
Net occupancy expense		—		421			67
Equipment expense		—		212			53
Data processing expense		—		423			81
Professional services expense		—		(2	)		1,408
Advertising		—		(196	)		185
Printing and supplies		—		78			255
Loss on restructure of bank-owned life insurance contracts		—		62			—
Other expense		—		1,363			196
Total nonoperating expenses	$	—	$	2,458		$	5,853

~~Table of Contents~~

Three Months Ended

Nine Months Ended

September 30,

June 30,

September 30,

September 30,
(in thousands)

2018

2018

2017

2018

2017
Nonoperating expense

Personnel expense

$
1,300

$
408

$
2,120

$
5,316

$
3,662
Net occupancy and equipment expense

962

1,239

500

2,321

777
Data processing expense

2,074

994

929

3,149

974
Professional services expense

638

5,192

2,854

7,238

9,681
Other real estate (income) expense

—

—

—

—

(1,511)
Advertising

(360)

1,127

358

952

1,389
Printing and supplies

5

846

173

1,106

183
Write-down related to FDIC loss share termination

—

—

—

—

6,603
Loss on restructure of bank-owned life insurance contracts

—

3,240

—

3,240

—
Other expense

208

2,759

4,459

3,163

6,715
Total nonoperating expenses

$
4,827

$
15,805

$
11,393

$
26,485

$
28,473

The following discussion of the components of operating expense excludes nonoperating items for each period.

Personnel expense totaled ~~$101.2~~$103.7 million for the ~~third~~first quarter of ~~2018, up $4.3~~2019, down $1.2 million, or 4%1%, compared to the prior quarter, primarily due to two fewer payroll days in the ~~addition of trust and asset management employees and higher incentives.~~quarter. Personnel costs ~~are~~were up ~~$4.2~~$7.3 million, or 4%8%, compared to the ~~third~~first quarter of ~~2017~~2018 due to merit increases and ~~the~~ additional ~~payroll expense related to~~headcount following the trust and asset management acquisition. ~~Year to date September 30, 2018 personnel expense was up $5.7 million, or 2%, compared to the prior year.~~

Occupancy and equipment expenses totaled ~~$15.5~~$16.7 million in the ~~third~~first quarter of ~~2018,~~2019, up ~~$0.1~~$ 0.7 million, or 1%4%, from the ~~second~~fourth quarter of 2018 and ~~down $0.3~~up $2.2 million, or 15%, from the ~~third~~first quarter of ~~2017.~~2018. The increase compared to the prior quarter is ~~primarily~~largely due to higher depreciation expense on furniture and equipment following the move of the New Orleans regional headquarters. The increase compared to first quarter of 2018 is attributable to both the move of the regional headquarters and an increase in depreciation ~~related to~~of new signage following the Company’s rebranding. ~~The reduction compared to the prior year is due largely to costs related to FNBC branches that had not yet been consolidated. Occupancy and equipment expenses totaled $45.2~~

Table of Contents

Data processing expense was $19.3 million for the first ~~nine months~~quarter of ~~2018, $1.7~~2019, up $0.8 million, or ~~4%, less than the first nine months of 2017, due to previously mentioned items.~~

~~Data processing expense was $18.4 million for the third quarter of 2018, up $1.1 million, or 7%~~5%, from the ~~second~~fourth quarter of 2018, and up ~~$2.5~~$3.0 million, or ~~16%~~18%, from the ~~third~~first quarter of 2017. Data processing expense was $52.1 million for the first nine months of 2018, $4.0 million, or 8%, over the first nine months of 2017. The increase in expense is attributable to revenue-generating initiatives related to new digital offerings, higher card transaction processing costs resulting from increased card activity and additional processing cost associated with the acquired trust and asset management business that is awaiting system conversion.2018.

Professional service expense totaled ~~$8.9~~$8.2 million in the ~~third~~first quarter of ~~2018, up $0.7~~2019, down $1.2 million, or 9%13%, compared to the previous quarter and up ~~$1.7~~$0.3 million, or ~~24%~~4% compared to the same quarter last year. ~~Professional service expense totaled $25.0 million for~~The decrease from the ~~first nine months of 2018, up $2.9 million, or 13%, compared to the first nine months of 2017. The increase over the previous~~prior quarter was largely due to ~~loan collection~~a decrease in costs ~~and various other projects.~~associated with problem credits. Professional service expense includes legal, audit, accounting and other consulting services.

Deposit insurance and regulatory fees and corporate value and franchise taxes were ~~$12.1~~$9.4 million, ~~an increase~~a decrease of ~~$0.1~~$0.2 million, or 1%2%, from the ~~second~~fourth quarter of 2018 and ~~up $1.1~~down $1.9 million, or ~~10%, from the third quarter of 2017. Deposit insurance and regulatory fees and corporate value and franchise taxes totaled $35.4 million for the first nine months of 2018, up $4.4 million, or 14%~~17%, from the first ~~nine months~~quarter of ~~2017.~~2018. Deposit insurance and regulatory fees and corporate value and franchise taxes were updown both quarter over quarter and year over year primarily due to ~~asset growth.~~

a reduction in the risk-based deposit insurance assessment fees, with the year-over-year variance impacted by the elimination of the quarterly deposit insurance fund surcharge.

Business development-related expenses (including advertising, travel and entertainment and contributions) were ~~$6.7~~$6.9 million for the ~~third~~first quarter of ~~2018,~~2019, down ~~$0.1~~$1.4 million, or 1%17%, from the ~~second~~fourth quarter of 2018 and ~~down $0.1~~up $1.0 million, or 1%16%, from the ~~third~~first quarter of ~~2017. Business development expense totaled $19.4~~2018. The primary driver of the decrease from the prior quarter and the increase from the same quarter a year ago is advertising expenditures.

Other real estate income was $1.0 million for the first ~~nine months~~quarter of ~~2018, $0.4~~2019 compared to $2.9 million ~~or 2%, less than the first nine months of 2017.~~

~~There was virtually no other real estate (“ORE”) expense~~ in the ~~third quarter of 2018, compared to net gains on ORE dispositions of $0.3 million during the second~~fourth quarter of 2018 and a net ~~ORE costs~~expense of $0.2 million in the ~~third~~first quarter of ~~2017. Net~~2018. The first quarter of 2019 and fourth quarter of 2018 reflect gains on ~~ORE~~ dispositions ~~exceeded ORE costs by $0.1 million for the nine months ended September 30, 2018 and $0.8 million for the same period~~of properties in ~~2017. ORE income/loss can vary from period to period.~~

excess of holding costs.

All other expenses, excluding amortization of intangibles and nonoperating expense items, totaled ~~$8.0~~$7.4 million for the ~~third~~first quarter of ~~2018, up $0.8~~2019, down $0.3 million, or ~~11%~~4%, from the ~~second~~fourth quarter of 2018, and up ~~$1.6 million, or 24%, from the third quarter of 2017. All other expenses, excluding amortization of intangibles and nonoperating expense items, totaled $22.0 million for the first nine months of~~

~~Table of Contents~~

~~2018, down $2.0~~$0.6 million, or 8%, from the first ~~nine months~~quarter of ~~2017.~~2018. The ~~decrease~~variances compared to prior quarter and prior year ~~are primarily due to lower~~were largely driven by changes in tax credit investment expense, the net credit for other retirement expense and ~~the elimination of FNBC related costs through branch consolidation.~~other miscellaneous expense.

Income Taxes

The effective income tax rate for the ~~third~~first quarter of ~~2018~~2019 was approximately ~~17.5%~~17.6%, compared to ~~18.3%~~7.9% in the ~~second~~fourth quarter of 2018 and ~~25.7%~~18.5% in the ~~third~~first quarter of ~~2017.~~2018. The ~~decrease in the~~ effective tax rate ~~from~~was lower in the ~~prior quarter is due to an expected increase in investments in new market tax credits, and the decrease from the third~~fourth quarter of ~~2017 is~~2018 primarily due to the ~~enactment~~$9.9 million income tax benefit attributable to the 2017 tax savings initiatives implemented following the passage of the Tax Cuts and Jobs Act (“Tax Act”) ~~on December 22, 2017. The Tax Act significantly revised U.S. corporate income tax laws by,~~, which, among other things, ~~lowering~~lowered the ~~statutory~~ corporate federal income tax rate from 35% to 21%, eliminating or reducing the deductibility of certain meals and entertainment expenses, limiting the deduction of FDIC insurance premiums, as well as modifying the deductibility of executive compensation through the elimination of the performance-based compensation exception and changes to the definition of a covered employee.

~~Our deferred tax assets and liabilities were re-measured to reflect the lower income~~. The fourth quarter 2018 effective tax rate during the fourth quarter of 2017. Pursuant to ASU 2018-05, entities have a measurement period not to exceed one year from the enactment date of the Tax Act to record provisional amounts related to theexcluding impact of the ~~Tax Act. As of September 30, 2018, no adjustment had~~tax savings initiatives would have been ~~made~~17.5%, which is comparable to the ~~provisional benefit recorded.~~first quarter 2019 effective tax rate. Management ~~does not expect to adjust~~expects the ~~provisional benefit recorded unless new guidance is issued by federal and/or state~~effective tax ~~authorities that would require us to reevaluate our original estimate of provisional impact. If so, any such adjustments could materially impact income tax expense~~rate for 2019 will be in the ~~period in which the adjustments are made.~~range of 17%-19% based on current forecasts.

Our effective tax rate has historically varied from the federal statutory rate primarily because of tax-exempt income and tax credits. Interest income on bonds issued by or loans to state and municipal governments and authorities, and earnings from the ~~bank-owned~~ life insurance contract program are the major components of tax-exempt income. The $3.2 million charge recorded during the second quarter of 2018 related to restructuring a portion of our bank-owned life insurance contracts negatively impacted the tax benefit attributable to life insurance contracts, as reflected in the table below.

The main source of tax credits has been investments in tax-advantaged securities and tax credit projects. These investments are made primarily in the markets the Company serves and are directed at tax credits issued under the Qualified Zone Academy Bonds (“QZAB”), Qualified School Construction Bonds (“QSCB”) ~~and~~as well as Federal and State New Market Tax Credit (“NMTC”) programs. The investments generate tax credits, which reduce current and future taxes and are recognized when earned as a benefit in the provision for income taxes. The Tax Act repealed the provision related to tax credit bonds effective for bonds issued after December 31, 2017. ~~As such, these bonds are no longer viable alternatives for lowering our effective tax rate.~~

We have invested in NMTC projects through investments in our own Community Development Entity (“CDE”), as well as other unrelated CDEs. ~~These investments are expected to generate approximately $104 million in federal and state tax credits.~~ Federal tax credits from NMTC investments are recognized over a seven-year period, while recognition of the benefits from state tax credits varies from three to five years. ~~In February 2018,~~

Based on tax credit investments that have been made to date and those anticipated to be made utilizing the ~~U.S. Department~~remaining portion of ~~Treasury announced the 2017 New Market Tax Credit allocation. We were awarded a New Market Tax Credit allocation that will allow us to invest~~our $50 million NMTC allocation award received in ~~tax credit projects~~2018, we expect to realize benefits from federal and ~~receive a total of $19.5 million in~~state tax credits ~~to be recognized~~ over ~~a seven-year period.~~

the next three years totaling $7.5 million, $5.6 million and $4.9 million for 2020, 2021 and 2022, respectively. We intend to continue making investments in tax credit projects. However, our ability to access new credits will depend upon, among other factors, federal and state tax policies and the level of competition for such credits. Based on tax credit investments that have been made to date and those we expect to make from our new allocation award, we expect to realize benefits from federal and state tax credits totaling $8.2 million, $5.8 million and $3.8 million for 2019, 2020 and 2021, respectively.

Additionally, the effective tax rate is affected by other items that may impact comparability from quarter to quarter, such as the excess benefit of vested employee share-based compensation. As of September 30, 2018, the year to date excess benefit of vested share-based compensation decreased income tax expense by $0.5 million. Management expects an effective tax rate of 8% to 10% for the fourth quarter of 2018 and 15% to 17% for the year ended December 31, 2018 due to fourth quarter stock compensation vesting and other tax reform related strategies that together will generate an additional income tax benefit of approximately $9 to $11 million, based on the Company’s share price at September 28, 2018.42

Table of Contents

The following table reconciles reported income tax expense to that computed at the statutory federal tax rate for the indicated periods.



	Three Months Ended						Nine Months Ended				Three Months Ended
	September 30,		June 30,		September 30,		September 30,				March 31,			December 31,			March 31,
(in thousands)	2018		2018		2017		2018		2017		2019			2018			2018
Taxes computed at statutory rate	$	21,347	$	18,288	$	27,761	$	58,298	$	74,812	$	20,163		$	21,946		$	18,663
Tax credits:
QZAB/QSCB		(760)		(760)		(643)		(2,279)		(1,928)		(710	)		(759	)		(759	)
NMTC - Federal and State		(1,379)		(1,378)		(1,679)		(4,136)		(5,037)		(1,402	)		(3,805	)		(1,379	)
LIHTC and other tax credits												—			(365	)		—
Total tax credits		(2,139)		(2,138)		(2,322)		(6,415)		(6,965)		(2,112	)		(4,929	)		(2,138	)
State income taxes, net of federal income tax benefit		1,989		1,924		1,167		5,957		3,143		1,905			2,813			2,044
Tax-exempt interest		(2,720)		(2,761)		(4,629)		(8,267)		(14,021)		(2,417	)		(2,536	)		(2,786	)
Life insurance contracts		(866)		306		(1,248)		(1,490)		(3,241)		(678	)		(529	)		(930	)
Employee share-based compensation		(146)		(176)		(202)		(461)		(2,003)		(272	)		(919	)		(140	)
Impact from interim estimated effective tax rate		(664)		(844)		(471)		(1,152)		2,230		(776	)		1,152			356
FDIC Assessment Disallowance		748		758		—		2,252		—
FDIC assessment disallowance												545			566			747
Return to provision adjustment												—			(9,942	)		—
Other, net		226		552		358		1,359		(390)		492			643			581
Income tax expense	$	17,775	$	15,909	$	20,414	$	50,081	$	53,565	$	16,850		$	8,265		$	16,397

~~Table of Contents~~

Selected Financial Data

The following tables contain selected financial data as of the dates and for the periods indicated.



