UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q



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

For the quarterly period ended ~~March 31,~~June 30, 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: 000-55106

BBVA ~~Compass~~USA Bancshares, Inc.

(Exact name of registrant as specified in its charter)



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

2200 Post Oak Blvd. Houston, Texas		77056
(Address of principal executive offices)		(Zip Code)
	(205) 297-3000
(Registrant’s telephone number, including area code)
	BBVA Compass Bancshares, Inc.
(Former name or former address, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act: None

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 þ No o

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 (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes þ No o

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 of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.



Large accelerated filer o	Accelerated filer o	Non-accelerated filer þ (Do not check if a smaller reporting company)
Smaller reporting company o	Emerging growth company o

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. o

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

~~Securities registered pursuant to Section 12(b) of the Act: None~~

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



Class		Outstanding as of ~~April~~July 26, 2019
Common Stock (par value $0.01 per share)		222,963,891 shares

Explanatory Note

The registrant meets the conditions set forth in General Instruction H(1)(a) and (b) of Form 10-Q and is therefore filing this report with certain reduced disclosures as permitted by those instructions.

TABLE OF CONTENTS



		Page

Part I	Financial Information
Item 1.	Financial Statements (Unaudited)	7
	Condensed Consolidated Balance Sheets as of ~~March 31,~~June 30, 2019 and December 31, 2018	7
	Condensed Consolidated Statements of Income for the three and six months ended ~~March 31,~~June 30, 2019 and 2018	8
	Condensed Consolidated Statements of Comprehensive Income for the three and six months ended ~~March 31,~~June 30, 2019 and 2018	9
	Condensed Consolidated Statements of Shareholder's Equity for the three and six months ended ~~March 31,~~June 30, 2019 and 2018	10
	Condensed Consolidated Statements of Cash Flows for the ~~three~~six months ended ~~March 31,~~June 30, 2019 and 2018	11
	Notes to the Unaudited Condensed Consolidated Financial Statements	12
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	5662
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	7888
Item 4.	Controls and Procedures	7888

Part II	Other Information
Item 1.	Legal Proceedings	7989
Item 1A.	Risk Factors	7989
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	7990
Item 3.	Defaults Upon Senior Securities	7990
Item 4.	Mine Safety Disclosures	7990
Item 5.	Other Information	7990
Item 6.	Exhibits	8191
Signatures		8292

Glossary of Acronyms and Terms

The following listing provides a comprehensive reference of common acronyms and terms used throughout the document:



AFS	Available For Sale
ASC	Accounting Standards Codification
ASU	Accounting Standards Update
Basel III	Global regulatory framework developed by the Basel Committee on Banking Supervision
Bank	~~Compass Bank~~BBVA USA
BBVA	Banco Bilbao Vizcaya Argentaria, S.A.
~~BBVA Compass~~	~~Registered trade name of Compass Bank~~
BBVA Group	BBVA and its consolidated subsidiaries
BOLI	Bank Owned Life Insurance
BSI	BBVA Securities Inc.
Cash Flow Hedge	A hedge of a forecasted transaction or of the variability of cash flows to be received or paid related to a recognized asset or liability
CD	Certificate of Deposit and/or time deposits
CET1	Common Equity Tier 1
CET1 Risk-Based Capital Ratio	Ratio of Common Equity Tier 1 capital to risk-weighted assets
CFPB	Consumer Financial Protection Bureau
Company	BBVA ~~Compass~~USA Bancshares, Inc. and its subsidiaries
~~Covered Assets~~	~~Loans and other real estate owned acquired from the FDIC subject to loss sharing agreements~~
~~Covered Loans~~	~~Loans acquired from the FDIC subject to loss sharing agreements~~
CRA	Community Reinvestment Act
EGRRCPA	Economic Growth Regulatory Relief and Consumer Protection Act
ERM	Enterprise Risk Management
EVE	Economic Value of Equity
Exchange Act	Securities and Exchange Act of 1934, as amended
Fair Value Hedge	A hedge of the fair value of a recognized asset or liability or of an unrecognized firm commitment
FASB	Financial Accounting Standards Board
FBO Tailoring Proposals	Federal banking agencies proposed rules that would adjust the thresholds at which certain enhanced prudential standards and Basel III capital and liquidity requirements apply to FBOs and the U.S. IHCs of FBOs pursuant to the EGRRCPA
FDIC	Federal Deposit Insurance Corporation
Federal Reserve Board	Board of Governors of the Federal Reserve System
FHC	Financial holding company
FHLB	Federal Home Loan Bank
FICO	Fair Isaac Corporation
Fitch	Fitch Ratings
FNMA	Federal National Mortgage Association
HTM	Held To Maturity
~~HVCRE~~	~~High-volatility commercial real estate~~
~~HVCRE ADC~~	~~HVCRE acquisition development or construction~~
Large FBO	Foreign Banking Organization with $100 billion or more in global total consolidated assets
LCR	Liquidity Coverage Ratio
Leverage Ratio	Ratio of Tier 1 capital to quarterly average on-balance sheet assets
Moody's	Moody's Investor Services, Inc.
MRA	Master Repurchase Agreement



MSR	Mortgage Servicing Rights
OREO	Other Real Estate Owned
OTTI	Other-Than-Temporary Impairment
OIS	Overnight Index Swap
Parent	BBVA ~~Compass~~USA Bancshares, Inc.



Potential Problem Loans	Commercial loans rated substandard or below, which do not meet the definition of nonaccrual, TDR, or 90 days past due and still accruing
Resolution Plan Proposal	Federal Reserve Board and FDIC proposed rule that would reduce or eliminate resolution planning requirements for institutions that fall into certain risk-based categories
SBA	Small Business Administration
SBIC	Small Business Investment Company
SEC	Securities and Exchange Commission
Series A Preferred Stock	Floating Non-Cumulative Perpetual Preferred Stock, Series A
SOFR	Secured Overnight Financing Rate
S&P	Standard and Poor's Rating Services
Tax Cuts and Jobs Act	H.R. 1, formerly known as the Tax Cuts and Jobs Act of 2017
TBA	To be announced
TDR	Troubled Debt Restructuring
Tier 1 Risk-Based Capital Ratio	Ratio of Tier 1 capital to risk-weighted assets
Total Risk-Based Capital Ratio	Ratio of Total capital (the sum of Tier 1 capital and Tier 2 capital) to risk-weighted assets
U.S.	United States of America
U.S. Treasury	United States Department of the Treasury
U.S. GAAP	Accounting principles generally accepted in the U.S.

Unless otherwise specified, the terms “we,” “us,” “our,” and the “Company” are used to refer to BBVA ~~Compass~~USA Bancshares, Inc. and its subsidiaries, or any one or more of them, as the context may require. The term “Parent” refers to BBVA ~~Compass~~USA Bancshares, Inc. The term “BBVA” refers to Banco Bilbao Vizcaya Argentaria, S.A., the parent company of BBVA ~~Compass~~USA Bancshares, Inc.

Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements about the Company and its industry that involve substantial risks and uncertainties. Statements other than statements of current or historical fact, including statements regarding the Company's future financial condition, results of operations, business plans, liquidity, cash flows, projected costs, and the impact of any laws or regulations applicable to the Company, are forward-looking statements. Words such as “anticipates,” “believes,” “estimates,” “expects,” “forecasts,” “intends,” “plans,” “projects,” “may,” “will,” “should,” and other similar expressions are intended to identify these forward-looking statements. Such statements are subject to factors that could cause actual results to differ materially from anticipated results. Such factors include, but are not limited to, the following:

national, regional and local economic conditions may be less favorable than expected, resulting in, among other things, increased charge-offs of loans, higher provisions for credit losses and/or reduced demand for the Company's services;

disruptions to the credit and financial markets, either nationally or globally;

decline in real estate values or overall economic weakness could also have an adverse impact upon the value of real estate or other assets which the Company owns as a result of foreclosing a loan and its ability to realize value on such assets;

legislative, regulatory or accounting changes, which may adversely affect our business and/or competitive position, impose additional costs on the Company or cause us to change our business practices;

the fiscal and monetary policies of the federal government and its agencies;

the impact of consumer protection regulations, including the CFPB's residential mortgage and other regulations, which could adversely affect the Company's business, financial condition or results of operations;

the failure to satisfy capital adequacy and liquidity guidelines applicable to the Company;

volatile or declining oil prices, which could have a negative impact on the economies and real estate markets of states such as Texas, resulting in, among other things, higher delinquencies and increased charge-offs in the energy lending portfolio as well as other commercial and consumer loan portfolios indirectly impacted by declining oil prices;

a failure by the Company to effectively manage the risks the Company faces, including credit, operational and cyber security risks;

failure to control concentration risk such as loan type, industry segment, borrower type or location of the borrower or collateral;

changes in the creditworthiness of customers;

downgrades to the Company's credit ratings;

changes in interest rates which could affect interest rate spreads and net interest income;

costs and effects of litigation, regulatory investigations, examinations or similar matters;

disruptions in the Company's ability to access capital markets, which may adversely affect its capital resources and liquidity;

increased loan losses or impairment of goodwill;

the Company's heavy reliance on communications and information systems to conduct its business and reliance on third parties and affiliates to provide key components of its business infrastructure, any disruptions of which could interrupt the Company's operations or increase the costs of doing business;

negative public opinion, which could damage the Company's reputation and adversely impact business and revenues;

the Company depends on the expertise of key personnel, and if these individuals leave or change their roles without effective replacements, operations may suffer;

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

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

increased pressures from competitors (both banks and non-banks) and/or an inability by the Company to remain competitive in the financial services industry, particularly in the markets which the Company serves, and keep pace with technological changes;

unpredictable natural or other disasters, which could impact the Company's customers or operations;

a loss of customer deposits, which could increase the Company's funding costs;

the Company's dependence on the accuracy and completeness of information about clients and counterparties;

changes in the Company's accounting policies or in accounting standards which could materially affect how the Company reports financial results and condition;

the Company has in the past and may in the future pursue acquisitions, which could affect costs and from which the Company may not be able to realize anticipated benefits; and

the Company may not be able to hire or retain additional qualified personnel and recruiting and compensation costs may increase as a result of turnover, both of which may increase costs and reduce profitability and may adversely impact the Company's ability to implement the Company's business strategies.

The forward-looking statements in this Quarterly Report on Form 10-Q speak only as of the time they are made and do not necessarily reflect the Company’s outlook at any other point in time. The Company undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or for any other reason. However, readers should carefully review the risk factors set forth in other reports or documents the Company files periodically with the SEC.

PART I FINANCIAL INFORMATION


Item 1.	Financial Statements (Unaudited)

BBVA COMPASS BANCSHARES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
BBVA USA BANCSHARES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)							BBVA USA BANCSHARES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

	March 31, 2019			December 31, 2018			June 30, 2019			December 31, 2018
	(In Thousands)						(In Thousands)
Assets:
Cash and due from banks	$	1,143,541		$	1,217,319		$	1,027,400		$	1,217,319
Federal funds sold, securities purchased under agreements to resell and interest bearing deposits	4,864,920			2,115,307			4,773,761			2,115,307
Cash and cash equivalents	6,008,461			3,332,626			5,801,161			3,332,626
Trading account assets	306,123			237,656			440,098			237,656
Debt securities available for sale	9,297,018			10,981,216			9,010,950			10,981,216
Debt securities held to maturity (fair value of $4,654,927 and $2,925,420 at March 31, 2019 and December 31, 2018, respectively)	4,575,041			2,885,613
Loans held for sale ($76,938 and $68,766 at fair value at March 31, 2019 and December 31, 2018, respectively)	1,273,821			68,766
Debt securities held to maturity (fair value of $5,065,268 and $2,925,420 at June 30, 2019 and December 31, 2018, respectively)							4,912,483			2,885,613
Loans held for sale, at fair value							90,537			68,766
Loans	63,757,545			65,186,554			63,311,553			65,186,554
Allowance for loan losses	(966,022		)	(885,242		)	(977,660		)	(885,242		)
Net loans	62,791,523			64,301,312			62,333,893			64,301,312
Premises and equipment, net	1,125,676			1,152,958			1,105,819			1,152,958
Bank owned life insurance	740,764			736,171			745,130			736,171
Goodwill	4,983,296			4,983,296			4,983,296			4,983,296
Other assets	2,740,863			2,267,560			2,760,678			2,267,560
Total assets	$	93,842,586		$	90,947,174		$	92,184,045		$	90,947,174
Liabilities:
Deposits:
Noninterest bearing	$	20,403,716		$	20,183,876		$	20,646,209		$	20,183,876
Interest bearing	53,976,592			51,984,111			51,942,601			51,984,111
Total deposits	74,380,308			72,167,987			72,588,810			72,167,987
FHLB and other borrowings	4,011,160			3,987,590			4,052,969			3,987,590
Federal funds purchased and securities sold under agreements to repurchase	188,024			102,275			191,739			102,275
Other short-term borrowings	30,975			—			2,067			—
Accrued expenses and other liabilities	1,504,582			1,176,793			1,477,737			1,176,793
Total liabilities	80,115,049			77,434,645			78,313,322			77,434,645
Shareholder’s Equity:
Series A Preferred stock — $0.01 par value, liquidation preference $200,000 per share
Authorized — 30,000,000 shares
Issued — 1,150 shares at both March 31, 2019 and December 31, 2018	229,475			229,475
Issued — 1,150 shares at both June 30, 2019 and December 31, 2018							229,475			229,475
Common stock — $0.01 par value:
Authorized — 300,000,000 shares
Issued — 222,963,891 and 222,950,751 shares at March 31, 2019 and December 31, 2018, respectively	2,230			2,230
Issued — 222,963,891 and 222,950,751 shares at June 30, 2019 and December 31, 2018, respectively							2,230			2,230
Surplus	14,542,166			14,545,849			14,364,527			14,545,849
Accumulated deficit	(927,877		)	(1,107,198		)	(768,290		)	(1,107,198		)
Accumulated other comprehensive loss	(148,135		)	(186,848		)
Total BBVA Compass Bancshares, Inc. shareholder’s equity	13,697,859			13,483,508
Accumulated other comprehensive income (loss)							13,508			(186,848		)
Total BBVA USA Bancshares, Inc. shareholder’s equity							13,841,450			13,483,508
Noncontrolling interests	29,678			29,021			29,273			29,021
Total shareholder’s equity	13,727,537			13,512,529			13,870,723			13,512,529
Total liabilities and shareholder’s equity	$	93,842,586		$	90,947,174		$	92,184,045		$	90,947,174

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

BBVA COMPASS BANCSHARES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
BBVA USA BANCSHARES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)					BBVA USA BANCSHARES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

	Three Months Ended March 31,				Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018		2019		2018
	(In Thousands)				(In Thousands)
Interest income:
Interest and fees on loans	$	800,488	$	663,935	$	787,767	$	711,006	$	1,588,255	$	1,374,941
Interest on debt securities available for sale	53,522		56,602		45,125		53,792		98,647		110,394
Interest on debt securities held to maturity	29,495		12,426		33,313		13,062		62,808		25,488
Interest on trading account assets	539		750		601		924		1,140		1,674
Interest and dividends on other earning assets	22,968		11,875		35,823		14,916		58,791		26,791
Total interest income	907,012		745,588		902,629		793,700		1,809,641		1,539,288
Interest expense:
Interest on deposits	182,354		97,347		202,478		116,323		384,832		213,670
Interest on FHLB and other borrowings	37,626		24,756		34,300		31,912		71,926		56,668
Interest on federal funds purchased and securities sold under agreements to repurchase	3,747		536		6,002		1,399		9,749		1,935
Interest on other short-term borrowings	196		344		100		567		296		911
Total interest expense	223,923		122,983		242,880		150,201		466,803		273,184
Net interest income	683,089		622,605		659,749		643,499		1,342,838		1,266,104
Provision for loan losses	182,292		57,029		155,018		91,280		337,310		148,309
Net interest income after provision for loan losses	500,797		565,576		504,731		552,219		1,005,528		1,117,795
Noninterest income:
Service charges on deposit accounts	58,908		56,161		61,731		58,581		120,639		114,742
Card and merchant processing fees	46,002		39,678		50,355		44,048		96,357		83,726
Investment services sales fees	26,696		30,108		31,333		29,782		58,029		59,890
Money transfer income	21,981		20,688		25,272		23,920		47,253		44,608
Investment banking and advisory fees	18,857		23,896		20,758		24,546		39,615		48,442
Asset management fees	10,767		10,770		11,867		10,989		22,634		21,759
Corporate and correspondent investment sales	6,892		12,056		5,607		16,355		12,499		28,411
Mortgage banking	4,937		8,397		5,870		7,964		10,807		16,361
Bank owned life insurance	4,584		4,215		4,803		4,375		9,387		8,590
Investment securities gains, net	8,958		—		—		—		8,958		—
Other	49,178		51,856		66,685		49,459		115,863		101,315
Total noninterest income	257,760		257,825		284,281		270,019		542,041		527,844
Noninterest expense:
Salaries, benefits and commissions	292,716		289,440		296,303		286,852		589,019		576,292
Professional services					73,784		68,577		137,680		129,222
Equipment	65,394		63,360		62,638		63,660		128,032		127,020
Professional services	63,896		60,645
Net occupancy	40,941		40,422		40,116		42,671		81,057		83,093
Money transfer expense	14,978		13,721		17,290		16,302		32,268		30,023
Securities impairment:
Other-than-temporary impairment	—		571		221		—		221		571
Less: non-credit portion recognized in other comprehensive income	—		262		108		—		108		262
Total securities impairment	—		309		113		—		113		309
Other	104,048		95,016		108,070		101,483		212,118		196,499
Total noninterest expense	581,973		562,913		598,314		579,545		1,180,287		1,142,458
Net income before income tax expense	176,584		260,488		190,698		242,693		367,282		503,181
Income tax expense	35,603		51,798		30,512		58,295		66,115		110,093
Net income	140,981		208,690		160,186		184,398		301,167		393,088
Less: net income attributable to noncontrolling interests	556		461		599		595		1,155		1,056
Net income attributable to BBVA Compass Bancshares, Inc.	140,425		208,229
Net income attributable to BBVA USA Bancshares, Inc.					159,587		183,803		300,012		392,032
Less: preferred stock dividends	4,485		3,864		4,724		4,259		9,209		8,123
Net income attributable to common shareholder	$	135,940	$	204,365	$	154,863	$	179,544	$	290,803	$	383,909

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

BBVA COMPASS BANCSHARES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)
BBVA USA BANCSHARES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)						BBVA USA BANCSHARES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)

	Three Months Ended March 31,					Three Months Ended June 30,					Six Months Ended June 30,
	2019		2018			2019		2018			2019		2018
	(In Thousands)					(In Thousands)
Net income	$	140,981	$	208,690		$	160,186	$	184,398		$	301,167	$	393,088
Other comprehensive income, net of tax:
Net unrealized gains (losses) arising during period from debt securities available for sale	51,700		(41,859		)	85,704		(33,272		)	137,404		(75,131		)
Less: reclassification adjustment for net gains on sale of debt securities available for sale in net income	6,834		—			—		—			6,834		—
Net change in net unrealized holding gains (losses) on debt securities available for sale	44,866		(41,859		)	85,704		(33,272		)	130,570		(75,131		)
Change in unamortized net holding losses on debt securities held to maturity	1,743		2,019			1,939		2,514			3,682		4,533
Unamortized unrealized net holding losses on debt securities available for sale transferred to debt securities held to maturity	—		(30,487		)	—		—			—		(30,487		)
Less: non-credit related impairment on debt securities held to maturity	—		200			82		—			82		200
Change in unamortized non-credit related impairment on debt securities held to maturity	368		130			132		285			500		415
Net change in unamortized holding gains (losses) on debt securities held to maturity	2,111		(28,538		)	1,989		2,799			4,100		(25,739		)
Unrealized holding gains (losses) arising during period from cash flow hedge instruments	24,053		(237		)	73,950		8,581			98,003		8,344
Change in defined benefit plans	3,119		(3,379		)	—		—			3,119		(3,379		)
Other comprehensive income (loss), net of tax	74,149		(74,013		)	161,643		(21,892		)	235,792		(95,905		)
Comprehensive income	215,130		134,677			321,829		162,506			536,959		297,183
Less: comprehensive income attributable to noncontrolling interests	556		461			599		595			1,155		1,056
Comprehensive income attributable to BBVA Compass Bancshares, Inc.	$	214,574	$	134,216
Comprehensive income attributable to BBVA USA Bancshares, Inc.						$	321,230	$	161,911		$	535,804	$	296,127

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

BBVA USA BANCSHARES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY (Unaudited)

	Preferred Stock		Common Stock		Surplus			Accumulated Deficit			Accumulated Other Comprehensive Income (Loss)			Non-Controlling Interests			Total Shareholder’s Equity
	(In Thousands)
Balance, March 31, 2018	$	229,475	$	2,230	$	14,814,744		$	(1,660,417	)	$	(271,431	)	$	29,538		$	13,144,139
Net income	—		—		—			183,803			—			595			184,398
Other comprehensive loss, net of tax	—		—		—			—			(21,892		)	—			(21,892		)
Preferred stock dividends	—		—		(4,259		)	—			—			(1,036		)	(5,295		)
Common stock dividends	—		—		(110,000		)	—			—			—			(110,000		)
Capital contribution	—		—		—			—			—			6			6
Vesting of restricted stock	—		—		(712		)	—			—			—			(712		)
Balance, June 30, 2018	$	229,475	$	2,230	$	14,699,773		$	(1,476,614	)	$	(293,323	)	$	29,103		$	13,190,644

Balance, March 31, 2019	$	229,475	$	2,230	$	14,542,166		$	(927,877	)	$	(148,135	)	$	29,678		$	13,727,537
Net income	—		—		—			159,587			—			599			160,186
Other comprehensive income, net of tax	—		—		—			—			161,643			—			161,643
Preferred stock dividends	—		—		(4,725		)	—			—			(1,037		)	(5,762		)
Common stock dividends	—		—		(170,000		)	—			—			—			(170,000		)
Capital contribution	—		—		—			—			—			33			33
Vesting of restricted stock	—		—		(2,914		)	—			—			—			(2,914		)
Balance, June 30, 2019	$	229,475	$	2,230	$	14,364,527		$	(768,290	)	$	13,508		$	29,273		$	13,870,723

BBVA COMPASS BANCSHARES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY (Unaudited)

	Preferred Stock		Common Stock		Surplus			Accumulated Deficit			Accumulated Other Comprehensive Loss			Non-Controlling Interests		Total Shareholder’s Equity			Preferred Stock		Common Stock		Surplus			Accumulated Deficit			Accumulated Other Comprehensive Income (Loss)			Non-Controlling Interests			Total Shareholder’s Equity
	(In Thousands)																		(In Thousands)
Balance, December 31, 2017	$	229,475	$	2,230	$	14,818,608		$	(1,868,659	)	$	(197,405	)	$	29,061	$	13,013,310		$	229,475	$	2,230	$	14,818,608		$	(1,868,659	)	$	(197,405	)	$	29,061		$	13,013,310
Cumulative effect from adoption of ASU 2016-01	—		—		—			13			(13		)	—		—			—		—		—			13			(13		)	—			—
Balance, January 1, 2018	$	229,475	$	2,230	$	14,818,608		$	(1,868,646	)	$	(197,418	)	$	29,061	$	13,013,310		$	229,475	$	2,230	$	14,818,608		$	(1,868,646	)	$	(197,418	)	$	29,061		$	13,013,310
Net income	—		—		—			208,229			—			461		208,690			—		—		—			392,032			—			1,056			393,088
Other comprehensive loss, net of tax	—		—		—			—			(74,013		)	—		(74,013		)	—		—		—			—			(95,905		)	—			(95,905		)
Preferred stock dividends	—		—		(3,864		)	—			—			—		(3,864		)	—		—		(8,123		)	—			—			(1,036		)	(9,159		)
Common stock dividends																			—		—		(110,000		)	—			—			—			(110,000		)
Capital contribution	—		—		—			—			—			16		16			—		—		—			—			—			22			22
Balance, March 31, 2018	$	229,475	$	2,230	$	14,814,744		$	(1,660,417	)	$	(271,431	)	$	29,538	$	13,144,139
Vesting of restricted stock																			—		—		(712		)	—			—			—			(712		)
Balance, June 30, 2018																			$	229,475	$	2,230	$	14,699,773		$	(1,476,614	)	$	(293,323	)	$	29,103		$	13,190,644

Balance, December 31, 2018	$	229,475	$	2,230	$	14,545,849		$	(1,107,198	)	$	(186,848	)	$	29,021	$	13,512,529		$	229,475	$	2,230	$	14,545,849		$	(1,107,198	)	$	(186,848	)	$	29,021		$	13,512,529
Cumulative effect adjustment related to ASU adoptions (1)	—		—		—			38,896			(35,436		)	—		3,460			—		—		—			38,896			(35,436		)	—			3,460
Balance, January 1, 2019	$	229,475	$	2,230	$	14,545,849		$	(1,068,302	)	$	(222,284	)	$	29,021	$	13,515,989		$	229,475	$	2,230	$	14,545,849		$	(1,068,302	)	$	(222,284	)	$	29,021		$	13,515,989
Net income	—		—		—			140,425			—			556		140,981			—		—		—			300,012			—			1,155			301,167
Other comprehensive income, net of tax	—		—		—			—			74,149			—		74,149			—		—		—			—			235,792			—			235,792
Issuance of common stock	—		—		802			—			—			—		802			—		—		802			—			—			—			802
Preferred stock dividends	—		—		(4,485		)	—			—			—		(4,485		)	—		—		(9,210		)	—			—			(1,037		)	(10,247		)
Common stock dividends																			—		—		(170,000		)	—			—			—			(170,000		)
Capital contribution	—		—		—			—			—			101		101			—		—		—			—			—			134			134
Balance, March 31, 2019	$	229,475	$	2,230	$	14,542,166		$	(927,877	)	$	(148,135	)	$	29,678	$	13,727,537
Vesting of restricted stock																			—		—		(2,914		)	—			—			—			(2,914		)
Balance, June 30, 2019																			$	229,475	$	2,230	$	14,364,527		$	(768,290	)	$	13,508		$	29,273		$	13,870,723


(1)	Related to the Company's adoption of ASU 2016-02, ASU 2017-12 and ASU 2018-02 on January 1, 2019. See Note 1, Basis of Presentation, for additional information.

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

BBVA COMPASS BANCSHARES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
BBVA USA BANCSHARES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)							BBVA USA BANCSHARES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

	Three Months Ended March 31,						Six Months Ended June 30,
	2019			2018			2019			2018
	(In Thousands)						(In Thousands)
Operating Activities:
Net income	$	140,981		$	208,690		$	301,167		$	393,088
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	85,705			68,104			127,357			138,150
Securities impairment	—			309			113			309
Amortization of intangibles	—			1,592			—			2,763
Accretion of discount, loan fees and purchase market adjustments, net	(13,557		)	(16,747		)	(16,671		)	(32,066		)
Provision for loan losses	182,292			57,029			337,310			148,309
Net change in trading account assets	(68,467		)	4,031			(202,442		)	(57,198		)
Net change in trading account liabilities	(30,075		)	30,102			(25,954		)	42,827
Originations and purchases of mortgage loans held for sale	(127,894		)	(141,761		)	(322,161		)	(315,648		)
Sale of mortgage loans held for sale	124,857			135,999			313,034			340,166
Deferred tax expense	666			830
Deferred tax (benefit) expense							(10,957		)	9,230
Investment securities gains, net	(8,958		)	—			(8,958		)	—
Net gain on sale of premises and equipment	(1,297		)	(668		)	(4,382		)	(704		)
Loss on sale of loans	78			—
Gain on sale of loans							(922		)	—
Gain on sale of mortgage loans held for sale	(5,135		)	(3,529		)	(12,644		)	(9,449		)
Net loss (gain) on sale of other real estate and other assets	1,305			(744		)	985			(947		)
Increase in other assets	(177,149		)	(151,479		)	(130,642		)	(108,194		)
Increase in other liabilities	46,979			76,980
Increase (decrease) in other liabilities							85,566			(102,673		)
Net cash provided by operating activities	150,331			268,738			429,799			447,963
Investing Activities:
Proceeds from sales of debt securities available for sale	1,446,776			—			1,446,776			—
Proceeds from prepayments, maturities and calls of debt securities available for sale	1,065,045			794,564			2,366,797			1,882,418
Purchases of debt securities available for sale	(772,086		)	(1,136,063		)	(1,691,741		)	(2,169,563		)
Proceeds from sales of equity securities	165,495			228,497			165,497			466,352
Purchases of equity securities	(168,209		)	(205,007		)	(175,561		)	(428,976		)
Proceeds from prepayments, maturities and calls of debt securities held to maturity	88,119			48,824			153,060			215,094
Purchases of debt securities held to maturity	(1,779,789		)	—			(2,182,708		)	(377,000		)
Net change in loan portfolio	(7,043		)	(648,254		)	289,420			(1,784,494		)
Proceeds from sales of loans	144,596			8,475			1,342,479			8,475
Purchases of premises and equipment	(31,735		)	(23,318		)	(61,010		)	(55,411		)
Proceeds from sales of premises and equipment	1,543			1,051			8,271			3,021
Proceeds from settlement of BOLI policies	—			2,237			450			2,519
Cash payments for premiums of BOLI policies	(9		)	(9		)	(17		)	(18		)
Proceeds from sales of other real estate owned	7,115			6,611			16,295			11,555
Net cash provided by (used in) investing activities	159,818			(922,392		)	1,678,008			(2,226,028		)
Financing Activities:
Net increase in demand deposits, NOW accounts and savings accounts	1,960,945			762,147			1,152,459			409,461
Net increase (decrease) in time deposits	254,278			(78,994		)
Net increase (decrease) in federal funds purchased and securities sold under agreements to repurchase	85,749			(13,658		)
Net (decrease) increase in time deposits							(724,469		)	484,754
Net increase in federal funds purchased and securities sold under agreements to repurchase							89,464			165,920
Net increase in other short-term borrowings	30,975			12,003			2,067			63,551
Proceeds from FHLB and other borrowings	3,840,000			4,700,000			3,840,000			12,073,916
Repayment of FHLB and other borrowings	(3,840,055		)	(5,300,052		)	(3,840,110		)	(11,830,105		)
Capital contribution for non-controlling interest	101			16			134			22
Vesting of restricted stock							(2,914		)	(712		)
Issuance of common stock	802			—			802			—
Common dividends paid							(170,000		)	(110,000		)
Preferred dividends paid	(4,485		)	(3,864		)	(10,247		)	(9,159		)
Net cash provided by financing activities	2,328,310			77,598			337,186			1,247,648
Net increase (decrease) in cash, cash equivalents and restricted cash	2,638,459			(576,056		)	2,444,993			(530,417		)
Cash, cash equivalents and restricted cash at beginning of year	3,501,380			4,270,950			3,501,380			4,270,950
Cash, cash equivalents and restricted cash at end of period	$	6,139,839		$	3,694,894		$	5,946,373		$	3,740,533

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

Table of Contents

BBVA ~~COMPASS~~USA BANCSHARES, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(1) Basis of Presentation

General

Effective June 10, 2019, the Company amended its Certificate of Formation to change its legal name from BBVA Compass Bancshares, Inc. to BBVA USA Bancshares, Inc.

The accounting and reporting policies of the Company and the methods of applying those policies that materially affect the consolidated financial statements conform with U.S. GAAP and with general financial services industry practices. The accompanying unaudited consolidated financial statements include the accounts of BBVA ~~Compass~~USA Bancshares, Inc. and its subsidiaries and have been prepared in conformity with U.S. GAAP for interim financial information and in accordance with the instructions to Quarterly Report on Form 10-Q and Article 10 of Regulation S-X as promulgated by the Securities and Exchange Commission. In the opinion of management, all adjustments, consisting of normal and recurring items, necessary for the fair presentation of the condensed consolidated financial statements have been included. Operating results for the three and six months ended ~~March 31,~~June 30, 2019, are not necessarily indicative of the results that may be expected for the year ended December 31, 2019. These interim financial statements should be read in conjunction with the consolidated financial statements and notes thereto in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018.

The Company has evaluated subsequent events for potential recognition and disclosure through the filing date of this Quarterly Report on Form 10-Q to determine if either recognition or disclosure of significant events or transactions is required.

Use of Estimates in the Preparation of Consolidated Financial Statements

The preparation of consolidated financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period, the most significant of which relate to the allowance for loan losses, goodwill impairment, fair value measurements and income taxes. Actual results could differ from those estimates.

Recently Adopted Accounting Standards

Leases

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) which supersedes ASC Topic 840, Leases. Subsequently, the FASB issued ASU 2018-01 in January 2018 which provides a practical expedient for land easements and issued ASU 2018-11 in July 2018 which includes an option to recognize a cumulative effect adjustment to retained earnings in the period of adoption instead of applying the guidance to prior comparative periods. This ASU, as amended, requires lessees to recognize right-of-use assets and associated liabilities that arise from leases, with the exception of short-term leases. Subsequent accounting for leases varies depending on whether the lease is classified as an operating lease or a finance lease. This ASU, as amended, does not make significant changes to lessor accounting. There are several new qualitative and quantitative disclosures required. Upon transition, lessees and lessors have the option to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective transition approach or to apply the modified retrospective approach with an additional, optional transition method that initially applies this ASU as of the adoption date and recognizes a cumulative effect adjustment to the opening balance of retained earnings in the period of adoption.

The Company adopted this ASU, as amended, on January 1, 2019 using the optional transition method, which allowed for a modified retrospective method of adoption with a cumulative effect adjustment to retained earnings without restating comparable periods. The Company also elected the transition relief package of practical expedients for which there is no requirement to reassess existence of leases, their classification, and initial direct costs as well as an exemption for short term leases with a term of less than one year. The Company did not elect the practical expedient to use hindsight in determining the lease term and in assessing impairment of right-of-use assets.

At January 1, 2019, the Company recognized right-of-use assets of $290 million and lease liabilities of $332 million. The right-of-use assets and corresponding lease liabilities, recorded upon adoption, were primarily based on the present value of unpaid future minimum lease payments as of January 1, 2019. Those amounts were impacted by assumptions related to renewals and/or extensions of existing lease contracts and the interest rate used to discount those future lease

obligations. Additionally, the Company recognized a cumulative effect adjustment of approximately $3.5 million at adoption to increase the beginning balance of retained earnings as of January 1, 2019 for the remaining deferred gains on sale-leaseback transactions which occurred prior to adoption. This ASU will not have a material impact on the timing of expense recognition on the Company's results of operations.

See Note 7, Leases, for the required disclosures in accordance with this ASU.

Premium Amortization on Purchased Callable Debt Securities

In March 2017, the FASB issued ASU 2017-08, Receivables - Nonrefundable Fees and Other Costs (Subtopic 310-20), Premium Amortization on Purchased Callable Debt Securities. The amendments in this ASU reduce the amortization period for certain callable debt securities carried at a premium and require the premium to be amortized over a period not to exceed the earliest call date. These amendments do not apply to securities carried at a discount. The Company adopted this ASU on January 1, 2019. The adoption of this standard had no impact on the financial condition or results of operations of the Company.

