0000933141 us-gaap:OperatingSegmentsMember us-gaap:MortgageBankingMember ibkc:IBERIABANKMember 2018-04-01 2018-06-30false--12-31Q320192019-09-300000933141P3Y680000011100000000100000000547962315226588754796231522658872170001266000860009030006000470005300015400001200070002440005906000245780002294000278050001000010000115000000500000013750237501375023750P3YCumulative-effect adjustment to beginning retained earnings for fair value adjustments related to the reclassification of certain equity investments in accordance with ASU 2016-01, adopted as of January 1, 2018.Cumulative-effect adjustment to beginning retained earnings related to the recognition of pre-existing lease liabilities and previously deferred gains on sale-leaseback transactions in accordance with ASU 2016-02, adopted as of January 1, 2019.


 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549 
 
FORM 10-Q


☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended JuneSeptember 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 001-37532
 
 
IBERIABANK Corporation
(Exact name of registrant as specified in its charter)
 
 
 
Louisiana 72-1280718
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification Number)
 
200 West Congress Street  
Lafayette,Louisiana 70501
(Address of principal executive office) (Zip Code)
(337) 521-4003
(Registrant’s telephone number, including area code)
 
 
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐
Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files).    Yes  ☒    No  ☐





Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a 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 ☒  Accelerated Filer ☐
    
Non-accelerated Filer ☐  Smaller Reporting Company ☐
       
    Emerging Growth Company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ 
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No  ☒


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

Title of each classTrading symbol(s)Name of each exchange on which registered
Common Stock (par value $1.00 per share)IBKCThe NASDAQ Stock Market, LLC
Depositary Shares, Each Representing a 1/400th Interest inIBKCPThe NASDAQ Stock Market, LLC
a Share of 6.625% Perpetual Preferred Stock, Series B
Depositary Shares, Each Representing a 1/400th Interest inIBKCOThe NASDAQ Stock Market, LLC
a Share of 6.60% Perpetual Preferred Stock, Series C
Depositary Shares, Each Representing a 1/400th InterestIBKCNThe NASDAQ Stock Market, LLC
a Share of 6.100% Perpetual Preferred Stock, Series D
At JulyOctober 31, 2019, the Registrant had 52,656,19952,267,165 shares of common stock, $1.00 par value, which were issued and outstanding.
 




IBERIABANK CORPORATION AND SUBSIDIARIES
TABLE OF CONTENTS

  
 Page
Part I. Financial Information 
  
Item 1.       Financial Statements (unaudited) 
Consolidated Balance Sheets as of JuneSeptember 30, 2019 and December 31, 2018
4
Consolidated Statements of Comprehensive Income for the three and sixnine months ended JuneSeptember 30, 2019 and 2018
5
Consolidated Statements of Shareholders’ Equity for the three and sixnine months ended JuneSeptember 30, 2019 and 2018
7
Consolidated Statements of Cash Flows for the sixnine months ended JuneSeptember 30, 2019 and 2018
9
Notes to Unaudited Consolidated Financial Statements
11
  
Item 2.        Management’s Discussion and Analysis of Financial Condition and Results of Operations
5455
  
Item 3.       Quantitative and Qualitative Disclosures About Market Risk
8483
  
Item 4.       Controls and Procedures
8483
  
Part II. Other Information
8584
  
Item 1.       Legal Proceedings
8584
  
Item 1A.     Risk Factors
8584
  
Item 2.       Unregistered Sales of Equity Securities and Use of Proceeds
8684
  
Item 3.       Defaults Upon Senior Securities
8785
  
Item 4.       Mine Safety Disclosures
8785
  
Item 5.       Other Information
8785
  
Item 6.       Exhibits
8886
  
Signatures
8987



Part I. FINANCIAL INFORMATION
Item 1. Financial Statements

IBERIABANK CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
(unaudited)  (unaudited)  
(in thousands, except share data)June 30, 2019 December 31, 2018September 30, 2019 December 31, 2018
Assets      
Cash and due from banks$289,502
 $294,186
$353,346
 $294,186
Interest-bearing deposits in other banks499,813
 396,267
577,587
 396,267
Total cash and cash equivalents789,315
 690,453
930,933
 690,453
Securities available for sale, at fair value4,455,308
 4,783,579
4,238,082
 4,783,579
Securities held to maturity (fair values of $198,012 and $204,277, respectively)192,917
 207,446
Securities held to maturity (fair values of $192,586 and $204,277, respectively)185,007
 207,446
Mortgage loans held for sale, at fair value187,987
 107,734
255,276
 107,734
Loans and leases, net of unearned income23,355,311
 22,519,815
23,676,537
 22,519,815
Allowance for loan and lease losses(146,386) (140,571)(146,235) (140,571)
Loans and leases, net23,208,925
 22,379,244
23,530,302
 22,379,244
Premises and equipment, net295,897
 300,507
298,309
 300,507
Goodwill1,235,533
 1,235,533
1,235,533
 1,235,533
Other intangible assets81,618
 88,736
79,143
 88,736
Other assets999,032
 1,039,783
982,013
 1,039,783
Total Assets$31,446,532
 $30,833,015
$31,734,598
 $30,833,015
Liabilities      
Deposits:      
Non-interest-bearing$6,474,394
 $6,542,490
$6,518,783
 $6,542,490
Interest-bearing17,820,937
 17,220,941
18,458,502
 17,220,941
Total deposits24,295,331
 23,763,431
24,977,285
 23,763,431
Short-term borrowings997,507
 1,482,882
498,049
 1,482,882
Long-term debt1,374,759
 1,166,151
1,394,202
 1,166,151
Other liabilities540,935
 364,274
581,762
 364,274
Total Liabilities27,208,532
 26,776,738
27,451,298
 26,776,738
Shareholders’ Equity      
Preferred stock, $1 par value - 5,000,000 shares authorized      
Non-cumulative perpetual, liquidation preference $10,000 per share; 23,750 and 13,750 shares issued and outstanding, respectively, including related surplus228,485
 132,097
228,485
 132,097
Common stock, $1 par value - 100,000,000 shares authorized; 52,805,461 and 54,796,231 shares issued and outstanding, respectively52,805
 54,796
Common stock, $1 par value - 100,000,000 shares authorized; 52,265,887 and 54,796,231 shares issued and outstanding, respectively52,266
 54,796
Additional paid-in capital2,714,074
 2,869,416
2,680,328
 2,869,416
Retained earnings1,195,546
 1,042,718
1,268,278
 1,042,718
Accumulated other comprehensive income (loss)47,090
 (42,750)53,943
 (42,750)
Total Shareholders’ Equity4,238,000
 4,056,277
4,283,300
 4,056,277
Total Liabilities and Shareholders’ Equity$31,446,532
 $30,833,015
$31,734,598
 $30,833,015
The accompanying Notes are an integral part of these Consolidated Financial Statements.