	Three Months Ended						Nine Months Ended				Three Months Ended
	September 30,		June 30,		September 30,		September 30,				March 31,		December 31,		March 31,
	2018		2018		2017		2018		2017		2019		2018		2018
Common Share Data
Earnings per share:
Basic	$	0.96	$	0.82	$	0.68	$	2.62	$	1.85	$	0.91	$	1.11	$	0.83
Diluted	$	0.96	$	0.82	$	0.68	$	2.61	$	1.85	$	0.91	$	1.10	$	0.83
Cash dividends paid	$	0.27	$	0.24	$	0.24	$	0.75	$	0.72	$	0.27	$	0.27	$	0.24
Book value per share (period-end)	$	34.90	$	34.33	$	33.78	$	34.90	$	33.78	$	37.23	$	35.98	$	33.96
Tangible book value per share (period-end)	$	24.44	$	24.66	$	23.92	$	24.44	$	23.92	$	26.92	$	25.62	$	24.22
Weighted average number of shares (000s):
Basic		85,348		85,305		84,749		85,298		84,577		85,688		85,522		82,241
Diluted		85,539		85,483		84,980		85,482		84,818		85,800		85,677		85,423
Period-end number of shares (000s)		85,364		85,335		84,767		85,364		84,767		85,710		85,643		85,285
Market data:
High sales price	$	53.00	$	55.00	$	50.40	$	56.40	$	52.94	$	44.34	$	49.22	$	56.40
Low sales price	$	46.05	$	45.76	$	41.05	$	45.76	$	41.05	$	34.11	$	32.59	$	49.48
Period-end closing price	$	47.55	$	46.65	$	48.45	$	47.55	$	48.45	$	40.40	$	34.77	$	51.70
Trading volume (000s) (a)		28,332		35,705		33,243		99,407		117,397		28,124		33,269		35,459

(a)

Trading volume is based on the total volume as determined by NASDAQ on the last day of the quarter.

Table of Contents

Three Months Ended

Nine Months Ended

September 30,

June 30,

September 30,

September 30,
(in thousands)

2018

2018

2017

2018

2017
Income Statement:

Interest income

$
263,212

$
252,304

$
232,716

$
756,911

$
661,408
Interest income (te) (a)

267,307

256,385

241,295

769,050

686,849
Interest expense

49,018

40,757

29,859

125,506

77,143
Net interest income (te)

218,289

215,628

211,436

643,544

609,706
Provision for loan losses

6,872

8,891

13,040

28,016

43,982
Noninterest income

75,518

68,832

67,115

210,602

198,093
Noninterest expense (excluding amortization of intangibles)

175,549

179,080

171,546

519,802

508,096
Amortization of intangibles

5,638

5,322

6,070

16,578

16,532
Income before income taxes

101,653

87,086

79,316

277,611

213,748
Income tax expense

17,775

15,909

20,414

50,081

53,565
Net income

$
83,878

$
71,177

$
58,902

$
227,530

$
160,183

Earnings excluding nonoperating items

Net income

$
83,878

$
71,177

$
58,902

$
227,530

$
160,183
Nonoperating income

—

—

—

1,145

(4,352)
Nonoperating expense

4,827

15,805

11,393

26,485

28,473
Income tax benefit

(1,014)

(3,319)

(3,988)

(5,549)

(8,442)
Nonoperating items, net of applicable income tax benefit

3,813

12,486

7,405

22,081

15,679
Operating earnings

$
87,691

$
83,663

$
66,307

$
249,611

$
175,862

Three Months ended

Nine Months ended

September 30,

June 30,

September 30,

September 30,

2018

2018

2017

2018

2017
Performance Ratios

Return on average assets

1.19
%

1.04
%

0.88
%

1.10
%

0.82
%
Return on average common equity

11.27
%

9.81
%

8.23
%

10.45
%

7.69
%
Return on average tangible common equity

16.11
%

13.72
%

11.68
%

14.75
%

10.77
%
Earning asset yield (te) (a)

4.11
%

4.05
%

3.92
%

4.04
%

3.84
%
Total cost of funds

0.75
%

0.64
%

0.48
%

0.66
%

0.43
%
Net interest margin (te)

3.36
%

3.40
%

3.44
%

3.38
%

3.41
%
Noninterest income to total revenue (te)

25.70
%

24.20
%

24.09
%

24.66
%

24.52
%
Average loan/deposit ratio

88.39
%

86.84
%

87.08
%

87.19
%

88.18
%
FTE employees (period-end)

3,858

3,780

3,979

3,858

3,979

Capital Ratios

Common stockholders' equity to total assets

10.60
%

10.49
%

10.68
%

10.60
%

10.68
%
Tangible common equity ratio (b)

7.67
%

7.76
%

7.80
%

7.67
%

7.80
%

Select performance measures excluding nonoperating items

Operating earnings per share - diluted (d)

$
1.01

$
0.96

$
0.76

$
2.87

$
2.03

Return on average assets - operating

1.24
%

1.22
%

0.99
%

1.21
%

0.90
%
Return on average common equity - operating

11.78
%

11.54
%

9.27
%

11.46
%

8.44
%
Return on average tangible common equity - operating

16.84
%

16.12
%

13.14
%

16.18
%

11.82
%
Efficiency ratio (c)

58.11
%

57.40
%

57.50
%

57.68
%

59.70
%
Noninterest income as a percent of total revenue (te) - operating

25.70
%

24.20
%

24.09
%

24.76
%

24.11
%

	Three Months Ended
	March 31,			December 31,			March 31,
(in thousands)	2019			2018			2018
Income Statement:
Interest income	$	276,283		$	271,357		$	241,395
Interest income (te) (a)		280,107			275,395			245,358
Interest expense		57,029			53,924			35,731
Net interest income (te)		223,078			221,471			209,627
Provision for loan and lease losses		18,043			8,100			12,253
Noninterest income		70,503			74,538			66,252
Noninterest expense (excluding amortization of intangibles)		170,562			173,894			165,173
Amortization of intangibles		5,138			5,472			5,618
Income before income taxes		96,014			104,505			88,872
Income tax expense		16,850			8,265			16,397
Net income	$	79,164		$	96,240		$	72,475

Earnings excluding nonoperating items
Net income	$	79,164		$	96,240		$	72,475
Provision for alleged fraud (b)	$	10,084			—			—
Nonoperating income		—			(604	)		1,145
Nonoperating expense		—			2,458			5,853
Income tax benefit		(2,118	)		(389	)		(1,216	)
Nonoperating items, net of applicable income tax benefit		7,966			1,465			5,782
Operating earnings	$	87,130		$	97,705		$	78,257

	Three Months Ended
	March 31,			December 31,			March 31,
	2019			2018			2018
Performance Ratios
Return on average assets		1.13	%		1.35	%		1.08	%
Return on average common equity		10.30	%		12.76	%		10.23	%
Return on average tangible common equity		14.38	%		18.15	%		14.41	%
Earning asset yield (te) (a)		4.35	%		4.21	%		3.95	%
Total cost of funds		0.89	%		0.82	%		0.58	%
Net interest margin (te)		3.46	%		3.39	%		3.37	%
Noninterest income to total revenue (te)		24.01	%		25.18	%		24.01	%
Average loan/deposit ratio		87.08	%		88.09	%		86.32	%
FTE employees (period-end)		3,885			3,933			3,775
Capital Ratios
Common stockholders' equity to total assets		11.20	%		10.91	%		10.61	%
Tangible common equity ratio (c)		8.36	%		8.02	%		7.80	%

Select performance measures excluding nonoperating items
Operating earnings per share - diluted (d)	$	1.00		$	1.12		$	0.90
Return on average assets - operating		1.24	%		1.37	%		1.17	%
Return on average common equity - operating		11.33	%		12.95	%		11.05	%
Return on average tangible common equity - operating		15.83	%		18.43	%		15.56	%
Efficiency ratio (e)		58.10	%		58.03	%		57.51	%
Noninterest income as a percent of total revenue (te) - operating		24.01	%		25.03	%		24.33	%

(a)

Taxable equivalent (te) amounts were calculated using a federal income tax rate of 21% ~~for the three and nine months ended September 30, 2018 and the three months ended June 30, 2018, and 35% for the three and nine months ended September 30, 2017.~~.

(b)

Provision for loan loss in response to circumstances surrounding the bankruptcy filing and alleged fraud by DC Solar.

(c)	The tangible common equity ratio is common stockholders’ equity less intangible assets divided by total assets less intangible assets.

(d)	~~(c)~~See Reconciliation of Non-GAAP Measures “Operating earnings per share – diluted” for the reconciliation of this non-GAAP measure.

(e)	The efficiency ratio is noninterest expense to total net interest (te) and noninterest income, excluding amortization of purchased intangibles and nonoperating items.

~~(d)~~

~~See Reconciliation of Non-GAAP Measures “Operating earnings per share – diluted” for the reconciliation of this non-GAAP measure.~~

Table of Contents



	Three Months Ended									Nine Months Ended						Three Months Ended
	September 30,			June 30,			September 30,			September 30,			September 30,			March 31,			December 31,			March 31,
($ in thousands)	2018			2018			2017			2018			2017			2019			2018			2018
Asset Quality Information
Nonaccrual loans (a)	$	201,646		$	241,681		$	269,676		$	201,646		$	269,676		$	204,831		$	187,295		$	275,179
Restructured loans - still accruing		162,189			152,507			96,735			162,189			96,735			117,578			139,042			166,520
Total nonperforming loans		363,835			394,188			366,411			363,835			366,411			322,409			326,337			441,699
Other real estate (ORE) and foreclosed assets		27,475			22,342			21,219			27,475			21,219			27,148			26,270			26,630
Total nonperforming assets	$	391,310		$	416,530		$	387,630		$	391,310		$	387,630		$	349,557		$	352,607		$	468,329
Accruing loans 90 days past due (a)	$	24,460		$	7,941		$	28,850		$	24,460		$	28,850
Accruing loans 90 days past due (b)																$	20,308		$	5,589		$	12,724
Net charge-offs		6,852			5,074			11,783			24,126			47,752			17,869			28,136			12,200
Allowance for loan losses		214,550			214,530			223,122			214,550			223,122
Provision for loan losses		6,872			8,891			13,040			28,016			43,982
Allowance for loan and lease losses																	194,688			194,514			210,713
Provision for loan and lease losses																	18,043			8,100			12,253
Ratios:
Nonperforming assets to loans, ORE and foreclosed assets		2.00	%		2.15	%		2.06	%		2.00	%		2.06	%		1.74	%		1.76	%		2.45	%
Accruing loans 90 days past due to loans		0.13	%		0.04	%		0.15	%		0.13	%		0.15	%		0.10	%		0.03	%		0.07	%
Nonperforming assets + accruing loans 90 days past due to loans, ORE and foreclosed assets		2.12	%		2.19	%		2.21	%		2.12	%		2.21	%		1.84	%		1.79	%		2.52	%
Net charge-offs to average loans		0.14	%		0.11	%		0.25	%		0.17	%		0.35	%		0.36	%		0.56	%		0.26	%
Allowance for loan losses to period-end loans		1.10	%		1.11	%		1.19	%		1.10	%		1.19	%		0.97	%		0.97	%		1.10	%
Allowance for loan losses to nonperforming loans + accruing loans 90 days past due		55.25	%		53.35	%		56.45	%		55.25	%		56.45	%		56.81	%		58.60	%		46.37	%

(a)

Included in nonaccrual loans are nonaccruing restructured loans totaling $105.9 million, $85.5 million and $118.0 million at 3/31/2019, 12/31/2018 and 3/31/2018, respectively. Nonaccrual loans and accruing loans past due 90 days or more do not include purchased credit impaired loans ~~with an accretable yield. Included~~which were written down to fair value upon acquisition and accrete interest income over the remaining life of the loan.

(b)

Excludes 90+ accruing troubled debt restructured loans already reflected in ~~nonaccrual~~total nonperforming loans ~~are $92.7~~of $1.5 million, ~~$98.8~~$8.7 million and ~~$119.7~~$13.7 million ~~in nonaccruing restructured loans at September 30, 2018, June 30, 2018,~~as of 3/31/19, 12/31/18 and ~~September 30, 2017,~~3/31/18, respectively.