Derivatives and Hedging

In August 2017, the FASB issued ASU 2017-12, Derivatives and Hedging (Topic 815), Targeted Improvements to Accounting for Hedging Activities. The amendments in this ASU better align an entity's risk management activities and financial reporting for hedging relationships through changes to both the designation and measurement guidance for qualifying hedging relationships and the presentation of hedge results.

In October 2018, the FASB issued ASU 2018-16, Inclusion of the SOFR OIS Rate as a Benchmark Interest Rate for Hedge Accounting Purposes. The amendments in this ASU permit the OIS rate based on SOFR as a US benchmark interest rate for hedge accounting purposes under Topic 815.

The Company adopted these ASUs on January 1, 2019. The adoption of these standards did not have a material impact on the financial condition or results of operations of the Company. The adoption resulted in an immaterial cumulative effect adjustment to the opening balance of retained earnings. For additional information on the Company’s derivative and hedging activities, see Note 5, Derivatives and Hedging.

Comprehensive Income

In February 2018, the FASB issued ASU 2018-02, Income Statement - Reporting Comprehensive Income, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. The amendments in this ASU allow a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act. The Company adopted this ASU on January 1, 2019 and reclassified approximately $35.4 million from accumulated other comprehensive income to retained earnings.

Recently Issued Accounting Standards Not Yet Adopted

Credit Losses

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses, which introduces new guidance for the accounting for credit losses on instruments within its scope. The new ~~guidance introduces an~~ approach ~~based on expected losses to estimate credit losses on certain types of financial instruments. It also modifies~~changes the impairment model for ~~AFS~~most financial assets, and will require the use of an “expected credit loss” model for financial instruments measured at amortized cost and certain other instruments. This model applies to trade and other receivables, loans, debt securities, and ~~provides for a simplified accounting~~off-balance sheet credit exposures. This model ~~for~~requires entities to estimate the lifetime expected credit loss on such instruments and record an allowance that represents the portion of the amortized cost basis that the entity does not expect to collect. This allowance is deducted from the financial asset’s amortized cost basis to present the net amount expected to be collected. The new expected credit loss model will also apply to purchased financial assets with credit deterioration, ~~since their origination.~~superseding current accounting guidance for such assets. The amended guidance also amends the impairment model for available-for-sale debt securities, requiring entities to determine whether all or a portion of the

unrealized loss on such securities is a credit loss, and also eliminating the option for management to consider the length of time a security has been in an unrealized loss position as a factor in concluding whether or not a credit loss exists. The amended model states that an entity will recognize an allowance for credit losses on available-for-sale debt securities as a contra account to the amortized cost basis, instead of a direct reduction of the amortized cost basis of the investment, as under current guidance. As a result, entities will recognize improvements to estimated credit losses on available-for-sale debt securities immediately in earnings as opposed to in interest income over time. There are also additional disclosure requirements included in this guidance. The amendments in this ASU are effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2019. Early application of this ASU is permitted. ~~Adoption will be applied through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the ASU is effective.~~ The Company intends to adopt this standard on January 1, ~~2020~~2020. Adoption will be applied on a modified retrospective basis with the cumulative effect of initially applying the amendments recognized in retained earnings at the date of initial application. However, certain provisions of the guidance are only required to be applied on a prospective basis.

The Company’s implementation process includes data sourcing and ~~has formed~~validation, loss model development, development of governance processes, development of a ~~cross-functional team~~qualitative framework, documentation and governance surrounding economic forecast for credit loss purposes, evaluation of technical accounting topics, updates to ~~oversee~~allowance policies and methodology documentation, development of reporting processes and related internal controls, and overall operational readiness for adoption of the amended guidance, which will continue throughout 2019, including parallel runs alongside the Company’s current allowance process. A limited parallel run that was more focused on the operational process was performed in the second quarter of 2019. Parallel runs will be enhanced throughout the remainder of 2019 to include the qualitative framework, supporting analytics, end-to-end governance, internal controls and disclosures.

The Company provides updates to senior management and the Audit Committee. These communications provide an update on the status of the implementation ~~of the ASU.~~ project plan and any identified risks.

The Company is currently in the process of ~~developing~~evaluating the impact of the amended guidance on its Condensed Consolidated Financial Statements. The extent of this impact is still being evaluated and will depend on economic conditions, economic forecasts and the composition and credit ~~models~~quality of the Company's loan portfolio at the time of adoption.

In November 2018, the FASB issued ASU 2018-19 and in April 2019, the FASB issued ASU 2019-04 which made minor clarifications to the guidance in ASU 2016-13. The FASB has also established a Transition Resource Group for Credit Losses to evaluate implementation issues arising from the amended guidance and make recommendations to the FASB on which issues may warrant the issuance of additional clarifying guidance. The Company continues to monitor the issues discussed by the Transition Resource Group and the recommended amendments proposed to the FASB as ~~well as accounting, reporting and governance processes to comply with the new ASU.~~part of its implementation analysis.

Goodwill

In January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, which simplifies the manner in which an entity is required to test goodwill for impairment

by eliminating Step 2 from the goodwill impairment test. Under the amendments in this ASU, an entity should (1) perform its annual or interim goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount, and (2) recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value, with the understanding that the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. Additionally, ASU No. 2017-04 removes the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment and, if it fails such qualitative test, to perform Step 2 of the goodwill impairment test. This ASU is effective for fiscal years beginning after December 15, 2019, and for interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. The ASU should be applied using a prospective method. Based on the Company’s most recent qualitative goodwill impairment assessment performed as of October 31, 2018, there were no reporting units for which it was more-likely-than-not that the carrying amount of a reporting unit exceeded its respective fair value; therefore, this ASU would not currently have an impact on the Company’s Consolidated Financial Statements or related disclosures. However, if upon adoption, which is expected to occur on January 1, 2020, the carrying amount of a reporting unit exceeds its respective fair value, the Company would be required to recognize an impairment charge for the amount that the carrying value exceeds the fair value.

Fair Value Measurements

In August 2018, the FASB issued ASU 2018-13, Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurements. The amendments in this ASU modify the disclosure requirements for fair value measurements in Topic 820, Fair Value Measurements. This ASU is effective for fiscal years beginning after December 15, 2019, and for interim periods within those fiscal years. Early adoption is permitted. The Company is currently assessing the impact that the adoption of this standard will have on its fair value disclosures.

Internal-Use Software

In August 2018, the FASB issued ASU 2018-15, Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract. The amendments in this ASU align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract 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. This ASU is effective for fiscal years beginning after December 15, 2019, and for interim periods within those fiscal years. Early adoption is permitted. The Company is currently assessing the impact that the adoption of this standard will have on the financial condition and results of operations of the Company.

(2) Debt Securities Available for Sale and Debt Securities Held to Maturity

The following tables present the adjusted cost and approximate fair value of debt securities available for sale and debt securities held to maturity.


	March 31, 2019								June 30, 2019
			Gross Unrealized								Gross Unrealized
	Amortized Cost		Gains		Losses		Fair Value		Amortized Cost		Gains		Losses		Fair Value
	(In Thousands)								(In Thousands)
Debt securities available for sale:
U.S. Treasury and other U.S. government agencies	$	4,244,399	$	2,275	$	73,014	$	4,173,660	$	4,202,665	$	33,645	$	41,245	$	4,195,065
Agency mortgage-backed securities	1,861,131		9,337		25,267		1,845,201		1,691,534		14,677		13,956		1,692,255
Agency collateralized mortgage obligations	3,326,835		4,620		54,180		3,277,275		3,139,758		7,035		24,046		3,122,747
States and political subdivisions	825		57		—		882		826		57		—		883
Total	$	9,433,190	$	16,289	$	152,461	$	9,297,018	$	9,034,783	$	55,414	$	79,247	$	9,010,950
Debt securities held to maturity:
U.S. Treasury and other U.S. government agencies	$	1,283,487	$	21,683	$	32	$	1,305,138	$	1,284,662	$	52,581	$	—	$	1,337,243
Collateralized mortgage obligations:
Agency	2,540,857		47,716		1,365		2,587,208		2,890,013		86,173		—		2,976,186
Non-agency	44,638		6,623		1,122		50,139		41,847		5,755		1,385		46,217
Asset-backed securities and other	60,909		1,531		696		61,744		59,920		1,191		1,029		60,082
States and political subdivisions	645,150		11,724		6,176		650,698		636,041		14,521		5,022		645,540
Total	$	4,575,041	$	89,277	$	9,391	$	4,654,927	$	4,912,483	$	160,221	$	7,436	$	5,065,268



	December 31, 2018
			Gross Unrealized
	Amortized Cost		Gains		Losses		Fair Value
	(In Thousands)
Debt securities available for sale:
U.S. Treasury and other U.S. government agencies	$	5,525,902	$	13,000	$	107,435	$	5,431,467
Agency mortgage-backed securities	2,156,872		9,402		36,453		2,129,821
Agency collateralized mortgage obligations	3,492,538		4,021		77,580		3,418,979
States and political subdivisions	886		63		—		949
Total	$	11,176,198	$	26,486	$	221,468	$	10,981,216
Debt securities held to maturity:
Collateralized mortgage obligations:
Agency	$	2,089,860	$	26,988	$	10,338	$	2,106,510
Non-agency	46,834		7,198		1,129		52,903
Asset-backed securities and other	61,304		2,346		471		63,179
States and political subdivisions	687,615		18,545		3,332		702,828
Total	$	2,885,613	$	55,077	$	15,270	$	2,925,420

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

The following tables disclose the fair value and the gross unrealized losses of the Company’s available for sale debt securities and held to maturity debt securities that were in a loss position at ~~March 31,~~June 30, 2019 and December 31, 2018. This information is aggregated by investment category and the length of time the individual securities have been in an unrealized loss position.


	March 31, 2019												June 30, 2019
	Securities in a loss position for less than 12 months				Securities in a loss position for 12 months or longer				Total				Securities in a loss position for less than 12 months				Securities in a loss position for 12 months or longer				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
	(In Thousands)												(In Thousands)
Debt securities available for sale:
U.S. Treasury and other U.S. government agencies	$	268,242	$	16	$	3,593,781	$	72,998	$	3,862,023	$	73,014	$	—	$	—	$	1,066,869	$	41,245	$	1,066,869	$	41,245
Agency mortgage-backed securities	22,193		97		1,345,329		25,170		1,367,522		25,267		20,602		23		1,109,240		13,933		1,129,842		13,956
Agency collateralized mortgage obligations	79,695		267		2,569,948		53,913		2,649,643		54,180		262,029		587		1,988,600		23,459		2,250,629		24,046
Total	$	370,130	$	380	$	7,509,058	$	152,081	$	7,879,188	$	152,461	$	282,631	$	610	$	4,164,709	$	78,637	$	4,447,340	$	79,247

Debt securities held to maturity:
U.S. Treasury and other U.S. government agencies	$	12,093	$	32	$	—	$	—	$	12,093	$	32
Collateralized mortgage obligations:
Agency	—		—		318,079		1,365		318,079		1,365
Non-agency	3,532		36		12,582		1,086		16,114		1,122		$	13,277	$	290	$	12,454	$	1,095	$	25,731	$	1,385
Asset-backed securities and other	24,786		287		5,451		409		30,237		696		36,657		420		9,613		609		46,270		1,029
States and political subdivisions	189,781		6,176		—		—		189,781		6,176		138,043		5,022		—		—		138,043		5,022
Total	$	230,192	$	6,531	$	336,112	$	2,860	$	566,304	$	9,391	$	187,977	$	5,732	$	22,067	$	1,704	$	210,044	$	7,436



	December 31, 2018
	Securities in a loss position for less than 12 months				Securities in a loss position for 12 months or longer				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
	(In Thousands)
Debt securities available for sale:
U.S. Treasury and other U.S. government agencies	$	338	$	1	$	3,879,564	$	107,434	$	3,879,902	$	107,435
Agency mortgage-backed securities	68,404		279		1,533,156		36,174		1,601,560		36,453
Agency collateralized mortgage obligations	116,052		132		2,710,008		77,448		2,826,060		77,580
Total	$	184,794	$	412	$	8,122,728	$	221,056	$	8,307,522	$	221,468

Debt securities held to maturity:
Collateralized mortgage obligations:
Agency	$	—	$	—	$	845,512	$	10,338	$	845,512	$	10,338
Non-agency	3,715		71		13,195		1,058		16,910		1,129
Asset-backed securities and other	6,911		87		5,994		384		12,905		471
States and political subdivisions	116,925		2,148		118,834		1,184		235,759		3,332
Total	$	127,551	$	2,306	$	983,535	$	12,964	$	1,111,086	$	15,270

As indicated in the previous tables, at ~~March 31,~~June 30, 2019, the Company held debt securities in unrealized loss positions. The Company does not intend to sell these securities nor is it more-likely-than-not-that it will be required to sell these securities before their anticipated recovery.

The Company regularly evaluates each available for sale and held to maturity debt security in a loss position for OTTI. In its evaluation, the Company considers such factors as the length of time and the extent to which the fair value has been below cost, the financial condition of the issuer, the Company’s intent to hold the security to an expected recovery in market value and whether it is more-likely-than-not-that the Company will have to sell the security before its fair value recovers. Activity related to the credit loss component of the OTTI is recognized in earnings. The portion of OTTI related to all other factors is recognized in other comprehensive income.

Management does not believe that any individual unrealized loss in the Company’s debt securities available for sale or held to maturity portfolios, presented in the preceding tables, represents an OTTI at either ~~March 31,~~June 30, 2019 or December 31, 2018, other than those noted below.

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


	Three Months Ended March 31,				Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018		2019		2018
	(In Thousands)				(In Thousands)
Balance at beginning of period	$	23,416	$	22,824	$	23,416	$	23,133	$	23,416	$	22,824
Reductions for securities paid off during the period (realized)	—		—		—		—		—		—
Additions for the credit component on debt securities in which OTTI was not previously recognized	—		—		—		—		—		—
Additions for the credit component on debt securities in which OTTI was previously recognized	—		309		113		—		113		309
Balance at end of period	$	23,416	$	23,133	$	23,529	$	23,133	$	23,529	$	23,133

For the three months ended ~~March 31,~~June 30, 2019, there was no$113 thousand of OTTI recognized on held to maturity securities. For the ~~three~~six months ended ~~March 31,~~June 30, 2019 and 2018, there was $113 thousand and $309 thousand, respectively, of OTTI

recognized on held to maturity securities. The debt securities primarily impacted by credit impairment are held to maturity non-agency collateralized mortgage obligations.

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


March 31, 2019	Amortized Cost		Fair Value
June 30, 2019					Amortized Cost		Fair Value
	(In Thousands)				(In Thousands)
Debt securities available for sale:
Maturing within one year	$	249,983	$	249,983	$	399,617	$	398,804
Maturing after one but within five years	2,988,014		2,958,666		2,838,535		2,859,447
Maturing after five but within ten years	399,577		398,756		399,133		408,023
Maturing after ten years	607,650		567,137		566,206		529,674
	4,245,224		4,174,542		4,203,491		4,195,948
Mortgage-backed securities and collateralized mortgage obligations	5,187,966		5,122,476		4,831,292		4,815,002
Total	$	9,433,190	$	9,297,018	$	9,034,783	$	9,010,950

Debt securities held to maturity:
Maturing within one year	$	50	$	50	$	17,965	$	17,938
Maturing after one but within five years	153,512		155,058		344,146		354,354
Maturing after five but within ten years	1,568,864		1,592,552		1,355,278		1,403,353
Maturing after ten years	267,120		269,920		263,234		267,220
	1,989,546		2,017,580		1,980,623		2,042,865
Collateralized mortgage obligations	2,585,495		2,637,347		2,931,860		3,022,403
Total	$	4,575,041	$	4,654,927	$	4,912,483	$	5,065,268

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


	Three Months Ended March 31,				Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018		2019		2018
	(In Thousands)				(In Thousands)
Gross gains	$	8,958	$	—	$	—	$	—	$	8,958	$	—
Gross losses	—		—		—		—		—		—
Net realized gains	$	8,958	$	—	$	—	$	—	$	8,958	$	—

(3) Loans and Allowance for Loan Losses

The following table presents the composition of the loan portfolio.


	March 31, 2019		December 31, 2018		June 30, 2019		December 31, 2018
	(In Thousands)				(In Thousands)
Commercial loans:
Commercial, financial and agricultural	$	25,281,930	$	26,562,319	$	24,852,656	$	26,562,319
Real estate – construction	1,945,347		1,997,537		1,982,646		1,997,537
Commercial real estate – mortgage	12,955,196		13,016,796		12,969,705		13,016,796
Total commercial loans	40,182,473		41,576,652		39,805,007		41,576,652
Consumer loans:
Residential real estate – mortgage	13,396,396		13,422,156		13,404,130		13,422,156
Equity lines of credit	2,716,307		2,747,217		2,672,830		2,747,217
Equity loans	288,169		298,614		275,778		298,614
Credit card	832,832		818,308		878,101		818,308
Consumer direct	2,533,916		2,553,588		2,476,628		2,553,588
Consumer indirect	3,807,452		3,770,019		3,799,079		3,770,019
Total consumer loans	23,575,072		23,609,902		23,506,546		23,609,902
Total loans	$	63,757,545	$	65,186,554	$	63,311,553	$	65,186,554

Allowance for Loan Losses and Credit Quality

The following table, which excludes loans held for sale, presents a summary of the activity in the allowance for loan losses. The portion of the allowance that has not been identified by the Company as related to specific loan categories has been allocated to the individual loan categories on a pro rata basis for purposes of the table below:


	Commercial, Financial and Agricultural			Commercial Real Estate (1)			Residential Real Estate (2)			Consumer (3)			Total			Commercial, Financial and Agricultural			Commercial Real Estate (1)			Residential Real Estate (2)			Consumer (3)			Total
	(In Thousands)															(In Thousands)
Three months ended March 31, 2019
Allowance for loan losses:
Beginning balance	$	393,315		$	112,437		$	101,929		$	277,561		$	885,242
Provision for loan losses	59,180			4,662			2,183			116,267			182,292
Loans charged-off	(9,503		)	(25		)	(5,012		)	(112,873		)	(127,413		)
Loan recoveries	4,760			1,462			3,589			16,090			25,901
Net (charge-offs) recoveries	(4,743		)	1,437			(1,423		)	(96,783		)	(101,512		)
Ending balance	$	447,752		$	118,536		$	102,689		$	297,045		$	966,022
Three months ended March 31, 2018
Three months ended June 30, 2019																Three months ended June 30, 2019
Allowance for loan losses:
Beginning balance	$	420,635		$	118,133		$	109,856		$	194,136		$	842,760		$	447,752		$	118,536		$	102,689		$	297,045		$	966,022
Provision (credit) for loan losses	(14,097		)	3,667			(2,531		)	69,990			57,029			54,218			(1,166		)	(250		)	102,216			155,018
Loans charged-off	(10,132		)	(203		)	(4,582		)	(68,384		)	(83,301		)	(49,325		)	(112		)	(4,679		)	(110,755		)	(164,871		)
Loan recoveries	1,737			178			3,111			10,557			15,583			3,409			528			2,591			14,963			21,491
Net charge-offs	(8,395		)	(25		)	(1,471		)	(57,827		)	(67,718		)
Net (charge-offs) recoveries																(45,916		)	416			(2,088		)	(95,792		)	(143,380		)
Ending balance	$	398,143		$	121,775		$	105,854		$	206,299		$	832,071		$	456,054		$	117,786		$	100,351		$	303,469		$	977,660
Three months ended June 30, 2018																Three months ended June 30, 2018
Allowance for loan losses:
Beginning balance																$	398,143		$	121,775		$	105,854		$	206,299		$	832,071
Provision (credit) for loan losses																43,934			(13,747		)	(6,254		)	67,347			91,280
Loans charged-off																(12,694		)	(686		)	(4,971		)	(68,212		)	(86,563		)
Loan recoveries																2,127			5,904			3,403			11,778			23,212
Net (charge-offs) recoveries																(10,567		)	5,218			(1,568		)	(56,434		)	(63,351		)
Ending balance																$	431,510		$	113,246		$	98,032		$	217,212		$	860,000

Six Months Ended June 30, 2019																Six Months Ended June 30, 2019
Allowance for loan losses:
Beginning balance																$	393,315		$	112,437		$	101,929		$	277,561		$	885,242
Provision for loan losses																113,398			3,496			1,933			218,483			337,310
Loan charge-offs																(58,828		)	(137		)	(9,691		)	(223,628		)	(292,284		)
Loan recoveries																8,169			1,990			6,180			31,053			47,392
Net (charge-offs) recoveries																(50,659		)	1,853			(3,511		)	(192,575		)	(244,892		)
Ending balance																$	456,054		$	117,786		$	100,351		$	303,469		$	977,660
Six Months Ended June 30, 2018																Six Months Ended June 30, 2018
Allowance for loan losses:
Beginning balance																$	420,635		$	118,133		$	109,856		$	194,136		$	842,760
Provision (credit) for loan losses																29,837			(10,080		)	(8,785		)	137,337			148,309
Loan charge-offs																(22,826		)	(889		)	(9,553		)	(136,596		)	(169,864		)
Loan recoveries																3,864			6,082			6,514			22,335			38,795
Net (charge-offs) recoveries																(18,962		)	5,193			(3,039		)	(114,261		)	(131,069		)
Ending balance																$	431,510		$	113,246		$	98,032		$	217,212		$	860,000


(1)	Includes commercial real estate – mortgage and real estate – construction loans.


(2)	Includes residential real estate – mortgage, equity lines of credit and equity loans.


(3)	Includes credit card, consumer direct and consumer indirect loans.

The table below provides a summary of the allowance for loan losses and related loan balances by portfolio.


	Commercial, Financial and Agricultural		Commercial Real Estate (1)		Residential Real Estate (2)		Consumer (3)		Total		Commercial, Financial and Agricultural		Commercial Real Estate (1)		Residential Real Estate (2)		Consumer (3)		Total
	(In Thousands)										(In Thousands)
March 31, 2019
June 30, 2019
Ending balance of allowance attributable to loans:	Ending balance of allowance attributable to loans:										Ending balance of allowance attributable to loans:
Individually evaluated for impairment	$	117,349	$	6,351	$	25,402	$	2,598	$	151,700	$	129,539	$	6,842	$	22,711	$	2,506	$	161,598
Collectively evaluated for impairment	330,403		112,185		77,287		294,447		814,322		326,515		110,944		77,640		300,963		816,062
Total allowance for loan losses	$	447,752	$	118,536	$	102,689	$	297,045	$	966,022	$	456,054	$	117,786	$	100,351	$	303,469	$	977,660
Ending balance of loans:	Ending balance of loans:										Ending balance of loans:
Individually evaluated for impairment	$	445,037	$	80,097	$	152,377	$	5,039	$	682,550	$	373,359	$	84,552	$	150,055	$	7,542	$	615,508
Collectively evaluated for impairment	24,836,893		14,820,446		16,248,495		7,169,161		63,074,995		24,479,297		14,867,799		16,202,683		7,146,266		62,696,045
Total loans	$	25,281,930	$	14,900,543	$	16,400,872	$	7,174,200	$	63,757,545	$	24,852,656	$	14,952,351	$	16,352,738	$	7,153,808	$	63,311,553

December 31, 2018
Ending balance of allowance attributable to loans:	Ending balance of allowance attributable to loans:										Ending balance of allowance attributable to loans:
Individually evaluated for impairment	$	73,072	$	6,283	$	26,008	$	1,880	$	107,243	$	73,072	$	6,283	$	26,008	$	1,880	$	107,243
Collectively evaluated for impairment	320,243		106,154		75,921		275,681		777,999		320,243		106,154		75,921		275,681		777,999
Total allowance for loan losses	$	393,315	$	112,437	$	101,929	$	277,561	$	885,242	$	393,315	$	112,437	$	101,929	$	277,561	$	885,242
Ending balance of loans:	Ending balance of loans:										Ending balance of loans:
Individually evaluated for impairment	$	386,282	$	85,250	$	153,342	$	5,135	$	630,009	$	386,282	$	85,250	$	153,342	$	5,135	$	630,009
Collectively evaluated for impairment	26,176,037		14,929,083		16,314,645		7,136,780		64,556,545		26,176,037		14,929,083		16,314,645		7,136,780		64,556,545
Total loans	$	26,562,319	$	15,014,333	$	16,467,987	$	7,141,915	$	65,186,554	$	26,562,319	$	15,014,333	$	16,467,987	$	7,141,915	$	65,186,554


(1)	Includes commercial real estate – mortgage and real estate – construction loans.


(2)	Includes residential real estate – mortgage, equity lines of credit and equity loans.


(3)	Includes credit card, consumer direct and consumer indirect loans.

The following tables present information on individually evaluated impaired loans, by loan class.


	March 31, 2019												June 30, 2019
	Individually Evaluated Impaired Loans With No Recorded Allowance						Individually Evaluated Impaired Loans With a Recorded Allowance						Individually Evaluated Impaired Loans With No Recorded Allowance						Individually Evaluated Impaired Loans With a Recorded Allowance
	Recorded Investment		Unpaid Principal Balance		Allowance		Recorded Investment		Unpaid Principal Balance		Allowance		Recorded Investment		Unpaid Principal Balance		Allowance		Recorded Investment		Unpaid Principal Balance		Allowance
	(In Thousands)												(In Thousands)
Commercial, financial and agricultural	$	155,057	$	162,849	$	—	$	289,980	$	347,690	$	117,349	$	148,193	$	153,470	$	—	$	225,166	$	275,630	$	129,539
Real estate – construction	—		—		—		132		132		6		1,385		1,385		—		127		127		5
Commercial real estate – mortgage	48,895		52,480		—		31,070		35,789		6,345		52,057		56,208		—		30,983		35,481		6,837
Residential real estate – mortgage	—		—		—		106,012		106,012		8,686		—		—		—		104,622		104,622		7,706
Equity lines of credit	—		—		—		15,005		15,009		12,821		—		—		—		15,554		15,559		11,906
Equity loans	—		—		—		31,360		32,240		3,895		—		—		—		29,879		30,755		3,099
Credit card	—		—		—		—		—		—		—		—		—		—		—		—
Consumer direct	—		—		—		4,702		4,702		2,265		—		—		—		7,293		7,293		2,265
Consumer indirect	—		—		—		337		337		333		—		—		—		249		249		241
Total loans	$	203,952	$	215,329	$	—	$	478,598	$	541,911	$	151,700	$	201,635	$	211,063	$	—	$	413,873	$	469,716	$	161,598



	December 31, 2018
	Individually Evaluated Impaired Loans With No Recorded Allowance						Individually Evaluated Impaired Loans With a Recorded Allowance
	Recorded Investment		Unpaid Principal Balance		Allowance		Recorded Investment		Unpaid Principal Balance		Allowance
	(In Thousands)
Commercial, financial and agricultural	$	162,011	$	196,316	$	—	$	224,271	$	262,947	$	73,072
Real estate – construction	—		—		—		138		138		6
Commercial real estate – mortgage	45,628		48,404		—		39,484		44,463		6,277
Residential real estate – mortgage	—		—		—		104,787		104,787		8,711
Equity lines of credit	—		—		—		16,012		16,016		13,334
Equity loans	—		—		—		32,543		33,258		3,963
Credit card	—		—		—		—		—		—
Consumer direct	—		—		—		4,715		4,715		1,473
Consumer indirect	—		—		—		420		420		407
Total loans	$	207,639	$	244,720	$	—	$	422,370	$	466,744	$	107,243

The following ~~table presents~~tables present information on individually evaluated impaired loans, by loan class.


	Three Months Ended March 31, 2019				Three Months Ended March 31, 2018				Three Months Ended June 30, 2019				Three Months Ended June 30, 2018
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
	(In Thousands)								(In Thousands)
Commercial, financial and agricultural	$	413,888	$	963	$	256,249	$	136	$	399,492	$	574	$	261,048	$	457
Real estate – construction	134		2		5,978		2		590		2		12,019		2
Commercial real estate – mortgage	82,864		215		83,733		211		79,700		251		82,537		199
Residential real estate – mortgage	106,397		649		111,057		680		106,521		681		110,986		689
Equity lines of credit	15,257		174		18,756		194		15,041		176		17,858		193
Equity loans	31,718		276		35,701		303		30,533		272		34,905		299
Credit card	—		—		—		—		—		—		—		—
Consumer direct	5,559		68		3,851		11		6,457		63		1,816		4
Consumer indirect	364		—		897		2		273		—		676		1
Total loans	$	656,181	$	2,347	$	516,222	$	1,539	$	638,607	$	2,019	$	521,845	$	1,844

									Six Months Ended June 30, 2019				Six Months Ended June 30, 2018
									Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
									(In Thousands)
Commercial, financial and agricultural									$	406,690	$	1,537	$	258,648	$	593
Real estate – construction									362		4		8,999		4
Commercial real estate – mortgage									81,282		466		83,135		410
Residential real estate – mortgage									106,459		1,330		111,022		1,369
Equity lines of credit									15,149		350		18,307		387
Equity loans									31,125		548		35,303		602
Credit card									—		—		—		—
Consumer direct									6,008		131		2,834		15
Consumer indirect									318		—		786		3
Total loans									$	647,393	$	4,366	$	519,034	$	3,383

Detailed information on the Company's allowance for loan losses methodology and the Company's impaired loan policy are included in the Notes to the Company's Consolidated Financial Statements for the year ended December 31, 2018.

The Company monitors the credit quality of its commercial portfolio using an internal dual risk rating, which considers both the obligor and the facility. The obligor risk ratings are defined by ranges of default probabilities of the borrowers, through internally assigned letter grades (AAA through D2) and the facility risk ratings are defined by ranges of the loss given default. The combination of those two approaches results in the assessment of the likelihood of loss and it is mapped to the regulatory classifications. The Company assigns internal risk ratings at loan origination and at regular intervals subsequent to origination. Loan review intervals are dependent on the size and risk grade of the loan, and are generally conducted at least annually. Additional reviews are conducted when information affecting the loan’s risk grade becomes available. The general characteristics of the risk grades are as follows:

The Company’s internally assigned letter grades “AAA” through “B-” correspond to the regulatory classification “Pass.” These loans do not have any identified potential or well-defined weaknesses and have a high likelihood of orderly repayment. Exceptions exist when either the facility is fully secured by a CD and held at the Company or the facility is secured by properly margined and controlled marketable securities.

Internally assigned letter grades “CCC+” through “CCC” correspond to the regulatory classification “Special Mention.” Loans within this classification have potential weaknesses that deserve management’s close

attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or in the institution’s credit position at some future date. Special mention loans are not adversely classified and do not expose an institution to sufficient risk to warrant adverse classification.

Internally assigned letter grades “CCC-” through “D1” correspond to the regulatory classification “Substandard.” A loan classified as substandard is inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any. Substandard loans have a well-defined weakness or weaknesses that jeopardize the liquidation of the loan. They are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected.

The internally assigned letter grade “D2” corresponds to the regulatory classification “Doubtful.” Loans classified as doubtful have all the weaknesses inherent in a loan classified as 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 or improbable.

The Company considers payment history as the best indicator of credit quality for the consumer portfolio. Nonperforming loans in the tables below include loans classified as nonaccrual, loans 90 days or more past due and loans modified in a TDR 90 days or more past due.

The following tables, which exclude loans held for sale, illustrate the credit quality indicators associated with the Company’s loans, by loan class.


	Commercial						Commercial
	March 31, 2019						June 30, 2019
	Commercial, Financial and Agricultural		Real Estate - Construction		Commercial Real Estate - Mortgage		Commercial, Financial and Agricultural		Real Estate - Construction		Commercial Real Estate - Mortgage
	(In Thousands)						(In Thousands)
Pass	$	23,933,079	$	1,916,571	$	12,683,872	$	23,641,146	$	1,872,429	$	12,561,359
Special Mention	515,971		13,051		148,168		505,172		63,653		209,212
Substandard	655,923		15,725		113,836		537,163		46,564		180,881
Doubtful	176,957		—		9,320		169,175		—		18,253
	$	25,281,930	$	1,945,347	$	12,955,196	$	24,852,656	$	1,982,646	$	12,969,705



	December 31, 2018
	Commercial, Financial and Agricultural		Real Estate - Construction		Commercial Real Estate - Mortgage
	(In Thousands)
Pass	$	25,395,640	$	1,971,852	$	12,620,421
Special Mention	412,129		12,372		215,322
Substandard	631,706		13,313		170,303
Doubtful	122,844		—		10,750
	$	26,562,319	$	1,997,537	$	13,016,796


	Consumer												Consumer
	March 31, 2019												June 30, 2019
	Residential Real Estate – Mortgage		Equity Lines of Credit		Equity Loans		Credit Card		Consumer Direct		Consumer Indirect		Residential Real Estate – Mortgage		Equity Lines of Credit		Equity Loans		Credit Card		Consumer Direct		Consumer Indirect
	(In Thousands)												(In Thousands)
Performing	$	13,223,614	$	2,679,837	$	278,237	$	814,333	$	2,511,940	$	3,777,828	$	13,242,925	$	2,634,080	$	266,166	$	859,339	$	2,454,916	$	3,764,473
Nonperforming	172,782		36,470		9,932		18,499		21,976		29,624		161,205		38,750		9,612		18,762		21,712		34,606
	$	13,396,396	$	2,716,307	$	288,169	$	832,832	$	2,533,916	$	3,807,452	$	13,404,130	$	2,672,830	$	275,778	$	878,101	$	2,476,628	$	3,799,079



	December 31, 2018
	Residential Real Estate -Mortgage		Equity Lines of Credit		Equity Loans		Credit Card		Consumer Direct		Consumer Indirect
	(In Thousands)
Performing	$	13,248,822	$	2,707,289	$	287,392	$	801,297	$	2,535,724	$	3,742,394
Nonperforming	173,334		39,928		11,222		17,011		17,864		27,625
	$	13,422,156	$	2,747,217	$	298,614	$	818,308	$	2,553,588	$	3,770,019

The following tables present an aging analysis of the Company’s past due loans, excluding loans classified as held for sale.