IBERIABANK CORPORATION AND SUBSIDIARIES
Consolidated Statements of Comprehensive Income
(unaudited)
Three Months Ended
June 30,
 
Six Months Ended
June 30,
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
(in thousands, except per share data)2019 2018 2019 20182019 2018 2019 2018
Interest and dividend income              
Loans and leases, including fees$296,686
 $270,476
 $581,565
 $508,545
$296,790
 $283,125
 $878,355
 $791,670
Mortgage loans held for sale, including fees1,588
 836
 2,642
 1,990
1,936
 1,037
 4,578
 3,027
Taxable securities31,662
 26,617
 65,578
 51,945
27,883
 27,113
 93,461
 79,058
Tax-exempt securities2,141
 2,708
 4,350
 5,474
2,049
 2,680
 6,399
 8,154
Other3,890
 3,186
 7,916
 6,412
4,520
 3,112
 12,436
 9,524
Total interest and dividend income335,967
 303,823
 662,051
 574,366
333,178
 317,067
 995,229
 891,433
Interest Expense       
Interest expense       
Deposits65,866
 36,159
 126,101
 64,403
70,753
 44,401
 196,854
 108,804
Short-term borrowings5,197
 3,327
 10,913
 5,851
3,880
 4,727
 14,793
 10,578
Long-term debt9,565
 8,224
 19,214
 15,110
9,212
 8,714
 28,426
 23,824
Total interest expense80,628
 47,710
 156,228
 85,364
83,845
 57,842
 240,073
 143,206
Net interest income255,339
 256,113
 505,823
 489,002
249,333
 259,225
 755,156
 748,227
Provision for credit losses10,755
 7,696
 24,518
 15,907
8,986
 11,384
 33,504
 27,290
Net interest income after provision for credit losses244,584
 248,417
 481,305
 473,095
240,347
 247,841
 721,652
 720,937
Non-interest income              
Mortgage income18,444
 13,721
 30,293
 23,316
17,432
 12,729
 47,725
 36,045
Service charges on deposit accounts12,847
 12,950
 25,657
 25,858
13,209
 13,520
 38,866
 39,378
Title revenue6,895
 6,846
 12,120
 11,873
7,170
 6,280
 19,290
 18,153
Broker commissions2,044
 2,396
 3,997
 4,617
1,800
 2,627
 5,797
 7,244
ATM and debit card fee income3,032
 2,925
 5,614
 5,558
2,948
 2,470
 8,562
 8,028
Credit card and merchant-related income3,226
 3,326
 6,637
 6,233
3,400
 3,114
 10,037
 9,347
Trust department income4,388
 4,243
 8,555
 7,669
4,281
 3,993
 12,836
 11,662
Income from bank owned life insurance1,750
 1,261
 3,547
 2,543
1,760
 1,744
 5,307
 4,287
Securities (losses) gains, net(1,014) 3
 (1,014) (56)
Securities gains (losses), net27
 —
 (987) (56)
Commission income2,963
 1,970
 7,627
 3,508
4,533
 3,027
 12,160
 6,534
Other non-interest income4,250
 4,299
 8,301
 7,387
7,114
 3,583
 15,415
 10,971
Total non-interest income58,825
 53,940
 111,334
 98,506
63,674
 53,087
 175,008
 151,593
Non-interest expense              
Salaries and employee benefits103,375
 107,445
 201,671
 212,031
103,257
 101,159
 304,928
 313,190
Net occupancy and equipment18,999
 19,931
 37,563
 39,978
21,316
 18,889
 58,879
 58,867
Communication and delivery3,597
 4,213
 7,297
 8,115
3,634
 3,773
 10,931
 11,888
Marketing and business development3,370
 4,895
 7,488
 9,647
3,163
 4,068
 10,651
 13,715
Computer services expense9,383
 9,309
 18,540
 21,702
9,638
 9,036
 28,178
 30,738
Professional services6,244
 7,160
 10,694
 14,551
6,323
 5,519
 17,017
 20,070
Credit and other loan related expense4,141
 5,089
 7,000
 9,482
4,532
 4,830
 11,532
 14,313
Insurance4,265
 6,946
 8,451
 14,051
4,825
 6,536
 13,276
 20,587
Travel and entertainment2,738
 2,797
 5,168
 6,034
2,185
 1,846
 7,353
 7,880
Amortization of acquisition intangibles4,786
 6,111
 9,795
 11,213
4,410
 5,382
 14,205
 16,595
Impairment of long-lived assets and other losses496
 15,700
 1,560
 24,457
Impairment of long-lived assets and other (gains) losses(309) 467
 1,251
 24,924
Other non-interest expense8,224
 7,180
 13,144
 13,586
9,688
 7,557
 22,832
 21,143
Total non-interest expense169,618
 196,776
 328,371
 384,847
172,662
 169,062
 501,033
 553,910
Income before income tax expense133,791
 105,581
 264,268
 186,754
131,359
 131,866
 395,627
 318,620
Income tax expense32,193
 30,457
 62,539
 48,009
31,509
 30,401
 94,048
 78,410
Net income101,598
 75,124
 201,729
 138,745
99,850
 101,465
 301,579
 240,210
Less: Preferred stock dividends949
 949
 4,547
 4,547
3,599
 3,599
 8,146
 8,146
Net income available to common shareholders$100,649
 $74,175
 $197,182
 $134,198
$96,251
 $97,866
 $293,433
 $232,064
              