Table of Contents

September 30,

June 30,

March 31,

December 31,

September 30,
(in thousands)

2018

2018

2018

2017

2017
Period-End Balance Sheet

Total loans, net of unearned income (a)

$
19,543,717

$
19,370,917

$
19,092,504

$
19,004,163

$
18,786,285
Loans held for sale

29,043

36,047

21,827

39,865

23,236
Securities

5,987,447

6,113,873

5,930,076

5,888,380

5,624,552
Short-term investments

108,074

104,210

61,541

92,384

111,725
Earning assets

25,668,281

25,625,047

25,105,948

25,024,792

24,545,798
Allowance for loan losses

(214,550)

(214,530)

(210,713)

(217,308)

(223,122)
Goodwill

791,157

745,523

745,523

745,523

739,403
Other intangible assets, net

101,438

79,700

85,021

90,640

96,525
Other assets

1,751,849

1,689,707

1,571,558

1,692,439

1,658,151
Total assets

$
28,098,175

$
27,925,447

$
27,297,337

$
27,336,086

$
26,816,755
Noninterest-bearing deposits

$
8,140,530

$
8,165,796

$
8,230,060

$
8,307,497

$
7,896,384
Interest-bearing transaction and savings deposits

7,972,417

7,711,542

8,058,793

8,181,554

7,893,546
Interest-bearing public funds deposits

2,613,858

2,854,839

3,108,008

3,040,318

2,762,048
Time deposits

3,691,002

3,503,161

3,088,861

2,723,833

2,981,881
Total interest-bearing deposits

14,277,277

14,069,542

14,255,662

13,945,705

13,637,475
Total deposits

22,417,807

22,235,338

22,485,722

22,253,202

21,533,859
Short-term borrowings

2,276,647

2,314,190

1,452,097

1,703,890

1,737,151
Long-term debt

215,912

266,009

300,443

305,513

331,179
Other liabilities

208,931

180,355

163,037

188,532

351,291
Stockholders' equity

2,978,878

2,929,555

2,896,038

2,884,949

2,863,275
Total liabilities & stockholders' equity

$
28,098,175

$
27,925,447

$
27,297,337

$
27,336,086

$
26,816,755



	Three Months Ended						Nine Months Ended
	September 30,		June 30,		September 30,		September 30,		June 30,		March 31,			December 31,			September 30,			June 30,			March 31,
(in thousands)	2018		2018		2017		2018		2017		2019			2018			2018			2018			2018
Average Balance Sheet
Total loans, net of unearned income (a)	$	19,464,639	$	19,193,234	$	18,591,219	$	19,230,385	$	18,092,622
Period-End Balance Sheet
Total loans, net of unearned income											$	20,112,838		$	20,026,411		$	19,543,717		$	19,370,917		$	19,092,504
Loans held for sale		25,992		22,575		21,723		26,898		21,815		27,437			28,150			29,043			36,047			21,827
Securities (b)		6,186,410		6,032,058		5,679,841		6,039,645		5,321,974
Securities												5,577,522			5,670,584			5,987,447			6,113,873			5,930,076
Short-term investments		155,331		143,158		194,643		148,958		435,066		163,762			111,094			108,074			104,210			61,541
Earning assets		25,832,372		25,391,025		24,487,426		25,445,886		23,871,477		25,881,559			25,836,239			25,668,281			25,625,047			25,105,948
Allowance for loan losses		(214,376)		(212,766)		(224,537)		(214,637)		(222,623)		(194,688	)		(194,514	)		(214,550	)		(214,530	)		(210,713	)
Goodwill and other intangible assets		886,226		827,760		837,107		849,279		798,050		883,097			887,123			892,595			825,223			830,544
Other assets		1,522,701		1,479,033		1,577,577		1,505,382		1,546,910		1,920,263			1,707,059			1,751,849			1,689,707			1,571,558
Total assets	$	28,026,923	$	27,485,052	$	26,677,573	$	27,585,910	$	25,993,814	$	28,490,231		$	28,235,907		$	28,098,175		$	27,925,447		$	27,297,337
Noninterest-bearing deposits	$	8,017,353	$	8,149,521	$	7,775,913	$	8,039,574	$	7,670,517	$	8,158,658		$	8,499,027		$	8,140,530		$	8,165,796		$	8,230,060
Interest-bearing transaction and savings deposits		7,944,349		7,860,019		8,097,370		7,948,819		7,685,213		8,224,203			8,000,093			7,972,417			7,711,542			8,058,793
Interest-bearing public fund deposits		2,682,269		2,970,117		2,764,961		2,906,067		2,618,215
Interest-bearing public funds deposits												3,229,589			3,006,516			2,613,858			2,854,839			3,108,008
Time deposits		3,377,588		3,121,817		2,711,574		3,160,943		2,543,834		3,767,844			3,644,549			3,691,002			3,503,161			3,088,861
Total interest-bearing deposits		14,004,206		13,951,953		13,573,905		14,015,829		12,847,262		15,221,636			14,651,158			14,277,277			14,069,542			14,255,662
Total deposits		22,021,559		22,101,474		21,349,818		22,055,403		20,517,779		23,380,294			23,150,185			22,417,807			22,235,338			22,485,722
Short-term borrowings		2,610,176		1,989,416		1,909,365		2,143,759		2,089,024		1,388,735			1,589,128			2,276,647			2,314,190			1,452,097
Long-term debt		241,517		299,695		339,535		281,876		408,191		224,962			224,993			215,912			266,009			300,443
Other liabilities		201,240		185,470		240,338		193,166		192,376		305,665			190,261			208,931			180,355			163,037
Stockholders' equity		2,952,431		2,908,997		2,838,517		2,911,706		2,786,444		3,190,575			3,081,340			2,978,878			2,929,555			2,896,038
Total liabilities & stockholders' equity	$	28,026,923	$	27,485,052	$	26,677,573	$	27,585,910	$	25,993,814	$	28,490,231		$	28,235,907		$	28,098,175		$	27,925,447		$	27,297,337

	Three Months Ended
	March 31,			December 31,			March 31,
(in thousands)	2019			2018			2018
Average Balance Sheet
Total loans, net of unearned income	$	20,126,948		$	19,817,729		$	19,028,490
Loans held for sale		20,618			22,187			32,194
Securities (a)		5,656,689			5,965,461			5,897,290
Short-term investments		216,192			205,806			148,309
Earning assets		26,020,447			26,011,183			25,106,283
Allowance for loan losses		(196,384	)		(213,902	)		(216,796	)
Goodwill and other intangible assets		885,381			889,820			833,269
Other assets		1,742,104			1,572,862			1,514,321
Total assets	$	28,451,548		$	28,259,963		$	27,237,077
Noninterest-bearing deposits	$	8,227,698		$	8,260,487		$	7,951,121
Interest-bearing transaction and savings deposits		8,082,584			7,940,670			8,043,176
Interest-bearing public fund deposits		3,060,565			2,680,837			3,070,079
Time deposits		3,743,292			3,616,151			2,979,043
Total interest-bearing deposits		14,886,441			14,237,658			14,092,298
Total deposits		23,114,139			22,498,145			22,043,419
Short-term borrowings		1,684,904			2,330,280			1,823,033
Long-term debt		224,966			222,339			305,117
Other liabilities		309,488			215,934			192,695
Stockholders' equity		3,118,051			2,993,265			2,872,813
Total liabilities & stockholders' equity	$	28,451,548		$	28,259,963		$	27,237,077

(a)

~~Includes nonaccrual loans.~~

~~(b)~~

Average securities do not include unrealized holding gains/losses on available for sale securities.

Table of Contents

Reconciliation of Non-GAAP Measures

~~Reported to core net interest income (te) and core net interest margin~~

Three Months Ended

Nine Months Ended

September 30,

June 30,

September 30,

September 30,
($ in thousands)
2018

2018

2017

2018

2017
Net interest income
$
214,194

$
211,547

$
202,857

$
631,405

$
584,265

Tax-equivalent adjustment (te)(a)

4,095

4,081

8,579

12,139

25,441

Net interest income (te)
$
218,289

$
215,628

$
211,436

$
643,544

$
609,706

Purchase accounting adjustments

Loan discount accretion (b)

5,415

6,376

7,711

18,899

21,529

Bond premium amortization (c)

(221)

(259)

(364)

(795)

(1,216)

Total net purchase accounting adjustments

5,194

6,117

7,347

18,104

20,313

Net interest income (te) - core
$
213,095

$
209,511

$
204,089

$
625,440

$
589,393

Average earning assets
$
25,832,372

$
25,391,025

$
24,487,426

$
25,445,886

$
23,871,477

Net interest margin - reported

3.36
%

3.40
%

3.44
%

3.38
%

3.41
%
Net purchase accounting adjustments

0.08
%

0.09
%

0.12
%

0.10
%

0.11
%
Net interest margin - core

3.28
%

3.31
%

3.32
%

3.28
%

3.30
%

Operating revenue (te) and operating pre-provision net revenue (te)


	Three Months Ended						Nine Months Ended				Three Months Ended
	September 30,		June 30,		September 30,		September 30,				March 31,			December 31,			September 30,			June 30,			March 31,
(in thousands)	2018		2018		2017		2018		2017		2019			2018			2018			2018			2018
Net interest income	$	214,194	$	211,547	$	202,857	$	631,405	$	584,265	$	219,254		$	217,433		$	214,194		$	211,547		$	205,664
Noninterest income		75,518		68,832		67,115		210,602		198,093		70,503			74,538			75,518			68,832			66,252
Total revenue	$	289,712	$	280,379	$	269,972	$	842,007	$	782,358	$	289,757		$	291,971		$	289,712		$	280,379		$	271,916
Tax-equivalent adjustment (a)		4,095		4,081		8,579		12,139		25,441		3,824			4,038			4,095			4,081			3,963
Nonoperating revenue		—		—		—		1,145		(4,352)		—			(604	)		—			—			1,145
Operating revenue (te)	$	293,807	$	284,460	$	278,551	$	855,291	$	803,447	$	293,581		$	295,405		$	293,807		$	284,460		$	277,024
Noninterest expense		(181,187)		(184,402)		(177,616)		(536,380)		(524,628)		(175,700	)		(179,366	)		(181,187	)		(184,402	)		(170,791	)
Nonoperating expense		4,827		15,805		11,393		26,485		28,473		-			2,458			4,827			15,805			5,853
Operating pre-prevision net revenue (te)	$	117,447	$	115,863	$	112,328	$	345,396	$	307,292
Operating pre-provision net revenue (te)											$	117,881		$	118,497		$	117,447		$	115,863		$	112,086

Operating earnings per share - diluted


	Three Months Ended						Nine Months Ended					Three Months Ended
	September 30,		June 30,		September 30,			September 30,				March 31,			December 31,			September 30,			June 30,			March 31,
(in thousands)	2018		2018		2017			2018		2017		2019			2018			2018			2018			2018
Net income	$	83,878	$	71,177	$	58,902		$	227,530	$	160,183	$	79,164		$	96,240		$	83,878		$	71,177		$	72,475
Net income allocated to participating securities		(1,544)		(1,328)		(1,244)			(4,238)		(3,566)		(1,337	)		(1,691	)		(1,544	)		(1,328	)		(1,366	)
Net income available to common shareholders		82,334		69,849	$	57,658		$	223,292	$	156,617		77,827			94,549			82,334			69,849			71,109
Nonoperating items, net of applicable income tax		3,813		12,486		7,405			22,081		15,679		7,966			1,465			3,813			12,486			5,782
Nonoperating items allocated to participating securities		(71)		(233)		(156)			(413)		(342)		(134	)		(26	)		(71	)		(233	)		(109	)
Operating earnings available to common shareholders	$	86,076	$	82,102		64,907			244,960		171,954		85,659			95,988			86,076			82,102			76,782
Weighted average common shares - diluted		85,539		85,483		84,980			85,482		84,818		85,800			85,677			85,539			85,483			85,423
Earnings per share -diluted	$	0.96	$	0.82	$	0.68		$	2.61	$	1.85
Earnings per share - diluted												$	0.91		$	1.10		$	0.96		$	0.82		$	0.83
Operating earnings per share - diluted	$	1.01	$	0.96	$	0.76		$	2.87	$	2.03	$	1.00		$	1.12		$	1.01		$	0.96		$	0.90

(a)

Taxable equivalent adjustment (te) amounts ~~were~~are calculated using a federal income tax rate of 21% ~~for the three and nine months ended September 30, 2018 and the three months ended June 30, 2018, and 35% for the three and nine months ended September 30, 2017.~~ .

~~(b)~~

~~Includes net loan discount accretion arising from business combination.~~

~~(c)~~

~~Includes net investment premium amortization arising from business combinations.~~

~~Table of Contents~~

LIQUIDITY

Liquidity management is focused on ensuring that funds are available to meet the cash flow requirements of our depositors and borrowers, while also meeting the operating, capital and strategic cash flow needs of the Company, the Bank and other subsidiaries. We develop liquidity management strategies and measure and ~~regularly~~ monitor liquidity risk as part of our overall asset/liability management process.