	March 31, 2019																June 30, 2019
	30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due		Nonaccrual		Accruing TDRs		Total Past Due and Impaired		Not Past Due or Impaired		Total		30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due		Nonaccrual		Accruing TDRs		Total Past Due and Impaired		Not Past Due or Impaired		Total
	(In Thousands)																(In Thousands)
Commercial, financial and agricultural	$	54,216	$	17,813	$	8,144	$	461,029	$	18,910	$	560,112	$	24,721,818	$	25,281,930	$	49,037	$	8,246	$	12,785	$	389,779	$	19,150	$	478,997	$	24,373,659	$	24,852,656
Real estate – construction	13,582		1,707		533		1,298		111		17,231		1,928,116		1,945,347		3,159		114		532		2,097		107		6,009		1,976,637		1,982,646
Commercial real estate – mortgage	4,679		322		1,160		109,447		3,811		119,419		12,835,777		12,955,196		4,716		3,283		360		107,137		3,687		119,183		12,850,522		12,969,705
Residential real estate – mortgage	78,538		22,384		9,007		163,463		59,167		332,559		13,063,837		13,396,396		74,767		25,226		6,681		154,247		59,130		320,051		13,084,079		13,404,130
Equity lines of credit	15,355		4,035		1,471		34,999		—		55,860		2,660,447		2,716,307		12,604		7,972		3,394		35,356		—		59,326		2,613,504		2,672,830
Equity loans	2,920		1,050		34		9,840		26,188		40,032		248,137		288,169		2,549		788		224		9,361		25,361		38,283		237,495		275,778
Credit card	9,394		7,465		18,499		—		—		35,358		797,474		832,832		11,119		7,007		18,762		—		—		36,888		841,213		878,101
Consumer direct	35,620		20,432		17,251		4,725		3,854		81,882		2,452,034		2,533,916		36,657		22,986		14,786		6,926		5,252		86,607		2,390,021		2,476,628
Consumer indirect	78,610		24,600		7,781		21,843		—		132,834		3,674,618		3,807,452		77,523		21,908		6,813		27,793		—		134,037		3,665,042		3,799,079
Total loans	$	292,914	$	99,808	$	63,880	$	806,644	$	112,041	$	1,375,287	$	62,382,258	$	63,757,545	$	272,131	$	97,530	$	64,337	$	732,696	$	112,687	$	1,279,381	$	62,032,172	$	63,311,553



	December 31, 2018
	30-59 Days Past Due			60-89 Days Past Due		90 Days or More Past Due		Nonaccrual		Accruing TDRs		Total Past Due and Impaired		Not Past Due or Impaired		Total
	(In Thousands)
Commercial, financial and agricultural	$	17,257		$	11,784	$	8,114	$	400,389	$	18,926	$	456,470	$	26,105,849	$	26,562,319
Real estate – construction	218			8,849		544		2,851		116		12,578		1,984,959		1,997,537
Commercial real estate – mortgage	11,678			3,375		2,420		110,144		3,661		131,278		12,885,518		13,016,796
Residential real estate – mortgage	80,366			29,852		5,927		167,099		57,446		340,690		13,081,466		13,422,156
Equity lines of credit	14,007			5,109		2,226		37,702		—		59,044		2,688,173		2,747,217
Equity loans	3,471			843		180		10,939		26,768		42,201		256,413		298,614
Credit card	9,516		��	7,323		17,011		—		—		33,850		784,458		818,308
Consumer direct	37,336			19,543		13,336		4,528		2,684		77,427		2,476,161		2,553,588
Consumer indirect	100,434			32,172		9,791		17,834		—		160,231		3,609,788		3,770,019
Total loans	$	274,283		$	118,850	$	59,549	$	751,486	$	109,601	$	1,313,769	$	63,872,785	$	65,186,554

Policies related to the Company's nonaccrual and past due loans are included in the Company's Consolidated Financial Statements for the year ended December 31, 2018.

It is the Company’s policy to classify TDRs that are not accruing interest as nonaccrual loans. It is also the Company’s policy to classify TDR past due loans that are accruing interest as TDRs and not according to their past due status. The tables above reflect this policy.

Modifications to borrowers' loan agreements are considered TDRs if a concession is granted for economic or legal reasons related to a borrower’s financial difficulties that otherwise would not be considered. Within each of the Company’s loan classes, TDRs typically involve modification of the loan interest rate to a below market rate or an extension or deferment of the loan. During the three months ended ~~March 31,~~June 30, 2019, ~~$4.7~~$4.8 million of TDR modifications included an interest rate concession and ~~$15.8~~$17.0 million of TDR modifications resulted from modifications to the loan’s

structure. During the three months ended ~~March 31,~~June 30, 2018, ~~$3.3~~$20.1 million of TDR modifications included an interest rate concession and ~~$4.0~~$2.5 million of TDR modifications resulted from modifications to the loan’s structure. During the six months ended June 30, 2019, $9.5 million of TDR modifications included an interest rate concession and $32.8 million of TDR modifications resulted from modifications to the loan’s structure. During the six months ended June 30, 2018, $23.4 million of TDR modifications included an interest rate concession and $6.5 million of TDR modifications resulted from modifications to the loan’s structure.

The following ~~table presents~~tables present an analysis of the types of loans that were restructured and classified as TDRs, excluding loans classified as held for sale.


	Three Months Ended March 31, 2019			Three Months Ended March 31, 2018			Three Months Ended June 30, 2019			Three Months Ended June 30, 2018
	Number of Contracts	Post-Modification Outstanding Recorded Investment		Number of Contracts	Post-Modification Outstanding Recorded Investment		Number of Contracts	Post-Modification Outstanding Recorded Investment		Number of Contracts	Post-Modification Outstanding Recorded Investment
	(Dollars in Thousands)						(Dollars in Thousands)
Commercial, financial and agricultural	3	$	11,570	2	$	490	3	$	15,349	2	$	16,708
Real estate – construction	—	—		1	32		—	—		1	275
Commercial real estate – mortgage	—	—		1	1,383		4	2,523		1	251
Residential real estate – mortgage	20	5,233		17	4,119		16	1,818		16	4,718
Equity lines of credit	—	—		—	—		2	94		4	117
Equity loans	4	176		7	1,271		3	231		5	500
Credit card	—	—		—	—		—	—		—	—
Consumer direct	13	3,519		—	—		55	1,796		1	6
Consumer indirect	—	—		—	—		—	—		—	—

							Six Months Ended June 30, 2019			Six Months Ended June 30, 2018
							Number of Contracts	Post-Modification Outstanding Recorded Investment		Number of Contracts	Post-Modification Outstanding Recorded Investment
							(Dollars in Thousands)
Commercial, financial and agricultural							6	$	26,919	4	$	17,198
Real estate – construction							—	—		2	307
Commercial real estate – mortgage							4	2,523		2	1,634
Residential real estate – mortgage							36	7,051		33	8,837
Equity lines of credit							2	94		4	117
Equity loans							7	407		12	1,771
Credit card							—	—		—	—
Consumer direct							68	5,315		1	6
Consumer indirect							—	—		—	—

The impact to the allowance for loan losses related to modifications classified as TDRs were approximately ~~$3.7~~$7.9 million and $11.6 million for the three and six months ended ~~March 31, 2019. Charge-offs and changes~~June 30, 2019, respectively. The impact to the allowance for loan losses related to modifications classified as TDRs were ~~not material~~$10.9 million and $11.3 million for the three and six months ended ~~March 31, 2018.~~June 30, 2018, respectively.

The Company considers TDRs aged 90 days or more past due, charged off or classified as nonaccrual subsequent to modification, where the loan was not classified as a nonperforming loan at the time of modification, as subsequently defaulted.

The following ~~table provides~~tables provide a summary of initial subsequent defaults that occurred within one year of the restructure date. The ~~table excludes~~tables exclude loans classified as held for sale as of period-end and includes loans no longer in default as of period-end.


	Three Months Ended March 31, 2019			Three Months Ended March 31, 2018			Three Months Ended June 30, 2019			Three Months Ended June 30, 2018
	Number of Contracts	Recorded Investment at Default		Number of Contracts	Recorded Investment at Default		Number of Contracts	Recorded Investment at Default		Number of Contracts	Recorded Investment at Default
	(Dollars in Thousands)						(Dollars in Thousands)
Commercial, financial and agricultural	—	$	—	—	$	—	—	$	—	—	$	—
Real estate – construction	—	—		—	—		—	—		—	—
Commercial real estate – mortgage	—	—		—	—		—	—		—	—
Residential real estate – mortgage	—	—		1	80		1	221		1	67
Equity lines of credit	—	—		—	—		—	—		—	—
Equity loans	2	151		2	132		—	—		1	35
Credit card	—	—		—	—		—	—		—	—
Consumer direct	2	15		—	—		1	1,995		—	—
Consumer indirect	—	—		—	—		—	—		—	—

							Six Months Ended June 30, 2019			Six Months Ended June 30, 2018
							Number of Contracts	Recorded Investment at Default		Number of Contracts	Recorded Investment at Default
							(Dollars in Thousands)
Commercial, financial and agricultural							—	$	—	—	$	—
Real estate – construction							—	—		—	—
Commercial real estate – mortgage							—	—		—	—
Residential real estate – mortgage							1	221		2	147
Equity lines of credit							—	—		—	—
Equity loans							2	151		3	167
Credit card							—	—		—	—
Consumer direct							3	2,010		—	—
Consumer indirect							—	—		—	—

All commercial and consumer loans modified in a TDR are considered to be impaired, even if they maintain their accrual status.

At ~~March 31,~~June 30, 2019 and December 31, 2018, there were ~~$56.6~~$76.5 million and $54.2 million, respectively, of commitments to lend additional funds to borrowers whose terms have been modified in a TDR.

Foreclosure Proceedings

OREO totaled $15 million and $17 million at ~~March 31,~~June 30, 2019 and December 31, 2018, respectively. OREO included $13 million and $14 million of foreclosed residential real estate properties at ~~both March 31,~~June 30, 2019 and December 31, ~~2018.~~2018, respectively. As of ~~March 31,~~June 30, 2019 and December 31, 2018, there were ~~$74~~$64 million and $62 million, respectively, of loans secured by residential real estate properties for which formal foreclosure proceedings were in process.

(4) Loan Sales and Servicing

Loans held for sale were ~~$1.3 billion~~$91 million and $69 million at ~~March 31,~~June 30, 2019 and December 31, 2018, ~~respectively. Loans held for sale at March 31, 2019 were comprised of $1.2 billion of commercial, financial~~respectively, and ~~agricultural loans and $77 million of residential real estate — mortgage loans. Loans held for sale at December 31, 2018~~ were comprised entirely of residential real estate —- mortgage loans.

The following table summarizes the Company's activity in the loans held for sale portfolio and loan sales, excluding activity related to loans originated for sale in the secondary market.


	Three Months Ended March 31,				Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018		2019		2018
	(In Thousands)				(In Thousands)
Loans transferred from held for investment to held for sale	$	1,196,883	$	—	$	—	$	—	$	1,196,883	$	—
Charge-offs on loans recognized at transfer from held for investment to held for sale	—		—		—		—		—		—
Loans and loans held for sale sold	144,674		8,475		936,624		—		1,081,298		8,475

The following table summarizes the Company's sales of loans originated for sale in the secondary market.


	Three Months Ended March 31,				Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018		2019		2018
	(In Thousands)				(In Thousands)
Residential real estate loans originated for sale in the secondary market sold (1)	$	119,722	$	132,470	$	180,668	$	198,247	$	300,390	$	330,717
Net gains recognized on sales of residential real estate loans originated for sale in the secondary market (2)	5,135		3,529		7,509		5,920		12,644		9,449
Servicing fees recognized (2)	2,672		2,800		2,632		2,837		5,304		5,637


(1)	The Company has retained servicing responsibilities for all loans sold that were originated for sale in the secondary market.


(2)	Recorded as a component of mortgage banking income in the Company's Unaudited Condensed Consolidated Statements of Income.

The following table provides the recorded balance of loans sold with retained servicing and the related MSRs.


	March 31, 2019		December 31, 2018		June 30, 2019		December 31, 2018
	(In Thousands)				(In Thousands)
Recorded balance of residential real estate mortgage loans sold with retained servicing (1)	$	4,566,191	$	4,588,273	$	4,550,307	$	4,588,273
MSRs (2)	47,545		51,539		41,966		51,539


(1)	These loans are not included in loans on the Company's Unaudited Condensed Consolidated Balance Sheets.


(2)	Recorded under the fair value method and included in other assets on the Company's Unaudited Condensed Consolidated Balance Sheets.

The fair value of MSRs is significantly affected by mortgage interest rates available in the marketplace, which influence mortgage loan prepayment speeds. In general, during periods of declining rates, the fair value of MSRs declines due to increasing prepayments attributable to increased mortgage-refinance activity. During periods of rising interest rates, the fair value of MSRs generally increases due to reduced refinance activity. The Company maintains a non-qualifying hedging strategy to manage a portion of the risk associated with changes in the fair value of the MSR portfolio. This strategy includes the purchase of various trading securities. The interest income, mark-to-market adjustments and gain or loss from sale activities associated with these securities are expected to economically hedge a portion of the change in the fair value of the MSR portfolio.

The following table is an analysis of the activity in the Company’s MSRs.


	Three Months Ended March 31,						Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018			2019			2018
	(In Thousands)						(In Thousands)
Carrying value, at beginning of period	$	51,539		$	49,597		$	47,545		$	53,025		$	51,539		$	49,597
Additions	1,059			1,543			1,646			2,129			2,705			3,672
Increase (decrease) in fair value:
Due to changes in valuation inputs or assumptions	(2,343		)	4,757			(4,691		)	2,113			(7,034		)	6,870
Due to other changes in fair value (1)	(2,710		)	(2,872		)	(2,534		)	(2,991		)	(5,244		)	(5,863		)
Carrying value, at end of period	$	47,545		$	53,025		$	41,966		$	54,276		$	41,966		$	54,276


(1)	Represents the realization of expected net servicing cash flows, expected borrower repayments and the passage of time.

See Note 9, Fair Value Measurements, for additional disclosures related to the assumptions and estimates used in determining fair value of MSRs.

At ~~March 31,~~June 30, 2019 and December 31, 2018, the sensitivity of the current fair value of the residential MSRs to immediate 10% and 20% adverse changes in key economic assumptions are included in the following table:


	March 31, 2019			December 31, 2018			June 30, 2019			December 31, 2018
	(Dollars in Thousands)						(Dollars in Thousands)
Fair value of MSRs	$	47,545		$	51,539		$	41,966		$	51,539
Composition of residential loans serviced for others:
Fixed rate mortgage loans	97.8		%	97.7		%	97.9		%	97.7		%
Adjustable rate mortgage loans	2.2			2.3			2.1			2.3
Total	100.0		%	100.0		%	100.0		%	100.0		%
Weighted average life (in years)	6.1			6.6			5.1			6.6
Prepayment speed:	7.8		%	7.4		%	12.8		%	7.4		%
Effect on fair value of a 10% increase	$	(1,273	)	$	(1,432	)	$	(2,290	)	$	(1,432	)
Effect on fair value of a 20% increase	(2,442		)	(2,778		)	(4,116		)	(2,778		)
Weighted average option adjusted spread:	6.5		%	6.5		%	6.4		%	6.5		%
Effect on fair value of a 10% increase	$	(1,781	)	$	(1,627	)	$	(1,119	)	$	(1,627	)
Effect on fair value of a 20% increase	(3,375		)	(3,116		)	(1,956		)	(3,116		)

The sensitivity calculations above are hypothetical and should not be considered to be predictive of future performance. As indicated, changes in fair value based on adverse changes in assumptions generally cannot be extrapolated because the relationship of the change in assumption to the change in fair value may not be linear. Also, in this table, the effect of an adverse variation in a particular assumption on the fair value of the MSRs is calculated without changing any other assumption; while in reality, changes in one assumption may result in changes to another, which may magnify or counteract the effect of the change.

(5) Derivatives and Hedging

The Company is a party to derivative instruments in the normal course of business to meet the financing needs of its customers and to reduce its own exposure to fluctuations in interest rates and foreign currency exchange rates. The Company has made an accounting policy decision not to offset derivative fair value amounts under master netting agreements. See Summary of Significant Accounting Policies in the Notes to Consolidated Financial Statements in the Company's Annual Report on Form 10-K for the year ended December 31, 2018, for additional information on the Company's accounting policies related to derivative instruments and hedging activities. For derivatives cleared through central clearing houses the variation margin payments made are legally characterized as settlements of the derivatives. As a result, these variation margin payments are netted against the fair value of the respective derivative contracts in the balance sheet and related disclosures. The following table reflects the notional amount and fair value of derivative instruments included on the Company’s Unaudited Condensed Consolidated Balance Sheets on a gross basis.


	March 31, 2019						December 31, 2018						June 30, 2019						December 31, 2018
			Fair Value						Fair Value						Fair Value						Fair Value
	Notional Amount		Derivative Assets (1)		Derivative Liabilities (2)		Notional Amount		Derivative Assets (1)		Derivative Liabilities (2)		Notional Amount		Derivative Assets (1)		Derivative Liabilities (2)		Notional Amount		Derivative Assets (1)		Derivative Liabilities (2)
	(In Thousands)												(In Thousands)
Derivatives designated as hedging instruments:
Fair value hedges:
Interest rate swaps related to long-term debt	$	2,923,950	$	12,085	$	17,266	$	2,923,950	$	13,479	$	28,479	$	2,923,950	$	20,526	$	713	$	2,923,950	$	13,479	$	28,479
Total fair value hedges			12,085		17,266				13,479		28,479				20,526		713				13,479		28,479
Cash flow hedges:
Interest rate contracts:
Swaps related to commercial loans	3,500,000		—		6,052		1,500,000		2,367		—		6,500,000		—		—		1,500,000		2,367		—
Swaps related to FHLB advances	120,000		—		2,371		120,000		—		1,938		120,000		—		3,552		120,000		—		1,938
Foreign currency contracts:
Forwards related to currency fluctuations	4,079		215		—		5,272		174		—		2,735		139		—		5,272		174		—
Total cash flow hedges			215		8,423				2,541		1,938				139		3,552				2,541		1,938
Total derivatives designated as hedging instruments			$	12,300	$	25,689			$	16,020	$	30,417			$	20,665	$	4,265			$	16,020	$	30,417

Free-standing derivatives not designated as hedging instruments:	Free-standing derivatives not designated as hedging instruments:												Free-standing derivatives not designated as hedging instruments:
Interest rate contracts:
Forward contracts related to held for sale mortgages	$	209,734	$	224	$	1,148	$	166,641	$	187	$	1,021	$	301,648	$	369	$	1,253	$	166,641	$	187	$	1,021
Option contracts related to mortgage servicing rights	40,000		456		—		—		—		—		170,000		664		—		—		—		—
Interest rate lock commitments	139,548		3,158		—		91,395		2,012		—		178,706		3,847		—		91,395		2,012		—
Equity contracts:
Purchased equity option related to equity-linked CDs	386,421		13,168		—		450,660		14,185		—		301,811		9,176		—		450,660		14,185		—
Written equity option related to equity-linked CDs	331,719		—		11,438		389,030		—		12,434		257,693		—		7,907		389,030		—		12,434
Foreign exchange contracts:
Forwards and swaps related to commercial loans	398,169		2,823		666		413,127		1,565		1,109		390,416		251		1,853		413,127		1,565		1,109
Spots related to commercial loans	14,053		15		8		19,911		24		2		31,632		18		1		19,911		24		2
Swap associated with sale of Visa, Inc. Class B shares	133,571		—		5,115		111,466		—		3,706		148,232		—		5,124		111,466		—		3,706
Futures contracts (3)	3,462,000		—		—		3,223,000		—		—		2,987,000		—		—		3,223,000		—		—
Trading account assets and liabilities:
Interest rate contracts for customers	34,636,125		210,707		101,105		34,436,223		149,269		130,704		34,638,176		334,687		102,812		34,436,223		149,269		130,704
Foreign exchange contracts for customers	1,193,220		19,139		16,865		1,140,665		19,465		17,341		1,437,637		21,522		19,279		1,140,665		19,465		17,341
Total trading account assets and liabilities			229,846		117,970				168,734		148,045				356,209		122,091				168,734		148,045
Total free-standing derivative instruments not designated as hedging instruments			$	249,690	$	136,345			$	186,707	$	166,317			$	370,534	$	138,229			$	186,707	$	166,317


(1)	Derivative assets, except for trading account assets that are recorded as a component of trading account assets on the Company's Unaudited Condensed Consolidated Balance Sheets, are recorded in other assets on the Company’s Unaudited Condensed Consolidated Balance Sheets.


(2)	Derivative liabilities are recorded in accrued expenses and other liabilities on the Company’s Unaudited Condensed Consolidated Balance Sheets.


(3)	Changes in fair value are cash settled daily; therefore, there is no ending balance at any given reporting period.

Hedging Derivatives

The Company uses derivative instruments to manage the risk of earnings fluctuations caused by interest rate volatility. For those financial instruments that qualify and are designated as a hedging relationship, either a fair value hedge or cash flow hedge, the effect of interest rate movements on the hedged assets or liabilities will generally be offset by change in fair value of the derivative instrument.

Fair Value Hedges

The Company enters into fair value hedging relationships using interest rate swaps to mitigate the Company’s exposure to losses in value as interest rates change. Derivative instruments that are used as part of the Company’s interest rate risk management strategy include interest rate swaps that relate to the pricing of specific balance sheet assets and liabilities.

Interest rate swaps are used to convert the Company’s fixed rate long-term debt to a variable rate. The critical terms of the interest rate swaps match the terms of the corresponding hedged items. All components of each derivative instrument’s gain or loss are included in the assessment of hedge effectiveness.

The Company recognized no gains or losses for the three and six months ended ~~March 31,~~June 30, 2019 and 2018, related to hedged firm commitments no longer qualifying as a fair value hedge. At ~~March 31,~~June 30, 2019, the fair value hedges had a weighted average expected remaining term of ~~3.1~~2.8 years.

Cash Flow Hedges

The Company enters into cash flow hedging relationships using interest rate swaps and options, such as caps and floors, to mitigate exposure to the variability in future cash flows or other forecasted transactions associated with its floating rate assets and liabilities. The Company uses interest rate swaps and options to hedge the repricing characteristics of its floating rate commercial loans and FHLB advances. The Company also uses foreign currency forward contracts to hedge its exposure to fluctuations in foreign currency exchange rates due to a portion of money transfer expense being denominated in foreign currency. All components of each derivative instrument’s gain or loss are included in the assessment of hedge effectiveness. The initial assessment of expected hedge effectiveness is based on regression analysis. The ongoing periodic measures of hedge ineffectiveness are based on the expected change in cash flows of the hedged item caused by changes in the benchmark interest rate. There were no gains or losses reclassified from other comprehensive income because of the discontinuance of cash flow hedges related to certain forecasted transactions that are probable of not occurring for the three and six months ended ~~March 31,~~June 30, 2019 and 2018.

At ~~March 31,~~June 30, 2019, cash flow hedges not terminated had a net fair value of ~~$(8)~~$(3) million and a weighted average life of ~~2.0~~2.7 years. Net losses of ~~$10.4~~$14.7 million are expected to be reclassified to income over the next 12 months as net settlements occur. The maximum length of time over which the entity is hedging its exposure to the variability in future cash flows for forecasted transactions is ~~4.8~~4.6 years.

The following table presents the effect of hedging derivative instruments on the Company’s Unaudited Condensed Consolidated Statements of Income.


	Interest Income			Interest Expense			Interest Income			Interest Expense
	Interest and fees on loans			Interest on FHLB and other borrowings			Interest and fees on loans			Interest on FHLB and other borrowings
	(In Thousands)						(In Thousands)
Three Months Ended March 31, 2019
Three Months Ended June 30, 2019
Total amounts presented in the unaudited condensed consolidated statements of income	$	800,488		$	37,626		$	787,767		$	34,300

Gains (losses) on fair value hedging relationships:
Interest rate contracts:
Amounts related to interest settlements and amortization on derivatives	$	—		$	(2,348	)	$	—		$	(1,708	)
Recognized on derivatives	—			24,034			—			42,912
Recognized on hedged items	—			(22,643		)	—			(40,868		)
Net income (expense) recognized on fair value hedges	$	—		$	(957	)	$	—		$	336

Gain (losses) on cash flow hedging relationships: (1)
Interest rate contracts:
Realized losses reclassified from AOCI into net income (2)	$	(1,210	)	$	(169	)	$	(1,260	)	$	(161	)
Net income (expense) recognized on cash flow hedges	$	(1,210	)	$	(169	)	$	(1,260	)	$	(161	)

Three Months Ended March 31, 2018
Three Months Ended June 30, 2018
Total amounts presented in the unaudited condensed consolidated statements of income	$	663,935		$	24,756		$	711,006		$	31,912

Gains (losses) on fair value hedging relationships:
Interest rate contracts:
Amounts related to interest settlements and amortization on derivatives	$	—		$	3,445		$	—		$	(159	)
Recognized on derivatives	—			(39,366		)	—			(11,132		)
Recognized on hedged items	—			37,429			—			10,123
Net income (expense) recognized on fair value hedges	$	—		$	1,508		$	—		$	(1,168	)

Gain (losses) on cash flow hedging relationships: (1)
Interest rate contracts:
Realized losses reclassified from AOCI into net income (2)	$	(8,890	)	$	(495	)	$	(13,167	)	$	(302	)
Net income (expense) recognized on cash flow hedges	$	(8,890	)	$	(495	)	$	(13,167	)	$	(302	)


(1)	See Note 10, Comprehensive Income, for gain or loss recognized for cash flow hedges in accumulated other comprehensive income.


(2)	Pre-tax



	Interest Income			Interest Expense
	Interest and fees on loans			Interest on FHLB and other borrowings
	(In Thousands)
Six Months Ended June 30, 2019
Total amounts presented in the unaudited condensed consolidated statements of income	$	1,588,255		$	71,926

Gains (losses) on fair value hedging relationships:
Interest rate contracts:
Amounts related to interest settlements and amortization on derivatives	$	—		$	(4,056	)
Recognized on derivatives	—			66,946
Recognized on hedged items	—			(63,511		)
Net income (expense) recognized on fair value hedges	$	—		$	(621	)

Gain (losses) on cash flow hedging relationships: (1)
Interest rate contracts:
Realized losses reclassified from AOCI into net income (2)	$	(2,470	)	$	(330	)
Net income (expense) recognized on cash flow hedges	$	(2,470	)	$	(330	)

Six Months Ended June 30, 2018
Total amounts presented in the unaudited condensed consolidated statements of income	$	1,374,941		$	56,668

Gains (losses) on fair value hedging relationships:
Interest rate contracts:
Amounts related to interest settlements and amortization on derivatives	$	—		$	3,286
Recognized on derivatives	—			(50,498		)
Recognized on hedged items	—			47,552
Net income (expense) recognized on fair value hedges	$	—		$	340

Gain (losses) on cash flow hedging relationships: (1)
Interest rate contracts:
Realized losses reclassified from AOCI into net income (2)	$	(22,057	)	$	(797	)
Net income (expense) recognized on cash flow hedges	$	(22,057	)	$	(797	)


(1)	See Note 10, Comprehensive Income, for gain or loss recognized for cash flow hedges in accumulated other comprehensive income.


(2)	Pre-tax

The following table presents the carrying amount and associated cumulative basis adjustment related to the application of hedge accounting that is included in the carrying amount of hedged assets and liabilities on the Company's Unaudited Condensed Consolidated Balance Sheets in fair value hedging relationships.

March 31, 2019
Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of Hedged Liabilities
Carrying Amount of Hedged Liabilities Hedged Items Currently Designated Hedged Items No Longer Designated
(In Thousands)
FHLB and other borrowings $ 3,481,395
$ (3,822 ) $ 3,525



	June 30, 2019
			Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of Hedged Liabilities
��	Carrying Amount of Hedged Liabilities		Hedged Items Currently Designated		Hedged Items No Longer Designated
	(In Thousands)
FHLB and other borrowings	$	3,482,981	$	37,005	$	2,978

Derivatives Not Designated As Hedges

Derivatives not designated as hedges include those that are entered into as either economic hedges to facilitate client needs or as part of the Company’s overall risk management strategy. Economic hedges are those that do not qualify

to be treated as a fair value hedge, cash flow hedge or foreign currency hedge for accounting purposes, but are necessary to economically manage the risk exposure associated with the assets and liabilities of the Company. The Company holds a portfolio of futures, forwards and interest rate lock commitments as well as options related to its equity-linked

CDs to mitigate its economic risk exposure. The Company also enters into a variety of interest rate contracts and foreign exchange contracts in its trading activities. See Note 13, Derivatives and Hedging, in the Notes to the December 31, 2018, Consolidated Financial Statements for a description of the Company's derivatives not designated as hedges.

The net gains and losses recorded in the Company's Unaudited Condensed Consolidated Statements of Income from free-standing derivative instruments not designated as hedging instruments are summarized in the following table.


		Gain (Loss) for the							Gain (Loss) for the
	Condensed Consolidated	Three Months Ended March 31,						Condensed Consolidated	Three Months Ended June 30,						Six Months Ended June 30,
	Statements of Income Caption	2019			2018			Statements of Income Caption	2019			2018			2019			2018
		(In Thousands)							(In Thousands)
Futures contracts	Mortgage banking income and corporate and correspondent investment sales	$	(579	)	$	72		Mortgage banking income and corporate and correspondent investment sales	$	(800	)	$	133		$	(1,379	)	$	205
Interest rate contracts:
Interest rate lock commitments								Mortgage banking income	689			2			1,835			194
Option contracts related to mortgage servicing rights								Mortgage banking income	734			—			1,028			(38		)
Forward contracts related to residential mortgage loans held for sale	Mortgage banking income	(89		)	80			Mortgage banking income	40			(235		)	(49		)	(155		)
Interest rate lock commitments	Mortgage banking income	1,146			192
Interest rate contracts for customers	Corporate and correspondent investment sales	3,428			8,564			Corporate and correspondent investment sales	2,664			11,356			6,092			19,920
Option contracts related to mortgage servicing rights	Mortgage banking income	294			(38		)
Equity contracts:
Purchased equity option related to equity-linked CDs	Other expense	(1,017		)	(7,082		)	Other expense	(3,992		)	(8,523		)	(5,009		)	(15,605		)
Written equity option related to equity-linked CDs	Other expense	996			6,523			Other expense	3,531			7,579			4,527			14,102
Foreign currency contracts:
Forward and swap contracts related to commercial loans	Other income	2,696			(219		)	Other income	(999		)	18,603			1,697			18,384
Spot contracts related to commercial loans	Other income	(502		)	(922		)	Other income	700			(197		)	198			(1,119		)
Foreign currency exchange contracts for customers	Corporate and correspondent investment sales	3,851			3,541			Corporate and correspondent investment sales	3,611			4,756			7,462			8,297

Derivatives Credit and Market Risks

By using derivative instruments, the Company is exposed to credit and market risk. If the counterparty fails to perform, credit risk is equal to the extent of the Company’s fair value gain in a derivative. When the fair value of a derivative instrument contract is positive, this generally indicates that the counterparty owes the Company and, therefore, creates a credit risk for the Company. When the fair value of a derivative instrument contract is negative, the Company owes the counterparty and, therefore, it has no credit risk. The Company minimizes the credit risk in derivative instruments by entering into transactions with high-quality counterparties that are reviewed periodically. Credit losses are also mitigated through collateral agreements and other contract provisions with derivative counterparties.

Market risk is the adverse effect that a change in interest rates or implied volatility rates has on the value of a financial instrument. The Company manages the market risk associated with interest rate contracts by establishing and monitoring limits as to the types and degree of risk that may be undertaken.

The Company’s derivatives activities are monitored by its Asset/Liability Committee as part of its risk-management oversight. The Company’s Asset/Liability Committee is responsible for mandating various hedging strategies that are developed through its analysis of data from financial simulation models and other internal and industry sources. The resulting hedging strategies are then incorporated into the Company’s overall interest rate risk management and trading strategies.

Entering into interest rate swap agreements and options involves not only the risk of dealing with counterparties and their ability to meet the terms of the contracts but also interest rate risk associated with unmatched positions. At ~~March 31,~~June 30, 2019, interest rate swap agreements and options classified as trading were substantially matched. The Company had credit risk of ~~$230~~$356 million related to derivative instruments in the trading account portfolio, which does not take into consideration master netting arrangements or the value of the collateral. There were no credit losses associated with derivative instruments classified as trading for the three and six months ended ~~March 31,~~June 30, 2019 and 2018. At ~~March 31,~~June 30, 2019 and December 31, 2018, there were no material nonperforming derivative positions classified as trading.

The Company’s derivative positions designated as hedging instruments are primarily executed in the over-the-counter market. These positions at ~~March 31,~~June 30, 2019, have credit risk of ~~$12~~$21 million, which does not take into consideration master netting arrangements or the value of the collateral.

There were no credit losses associated with derivative instruments classified as nontrading for the three and six months ended ~~March 31,~~June 30, 2019 and 2018. At ~~March 31,~~June 30, 2019 and December 31, 2018, there were no nonperforming derivative positions classified as nontrading.

As of ~~March 31,~~June 30, 2019 and December 31, 2018, the Company had recorded the right to reclaim cash collateral of ~~$80~~$90 million and $97 million, respectively, within other assets on the Company’s Unaudited Condensed Consolidated Balance Sheets and had recorded the obligation to return cash collateral of ~~$28~~$15 million and $22 million, respectively, within deposits on the Company’s Unaudited Condensed Consolidated Balance Sheets.

Contingent Features

Certain of the Company’s derivative instruments contain provisions that require the Company’s debt maintain a certain credit rating from each of the major credit rating agencies. If the Company’s debt were to fall below this rating, it would be in violation of these provisions, and the counterparties to the derivative instruments could demand immediate and ongoing full overnight collateralization on derivative instruments in net liability positions. The aggregate fair value of all derivative instruments with credit-risk-related contingent features that were in a liability position on ~~March 31,~~June 30, 2019, was ~~$29~~$47 million for which the Company has collateral requirements of ~~$28~~$45 million in the normal course of business. If the credit risk-related contingent features underlying these agreements had been triggered on ~~March 31,~~June 30, 2019, the Company’s collateral requirements to its counterparties would increase by $1$2 million. The aggregate fair value of all derivative instruments with credit risk-related contingent features that were in a liability position on December 31, 2018, was $24 million for which the Company had collateral requirements of $23 million in the normal course of business. If the credit risk-related contingent features underlying these agreements had been triggered on December 31, 2018, the Company’s collateral requirements to its counterparties would have increased by $1 million.

Netting of Derivative Instruments

The Company is party to master netting arrangements with its financial institution counterparties for some of its derivative and hedging activities. The Company does not offset assets and liabilities under these master netting arrangements for financial statement presentation purposes. The master netting arrangements provide for single net settlement of all derivative instrument arrangements, as well as collateral, in the event of default with respect to, or termination of, any one contract with the respective counterparties. Cash collateral is usually posted by the counterparty with a net liability position in accordance with contract thresholds.

The following table represents the Company’s total gross derivative instrument assets and liabilities subject to an enforceable master netting arrangement. The derivative instruments the Company has with its customers are not subject to an enforceable master netting arrangement.


	Gross Amounts Recognized		Gross Amounts Offset in the Condensed Consolidated Balance Sheets		Net Amount Presented in the Condensed Consolidated Balance Sheets		Financial Instruments Collateral Received/Pledged (1)		Cash Collateral Received/ Pledged (1)		Net Amount		Gross Amounts Recognized		Gross Amounts Offset in the Condensed Consolidated Balance Sheets		Net Amount Presented in the Condensed Consolidated Balance Sheets		Financial Instruments Collateral Received/Pledged (1)		Cash Collateral Received/ Pledged (1)		Net Amount
	(In Thousands)												(In Thousands)
March 31, 2019
June 30, 2019
Derivative financial assets:
Subject to a master netting arrangement	$	78,151	$	—	$	78,151	$	—	$	24,339	$	53,812	$	60,415	$	—	$	60,415	$	—	$	11,055	$	49,360
Not subject to a master netting arrangement	183,839		—		183,839		—		—		183,839		330,784		—		330,784		—		—		330,784
Total derivative financial assets	$	261,990	$	—	$	261,990	$	—	$	24,339	$	237,651	$	391,199	$	—	$	391,199	$	—	$	11,055	$	380,144


Derivative financial liabilities:
Subject to a master netting arrangement	$	93,166	$	—	$	93,166	$	—	$	80,395	$	12,771	$	94,460	$	—	$	94,460	$	—	$	89,666	$	4,794
Not subject to a master netting arrangement	68,868		—		68,868		—		—		68,868		48,034		—		48,034		—		—		48,034
Total derivative financial liabilities	$	162,034	$	—	$	162,034	$	—	$	80,395	$	81,639	$	142,494	$	—	$	142,494	$	—	$	89,666	$	52,828

December 31, 2018
Derivative financial assets:
Subject to a master netting arrangement	$	82,168	$	—	$	82,168	$	—	$	18,932	$	63,236	$	82,168	$	—	$	82,168	$	—	$	18,932	$	63,236
Not subject to a master netting arrangement	120,559		—		120,559		—		—		120,559		120,559		—		120,559		—		—		120,559
Total derivative financial assets	$	202,727	$	—	$	202,727	$	—	$	18,932	$	183,795	$	202,727	$	—	$	202,727	$	—	$	18,932	$	183,795

Derivative financial liabilities:
Subject to a master netting arrangement	$	99,579	$	—	$	99,579	$	—	$	96,917	$	2,662	$	99,579	$	—	$	99,579	$	—	$	96,917	$	2,662
Not subject to a master netting arrangement	97,155		—		97,155		—		—		97,155		97,155		—		97,155		—		—		97,155
Total derivative financial liabilities	$	196,734	$	—	$	196,734	$	—	$	96,917	$	99,817	$	196,734	$	—	$	196,734	$	—	$	96,917	$	99,817


(1)	The actual amount of collateral received/pledged is limited to the asset/liability balance and does not include excess collateral received/pledged. When excess collateral exists, the collateral shown in the table above has been allocated based on the percentage of the actual amount of collateral posted.