Income available to common shareholders - basic$100,649
 $74,175
 $197,182
 $134,198
$96,251
 $97,866
 $293,433
 $232,064
Less: Earnings allocated to unvested restricted stock999
 767
 1,931
 1,409
874
 908
 2,806
 2,341
Earnings allocated to common shareholders$99,650
 $73,408
 $195,251
 $132,789
$95,377
 $96,958
 $290,627
 $229,723
Earnings per common share - basic$1.87
 $1.31
 $3.63
 $2.42
$1.83
 $1.74
 $5.47
 $4.17
Earnings per common share - diluted1.86
 1.30
 3.61
 2.41
1.82
 1.73
 5.43
 4.14
Cash dividends declared per common share0.43
 0.38
 0.86
 0.76
0.45
 0.39
 1.31
 1.15
Comprehensive income              
Net income$101,598
 $75,124
 $201,729
 $138,745
$99,850
 $101,465
 $301,579
 $240,210
Other comprehensive income (loss), net of tax:              
Unrealized gains (losses) on securities:              
Unrealized holding gains (losses) arising during the period (net of tax effects of $14,836, $4,449, $25,511, and $18,672, respectively)45,108
 (16,734) 86,516
 (70,240)
Less: Reclassification adjustment for gains (losses) included in net income (net of tax effects of $251, $1, $251, and $12, respectively)(763) 2
 (763) (44)
Unrealized holding gains (losses) arising during the period (net of tax effects of $2,294, $5,906, $27,805, and $24,578, respectively)6,975
 (22,220) 93,491
 (92,460)
Less: Reclassification adjustment for gains (losses) included in net income (net of tax effects of $7, $0, $244, and $12, respectively)20
 —
 (743) (44)
Unrealized gains (losses) on securities, net of tax45,871
 (16,736) 87,279
 (70,196)6,955
 (22,220) 94,234
 (92,416)
Fair value of derivative instruments designated as cash flow hedges:              
Change in fair value of derivative instruments designated as cash flow hedges during the period (net of tax effects of $1,461, $371, $990, and $1,048, respectively)4,441
 1,395
 2,256
 3,944
Less: Reclassification adjustment for gains (losses) included in net income (net of tax effects of $26, $11, $100, and $42, respectively)(78) (40) (305) (156)
Change in fair value of derivative instruments designated as cash flow hedges during the period (net of tax effects of $86, $217, $903, and $1,266, respectively)(264) 818
 1,992
 4,762
Less: Reclassification adjustment for gains (losses) included in net income (net of tax effects of $53, $6, $154, and $47, respectively)(162) (22) (467) (178)
Fair value of derivative instruments designated as cash flow hedges, net of tax4,519
 1,435
 2,561
 4,100
(102) 840
 2,459
 4,940
Other comprehensive income (loss), net of tax50,390
 (15,301) 89,840
 (66,096)6,853
 (21,380) 96,693
 (87,476)
Comprehensive income$151,988
 $59,823
 $291,569
 $72,649
$106,703
 $80,085
 $398,272
 $152,734
The accompanying Notes are an integral part of these Consolidated Financial Statements.



IBERIABANK CORPORATION AND SUBSIDIARIES
Consolidated Statements of Shareholders’ Equity
(unaudited)
For the Six Months EndedFor the Nine Months Ended
        Additional Paid-In Capital Retained Earnings Accumulated
Other Comprehensive Income (Loss)		 Total        Additional Paid-In Capital Retained Earnings Accumulated
Other Comprehensive Income (Loss)		 Total
Preferred Stock Common Stock Preferred Stock Common Stock 
(in thousands, except share and per share data)Shares Amount Shares Amount Shares Amount Shares Amount 
Balance, December 31, 201713,750
 $132,097
 53,872,272
 $53,872
 $2,787,484
 $769,226
 $(45,888) $3,696,791
13,750
 $132,097
 53,872,272
 $53,872
 $2,787,484
 $769,226
 $(45,888) $3,696,791
Cumulative-effect adjustment due to the adoption of ASU 2016-01 (1)
—
 —
 —
 —
 —
 (345) —
 (345)—
 —
 —
 —
 —
 (345) —
 (345)
Net income—
 —
 —
 —
 —
 138,745
 —
 138,745
—
 —
 —
 —
 —
 240,210
 —
 240,210
Other comprehensive income (loss)—
 —
 —
 —
 —
 —
 (66,096) (66,096)—
 —
 —
 —
 —
 —
 (87,476) (87,476)
Cash dividends declared, $0.76 per share—
 —
 —
 —
 —
 (43,006) —
 (43,006)
Cash dividends declared, $1.15 per share—
 —
 —
 —
 —
 (64,288) —
 (64,288)
Preferred stock dividends—
 —
 —
 —
 —
 (4,547) —
 (4,547)—
 —
 —
 —
 —
 (8,146) —
 (8,146)
Common stock issued under incentive plans, net of shares surrendered in payment—
 —
 130,342
 130
 (2,232) —
 —
 (2,102)—
 —
 109,983
 110
 (3,252) —
 —
 (3,142)
Common stock issued for acquisitions—
 —
 2,787,773
 2,788
 211,871
 —
 —
 214,659
—
 —
 2,787,773
 2,788
 211,871
 —
 —
 214,659
Common stock repurchases—
 —
 (400,000) (400) (30,270) —
 —
 (30,670)—
 —
 (763,210) (763) (60,283) —
 —
 (61,046)
Share-based compensation expense—
 —
 —
 —
 9,980
 —
 —
 9,980
—
 —
 —
 —
 15,144
 —
 —
 15,144
Balance, June 30, 201813,750
 $132,097
 56,390,387
 $56,390
 $2,976,833
 $860,073
 $(111,984) $3,913,409
Balance, September 30, 201813,750
 $132,097
 56,006,818
 $56,007
 $2,950,964
 $936,657
 $(133,364) $3,942,361
                              