The asset portion of the balance sheet provides liquidity primarily through loan principal repayments, ~~as well as~~ maturities and repayments of investment ~~securities.~~securities and occasional sales of various assets. Short-term investments such as federal funds sold, securities purchased under agreements to resell and interest-bearing deposits with the Federal Reserve Bank or with other commercial banks are additional sources of liquidity to meet cash flow requirements. Free securities represent unpledged securities that can be sold or used as collateral for borrowings, and include unpledged securities assigned to short-term dealer repurchase agreements or to the Federal Reserve Bank discount window. Management has established an internal target for the ratio of free securities to total securities to be 20% or more. As shown in the table below, our ratio of free securities to total securities was ~~48.90%~~33.57% at ~~September 30, 2018,~~March 31, 2019, compared to ~~49.31%~~41.39% at ~~June 30,~~December 31, 2018 and ~~36.61%~~43.35% at ~~September 30, 2017.~~March 31, 2018. The total of pledged securities at ~~September 30, 2018~~March 31, 2019 was ~~$3.1~~$3.7 billion, ~~down $29~~up $391.2 million from ~~June 30, 2018~~December 31, 2018. Securities are pledged as collateral related to ~~seasonal~~ public ~~fund tax deposits was released.~~funds and repurchase agreements. Total securities of $5.6 billion at ~~September 30,~~March 31, 2019 were down $93.1 million compared to December 31, 2018 ~~was $0.4 billion higher~~and $297.7 million lower than at ~~September 30, 2017.~~March 31, 2018.

Table of Contents



	September 30,		June 30,		March 31,		December 31,		September 30,		March 31,			December 31,			September 30,			June 30,			March 31,
Liquidity Metrics	2018		2018		2018		2017		2017		2019			2018			2018			2018			2018
Free securities / total securities	48.90	%	49.31	%	43.35	%	44.15	%	36.61	%		33.57	%		41.39	%		48.90	%		49.31	%		43.35	%
Core deposits / total deposits	89.71	%	89.65	%	90.84	%	93.03	%	91.70	%		89.98	%		90.47	%		89.71	%		89.65	%		90.94	%
Wholesale funds / core deposits	19.34	%	19.93	%	14.44	%	13.76	%	15.94	%		13.61	%		14.53	%		19.34	%		19.93	%		14.32	%
Quarter-to-date average loans /quarter-to-date average deposits	88.39	%	86.84	%	86.32	%	86.57	%	87.08	%
Quarterly average loans /quarterly average deposits												87.08	%		88.09	%		88.39	%		86.84	%		86.32	%

The liability portion of the balance sheet provides liquidity mainly through the Company’s ability to use cash sourced from various customers’ interest-bearing and noninterest-bearing deposit and sweep accounts. At March 31, 2019, deposits totaled $23.4 billion, an increase of $230.1 million, or 1%, from December 31, 2018 and an increase of $894.6 million, or 4%, from March 31, 2018. Core deposits consist of total deposits excluding certificates of deposit (“CDs”) of $250,000 or more and brokered deposits. Core deposits totaled $21.0 billion at March 31, 2019, an increase of $93.6 million from December 31, 2018, and $591.2 million from March 31, 2018. The ratio of core deposits to total deposits was ~~89.71%~~89.98% at ~~September 30, 2018,~~March 31, 2019, compared to ~~89.65%~~90.47% at ~~June 30,~~December31, 2018 and ~~91.70%~~90.94% at ~~September 30, 2017. Core~~March 31, 2018. Brokered deposits totaled ~~$20.1~~$1.2 billion ~~at September 30, 2018,~~as of March 31, 2019, an increase of ~~$0.2 billion from June 30, 2018, and $0.4 billion from September 30, 2017. Brokered deposits totaled $1.4 billion as of September 30, 2018, a $26 million increase compared to June 30, 2018 and $354~~$21.2 million compared to ~~September 30, 2017.~~December 31, 2018 and $74.9 million compared to March 31, 2018. The use of brokered deposits as a funding source is subject to ~~strict parameters~~certain policies regarding the amount, term and interest rate.

Purchases of federal funds, securities sold under agreements to repurchase and other short-term borrowings from customers provide additional sources of liquidity to meet short-term funding requirements. Besides funding from customer sources, the Bank has a line of credit with the FHLB that is secured by blanket pledges of certain mortgage loans. At ~~September 30, 2018,~~March 31, 2019, the Bank had borrowings of approximately ~~$1.8 billion~~$900 million and had approximately ~~$2.8~~$3.8 billion available under this line. The Bank also has unused borrowing capacity at the Federal Reserve’s discount window of approximately ~~$2.3~~$2.7 billion; there were no outstanding borrowings with the Federal Reserve at any date during ~~the twelve months ended September 30, 2018.~~any period covered by this report.

Wholesale funds, which are comprised of short-term borrowings, long-term debt and brokered deposits were ~~19.34%~~13.61% of core deposits at ~~September 30, 2018,~~March 31, 2019, compared to ~~19.93%~~14.53% at ~~June 30,~~December 31, 2018 and ~~15.94%~~14.32% at ~~September 30, 2017.~~March 31, 2018. The linked quarter decrease in wholesale funds was primarily related to decreases in FHLB ~~borrowings, customer repurchase agreements, and long-term debt, partially offset by an increase in federal funds purchased.~~borrowings. The year over year ~~increase~~decrease in wholesale funds was primarily related to ~~increases~~decreases in FHLB borrowings, long-term debt and ~~brokered deposits,~~federal funds purchased, partially offset by ~~a decrease~~increases in ~~long-term debt. Management~~brokered deposits and repurchase agreements. The Company has established an internal target for wholesale funds to be less than 25% of core deposits.

Another key measure used to monitor our liquidity position is the loan-to-deposit ratio (average loans outstanding for the reporting period divided by average deposits outstanding). The loan-to-deposit ratio measures the amount of funds the Company lends for each dollar of deposits on hand. Our loan-to-deposit ratio for the ~~third~~first quarter of ~~2018~~2019 was ~~88.39%~~87.08%, compared to ~~86.84%~~88.09% for the ~~second~~fourth quarter of 2018 and ~~87.08%~~86.32% for the ~~third~~first quarter of ~~2017.~~2018. Management has an established target range for ~~its~~the loan-to-deposit ratio of ~~83%~~87% to ~~87%, but will operate temporarily outside of that range depending on market conditions.~~89%.

Cash generated from operations is another important source of funds to meet liquidity needs. The consolidated statements of cash flows present operating cash flows and summarize all significant sources and uses of funds for the ~~nine~~three months ended ~~September 30, 2018~~March 31, 2019 and ~~2017.~~2018.

Dividends received from the Bank have been the primary source of funds available to the Parent for the payment of dividends to our stockholders and for servicing its debt. The liquidity management process takes into account the various regulatory provisions that can limit the amount of dividends the Bank can distribute to the Parent. The Parent targets cash and other liquid assets to provide liquidity in an amount sufficient to fund approximately six quarters of anticipated common stockholder ~~dividends.~~ dividends, but will temporarily operate below that level if a return to the target can be achieved in the near-term.

~~Table of Contents~~

CAPITAL RESOURCES

Stockholders’ equity totaled ~~$3.0~~$3.2 billion at ~~September 30, 2018,~~March 31, 2019, up ~~$49 million, or 2% from June 30, 2018 and up $116~~$109 million, or 4%, from ~~September 30, 2017.~~December 31, 2018 and up $295 million, or 10%, from March 31, 2018. The tangible common equity ratio was ~~7.67%~~8.36 % at ~~September 30, 2018,~~March 31, 2019, compared to ~~7.76%~~8.02% at ~~June 30,~~December 31, 2018 and 7.80% at ~~September 30, 2017.~~March 31, 2018. The ~~decrease~~increase in the ratio from prior quarter is due to ~~increase~~increases in ~~goodwill and other intangibles resulting from the trust and asset management acquisition, partially offset by~~ net tangible retained ~~earnings.~~earnings and net gains on fair value adjustments of securities available for sale included in other comprehensive income. The ~~decrease~~increase from ~~September 30, 2017~~March 31, 2018 was primarily related to the change in net tangible retained earnings and the reduction in accumulated other comprehensive ~~loss,~~losses, partially offset by tangible asset growth and an increase in intangible assets related to acquisition ~~transactions, partially offset by an increase in net tangible retained earnings.~~transactions. Management has established an internal target for the tangible common equity ratio of at least 8.00%; however, management will allow the tangible common equity ratio to drop below 8.00% on a temporary basis if it believes that the shortfall can be replenished through normal ~~operations. We expect to be back~~operations within ~~our target range in the first half~~a short time frame.

Table of ~~2019.~~Contents

The regulatory capital ratios of the Company and the Bank as of ~~September 30, 2018 declined compared~~March 31, 2019 continued to ~~prior quarter due mostly to the intangible assets generated from the trust~~improve and ~~asset management transaction and asset growth, however, the ratios remain strong and are~~remained well in excess of current regulatory minimum requirements. The Company and the Bank have been categorized as “well-capitalized” in the most recent notices received from our regulators. Both entities currently exceed all capital requirements of the Basel III requirements, including the fully phased-in conservation buffer. ~~See~~Refer to the Supervision and Regulation section in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2017~~2018 for further discussion of our capital requirements.

The following table shows the regulatory capital ratios for the Company and the Bank as calculated under current rules for the indicated periods. The Company’s and Bank’s regulatory filings for ~~quarters ending~~quarter ended March 31, 2018 ~~and prior~~ were filed in the names of Hancock Holding Company and Whitney Bank, respectively.

Well-

September 30,

June 30,

March 31,

December 31,

September 30,

Capitalized

2018

2018

2018

2017

2017
Total capital (to risk weighted assets)

Hancock Whitney Corporation

10.00
%

11.98
%

12.12
%

12.00
%

11.90
%

11.84
%
Hancock Whitney Bank

10.00
%

11.25
%

11.57
%

11.60
%

11.55
%

11.35
%
Tier 1 common equity capital (to risk weighted assets)

Hancock Whitney Corporation

6.50
%

10.36
%

10.48
%

10.35
%

10.21
%

10.10
%
Hancock Whitney Bank

6.50
%

10.30
%

10.60
%

10.63
%

10.54
%

10.31
%
Tier 1 capital (to risk weighted assets)

Hancock Whitney Corporation

8.00
%

10.36
%

10.48
%

10.35
%

10.21
%

10.10
%
Hancock Whitney Bank

8.00
%

10.30
%

10.60
%

10.63
%

10.54
%

10.31
%
Tier 1 leverage capital

Hancock Whitney Corporation

5.00
%

8.50
%

8.66
%

8.51
%

8.43
%

8.34
%
Hancock Whitney Bank

5.00
%

8.46
%

8.77
%

8.75
%

8.72
%

8.53
%

~~Regulatory definitions:~~

~~(1)~~

~~Tier 1 common equity capital generally includes common equity and retained earnings, reduced by goodwill and other disallowed intangibles, disallowed deferred tax assets and certain other assets.~~

~~(2)~~

~~Tier 1 capital consists of Tier 1 common equity capital plus non-controlling interest in equity of consolidated subsidiaries and a limited amount of qualifying perpetual preferred stock.~~

~~(3)~~

Total capital consists of Tier 1 capital plus perpetual preferred stock not qualifying as Tier 1 capital, mandatory convertible securities, certain types of subordinated debt and a limited amount of allowances for credit losses.

~~(4)~~

The risk-weighted asset base is equal to the sum of the aggregate value of assets and credit-converted off-balance sheet items in each risk category as specified in regulatory guidelines, multiplied by the weight assigned by the guidelines to that category.

~~(5)~~

~~The Tier 1 leverage capital ratio is Tier 1 capital divided by average total assets reduced by the deductions for Tier 1 capital noted above.~~

	Well-			March 31,			December 31,			September 30,			June 30,			March 31,
	Capitalized			2019			2018			2018			2018			2018
Total capital (to risk weighted assets)
Hancock Whitney Corporation		10.00	%		12.24	%		11.99	%		11.98	%		12.12	%		12.00	%
Hancock Whitney Bank		10.00	%		11.73	%		11.17	%		11.25	%		11.57	%		11.60	%
Tier 1 common equity capital (to risk weighted assets)
Hancock Whitney Corporation		6.50	%		10.74	%		10.48	%		10.36	%		10.48	%		10.35	%
Hancock Whitney Bank		6.50	%		10.88	%		10.32	%		10.30	%		10.60	%		10.63	%
Tier 1 capital (to risk weighted assets)
Hancock Whitney Corporation		8.00	%		10.74	%		10.48	%		10.36	%		10.48	%		10.35	%
Hancock Whitney Bank		8.00	%		10.88	%		10.32	%		10.30	%		10.60	%		10.63	%
Tier 1 leverage capital
Hancock Whitney Corporation		5.00	%		8.85	%		8.67	%		8.50	%		8.66	%		8.51	%
Hancock Whitney Bank		5.00	%		8.97	%		8.54	%		8.46	%		8.77	%		8.75	%

On May 24, 2018, our board of directors approved a stock buyback program that authorized the repurchase of up to 5%, or approximately 4.3 million shares, of ~~its~~ outstanding common stock. The approved program allows us to repurchase shares of our common stock either in the open market in compliance with Rule 10b-18 promulgated under the Securities Exchange Act of 1934, as amended, or in privately negotiated transactions with non-affiliated sellers or as otherwise determined by the Company in one or more transactions, from time to time until December 31, 2019. The Company is not obligated to purchase any shares under this program and the board of directors may terminate or amend the program at any time prior to the expiration. As of ~~September 30, 2018,~~March 31, 2019, we had ~~not~~ purchased ~~any~~200,000 shares of our common stock at an average price of $41.30 per share under this program.

On ~~July 26, 2018, the~~January 28, 2019, our board of directors declared the regular ~~third~~first quarter cash dividend at $0.27 per share, ~~a 12.5% increase from~~ the same as prior quarter. ~~The annual cash dividend payable rate increased to $1.08 per share, compared to the previous rate of $0.96 per share.~~ The Company has paid uninterrupted ~~quarter~~quarterly dividends to shareholders since 1967.