(6) Securities Financing Activities

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

The Company has various financial assets and liabilities that are subject to enforceable master netting agreements or similar agreements. The Company's derivatives that are subject to enforceable master netting agreements or similar transactions are discussed in Note 5, Derivatives and Hedging. The Company enters into agreements under which it purchases or sells securities subject to an obligation to resell or repurchase the same or similar securities. Securities purchased under agreements to resell and securities sold under agreements to repurchase are generally accounted for as collateralized financing transactions and recorded at the amounts at which the securities were purchased or sold plus accrued interest. The securities pledged as collateral are generally U.S. Treasury securities and other U.S. government agency securities and mortgage-backed securities.

Securities purchased under agreements to resell and securities sold under agreements to repurchase are governed by a MRA. Under the terms of the MRA, all transactions between the Company and the counterparty constitute a single business relationship such that in the event of default, the nondefaulting party is entitled to set off claims and apply property held by that party in respect of any transaction against obligations owed. Any payments, deliveries, or other transfers may be applied against each other and netted. These amounts are limited to the contract asset/liability balance,

and accordingly, do not include excess collateral received or pledged. The Company offsets the assets and liabilities

under netting arrangements for the balance sheet presentation of securities purchased under agreements to resell and securities sold under agreements to repurchase provided certain criteria are met that permit balance sheet netting.


	Gross Amounts Recognized		Gross Amounts Offset in the Condensed Consolidated Balance Sheets		Net Amount Presented in the Condensed Consolidated Balance Sheets		Financial Instruments Collateral Received/Pledged (1)		Cash Collateral Received/ Pledged (1)		Net Amount		Gross Amounts Recognized		Gross Amounts Offset in the Condensed Consolidated Balance Sheets		Net Amount Presented in the Condensed Consolidated Balance Sheets		Financial Instruments Collateral Received/Pledged (1)		Cash Collateral Received/ Pledged (1)		Net Amount
	(In Thousands)												(In Thousands)
March 31, 2019
June 30, 2019
Securities purchased under agreements to resell:	Securities purchased under agreements to resell:												Securities purchased under agreements to resell:
Subject to a master netting arrangement	$	279,283	$	91,836	$	187,447	$	187,447	$	—	$	—	$	1,767,525	$	1,573,274	$	194,251	$	194,251	$	—	$	—

Securities sold under agreements to repurchase:	Securities sold under agreements to repurchase:												Securities sold under agreements to repurchase:
Subject to a master netting arrangement	$	274,800	$	91,836	$	182,964	$	182,964	$	—	$	—	$	1,765,013	$	1,573,274	$	191,739	$	191,739	$	—	$	—

December 31, 2018
Securities purchased under agreements to resell:	Securities purchased under agreements to resell:												Securities purchased under agreements to resell:
Subject to a master netting arrangement	$	246,844	$	136,897	$	109,947	$	109,947	$	—	$	—	$	246,844	$	136,897	$	109,947	$	109,947	$	—	$	—

Securities sold under agreements to repurchase:	Securities sold under agreements to repurchase:												Securities sold under agreements to repurchase:
Subject to a master netting arrangement	$	239,172	$	136,897	$	102,275	$	102,275	$	—	$	—	$	239,172	$	136,897	$	102,275	$	102,275	$	—	$	—


(1)	The actual amount of collateral received/pledged is limited to the asset/liability balance and does not include excess collateral received/pledged. When excess collateral exists, the collateral shown in the table above has been allocated based on the percentage of the actual amount of collateral posted.

Collateral Associated with Securities Financing Activities

Securities sold under agreements to repurchase are accounted for as secured borrowings. The following table presents the Company's related activity, by collateral type and remaining contractual maturity.


		Remaining Contractual Maturity of the Agreements											Remaining Contractual Maturity of the Agreements
		Overnight and Continuous		Up to 30 days		30 - 90 days		Greater Than 90 days		Total			Overnight and Continuous		Up to 30 days		30 - 90 days		Greater Than 90 days		Total
		(In Thousands)											(In Thousands)
March 31, 2019
June 30, 2019
Securities sold under agreements to repurchase:	Securities sold under agreements to repurchase:											Securities sold under agreements to repurchase:
U.S. Treasury and other U.S. government agencies		$	201,148	$	29,095	$	—	$	—	$	230,243		$	1,164,671	$	446,016	$	—	$	110,575	$	1,721,262
Mortgage-backed securities		—		—		44,557		—		44,557			—		—		43,751		—		43,751
Total		$	201,148	$	29,095	$	44,557	$	—	$	274,800		$	1,164,671	$	446,016	$	43,751	$	110,575	$	1,765,013

December 31, 2018
Securities sold under agreements to repurchase:	Securities sold under agreements to repurchase:											Securities sold under agreements to repurchase:
U.S. Treasury and other U.S. government agencies		$	190,650	$	—	$	—	$	—	$	190,650		$	190,650	$	—	$	—	$	—	$	190,650
Mortgage-backed securities		—		—		48,522		—		48,522			—		—		48,522		—		48,522
Total		$	190,650	$	—	$	48,522	$	—	$	239,172		$	190,650	$	—	$	48,522	$	—	$	239,172

In the event of a significant decline in fair value of the collateral pledged for the securities sold under agreements to repurchase, the Company would be required to provide additional collateral. The Company minimizes the risk by monitoring the liquidity and credit quality of the collateral, as well as the maturity profile of the transactions.

At ~~March 31,~~June 30, 2019, the fair value of collateral received related to securities purchased under agreements to resell was ~~$283 million~~$2.4 billion and the fair value of collateral pledged for securities sold under agreements to repurchase was ~~$280 million.~~ $2.0 billion.

At December 31, 2018, the fair value of collateral received related to securities purchased under agreements

to resell was $251 million and the fair value of collateral pledged for securities sold under agreements to repurchase was $247 million.

(7) Leases

The Company leases certain land, office space, and branches. These leases are generally for periods of 10 to 20 years with various renewal options. The Company, by policy, does not include renewal options for facility leases as part of its right-of-use assets and lease liabilities unless they are deemed reasonably certain to be exercised. Variable lease payments that are dependent on an index or a rate are initially measured using the index or rate at the commencement date and are included in the measurement of lease liability. Variable lease payments that are not dependent on an index or a rate or changes in variable payments based on an index or rate after the commencement date are excluded from the measurement of the lease liability and recognized in profit and loss in accordance with Topic 842. Variable lease payments are defined as payments made for the right to use an asset that vary because of changes in facts or circumstances occurring after the commencement date, other than the passage of time.

The Company has made a policy election to not apply the recognition requirements of ASC 842 to all short-term leases. Instead, the short-term lease payments will be recognized in profit or loss on a straight-line basis over the lease term and variable lease payments in the period in which the obligation for those payments is incurred. As a practical expedient, the Company has also made a policy election to not separate nonlease components from lease components and instead account for each separate lease component and the nonlease components associated with that lease component as a single lease component.

The Company determines whether a contract contains a lease based on whether a contract, or a part of a contract, that conveys the right to control the use of an identified asset for a period of time in exchange for consideration. The discount rate is determined as the rate implicit in the lease or when a rate cannot be readily determined, the Company’s incremental borrowing rate. The incremental borrowing rate is the rate of interest that the Company would have to pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment.

The following table summarizes the Company’s lease portfolio classification and respective right-of-use asset balances and lease liability balances which are included in other assets and accrued expenses and other liabilities, respectively, on the Company’s Unaudited Condensed Consolidated Balance Sheets.


	March 31, 2019						June 30, 2019
	Finance		Operating		Total		Finance		Operating		Total
	(In Thousands)						(In Thousands)
Right-of-use asset	$	9,558	$	289,830	$	299,388	$	9,227	$	284,713	$	293,940
Lease liability balance	13,541		328,576		342,117		13,148		326,866		340,014

The table below presents information about the Company's total lease costs which include amounts recognized on the Company’s Unaudited Condensed Consolidated Statements of Income during the period.


	Three Months Ended March 31,			Three Months Ended June 30,			Six Months Ended June 30,
	2019			2019			2019
	(In Thousands)			(In Thousands)
Interest on lease liabilities	$	159		$	154		$	313
Amortization of right-of-use assets	331			330			661
Finance lease cost	490			484			974
Operating lease cost	12,834			12,970			25,804
Variable lease cost	3,966			4,479			8,445
Sublease income	(504		)	(3,048		)	(3,552		)
Total lease cost	$	16,786		$	14,885		$	31,671

The table below presents supplemental cash flow information arising from lease transactions and noncash information on lease liabilities arising from obtaining right-of-use assets.


	Three Months Ended March 31,		Six Months Ended June 30,
	2019		2019
	(In Thousands)		(In Thousands)
Cash paid for amounts included in measurement of liabilities
Operating cash flows from operating leases	$	13,417	$	26,993
Operating cash flows from finance leases	159		313
Financing cash flows from finance leases	386		779
Right-of-use assets obtained in exchange for lease obligations
Operating leases	22,108		24,717
Finance leases	—		—

The weighted-average remaining lease term and discount rates at ~~March 31,~~June 30, 2019 were as follows:


	Finance		Operating		Total		Finance		Operating		Total
Weighted-average remaining lease term	9.0 years		9.9 years		9.8 years		8.8 years		9.9 years		9.8 years
Weighted-average discount rate	4.7	%	3.4	%	3.4	%	4.7	%	3.3	%	3.4	%

The following table provides the annual undiscounted future minimum payments under finance and noncanceable operating leases at ~~March 31,~~June 30, 2019:


	Finance		Operating		Total		Finance		Operating		Total
	(In Thousands)						(In Thousands)
Remainder of 2019	$	1,651	$	41,527	$	43,178	$	1,104	$	27,995	$	29,099
2020	2,233		53,253		55,486		2,233		54,233		56,466
2021	2,143		48,995		51,138		2,143		50,057		52,200
2022	1,923		44,011		45,934		1,923		45,045		46,968
2023	1,501		38,157		39,658		1,501		39,162		40,663
2024	1,410		29,534		30,944		1,410		30,353		31,763
Thereafter	5,696		132,191		137,887		5,696		137,665		143,361
Total	$	16,557	$	387,668	$	404,225	$	16,010	$	384,510	$	400,520

At ~~March 31,~~June 30, 2019 the Company had no additional operating or finance leases that had not yet commenced that would create significant rights and obligations for the Company as a lessee.

The table below presents a reconciliation of the undiscounted cash flows to the finance lease liabilities and operating lease liabilities.


	March 31, 2019						June 30, 2019
	Finance		Operating		Total		Finance		Operating		Total
	(In Thousands)						(In Thousands)
Total undiscounted lease liability	$	16,557	$	387,668	$	404,225	$	16,010	$	384,510	$	400,520
Less: imputed interest	3,016		59,092		62,108		2,862		57,644		60,506
Total discounted lease liability	$	13,541	$	328,576	$	342,117	$	13,148	$	326,866	$	340,014

(8) Commitments, Contingencies and Guarantees

Commitments to Extend Credit & Standby and Commercial Letters of Credit

The following represents the Company’s commitments to extend credit, standby letters of credit and commercial letters of credit:


	March 31, 2019		December 31, 2018		June 30, 2019		December 31, 2018
	(In Thousands)				(In Thousands)
Commitments to extend credit	$	27,906,018	$	28,827,897	$	27,184,108	$	28,827,897
Standby and commercial letters of credit	1,167,342		1,249,205		1,047,090		1,249,205

Commitments to extend credit are agreements to lend to customers as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements.

Standby and commercial letters of credit are commitments issued by the Company to guarantee the performance of a customer to a third party. These guarantees are primarily issued to support public and private borrowing arrangements, including commercial paper, bond financing and similar transactions, and expire in decreasing amounts with terms ranging from one to four years.

The credit risk involved in issuing letters of credit and commitments is essentially the same as that involved in extending loan facilities to customers. The fair value of the letters of credit and commitments typically approximates the fee received from the customer for issuing such commitments. These fees are deferred and are recognized over the commitment period. At ~~March 31,~~June 30, 2019 and December 31, 2018, the recorded amount of these deferred fees was $5$7 million and $8 million, respectively. The Company holds various assets as collateral supporting those commitments for which collateral is deemed necessary. At ~~March 31,~~June 30, 2019, the maximum potential amount of future undiscounted payments the Company could be required to make under outstanding standby letters of credit was ~~$1.2~~$1.0 billion. At ~~March 31,~~both June 30, 2019 and December 31, 2018, the Company had reserves related to letters of credit and unfunded commitments recorded in accrued expenses and other liabilities on the Company’s Unaudited Condensed Consolidated Balance Sheet of ~~$68 million and~~ $66 ~~million, respectively.~~million.

Loan Sale Recourse

The Company has potential recourse related to specific FNMA securitizations. At both ~~March 31,~~June 30, 2019 and December 31, 2018, the amount of potential recourse was $19 million of which the Company had reserved $793 thousand which is recorded in accrued expenses and other liabilities on the Company's Unaudited Condensed Consolidated Balance Sheets for the respective periods.

The Company also issues standard representations and warranties related to mortgage loan sales to government-sponsored agencies. Although these agreements often do not specify limitations, the Company does not believe that any payments related to these representations and warranties would materially change the financial condition or results of operations of the Company. At both ~~March 31,~~June 30, 2019 and December 31, 2018, the Company had $1.2 million of reserves in accrued expenses and other liabilities on the Company’s Unaudited Condensed Consolidated Balance Sheets related to potential losses from loans sold.

Legal and Regulatory Proceedings

In the ordinary course of business, the Company is subject to legal proceedings, including claims, litigation, investigations and administrative proceedings, all of which are considered incidental to the normal conduct of business. The Company believes it has substantial defenses to the claims asserted against it in its currently outstanding legal proceedings and, with respect to such legal proceedings, intends to defend itself vigorously. Set forth below are descriptions of certain of the Company’s legal proceedings.

In January 2014, the Bank was named as a defendant in a lawsuit filed in the District Court of Dallas County, Texas, David Bagwell, individually and as Trustee of the David S. Bagwell Trust, et al. v. BBVA ~~Compass,~~USA, et al., wherein the plaintiffs (who are the borrowers and guarantors of the underlying loans) allege that BBVA ~~Compass~~USA wrongfully sold their loans to a third party after representing that it would not do so. The plaintiffs seek unspecified monetary relief. Following trial in December 2017, the jury rendered a verdict in favor of the plaintiffs totaling $98 million. On June 27, 2018, the court entered a judgment in favor of the plaintiffs in the amount of $96 million, which includes prejudgment interest. The Bank has appealed and will vigorously contest the judgment on appeal. The Company believes there are substantial defenses to these claims and intends to defend them vigorously.

In March 2015, the Bank was named as a defendant in a lawsuit filed in the United States District Court for the Southern District of Texas, Lomix Limited Partnership, et al. v. BBVA ~~Compass~~USA, wherein the plaintiffs (who are the borrower and guarantors of the underlying loan) allege that the Bank wrongfully sold their loan to a third party, and wrongfully disclosed the guarantors’ personal financial information in connection with the sale of the loan. The plaintiffs seek unspecified monetary relief. On February 28, 2019, the Court granted partial summary judgment in favor of BBVA ~~Compass,~~USA, leaving only a nominal claim for damages. The plaintiffs disclaimed nominal damages and the Court entered a final judgment in favor of BBVA ~~Compass.~~USA. Plaintiffs filed a notice of appeal with the Fifth Circuit Court of Appeals on April 5, 2019. The Company believes there are substantial defenses to these claims and intends to defend them vigorously.

In January 2016, BSI was named as a defendant in a putative class action lawsuit filed in the United States District Court for the Southern District of Texas, In re Plains All American Pipeline, L.P. Securities Litigation, wherein the plaintiffs challenge statements made in registration materials and prospectuses filed with the SEC in connection with eight securities offerings of stock and notes issued by Plains GP Holdings and Plains All American Pipeline and underwritten by BSI, among others. The plaintiffs seek unspecified monetary relief. On April 2, 2018, the court granted the defendants' motion to dismiss with prejudice. The plaintiffs ~~have appealed.~~appealed to the United States Court of Appeals for the Fifth Circuit. After briefing and oral argument, on July 16, 2019, the appellate court issued an opinion affirming the trial court’s dismissal of BSI. Additional review and/or appeal of the Fifth Circuit’s opinion is possible. The Company believes there are substantial defenses to these claims and intends to defend them vigorously.

In October 2016, BSI was named as a defendant in a putative class action lawsuit filed in the District Court of Harris County, Texas, St. Lucie County Fire District Firefighters' Pension Trust, individually and on behalf of all others similarly situated v. Southwestern Energy Company, et al., wherein the plaintiffs allege that Southwestern Energy Company, its officers and directors, and the underwriting defendants (including BSI) made inaccurate and misleading statements in the registration statement and prospectus related to a securities offering. The plaintiffs seek unspecified monetary relief. The Company believes there are substantial defenses to these claims and intends to defend them vigorously.

In December 2016, the Bank was named as a defendant in a putative class action lawsuit filed in the United States District Court for the Northern District of Alabama, Robert Hossfeld, individually and on behalf of all others similarly situated v. BBVA ~~Compass~~USA, alleging violations of the Telephone Consumer Protection Act in the context of customer satisfaction survey calls to the cell phones of individuals who have not given, or who have withdrawn, consent to receive calls on their cell phones. The plaintiffs seek unspecified monetary relief. The parties reached a settlement ~~in principle~~ on November 6, 2018, and the Court ~~has~~ entered a Preliminary ~~approval~~Approval of Settlement ~~Order.~~Order on February 19, 2019. The ~~claims process is ongoing.~~hearing for Final Approval of Settlement has been set for August 28, 2019.

The Company and the Bank have been named in two proceedings involving David L. Powell: one that was filed in January 2017 with the Federal Conciliation and Arbitration Labor Board of Mexico City, Mexico, David Lannon Powell Finneran v. BBVA ~~Compass~~USA Bancshares, Inc., et al., and one that was filed in April 2018 in the United States District Court for the Northern District of Texas, David L. Powell, et al. v. BBVA ~~Compass~~USA. Powell alleges discrimination and wrongful termination in both proceedings, and seeks unspecified monetary relief. The Company believes there are substantial defenses to these claims and intends to defend them vigorously.

In November 2017, the ~~Banks~~Bank was named as a defendant in a lawsuit filed in the United States District Court for the Southern District of New York and subsequently transferred to the United States District Court for the Northern District of Texas, Stabilis Fund II, LLC v. BBVA ~~Compass~~USA, alleging that the Bank fraudulently induced the plaintiff to purchase a loan that subsequently became the subject of litigation. The plaintiff seeks unspecified monetary relief. The Company believes there are substantial defenses to these claims and intends to defend them vigorously.

In March 2018, the Company and BSI were named as defendants in a putative class action lawsuit filed in the United States District Court for the Southern District of New York, In re Mexican Government Bonds Antitrust Litigation, alleging that the defendant financial institutions engaged in collusion with respect to the purchase and sale of Mexican government bonds. Five substantially similar lawsuits were filed and consolidated with the original lawsuit. The plaintiffs seek injunctive and unspecified monetary relief. The Company believes there are substantial defenses to these claims and intends to defend them vigorously.

In March 2019, the Company and its subsidiary, Simple Finance Technology Corp., were named as defendants in a putative class action lawsuit filed in the United States District Court for the Northern District of California, Amitahbo Chattopadhyay v. BBVA ~~Compass~~USA Bancshares, Inc., et al. Plaintiff claims that Simple and the Company only permit United States citizens to open Simple accounts (which are exclusively originated through online channels). Plaintiff alleges that this constitutes alienage discrimination and violations of California's Unruh Act. The Company believes that there are substantial defenses to these claims and intends to defend them vigorously.

In July 2019, the Company was named as a defendant in a putative class action lawsuit filed in the United States District Court for the Northern District of Alabama, Ferguson v. BBVA USA Bancshares, Inc., wherein the plaintiffs allege certain investment options within the Company’s employee retirement plan violate provisions of ERISA. The plaintiffs seek unspecified monetary relief. The Company has not yet filed its response to the allegations. The Company believes there are substantial defenses to these claims and intends to defend them vigorously.

The Company is or may become involved from time to time in information-gathering requests, reviews, investigations and proceedings (both formal and informal) by various governmental regulatory agencies, law enforcement authorities and self-regulatory bodies regarding the Company’s business. Such matters may result in material adverse consequences, including without limitation adverse judgments, settlements, fines, penalties, orders, injunctions, alterations in the Company’s business practices or other actions, and could result in additional expenses and collateral costs, including reputational damage, which could have a material adverse impact on the Company’s business, consolidated financial position, results of operations or cash flows.

The Company assesses its liabilities and contingencies in connection with outstanding legal proceedings utilizing the latest information available. Where it is probable that the Company will incur a loss and the amount of the loss can be reasonably estimated, the Company records a liability in its consolidated financial statements. These legal reserves may be increased or decreased to reflect any relevant developments. Where a loss is not probable or the amount of a probable loss is not reasonably estimable, the Company does not accrue legal reserves. At ~~March 31,~~June 30, 2019, the Company had accrued legal reserves in the amount of $24 million. Additionally, for those matters where a loss is reasonably possible and the amount of loss is reasonably estimable, the Company estimates the amount of losses that it could incur beyond the accrued legal reserves. Under U.S. GAAP, an event is “reasonably possible” if “the chance of the future event or events occurring is more than remote but less than likely” and an event is “remote" if “the chance of the future event or events occurring is slight.” For a limited number of legal matters in which the Company is involved, the Company is able to estimate a range of reasonably possible losses in excess of related reserves, if any. Management currently estimates these losses to range from $0 to approximately $87 million. This estimated range of reasonably possible losses is based on information available at ~~March 31,~~June 30, 2019. The matters underlying the estimated range will change from time to time, and the actual results may vary significantly from this estimate. Those matters for which an estimate is not possible are not included within this estimated range; therefore, this estimated range does not represent the Company’s maximum loss exposure.

While the outcome of legal proceedings and the timing of the ultimate resolution are inherently difficult to predict,

based on information currently available, advice of counsel and available insurance coverage, the Company believes that it has established adequate legal reserves. Further, based upon available information, the Company is of the opinion that these legal proceedings, individually or in the aggregate, will not have a material adverse effect on the Company’s financial condition or results of operations. However, in the event of unexpected future developments, it is possible that the ultimate resolution of those matters, if unfavorable, may be material to the Company’s results of operations for any particular period, depending, in part, upon the size of the loss or liability imposed and the operating results for the applicable period.

Income Tax Review

The Company is subject to review and examination from various tax authorities. The Company is currently under examination by a number of states, and has received notices of proposed adjustments related to state income taxes due for prior years. Management believes that adequate provisions for income taxes have been recorded.

(9) Fair Value Measurements

See Note 19, Fair Value Measurements, in the Notes to the December 31, 2018, Consolidated Financial Statements for a description of valuation methodologies for assets and liabilities measured at fair value on a recurring and non-recurring basis.

The following tables summarize the financial assets and liabilities measured at fair value on a recurring basis.


			Fair Value Measurements at the End of the Reporting Period Using								Fair Value Measurements at the End of the Reporting Period Using
	Fair Value		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs		Fair Value		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
	March 31, 2019		(Level 1)		(Level 2)		(Level 3)		June 30, 2019		(Level 1)		(Level 2)		(Level 3)
	(In Thousands)								(In Thousands)
Recurring fair value measurements
Assets:
Trading account assets:
U.S. Treasury and other U.S. government agencies	$	76,277	$	76,277	$	—	$	—	$	83,889	$	83,889	$	—	$	—
Interest rate contracts	210,707		—		210,707		—		334,687		—		334,687		—
Foreign exchange contracts	19,139		—		19,139		—		21,522		—		21,522		—
Total trading account assets	306,123		76,277		229,846		—		440,098		83,889		356,209		—
Debt securities available for sale:
U.S. Treasury and other U.S. government agencies	4,173,660		3,529,039		644,621		—		4,195,065		3,586,339		608,726		—
Mortgage-backed securities	1,845,201		—		1,845,201		—		1,692,255		—		1,692,255		—
Collateralized mortgage obligations	3,277,275		—		3,277,275		—		3,122,747		—		3,122,747		—
States and political subdivisions	882		—		882		—		883		—		883		—
Total debt securities available for sale	9,297,018		3,529,039		5,767,979		—		9,010,950		3,586,339		5,424,611		—
Loans held for sale	76,938		—		76,938		—		90,537		—		90,537		—
Derivative assets:
Interest rate contracts	15,923		456		12,309		3,158		25,406		664		20,895		3,847
Equity contracts	13,168		—		13,168		—		9,176		—		9,176		—
Foreign exchange contracts	3,053		—		3,053		—		408		—		408		—
Total derivative assets	32,144		456		28,530		3,158		34,990		664		30,479		3,847
Other assets:
Equity securities	15,705		15,705		—		—		16,872		16,872		—		—
MSR	47,545		—		—		47,545		41,966		—		—		41,966
SBIC	93,343		—		—		93,343		102,065		—		—		102,065
Liabilities:
Trading account liabilities:
U.S. Treasury and other U.S. government agencies	$	30,975	$	30,975	$	—	$	—	$	2,067	$	2,067	$	—	$	—
Interest rate contracts	101,105		—		101,105		—		102,812		—		102,812		—
Foreign exchange contracts	16,865		—		16,865		—		19,279		—		19,279		—
Total trading account liabilities	148,945		30,975		117,970		—		124,158		2,067		122,091		—
Derivative liabilities:
Interest rate contracts	26,837		—		26,837		—		5,518		—		5,518		—
Equity contracts	11,438		—		11,438		—		7,907		—		7,907		—
Foreign exchange contracts	674		—		674		—		1,854		—		1,854		—
Total derivative liabilities	38,949		—		38,949		—		15,279		—		15,279		—



			Fair Value Measurements at the End of the Reporting Period Using
	Fair Value		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
	December 31, 2018		(Level 1)		(Level 2)		(Level 3)
	(In Thousands)
Recurring fair value measurements
Assets:			��
Trading account assets:
U.S. Treasury and other U.S. government agencies	$	68,922	$	68,922	$	—	$	—
Interest rate contracts	149,269		—		149,269		—
Foreign exchange contracts	19,465		—		19,465		—
Total trading account assets	237,656		68,922		168,734		—
Debt securities available for sale:
U.S. Treasury and other U.S. government agencies	5,431,467		4,746,335		685,132		—
Mortgage-backed securities	2,129,821		—		2,129,821		—
Collateralized mortgage obligations	3,418,979		—		3,418,979		—
States and political subdivisions	949		—		949		—
Total debt securities available for sale	10,981,216		4,746,335		6,234,881		—
Loans held for sale	68,766		—		68,766		—
Derivative assets:
Interest rate contracts	18,045		—		16,033		2,012
Equity contracts	14,185		—		14,185		—
Foreign exchange contracts	1,763		—		1,763		—
Total derivative assets	33,993		—		31,981		2,012
Other assets:
Equity securities	17,839		17,839		—		—
MSR	51,539		—		—		51,539
SBIC	80,074		—		—		80,074
Liabilities:
Trading account liabilities:
Interest rate contracts	$	130,704	$	—	$	130,704	$	—
Foreign exchange contracts	17,341		—		17,341		—
Total trading account liabilities	148,045		—		148,045		—
Derivative liabilities:
Interest rate contracts	31,438		—		31,438		—
Equity contracts	12,434		—		12,434		—
Foreign exchange contracts	1,111		—		1,111		—
Total derivative liabilities	44,983		—		44,983		—

There were no transfers between Levels 1 or 2 of the fair value hierarchy for the three and six months ended ~~March 31,~~June 30, 2019 and 2018. It is the Company’s policy to value any transfers between levels of the fair value hierarchy based on end of period fair values.

The following ~~table reconciles~~tables reconcile the assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3).


	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)							Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
Three Months Ended March 31,	Interest Rate Contracts, net		Other Assets - MSR			Other Assets - SBIC
Three Months Ended June 30,								Interest Rate Contracts, net		Other Assets - MSR			Other Assets - SBIC
	(In Thousands)							(In Thousands)
Balance, December 31, 2017	$	2,416	$	49,597		$	45,042
Balance, March 31, 2018								$	2,608	$	53,025		$	47,987
Transfers into Level 3	—		—			—		—		—			—
Transfers out of Level 3	—		—			—		—		—			—
Total gains or losses (realized/unrealized):
Included in earnings (1)	192		1,885			—		2		(878		)	(6,673		)
Included in other comprehensive income	—		—			—		—		—			—
Purchases, issuances, sales and settlements:
Purchases	—		—			2,945		—		—			199
Issuances	—		1,543			—		—		2,129			—
Sales	—		—			—		—		—			—
Settlements	—		—			—		—		—			—
Balance, March 31, 2018	$	2,608	$	53,025		$	47,987
Change in unrealized gains (losses) included in earnings for the period, attributable to assets and liabilities still held at March 31, 2018	$	192	$	1,885		$	—
Balance, June 30, 2018								$	2,610	$	54,276		$	41,513
Change in unrealized gains (losses) included in earnings for the period, attributable to assets and liabilities still held at June 30, 2018								$	2	$	(878	)	$	(6,673	)

Balance, December 31, 2018	$	2,012	$	51,539		$	80,074
Balance, March 31, 2019								$	3,158	$	47,545		$	93,343
Transfers into Level 3	—		—			—		—		—			—
Transfers out of Level 3	—		—			—		—		—			—
Total gains or losses (realized/unrealized):
Included in earnings (1)	1,146		(5,053		)	7,557		689		(7,225		)	6,514
Included in other comprehensive income	—		—			—		—		—			—
Purchases, issuances, sales and settlements:
Purchases	—		—			5,712		—		—			2,208
Issuances	—		1,059			—		—		1,646			—
Sales	—		—			—		—		—			—
Settlements	—		—			—		—		—			—
Balance, March 31, 2019	$	3,158	$	47,545		$	93,343
Change in unrealized gains (losses) included in earnings for the period, attributable to assets and liabilities still held at March 31, 2019	$	1,146	$	(5,053	)	$	7,557
Balance, June 30, 2019								$	3,847	$	41,966		$	102,065
Change in unrealized gains (losses) included in earnings for the period, attributable to assets and liabilities still held at June 30, 2019								$	689	$	(7,225	)	$	6,514


(1)	Included in noninterest income in the Unaudited Condensed Consolidated Statements of Income.



	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
Six Months Ended June 30,	Interest Rate Contracts, net		Other Assets - MSR			Other Assets - SBIC
	(In Thousands)
Balance, December 31, 2017	$	2,416	$	49,597		$	45,042
Transfers into Level 3	—		—			—
Transfers out of Level 3	—		—			—
Total gains or losses (realized/unrealized):
Included in earnings (1)	194		1,007			(6,673		)
Included in other comprehensive income	—		—			—
Purchases, issuances, sales and settlements:
Purchases	—		—			3,144
Issuances	—		3,672			—
Sales	—		—			—
Settlements	—		—			—
Balance, June 30, 2018	$	2,610	$	54,276		$	41,513
Change in unrealized gains (losses) included in earnings for the period, attributable to assets and liabilities still held at June 30, 2018	$	194	$	1,007		$	(6,673	)

Balance, December 31, 2018	$	2,012	$	51,539		$	80,074
Transfers into Level 3	—		—			—
Transfers out of Level 3	—		—			—
Total gains or losses (realized/unrealized):
Included in earnings (1)	1,835		(12,278		)	14,071
Included in other comprehensive income	—		—			—
Purchases, issuances, sales and settlements:
Purchases	—		—			7,920
Issuances	—		2,705			—
Sales	—		—			—
Settlements	—		—			—
Balance, June 30, 2019	$	3,847	$	41,966		$	102,065
Change in unrealized gains (losses) included in earnings for the period, attributable to assets and liabilities still held at June 30, 2019	$	1,835	$	(12,278	)	$	14,071


(1)	Included in noninterest income in the Unaudited Condensed Consolidated Statements of Income.

Assets Measured at Fair Value on a Nonrecurring Basis

Periodically, certain assets may be recorded at fair value on a non-recurring basis. These adjustments to fair value usually result from the application of lower of cost or fair value accounting or write-downs of individual assets due to impairment. The following tables represent those assets that were subject to fair value adjustments during the three and six months ended ~~March 31,~~June 30, 2019 and 2018, and still held as of the end of the period, and the related gains and losses from fair value adjustments on assets sold during the period as well as assets still held as of the end of the period.


			Fair Value Measurements at the End of the Reporting Period Using											Fair Value Measurements at the End of the Reporting Period Using
	Fair Value		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs		Total Gains (Losses)			Fair Value		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs		Total Gains (Losses)
	March 31, 2019		(Level 1)		(Level 2)		(Level 3)		Three Months Ended March 31, 2019			June 30, 2019		(Level 1)		(Level 2)		(Level 3)		Three Months Ended June 30, 2019			Six Months Ended June 30, 2019
	(In Thousands)											(In Thousands)
Nonrecurring fair value measurements	Nonrecurring fair value measurements											Nonrecurring fair value measurements
Assets:
Debt securities held to maturity												$	1,072	$	—	$	—	$	1,072	$	(113	)	$	(113	)
Impaired loans (1)												3,404		—		—		3,404		(41,482		)	(43,525		)
OREO	$	14,983	$	—	$	—	$	14,983	$	(1,973	)	15,302		—		—		15,302		(786		)	(2,759		)

			Fair Value Measurements at the End of the Reporting Period Using											Fair Value Measurements at the End of the Reporting Period Using
	Fair Value		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs		Total Gains (Losses)			Fair Value		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs		Total Gains (Losses)
	March 31, 2018		(Level 1)		(Level 2)		(Level 3)		Three Months Ended March 31, 2018			June 30, 2018		(Level 1)		(Level 2)		(Level 3)		Three Months Ended June 30, 2018			Six Months Ended June 30, 2018
	(In Thousands)											(In Thousands)
Nonrecurring fair value measurements	Nonrecurring fair value measurements											Nonrecurring fair value measurements
Assets:
Debt securities held to maturity	$	2,260	$	—	$	—	$	2,260	$	(309	)	$	2,391	$	—	$	—	$	2,391	$	—		$	(309	)
Impaired loans (1)	7,251		—		—		7,251		(4,559		)	2,905		—		—		2,905		(6,882		)	(11,441		)
OREO	16,147		—		—		16,147		(527		)	16,499		—		—		16,499		(558		)	(1,085		)


(1)	Total gains (losses) represent charge-offs on impaired loans for which adjustments are based on the appraised value of the collateral.