Balance, December 31, 201813,750
 $132,097
 54,796,231
 $54,796
 $2,869,416
 $1,042,718
 $(42,750) $4,056,277
13,750
 $132,097
 54,796,231
 $54,796
 $2,869,416
 $1,042,718
 $(42,750) $4,056,277
Cumulative-effect adjustment due to the adoption of ASU 2016-02 (2)
—
 —
 —
 —
 —
 1,847
 —
 1,847
—
 —
 —
 —
 —
 1,847
 —
 1,847
Net income—
 —
 —
 —
 —
 201,729
 —
 201,729
—
 —
 —
 —
 —
 301,579
 —
 301,579
Other comprehensive income (loss)—
 —
 —
 —
 —
 —
 89,840
 89,840
—
 —
 —
 —
 —
 —
 96,693
 96,693
Cash dividends declared, $0.86 per share—
 —
 —
 —
 —
 (46,201) —
 (46,201)
Cash dividends declared, $1.31 per share—
 —
 —
 —
 —
 (69,720) —
 (69,720)
Preferred stock dividends—
 —
 —
 —
 —
 (4,547) —
 (4,547)—
 —
 —
 —
 —
 (8,146) —
 (8,146)
Preferred stock issued10,000
 96,388
 —
 —
 —
 —
 —
 96,388
10,000
 96,388
 —
 —
 —
 —
 —
 96,388
Common stock issued under incentive plans, net of shares surrendered in payment—
 —
 157,000
 157
 (4,605) —
 —
 (4,448)—
 —
 169,656
 170
 (4,348) —
 —
 (4,178)
Common stock repurchases—
 —
 (2,147,770) (2,148) (162,576) —
 —
 (164,724)—
 —
 (2,700,000) (2,700) (202,040) —
 —
 (204,740)
Share-based compensation expense—
 —
 —
 —
 11,839
 —
 —
 11,839
—
 —
 —
 —
 17,300
 —
 —
 17,300
Balance, June 30, 201923,750
 $228,485
 52,805,461
 $52,805
 $2,714,074
 $1,195,546
 $47,090
 $4,238,000
Balance, September 30, 201923,750
 $228,485
 52,265,887
 $52,266
 $2,680,328
 $1,268,278
 $53,943
 $4,283,300
(1) 
Cumulative-effect adjustment to beginning retained earnings for fair value adjustments related to the reclassification of certain equity investments in accordance with ASU 2016-01, adopted as of January 1, 2018.
(2) 
Cumulative-effect adjustment to beginning retained earnings related to the recognition of pre-existing lease liabilities and previously deferred gains on sale-leaseback transactions in accordance with ASU 2016-02, adopted as of January 1, 2019.



The accompanying Notes are an integral part of these Consolidated Financial Statements.










 For the Three Months Ended
         Additional Paid-In Capital Retained Earnings Accumulated Other Comprehensive Income (Loss) Total
 Preferred Stock Common Stock    
(in thousands, except share and per share data)Shares Amount Shares Amount    
Balance, March 31, 201813,750
 $132,097
 56,778,841
 $56,779
 $3,001,389
 $807,325
 $(96,683) $3,900,907
Net income—
 —
 —
 —
 —
 75,124
 —
 75,124
Other comprehensive income (loss)—
 —
 —
 —
 —
 —
 (15,301) (15,301)
Cash dividends declared, $0.38 per share—
 —
 —
 —
 —
 (21,427) —
 (21,427)
Preferred stock dividends—
 —
 —
 —
 —
 (949) —
 (949)
Common stock issued under incentive plans, net of shares surrendered in payment—
 —
 11,546
 11
 468
 —
 —
 479
Common stock repurchases—
 —
 (400,000) (400) (30,270) —
 —
 (30,670)
Share-based compensation expense—
 —
 —
 —
 5,246
 —
 —
 5,246
Balance, June 30, 201813,750
 $132,097
 56,390,387
 $56,390
 $2,976,833
 $860,073
 $(111,984) $3,913,409
                
Balance, March 31, 201913,750
 $132,097
 54,551,264
 $54,551
 $2,840,842
 $1,117,641
 $(3,300) $4,141,831
Net income—
 —
 —
 —
 —
 101,598
 —
 101,598
Other comprehensive income (loss)—
 —
 —
 —
 —
 —
 50,390
 50,390
Cash dividends declared, $0.43 per share—
 —
 —
 —
 —
 (22,744) —
 (22,744)
Preferred stock dividends—
 —
 —
 —
 —
 (949) —
 (949)
Preferred stock issued10,000
 96,388
 —
 —
 —
 —
 —
 96,388
Common stock issued under incentive plans, net of shares surrendered in payment—
 —
 14,046
 14
 (17) —
 —
 (3)
Common stock repurchases—
 —
 (1,759,849) (1,760) (133,018) —
 —
 (134,778)
Share-based compensation expense—
 —
 —
 —
 6,267
 —
 —
 6,267
Balance, June 30, 201923,750
 $228,485
 52,805,461
 $52,805
 $2,714,074
 $1,195,546
 $47,090
 $4,238,000
 