~~Table of Contents~~

BALANCE SHEET ANALYSIS

Securities

~~Investments~~Investment in securities totaled ~~approximately $6.0~~$5.6 billion at ~~September 30, 2018,~~March 31, 2019, down ~~$126~~$93.1 million, or 2%, from ~~June 30,~~at December 31, 2018 and ~~up $363~~down $352.6 million, or 6%, from ~~September 30, 2017.~~March 31, 2018. At ~~September 30, 2018,~~March 31, 2019, securities available for sale totaled ~~$2.9~~$2.7 billion and securities held to maturity totaled ~~$3.1~~$2.9 billion.

~~The~~Our securities portfolio consists mainly of residential and commercial mortgage-backed securities and collateralized mortgage obligations that are issued or guaranteed by U.S. government agencies. ~~The portfolio is designed to enhance liquidity while providing an acceptable rate of return. The Company invests~~We invest only in high quality investment grade securities with a targeted ~~effective~~ duration ~~for the overall portfolio of~~generally between two and five and a half years. ~~The effective duration calculates the price sensitivity to changes in interest rates.~~ At ~~September 30, 2018,~~March 31, 2019, the average expected maturity of the portfolio was ~~5.61~~5.52 years with an effective duration of ~~4.90~~4.37 years and a nominal weighted-average yield of ~~2.54%~~2.75%. Management simulations indicate that the effective duration would ~~decrease~~increase to ~~4.84~~4.59 years with a 100 ~~bps~~bp increase in the yield curve and increase to ~~4.91~~4.75 years with a 200 ~~bps~~bp increase. At ~~June 30,~~December 31, 2018, the average expected maturity of the portfolio was ~~6.09~~5.67 years with an effective duration of ~~4.89~~4.67 years and a nominal weighted-average yield of ~~2.53%~~2.75%. The ~~average~~change in expected maturity, effective duration, and nominal weighted-average yield is primarily related to securities prepayments and maturities during the first quarter of ~~the portfolio at September 30, 2017 was 5.57 years, while the duration was 4.64 years, and the nominal weighted average yield was 2.36%.~~2019.

Loans

Total loans at ~~September 30, 2018~~March 31, 2019 were ~~$19.5~~$20.1 billion, up ~~approximately $173~~$86.4 million, or less than 1%, from ~~June 30,~~December 31, 2018, and up ~~$757 million,~~$1.0 billion, or 4%5.3%, from ~~September 30, 2017. The increase~~March 31, 2018. Growth from ~~June 30,~~December 31, 2018 iswas impacted by unanticipated paydowns, approximately $42 million of

Table of Contents

mortgage loan sales, and $17.9 million in net ~~of approximately $90 million of paydowns on two relationships that occurred at quarter end, approximately half~~charge-offs, of which $10.1 million was inrelated to the ~~energy related transportation sector, where we are working to reduce our exposure.~~DC Solar alleged fraud. Net loan growth continues to be diversified ~~both regionally~~across products and ~~in areas identified as a part of~~ the Company’s ~~revenue generating initiatives, including equipment finance and healthcare. Loans~~footprint. Management anticipates $75 million to ~~energy related entities decreased $58~~$125 million of period end loan growth during ~~third~~the second quarter of ~~2018 and are down $206 million compared~~2019, with full year average percentage growth expected to ~~September 30, 2017 as we continue to reduce our exposure to the energy sector.~~ be in mid-single digits.

The following table shows the composition of our loan ~~portfolio:~~

portfolio at each date indicated:



	September 30,		June 30,		March 31,		December 31,		September 30,		March 31,		December 31,		September 30,		June 30,		March 31,
(in thousands)	2018		2018		2018		2017		2017		2019		2018		2018		2018		2018
Total loans:
Commercial non-real estate	$	8,438,884	$	8,410,961	$	8,336,222	$	8,297,937	$	8,129,429	$	8,656,326	$	8,620,601	$	8,438,884	$	8,410,961	$	8,336,222
Commercial real estate - owner occupied		2,300,271		2,233,794		2,185,543		2,142,439		2,076,014		2,515,428		2,457,748		2,300,271		2,233,794		2,185,543
Total commercial and industrial		10,739,155		10,644,755		10,521,765		10,440,376		10,205,443		11,171,754		11,078,349		10,739,155		10,644,755		10,521,765
Commercial real estate - income producing		2,311,699		2,342,192		2,394,862		2,384,599		2,511,808		2,563,394		2,341,779		2,311,699		2,342,192		2,394,862
Construction and land development		1,523,419		1,515,233		1,413,878		1,373,421		1,373,048		1,340,067		1,548,335		1,523,419		1,515,233		1,413,878
Residential mortgages		2,846,916		2,780,359		2,732,821		2,690,472		2,596,692		2,933,251		2,910,081		2,846,916		2,780,359		2,732,821
Consumer		2,122,528		2,088,378		2,029,178		2,115,295		2,099,294		2,104,372		2,147,867		2,122,528		2,088,378		2,029,178
Total loans	$	19,543,717	$	19,370,917	$	19,092,504	$	19,004,163	$	18,786,285	$	20,112,838	$	20,026,411	$	19,543,717	$	19,370,917	$	19,092,504

Our commercial customer base is diversified over a range of industries, including energy, healthcare, wholesale and retail trade in various durable and nondurable products and the manufacture of such products, marine transportation and maritime construction, financial and professional services, and agricultural production.

~~Table of Contents~~

~~The following table provides detail of the more significant industry concentrations for our commercial and industrial loan portfolio, which is based on NAICS codes.~~

September 30,

June 30,

March 31,

December 31,

September 30,

2018

2018

2018

2017

2017

Pct of

Pct of

Pct of

Pct of

Pct of
($ in thousands)

Balance

Total

Balance

Total

Balance

Total

Balance

Total

Balance

Total
Commercial & industrial loans:

Real Estate and Rental and Leasing

$
1,232,737

11
%

$
1,195,278

11
%

$
1,154,304

11
%

$
1,122,389

11
%

$
1,134,451

12
%
Health Care and Social Assistance

1,135,040

11

1,152,593

11

1,159,214

11

1,118,288

11

1,023,939

10

Retail Trade (a)

930,134

9

901,020

8

869,662

8

757,998

7

761,418

7

Mining, Quarrying, and Oil and Gas Extraction (a)

874,223

8

932,113

9

972,580

9

992,179

10

1,074,822

11

Manufacturing (a)

846,447

8

820,135

8

795,014

8

745,744

7

726,339

7

Public Administration

842,199

8

866,052

8

857,736

8

840,773

8

832,638

8

Transportation and Warehousing (a)

700,698

6

702,615

7

651,869

6

609,011

6

563,263

6

Construction

582,761

5

632,592

6

626,013

6

619,956

6

564,444

6

Wholesale Trade (a)

559,638

5

523,839

5

536,791

5

578,037

6

513,086

5

Finance and Insurance

524,836

5

460,803

4

437,547

4

501,157

5

559,092

5

Professional, Scientific, and Technical Services (a)

439,153

4

440,727

4

433,169

4

429,637

4

356,560

3

Educational Services

430,238

4

437,484

4

440,272

4

462,595

4

438,247

4

Other Services (except Public Administration)

391,040

4

382,737

4

371,913

4

356,787

3

349,711

3

Accommodation and Food Services

331,604

3

366,240

3

357,693

3

324,619

3

340,551

3

Other (a)

918,407

9

830,527

8

857,988

9

981,206

9

966,882

10

Total commercial & industrial loans

$
10,739,155

100
%

$
10,644,755

100
%

$
10,521,765

100
%

$
10,440,376

100
%

$
10,205,443

100
%

(a) Certain balances within each of these industry categories may contain loans considered to be energy related lending, as our definition of energy related is based on the borrower’s source of revenue. The energy related portfolio totaled approximately $.9 billion at September 30, 2018, $1.0 billion at June 30, 2018, and $1.1 billion atAt March 31, ~~2018, December 31, 2017 and September 30, 2017.~~

~~At September 30, 2018,~~2019, commercial and industrial (“C&I”) loans, including both non-real estate and owner occupied real estate secured loans, totaled approximately ~~$10.7~~$11.2 billion, or 56% of the total loan portfolio, an increase of ~~$94~~$93 million, or 1%, from ~~June 30,~~December 31, 2018. Included in C&I are $927 million in energy related loans, which are comprised of credits to both the exploration and production segment and the support services segment. Energy related loans comprised 4.7% of total loans at September 30, 2018, down from 12.4% in fourth quarter of 2014, the beginning of the downturn in the energy cycle, meeting our strategic target to reduce concentration of energy loans to 5% or lower. The ~~energy portfolio is also more balanced~~growth was across the ~~segments with 53%~~Company’s footprint and in ~~support services~~many major lines including real estate, manufacturing, retail and 47% in upstream and midstream at September 30, 2018, compared to 62% and 38%, respectively, at June 30, 2018. Third quarter 2018 activity in the energy portfolio included payoffs and paydowns of approximately $151 million, partially offset by approximately $93 million in draws on existing lines of credit. There were no energy charge-offs during the third quarter of 2018.transportation.

The Bank lends mainly to middle market and smaller commercial entities, although it participates in larger shared credit loan facilities. Shared national credits funded at ~~September 30, 2018~~March 31, 2019 totaling approximately ~~$1.8~~$2.1 billion, or ~~9%,~~10% of total loans, were up ~~$77.9~~$96.6 million from ~~June 30,~~December 31, 2018. Approximately ~~$458~~$555.6 million of our shared national credits were with ~~energy related~~energy-related customers at ~~September 30,~~March 31, 2019.

Loans to borrowers in the energy sector totaled $1.1 billion, relatively unchanged from December 31, 2018 and March 31, 2018. We intend to maintain our total energy concentration at approximately 5% while continuing to shift the mix within the portfolio to approximately one-third support services subsector and two-thirds exploration and production and midstream subsectors. At March 31, 2019, approximately $580 million, or 55%, of the portfolio was comprised of customers engaged in exploration and production, transportation, and storage activities. The remaining $483 million, or 45%, of the portfolio was comprised of customers engaged in onshore and offshore services and products to support exploration and production activities.

Table of Contents

The following table provide s detail of the more significant industry concentrations for our commercial and industrial loan portfolio, which is based on NAICS codes.

	March 31,					December 31,					September 30,					June 30,					March 31,
	2019					2018					2018					2018					2018
			Pct of					Pct of					Pct of					Pct of					Pct of
( $ in thousands )	Balance		Total			Balance		Total			Balance		Total			Balance		Total			Balance		Total
Commercial & industrial loans:
Real Estate and Rental and Leasing	$	1,430,878		13	%	$	1,349,674		12	%	$	1,232,737		11	%	$	1,195,278		11	%	$	1,154,304		11	%
Health Care and Social Assistance		1,083,469		10	%		1,120,799		10	%		1,135,040		11	%		1,152,593		11	%		1,159,214		11	%
Mining, Quarrying, and Oil and Gas Extraction (a)		957,590		8	%		1,016,870		9	%		874,223		8	%		932,113		9	%		972,580		9	%
Retail Trade (a)		932,857		8	%		902,783		8	%		930,134		9	%		901,020		8	%		869,662		8	%
Manufacturing (a)		913,363		8	%		866,079		8	%		846,447		8	%		820,135		8	%		795,014		8	%
Public Administration		799,237		7	%		814,442		7	%		842,199		8	%		866,052		8	%		857,736		8	%
Transportation and Warehousing (a)		746,837		7	%		717,746		7	%		700,698		6	%		702,615		7	%		651,869		6	%
Wholesale Trade (a)		657,685		6	%		602,052		6	%		559,638		5	%		523,839		5	%		536,791		5	%
Construction		645,107		6	%		643,932		6	%		582,761		5	%		632,592		6	%		626,013		6	%
Finance and Insurance		595,373		5	%		605,663		6	%		524,836		5	%		460,803		4	%		437,547		4	%
Other Services (except Public Administration)		450,153		4	%		436,390		4	%		391,040		4	%		382,737		4	%		371,913		4	%
Professional, Scientific, and Technical Services (a)		421,999		4	%		462,984		4	%		439,153		4	%		440,727		4	%		433,169		4	%
Accommodation and Food Services		410,754		4	%		383,087		3	%		331,604		3	%		366,240		3	%		357,693		3	%
Educational Services		353,803		3	%		359,997		3	%		430,238		4	%		437,484		4	%		440,272		4	%
Other (a)		772,649		7	%		795,851		7	%		918,407		9	%		830,527		8	%		857,988		9	%
Total commercial & industrial loans	$	11,171,754		100	%	$	11,078,349		100	%	$	10,739,155		100	%	$	10,644,755		100	%	$	10,521,765		100	%

(a)

Certain balances within each of these industry categories may contain loans considered to be energy related lending, as our definition of energy related is based on the borrower’s source of revenue. The energy related portfolio totaled approximately $1.1 billion at March 31, 2019 and December 31, 2018, $0.9 billion at September 30, 2018, $1.0 billion at June 30, 2018, and $1.1 billion at March 31, 2018.

Commercial real estate – income producing loans totaled approximately ~~$2.3~~$2.6 billion at ~~September 30, 2018, a decrease~~March 31, 2019, an increase of ~~$30.5~~$222 million, or 1%9%, from ~~June 30,~~December 31, 2018. The ~~decrease was related primarily~~increase reflects the transfer of loans from construction to ~~healthcare~~permanent financing, as well as new production that included increases for senior care facilities, multifamily properties and ~~multifamily~~retail properties. The following table details for the preceding five quarters the end-of-period commercial real estate – income producing loan balances by property type.