The following is a description of the methodologies applied for valuing these assets:

Debt securities held to maturity – Nonrecurring fair value adjustments on debt securities held to maturity reflect impairment write-downs which the Company believes are other than temporary. For analyzing these securities, the Company has retained a third-party valuation firm. Impairment is determined through the use of cash flow models that estimate cash flows on the underlying mortgages using security-specific collateral and the transaction structure. The cash flow models incorporate the remaining cash flows which are adjusted for future expected credit losses. Future expected credit losses are determined by using various assumptions such as current default rates, prepayment rates, and loss severities. The Company develops these assumptions through the use of market data published by third-party sources in addition to historical analysis which includes actual delinquency and default information through the current period. The expected cash flows are then discounted at the interest rate used to recognize interest income on the security to arrive at a present value amount. As the fair value assessments are derived using a discounted cash flow modeling approach, the nonrecurring fair value adjustments are classified as Level 3.

Impaired Loans – Impaired loans measured at fair value on a non-recurring basis represent the carrying value of impaired loans for which adjustments are based on the appraised value of the collateral. Nonrecurring fair value adjustments to impaired loans reflect full or partial write-downs that are generally based on the fair value of the underlying collateral supporting the loan. Loans subjected to nonrecurring fair value adjustments based on the current estimated fair value of the collateral are classified as Level 3.

OREO – OREO is recorded at the lower of recorded balance or fair value, which is based on appraisals and third-party price opinions, less estimated costs to sell. The fair value is classified as Level 3.

The tables below presents information about the significant unobservable inputs for material assets and liabilities measured at fair value using significant unobservable inputs (Level 3) on a recurring and nonrecurring basis.

Quantitative Information about Level 3 Fair Value Measurements

Fair Value at

Range of Unobservable Inputs

Fair Value at

Range of Unobservable Inputs

March 31, 2019

Valuation Technique

Unobservable Input(s)

(Weighted Average)

June 30, 2019

Valuation Technique

Unobservable Input(s)

(Weighted Average)

(In Thousands)

Recurring fair value measurements:

Interest rate contracts, net

3,158

Discounted cash flow

Closing ratios (pull-through)

21.8% - 99.9% (66.5%)

3,847

Discounted cash flow

Closing ratios (pull-through)

21.5% - 99.9% (65.6%)

Cap grids

0.5% - 3.2% (1.1%)

Cap grids

0.5% - 3.0% (1.1%)

Other assets - MSRs

47,545

Discounted cash flow

Option adjusted spread

6.3% - 8.5% (6.5%)

41,966

Discounted cash flow

Option adjusted spread

6.0% - 9.0% (6.4%)

Constant prepayment rate or life speed

0.0% - 60.0% (10.5%)

Constant prepayment rate or life speed

0.0% - 78.3% (12.8%)

Cost to service

$65 - $4,000 ($86)

Cost to service

$65 - $4,000 ($88)

Other assets - SBIC investments

93,343

Transaction price

N/A

102,065

Transaction price

N/A

Nonrecurring fair value measurements:

Debt securities held to maturity

1,072

Discounted cash flow

Prepayment rate

9.9%

Default rate

6.0%

Loss severity

61.9%

Impaired loans

3,404

Appraised value

0.0% - 80.0% (12.6%)

OREO

14,983

Appraised value

8.0% (1)

15,302

Appraised value

8.0% (1)


(1)	Represents discount to appraised value for estimated costs to sell.



			Quantitative Information about Level 3 Fair Value Measurements
	Fair Value at				Range of Unobservable Inputs
	December 31, 2018		Valuation Technique	Unobservable Input(s)	(Weighted Average)
	(In Thousands)
Recurring fair value measurements:
Interest rate contracts, net	$	2,012	Discounted cash flow	Closing ratios (pull-through)	15.0% - 99.6% (61.5%)
				Cap grids	0.5% - 3.1% (1.0%)
Other assets - MSRs	51,539		Discounted cash flow	Option adjusted spread	6.3% - 8.5% (6.5%)
				Constant prepayment rate or life speed	0.0% - 43.6% (9.6%)
				Cost to service	$65 - $4,000 ($84)
Other assets - SBIC investments	80,074		Transaction price	Transaction price	N/A
Nonrecurring fair value measurements:
Debt securities held to maturity	$	4,380	Discounted cash flow	Prepayment rate	8.4%
				Default rate	9.4%
				Loss severity	83.5%
Impaired loans	57,968		Appraised value	Appraised value	0.0% - 70.0% (14.6%)
OREO	16,869		Appraised value	Appraised value	8.0% (1)


(1)	Represents discount to appraised value for estimated costs to sell.

The following provides a description of the sensitivity of the valuation technique to changes in unobservable inputs for recurring fair value measurements.

Recurring Fair Value Measurements Using Significant Unobservable Inputs

Interest Rate Contracts - Interest Rate Lock Commitments

Significant unobservable inputs used in the valuation of interest rate contracts are pull-through and cap grids. Increases or decreases in the pull-through or cap grids will have a corresponding impact in the value of interest rate contracts.

Other Assets - MSRs

The significant unobservable inputs used in the fair value measurement of MSRs are option-adjusted spreads, constant prepayment rate or life speed, and cost to service assumptions. The impact of prepayments and changes in the option-adjusted spread are based on a variety of underlying inputs. Increases or decreases to the underlying cash flow inputs will have a corresponding impact on the value of the MSR asset. The impact of the costs to service assumption will have a directionally opposite change in the fair value of the MSR asset.

Other Assets - SBIC Investments

The significant unobservable inputs used in the fair value measurement of SBIC Investments are initially based upon transaction price. Increases or decreases in valuation factors such as recent or proposed purchase or sale of debt or equity of the issuer, pricing by other dealers in similar securities, size of position held, liquidity of the market will have a corresponding impact in the value of SBIC investments.

Fair Value of Financial Instruments

The carrying amounts and estimated fair values, as well as the level within the fair value hierarchy, of the Company’s financial instruments, excluding financial instruments measured at fair value on a recurring basis, are as follows:


	March 31, 2019										June 30, 2019
	Carrying Amount		Estimated Fair Value		Level 1		Level 2		Level 3		Carrying Amount		Estimated Fair Value		Level 1		Level 2		Level 3
	(In Thousands)										(In Thousands)
Financial Instruments:
Assets:
Cash and cash equivalents	$	6,008,461	$	6,008,461	$	6,008,461	$	—	$	—	$	5,801,161	$	5,801,161	$	5,801,161	$	—	$	—
Debt securities held to maturity	4,575,041		4,654,927		1,305,138		2,587,208		762,581		4,912,483		5,065,268		1,337,243		2,976,186		751,839
Loans and loans held for sale not measured at fair value, net	63,988,406		61,266,387		—		—		61,266,387
Loans, net											62,333,893		60,052,631		—		—		60,052,631
Liabilities:
Deposits	$	74,380,308	$	74,459,748	$	—	$	74,459,748	$	—	$	72,588,810	$	72,624,252	$	—	$	72,624,252	$	—
FHLB and other borrowings	4,011,160		4,018,267		—		4,018,267		—		4,052,969		4,081,964		—		4,081,964		—
Federal funds purchased and securities sold under agreements to repurchase	188,024		188,024		—		188,024		—		191,739		191,739		—		191,739		—



	December 31, 2018
	Carrying Amount		Estimated Fair Value		Level 1		Level 2			Level 3
	(In Thousands)
Financial Instruments:
Assets:
Cash and cash equivalents	$	3,332,626	$	3,332,626	$	3,332,626	$	—		$	—
Debt securities held to maturity	2,885,613		2,925,420		—		2,106,510			818,910
Loans, net	64,301,312		61,186,996		—		—			61,186,996
Liabilities:
Deposits	$	72,167,987	$	72,175,418	$	—	$	72,175,418		$	—
FHLB and other borrowings	3,987,590		3,935,945		—		3,935,945			—
Federal funds purchased and securities sold under agreements to repurchase	102,275		102,275		—		102,275		��	—

Fair Value Option

The Company has elected to apply the fair value option for single family real estate mortgage loans originated for resale in the secondary market. The election allows for a more effective offset of the changes in fair values of the loans and the derivative instruments used to economically hedge them without the burden of complying with the requirements for hedge accounting. The Company has not elected the fair value option for other loans held for sale primarily because they are not economically hedged using derivative instruments.

At both ~~March 31,~~June 30, 2019 and December 31, 2018, no loans held for sale for which the fair value option was elected were 90 days or more past due or were in nonaccrual. Interest income on mortgage loans held for sale is recognized based on contractual rates and is reflected in interest and fees on loans in the Company's Unaudited Condensed Consolidated Statements of Income. Net gains (losses) of ~~$245~~$423 thousand and ~~$(173)~~$(200) thousand resulting from changes in fair value of these loans were recorded in noninterest income during the three months ended ~~March 31,~~June 30, 2019 and 2018, respectively. Net gains (losses) of $668 thousand and $(373) thousand resulting from changes in fair value of these loans were recorded in noninterest income during the six months ended June 30, 2019 and 2018, respectively.

The Company also had fair value changes on forward contracts related to residential mortgage loans held for sale of approximately ~~$(89)~~$40 thousand and ~~$80~~$(235) thousand for the three months ended ~~March 31,~~June 30, 2019 and 2018, respectively. The Company also had fair value changes on forward contracts related to residential mortgage loans held for sale of

approximately $(49) thousand and $(155) thousand for the six months ended June 30, 2019 and 2018, respectively. An immaterial portion of these amounts was attributable to changes in instrument-specific credit risk.

The following table summarizes the difference between the aggregate fair value and the aggregate unpaid principal balance for residential mortgage loans measured at fair value.


	Aggregate Fair Value		Aggregate Unpaid Principal Balance		Difference		Aggregate Fair Value		Aggregate Unpaid Principal Balance		Difference
	(In Thousands)						(In Thousands)
March 31, 2019
June 30, 2019
Residential mortgage loans held for sale	$	76,938	$	73,978	$	2,960	$	90,537	$	87,153	$	3,384
December 31, 2018
Residential mortgage loans held for sale	$	68,766	$	66,052	$	2,714	$	68,766	$	66,052	$	2,714

(10) Comprehensive Income

Comprehensive income is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances arising from nonowner sources. The following summarizes the change in the components of other comprehensive income.


																Three Months Ended June 30,
																2019						2018
																Pretax		Tax Expense/ (Benefit)		After-tax		Pretax			Tax Expense/ (Benefit)			After-tax
																(In Thousands)
Other comprehensive income (loss):
Unrealized holding gains (losses) arising during period from debt securities available for sale																$	112,339	$	26,635	$	85,704	$	(43,560	)	$	(10,288	)	$	(33,272	)
Less: reclassification adjustment for net gains on sale of debt securities in net income																—		—		—		—			—			—
Net change in unrealized gains (losses) on debt securities available for sale																112,339		26,635		85,704		(43,560		)	(10,288		)	(33,272		)
Change in unamortized net holding losses on debt securities held to maturity																2,542		603		1,939		3,295			781			2,514
Unamortized unrealized net holding losses on debt securities available for sale transferred to debt securities held to maturity																—		—		—		—			—			—
Less: non-credit related impairment on debt securities held to maturity																108		26		82		—			—			—
Change in unamortized non-credit related impairment on debt securities held to maturity																174		42		132		373			88			285
Net change in unamortized holding gains on debt securities held to maturity																2,608		619		1,989		3,668			869			2,799
Unrealized holding gains arising during period from cash flow hedge instruments																96,932		22,982		73,950		11,794			3,213			8,581
Change in defined benefit plans																—		—		—		—			—			—
Other comprehensive income (loss)																$	211,879	$	50,236	$	161,643	$	(28,098	)	$	(6,206	)	$	(21,892	)


	Three Months Ended March 31,															Six Months Ended June 30,
	2019						2018									2019						2018
	Pretax		Tax Expense/ (Benefit)		After-tax		Pretax			Tax Expense/ (Benefit)			After-tax			Pretax		Tax Expense/ (Benefit)		After-tax		Pretax			Tax Expense/ (Benefit)			After-tax
	(In Thousands)															(In Thousands)
Other comprehensive income (loss):
Unrealized holding gains (losses) arising during period from debt securities available for sale	$	67,768	$	16,068	$	51,700	$	(54,845	)	$	(12,986	)	$	(41,859	)	$	180,107	$	42,703	$	137,404	$	(98,405	)	$	(23,274	)	$	(75,131	)
Less: reclassification adjustment for net gains on sale of debt securities in net income	8,958		2,124		6,834		—			—			—			8,958		2,124		6,834		—			—			—
Net change in unrealized gains (losses) on debt securities available for sale	58,810		13,944		44,866		(54,845		)	(12,986		)	(41,859		)	171,149		40,579		130,570		(98,405		)	(23,274		)	(75,131		)
Change in unamortized net holding losses on debt securities held to maturity	2,284		541		1,743		2,639			620			2,019			4,826		1,144		3,682		5,934			1,401			4,533
Unamortized unrealized net holding losses on debt securities available for sale transferred to debt securities held to maturity	—		—		—		(39,904		)	(9,417		)	(30,487		)	—		—		—		(39,904		)	(9,417		)	(30,487		)
Less: non-credit related impairment on debt securities held to maturity	—		—		—		262			62			200			108		26		82		262			62			200
Change in unamortized non-credit related impairment on debt securities held to maturity	482		114		368		171			41			130			656		156		500		544			129			415
Net change in unamortized holding gains (losses) on debt securities held to maturity	2,766		655		2,111		(37,356		)	(8,818		)	(28,538		)	5,374		1,274		4,100		(33,688		)	(7,949		)	(25,739		)
Unrealized holding gains (losses) arising during period from cash flow hedge instruments	31,518		7,465		24,053		(87		)	150			(237		)
Unrealized holding gains arising during period from cash flow hedge instruments																128,450		30,447		98,003		11,707			3,363			8,344
Change in defined benefit plans	4,089		970		3,119		(4,425		)	(1,046		)	(3,379		)	4,089		970		3,119		(4,425		)	(1,046		)	(3,379		)
Other comprehensive income (loss)	$	97,183	$	23,034	$	74,149	$	(96,713	)	$	(22,700	)	$	(74,013	)	$	309,062	$	73,270	$	235,792	$	(124,811	)	$	(28,906	)	$	(95,905	)

Activity in accumulated other comprehensive income (loss), net of tax was as follows:


	Unrealized Gains (Losses) on Debt Securities Available for Sale and Transferred to Held to Maturity			Accumulated Gains (Losses) on Cash Flow Hedging Instruments			Defined Benefit Plan Adjustment			Unamortized Impairment Losses on Debt Securities Held to Maturity			Total			Unrealized Gains (Losses) on Debt Securities Available for Sale and Transferred to Held to Maturity			Accumulated Gains (Losses) on Cash Flow Hedging Instruments			Defined Benefit Plan Adjustment			Unamortized Impairment Losses on Debt Securities Held to Maturity			Total
	(In Thousands)															(In Thousands)
Balance, December 31, 2017	$	(132,821	)	$	(24,765	)	$	(34,228	)	$	(5,591	)	$	(197,405	)	$	(132,821	)	$	(24,765	)	$	(34,228	)	$	(5,591	)	$	(197,405	)
Cumulative effect of adoption of ASU 2016-01	(13		)	—			—			—			(13		)	(13		)	—			—			—			(13		)
	$	(132,834	)	$	(24,765	)	$	(34,228	)	$	(5,591	)	$	(197,418	)	$	(132,834	)	$	(24,765	)	$	(34,228	)	$	(5,591	)	$	(197,418	)
Other comprehensive loss before reclassifications	(72,346		)	(7,407		)	—			(200		)	(79,953		)	(105,618		)	(9,115		)	—			(200		)	(114,933		)
Amounts reclassified from accumulated other comprehensive income (loss)	2,019			7,170			(3,379		)	130			5,940			4,533			17,459			(3,379		)	415			19,028
Net current period other comprehensive loss	(70,327		)	(237		)	(3,379		)	(70		)	(74,013		)
Balance, March 31, 2018	$	(203,161	)	$	(25,002	)	$	(37,607	)	$	(5,661	)	$	(271,431	)
Net current period other comprehensive (loss) income																(101,085		)	8,344			(3,379		)	215			(95,905		)
Balance, June 30, 2018																$	(233,919	)	$	(16,421	)	$	(37,607	)	$	(5,376	)	$	(293,323	)

Balance, December 31, 2018	$	(158,433	)	$	6,175		$	(29,495	)	$	(5,095	)	$	(186,848	)	$	(158,433	)	$	6,175		$	(29,495	)	$	(5,095	)	$	(186,848	)
Cumulative effect of adoption of ASUs (1)	(25,844		)	(1,040		)	(7,351		)	(1,201		)	(35,436		)	(25,844		)	(1,040		)	(7,351		)	(1,201		)	(35,436		)
	$	(184,277	)	$	5,135		$	(36,846	)	$	(6,296	)	$	(222,284	)	$	(184,277	)	$	5,135		$	(36,846	)	$	(6,296	)	$	(222,284	)
Other comprehensive income before reclassifications	51,700			23,001			—			—			74,701
Other comprehensive income (loss) before reclassifications																137,404			95,867			—			(82		)	233,189
Amounts reclassified from accumulated other comprehensive income (loss)	(5,091		)	1,052			3,119			368			(552		)	(3,152		)	2,136			3,119			500			2,603
Net current period other comprehensive income	46,609			24,053			3,119			368			74,149			134,252			98,003			3,119			418			235,792
Balance, March 31, 2019	$	(137,668	)	$	29,188		$	(33,727	)	$	(5,928	)	$	(148,135	)
Balance, June 30, 2019																$	(50,025	)	$	103,138		$	(33,727	)	$	(5,878	)	$	13,508


(1)	Related to the Company's adoption of ASU 2017-12 and ASU 2018-02 on January 1, 2019. See Note 1, Basis of Presentation, for additional information.

The following table presents information on reclassifications out of accumulated other comprehensive income (loss).


Details About Accumulated Other Comprehensive Income (Loss) Components	Amounts Reclassified From Accumulated Other Comprehensive Income (Loss)(1)						Condensed Consolidated Statements of Income Caption	Amounts Reclassified From Accumulated Other Comprehensive Income (Loss)(1)												Condensed Consolidated Statements of Income Caption
	Three Months Ended March 31,							Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018				2019			2018			2019			2018
	(In Thousands)							(In Thousands)
Unrealized Gains (Losses) on Debt Securities Available for Sale and Transferred to Held to Maturity	$	8,958		$	—		Investment securities gains, net	$	—		$	—		$	8,958		$	—		Investment securities gains, net
	(2,284		)	(2,639		)	Interest on debt securities held to maturity	(2,542		)	(3,295		)	(4,826		)	(5,934		)	Interest on debt securities held to maturity
	6,674			(2,639		)		(2,542		)	(3,295		)	4,132			(5,934		)
	(1,583		)	620			Income tax (expense) benefit	603			781			(980		)	1,401			Income tax (expense) benefit
	$	5,091		$	(2,019	)	Net of tax	$	(1,939	)	$	(2,514	)	$	3,152		$	(4,533	)	Net of tax

Accumulated Gains (Losses) on Cash Flow Hedging Instruments	$	(1,210	)	$	(8,890	)	Interest and fees on loans	$	(1,260	)	$	(13,167	)	$	(2,470	)	$	(22,057	)	Interest and fees on loans
	(169		)	(495		)	Interest on FHLB and other borrowings	(161		)	(302		)	(330		)	(797		)	Interest on FHLB and other borrowings
	(1,379		)	(9,385		)		(1,421		)	(13,469		)	(2,800		)	(22,854		)
	327			2,215			Income tax benefit	337			3,180			664			5,395			Income tax benefit
	$	(1,052	)	$	(7,170	)	Net of tax	$	(1,084	)	$	(10,289	)	$	(2,136	)	$	(17,459	)	Net of tax

Defined Benefit Plan Adjustment	$	(4,089	)	$	4,425		(2)	$	—		$	—		$	(4,089	)	$	4,425		(2)
	970			(1,046		)	Income tax benefit (expense)	—			—			970			(1,046		)	Income tax benefit (expense)
	$	(3,119	)	$	3,379		Net of tax	$	—		$	—		$	(3,119	)	$	3,379		Net of tax

Unamortized Impairment Losses on Debt Securities Held to Maturity	$	(482	)	$	(171	)	Interest on debt securities held to maturity	$	(174	)	$	(373	)	$	(656	)	$	(544	)	Interest on debt securities held to maturity
	114			41			Income tax benefit	42			88			156			129			Income tax benefit
	$	(368	)	$	(130	)	Net of tax	$	(132	)	$	(285	)	$	(500	)	$	(415	)	Net of tax


(1)	Amounts in parentheses indicate debits to the Unaudited Condensed Consolidated Statements of Income.


(2)	These accumulated other comprehensive income components are included in the computation of net periodic pension cost (see Note 17, Benefit Plans, in the Notes to the December 31, 2018, Consolidated Financial Statements for additional details).

(11) Supplemental Disclosure for Statement of Cash Flows

The following table presents the Company’s supplemental disclosures for statement of cash flows.


	Three Months Ended March 31,					Six Months Ended June 30,
	2019		2018			2019		2018
	(In Thousands)					(In Thousands)
Supplemental disclosures of cash flow information:
Interest paid	$	194,297	$	96,332		$	464,281	$	240,799
Net income taxes paid (refunded)	320		(569		)
Net income taxes paid						68,758		76,103
Supplemental schedule of noncash investing and financing activities:
Transfer of loans and loans held for sale to OREO	$	6,534	$	4,736		$	15,713	$	9,829
Transfer of available for sale debt securities to held to maturity debt securities	—		1,017,275			—		1,017,275
Transfer of loans to loans held for sale	1,196,883		—			1,196,883		—

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the Company’s Unaudited Condensed Consolidated Balance Sheets that sum to the total of the same such amounts shown in the Company's Unaudited Condensed Consolidated Statements of Cash Flows.


	Three Months Ended March 31,				Six Months Ended June 30,
	2019		2018		2019		2018
	(In Thousands)				(In Thousands)
Cash and cash equivalents	$	6,008,461	$	3,523,332	$	5,801,161	$	3,576,619
Restricted cash in other assets	131,378		171,562		145,212		163,914
Total cash, cash equivalents and restricted cash shown in the statement of cash flows	$	6,139,839	$	3,694,894	$	5,946,373	$	3,740,533

Restricted cash primarily represents cash collateral related to the Company's derivatives as well as amounts restricted for regulatory purposes related to BSI and BBVA ~~Compass Payments,~~Transfer Holdings, Inc. Restricted cash is included in other assets on the Company’s Unaudited Condensed Consolidated Balance Sheets.

(12) Segment Information

The Company’s operating segments are based on the Company’s organizational structure. Each segment reflects the manner in which financial information is evaluated by management. The operating segment results include certain overhead allocations and intercompany transactions. All intercompany transactions have been eliminated to determine the consolidated balances. The Company operates primarily in the United States, and, accordingly, revenue and assets outside the United States are not material. There are no individual customers whose attributable revenues exceed 10% of consolidated revenue.

The following tables present the segment information for the Company’s existing segments.


	Three Months Ended March 31, 2019														Three Months Ended June 30, 2019
	Commercial Banking and Wealth		Retail Banking		Corporate and Investment Banking		Treasury			Corporate Support and Other			Consolidated		Commercial Banking and Wealth		Retail Banking		Corporate and Investment Banking			Treasury			Corporate Support and Other			Consolidated
	(In Thousands)														(In Thousands)
Net interest income (expense)	$	339,608	$	383,820	$	37,814	$	(20,477	)	$	(57,676	)	$	683,089	$	349,653	$	395,618	$	41,111		$	(21,045	)	$	(105,588	)	$	659,749
Allocated provision (credit) for loan losses	57,440		103,405		25,930		373			(4,856		)	182,292		78,678		56,271		(675		)	(1,012		)	21,756			155,018
Noninterest income	60,985		112,135		36,517		12,486			35,637			257,760		68,494		122,685		39,711			2,659			50,732			284,281
Noninterest expense	181,561		298,594		39,879		5,589			56,350			581,973		171,357		307,098		39,183			4,416			76,260			598,314
Net income (loss) before income tax expense (benefit)	161,592		93,956		8,522		(13,953		)	(73,533		)	176,584		168,112		154,934		42,314			(21,790		)	(152,872		)	190,698
Income tax expense (benefit)	33,935		19,731		1,790		(2,930		)	(16,923		)	35,603		35,304		32,536		8,886			(4,576		)	(41,638		)	30,512
Net income (loss)	127,657		74,225		6,732		(11,023		)	(56,610		)	140,981		132,808		122,398		33,428			(17,214		)	(111,234		)	160,186
Less: net income attributable to noncontrolling interests	96		—		—		405			55			556		166		—		—			402			31			599
Net income (loss) attributable to BBVA Compass Bancshares, Inc.	$	127,561	$	74,225	$	6,732	$	(11,428	)	$	(56,665	)	$	140,425
Net income (loss) attributable to BBVA USA Bancshares, Inc.															$	132,642	$	122,398	$	33,428		$	(17,616	)	$	(111,265	)	$	159,587
Average assets	$	40,168,306	$	19,191,981	$	8,214,217	$	17,214,202		$	8,197,170		$	92,985,876	$	39,739,186	$	19,136,127	$	7,245,328		$	18,997,865		$	8,334,333		$	93,452,839


	Three Months Ended March 31, 2018															Three Months Ended June 30, 2018
	Commercial Banking and Wealth		Retail Banking		Corporate and Investment Banking			Treasury			Corporate Support and Other			Consolidated		Commercial Banking and Wealth		Retail Banking		Corporate and Investment Banking			Treasury			Corporate Support and Other			Consolidated
	(In Thousands)															(In Thousands)
Net interest income (expense)	$	322,872	$	341,378	$	46,396		$	(4,273	)	$	(83,768	)	$	622,605	$	337,880	$	366,140	$	49,522		$	(27,081	)	$	(82,962	)	$	643,499
Allocated provision (credit) for loan losses	20,407		29,057		(18,209		)	(121		)	25,895			57,029		16,862		30,477		(11,613		)	(389		)	55,943			91,280
Noninterest income	61,238		108,752		41,792			6,725			39,318			257,825		62,900		115,744		48,189			5,172			38,014			270,019
Noninterest expense	168,104		286,826		39,610			5,589			62,784			562,913		164,924		291,014		36,773			5,215			81,619			579,545
Net income (loss) before income tax expense (benefit)	195,599		134,247		66,787			(3,016		)	(133,129		)	260,488		218,994		160,393		72,551			(26,735		)	(182,510		)	242,693
Income tax expense (benefit)	41,076		28,192		14,025			(633		)	(30,862		)	51,798		45,989		33,683		15,236			(5,614		)	(30,999		)	58,295
Net income (loss)	154,523		106,055		52,762			(2,383		)	(102,267		)	208,690		173,005		126,710		57,315			(21,121		)	(151,511		)	184,398
Less: net income attributable to noncontrolling interests	35		—		—			409			17			461		223		—		—			413			(41		)	595
Net income (loss) attributable to BBVA Compass Bancshares, Inc.	$	154,488	$	106,055	$	52,762		$	(2,792	)	$	(102,284	)	$	208,229
Net income (loss) attributable to BBVA USA Bancshares, Inc.																$	172,782	$	126,710	$	57,315		$	(21,534	)	$	(151,470	)	$	183,803
Average assets	$	37,667,960	$	18,258,376	$	8,280,917		$	15,898,805		$	7,664,851		$	87,770,909	$	38,298,224	$	18,511,761	$	8,447,629		$	16,130,339		$	7,644,098		$	89,032,051



	Six Months Ended June 30, 2019
	Commercial Banking and Wealth		Retail Banking		Corporate and Investment Banking		Treasury			Corporate Support and Other			Consolidated
	(In Thousands)
Net interest income (expense)	$	689,261	$	779,438	$	78,925	$	(41,522	)	$	(163,264	)	$	1,342,838
Allocated provision (credit) for loan losses	136,118		159,676		25,255		(638		)	16,899			337,310
Noninterest income	129,480		234,821		76,228		15,145			86,367			542,041
Noninterest expense	352,918		605,692		79,062		10,004			132,611			1,180,287
Net income (loss) before income tax expense (benefit)	329,705		248,891		50,836		(35,743		)	(226,407		)	367,282
Income tax expense (benefit)	69,238		52,267		10,675		(7,506		)	(58,559		)	66,115
Net income (loss)	260,467		196,624		40,161		(28,237		)	(167,848		)	301,167
Less: net income attributable to noncontrolling interests	262		—		—		807			86			1,155
Net income (loss) attributable to BBVA USA Bancshares, Inc.	$	260,205	$	196,624	$	40,161	$	(29,044	)	$	(167,934	)	$	300,012
Average assets	$	39,952,560	$	19,163,900	$	7,727,096	$	18,110,961		$	8,266,131		$	93,220,648



	Six Months Ended June 30, 2018
	Commercial Banking and Wealth		Retail Banking		Corporate and Investment Banking			Treasury			Corporate Support and Other			Consolidated
	(In Thousands)
Net interest income (expense)	$	660,752	$	707,518	$	95,918		$	(31,355	)	$	(166,729	)	$	1,266,104
Allocated provision (credit) for loan losses	37,269		59,534		(29,822		)	(511		)	81,839			148,309
Noninterest income	124,138		224,496		89,981			11,897			77,332			527,844
Noninterest expense	333,028		577,840		76,383			10,804			144,403			1,142,458
Net income (loss) before income tax expense (benefit)	414,593		294,640		139,338			(29,751		)	(315,639		)	503,181
Income tax expense (benefit)	87,064		61,874		29,261			(6,248		)	(61,858		)	110,093
Net income (loss)	327,529		232,766		110,077			(23,503		)	(253,781		)	393,088
Less: net income attributable to noncontrolling interests	258		—		—			822			(24		)	1,056
Net income (loss) attributable to BBVA USA Bancshares, Inc.	$	327,271	$	232,766	$	110,077		$	(24,325	)	$	(253,757	)	$	392,032
Average assets	$	37,984,833	$	18,385,768	$	8,364,734		$	16,015,211		$	7,654,418		$	88,404,964

The financial information presented was derived from the internal profitability reporting system used by management to monitor and manage the financial performance of the Company. This information is based on internal management accounting policies that have been developed to reflect the underlying economics of the businesses. These policies address the methodologies applied and include policies related to funds transfer pricing, cost allocations and capital allocations.

Funds transfer pricing was used in the determination of net interest income earned primarily on loans and deposits. The method employed for funds transfer pricing is a matched funding concept whereby lines of business which are fund providers are credited and those that are fund users are charged based on maturity, prepayment and/or repricing characteristics applied on an instrument level. Costs for centrally managed operations are generally allocated to the lines of business based on the utilization of services provided or other appropriate indicators. Capital is allocated to the lines of business based upon the underlying risks in each business considering economic and regulatory capital standards.

The development and application of these methodologies is a dynamic process. Accordingly, prior period financial results have been revised to reflect management accounting enhancements and changes in the Company's organizational structure. The 2018 segment information has been revised to conform to the 2019 presentation. In addition, unlike financial accounting, there is no authoritative literature for management accounting similar to U.S. GAAP. Consequently, reported results are not necessarily comparable with those presented by other financial institutions.

(13) Revenue from Contracts with Customers

The following tables depict the disaggregation of revenue according to revenue type and segment.


	Commercial Banking and Wealth		Retail Banking		Corporate and Investment Banking		Treasury and Corporate Support and Other		Total			Commercial Banking and Wealth		Retail Banking		Corporate and Investment Banking		Treasury and Corporate Support and Other		Total
	(In Thousands)											(In Thousands)
Three Months Ended March 31, 2019
Three Months Ended June 30, 2019											Three Months Ended June 30, 2019
Service charges on deposit accounts	$	12,340	$	44,917	$	1,651	$	—	$	58,908		$	12,693	$	47,387	$	1,651	$	—	$	61,731
Card and merchant processing fees	8,287		34,180		—		3,535		46,002			9,173		37,316		—		3,866		50,355
Investment services sales fees	26,696		—		—		—		26,696			31,333		—		—		—		31,333
Money transfer income	—		—		—		21,981		21,981			—		—		—		25,272		25,272
Investment banking and advisory fees	—		—		18,857		—		18,857			—		—		20,758		—		20,758
Asset management fees	10,767		—		—		—		10,767			11,867		—		—		—		11,867
	58,090		79,097		20,508		25,516		183,211			65,066		84,703		22,409		29,138		201,316
Other revenues (1)	2,895		33,038		16,009		22,607		74,549			3,428		37,982		17,302		24,253		82,965
Total noninterest income	$	60,985	$	112,135	$	36,517	$	48,123	$	257,760		$	68,494	$	122,685	$	39,711	$	53,391	$	284,281

Three Months Ended March 31, 2018
Three Months Ended June 30, 2018
Service charges on deposit accounts	$	11,206	$	43,340	$	1,615	$	—	$	56,161		$	11,564	$	45,284	$	1,733	$	—	$	58,581
Card and merchant processing fees	6,704		29,953		—		3,021		39,678			7,404		33,351		—		3,293		44,048
Investment services sales fees	30,108		—		—		—		30,108			29,782		—		—		—		29,782
Money transfer income	—		—		—		20,688		20,688			—		—		—		23,920		23,920
Investment banking and advisory fees	—		—		23,896		—		23,896			—		—		24,546		—		24,546
Asset management fees	10,770		—		—		—		10,770			10,989		—		—		—		10,989
	58,788		73,293		25,511		23,709		181,301			59,739		78,635		26,279		27,213		191,866
Other revenues (1)	2,450		35,459		16,281		22,334		76,524			3,161		37,109		21,910		15,973		78,153
Total noninterest income	$	61,238	$	108,752	$	41,792	$	46,043	$	257,825		$	62,900	$	115,744	$	48,189	$	43,186	$	270,019


(1)	Other revenues primarily relate to revenues not derived from contracts with customers.



	Commercial Banking and Wealth		Retail Banking		Corporate and Investment Banking		Treasury and Corporate Support and Other		Total
	(In Thousands)
Six Months Ended June 30, 2019
Service charges on deposit accounts	$	25,033	$	92,304	$	3,302	$	—	$	120,639
Card and merchant processing fees	17,460		71,496		—		7,401		96,357
Investment services sales fees	58,029		—		—		—		58,029
Money transfer income	—		—		—		47,253		47,253
Investment banking and advisory fees	—		—		39,615		—		39,615
Asset management fees	22,634		—		—		—		22,634
	123,156		163,800		42,917		54,654		384,527
Other revenues (1)	6,324		71,021		33,311		46,858		157,514
Total noninterest income	$	129,480	$	234,821	$	76,228	$	101,512	$	542,041

Six Months Ended June 30, 2018
Service charges on deposit accounts	$	22,770	$	88,623	$	3,349	$	—	$	114,742
Card and merchant processing fees	14,107		63,304		—		6,315		83,726
Investment services sales fees	59,890		—		—		—		59,890
Money transfer income	—		—		—		44,608		44,608
Investment banking and advisory fees	—		—		48,442		—		48,442
Asset management fees	21,759		—		—		—		21,759
	118,526		151,927		51,791		50,923		373,167
Other revenues (1)	5,612		72,569		38,190		38,306		154,677
Total noninterest income	$	124,138	$	224,496	$	89,981	$	89,229	$	527,844


(1)	Other revenues primarily relate to revenues not derived from contracts with customers.