 For the Three Months Ended
         Additional Paid-In Capital Retained Earnings Accumulated Other Comprehensive Income (Loss) Total
 Preferred Stock Common Stock    
(in thousands, except share and per share data)Shares Amount Shares Amount    
Balance, June 30, 201813,750
 $132,097
 56,390,387
 $56,390
 $2,976,833
 $860,073
 $(111,984) $3,913,409
Net income—
 —
 —
 —
 —
 101,465
 —
 101,465
Other comprehensive income (loss)—
 —
 —
 —
 —
 —
 (21,380) (21,380)
Cash dividends declared, $0.39 per share—
 —
 —
 —
 —
 (21,282) —
 (21,282)
Preferred stock dividends—
 —
 —
 —
 —
 (3,599) —
 (3,599)
Common stock issued under incentive plans, net of shares surrendered in payment—
 —
 (20,359) (20) (1,020) —
 —
 (1,040)
Common stock repurchases—
 —
 (363,210) (363) (30,013) —
 —
 (30,376)
Share-based compensation expense—
 —
 —
 —
 5,164
 —
 —
 5,164
Balance, September 30, 201813,750
 $132,097
 56,006,818
 $56,007
 $2,950,964
 $936,657
 $(133,364) $3,942,361
                
Balance, June 30, 201923,750
 $228,485
 52,805,461
 $52,805
 $2,714,074
 $1,195,546
 $47,090
 $4,238,000
Net income—
 —
 —
 —
 —
 99,850
 —
 99,850
Other comprehensive income (loss)—
 —
 —
 —
 —
 —
 6,853
 6,853
Cash dividends declared, $0.45 per share—
 —
 —
 —
 —
 (23,519) —
 (23,519)
Preferred stock dividends—
 —
 —
 —
 —
 (3,599) —
 (3,599)
Common stock issued under incentive plans, net of shares surrendered in payment—
 

 12,656
 13
 257
 —
 —
 270
Common stock repurchases—
 —
 (552,230) (552) (39,464) —
 —
 (40,016)
Share-based compensation expense—
 —
 —
 —
 5,461
 —
 —
 5,461
Balance, September 30, 201923,750
 $228,485
 52,265,887
 $52,266
 $2,680,328
 $1,268,278
 $53,943
 $4,283,300
 

The accompanying Notes are an integral part of these Consolidated Financial Statements.




IBERIABANK CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(unaudited)

For the Six Months Ended June 30,For the Nine Months Ended September 30,
(in thousands)2019 20182019 2018
Cash Flows from Operating Activities      
Net income$201,729
 $138,745
$301,579
 $240,210
Adjustments to reconcile net income to net cash provided by operating activities:      
Depreciation, amortization, and accretion, including amortization of purchase accounting adjustments and market value adjustments4,811
 (562)5,638
 (1,644)
Provision for credit losses24,518
 15,907
33,504
 27,290
Share-based compensation expense - equity awards11,839
 9,980
17,300
 15,144
(Gain) loss on sale of OREO and long-lived assets, net of impairment(1,270) 5,131
(1,657) 6,831
Securities losses, net1,014
 56
987
 56
(Gain) loss on early termination of FDIC loss share agreements—
 (2,708)
Cash paid for early termination of FDIC loss share agreements—
 (5,637)
Deferred income tax expense35,044
 11,715
29,407
 31,348
Originations of mortgage loans held for sale(864,324) (774,849)(1,443,094) (1,139,117)
Proceeds from sales of mortgage loans held for sale815,728
 848,116
1,347,850
 1,260,962
Realized and unrealized (gain) on mortgage loans held for sale, net(29,425) (22,688)(52,873) (35,244)
Other operating activities, net164,193
 13,977
200,074
 (36,390)
Net Cash Provided by Operating Activities363,857
 245,528
438,715
 361,101
Cash Flows from Investing Activities      
Proceeds from sales of available for sale securities299,513
 18,867
Proceeds from maturities, prepayments and calls of available for sale securities316,982
 311,340
Purchases of available for sale securities, net of available for sale securities acquired(186,554) (511,074)
Proceeds from maturities, prepayments and calls of held to maturity securities13,123
 4,746
Proceeds from sales of securities available for sale299,513
 18,867
Proceeds from maturities, prepayments and calls of securities available for sale549,747
 493,095
Purchases of securities available for sale, net of securities available for sale acquired(199,321) (711,258)
Proceeds from maturities, prepayments and calls of securities held to maturity20,353
 11,464
Purchases of equity securities, net of equity securities acquired(15,154) (11,545)(15,154) (21,090)
Proceeds from sales of equity securities3,637
 70,371
25,741
 70,371
Increase in loans, net of loans acquired(824,675) (501,618)(1,135,759) (767,715)
Proceeds from sales of premises and equipment101
 2,003
1,149
 5,698
Purchases of premises and equipment, net of premises and equipment acquired(7,819) (8,304)(17,030) (11,575)
Proceeds from dispositions of OREO8,247
 11,431
9,471
 12,166
Cash paid for additional investment in tax credit entities(4,790) (1,831)(6,060) (6,059)
Cash received for acquisition of a business, net of cash paid—
 99,318
—
 99,318
Purchase of bank owned life insurance policies—
 (50,000)—
 (50,000)
Other investing activities, net249
 554
999
 595
Net Cash Used in Investing Activities(397,140) (565,742)(466,351) (856,123)
Cash Flows from Financing Activities      
Increase in deposits, net of deposits acquired531,900
 899,752
1,213,854
 662,680
Net change in short-term borrowings(485,375) 62,916
(984,833) 251,422
Proceeds from long-term debt, net of long-term debt acquired400,000
 440,299
500,000
 927,884
Repayments of long-term debt(191,123) (902,262)(271,562) (1,361,482)
Cash dividends paid on common stock(45,926) (41,508)(68,667) (62,937)
Cash dividends paid on preferred stock(4,547) (4,547)(8,146) (8,146)
Net share-based compensation stock transactions(4,448) (2,102)(4,178) (3,142)
Payments to repurchase common stock(164,724) (30,670)(204,740) (61,046)
Net proceeds from issuance of preferred stock96,388
 —
96,388
 —
Net Cash Provided by Financing Activities132,145
 421,878
Net Increase In Cash and Cash Equivalents98,862
 101,664
Cash and Cash Equivalents at Beginning of Period690,453
 625,724