	September 30,				June 30,				March 31,				December 31,				September 30,				March 31,					December 31,					September 30,					June 30,					March 31,
	2018				2018				2018				2017				2017				2019					2018					2018					2018					2018
			Pct of				Pct of				Pct of				Pct of				Pct of				Pct of					Pct of					Pct of					Pct of					Pct of
($ in thousands)	Balance		Total		Balance		Total		Balance		Total		Balance		Total		Balance		Total		Balance		Total			Balance		Total			Balance		Total			Balance		Total			Balance		Total
Commercial real estate - income producing loans:
Retail	$	499,395	22	%	$	502,809	22	%	$	521,607	22	%	$	526,929	22	%	$	550,720	22	%	$	542,904		21	%	$	507,129		22	%	$	499,395		22	%	$	502,809		22	%	$	521,607		22	%
Office		421,965	18			430,319	18			436,789	18			441,539	19			472,169	19			436,819		17	%		444,973		19	%		421,965		18	%		430,319		18	%		436,789		18	%
Hotel/Motel		346,735	15			332,411	14			336,724	14			328,238	14			299,796	12			377,674		15	%		374,430		16	%		346,735		15	%		332,411		14	%		336,724		14	%
Multifamily		333,144	15			347,732	15			379,932	16			341,783	14			339,656	13			369,041		14	%		332,145		14	%		333,144		15	%		347,732		15	%		379,932		16	%
Industrial		285,292	12			279,041	12			270,812	11			272,133	11			327,048	13			353,804		14	%		311,933		13	%		285,292		12	%		279,041		12	%		270,812		11	%
Other		425,168	18			449,880	19			448,998	19			473,977	20			522,419	21			483,152		19	%		371,169		16	%		425,168		18	%		449,880		19	%		448,998		19	%
Total commercial real estate - income producing loans	$	2,311,699	100	%	$	2,342,192	100	%	$	2,394,862	100	%	$	2,384,599	100	%	$	2,511,808	100	%	$	2,563,394		100	%	$	2,341,779		100	%	$	2,311,699		100	%	$	2,342,192		100	%	$	2,394,862		100	%

~~Table of Contents~~

Construction and land development loans, totaling approximately ~~$1.5~~$1.3 billion at ~~September 30, 2018,~~March 31, 2019, decreased $208.3 million from December 31, 2018. The decrease was ~~relatively unchanged~~primarily due to the reclassification of loans from ~~June 30, 2018.~~construction and land development loans to commercial real estate loans as noted above. Residential mortgages increased ~~$66.6~~$23.2 million and consumer loans ~~increased $34.2~~decreased $43.5 million during the ~~third~~first quarter of ~~2018.~~ 2019.

Table of Contents

~~We currently expect a slight slowdown in production in the fourth quarter of 2018, with end of period fourth quarter net loan growth estimated at $200 to $225 million.~~

Allowance for Loan Losses and Asset Quality

The Company's total allowance for loan losses was ~~$214.5~~$194.7 million at ~~September 30, 2018~~March 31, 2019 virtually unchanged from ~~June 30,~~December 31, 2018 and down ~~$2.8~~$16.0 million ~~from $217.3 million at December~~compared to March 31, ~~2017.~~2018. The ratio of the allowance for loan losses to period-end loans ~~decreased slightly to 1.10%, compared to 1.11%~~of 0.97% at ~~June 30, 2018 and 1.14% at year end.~~March 31, 2019 was unchanged from December 31, 2018. The allowance for loan losses at March 31, 2019 compared to ~~second quarter~~December 31, 2018 reflects a net build in the ~~net of an $8.8 million increase in allowance for loan losses on the~~commercial nonenergy portfolio of $3.0 million, partially offset by a ~~decrease~~net release of ~~$8.8~~$1.7 million in the energy ~~reserves.~~portfolio. The ~~increase~~consumer and residential mortgage allowances had releases of $0.9 million and $0.2 million, respectively. The relatively flat allowance reflects the favorable impact of improvement in criticized levels and other credit metrics across most of the loan portfolios, offset by slightly elevated loss coverage ratios in the ~~nonenergy allowance reflects increased growth~~commercial portfolio as we continue to grow and ~~diversification of this portfolio, the impact~~diversify that ~~rising interest rates may have on ability~~portfolio. Energy performance continues to ~~repay~~be stable with increasing oil prices and a continued decline in criticized ~~and nonperforming~~ levels ~~that, while down~~ compared to ~~the~~ prior period-end, remain elevated compared to the last several years. The decline in energy reserves reflects the stabilization in crude oil prices, a sizable decline in energy exposure and a significant reduction in criticized loan balances. While there are a few problem energy credits for which we anticipate future charge-offs, management believes the allowance level is sufficient to cover that potential.quarter.

The Company’s balance of criticized commercial loans totaled ~~$0.8 billion~~$584 million at ~~September 30, 2018,~~March 31, 2019, down ~~$63~~$41 million, or 7%, compared to ~~June 30,~~December 31, 2018, with a$26 million of the decrease inattributable to the commercial nonenergy ~~criticized loans of $12~~portfolio and $15 million ~~and a decrease in~~attributable to the energy ~~of $51 million.~~portfolio. Commercial criticized loans are down ~~$242~~$500 million, or 46%, compared to ~~December 31, 2017,~~first quarter of 2018, with $259 million of the decrease attributable to the energy portfolio ~~down $193~~and $241 million ~~and~~attributable to the commercial nonenergy ~~down $49 million.~~portfolio. Criticized loans are defined as those having potential weaknesses that deserve management’s close attention (risk-rated as special mention, substandard and doubtful), including both accruing and nonaccruing loans. Our commercial nonenergy criticized portfolio, totaling ~~$477~~$320 million at ~~September 30, 2018~~March 31, 2019, is comprised of loans that are diversified as to both industry and ~~geography, and the level of~~geography. Commercial nonenergy criticized loans ~~as a percentage~~comprised 2.12% of ~~total loans is not outside of historical norms.~~that portfolio at March 31, 2019, compared to 2.31% at December 31, 2018 and 3.91% at March 31, 2018. As of ~~September 30, 2018,~~March 31, 2019, criticized loans in the energy portfolio were ~~$357~~$264 million, or approximately ~~39%,~~25% of that portfolio. Energy related loans delinquent for more than 30 days, including accrual and nonaccrual loans, totaled $71 million, or 8%, of the energy portfolio at September 30, 2018, up from $62 million, or 6%, at June 30, 2018.

Management continues to closely monitor the ability of our ~~energy related~~energy-related customers to service their debt, including reviews of customers’ balance sheets, leverage ratios, collateral values and other critical lending metrics. ~~With oil prices approximating $70 per barrel, and continued stabilization in prices, we anticipate the cycle for us could end soon.~~ We believe we are adequately reserved for losses on remaining credits, and do not expect a significant provision for any additional issues. Management maintains the estimate that net charge offs from energy related credits could be as high as $95 million over the duration of the cycle, which started in the fourth quarter of 2014. To date, we haveThe Company has recorded approximately ~~$79~~$95 million in energy ~~related net~~ charge-offs ~~since~~during the latest down cycle ~~began. See Item 7~~that began in ~~our Annual Report on Form 10-K for the year ended December 31, 2017 for further discussion of our energy portfolio and its potential impact on the allowance for loan losses.~~late 2014.

~~The following table provides a breakout of the allowance for loan loss for the energy portfolio, allocated by sector, as of September 30, 2018 and December 31, 2017.~~

September 30, 2018

December 31, 2017
(in millions)

Outstanding Balance

Allocated Allowance for Loan and Lease Losses

Allowance for Loan and Lease Losses as a % of Loans

Outstanding Balance

Allocated Allowance for Loan and Lease Losses

Allowance for Loan and Lease Losses as a % of Loans
Upstream (reserve-based lending)

$
375

$
7.6

2.0%

$
353

$
11.4

3.2%
Midstream

57

0.7

1.2%

52

0.4

0.7%
Support - drilling

110

6.3

5.7%

121

10.5

8.6%
Support - nondrilling

385

35.6

9.2%

529

47.9

9.1%
Total

$
927

$
50.2

5.4%

$
1,055

$
70.2

6.7%

Net ~~charge-offs~~charge- offs were ~~$6.9~~$17.9 million, or ~~0.14%~~0.36%, of average total loans on an annualized basis in the ~~third~~first quarter of ~~2018, up~~2019, down from ~~$5.1~~$28.1 million, or ~~0.11%,~~0.56% of average total loans in the ~~second~~fourth quarter of 2018. Commercial net charge-offs totaled $14.4 million in the first quarter of 2019 compared to $24.3 million in the fourth quarter of 2018. The first quarter net charge-offs included $10.1 million related to the alleged fraud associated with the DC Solar equipment finance credit. There were no energy net charge-offs during the ~~third~~first quarter of ~~2018~~2019 compared to a$15.8 million of net ~~recovery~~charge-offs in the ~~second quarter of 2018 of $1.9 million. Commercial nonenergy net charge-offs were up $0.4 million to $3.2 million in third~~fourth quarter of 2018. Consumer loan net charge-offs of ~~$4.7~~$3.2 million were ~~up $1.1~~down $1.0 million compared to the ~~second~~fourth quarter of 2018 ~~but were more in line with~~and down $3.0 million compared to the first quarter 2018. The first quarter of 2018 ~~and fourth quarter 2017 when adjusted~~included $1.5 million of net charge-offs related to ~~exclude Harrison~~the consumer finance subsidiary that was sold on March 9, 2018.

Table of Contents

~~Finance. The mortgage portfolio continued to perform well during third quarter of 2018 with a net recovery of $1.1 million compared to net recovery of $0.3 million in second quarter of 2018.~~

The following table sets forth activity in the allowance for loan losses for the periods indicated:



	Three Months Ended									Nine Months Ended						Three Months Ended
	September 30,			June 30,			September 30,			September 30,						March 31,			December 31,			March 31,
(in thousands)	2018			2018			2017			2018			2017			2019			2018			2018
Allowance for loan losses at beginning of period	$	214,530		$	210,713		$	221,865		$	217,308		$	229,418		$	194,514		$	214,550		$	217,308
Loans charged-off:
Commercial non real estate		3,556			2,510			9,029			15,401			35,247			16,344			24,668			9,335
Commercial real estate - owner-occupied		526			5,953			10			7,330			527			—			729			851
Total commercial & industrial		4,082			8,463			9,039			22,731			35,774			16,344			25,397			10,186
Commercial real estate - income producing		29			1,604			—			1,633			160			10			-			—
Construction and land development		45			210			498			265			670			—			69			10
Total commercial		4,156			10,277			9,537			24,629			36,604			16,354			25,466			10,196
Residential mortgages		87			306			1,709			585			2,485			406			29			192
Consumer		5,635			4,916			7,584			18,599			22,844			4,231			5,314			8,048
Total charge-offs		9,878			15,499			18,830			43,813			61,933			20,991			30,809			18,436
Commercial non real estate		758			8,330			4,624			13,234			6,442			1,926			1,151			4,146
Commercial real estate - owner-occupied		7			187			111			282			447			17			35			88
Total commercial & industrial		765			8,517			4,735			13,516			6,889			1,943			1,186			4,234
Commercial real estate - income producing		156			2			257			221			655			2			-			63
Construction and land development		30			9			295			68			1,050			11			28			29
Total commercial		951			8,528			5,287			13,805			8,594			1,956			1,214			4,326
Residential mortgages		1,142			596			58			1,854			339			162			325			116
Consumer		933			1,301			1,702			4,028			5,248			1,004			1,134			1,794
Total recoveries		3,026			10,425			7,047			19,687			14,181			3,122			2,673			6,236
Total net charge-offs		6,852			5,074			11,783			24,126			47,752			17,869			28,136			12,200
Provision for loan losses		6,872			8,891			13,040			28,016			43,982			18,043			8,100			12,253
Decrease in allowance as a result of sale of subsidiary		—			—			—			(6,648)			—			—			—			(6,648	)
Increase (decrease) in FDIC loss share receivable		—			—			—			—			(2,526)
Allowance for loan losses at end of period	$	214,550		$	214,530		$	223,122		$	214,550		$	223,122		$	194,688		$	194,514		$	210,713
Ratios:
Gross charge-offs to average loans		0.20	%		0.32	%		0.40	%		0.30	%		0.46	%		0.42	%		0.62	%		0.39	%
Recoveries to average loans		0.06	%		0.22	%		0.15	%		0.14	%		0.10	%		0.06	%		0.05	%		0.13	%
Net charge-offs to average loans		0.14	%		0.11	%		0.25	%		0.17	%		0.35	%		0.36	%		0.56	%		0.26	%
Allowance for loan losses to period-end loans		1.10	%		1.11	%		1.19	%		1.10	%		1.19	%		0.97	%		0.97	%		1.10	%

Table of Contents

The following table sets forth nonperforming assets by type for the periods indicated, consisting of nonaccrual loans, troubled debt restructurings and foreclosed and surplus ORE and other foreclosed assets. Loans past due 90 days or more and still accruing are also disclosed.