(14) Related Party Transactions

The Company enters into various transactions with BBVA that affect the Company’s business and operations. The following discloses the significant transactions between the Company and BBVA during 2019 and 2018.

The Company believes all of the transactions entered into between the Company and BBVA were transacted on terms that were no more or less beneficial to the Company than similar transactions entered into with unrelated market participants, including interest rates and transaction costs. The Company foresees executing similar transactions with BBVA in the future.

Derivatives

The Company has entered into various derivative contracts as noted below with BBVA as the upstream counterparty. The total notional amount of outstanding derivative contracts between the Company and BBVA are ~~$4.1~~$3.9 billion and 4.1 billion as of ~~both March 31,~~June 30, 2019 and December 31, ~~2018.~~2018, respectively. The net fair value of outstanding derivative contracts between the Company and BBVA are detailed below.


	March 31, 2019			December 31, 2018			June 30, 2019			December 31, 2018
	(In Thousands)						(In Thousands)
Derivative contracts:
Fair value hedges	$	(13,132	)	$	(24,839	)	$	7,434		$	(24,839	)
Cash flow hedges	215			174			139			174
Free-standing derivatives not designated as hedging instruments	14,259			23,378			(333		)	23,378

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

The Company enters into agreements with BBVA as the counterparty under which it purchases/sells securities subject to an obligation to resell/repurchase the same or similar securities. The following represents the amount of securities purchased under agreement to resell and securities sold under agreement to repurchase where BBVA is the counterparty.


	March 31, 2019		December 31, 2018		June 30, 2019		December 31, 2018
	(In Thousands)				(In Thousands)
Securities purchased under agreements to resell	$	187,447	$	109,947	$	175,831	$	109,947
Securities sold under agreements to repurchase	29,095		—		191,739		—

Borrowings

BSI, a wholly owned subsidiary of the Company, had a $420 million revolving note and cash subordination agreement with BBVA that was executed on March 16, 2012, with an original maturity date of March 16, 2018. On March 16, 2017, the agreement was amended to increase the available amount to $450 million and the maturity date was extended to March 16, 2023. On March 16, 2017, BSI entered into an uncommitted demand facility agreement with BBVA for a revolving loan facility up to $1 billion to be used for trade settlement purposes. BSI has not drawn against this facility in 2019. At both ~~March 31,~~June 30, 2019 and December 31, 2018 there was no amount outstanding under the revolving note and cash subordination agreement. There was no interest expense related to these agreements for the three months ended June 30, 2019 and $112 thousand for the three months ended June 30, 2018 and are included in interest on other short-term borrowings within the Company's Unaudited Condensed Consolidated Statements of Income. Interest expense related to these agreements was $25 thousand and ~~$120~~$232 thousand for the ~~three~~six months ended ~~March 31,~~June 30, 2019 and 2018, respectively, and are included in interest on other short-term borrowings within the Company's Unaudited Condensed Consolidated Statements of Income.

Service and Referral Agreements

The Company and its affiliates entered into or were subject to various service and referral agreements with BBVA and its affiliates. Each of the agreements was done in the ordinary course of business and on market terms. Income associated with these agreements was ~~$4.1~~$7.5 million and ~~$12.1~~$13.2 million for the three months ended ~~March 31,~~June 30, 2019 and 2018, respectively, and is recorded as a component of noninterest income within the Company's Unaudited Condensed Consolidated Statements of Income. Expenses associated with these agreements was ~~$8.5~~$8.0 million and ~~$7.3~~$8.2 million for the three months ended ~~March 31,~~June 30, 2019 and 2018, respectively, and is recorded as a component of noninterest expense within the Company's Unaudited Condensed Consolidated Statements of Income. Income associated with these agreements was $11.6 million and $25.3 million for the six months ended June 30, 2019 and 2018, respectively, and is recorded as a component of noninterest income within the Company's Unaudited Condensed Consolidated Statements of Income. Expenses associated with these agreements was $16.5 million and $15.5 million for the six months ended June 30, 2019 and 2018, respectively, and is recorded as a component of noninterest expense within the Company's Unaudited Condensed Consolidated Statements of Income.

Series A Preferred Stock

BBVA is the sole holder of the Series A Preferred Stock that the Company issued in December 2015. At both ~~March 31,~~June 30, 2019 and December 31, 2018, the carrying amount of the Series A Preferred Stock was approximately $229 million. During the ~~three~~six months ended ~~March 31,~~June 30, 2019 and 2018, the Company paid ~~$4.5~~$9.2 million and ~~$3.9~~$8.1 million, respectively, of preferred stock dividends to BBVA.

Loan Sales to Related Parties

During the ~~three~~six months ended ~~March 31,~~June 30, 2019, the Company transferred ~~$1.2 billion of commercial loans~~ to loans held for sale ~~as the Company plans to sell these~~and subsequently sold $1.2 billion of commercial loans to BBVA, S.A. New York Branch. ~~These~~The Company recognized a gain on the sale of the loans ~~are carried at the lower~~ of ~~cost or fair value. The loss recorded at transfer to loans held for sale was not material.~~$778 thousand.


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

Critical Accounting Policies

The accounting principles followed by the Company and the methods of applying these principles conform with accounting principles generally accepted in the United States of America and with general practices within the banking industry. The Company’s critical accounting policy relates to the allowance for loan losses. This critical accounting policy requires the use of estimates, assumptions and judgments which are based on information available as of the date of the financial statements. Accordingly, as this information changes, future financial statements could reflect the use of different estimates, assumptions and judgments. Certain determinations inherently have a greater reliance on the use of estimates, assumptions and judgments and, as such, have a greater possibility of producing results that could be materially different than originally reported. The Company’s significant accounting policies and changes in accounting principles and effects of new accounting pronouncements are discussed in detail in Note 1 in the Notes to Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018. Additional disclosures regarding the effects of new accounting pronouncements are included in Note 1, Basis of Presentation, in the Notes to the Unaudited Condensed Consolidated Financial Statements, included herein.

Executive Overview

Financial Performance

Consolidated net income attributable to the Company for the three months ended ~~March 31,~~June 30, 2019 was ~~$140.4~~$159.6 million compared to ~~$208.2~~$183.8 million earned during the three months ended ~~March 31,~~June 30, 2018. The Company’s results of operations for the three months ended ~~March 31,~~June 30, 2019, reflected higher net interest income and noninterest income and lower income tax expense offset by higher provision for loan losses and noninterest expense.

Net interest income totaled ~~$683.1~~$659.7 million for the three months ended ~~March 31,~~June 30, 2019 compared to ~~$622.6~~$643.5 million for the three months ended ~~March 31, 2018. The net interest margin for the three months ended March 31, 2019 was 3.41%, compared to 3.27% for the three months ended March 31,~~June 30, 2018. Net interest income was positively impacted by higher interest rates due to the impact of increases in the Federal Reserve Board benchmark interest rate partially offset by higher funding costs. The net interest margin for the three months ended June 30, 2019 was 3.24%, compared to 3.30% for the three months ended June 30, 2018.

The provision for loan losses was ~~$182.3~~$155.0 million for the three months ended ~~March 31,~~June 30, 2019 compared to ~~$57.0~~$91.3 million for the three months ended ~~March 31,~~June 30, 2018. The increase in provision for loan losses for the three months ended ~~March 31,~~June 30, 2019 was driven by higher losses within the consumer direct loan portfolio as well as an increase in the allowance on individually evaluated nonperforming loans in the commercial, financial and agricultural loan portfolio.

Net charge-offs for the three months ended ~~March 31,~~June 30, 2019 totaled ~~$101.5~~$143.4 million compared to ~~$67.7~~$63.4 million for the three months ended ~~March 31,~~June 30, 2018. The increase in net charge-offs for the three months ended ~~March 31,~~June 30, 2019 as compared to the corresponding period in 2018 was primarily driven by a ~~$28.5~~$35.3 million increase in commercial, financial and agricultural net charge-offs and a $27.3 million increase in consumer direct net charge-offs.

Noninterest income ~~was $257.8 million for both the three months ended March 31, 2019 and 2018.~~

~~Noninterest expense~~ increased ~~$19.1 million~~ to ~~$582.0~~$284.3 million for the three months ended ~~March 31,~~June 30, 2019 compared to ~~$562.9~~$270.0 million for the three months ended ~~March 31,~~June 30, 2018. The primary driver of the increase in noninterest income was a $17.2 million increase in other noninterest income due to a $13.2 million increase in the value of the SBIC investments and a $4.6 million increase in syndication fees.

Noninterest expense increased $18.8 million to $598.3 million for the three months ended June 30, 2019 compared to $579.5 million for the three months ended June 30, 2018. The increase was driven by a ~~$3.3~~$9.5 million increase in salaries, benefits and commissions, a $5.2 million increase in professional services, ~~$2.0 million increase in equipment, a $1.3 million increase in money transfer expense,~~ and a ~~$9.0~~$6.6 million increase in other noninterest expense primarily attributable to an increase in provision for unfunded ~~commitments.~~commitments and marketing expense partially offset by a decrease in business development expense.

Income tax expense was ~~$35.6~~$30.5 million for the three months ended ~~March 31,~~June 30, 2019 compared to ~~$51.8~~$58.3 million for the three months ended ~~March 31,~~June 30, 2018. This resulted in an effective tax rate of ~~20.2%~~16.0% for the three months ended ~~March 31,~~June 30, 2019 and ~~19.9%~~24.0% for three months ended ~~March 31,~~June 30, 2018. The decrease in the tax rate was driven by lower net income before taxes for the three months ended June 30, 2019. Additionally, the tax rate for the three months ended June 30, 2018 was also impacted by $11.4 million of additional income tax expense related to the correction of an error in prior

periods that resulted from an incorrect calculation of the proportional amortization of the Company's Low Income Housing Tax Credit investments.

The Company's total assets at ~~March 31,~~June 30, 2019 were ~~$93.8~~$92.2 billion, an increase of ~~$2.9~~$1.2 billion from December 31, 2018 levels. Total loans, excluding loans held for sale, were ~~$63.8~~$63.3 billion at ~~March 31,~~June 30, 2019, a decrease of ~~$1.4~~$1.9 billion or ~~2.2%~~2.9% from year-end December 31, 2018 levels. The decrease in loans was primarily due to the ~~transfer~~sale of approximately $1.2

billion in commercial loans to ~~loans held for sale.~~BBVA, S.A. New York Branch. Deposits increased ~~$2.2 billion~~$421 million or ~~3.1%~~0.6% compared to December 31, ~~2018, driven by an increase in interest bearing transaction accounts which increased 4.8%.~~2018.

Total shareholder's equity at ~~March 31,~~June 30, 2019 was ~~$13.7~~$13.9 billion, an increase of ~~$215~~$358 million compared to December 31, 2018.

Capital and Regulatory

Under the Basel III transitional provisions, the Company's Tier1 and CET1 ratios were ~~12.67%~~12.91% and ~~12.34%~~12.57%, respectively, at ~~March 31,~~June 30, 2019 compared to 12.33% and 12.00%, respectively, at December 31, 2018.

In April 2019 the federal banking agencies issued proposed rules that would adjust the thresholds at which certain enhanced prudential standards and Basel III capital and liquidity requirements apply to FBOs, including BBVA, and the U.S. IHCs of FBOs, including the Parent, pursuant to the EGRRCPA. The FBO Tailoring Proposals would establish risk-based categories for FBOs and their U.S. IHCs that would determine whether and to what extent enhanced prudential standards and certain capital and liquidity requirements apply to FBOs and their U.S. IHCs. If the FBO Tailoring Proposals are adopted as proposed, BBVA and the Parent would be subject to less restrictive enhanced prudential standards and capital and liquidity requirements than under current regulations. In addition, in April 2019 the Federal Reserve Board and the FDIC issued a proposed rule that would reduce or eliminate resolution planning requirements for institutions that fall into certain risk-based categories. If the Resolution Plan Proposal is adopted as proposed, BBVA, the Company and the Bank would be subject to reduced resolution planning requirements. The Company cannot predict at this time, however, whether the FBO Tailoring Proposals or the Resolution Plan Proposal will be adopted as proposed and what effect any such final rules would have on the Company, its subsidiaries, or these entities’ activities, financial condition and/or results of operations.

Liquidity

The Company’s sources of liquidity include customers’ interest-bearing and noninterest-bearing deposit accounts, loan principal and interest payments, investment securities, short-term investments and borrowings. As a holding company, the Parent’s primary source of liquidity is dividends from the Bank. Due to the net earnings restrictions on dividend distributions under Alabama law, the Bank must obtain regulatory approval prior to paying any dividends.

Any dividends paid by the Parent must be set forth as capital actions in the Company's capital plan and not objected to by the Federal Reserve Board.

Management believes that the current sources of liquidity are adequate to meet the Company’s requirements and plans for continued growth.

Other

OnIn April, ~~24, 2019,~~ BBVA announced that it iswas moving to unify its brand globally. ~~In the coming months,~~As part of this re-branding, the Bank will ~~begin the process of transitioning~~transition away from the use of the BBVA Compass name and be ~~re-branding~~re-branded as BBVA. As part of this re-branding, effective June 10, 2019, the Company amended its Certificate of Formation to change its legal name from BBVA Compass Bancshares, Inc. to BBVA USA Bancshares, Inc.

Analysis of Results of Operations

Consolidated net income attributable to the Company totaled ~~$140.4~~$159.6 million and ~~$208.2~~$183.8 million for the three months ended ~~March 31,~~June 30, 2019 and 2018, respectively. The Company’s results of operations for the three months ended ~~March 31,~~June 30, 2019, reflected higher net interest income and noninterest income and lower income tax expense offset by higher provision for loan losses and noninterest expense.

Consolidated net income attributable to the Company totaled $300.0 million and $392.0 million for the six months ended June 30, 2019 and 2018, respectively. The Company’s results of operations for the six months ended June 30, 2019, reflected higher net interest income and noninterest income and lower income tax expense offset by higher provision for loan losses and noninterest expense.

Net Interest Income and Net Interest Margin

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

Three Months Ended ~~March 31,~~June 30, 2019 and 2018

Net interest income totaled ~~$683.1~~$659.7 million for the three months ended ~~March 31,~~June 30, 2019 compared to ~~$622.6~~$643.5 million for the three months ended ~~March 31,~~June 30, 2018.

Net interest income on a fully taxable equivalent basis totaled ~~$696.3~~$672.8 million for the three months ended ~~March 31,~~June 30, 2019, an increase of ~~$61.3~~$16.5 million compared with ~~$635.0~~$656.3 million for the three months ended ~~March 31,~~June 30, 2018. The increase in net interest income was primarily the result of an increase in interest income on loans and investment securities offset by an increase in interest expense on interest bearing deposits.

Net interest margin was ~~3.41%~~3.24% for the three months ended ~~March 31,~~June 30, 2019 compared to ~~3.27%~~3.30% for the three months ended ~~March 31,~~June 30, 2018. The 146 basis point ~~increase~~decrease in net interest margin was primarily driven by higher funding costs as well as the impact of ~~higher~~the increase in the balance of interest ~~rates.~~bearing deposits with the Federal Reserve.

The fully taxable equivalent yield for the three months ended ~~March 31,~~June 30, 2019, on the loan portfolio was ~~5.03%~~5.01% compared to ~~4.40%~~4.58% for the same period in 2018. The 6343 basis point increase was primarily driven by the impact of higher interest rates.

The fully taxable equivalent yield on the investment securities portfolio was ~~2.45%~~2.33% for the three months ended ~~March 31,~~June 30, 2019 compared to ~~2.13%~~2.01% for the three months ended ~~March 31,~~June 30, 2018. The increase was a result of increases in interest rates. Additionally, as interest rates have increased the amount of premium amortization required has decreased as actual and expected prepayments have decreased.

The average rate paid on interest bearing deposits was ~~1.42%~~1.55% for the three months ended ~~March 31,~~June 30, 2019 compared to ~~0.83%~~0.96% for the three months ended ~~March 31,~~June 30, 2018 and reflects the impact of higher funding costs on interest bearing deposit offerings including savings, money market and CD products.

The average rate paid on FHLB and other borrowings for the three months ended ~~March 31,~~June 30, 2019 was ~~3.56%~~3.42% compared to ~~3.03%~~3.22% for the corresponding period in 2018. The 20 basis point increase was primarily driven by the impact of higher rate FHLB advances as well as the impact of the $1.2 billion issuance of unsecured senior notes in June 2018.

Six Months Ended June 30, 2019 and 2018

Net interest income totaled $1.3 billion for both the six months ended June 30, 2019 and the six months ended June 30, 2018.

Net interest income on a fully taxable equivalent basis totaled $1.4 billion for the six months ended June 30, 2019, an increase of $77.8 million compared with $1.3 billion for the six months ended June 30, 2018. The increase in net

interest income was primarily the result of an increase in interest income on loans and investment securities offset by an increase in interest expense on interest bearing deposits.

Net interest margin was 3.33% for the six months ended June 30, 2019 compared to 3.28% for the six months ended June 30, 2018. The 5 basis point increase in net interest margin was primarily driven by the impact of higher interest rates.

The fully taxable equivalent yield for the six months ended June 30, 2019, for the loan portfolio was 5.02% compared to 4.49% for the same period in 2018. The 53 basis point increase was primarily driven by the impact of higher interest rates.

The fully taxable equivalent yield on the investment securities portfolio was 2.39% for the six months ended June 30, 2019 compared to 2.07% for the six months ended June 30, 2018. The 32 basis point increase was a result of increases in interest rates. Additionally, as interest rates have increased the amount of premium amortization required has decreased as actual and expected prepayments have decreased.

The average rate paid on interest bearing deposits was 1.49% for the six months ended June 30, 2019 compared to 0.89% for the six months ended June 30, 2018 and reflects the impact of higher interest rates offered on savings and money market products.

The average rate paid on FHLB and other borrowings for the six months ended June 30, 2019 was 3.49% compared to 3.14% for the corresponding period in 2018. The 35 basis point increase was primarily driven by the impact of higher rate FHLB advances as well as the impact of the $1.2 billion issuance of unsecured senior notes in June 2018.

The following table sets forth the major components of net interest income and the related annualized yields and rates.

Table 1 Consolidated Average Balance and Yield/ Rate Analysis	Table 1 Consolidated Average Balance and Yield/ Rate Analysis														Table 1 Consolidated Average Balance and Yield/ Rate Analysis

	Three Months Ended March 31, 2019							Three Months Ended March 31, 2018							Three Months Ended June 30, 2019							Three Months Ended June 30, 2018
	Average Balance			Income/Expense		Yield/ Rate		Average Balance			Income/ Expense		Yield/Rate		Average Balance			Income/Expense		Yield/ Rate		Average Balance			Income/ Expense		Yield/Rate
	(Dollars in Thousands)														(Dollars in Thousands)
Assets:
Interest earning assets:
Loans (1) (2) (3)	$	65,482,395		$	812,415	5.03	%	$	62,200,448		$	674,830	4.40	%	$	64,056,915		$	799,680	5.01	%	$	63,202,826		$	722,346	4.58	%
Debt securities – AFS	9,922,400			53,522		2.19		11,424,405			56,605		2.01		8,983,280			45,125		2.01		11,535,569			53,792		1.87
Debt securities – HTM (tax exempt) (3)	658,910			6,091		3.75		886,774			7,054		3.23		628,991			5,503		3.51		802,705			6,982		3.49
Debt securities – HTM (taxable)	3,375,382			24,674		2.96		1,109,635			6,848		2.50		4,115,593			28,955		2.82		1,286,012			7,539		2.35
Total debt securities - HTM	4,034,292			30,765		3.09		1,996,409			13,902		2.82		4,744,584			34,458		2.91		2,088,717			14,521		2.79
Trading account securities (3)	81,552			539		2.68		121,371			751		2.51		83,307			601		2.89		150,547			924		2.46
Other (4) (5)	3,170,307			22,968		2.94		3,098,494			11,875		1.55		5,387,203			35,823		2.67		2,852,459			14,916		2.10
Total earning assets	82,690,946			920,209		4.51		78,841,127			757,963		3.90		83,255,289			915,687		4.41		79,830,118			806,499		4.05
Noninterest earning assets:
Cash and due from banks	1,293,095							580,515							828,499							727,440
Allowance for loan losses	(909,663		)					(844,248		)					(974,772		)					(840,557		)
Net unrealized (loss) gain on investment securities available for sale	(187,905		)					(228,187		)					(102,830		)					(291,461		)
Other noninterest earning assets	10,099,403							9,421,702							10,446,653							9,606,511
Total assets	$	92,985,876						$	87,770,909						$	93,452,839						$	89,032,051
Liabilities:
Interest bearing liabilities:
Interest bearing demand deposits	$	8,685,693		20,346		0.95		$	8,195,605		9,581		0.47		$	9,304,889		26,536		1.14		$	7,944,965		11,025		0.56
Savings and money market accounts	27,218,571			76,909		1.15		25,526,343			38,890		0.62		27,643,291			88,203		1.28		25,863,488			48,793		0.76
Certificates and other time deposits	16,116,509			85,099		2.14		14,109,950			48,876		1.40		15,452,630			87,739		2.28		14,654,013			56,505		1.55
Total interest bearing deposits	52,020,773			182,354		1.42		47,831,898			97,347		0.83		52,400,810			202,478		1.55		48,462,466			116,323		0.96
FHLB and other borrowings	4,290,724			37,626		3.56		3,310,286			24,756		3.03		4,026,581			34,300		3.42		3,974,769			31,912		3.22
Federal funds purchased and securities sold under agreements to repurchase (5)	411,925			3,747		3.69		22,235			536		9.78		466,926			6,002		5.16		103,974			1,399		5.40
Other short-term borrowings	28,117			196		2.83		51,626			344		2.70		7,402			100		5.42		78,402			567		2.90
Total interest bearing liabilities	56,751,539			223,923		1.60		51,216,045			122,983		0.97		56,901,719			242,880		1.71		52,619,611			150,201		1.14
Noninterest bearing deposits	20,183,069							21,581,905							20,286,244							21,281,715
Other noninterest bearing liabilities	2,410,613							1,882,541							2,482,865							1,912,894
Total liabilities	79,345,221							74,680,491							79,670,828							75,814,220
Shareholder’s equity	13,640,655							13,090,418							13,782,011							13,217,831
Total liabilities and shareholder’s equity	$	92,985,876						$	87,770,909						$	93,452,839						$	89,032,051
Net interest income/net interest spread				$	696,286	2.91	%				$	634,980	2.93	%				$	672,807	2.70	%				$	656,298	2.91	%
Net interest margin						3.41	%						3.27	%						3.24	%						3.30	%
Taxable equivalent adjustment				13,197							12,375							13,058							12,799
Net interest income				$	683,089						$	622,605						$	659,749						$	643,499


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


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


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


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


(5)	Yield/rate reflects impact of balance sheet offsetting. See Note 6, Securities Financing Activities, in the notes to the financial statements.

Table 1 Consolidated Average Balance and Yield/ Rate Analysis

	Six Months Ended June 30, 2019							Six Months Ended June 30, 2018
	Average Balance			Income/Expense		Yield/ Rate		Average Balance			Income/ Expense		Yield/Rate
	(Dollars in Thousands)
Assets:
Interest earning assets:
Loans (1) (2) (3)	$	64,765,717		$	1,612,095	5.02	%	$	62,704,406		$	1,397,176	4.49	%
Debt securities – AFS	9,450,246			98,647		2.11		11,480,294			110,397		1.94
Debt securities – HTM (tax exempt) (3)	643,868			11,594		3.63		844,507			14,036		3.35
Debt securities – HTM (taxable)	3,747,532			53,629		2.89		1,198,311			14,387		2.42
Total debt securities - HTM	4,391,400			65,223		3.00		2,042,818			28,423		2.81
Trading account securities (3)	82,434			1,140		2.79		136,039			1,675		2.48
Other (4) (5)	4,284,880			58,791		2.77		2,974,798			26,791		1.82
Total earning assets	82,974,677			1,835,896		4.46		79,338,355			1,564,462		3.98
Noninterest earning assets:
Cash and due from banks	1,059,514							654,383
Allowance for loan losses	(942,398		)					(842,392		)
Net unrealized (loss) gain on investment securities available for sale	(145,133		)					(259,999		)
Other noninterest earning assets	10,273,988							9,514,617
Total assets	$	93,220,648						$	88,404,964
Liabilities:
Interest bearing liabilities:
Interest bearing demand deposits	$	8,997,002		46,882		1.05		$	8,069,593		20,606		0.51
Savings and money market accounts	27,432,104			165,112		1.21		25,695,846			87,683		0.69
Certificates and other time deposits	15,782,736			172,838		2.21		14,383,484			105,381		1.48
Total interest bearing deposits	52,211,842			384,832		1.49		48,148,923			213,670		0.89
FHLB and other borrowings	4,157,923			71,926		3.49		3,644,363			56,668		3.14
Federal funds purchased and securities sold under agreements to repurchase (5)	439,577			9,749		4.47		63,330			1,935		6.16
Other short-term borrowings	17,702			296		3.37		65,088			911		2.82
Total interest bearing liabilities	56,827,044			466,803		1.66		51,921,704			273,184		1.06
Noninterest bearing deposits	20,234,941							21,430,981
Other noninterest bearing liabilities	2,446,939							1,897,803
Total liabilities	79,508,924							75,250,488
Shareholder’s equity	13,711,724							13,154,476
Total liabilities and shareholder’s equity	$	93,220,648						$	88,404,964
Net interest income/net interest spread				$	1,369,093	2.80	%				$	1,291,278	2.92	%
Net interest margin						3.33	%						3.28	%
Taxable equivalent adjustment				26,255							25,174
Net interest income				$	1,342,838						$	1,266,104


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


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


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


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


(5)	Yield/rate reflects impact of balance sheet offsetting. See Note 6, Securities Financing Activities, in the notes to the financial statements.

Provision for Loan Losses

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

Three Months Ended ~~March 31,~~June 30, 2019 and 2018

For the three months ended ~~March 31,~~June 30, 2019, the Company recorded ~~$182.3~~$155.0 million of provision for loan losses compared to ~~$57.0~~$91.3 million for the three months ended ~~March 31,~~June 30, 2018. The increase in provision for loan losses for the three months ended ~~March 31,~~June 30, 2019 was primarily attributable to higher losses within the consumer direct loan portfolio as well as an increase in the allowance on individually evaluated nonperforming loans in the commercial, financial and agricultural loan portfolio during the three months ended ~~March 31,~~June 30, 2019.

The Company recorded net charge-offs of ~~$101.5~~$143.4 million during the three months ended ~~March 31,~~June 30, 2019 compared to ~~$67.7~~$63.4 million during the corresponding period in 2018. The increase in net charge-offs for the three months ended ~~March 31,~~June 30, 2019, as compared to the corresponding period in 2018, was primarily driven by a ~~$28.5~~$35.3 million increase in commercial, financial and agricultural net charge-offs and a $27.3 million increase in consumer direct net charge-offs.

For further discussion and analysis of the allowance for loan losses, refer to the discussion of lending activities found later in this section. Also, refer to Note 3, Loans and Allowance for Loan Losses, in the Notes to the Unaudited Condensed Consolidated Financial Statements for additional disclosures.

Six Months Ended June 30, 2019 and 2018

For the six months ended June 30, 2019, the Company recorded $337.3 million of provision for loan losses compared to $148.3 million for the six months ended June 30, 2018. The increase in provision for loan losses was primarily attributable to higher losses within the consumer direct loan portfolio as well as an increase in the allowance on individually evaluated nonperforming loans in the commercial, financial and agricultural loan portfolio during the six months ended June 30, 2019.

The Company recorded net charge-offs of $244.9 million during the six months ended June 30, 2019 compared to $131.1 million during the corresponding period in 2018. The increase in net charge-offs for the six months ended June 30, 2019 as compared to the corresponding period in 2018 was driven in part by a $31.7 million increase in commercial, financial and agricultural net charge-offs as well as a $55.7 million increase in consumer direct net charge-offs and a $12.1 million increase in consumer indirect net charge-offs.

Net charge-offs were 0.77% of average loans for the six months ended June 30, 2019 compared to 0.42% of average loans for the six months ended June 30, 2018.

Noninterest Income

The following table presents the components of noninterest income.

Table 2 Noninterest Income	Table 2 Noninterest Income				Table 2 Noninterest Income

	Three Months Ended March 31,				Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018		2019		2018
	(In Thousands)				(In Thousands)
Service charges on deposit accounts	$	58,908	$	56,161	$	61,731	$	58,581	$	120,639	$	114,742
Card and merchant processing fees	46,002		39,678		50,355		44,048		96,357		83,726
Investment services sales fees	26,696		30,108		31,333		29,782		58,029		59,890
Money transfer income	21,981		20,688		25,272		23,920		47,253		44,608
Investment banking and advisory fees	18,857		23,896		20,758		24,546		39,615		48,442
Asset management fees	10,767		10,770		11,867		10,989		22,634		21,759
Corporate and correspondent investment sales	6,892		12,056		5,607		16,355		12,499		28,411
Mortgage banking	4,937		8,397		5,870		7,964		10,807		16,361
Bank owned life insurance	4,584		4,215		4,803		4,375		9,387		8,590
Investment securities gains, net	8,958		—		—		—		8,958		—
Other	49,178		51,856		66,685		49,459		115,863		101,315
Total noninterest income	$	257,760	$	257,825	$	284,281	$	270,019	$	542,041	$	527,844

Three Months Ended ~~March 31,~~June 30, 2019 and 2018

Noninterest income was ~~$257.8~~$284.3 million for ~~both~~ the three months ended ~~March 31,~~June 30, 2019, compared to $270.0 million for the three months ended June 30, 2018. The increase in noninterest income was primarily driven by increases in services charges on deposit accounts, card and merchant processing fees, and other noninterest income partially offset by decreases in investment banking and advisory fees, corporate and correspondent investment sales, and mortgage banking.

Service charges on deposit accounts represent the Company's largest category of noninterest revenue. Service charges on deposit accounts increased to $61.7 million for the three months ended June 30, 2019, compared to $58.6 million for the three months ended June 30, 2018 due in part to continued customer account growth and increases in non-sufficient fund activity in 2019 when compared to 2018.

Card and merchant processing fees represents income related to customers' utilization of their debt and credit cards, as well as interchange income and merchants' discounts. Income from card and merchant processing fees increased to ~~$46.0~~$50.4 million for the three months ended ~~March 31,~~June 30, 2019, compared to ~~$39.7~~$44.0 million for the three months ended ~~March 31,~~June 30, 2018. Contributing to this increase was a ~~$4.7~~$5.1 million increase in interchange income related to growth in the number of accounts as well as an increase in current customers' spending volumes.

Investment services sales fees is comprised of mutual fund and annuity sales income and insurance sales fees. Income from investment services sales fees decreased to $26.7 million for the three months ended March 31, 2019, compared to $30.1 million for the three months ended March 31, 2018, due to a decrease of $5.7 million in securities transaction fees partially offset by an increase of $1.8 million related to life and disability insurance fees.

Investment banking and advisory fees primarily represent income from BSI. Income from investment banking and advisory fees decreased to ~~$18.9~~$20.8 million for the three months ended ~~March 31,~~June 30, 2019, compared to ~~$23.9~~$24.5 million for the three months ended ~~March 31,~~June 30, 2018. The primary driver of this decrease was a decline in the volume of underwriting activity during the three months ended ~~March 31,~~June 30, 2019 compared to the same period in 2018.

Corporate and correspondent investment sales represents income generated through the sales of interest rate protection contracts to corporate customers and the sale of bonds and other services to the Company's correspondent banking clients. Income from corporate and correspondent investment sales decreased to ~~$6.9~~$5.6 million for the three months ended ~~March 31,~~June 30, 2019, compared to ~~$12.1~~$16.4 million for the three months ended ~~March 31,~~June 30, 2018. The decrease was primarily driven by a decline in customer interest rate and foreign exchange swap income due to a decrease in interest rate contract and foreign exchange sales as well as valuation adjustments on interest rate contracts for the three months ended ~~March 31,~~June 30, 2019 compared to the same period in 2018.

Mortgage banking for the three months ended March 31, 2019 was $4.9 million, a decrease of $3.5 million compared to the three months ended March 31, 2018. Mortgage banking for the three months ended March 31, 2019, included $6.8 million ofrepresents servicing income, guarantee fees and gains on sales of mortgage loans ~~partially offset by net losses of $1.9 million related to~~along with fair value adjustments on mortgage loans held for sale, mortgage related derivatives and MSRs. Mortgage banking for the three months ended ~~March 31, 2018, included $8.3~~June 30, 2019 was $5.9 million, a decrease of ~~servicing income, guarantee fees and gains on sales of mortgage loans as well as net gains of $405 thousand related~~$2.1 million compared to ~~fair value adjustments on mortgage loans held for sale, mortgage related derivatives and MSRs.~~the three months ended June 30, 2018. The decrease in mortgage banking income was driven by a decrease in ~~part~~the valuation related to MSRs due to a decline in interest rates.

Other income is comprised of income recognized that does not typically fit into one of the other noninterest income categories and includes various fees associated with letters of credit, syndications, ATMS and foreign exchange. Other noninterest income increased to $66.7 million for the three months ended June 30, 2019, compared to $49.5 million for the three months ended June 30, 2018, due to a $13.2 million increase in the value of the SBIC investments and a $4.6 million increase in syndication fees.

Six Months Ended June 30, 2019 and 2018

Noninterest income was $542.0 million for the six months ended June 30, 2019, compared to $527.8 million for the six months ended June 30, 2018. The increase in noninterest income was primarily driven by increases in service charges on deposit accounts, card and merchant processing fees and other noninterest income partially offset by decreases in investment banking and advisory fees, corporate and correspondent investment sales and mortgage banking.

Service charges on deposit accounts increased to $120.6 million for the six months ended June 30, 2019, compared to $114.7 million for the six months ended June 30, 2018 due primarily to continued customer account growth and increases in non-sufficient fund activity in 2019 when compared to 2018.

Income from card and merchant processing fees increased to $96.4 million for the six months ended June 30, 2019, compared to $83.7 million for the six months ended June 30, 2018, due to a $9.9 million increase in interchange income related to growth in the number of accounts. Additionally, merchant income and cash advance fees also increased $2.8 million in 2019 when compared to 2018.

Income from investment banking and advisory fees decreased to $39.6 million for the six months ended June 30, 2019, compared to $48.4 million for the six months ended June 30, 2018. The primary driver of this decrease was a decline in the volume of underwriting activity during the six months ended June 30, 2019 compared to the same period in 2018.