Net Cash Provided by Financing Activities268,116
 345,233
Net Increase (Decrease) In Cash and Cash Equivalents240,480
 (149,789)
Cash and Cash Equivalents at Beginning of Period690,453
 625,724
Cash and Cash Equivalents at End of Period$789,315
 $727,388
$930,933
 $475,935
      
      
Supplemental Schedule of Non-cash Activities      
Acquisition of real estate in settlement of loans$5,055
 $2,722
$6,023
 $13,066
Common stock issued in acquisitions$—
 $214,659
$—
 $214,659
Supplemental Disclosures      
Cash paid (received) for:   
Interest on deposits and borrowings, net of acquired$149,638
 $83,057
Income taxes, net$(152,950) $19,006
Cash paid for interest on deposits and borrowings, net of acquired$235,888
 $137,727
Cash paid for income taxes$57,287
 $34,968
Cash received from income tax refunds$178,288

$364
The accompanying Notes are an integral part of these Consolidated Financial Statements.


IBERIABANK CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
NOTE 1 - BASIS OF PRESENTATION
IBERIABANK Corporation is a financial holding company based in Lafayette, Louisiana. The accompanying unaudited consolidated financial statements include the accounts of IBERIABANK Corporation and its consolidated subsidiaries (the "Company"). Through its subsidiaries, the Company provides a full range of commercial and consumer banking services, including private banking, small business, wealth and trust management, retail brokerage, mortgage, commercial leasing and equipment financing, and title insurance services through locations in Louisiana, Arkansas, Tennessee, Alabama, Texas, Florida, Georgia, South Carolina, North Carolina, Mississippi, Missouri, and New York.
The accompanying unaudited consolidated financial statements have been prepared in accordance with GAAP for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all information and notes necessary for complete financial statements in accordance with GAAP. In the opinion of management, the accompanying unaudited consolidated financial statements contain all the significant adjustments, consisting of normal and recurring items, considered necessary for fair presentation. These interim financial statements should be read in conjunction with the Company's audited consolidated financial statements and notes in the Annual Report on Form 10-K for the year ended December 31, 2018. Operating results for the interim period are not necessarily indicative of the results that may be expected for the full year.
All significant intercompany balances and transactions have been eliminated in consolidation. Certain amounts reported in prior periods have been reclassified to conform to the current period presentation. See the Glossary of Defined Terms included in this Report for terms used herein.




NOTE 2 - RECENT ACCOUNTING PRONOUNCEMENTS
Pronouncements adopted during the sixnine months ended JuneSeptember 30, 2019:
ASU No. 2016-02, ASU No. 2018-11, ASU No. 2018-20, and ASU 2019-01
In February 2016, the FASB issued ASU No. 2016-02, Leases (ASC 842) which requires lessees to recognize ROU assets and lease liabilities on the balance sheet for most leases, including operating leases. The lessor accounting model was relatively unchanged by this ASU. Additional quantitative and qualitative disclosures are also required. During 2018 and early 2019, the FASB issued ASU No. 2018-11, Targeted Improvements, ASU No. 2018-20, Narrow-Scope Improvements for Lessors, and ASU No. 2019-01, Codification Improvements, which clarified certain implementation issues, provided an additional optional transition method and clarified the disclosure requirements during the period of adopting ASC 842, among others.
The Company adopted ASU No. 2016-02 and the related ASUs discussed above effective January 1, 2019 using the optional transition method. The Company elected the package of practical expedients that does not require the reassessment of whether expired or existing contracts contain leases, the reassessment of the lease classification for any expired or existing leases, or the reassessment of initial direct costs for existing leases. Additionally, the Company did not elect the hindsight practical expedient.
The Company conducted a review of all existing lease contracts and service contracts which might contain embedded leases. Some of the Company’s leases contain variable lease payments, the majority of which depend on an index or rate, such as the Consumer Price Index. At transition, the present value of variable payments was based on the index or rate as of January 1, 2019. To determine the present value of lease payments at transition, the Company applied a portfolio approach utilizing an FHLB Advance rate based on the weighted average remaining term of the Company’s existing leases as of January 1, 2019. As a result of adopting ASC 842, the Company established an ROU asset and a lease liability as of January 1, 2019 of $94.2 million and $118.9 million, respectively. Additionally, as part of the adoption of ASC 842, $24.7 million in pre-existing liabilities were reclassified to the ROU asset on January 1, 2019. This resulted in a gross-up of the balance sheet of $94.2 million as a result of recognizing lease liabilities and corresponding right-of-use assets for operating leases. The adoption of ASC 842 also required the recognition of previously deferred gains on sale-leaseback transactions which resulted in an insignificant increase to retained earnings on January 1, 2019. The related impact on the Company’s regulatory capital ratios was not significant. The Company does not expect material changes to the recognition of lease expense in future periods as a result of the adoption of ASC 842. See Note 8, Leases, for additional disclosures required by ASC 842.
ASU No. 2018-16
In October 2018, the FASB released ASU No. 2018-16, Derivatives and Hedging (ASC 815): Inclusion of the Secured Overnight Financing Rate (SOFR) Overnight Index Swap (OIS) Rate as a Benchmark Interest Rate for Hedge Accounting Purposes, which permits the use of the OIS rate based on SOFR as a U.S. benchmark interest rate for hedge accounting purposes under ASC 815 in addition to the interest rates on direct Treasury obligations of the UST, the LIBOR swap rate, the OIS Rate based on the Fed Funds Effective Rate, and the SIFMA Municipal Swap Rate.
The required effective date of this ASU was dependent upon when an entity adopted the provisions of ASU No. 2017-12. The Company adopted ASU No. 2018-16 effective January 1, 2019 on a prospective basis for qualifying new or redesignated hedging relations as ASU No. 2017-12 had previously been adopted on January 1, 2018. The implementation of this ASU did not have a significant impact on the Company’s consolidated financial statements.
ASU No. 2017-08
In March 2017, the FASB issued ASU No. 2017-08, Receivables-Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities, which shortens the amortization period for callable debt securities held at a premium to the earliest call date instead of the maturity date. The amendments do not require an accounting change for securities held at a discount, which will continue to be amortized to the maturity date.
The Company adopted ASU No. 2017-08 effective January 1, 2019. The adoption of the ASU did not have a material impact to the Company’s consolidated financial statements.