	September 30,			December 31,			March 31,			December 31,
(in thousands)	2018			2017			2019			2018
Loans accounted for on a nonaccrual basis: (a)
Commercial non-real estate	$	35,334		$	63,387		$	22,933		$	26,617
Commercial non-real estate - restructured		91,095			89,476			104,060			84,036
Total commercial non-real estate		126,429			152,863			126,993			110,653
Commercial real estate - owner occupied		20,501			23,549			14,104			16,682
Commercial real estate - owner-occupied - restructured		218			2,440			362			213
Total commercial real estate - owner-occupied		20,719			25,989			14,466			16,895
Commercial real estate - income producing		3,656			9,054			4,205			4,991
Commercial real estate - income producing - restructured		285			5,520			—			—
Total commercial real estate - income producing		3,941			14,574			4,205			4,991
Construction and land development		3,237			3,791			2,002			2,134
Construction and land development - restructured		12			16			11			12
Total construction and land development		3,249			3,807			2,013			2,146
Residential mortgage		30,608			38,703			37,849			34,594
Residential mortgage - restructured		1,124			1,777			1,426			1,272
Total residential mortgage		31,732			40,480			39,275			35,866
Consumer		15,576			15,087			17,879			16,744
Consumer - restructured		—			—			—			—
Total consumer		15,576			15,087			17,879			16,744
Total nonaccrual loans	$	201,646		$	252,800		$	204,831		$	187,295
Restructured loans - still accruing:
Commercial non-real estate	$	151,613		$	114,224		$	109,872		$	130,075
Commercial real estate - owner occupied		8,827			1,578			5,928			7,286
Commercial real estate - income producing		401			3,827			391			398
Construction and land development		—			—			9			9
Residential mortgage		737			480			341			546
Consumer		611			384			1,037			728
Total restructured loans - still accruing		162,189			120,493			117,578			139,042
Total nonperforming loans		363,835			373,293			322,409			326,337
ORE and foreclosed assets		27,475			27,542			27,148			26,270
Total nonperforming assets (b)	$	391,310		$	400,835		$	349,557		$	352,607
Loans 90 days past due still accruing to loans (c)	$	24,460		$	27,766		$	20,308		$	5,589
Total restructured loans	$	254,923		$	219,722		$	223,437		$	224,575
Ratios:
Nonperforming assets to loans plus ORE and foreclosed assets		2.00	%		2.11	%		1.74	%		1.76	%
Allowance for loan losses to nonperforming loans and accruing loans 90 days past due		55.25	%		54.18	%		56.81	%		58.60	%
Loans 90 days past due still accruing to loans		0.13	%		0.15	%
Loans 90 days past due still accruing to loans (c)								0.10	%		0.03	%

(a)

Nonaccrual loans and accruing loans past due 90 days or more do not include purchased credit impaired loans which were written down to fair value upon acquisition and accrete interest income over the remaining life of the loan.

(b)

Includes total nonaccrual loans, total restructured loans - still accruing and ORE and foreclosed assets.

(c)

Excludes 90+ accruing TDR already reflected as a restructured accruing ~~loan.~~loan totaling $1.5 million and $8.7 million at March 31, 2019 and December 31, 2018, respectively.

Nonperforming assets totaled ~~$391.3~~$349.6 million at ~~September 30, 2018,~~March 31, 2019, down ~~$25.2 million from June 30, 2018 and $9.5~~$3.1 million from December 31, ~~2017, but up $3.7~~2018 and $118.8 million from ~~September 30, 2017.~~March 31, 2018. Nonperforming loans decreased approximately ~~$30.4~~$3.9 million compared to ~~June 30,~~December 31, 2018 with a continued reduction in energy nonperforming loans of $15 million, partially offset by an increase in commercial nonenergy nonperforming loans of $11 million. Our nonperforming loans included $117.8 million of accruing restructured loans, or approximately one-third of total nonperforming loans, most within energy credits that endured challenges during the energy ~~portfolio down $17.5 million and nonenergy down $12.9 million.~~cycle. Nonperforming assets as a percent of total loans, ORE and other foreclosed assets was ~~2.00%~~1.74% at ~~September 30, 2018,~~March 31, 2019, down ~~15 bps from June 30, 2018, 11~~2 bps from December 31, ~~2017,~~2018 and 671 bps from ~~September 30, 2017.~~ March 31, 2018.

Table of Contents

Short-Term Investments

Short-term liquidity investments, including interest-bearing bank deposits and federal funds sold, were $163.8 million at March 31, 2019. This represents an increase of $52.7 million from December 31, 2018 and an increase of $102.2 million from March 31, 2018. These assets are volatile on a daily basis depending upon movement in customer loan and deposit accounts. Average short-term investments of $216.2 million for the first quarter of 2019 were up $10.4 million compared to the fourth quarter of 2018, and up $67.9 million compared to the first quarter of 2018. Short-term liquidity assets are held to ensure funds are available to meet the cash flow needs of both borrowers and depositors. Short-term liquidity investments, including interest-bearing bank deposits and federal funds sold, were $108.1 million at September 30, 2018. This represents an increase of $3.9 million from June 30, 2018 and a decrease of $3.7 million compared to September 30, 2017. These assets are highly volatile on a daily basis depending upon movement in customer loan and deposit accounts. Average short-term investments of $155.3 million for the third quarter of 2018 were up $12.2 million compared to the second quarter of 2018, and down $39.3 million compared to the third quarter of 2017. See the Liquidity section earlier in this Item for further discussion regarding the management of our short-term investment portfolio and the impact upon our liquidity in general.

Deposits

Total deposits were ~~$22.4~~$23.4 billion at ~~September 30, 2018,~~March 31, 2019, up ~~$182.5~~$230.1 million, or 1%, from ~~June 30,~~December 31, 2018, and up ~~$883.9~~$894.6 million, or 4%, from ~~September 30, 2017.~~March 31, 2018. Average deposits for the ~~third~~first quarter of ~~2018~~2019 were ~~$22.0~~$23.1 billion, ~~down $79.9 million, or less than 1%, from the second quarter of 2018 and~~ up ~~$671.7~~$616.0 million, or 3%, from the ~~third~~fourth quarter of ~~2017.~~

2018 and up $1.1 billion, or 5%, from the first quarter of 2018.

Noninterest-bearing demand deposits were ~~$8.1~~$8.2 billion at ~~September 30, 2018,~~March 31, 2019, down ~~$25.3~~$340.4 million, or ~~less than~~4%, compared to December 31, 2018, and down $71.4 million, or 1%, ~~linked quarter, and up $244.1 million, or 3%, year over year.~~compared to March 31, 2018. Noninterest-bearing demand deposits comprised ~~36%~~35% of total deposits at ~~September 30, 2018,~~March 31, 2019, and 37% at ~~June 30,~~December 31, 2018 and ~~September 30, 2017.~~

March 31, 2018.

Interest-bearing transaction and savings accounts of ~~$8.0~~$8.2 billion at ~~September 30, 2018~~March 31, 2019 increased ~~$260.9~~$224 million, or 3%, compared to ~~June 30,~~December 31, 2018 and increased $165.4 million, or 2%, compared to March 31, 2018, with the year-over-year increase mainly ~~due~~attributable to ~~$229 million of~~ customer deposits ~~related to~~assumed in the trust and asset management ~~acquisition, and increased $78.9 million, or 1%, compared to September 30, 2017.~~ acquisition.

Interest-bearing public fund deposits totaled ~~$2.6~~$3.2 billion at ~~September 30, 2018, down $241~~March 31, 2019, up $223.1 million, or 8%7%, from ~~June 30,~~December 31, 2018, ~~consistent with seasonal trends,~~primarily due to both new and ~~down $148.2~~enhanced business relationships, and up $121.6 million, or 5%4%, compared to ~~September 30, 2017.~~March 31, 2018. Time deposits other than public funds totaled $3.7 billion at ~~September 30, 2018~~March 31, 2019 up ~~$187.8~~$123.3 million from ~~June 30,~~December 31, 2018, driven by promotional certificate of deposit offers across our ~~markets.~~markets and a $21.2 million increase in brokered certificates of deposit. Time deposits other than public funds ~~was~~were up ~~$709.1~~$679.0 million, or ~~24%~~22.0%, compared to ~~September 30, 2017,~~March 31, 2018, due ~~to both increased~~largely an increase in retail ~~and brokered deposits.~~certificates of deposit.

Short-Term Borrowings

At ~~September 30, 2018,~~March 31, 2019, short-term borrowings totaled ~~$2.3~~$1.4 billion, down ~~$37.5~~$200.4 million from ~~June 30,~~December 31, 2018, as FHLB borrowings decreased ~~$50.3~~$250.1 million and securities sold under repurchase agreements ~~decreased $37.0 million, and federal funds purchased~~ increased ~~$49.8~~$49.7 million. Short-term borrowings ~~increased $539.5~~decreased $63.4 million from ~~September 30, 2017.~~March 31, 2018.

Average short-term borrowings of ~~$2.6~~$1.7 billion in the ~~third~~first quarter of ~~2018~~2019 were ~~up $620.8~~down $645.4 million, or ~~31%~~28%, compared to the ~~second~~fourth quarter of 2018, and ~~up $700.8~~down $138.1 million, or ~~37%~~8%, compared to the ~~third~~first quarter of ~~2017.~~ 2018. The decrease compared to prior periods was due in part to a portfolio restructure late in the fourth quarter where proceeds from the sale of loans and securities were used to pay down a portion of FHLB borrowings.

Customer repurchase agreements and FHLB borrowings are the major sources of short-term borrowings. Customer repurchase agreements are offered mainly to commercial customers to assist them with their cash management strategies or to provide a temporary investment vehicle for their excess liquidity pending redeployment for corporate or investment purposes. While customer repurchase agreements provide a recurring source of funds to the Bank, ~~the~~ amounts available ~~over time can be volatile.~~will vary. FHLB borrowings are funds from the Federal Home Loan Bank that are collateralized by single family and commercial real estate loans included in the Bank’s loan portfolio, subject to specific criteria.

~~Long-Term Debt~~Operating Leases

~~At September 30, 2018, long-term debt totaled $215.9~~Effective January 1, 2019, the Company adopted the amended provisions of Financial Accounting Standards Codification Topic 842, “Leases,” using the modified retrospective approach, impacting the reporting and disclosures for operating leases. The core principle of Topic 842 is that a lessee should recognize in the statement of financial position a liability representing the present value of future lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset over the lease term, as well as the disclosure of key information about operating leasing arrangements. Upon adoption, the Company recorded a gross-up of assets and liabilities in its consolidated balance sheet, with approximately $116 million ~~down $50.1~~for right-of-use assets and $131 million ~~from June 30, 2018. The decrease~~of lease payment obligations offset by the elimination of $15 million of existing lease incentive and other deferred rent liabilities. Accounting for leases in ~~long-term debt during~~accordance with Topic 842 has not had a material impact upon our consolidated results of operations, and is not expected to in future periods. Refer to Note 5 – Operating Leases for further information related to the ~~third quarter 2018 reflects a $50 million early payoff of the Parent’s term scheduled to mature in December 2018.~~operating lease accounting policy, practical expedient elections for adoption and operating leasing information at adoption.

Table of Contents

OFF-BALANCE SHEET ARRANGEMENTS

Loan Commitments and Letters of Credit

In the normal course of business, the Bank enters into financial instruments, such as commitments to extend credit and letters of credit, to meet the financing needs of their customers. Such instruments are not reflected in the accompanying consolidated financial statements until they are funded, although they expose the Bank to varying degrees of credit risk and interest rate risk in much the same way as funded loans. Under regulatory capital guidelines, the Company and Bank must include unfunded commitments meeting certain criteria in risk-weighted capital calculations.

The contract amounts of these instruments reflect the Company's exposure to credit risk. The Company undertakes the same credit evaluation in making loan commitments and assuming conditional obligations as it does for on-balance sheet instruments and may require collateral or other credit support.

The following table shows the commitments to extend credit and letters of credit at ~~September 30, 2018~~March 31, 2019 according to expiration date.



			Expiration Date
													Expiration Date
			Less than		1-3		3-5		More than				Less than		1-3		3-5		More than
(in thousands)	Total		1 year		years		years		5 years		Total		1 year		years		years		5 years
Commitments to extend credit	$	7,212,886	$	2,963,452	$	1,414,145	$	1,507,202	$	1,328,087	$	7,198,032	$	3,275,846	$	1,543,306	$	1,456,399	$	922,481
Letters of credit		353,490		266,377		36,895		50,218		—		336,419		250,652		35,805		49,962		—
Total	$	7,566,376	$	3,229,829	$	1,451,040	$	1,557,420	$	1,328,087	$	7,534,451	$	3,526,498	$	1,579,111	$	1,506,361	$	922,481

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

There were no material changes or developments with respect to methodologies that the Company uses when applying what management believes are critical accounting policies and developing critical accounting estimates as disclosed in our Annual Report on Form 10-K for the year ended December 31, ~~2017.~~ 2018.

The consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America and with those generally practiced within the banking industry which require management to make estimates and assumptions about future events. Estimates are based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, and the resulting estimates form the basis for making judgments about the carrying values of certain assets and liabilities not readily apparent from other sources. Actual results could differ significantly from those estimates.

NEW ACCOUNTING PRONOUNCEMENTS

Refer to Note 16 to our Consolidated Financial Statements included elsewhere in this report.