Income from corporate and correspondent investment sales decreased to $12.5 million for the six months ended June 30, 2019, compared to $28.4 million for the six months ended June 30, 2018, primarily driven by a decline in customer interest rate and foreign exchange swap income due to a decrease in interest rate contract and foreign exchange sales as well as valuation adjustments on interest rate contracts for the six months ended June 30, 2019 compared to the same period in 2018.

Mortgage banking for the six months ended June 30, 2019 was $10.8 million, a decrease of $5.6 million compared to the six months ended June 30, 2018. The decrease in mortgage banking income was driven by a decrease in the valuation related to MSRs due to a decline in interest rates ~~as well as decreased mortgage loan sales volume.~~along with tighter margins during 2019 when compared to 2018.

Investment securities gains, net were $9.0 million for the ~~three~~six months ended ~~March 31,~~June 30, 2019. See, “—Debt Securities” for more information related to the debt securities sales.

Other noninterest income increased to $115.9 million for the six months ended June 30, 2019, compared to $101.3 million for the six months ended June 30, 2018, due in part to a $20.8 million increase in the value of the SBIC investments and a $6.0 million increase related to gains on the sale of fixed assets which were partially offset by a $12.9 million decrease in service and referral income with BBVA and its affiliates.

Noninterest Expense

The following table presents the components of noninterest expense.

Table 3 Noninterest Expense	Table 3 Noninterest Expense				Table 3 Noninterest Expense

	Three Months Ended March 31,				Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018		2019		2018
	(In Thousands)				(In Thousands)
Salaries, benefits and commissions	$	292,716	$	289,440	$	296,303	$	286,852	$	589,019	$	576,292
Professional services					73,784		68,577		137,680		129,222
Equipment	65,394		63,360		62,638		63,660		128,032		127,020
Professional services	63,896		60,645
Net occupancy	40,941		40,422		40,116		42,671		81,057		83,093
Money transfer expense	14,978		13,721		17,290		16,302		32,268		30,023
Total securities impairment	—		309		113		—		113		309
Other	104,048		95,016		108,070		101,483		212,118		196,499
Total noninterest expense	$	581,973	$	562,913	$	598,314	$	579,545	$	1,180,287	$	1,142,458

Three Months Ended ~~March 31,~~June 30, 2019 and 2018

Noninterest expense was ~~$582.0~~$598.3 million for the three months ended ~~March 31,~~June 30, 2019, an increase of ~~$19.1~~$18.8 million compared to ~~$562.9~~$579.5 million for the three months ended ~~March 31,~~June 30, 2018. The increase was driven by increases in ~~equipment,~~salaries, benefits, and commissions, professional services, ~~money transfer expense~~equipment and other noninterest expense.

~~Equipment~~Salaries, benefits and commissions expense increased ~~by $2.0~~to $296.3 million during the three months ended ~~March 31,~~June 30, 2019, ~~to $65.4 million~~ compared to ~~$63.4~~$286.9 million for the ~~corresponding period~~three months ended June 30, 2018, related to increases in ~~2018 primarily~~full time salaries due to ~~a $3.1 million increase~~annual merit increases and increases in ~~software maintenance and software amortization partially offset by a $1.1 million decrease in depreciation expense.~~deferred compensation plans as well as higher costs associated with benefits.

Professional services represents fees incurred for the various support functions, which includes legal, consulting, outsourcing and other professional related fees. Professional services increased ~~$3.3~~$5.2 million during the three months ended ~~March 31,~~June 30, 2019, to ~~$63.9~~$73.8 million compared to ~~$60.6~~$68.6 million for the corresponding period in 2018 due to a ~~$1.3~~$2.3 million increase in outsourcing and professional services, a $1.7 million increase in services related to credit reporting and ~~credit card processing.~~

~~Money transfer expense increased to $15.0~~a $1.1 million ~~during the three months ended March 31, 2019 compared to $13.7 million for the three months ended March 31, 2018 driven by an~~ increase in ~~transaction volumes during 2019.~~bankcard fees.

Other noninterest expense includes FDIC insurance, marketing, communications, postage, supplies, subscriptions, provision for unfunded commitments and gains and losses on the sales and write-downs of OREO. Other noninterest expense increased ~~$9.0~~$6.6 million during the three months ended ~~March 31,~~June 30, 2019, to ~~$104.0~~$108.1 million compared to ~~$95.0~~$101.5 million for the three months ended ~~March 31,~~June 30, 2018. The ~~primary driver~~drivers of the increase ~~was~~were due primarily to a ~~$5.2~~$4.6 million increase in marketing expense, a $4.4 million increase in the provision for unfunded commitments, and a $1.2 million increase in item processing fees. The increases were partially offset by a $5.3 million decrease in business development expense in 2019 compared to the corresponding period in 2018.

Six Months Ended June 30, 2019 and 2018

Noninterest expense increased $37.8 million to $1.2 billion for the six months ended June 30, 2019 compared to the six months ended June 30, 2018. Noninterest expense was impacted by increases in salaries, benefits and commissions, professional services and other noninterest expense.

Salaries, benefits and commissions expense increased to $589.0 million during the six months ended June 30, 2019, compared to $576.3 million for the six months ended June 30, 2018, related to increases in full time salaries due to annual merit increases and increases in deferred compensation plans as well as higher costs associated with benefits.

ended June 30, 2019, to $137.7 million compared to $129.2 million for the corresponding period in 2018 due to a $4.1 million increase in services related to credit reporting and credit card processing, a $2.6 million increase in outsourcing and a $1.5 million increase in bankcard fees.

Other noninterest expense increased $15.6 million during the six months ended June 30, 2019, to $212.1 million compared to $196.5 million for the six months ended June 30, 2018. The increase was attributable to a $9.6 million increase in the provision for unfunded commitments and a $6.2 million increase in marketing expense in 2019 compared to the corresponding period in 2018.

Income Tax Expense

Three Months Ended ~~March 31,~~June 30, 2019 and 2018

The Company’s income tax expense totaled ~~$35.6~~$30.5 million and ~~$51.8~~$58.3 million for the three months ended ~~March 31,~~June 30, 2019 and 2018, respectively. The effective tax rate was ~~20.2%~~16.0% for the three months ended ~~March 31,~~June 30, 2019 and ~~19.9%~~24.0% for the three months ended ~~March 31,~~June 30, 2018.The decrease in the tax rate was driven by lower net income before taxes for the three months ended June 30, 2019. Additionally, the tax rate for the three months ended June 30, 2018 was also impacted by $11.4 million of additional income tax expense related to the correction of an error in prior periods that resulted from an incorrect calculation of the proportional amortization of the Company's Low Income Housing Tax Credit investments.

Six Months Ended June 30, 2019 and 2018

The Company’s income tax expense totaled $66.1 million and $110.1 million for the six months ended June 30, 2019 and 2018, respectively. The effective tax rate was 18.0% for the six months ended June 30, 2019 and 21.9% for the six months ended June 30, 2018.The decrease in the tax rate was driven by lower net income before taxes for the six months ended June 30, 2019. Additionally, the tax rate for the six months ended June 30, 2018 was also impacted by $11.4 million of additional income tax expense related to the correction of an error in prior periods that resulted from an incorrect calculation of the proportional amortization of the Company's Low Income Housing Tax Credit investments.

Analysis of Financial Condition

A review of the Company’s major balance sheet categories is presented below.

Federal Funds Sold, Securities Purchased Under Agreements to Resell and Interest Bearing Deposits

Federal funds sold, securities purchased under agreements to resell and interest bearing deposits totaled ~~$4.9~~$4.8 billion at ~~March 31,~~June 30, 2019, compared to $2.1 billion December 31, 2018. The increase was primarily driven by a ~~$2.7~~$2.4 billion increase in interest bearing deposits with the Federal Reserve.

Trading Account Assets

Trading account assets totaled ~~$306~~$440 million at ~~March 31,~~June 30, 2019, compared to $238 million December 31, 2018. The increase in trading account assets primarily related to increases in the fair value of interest rate derivative contracts for customers.

Debt Securities

At ~~March 31,~~June 30, 2019, the securities portfolio included ~~$9.3~~$9.0 billion in available for sale debt securities and ~~$4.6~~$4.9 billion in held to maturity debt securities for a total debt securities portfolio of $13.9 billion, an increase of $5$57 million compared with December 31, 2018.

During the ~~three~~six months ended ~~March 31,~~June 30, 2019, the Company received proceeds of $1.4 billion related to the sale of U.S. Treasury securities and agency mortgage-backed securities classified as available for sale which resulted in a net gain of $9.0 million. The Company also purchased approximately ~~$1.8~~$2.2 billion of U.S. Treasury securities that were classified as held to maturity.

The Company recognized $113 thousand and $309 thousand in OTTI charges during the six months ended June 30, 2019 and 2018, respectively. While all securities are reviewed by the Company for OTTI, the securities primarily impacted by credit impairment are held to maturity non-agency collateralized mortgage obligations. Refer to Note 2, Debt Securities Available for Sale and Debt Securities Held to Maturity, in the Notes to the Unaudited Condensed Consolidated Financial Statements for further details.

Lending Activities

The Company groups its loans into portfolio segments based on internal classifications reflecting the manner in which the allowance for loan losses is established and how credit risk is measured, monitored and reported. Commercial loans are comprised of commercial, financial and agricultural, real estate — construction, and commercial real estate–mortgage loans. Consumer loans are comprised of residential real estate — mortgage, equity lines of credit, equity loans, credit cards, consumer direct and consumer indirect loans.

The following table presents the composition of the loan portfolio.

Table 4 Loan Portfolio	Table 4 Loan Portfolio				Table 4 Loan Portfolio

	March 31, 2019		December 31, 2018		June 30, 2019		December 31, 2018
	(In Thousands)				(In Thousands)
Commercial loans:
Commercial, financial and agricultural	$	25,281,930	$	26,562,319	$	24,852,656	$	26,562,319
Real estate – construction	1,945,347		1,997,537		1,982,646		1,997,537
Commercial real estate – mortgage	12,955,196		13,016,796		12,969,705		13,016,796
Total commercial loans	$	40,182,473	$	41,576,652	$	39,805,007	$	41,576,652
Consumer loans:
Residential real estate – mortgage	$	13,396,396	$	13,422,156	$	13,404,130	$	13,422,156
Equity lines of credit	2,716,307		2,747,217		2,672,830		2,747,217
Equity loans	288,169		298,614		275,778		298,614
Credit card	832,832		818,308		878,101		818,308
Consumer direct	2,533,916		2,553,588		2,476,628		2,553,588
Consumer indirect	3,807,452		3,770,019		3,799,079		3,770,019
Total consumer loans	$	23,575,072	$	23,609,902	$	23,506,546	$	23,609,902
Total loans	$	63,757,545	$	65,186,554	$	63,311,553	$	65,186,554
Loans held for sale	1,273,821		68,766		90,537		68,766
Total loans and loans held for sale	$	65,031,366	$	65,255,320	$	63,402,090	$	65,255,320

Loans and loans held for sale, net of unearned income, totaled ~~$65.0~~$63.4 billion at ~~March 31,~~June 30, 2019, a decrease of ~~$224.0 million~~$1.9 billion from December 31, 2018. During the ~~three~~six months ended ~~March 31,~~June 30, 2019, the Company ~~transferred $1.2 billion of commercial loans to loans held for sale as the Company plans to sell these loans~~sold to BBVA, S.A. New York ~~Branch.~~Branch approximately $1.2 billion of commercial loans.

See Note 3, Loans and Allowance for Loan Losses, and Note 4, Loan Sales and Servicing, in the Notes to the Unaudited Condensed Consolidated Financial Statements for additional discussion.

Asset Quality

Nonperforming assets, which includes nonaccrual loans, nonaccrual loans held for sale, accruing loans 90 days past due, accruing TDRs 90 days past due, ~~other~~foreclosed real estate ~~owned~~ and other repossessed assets, totaled ~~$897~~$824 million at ~~March 31,~~June 30, 2019, ~~an increase~~a decrease of ~~$57~~$16 million compared to $840 million at December 31, 2018. The increase in nonperforming assets was primarily due to a $55 million increase in nonaccrual loans driven by a $61 million increase in commercial, financial and agricultural nonaccrual loans primarily due to four unrelated commercial, financial and agricultural loans in the healthcare and energy sectors being placed on nonaccrual status. As a percentage of total loans and loans held for sale, ~~other~~foreclosed real estate ~~owned~~ and other repossessed assets, nonperforming assets were ~~1.38%~~1.30% at ~~March 31,~~June 30, 2019 compared with 1.29% at December 31, 2018.

The Company defines potential problem loans as commercial loans rated substandard or doubtful that do not meet the definition of nonaccrual, TDR or 90 days past due and still accruing. See Note 3, Loans and Allowance for Loan Losses, in the Notes to the Unaudited Condensed Consolidated Financial Statements for further information on the Company’s credit grade categories, which are derived from standard regulatory rating definitions. The following table provides a summary of potential problem loans.

Table 5 Potential Problem Loans	Table 5 Potential Problem Loans				Table 5 Potential Problem Loans

	March 31, 2019		December 31, 2018		June 30, 2019		December 31, 2018
	(In Thousands)				(In Thousands)
Commercial, financial and agricultural	$	328,985	$	371,627	$	333,962	$	371,627
Real estate – construction	15,205		12,791		44,661		12,791
Commercial real estate – mortgage	138,010		74,737		94,976		74,737
	$	482,200	$	459,155	$	473,599	$	459,155

The following table summarizes asset quality information and includes loans held for sale.

Table 6 Asset Quality	Table 6 Asset Quality				Table 6 Asset Quality

	March 31, 2019		December 31, 2018		June 30, 2019		December 31, 2018
	(In Thousands)				(In Thousands)
Nonaccrual loans:
Commercial, financial and agricultural	$	461,029	$	400,389	$	389,779	$	400,389
Real estate – construction	1,298		2,851		2,097		2,851
Commercial real estate – mortgage	109,447		110,144		107,137		110,144
Residential real estate – mortgage	163,463		167,099		154,247		167,099
Equity lines of credit	34,999		37,702		35,356		37,702
Equity loans	9,840		10,939		9,361		10,939
Credit card	—		—		—		—
Consumer direct	4,725		4,528		6,926		4,528
Consumer indirect	21,843		17,834		27,793		17,834
Total nonaccrual loans	806,644		751,486		732,696		751,486
Nonaccrual loans held for sale	—		—		—		—
Total nonaccrual loans and loans held for sale	$	806,644	$	751,486	$	732,696	$	751,486
Accruing TDRs: (1)
Commercial, financial and agricultural	$	18,910	$	18,926	$	19,150	$	18,926
Real estate – construction	111		116		107		116
Commercial real estate – mortgage	3,811		3,661		3,687		3,661
Residential real estate – mortgage	59,167		57,446		59,130		57,446
Equity lines of credit	—		—		—		—
Equity loans	26,188		26,768		25,361		26,768
Credit card	—		—		—		—
Consumer direct	3,854		2,684		5,252		2,684
Consumer indirect	—		—		—		—
Total Accruing TDRs	112,041		109,601		112,687		109,601
Accruing TDRs classified as loans held for sale	—		—		—		—
Total Accruing TDRs (loans and loans held for sale)	$	112,041	$	109,601	$	112,687	$	109,601
Loans 90 days past due and accruing:
Commercial, financial and agricultural	$	8,144	$	8,114	$	12,785	$	8,114
Real estate – construction	533		544		532		544
Commercial real estate – mortgage	1,160		2,420		360		2,420
Residential real estate – mortgage	9,007		5,927		6,681		5,927
Equity lines of credit	1,471		2,226		3,394		2,226
Equity loans	34		180		224		180
Credit card	18,499		17,011		18,762		17,011
Consumer direct	17,251		13,336		14,786		13,336
Consumer indirect	7,781		9,791		6,813		9,791
Total loans 90 days past due and accruing	63,880		59,549		64,337		59,549
Loans held for sale 90 days past due and accruing	—		—		—		—
Total loans and loans held for sale 90 days past due and accruing	$	63,880	$	59,549	$	64,337	$	59,549
OREO	$	14,983	$	16,869
Foreclosed real estate					$	13,752	$	16,869
Other repossessed assets	$	11,225	$	12,031	$	13,040	$	12,031


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

Nonperforming assets, which include loans held for sale, are detailed in the following tables.

Table 7 Nonperforming Assets	Table 7 Nonperforming Assets				Table 7 Nonperforming Assets

	March 31, 2019		December 31, 2018		June 30, 2019		December 31, 2018
	(In Thousands)				(In Thousands)
Nonaccrual loans	$	806,644	$	751,486	$	732,696	$	751,486
Loans 90 days or more past due and accruing (1)	63,880		59,549		64,337		59,549
TDRs 90 days or more past due and accruing	370		411		304		411
Nonperforming loans	870,894		811,446		797,337		811,446
OREO	14,983		16,869
Foreclosed real estate					13,752		16,869
Other repossessed assets	11,225		12,031		13,040		12,031
Total nonperforming assets	$	897,102	$	840,346	$	824,129	$	840,346


(1)	Excludes loans classified as TDR.

Table 8 Asset Quality Ratios	Table 8 Asset Quality Ratios				Table 8 Asset Quality Ratios

	March 31, 2019		December 31, 2018		June 30, 2019		December 31, 2018
Asset Quality Ratios:
Nonperforming loans and loans held for sale as a percentage of loans and loans held for sale (1)	1.34	%	1.24	%	1.26	%	1.24	%
Nonperforming assets as a percentage of total loans and loans held for sale, other real estate owned, and other repossessed assets (2)	1.38		1.29
Nonperforming assets as a percentage of total loans and loans held for sale, foreclosed real estate, and other repossessed assets (2)					1.30		1.29
Allowance for loan losses as a percentage of loans	1.52		1.36		1.54		1.36
Allowance for loan losses as a percentage of nonperforming loans (3)	110.92		109.09		122.62		109.09


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


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


(3)	Nonperforming loans include nonaccrual loans (including nonaccrual loans classified as TDR), accruing loans 90 days past due and accruing TDRs 90 days past due.

The following table provides a rollforward of nonaccrual loans and loans held for sale.

Table 9 Rollforward of Nonaccrual Loans	Table 9 Rollforward of Nonaccrual Loans						Table 9 Rollforward of Nonaccrual Loans

	Three Months Ended March 31,						Six Months Ended June 30,
	2019			2018			2019			2018
	(In Thousands)						(In Thousands)
Balance at beginning of period,	$	751,486		$	658,865		$	751,486		$	658,865
Additions	227,190			148,155			407,941			370,811
Returns to accrual	(37,819		)	(25,073		)	(67,014		)	(104,646		)
Loan sales	—			(8,475		)	—			(8,475		)
Payments and paydowns	(17,758		)	(49,229		)	(90,366		)	(98,175		)
Transfers to OREO	(5,984		)	(4,576		)
Transfers to foreclosed real estate							(12,175		)	(8,742		)
Charge-offs	(110,471		)	(72,457		)	(257,176		)	(146,647		)
Balance at end of period	$	806,644		$	647,210		$	732,696		$	662,991

When borrowers are experiencing financial difficulties, the Company, in order to assist the borrowers in repaying the principal and interest owed to the Company, may make certain modifications to the loan agreement. To facilitate this process, a concessionary modification that would not otherwise be considered may be granted resulting in a classification of the loan as a TDR. Within each of the Company’s loan classes, TDRs typically involve modification of the loan interest rate to a below market rate or an extension or deferment of the loan term. The financial effects of TDRs are reflected in the components that comprise the allowance for loan losses in either the amount of charge-offs or loan loss provision and period-end allowance levels. All TDRs are considered to be impaired loans. Refer to Note

3, Loans and Allowance for Loan Losses, in the Notes to the Unaudited Condensed Consolidated Financial Statements for additional information.

The following table provides a rollforward of TDR activity, excluding loans held for sale.

Table 10 Rollforward of TDR Activity	Table 10 Rollforward of TDR Activity						Table 10 Rollforward of TDR Activity

	Three Months Ended March 31,						Six Months Ended June 30,
	2019			2018			2019			2018
	(In Thousands)						(In Thousands)
Balance at beginning period	$	311,442		$	285,606		$	311,442		$	285,606
New TDRs	20,498			7,295			42,309			29,870
Payments/Payoffs	(15,719		)	(7,725		)	(78,429		)	(26,737		)
Charge-offs	(460		)	(4,173		)	(27,510		)	(5,279		)
Transfer to OREO	—			—
Transfers to foreclosed real estate							—			—
Balance at end of period	$	315,761		$	281,003		$	247,812		$	283,460

The Company’s aggregate recorded investment in impaired loans modified through TDRs was ~~$316~~$248 million at ~~March 31,~~June 30, 2019 compared to $311 million at December 31, 2018. Included in these amounts are ~~$112~~$113 million at ~~March 31,~~June 30, 2019 and $110 million at December 31, 2018 of accruing TDRs. Accruing TDRs are not considered nonperforming because they are performing in accordance with the restructured terms.

Allowance for Loan Losses

Management’s policy is to maintain the allowance for loan losses at a level sufficient to absorb estimated probable incurred losses in the loan portfolio. See Note 3, Loans and Allowance for Loan Losses, in the Notes to the Unaudited Condensed Consolidated Financial Statements for additional disclosures regarding the allowance for loan losses. The total allowance for loan losses increased to ~~$966~~$978 million at ~~March 31,~~June 30, 2019, from $885 million at December 31, 2018. The ratio of the allowance for loan losses to total loans was ~~1.52%~~1.54% at ~~March 31,~~June 30, 2019 compared to 1.36% at December 31, 2018. Nonperforming loans were ~~$871~~$797 million at ~~March 31,~~June 30, 2019 compared to $811 million at December 31, 2018. The allowance attributable to individually impaired loans was ~~$152~~$162 million at ~~March 31,~~June 30, 2019 compared to $107 million at December 31, 2018. The increase was driven by ~~the increase in~~downgrades to nonperforming loans as well as updated impairment analysis. Loans individually evaluated for impairment may have no allowance recorded if the fair value of the collateral less costs to sell or the present value of the loan's expected future cash flows exceeds the recorded investment of the loan.

Net charge-offs were ~~0.63%~~0.90% of average loans for the three months ended ~~March 31,~~June 30, 2019 compared to ~~0.44%~~0.40% of average loans for the three months ended ~~March 31,~~June 30, 2018. The increase in net charge-offs for the three months ended ~~March 31,~~June 30, 2019, as compared to the corresponding period in 2018, was primarily ~~due to~~driven by a ~~$28.5~~$35.3 million increase in commercial, financial and agricultural net charge-offs and a $27.3 million increase in consumer direct net charge-offs.

Net charge-offs were 0.77% of average loans for the six months ended June 30, 2019 compared to 0.42% of average loans for the six months ended June 30, 2018. The increase in net charge-offs for the six months ended June 30, 2019 as compared to the corresponding period in 2018 was driven in part by a $31.7 million increase in commercial, financial and agricultural net charge-offs as well as a $55.7 million increase in consumer direct net charge-offs and a $12.1 million increase in consumer indirect net charge-offs.

The following table sets forth information with respect to the Company’s loans, excluding loans held for sale, and the allowance for loan losses.

Table 11 Summary of Loan Loss Experience	Table 11 Summary of Loan Loss Experience						Table 11 Summary of Loan Loss Experience

	Three Months Ended March 31,						Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018			2019			2018
	(Dollars in Thousands)						(Dollars in Thousands)
Average loans outstanding during the period	$	65,386,558		$	62,162,146		$	63,581,887		$	63,133,236		$	64,479,237		$	62,650,373
Allowance for loan losses, beginning of period	$	885,242		$	842,760		$	966,022		$	832,071		$	885,242		$	842,760
Charge-offs:
Commercial, financial and agricultural	9,503			10,132			49,325			12,694			58,828			22,826
Real estate – construction	19			30			—			406			19			436
Commercial real estate – mortgage	6			173			112			280			118			453
Residential real estate – mortgage	1,446			2,137			2,199			2,469			3,645			4,606
Equity lines of credit	3,238			1,674			1,581			1,911			4,819			3,585
Equity loans	328			771			899			591			1,227			1,362
Credit card	16,942			10,844			18,166			12,372			35,108			23,216
Consumer direct	59,131			27,555			62,716			31,108			121,847			58,663
Consumer indirect	36,800			29,985			29,873			24,732			66,673			54,717
Total charge-offs	127,413			83,301			164,871			86,563			292,284			169,864
Recoveries:
Commercial, financial and agricultural	4,760			1,737			3,409			2,127			8,169			3,864
Real estate – construction	1,429			119			477			119			1,906			238
Commercial real estate – mortgage	33			59			51			5,785			84			5,844
Residential real estate – mortgage	517			757			676			911			1,193			1,668
Equity lines of credit	2,663			1,514			1,210			1,458			3,873			2,972
Equity loans	409			840			705			1,034			1,114			1,874
Credit card	1,699			970			1,730			1,073			3,429			2,043
Consumer direct	5,257			2,143			5,574			1,232			10,831			3,375
Consumer indirect	9,134			7,444			7,659			9,473			16,793			16,917
Total recoveries	25,901			15,583			21,491			23,212			47,392			38,795
Net charge-offs	101,512			67,718			143,380			63,351			244,892			131,069
Total provision for loan losses	182,292			57,029			155,018			91,280			337,310			148,309
Allowance for loan losses, end of period	$	966,022		$	832,071		$	977,660		$	860,000		$	977,660		$	860,000
Net charge-offs to average loans	0.63		%	0.44		%	0.90		%	0.40		%	0.77		%	0.42		%

Concentrations

The following tables provide further details regarding the Company’s commercial, financial and agricultural, commercial real estate, residential real estate and consumer portfolio segments as of ~~March 31,~~June 30, 2019 and December 31, 2018.

Commercial, Financial and Agricultural

In accordance with the Company's lending policy, each commercial loan undergoes a detailed underwriting process, which incorporates the Company's risk tolerance, credit policy and procedures. In addition, the Company has a graduated approval process which accounts for the quality, loan type and total exposure of the borrower. The Company has also adopted an internal exposure-based limit which is based on a variety of risk factors, including but not limited to the borrower industry.

The commercial, financial and agricultural portfolio segment totaled ~~$25.3~~$24.9 billion at ~~March 31,~~June 30, 2019 compared to $26.6 billion at December 31, 2018. This segment consists primarily of large national and international companies and small to mid-sized companies. This portfolio segment also contains owner occupied commercial real estate loans. Loans in this portfolio are generally underwritten individually and are secured with the assets of the company, and/or the personal guarantees of the business owners. The Company minimizes the risk associated with this portfolio segment

by various means, including maintaining prudent advance rates, financial covenants, and obtaining personal guarantees from the principals of the borrower.

The following table provides details related to the commercial, financial, and agricultural portfolio segment.

Table 12 Commercial, Financial and Agricultural	Table 12 Commercial, Financial and Agricultural																	Table 12 Commercial, Financial and Agricultural

		March 31, 2019								December 31, 2018 (1)									June 30, 2019								December 31, 2018 (1)
Industry		Recorded Investment		Nonaccrual		Accruing TDRs		Accruing Greater Than 90 Days Past Due		Recorded Investment		Nonaccrual		Accruing TDRs		Accruing Greater Than 90 Days Past Due			Recorded Investment		Nonaccrual		Accruing TDRs		Accruing Greater Than 90 Days Past Due		Recorded Investment		Nonaccrual		Accruing TDRs		Accruing Greater Than 90 Days Past Due
		(In Thousands)																	(In Thousands)
Autos, Components and Durable Goods		$	2,255,972	$	46,537	$	—	$	—	$	2,403,917	$	68,891	$	—	$	3,922		$	2,176,768	$	35,726	$	—	$	—	$	2,403,917	$	68,891	$	—	$	3,922
Basic Materials		574,570		2,324		—		660		567,966		2,426		—		—			532,220		2,101		—		350		567,966		2,426		—		—
Capital Goods & Industrial Services		2,570,169		75,048		117		87		2,523,857		74,769		124		39			2,186,800		15,048		110		127		2,523,857		74,769		124		39
Construction & Construction Materials		785,030		20,347		—		—		732,838		19,971		—		—			712,052		49,408		—		1,587		732,838		19,971		—		—
Consumer		592,320		682		—		—		592,607		600		—		—			644,328		1,763		—		1,651		592,607		600		—		—
Healthcare		2,830,302		54,977		328		—		2,914,464		18,682		333		83			2,757,609		66,356		322		—		2,914,464		18,682		333		83
Energy		2,836,518		161,864		—		—		2,863,529		119,069		—		—			2,968,927		150,971		—		—		2,863,529		119,069		—		—
Financial Services		950,487		84		—		470		1,061,922		94		—		—			968,311		2,168		—		480		1,061,922		94		—		—
General Corporates		1,686,344		4,211		—		6,033		1,757,121		4,645		3		3,993			1,769,236		4,603		—		8,590		1,757,121		4,645		3		3,993
Institutions		3,031,525		467		—		—		3,349,248		474		—		—			3,167,844		459		—		—		3,349,248		474		—		—
Leisure and Consumer Services		2,475,633		24,615		—		—		2,597,598		22,544		—		10			2,524,186		9,335		—		—		2,597,598		22,544		—		10
Real Estate		1,326,247		230		—		—		1,533,206		248		—		—			1,351,749		230		—		—		1,533,206		248		—		—
Retail		560,758		33,192		—		894		573,658		29,751		—		67			534,298		16,895		252		—		573,658		29,751		—		67
Telecoms, Technology & Media		1,363,926		3,338		45		—		1,525,730		3,680		46		—			1,219,071		3,031		45		—		1,525,730		3,680		46		—
Transportation		899,832		33,113		—		—		1,000,564		34,545		—		—			948,045		31,685		—		—		1,000,564		34,545		—		—
Utilities		542,297		—		18,420		—		564,094		—		18,420		—			391,212		—		18,421		—		564,094		—		18,420		—
Total Commercial, Financial and Agricultural		$	25,281,930	$	461,029	$	18,910	$	8,144	$	26,562,319	$	400,389	$	18,926	$	8,114		$	24,852,656	$	389,779	$	19,150	$	12,785	$	26,562,319	$	400,389	$	18,926	$	8,114


(1)	December 31, 2018 data has been revised to conform to current period industry classifications, as the Company redefined industry classifications during the first quarter of 2019.

Commercial Real Estate

The commercial real estate portfolio segment includes the commercial real estate and real estate - construction loan portfolios. Commercial real estate loans totaled $13.0 billion at both ~~March 31,~~June 30, 2019 and December 31, 2018, and real estate — construction loans totaled ~~$1.9~~$2.0 billion at ~~March 31,~~both June 30, 2019 and ~~$2.0 billion at~~ December 31, 2018.

This portfolio segment consists primarily of extensions of credits to real estate developers and investors for the financing of land and buildings, whereby the repayment is generated from the sale of the real estate or the income generated by the real estate property. The Company attempts to minimize risk on commercial real estate properties by

various means, including requiring collateral with values that exceed the loan amount, adequate cash flow to service the debt, and the personal guarantees of principals of the borrowers. In order to minimize risk on the construction portfolio, the Company has established an operations group outside of the lending staff which is responsible for loan disbursements during the construction process.

The following tables present the geographic distribution for the commercial real estate and real estate — construction portfolios.

Table 13 Commercial Real Estate	Table 13 Commercial Real Estate																	Table 13 Commercial Real Estate

		March 31, 2019								December 31, 2018									June 30, 2019								December 31, 2018
State		Recorded Investment		Nonaccrual		Accruing TDRs		Accruing Greater Than 90 Days Past Due		Recorded Investment		Nonaccrual		Accruing TDRs		Accruing Greater Than 90 Days Past Due			Recorded Investment		Nonaccrual		Accruing TDRs		Accruing Greater Than 90 Days Past Due		Recorded Investment		Nonaccrual		Accruing TDRs		Accruing Greater Than 90 Days Past Due
		(In Thousands)																	(In Thousands)
Alabama		$	370,393	$	5,256	$	2,180	$	—	$	375,442	$	5,507	$	2,221	$	237		$	378,594	$	5,124	$	2,136	$	—	$	375,442	$	5,507	$	2,221	$	237
Arizona		842,750		8,021		—		—		855,007		8,342		—		—			796,134		7,817		—		—		855,007		8,342		—		—
California		1,987,414		—		—		28		2,196,360		—		—		1,722			1,984,176		—		—		28		2,196,360		—		—		1,722
Colorado		569,732		6,863		—		—		533,481		6,036		—		—			579,362		5,970		—		—		533,481		6,036		—		—
Florida		1,090,408		18,121		56		—		1,086,443		18,030		66		—			1,197,671		17,741		50		—		1,086,443		18,030		66		—
New Mexico		138,561		3,607		119		—		157,473		3,769		121		14			118,263		4,185		117		—		157,473		3,769		121		14
Texas		3,884,412		38,716		590		1,132		3,911,128		41,707		382		447			3,674,003		43,058		527		332		3,911,128		41,707		382		447
Other		4,071,526		28,863		866		—		3,901,462		26,753		871		—			4,241,502		23,242		857		—		3,901,462		26,753		871		—
		$	12,955,196	$	109,447	$	3,811	$	1,160	$	13,016,796	$	110,144	$	3,661	$	2,420		$	12,969,705	$	107,137	$	3,687	$	360	$	13,016,796	$	110,144	$	3,661	$	2,420

Table 14 Real Estate – Construction	Table 14 Real Estate – Construction																	Table 14 Real Estate – Construction

		March 31, 2019								December 31, 2018									June 30, 2019								December 31, 2018
State		Recorded Investment		Nonaccrual		Accruing TDRs		Accruing Greater Than 90 Days Past Due		Recorded Investment		Nonaccrual		Accruing TDRs		Accruing Greater Than 90 Days Past Due			Recorded Investment		Nonaccrual		Accruing TDRs		Accruing Greater Than 90 Days Past Due		Recorded Investment		Nonaccrual		Accruing TDRs		Accruing Greater Than 90 Days Past Due
		(In Thousands)																	(In Thousands)
Alabama		$	71,423	$	95	$	—	$	115	$	64,758	$	96	$	—	$	69		$	71,203	$	1,478	$	—	$	115	$	64,758	$	96	$	—	$	69
Arizona		201,305		—		—		—		181,143		—		—		—			221,333		—		—		—		181,143		—		—		—
California		239,653		—		—		—		253,416		—		—		—			258,596		—		—		—		253,416		—		—		—
Colorado		65,647		—		—		—		111,375		—		—		—			75,882		—		—		—		111,375		—		—		—
Florida		179,218		—		—		—		213,502		—		—		—			149,032		—		—		—		213,502		—		—		—
New Mexico		8,208		—		45		1		6,868		—		46		—			11,217		—		43				6,868		—		46		—
Texas		752,266		777		66		417		754,994		2,331		70		475			785,598		193		64		417		754,994		2,331		70		475
Other		427,627		426		—		—		411,481		424		—		—			409,785		426		—		—		411,481		424		—		—
		$	1,945,347	$	1,298	$	111	$	533	$	1,997,537	$	2,851	$	116	$	544		$	1,982,646	$	2,097	$	107	$	532	$	1,997,537	$	2,851	$	116	$	544

Residential Real Estate

The residential real estate portfolio includes residential real estate — mortgage loans, equity lines of credit and equity loans. The residential real estate portfolio primarily contains loans to individuals, which are secured by single-family residences. Loans of this type are generally smaller in size than commercial real estate loans and are geographically dispersed throughout the Company's market areas, with some guaranteed by government agencies or

private mortgage insurers. Losses on residential real estate loans depend, to a large degree, on the level of interest rates, the unemployment rate, economic conditions and collateral values.