Pronouncements issued but not yet adopted:
ASU No. 2016-13, ASU No. 2019-04 (portion related to ASC 326), and ASU No. 2019-05
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (ASC 326): Measurement of Credit Losses on Financial Instruments. The guidance introduces an impairment model that is based on expected credit losses (ECL), rather than incurred losses, to estimate credit losses on certain types of financial instruments such as loans and held-to-maturity securities, including certain off-balance sheet financial instruments such as loan commitments. The measurement of ECL should consider historical information, current information, and reasonable and supportable forecasts, including estimates of prepayments, over the contractual term. Financial instruments with similar risk characteristics must be grouped together when estimating ECL. The ASU also expands credit quality disclosures.
Additionally, ASU No. 2016-13 amends the current AFS security impairment model for debt securities. The new model will require an estimate of ECL when the fair value is below the amortized cost of the asset. The credit-related impairment (and subsequent recoveries) are recognized as an allowance on the balance sheet with a corresponding adjustment to the income statement. Non-credit related losses will continue to be recognized through OCI.
In addition, ASU No. 2016-13 provides for a simplified accounting model for purchased financial assets with a more-than-insignificant amount of credit deterioration since their origination. The initial estimate of expected credit losses would be recognized through an ALLL with an offset (i.e., increase) to the cost basis of the related financial asset at acquisition.
ASU No. 2016-13 will be effective for fiscal years beginning after December 15, 2019, including interim periods. This ASU will be applied through a modified-retrospective approach, resulting in a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective. A prospective transition approach is required for debt securities for which OTTI had been recognized before the effective date. Amounts previously recognized in AOCI as of the date of adoption that relate to improvements in cash flows expected to be collected should continue to be accreted into income over the remaining life of the asset. Recoveries of amounts previously written off relating to improvements in cash flows after the date of adoption should be recorded in earnings when received.
During 2019, the FASB issued ASU No. 2019-04, Codification Improvements to Financial Instruments-Credit Losses (ASC 326), Derivatives and Hedging (ASC 815), and Financial Instruments (ASC 825), which clarified the scope of ASU No. 2016-13 and addressed various issues, including accrued interest receivable balances, recoveries, variable interest rates and prepayments, and ASU No. 2019-05, Financial Instruments-Credit Losses (Topic 326): Targeted Transition Relief, which clarified certain implementation issues. The effective date for the portion of ASU No. 2019-04 related to credit losses and ASU No. 2019-05 are the same as ASU No. 2016-13.
The Company has established aCompany’s cross-function implementation team and engaged third-party consultants who have jointly developed aand continue to execute the project plan toand provide implementation oversight. ImplementationSignificant progress has been made in implementation efforts, are underway, including model development and validation, fulfillment of additional data needs for new disclosure and reporting requirements, and drafting of accounting policies. Substantial progress has been made in model development. Model validation commenced in the second quarter of 2019. UserIn October 2019, user acceptance testing was completed and parallel runs are scheduled to beginthe Company began concurrent model runs. Implementation efforts will continue through the remainder of 2019, including continued process refinement, documentation enhancement, and finalization of the internal control framework.
Based on a preliminary analysis performed in the third quarter of 2019. The Company expects that these ASUs will result in an increase to ACL2019 and forecasts of macroeconomic conditions and exposures as of September 30, 2019, the transition adjustment on January 1, 2020 givenis estimated to generate an ACL to loans ratio of 1.00% to 1.20%. The Company currently intends to use a blend of multiple economic forecasts to estimate expected credit losses over a one to two year reasonable and supportable forecast period and then revert to longer term historical loss experience to arrive at lifetime expected credit losses. The estimated increase in ACL is primarily due to required increases for residential mortgage and home equity loans to include the requirement to estimate lifetime expected credit losses and the remaining length of time to maturity for the loan portfolio, although the extent of thethese loans as well as an increase to ACL is not yet known. The transition adjustment to increase ACL is expected to result in a decrease to shareholders' equity and to a lesser extent, discountsreserves on acquired loans. non-impaired loans which had low reserve levels under the previous accounting guidance.
While these ASUs are expected to increase ACL, they do not change the overall credit risk in the Company's loan and lease portfolios or the ultimate losses therein. The transition adjustment to increase ACL will primarily result in a decrease to shareholders' equity, net of income taxes, on January 1, 2020. The ultimate impact of the adoption of these ASUs will depend on the composition of the loan, lease and securities portfolios, finalization of credit loss models, and macroeconomic conditions and forecasts at the adoption date.