Table of Contents

Item 3. Quantitative and ~~Qualitative~~Qualitative Disclosures About Market Risk

The Company’s net income is materially dependent on net interest income. The Company’s primary market risk is interest rate risk which stems from uncertainty with respect to absolute and relative levels of future market interest rates that affect financial products and services. In order to manage the exposures to interest rate risk, management measures the sensitivity of net interest income and cash flows under various market interest rate scenarios, establishes interest rate risk management policies and implements asset/liability management strategies designed to produce a relatively stable net interest margin under varying rate environments.

The ~~Company measures its~~following table presents an analysis of our interest rate ~~sensitivity primarily~~risk as measured by ~~running various~~the estimated changes in net interest income simulations. The Company’s balance sheet is asset sensitive over a two-year period due to a larger volume of rate sensitive assets than rate sensitive liabilities. The model measures annual net interest income sensitivity relative to a base case scenario and incorporates assumptions regarding balance sheet growth and the mix of earning assets and funding sources as well as pricing, repricing and maturity characteristics of the existing and projected balance sheet.

~~The table below presents the results of simulations run as of September 30, 2018 for year 1 and year 2, assuming the indicated~~resulting from an instantaneous and sustained parallel shift in rates at March 31, 2019. Shifts are measured in 100 basis point increments in a range from -500 to +500 basis points from base case, with -200 through +300 basis points presented in the ~~yield curve at~~table below. Our interest rate sensitivity modeling incorporates a number of assumptions including loan and deposit repricing characteristics, the ~~measurement date.~~rate of loan prepayments and other factors. The ~~results demonstrate an increase~~base scenario assumes that the current interest rate environment is held constant over a 24-month forecast period and is the scenario to which all others are compared in order to measure the change in net interest income. Policy limits on the change in net interest income ~~as rates rise~~under a variety of interest rate scenarios are approved by the Board. All policy scenarios assume a static volume forecast where the balance sheet is held constant, although other scenarios are modeled.

	Estimated Increase
	(Decrease) in NII
Change in Interest Rates	Year 1			Year 2
(basis points)
-200		(9.96	)%		(13.82	)%
-100		(4.27	)%		(5.69	)%
+100		3.10	%		3.92	%
+200		5.77	%		7.13	%
+300		8.12	%		9.80	%

The results indicate a general asset sensitivity across most scenarios driven primarily by repricing in variable rate loans and a ~~decline should rates fall as compared~~funding mix which is composed of material volumes of non-interest bearing and lower rate sensitive deposits. When deemed prudent, management has taken actions to mitigate exposure to interest rate risk with on- or off-balance sheet financial instruments and intends to do so in the ~~stable~~future. Possible actions include, but are not limited to, changes in the pricing of loan and deposit products, modifying the composition of earning assets and interest-bearing liabilities, and adding to, modifying or terminating existing interest rate ~~environment assumed~~swap agreements or other financial instruments used for ~~the base case.~~interest rate risk management purposes.

Estimated Increase

(Decrease) in NII
Change in Interest Rates

Year 1

Year 2
(basis points)

- 100

(2.45)
%

(3.51)
%
+100

1.71
%

2.50
%
+200

3.04
%

4.43
%
+300

4.13
%

5.86
%

~~Note: Decrease~~Even if interest rates change in the designated amounts, there can be no assurance that our assets and liabilities would perform as anticipated. Additionally, a change in the U.S. Treasury rates in the designated amounts accompanied by a change in the shape of the U.S. Treasury yield curve would cause significantly different changes to net interest income than indicated above. Strategic management of our balance sheet and earnings is fluid and would be adjusted to accommodate these movements. As with any method of measuring interest rate risk, certain shortcomings are inherent in the methods of analysis presented above. For example, although certain assets and liabilities may have similar maturities or periods to repricing, they may react in different degrees to changes in market interest rates. Also, the interest rates on certain types of assets and liabilities may fluctuate in advance of changes in market interest rates, while interest rates on other types may lag behind changes in market rates. Certain assets such as adjustable-rate loans have features which restrict changes in interest rates ~~limited~~on a short-term basis and over the life of the asset. Also, the ability of many borrowers to ~~100 basis points~~service their debt may decrease in the ~~current~~event of an interest rate ~~environment~~increase. We consider all of these factors in monitoring exposure to interest rate risk.

The foregoing disclosures related to our market risk should be read in conjunction with our audited consolidated financial statements, related notes and management’s discussion and analysis included in our Annual Report on Form 10-K for the year ended December 31, ~~2017.~~2018.

Item 4. Controls and Procedures

In connection with the preparation of this Quarterly Report on Form 10-Q, an evaluation was carried out by the Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Disclosure controls and procedures are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and that such information is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosures. Based on that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that, as of ~~September 30, 2018,~~March 31, 2019, the Company’s disclosure controls and procedures were effective.

Table of Contents

Our management, including the Chief Executive Officer and Chief Financial Officer, identified no change in our internal control over financial reporting that occurred during the three month period ended ~~September 30, 2018,~~March 31, 2019, that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.

Table of Contents

~~PART II~~

~~. OTHER~~PART II. OTHER INFORMATION

Item 1. Legal Proceedings

The Company, including subsidiaries, is party to various legal proceedings arising in the ordinary course of business. We do not believe that loss contingencies, if any, arising from pending litigation and regulatory matters will have a material adverse effect on our consolidated financial position or liquidity.

Item 1A. Risk Factors

The Company disclosed risk factors in its Annual Report on Form 10-K for the year ended December 31, ~~2017.~~2018. The risks described may not be the only risks facing us. Additional risks and uncertainties not currently known to us or that are currently considered to not be material also may materially adversely affect our business, financial condition, and/or operating results. The following risk factor regarding cybersecurity matters has been included in this Quarterly Report on Form 10-Q in response to the SEC’s Statement and Guidance on Public Company Cybersecurity Disclosures published on February 26, 2018.

Our operational and communications systems and infrastructure may fail or may be the subject of a breach or cyber-attack that, if successful, could adversely affect our business and disrupt business continuity.

We depend on our ability to process, record and monitor a large number of client transactions and to communicate with clients and other institutions on a continuous basis. As client, industry, public and regulatory expectations regarding operational and information security have increased, our operational systems and infrastructure continue to be safeguarded and monitored for potential failures, disruptions and breakdowns, whether as a result of events beyond our control or otherwise.

Our business, financial, accounting, data processing, or other operating systems and facilities may stop operating properly or become disabled or damaged as a result of a number of factors, including events that are wholly or partially beyond our control. For example, there could be sudden increases in client transaction volume; electrical or telecommunications outages; natural disasters such as earthquakes, tornadoes, floods, and hurricanes; disease pandemics; events arising from local or larger scale political or social matters, including terrorist acts; occurrences of employee error, fraud, or malfeasance; and, as described below, cyber-attacks.

Although we have business continuity plans and other safeguards in place, our operations and communications may be adversely affected by significant and widespread disruption to our systems and infrastructure that support our businesses and clients. While we continue to evolve and modify our business continuity plans, there can be no assurance in an escalating threat environment that they will be effective in avoiding disruption and business impacts. Our insurance may not be adequate to compensate us for all resulting losses, and the cost to obtain adequate coverage may increase for us or the industry.

Security risks for financial institutions such as ours have dramatically increased in recent years, in part because of the proliferation of new technologies, the use of the internet and telecommunications technologies to conduct financial transactions, and the increased sophistication, resources and activities of hackers, terrorists, activists, organized crime, and other external parties, including nation state actors. In addition, clients may use devices or software to access our products and services that are beyond our control environment, which may provide additional avenues for attackers to gain access to confidential information. Although we have information security procedures and controls in place, our technologies, systems, networks, and clients’ devices and software may become the target of cyber-attacks or information security breaches that could result in the unauthorized release, gathering, monitoring, misuse, loss, change or destruction of our or our clients’ confidential, proprietary and other information (including personal identifying information of individuals), or otherwise disrupt our or our clients’ or other third parties’ business operations. Other U.S. financial institutions and financial service companies have reported breaches in the security of their websites or other systems, including attempts to shut down access to their networks and systems in an attempt to extract compensation from them to regain control. Financial institutions have experienced distributed denial-of-service attacks, a sophisticated and targeted attack intended to disable or degrade internet service or to sabotage systems.

We and others in our industry are regularly the subject of attempts by attackers to gain unauthorized access to our networks, systems, and data, or to obtain, change, or destroy confidential data (including personal identifying information of individuals) through a variety of means, including computer viruses, malware, and phishing. In the future, these attacks may result in unauthorized individuals obtaining access to our confidential information or that of our clients, or otherwise accessing, damaging, or disrupting our systems or infrastructure.

We are continuously enhancing our controls, processes and practices designed to protect our systems, computers, software, data and networks from attack, damage or unauthorized access. This continued enhancement will require us to expend additional resources, including to investigate and remediate any information security vulnerabilities that may be detected. Despite our ongoing investments in security resources, talent, and business practices, we are unable to assure that security measures will be effective.

If our systems and infrastructure were to be breached, damaged, or disrupted, or if we were to experience a loss of our confidential information or that of our clients, we could be subject to serious negative consequences, including disruption of our operations,

~~Table of Contents~~

damage to our reputation, a loss of trust in us on the part of our clients, vendors or other counterparties, client attrition, reimbursement or other costs, increased compliance costs, significant litigation exposure and legal liability, or regulatory fines, penalties or intervention. Any of these could materially and adversely affect our results of operations, our financial condition, and/or our share price.

Item 2.2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

~~None.~~

Item 6. Exhibits

(a) Exhibits:

Exhibit Number	Description	Filed Herewith	Form	Exhibit	Filing Date
3.1	Composite Articles of the Company		8-K	3.1	5/24/2018
3.2	Amended and Restated Bylaws		8-K	3.2	5/24/2018
31.1	Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	X
31.2	Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	X
32.1	Certification of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	X
32.2	Certification of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	X
101	XBRL Interactive Data	X

Exhibit

Filed

Incorporated by Reference
Number

Description

Herewith

Form

Exhibit

Filing Date
3.1

Composite Articles of the Company

8-K

3.1

5/24/2018
3.2

Amended and Restated Bylaws

8-K

3.2

5/24/2018
*10.1

Amended and Restated 2010 Employee Stock Purchase Plan

X

31.1

Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

X

31.2

Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

X

32.1

Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

X

32.2

Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

X

101

XBRL Interactive Data

X

* Compensatory plan or arrangement

Table of Contents

~~SIGNATURES~~SIGNA

TURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	Hancock Whitney Corporation

By:	~~By:~~	/s/ John M. Hairston
		John M. Hairston
		President & Chief Executive Officer
		(Principal Executive Officer)

		/s/ Michael M. Achary
		Michael M. Achary
		Senior Executive Vice President & Chief Financial Officer (Principal Financial Officer)


		/s/ Stephen E. Barker
		Stephen E. Barker
		Executive Vice President & Chief Accounting Officer ~~November 1, 2018~~(Principal Accounting Officer)



		May 7, 2019





			September 30, 2018					December 31, 2017
				Derivative (1)						Derivative (1)
(in thousands)	Type of Hedge		Notional or Contractual Amount	Assets		Liabilities		Notional or Contractual Amount		Assets		Liabilities
Derivatives designated as hedging instruments:
Interest rate swaps	Cash Flow	$	875,000	$	—	$	23,131	$	875,000	$	—	$	14,020
Interest rate swaps	Fair Value		483,110		—		3,408		483,110		—		2,475
			1,358,110		—		26,539		1,358,110		—		16,495
Derivatives not designated as hedging instruments:
Interest rate swaps (2)	N/A		1,223,626		28,397		28,239		1,144,789		15,408		15,857
Risk participation agreements	N/A		173,066		5		56		119,951		23		109
Forward commitments to sell residential mortgage loans	N/A		79,432		882		330		80,462		1,000		290
Interest rate-lock commitments on residential mortgage loans	N/A		55,502		227		784		53,724		186		782
Foreign exchange forward contracts	N/A		38,742		1,457		1,429		42,260		2,453		2,419
			1,570,368		30,968		30,838		1,441,186		19,070		19,457
Total derivatives		$	2,928,478	$	30,968	$	57,377	$	2,799,296	$	19,070	$	35,952
Less: netting adjustment (3)					(19,557)		(28,586)				(4,913)		(21,563)
Total derivative assets/liabilities				$	11,411	$	28,791			$	14,157	$	14,389



	September 30, 2018					December 31, 2017
(in millions)	Outstanding Balance		Allocated Allowance for Loan and Lease Losses		Allowance for Loan and Lease Losses as a % of Loans	Outstanding Balance		Allocated Allowance for Loan and Lease Losses		Allowance for Loan and Lease Losses as a % of Loans
Upstream (reserve-based lending)	$	375	$	7.6	2.0%	$	353	$	11.4	3.2%
Midstream		57		0.7	1.2%		52		0.4	0.7%
Support - drilling		110		6.3	5.7%		121		10.5	8.6%
Support - nondrilling		385		35.6	9.2%		529		47.9	9.1%
Total	$	927	$	50.2	5.4%	$	1,055	$	70.2	6.7%




Exhibit		Filed	Incorporated by Reference
Number	Description	Herewith	Form	Exhibit	Filing Date
3.1	Composite Articles of the Company		8-K	3.1	5/24/2018
3.2	Amended and Restated Bylaws		8-K	3.2	5/24/2018
*10.1	Amended and Restated 2010 Employee Stock Purchase Plan	X
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	X
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	X
32.1	Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	X
32.2	Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	X
101	XBRL Interactive Data	X