Residential real estate — mortgage loans totaled $13.4 billion at both ~~March 31,~~June 30, 2019 and December 31, 2018. Risks associated with residential real estate — mortgage loans are mitigated through rigorous underwriting procedures, collateral values established by independent appraisers and mortgage insurance. In addition, the collateral for this portfolio segment is concentrated in the Company's footprint as indicated in the table below.

Table 15 Residential Real Estate — Mortgage	Table 15 Residential Real Estate — Mortgage																	Table 15 Residential Real Estate — Mortgage

		March 31, 2019								December 31, 2018									June 30, 2019								December 31, 2018
State		Recorded Investment		Nonaccrual		Accruing TDRs		Accruing Greater Than 90 Days Past Due		Recorded Investment		Nonaccrual		Accruing TDRs		Accruing Greater Than 90 Days Past Due			Recorded Investment		Nonaccrual		Accruing TDRs		Accruing Greater Than 90 Days Past Due		Recorded Investment		Nonaccrual		Accruing TDRs		Accruing Greater Than 90 Days Past Due
		(In Thousands)																	(In Thousands)
Alabama		$	935,175	$	22,704	$	11,916	$	1,574	$	944,556	$	23,285	$	11,677	$	1,002		$	933,359	$	22,417	$	11,390	$	1,132	$	944,556	$	23,285	$	11,677	$	1,002
Arizona		1,352,308		13,742		7,451		293		1,334,736		12,572		8,415		217			1,358,213		12,434		8,110		165		1,334,736		12,572		8,415		217
California		3,256,048		13,873		4,358		916		3,252,592		15,898		3,910		—			3,277,998		15,585		3,790		2,698		3,252,592		15,898		3,910		—
Colorado		1,134,245		5,067		1,173		—		1,132,517		5,255		784		—			1,140,240		5,100		1,667		—		1,132,517		5,255		784		—
Florida		1,572,840		39,306		11,072		584		1,590,912		39,699		9,908		1,433			1,554,604		34,922		10,936		405		1,590,912		39,699		9,908		1,433
New Mexico		216,913		3,656		1,285		—		219,434		3,683		1,287		—			215,963		3,893		1,269		279		219,434		3,683		1,287		—
Texas		4,517,551		50,014		19,917		2,994		4,536,383		50,069		19,293		3,275			4,515,375		47,321		20,007		2,002		4,536,383		50,069		19,293		3,275
Other		411,316		15,101		1,995		2,646		411,026		16,638		2,172		—			408,378		12,575		1,961		—		411,026		16,638		2,172		—
		$	13,396,396	$	163,463	$	59,167	$	9,007	$	13,422,156	$	167,099	$	57,446	$	5,927		$	13,404,130	$	154,247	$	59,130	$	6,681	$	13,422,156	$	167,099	$	57,446	$	5,927

The following table provides information related to refreshed FICO scores for the Company's residential real estate portfolio.

Table 16 Residential Real Estate - Mortgage	Table 16 Residential Real Estate - Mortgage																	Table 16 Residential Real Estate - Mortgage

		March 31, 2019								December 31, 2018									June 30, 2019								December 31, 2018
FICO Score		Recorded Investment		Nonaccrual		Accruing TDRs		Accruing Greater Than 90 Days Past Due		Recorded Investment		Nonaccrual		Accruing TDRs		Accruing Greater Than 90 Days Past Due			Recorded Investment		Nonaccrual		Accruing TDRs		Accruing Greater Than 90 Days Past Due		Recorded Investment		Nonaccrual		Accruing TDRs		Accruing Greater Than 90 Days Past Due
		(In Thousands)																	(In Thousands)
Below 621		$	735,544	$	111,662	$	20,115	$	5,521	$	730,294	$	113,560	$	19,131	$	4,803		$	706,957	$	103,246	$	20,521	$	5,629	$	730,294	$	113,560	$	19,131	$	4,803
621 – 680		1,134,063		19,757		12,911		144		1,146,999		20,877		14,168		301			1,118,959		19,620		12,839		141		1,146,999		20,877		14,168		301
681 – 720		1,731,800		12,460		11,596		121		1,725,819		11,471		9,031		451			1,744,337		11,876		11,413		117		1,725,819		11,471		9,031		451
Above 720		9,202,495		10,439		13,963		3,038		9,208,678		11,156		14,847		107			9,228,152		9,523		13,784		375		9,208,678		11,156		14,847		107
Unknown		592,494		9,145		582		183		610,366		10,035		269		265			605,725		9,982		573		419		610,366		10,035		269		265
		$	13,396,396	$	163,463	$	59,167	$	9,007	$	13,422,156	$	167,099	$	57,446	$	5,927		$	13,404,130	$	154,247	$	59,130	$	6,681	$	13,422,156	$	167,099	$	57,446	$	5,927

Equity lines of credit and equity loans totaled $2.9 billion at June 30, 2019 and $3.0 billion at ~~both March 31, 2019 and~~ December 31, 2018. Losses in these portfolios generally track overall economic conditions. These loans are underwritten in accordance with the underwriting standards set forth in the Company's policy and procedures. The collateral for this portfolio segment is concentrated within the Company's footprint as indicated in the table below.

Table 17 Equity Loans and Lines	Table 17 Equity Loans and Lines																	Table 17 Equity Loans and Lines

		March 31, 2019								December 31, 2018									June 30, 2019								December 31, 2018
State		Recorded Investment		Nonaccrual		Accruing TDRs		Accruing Greater Than 90 Days Past Due		Recorded Investment		Nonaccrual		Accruing TDRs		Accruing Greater Than 90 Days Past Due			Recorded Investment		Nonaccrual		Accruing TDRs		Accruing Greater Than 90 Days Past Due		Recorded Investment		Nonaccrual		Accruing TDRs		Accruing Greater Than 90 Days Past Due
		(In Thousands)																	(In Thousands)
Alabama		$	485,632	$	11,288	$	7,939	$	256	$	498,839	$	11,536	$	8,062	$	477		$	473,716	$	9,758	$	7,729	$	418	$	498,839	$	11,536	$	8,062	$	477
Arizona		344,147		6,780		3,796		164		348,763		6,409		4,005		221			332,798		6,963		3,756		103		348,763		6,409		4,005		221
California		428,430		1,099		265		233		426,179		3,358		267		402			421,398		1,522		125		1,833		426,179		3,358		267		402
Colorado		186,755		2,808		832		—		193,122		2,822		841		128			182,321		2,673		758		320		193,122		2,822		841		128
Florida		321,620		8,469		5,549		276		332,367		8,646		5,704		398			313,910		8,435		5,366		193		332,367		8,646		5,704		398
New Mexico		48,324		1,583		587		—		50,873		1,515		593		286			48,255		1,928		584		85		50,873		1,515		593		286
Texas		1,162,123		11,553		6,829		516		1,166,304		13,097		6,901		446			1,148,225		12,239		6,654		664		1,166,304		13,097		6,901		446
Other		27,445		1,259		391		60		29,384		1,258		395		48			27,985		1,199		389		2		29,384		1,258		395		48
		$	3,004,476	$	44,839	$	26,188	$	1,505	$	3,045,831	$	48,641	$	26,768	$	2,406		$	2,948,608	$	44,717	$	25,361	$	3,618	$	3,045,831	$	48,641	$	26,768	$	2,406

The following table provides information related to refreshed FICO scores for the Company's equity loans and lines.

Table 18 Equity Loans and Lines	Table 18 Equity Loans and Lines																	Table 18 Equity Loans and Lines

		March 31, 2019								December 31, 2018									June 30, 2019								December 31, 2018
FICO Score		Recorded Investment		Nonaccrual		Accruing TDRs		Accruing Greater Than 90 Days Past Due		Recorded Investment		Nonaccrual		Accruing TDRs		Accruing Greater Than 90 Days Past Due			Recorded Investment		Nonaccrual		Accruing TDRs		Accruing Greater Than 90 Days Past Due		Recorded Investment		Nonaccrual		Accruing TDRs		Accruing Greater Than 90 Days Past Due
		(In Thousands)																	(In Thousands)
Below 621		$	213,265	$	23,602	$	7,338	$	1,251	$	204,527	$	26,747	$	5,905	$	1,923		$	211,008	$	23,993	$	7,195	$	3,295	$	204,527	$	26,747	$	5,905	$	1,923
621 – 680		371,803		10,005		7,274		137		376,248		9,548		9,126		254			350,181		9,059		7,042		280		376,248		9,548		9,126		254
681 – 720		536,033		7,080		4,491		35		537,568		8,014		3,908		106			519,691		7,510		4,130		26		537,568		8,014		3,908		106
Above 720		1,875,989		3,808		7,085		82		1,919,796		3,950		7,829		106			1,861,203		4,050		6,877		17		1,919,796		3,950		7,829		106
Unknown		7,386		344		—		—		7,692		382		—		17			6,525		105		117		—		7,692		382		—		17
		$	3,004,476	$	44,839	$	26,188	$	1,505	$	3,045,831	$	48,641	$	26,768	$	2,406		$	2,948,608	$	44,717	$	25,361	$	3,618	$	3,045,831	$	48,641	$	26,768	$	2,406

Other Consumer

The Company centrally underwrites and sources from the Company's branches or online, credit card loans and other consumer direct loans. Total consumer direct loans at ~~March 31,~~June 30, 2019 were $2.5 billion and $2.6 billion at December 31, 2018. Total credit cards at ~~March 31,~~June 30, 2019 were ~~$833~~$878 million and $818 million at December 31, 2018.

The Company also operates a consumer finance unit which purchases loan contracts for indirect automobile and other consumer financing. These loans are centrally underwritten using underwriting guidelines and industry accepted tools. Total consumer indirect loans were $3.8 billion at both ~~March 31,~~June 30, 2019 and December 31, 2018.

The following tables provide information related to refreshed FICO scores for the Company's consumer direct and consumer indirect loans.

Table 19 Consumer Direct	Table 19 Consumer Direct																	Table 19 Consumer Direct

		March 31, 2019								December 31, 2018									June 30, 2019								December 31, 2018
FICO Score		Recorded Investment		Nonaccrual		Accruing TDRs		Accruing Greater Than 90 Days Past Due		Recorded Investment		Nonaccrual		Accruing TDRs		Accruing Greater Than 90 Days Past Due			Recorded Investment		Nonaccrual		Accruing TDRs		Accruing Greater Than 90 Days Past Due		Recorded Investment		Nonaccrual		Accruing TDRs		Accruing Greater Than 90 Days Past Due
		(In Thousands)																	(In Thousands)
Below 621		$	240,831	$	3,802	$	1,295	$	15,302	$	217,273	$	3,870	$	1,002	$	12,197		$	184,239	$	4,214	$	1,186	$	6,048	$	217,273	$	3,870	$	1,002	$	12,197
621 – 680		510,086		454		861		291		531,466		257		387		178			481,220		1,304		615		4,385		531,466		257		387		178
681 – 720		593,225		189		1,698		30		596,889		147		1,295		311			589,813		741		2,935		2,432		596,889		147		1,295		311
Above 720		1,126,393		280		—		60		1,149,606		254		—		11			1,149,339		571		516		1,400		1,149,606		254		—		11
Unknown		63,381		—		—		1,568		58,354		—		—		639			72,017		96		—		521		58,354		—		—		639
		$	2,533,916	$	4,725	$	3,854	$	17,251	$	2,553,588	$	4,528	$	2,684	$	13,336		$	2,476,628	$	6,926	$	5,252	$	14,786	$	2,553,588	$	4,528	$	2,684	$	13,336

Table 20 Consumer Indirect	Table 20 Consumer Indirect																	Table 20 Consumer Indirect

		March 31, 2019								December 31, 2018									June 30, 2019								December 31, 2018
FICO Score		Recorded Investment		Nonaccrual		Accruing TDRs		Accruing Greater Than 90 Days Past Due		Recorded Investment		Nonaccrual		Accruing TDRs		Accruing Greater Than 90 Days Past Due			Recorded Investment		Nonaccrual		Accruing TDRs		Accruing Greater Than 90 Days Past Due		Recorded Investment		Nonaccrual		Accruing TDRs		Accruing Greater Than 90 Days Past Due
		(In Thousands)																	(In Thousands)
Below 621		$	880,920	$	18,297	$	—	$	7,456	$	865,702	$	14,700	$	—	$	9,128		$	787,725	$	22,700	$	—	$	5,605	$	865,702	$	14,700	$	—	$	9,128
621 – 680		1,072,516		2,243		—		222		1,083,116		2,084		—		381			1,085,287		3,262		—		763		1,083,116		2,084		—		381
681 – 720		714,159		770		—		53		719,093		648		—		69			733,067		1,001		—		286		719,093		648		—		69
Above 720		1,137,242		477		—		50		1,099,289		402		—		213			1,190,443		830		—		154		1,099,289		402		—		213
Unknown		2,615		56		—		—		2,819		—		—		—			2,557		—		—		5		2,819		—		—		—
		$	3,807,452	$	21,843	$	—	$	7,781	$	3,770,019	$	17,834	$	—	$	9,791		$	3,799,079	$	27,793	$	—	$	6,813	$	3,770,019	$	17,834	$	—	$	9,791

Foreign Exposure

As of ~~March 31,~~June 30, 2019, foreign exposure risk did not represent a significant concentration of the Company's total portfolio of loans and was substantially represented by borrowers domiciled in Mexico and foreign borrowers currently residing in the United States.

Funding Activities

Deposits are the primary source of funds for lending and investing activities and their cost is the largest category of interest expense. The Company also utilizes brokered deposits as a funding source in addition to customer deposits. Scheduled payments, as well as prepayments, and maturities from portfolios of loans and investment securities also provide a stable source of funds. FHLB advances, other secured borrowings, federal funds purchased, securities sold under agreements to repurchase and other short-term borrowed funds, as well as longer-term debt issued through the capital markets, all provide supplemental liquidity sources. The Company’s funding activities are monitored and governed through the Company’s asset/liability management process.

There were no changes in the Company's and the Bank's credit ~~rating~~ratings during the three months ended ~~March 31,~~June 30, 2019. The Company's and the Bank's credit ratings at ~~March 31,~~June 30, 2019 were as follows:

Table 21 Credit Ratings

	As of ~~March 31,~~June 30, 2019
	Standard & Poor’s	Moody’s	Fitch
BBVA ~~Compass~~USA Bancshares, Inc.
Long-term debt rating	BBB+	Baa2	BBB+
Short-term debt rating	A-2	—	F2
~~Compass Bank~~BBVA USA
Long-term debt rating	BBB+	Baa2	BBB+
Long-term bank deposits (1)	N/A	A2	A-
Subordinated debt	BBB	Baa2	BBB
Short-term debt rating	A-2	P-2	F2
Short-term deposit rating (1)	N/A	P-1	F2
Outlook	Stable	Stable	Negative

(1) S&P does not provide a rating; therefore, the rating is N/A.

The cost and availability of financing to the Company and the Bank are impacted by its credit ratings. A downgrade to the Company’s or Bank’s credit ratings could affect its ability to access the credit markets and increase its borrowing costs, thereby adversely impacting the Company’s financial condition and liquidity. Key factors in maintaining high credit ratings include a stable and diverse earnings stream, strong credit quality, strong capital ratios and diverse funding sources, in addition to disciplined liquidity monitoring procedures. See the risk factors disclosed in the Company's Annual Report on Form 10-K for the year ended December 31, 2018, for additional information.

A credit rating is not a recommendation to buy, sell or hold securities, and the ratings are subject to revision or withdrawal by the assigning rating agency. Each rating should be evaluated independently of any other rating.

Deposits

Total deposits increased by ~~$2.2 billion~~$420.8 million from December 31, 2018 to ~~March 31,~~June 30, 2019. At ~~March 31,~~June 30, 2019 and December 31, 2018, total deposits included ~~$8.5~~$6.7 billion and $9.0 billion, respectively, of brokered deposits. The following table presents the Company’s deposits segregated by major category:

Table 22 Composition of Deposits	Table 22 Composition of Deposits								Table 22 Composition of Deposits

	March 31, 2019				December 31, 2018				June 30, 2019				December 31, 2018
	Balance		% of Total		Balance		% of Total		Balance		% of Total		Balance		% of Total
	(Dollars in Thousands)								(Dollars in Thousands)
Noninterest-bearing demand deposits	$	20,403,716	27.4	%	$	20,183,876	28.0	%	$	20,646,209	28.5	%	$	20,183,876	28.0	%
Interest-bearing demand deposits	9,509,563		12.8		8,400,192		11.6		9,388,226		12.9		8,400,192		11.6
Savings and money market	28,508,858		38.3		27,877,124		38.6		27,579,216		38.0		27,877,124		38.6
Time deposits	15,958,171		21.5		15,706,795		21.8		14,975,159		20.6		15,706,795		21.8
Total deposits	$	74,380,308	100.0	%	$	72,167,987	100.0	%	$	72,588,810	100.0	%	$	72,167,987	100.0	%

Borrowed Funds

In addition to internal deposit generation, the Company also relies on borrowed funds as a supplemental source of funding. Borrowed funds consist of short-term borrowings, FHLB advances, subordinated debentures and other long-term borrowings.

Short-term borrowings are primarily in the form of federal funds purchased, securities sold under agreements to repurchase and other short-term borrowings.

The short-term borrowings table presents the distribution of the Company’s short-term borrowed funds and the corresponding weighted average interest rates. Also provided are the maximum outstanding amounts of borrowings, the average amounts of borrowings and the average interest rates at period-end.

Table 23 Short-Term Borrowings	Table 23 Short-Term Borrowings										Table 23 Short-Term Borrowings

	Maximum Outstanding at Any Month End		Average Balance		Average Interest Rate		Ending Balance		Average Interest Rate at Period End		Maximum Outstanding at Any Month End		Average Balance		Average Interest Rate		Ending Balance		Average Interest Rate at Period End
	(Dollars in Thousands)										(Dollars in Thousands)
Balance at March 31, 2019
Balance at June 30, 2019
Federal funds purchased	$	5,060	$	398	2.50	%	$	5,060	2.50	%	$	5,060	$	1,505	2.50	%	$	—	—	%
Securities sold under agreements to repurchase (1)	407,248		411,527		1.69		182,964		2.83		807,833		438,072		0.45		191,739		2.62
Other short-term borrowings	69,446		28,117		2.83		30,975		2.00		69,446		17,702		3.37		2,067		4.26
	$	481,754	$	440,042			$	218,999			$	882,339	$	457,279			$	193,806
Balance at December 31, 2018
Federal funds purchased	$	2,000	$	82	2.50	%	$	—	—	%	$	2,000	$	82	2.50	%	$	—	—	%
Securities sold under agreements to repurchase (1)	183,511		109,770		1.78		102,275		3.73		183,511		109,770		1.78		102,275		3.73
Other short-term borrowings	159,004		68,423		3.04		—		—		159,004		68,423		3.04		—		—
	$	344,515	$	178,275			$	102,275			$	344,515	$	178,275			$	102,275


(1)	Average interest rate does not reflect impact of balance sheet offsetting. See Note 6, Securities Financing Activities, in the Notes to the Unaudited Condensed Consolidated Financial Statements.

At ~~both March 31,~~June 30, 2019 and December 31, 2018, FHLB and other borrowings were $4.1 billion and $4.0 ~~billion.~~billion, respectively.

For the ~~three~~six months ended ~~March 31,~~June 30, 2019, the Company had $3.8 billion of proceeds received from FHLB and other borrowings and repayments were approximately $3.8 billion.

Shareholder’s Equity

Total shareholder's equity was ~~$13.7~~$13.9 billion at ~~March 31,~~June 30, 2019, compared to $13.5 billion at December 31, 2018, an increase of ~~$215~~$358 million. Shareholder's equity increased ~~$140~~$300 million due to earnings attributable to the Company during the period, as well as a ~~$74~~$236 million ~~decrease~~increase in accumulated other comprehensive ~~loss~~income largely attributable to a decrease in unrealized losses on available for sale securities offset, in part, by the payment of preferred and common dividends totaling ~~$4.5~~$179.2 million to its sole shareholder, BBVA.

Risk Management

In the normal course of business, the Company encounters inherent risk in its business activities. The Company’s risk management approach includes processes for identifying, assessing, managing, monitoring and reporting risks. Management has grouped the risks facing its operations into the following categories: credit risk, interest rate risk, liquidity risk, operational risk, market risk, model risk, reputational risk, fiduciary risk, suitability risk, compliance risk, legal risk, and strategic and business risk. Each of these risks is managed through the Company’s ERM program. The ERM program provides the structure and framework necessary to identify, measure, control and manage risk across the organization. ERM is the cornerstone for defining risk tolerance, identifying and monitoring key risk indicators, managing capital and integrating the Company’s capital planning process with on-going risk assessments and related stress testing for major risks.

Market Risk Management

The effective management of market risk is essential to achieving the Company’s strategic financial objectives. As a financial institution, the Company’s most significant market risk exposure is interest rate risk in its balance sheet; however, market risk also includes product liquidity risk, price risk and volatility risk in the Company’s lines of business.

The primary objectives of market risk management are to minimize any adverse effect that changes in market risk factors may have on net interest income, and to offset the risk of price changes for certain assets recorded at fair value.

Interest Rate Market Risk

The Company’s net interest income and the fair value of its financial instruments are influenced by changes in the level of interest rates. The Company manages its exposure to fluctuations in interest rates through policies established by its Asset/Liability Committee. The Asset/Liability Committee meets regularly and has responsibility for approving asset/liability management policies, formulating strategies to improve balance sheet positioning and/or earnings and reviewing the interest rate sensitivity of the Company.

Management utilizes an interest rate simulation model to estimate the sensitivity of the Company’s net interest income to changes in interest rates. Such estimates are based upon a number of assumptions for each scenario, including the level of balance sheet growth, deposit repricing characteristics and the rate of prepayments.

The estimated impact on the Company’s net interest income sensitivity over a one-year time horizon at ~~March 31,~~June 30, 2019, is shown in the table below. Such analysis assumes a gradual and sustained parallel shift in interest rates, expectations of balance sheet growth and composition and the Company’s estimate of how interest-bearing transaction accounts would reprice in each scenario using current yield curves at ~~March 31,~~June 30, 2019.

Table 24 Net Interest Income Sensitivity

	Estimated % Change in Net Interest Income
	~~March 31,~~June 30, 2019
Rate Change
+ 200 basis points	~~5.46~~6.15	%
+ 100 basis points	~~2.89~~3.27
- 100 basis points	(~~5.05~~4.67	)

The following table shows the effect that the indicated changes in interest rates would have on EVE. Inherent in this calculation are many assumptions used to project lifetime cash flows for every item on the balance sheet that may or may not be realized, such as deposit decay rates, prepayment speeds and spread assumptions. This measurement only values existing business without consideration of new business or potential management actions.

Table 25 Economic Value of Equity

	Estimated % Change in Economic Value of Equity
	~~March 31,~~June 30, 2019
Rate Change
+ 300 basis points	~~(11.20)~~(11.02)	%
+ 200 basis points	(~~7.22~~6.90	)
+ 100 basis points	(~~3.24~~2.76	)
- 100 basis points	~~0.55~~0.13

The Company is also subject to trading risk. The Company utilizes various tools to measure and manage price risk in its trading portfolios. In addition, the Board of Directors of the Company has established certain limits relative to positions and activities. The level of price risk exposure at any given point in time depends on the market environment and expectation of future price and market movements, and will vary from period to period.

Derivatives

The Company uses derivatives primarily to manage economic risks related to commercial loans, mortgage banking operations, long-term debt and other funding sources. The Company also uses derivatives to facilitate transactions on behalf of its clients. As of ~~March 31,~~June 30, 2019, the Company had derivative financial instruments outstanding with notional amounts of ~~$47.5~~$50.4 billion. The estimated net fair value of open contracts was in an asset position of ~~$100~~$249 million at ~~March 31,~~

June 30, 2019. For additional information about derivatives, refer to Note 5, Derivatives and Hedging, in the Notes to the Unaudited Condensed Consolidated Financial Statements.

Liquidity Management

Liquidity is the ability of the Company to convert assets into cash or cash equivalents without significant loss and to raise additional funds by increasing liabilities. Liquidity management involves maintaining the Company’s ability to meet the day-to-day cash flow requirements of its customers, whether they are depositors wishing to withdraw funds or borrowers requiring funds to meet their credit needs. Without proper liquidity management, the Company would not be able to perform the primary function of a financial intermediary and would, therefore, not be able to meet the needs of the communities it serves.

The Company regularly assesses liquidity needs under various scenarios of market conditions, asset growth and changes in credit ratings. The assessment includes liquidity stress testing which measures various sources and uses of funds under the different scenarios. The assessment provides regular monitoring of unused borrowing capacity and available sources of contingent liquidity to prepare for unexpected liquidity needs and to cover unanticipated events that could affect liquidity.

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

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

In addition to the Company’s financial performance and condition, liquidity may be impacted by the Parent’s structure as a holding company that is a separate legal entity from the Bank. The Parent requires cash for various operating needs including payment of dividends to its shareholder, the servicing of debt, and the payment of general corporate expenses. The primary source of liquidity for the Parent is dividends paid by the Bank. Applicable federal and state statutes and regulations impose restrictions on the amount of dividends that may be paid by the Bank. In addition to the formal statutes and regulations, regulatory authorities also consider the adequacy of the Bank’s total capital in relation to its assets, deposits and other such items. Due to the net earnings restrictions on dividend distributions under Alabama law, the Bank was not permitted to pay dividends at ~~March 31,~~June 30, 2019 or December 31, 2018 without regulatory approval. Appropriate limits and guidelines are in place to ensure the Parent has sufficient cash to meet operating expenses and other commitments without relying on subsidiaries or capital markets for funding. Any future dividends paid from the Parent must be set forth as capital actions in the Company's capital plans and not objected to by the Federal Reserve Board.

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

The Federal Reserve Board will no longer take action to require the Company to comply with the Federal Reserve Board’s LCR rule until it formally amends its regulations to implement the EGRRCPA. At ~~March 31,~~June 30, 2019, the Company's LCR was ~~145%~~144% and was fully compliant with the LCR requirements. However, should the Company's cash position or investment mix change in the future, the Company's ability to meet the LCR requirement may be impacted.

Management believes that the current sources of liquidity are adequate to meet the Company’s requirements and plans for continued growth.

Capital

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

The following table sets forth the Company's U.S. Basel III regulatory capital ratios subject to transitional provisions at ~~March 31,~~June 30, 2019 and December 31, 2018.

Table 26 Capital Ratios	Table 26 Capital Ratios						Table 26 Capital Ratios

	March 31, 2019			December 31, 2018			June 30, 2019			December 31, 2018
	(Dollars in Thousands)						(Dollars in Thousands)
Capital:
CET1 Capital	$	8,631,558		$	8,457,585		$	8,615,070		$	8,457,585
Tier 1 Capital	8,865,758			8,691,785			8,849,270			8,691,785
Total Capital	10,402,209			10,216,625			10,331,094			10,216,625
Ratios:
CET1 Risk-based Capital Ratio	12.34		%	12.00		%	12.57		%	12.00		%
Tier 1 Risk-based Capital Ratio	12.67			12.33			12.91			12.33
Total Risk-based Capital Ratio	14.87			14.49			15.08			14.49
Leverage Ratio	10.05			10.03			9.99			10.03

At ~~March 31,~~June 30, 2019, the regulatory capital ratios of the Bank exceeded the “well-capitalized” standard for banks based on applicable U.S. regulatory capital requirements. The Company continually monitors these ratios to ensure that the Bank exceeds this standard.


Item 3.	Quantitative and Qualitative Disclosures about Market Risk

Refer to “Market Risk Management” in Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations, herein.

Item 4. Controls and Procedures

Disclosure Controls and Procedures.

Management of the Company, with the participation of its Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the Company’s disclosure controls and procedures. Based on their evaluation, as of the end of the period covered by this Quarterly Report on Form 10-Q, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) were effective.

Changes In Internal Control Over Financial Reporting.

There have been no changes in the Company’s internal control over financial reporting during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II OTHER INFORMATION


Item 1.	Legal Proceedings

See under “Legal and Regulatory Proceedings” in Note 8, Commitments, Contingencies and Guarantees, of the Notes to the Unaudited Condensed Consolidated Financial Statements.


Item 1A.	Risk Factors

Various risk and uncertainties could affect the Company's business. These risks are described elsewhere in this report and the Company's other filings with the SEC, including the Company's Annual Report on Form 10-K for the year-ended December 31, 2018.

The following discussion updates the risk factors disclosed in the Company's Annual Report on Form 10-K for the year-ended December 31, 2018.

The Company is a subsidiary of BBVA Group, and activities across BBVA Group could adversely affect the Company’s business and results of operations.

The Company is a part of a highly diversified international financial group which offers a wide variety of financial and related products and services including retail banking, asset management, private banking and wholesale banking. The BBVA Group strives to foster a culture in which its employees act with integrity and feel comfortable reporting instances of misconduct. The BBVA Group employees are essential to this culture, and acts of misconduct by any employee, and particularly by senior management, could erode trust and confidence and damage the BBVA Group and the Company’s reputation among existing and potential clients and other stakeholders. Negative public opinion could result from actual or alleged conduct by the BBVA Group entities in any number of activities or circumstances, including operations, employment-related offenses such as sexual harassment and discrimination, regulatory compliance, the use and protection of data and systems, and the satisfaction of client expectations, and from actions taken by regulators or others in response to such conduct.

The Spanish judicial authorities are investigating the activities of the company Centro Exclusivo de Negocios y Transacciones, S.L. (Cenyt). Such investigation includes the provision of services to BBVA. In this regard, on July 29, 2019, BBVA was notified of the order from the Central Investigating Court number 6 of the National High Court, declaring BBVA as an official suspect (investigado) under preliminary proceedings 96/2017 - piece number 9, for possible breaches of law related to bribery, revelation of secrets and corruption. BBVA has been collaborating proactively with the judicial authorities, sharing with the courts information of the 'forensic' investigation, currently ongoing, which was commissioned to PriceWaterhouseCoopers through its external lawyers Garrigues, together with Uría. BBVA is not authorized to publicly divulge this information given the requirement of not interfering with the judicial investigation. The criminal proceeding is at an incipient stage in the pre-trial phase and continues under secrecy order, so it is not possible to predict at this time the scope or duration of such proceeding or its possible outcome or implications for the Group, notwithstanding the potential reputation risk of these proceedings. This matter or any similar matters arising across the Group could damage the Company’s reputation and adversely affect the confidence of the Company’s clients, rating agencies, regulators, bondholders and other parties and could have an adverse effect on the Company’s business, financial condition and operating results

The Company's rebranding strategy may not produce the benefits expected, may involve substantial costs and may not be favorably received by Customers.

Since 2008, the Company has marketed the Company's products and services using the “BBVA Compass” brand name and logo. On April 24, 2019, BBVA announced that it is moving to unify its brand globally. In the coming months, the Bank will begin the process of transitioning away from the use of the “BBVA Compass” name and rebranding as “BBVA.”

Developing and maintaining awareness and integrity of the Company and the Company's brand are important to achieving widespread acceptance of our existing and future offerings and are important elements in attracting new customers. The importance of brand recognition will increase as competition in the Company's market further intensifies. Successful promotion of the Company's brand will depend on the effectiveness of the Company's marketing efforts and on the Company's ability to provide reliable and useful banking solutions. The Company plans to continue investing

substantial resources to promote the Company's brand, but there is no guarantee that the Company will be able to achieve or maintain brand name recognition or status under the new brand, “BBVA,” that is comparable to the recognition and status previously enjoyed by the “BBVA Compass” brand. Even if the Company's brand recognition and loyalty increases, this may not result in increased use of the Company's products and services or higher revenue.

For these reasons, the Company's rebranding initiative may not produce the benefits expected, could adversely affect the Company's ability to retain and attract customers, and may have a negative impact on the Company's operations, business, financial results and financial condition.


Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds

Omitted pursuant to General Instruction H of Form 10-Q.


Item 3.	Defaults Upon Senior Securities

Omitted pursuant to General Instruction H of Form 10-Q.


Item 4.	Mine Safety Disclosures

Not Applicable.


Item 5.	Other Information

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

The Company discloses the following information pursuant to Section 13(r) of the Exchange Act, which requires an issuer to disclose whether it or any of its affiliates knowingly engaged in certain activities, transactions or dealings relating to Iran or with natural persons or entities designated by the U.S. government under specified executive orders, including activities not prohibited by U.S. law and conducted outside the United States by non-U.S. affiliates in compliance with local law. In order to comply with this requirement, the Company has requested relevant information from its affiliates globally.

The Company has not knowingly engaged in activities, transactions or dealings relating to Iran or with natural persons or entities designated by the U.S. government under the specified executive orders.

Because the Company is controlled by BBVA, a Spanish corporation, the Company's disclosure includes activities, transactions or dealings conducted outside the United States by non-U.S. affiliates of BBVA and its consolidated subsidiaries that are not controlled by the Company. The BBVA Group has the following activities, transactions and dealings with Iran requiring disclosure.

Iranian embassy-related activity. The BBVA Group maintains bank accounts in Spain for one employee of the Iranian embassy in Spain. This employee is a Spanish citizen. Estimated gross revenues for the three months ended ~~March 31,~~June 30, 2019, from embassy-related activity, which include fees and/or commissions, did not exceed ~~$1,062.~~$506. The BBVA Group does not allocate direct costs to fees and commissions and therefore has not disclosed a separate profit measure.


Item 6.	Exhibits



Exhibit Number	Description of Documents

3.1	Second Amended and Restated Certificate of Formation of the Company, reflecting name change to BBVA ~~Compass~~USA Bancshares, Inc., (incorporated herein by reference to Exhibit 3.1 of the Company's Current Report on Form 8-K (file no. 000-55106), filed ~~with the Commission~~ on ~~April 13, 2015 File No. 0-55106 and as amended by the Certificate of Preferences and Rights of the Floating Non-Cumulative Perpetual Preferred Stock, Series A incorporated herein by reference to~~ ~~Exhibit 3.1~~ ~~of the Company’s Current Report on Form 8-K filed with the Commission on December 3, 2015, File No. 0-55106)~~June 10, 2019).
3.2	Bylaws of BBVA ~~Compass~~USA Bancshares, Inc. (incorporated herein by reference to Exhibit 3.2 of the Company’s Registration Statement on Form 10 filed with the Commission on November 22, 2013, File No. 0-55106).
31.1	Certification by the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification by the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification by the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification by the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.1	Interactive Data File.

Certain instruments defining rights of holders of long-term debt of the Company and its subsidiaries constituting less than 10% of the Company’s total assets are not filed herewith pursuant to Item 601(b)(4)(iii)(A) of Regulation S-K. At the SEC’s request, the Company agrees to furnish the SEC a copy of any such agreement.

SIGNATURES

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.



Date: ~~May 8,~~August 6, 2019	BBVA ~~Compass~~USA Bancshares, Inc.
	By:	/s/ Kirk P. Pressley
		Name:	Kirk P. Pressley
		Title:	Senior Executive Vice President, Chief Financial Officer and Duly Authorized Officer

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