ASU No. 2018-13
In August 2018, the FASB released ASU No. 2018-13, Fair Value Measurement (ASC 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement, which eliminates, adds and modifies certain disclosure requirements for fair value measurements. The ASU will be effective for fiscal years beginning after December 15, 2019, including interim periods, with early adoption permitted.
The Company is currently evaluating the impact of the ASU. While adoption of this ASU will result in changes to existing disclosures, it will not have an impact on the Company’s financial position or results of operations.






ASU No. 2018-17
In October 2018, the FASB released ASU No. 2018-17, Consolidation (ASC 810): Targeted Improvements to Related Party Guidance for Variable Interest Entities, which improves the consistency of the application of the variable interest entity (VIE) related party guidance for common control arrangements. This ASU requires reporting entities to consider indirect interests held through related parties under common control on a proportional basis rather than as the equivalent of a direct interest in its entirety (as currently required in GAAP) when determining whether a decision-making fee is a variable interest. ASU No. 2018-17 will be effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years, and early adoption is permitted. The guidance will be applied retrospectively with a cumulative-effect adjustment to retained earnings at the beginning of the earliest period presented.
The Company is currently evaluating the impact of the ASU on the Company’s consolidated financial statements.
ASU No. 2019-04
In April 2019, the FASB released ASU No. 2019-04, Codification Improvements to Financial Instruments-Credit Losses (ASC 326), Derivatives and Hedging (ASC 815), and Financial Instruments (ASC 825). The amendments in the ASU improve the Codification by eliminating inconsistencies and providing clarifications. The amendments related to the credit losses standard are discussed above under ASU 2016-13.

With respect to hedge accounting, the ASU addresses partial-term fair value hedges, fair value hedge basis adjustments, and certain transition requirements, among other things. For recognizing and measuring financial instruments, the ASU addresses the scope of the guidance, the requirement for re-measurement under ASC 820 when using the measurement alternative, certain disclosure requirements and which equity securities have to be re-measured at historical exchange rates.

Since the Company early adopted the guidance in ASU No. 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities in 2018, the amended hedge accounting guidance in ASU No. 2019-04 will be effective as of the beginning of the first annual reporting period beginning after April 25, 2019 with early adoption permitted on any date after the issuance of this ASU.

The Company is currently evaluating the impact of the ASU on the Company’s consolidated financial statements.




NOTE 3 – INVESTMENT SECURITIES
The amortized cost and fair values of investment securities, with gross unrealized gains and losses, consistconsisted of the following:
June 30, 2019September 30, 2019
(in thousands)Amortized
Cost		 Gross
Unrealized
Gains		 Gross
Unrealized
Losses		 Estimated
Fair
Value		Amortized
Cost		 Gross
Unrealized
Gains		 Gross
Unrealized
Losses		 Estimated
Fair
Value
Securities available for sale:              
U.S. Government-sponsored enterprise obligations$39,859
 $341
 $—
 $40,200
$39,887
 $294
 $—
 $40,181
Obligations of state and political subdivisions172,160
 6,698
 —
 178,858
166,034
 7,333
 —
 173,367
Mortgage-backed securities:              
Residential agency3,341,602
 32,909
 (6,364) 3,368,147
3,135,619
 31,354
 (3,930) 3,163,043
Commercial agency742,760
 17,383
 (1,107) 759,036
732,669
 24,239
 (179) 756,729
Other securities105,620
 3,539
 (92) 109,067
101,324
 3,543
 (105) 104,762
Total securities available for sale$4,402,001
 $60,870
 $(7,563) $4,455,308
$4,175,533
 $66,763
 $(4,214) $4,238,082
Securities held to maturity:              
Obligations of state and political subdivisions$175,281
 $5,407
 $—
 $180,688
$167,888
 $7,725
 $—
 $175,613
Mortgage-backed securities:              
Residential agency17,636
 30
 (342) 17,324
17,119
 50
 (196) 16,973
Total securities held to maturity$192,917
 $5,437
 $(342) $198,012
$185,007
 $7,775
 $(196) $192,586


 December 31, 2018
(in thousands)Amortized
Cost		 Gross
Unrealized
Gains		 Gross
Unrealized
Losses		 Estimated
Fair
Value
Securities available for sale:       
U.S. Government-sponsored enterprise obligations$995
 $3
 $—
 $998
Obligations of state and political subdivisions177,566
 2,045
 (723) 178,888
Mortgage-backed securities:       
           Residential agency3,837,584
 8,886
 (57,073) 3,789,397
           Commercial agency730,148
 2,363
 (14,799) 717,712
Other securities97,020
 351
 (787) 96,584
Total securities available for sale$4,843,313
 $13,648
 $(73,382) $4,783,579
Securities held to maturity:       
Obligations of state and political subdivisions$188,684
 $309
 $(2,497) $186,496
Mortgage-backed securities:       
          Residential agency18,762
 30
 (1,011) 17,781
Total securities held to maturity$207,446
 $339
 $(3,508) $204,277

Securities with carrying values of $2.2$2.1 billion and $2.4 billion were pledged to support repurchase transactions, public funds deposits, and certain long-term borrowings at JuneSeptember 30, 2019 and December 31, 2018, respectively.



Information pertaining to securities with gross unrealized losses, aggregated by investment category and length of time that individual securities have been in a continuous loss position, was as follows:
June 30, 2019September 30, 2019
Less Than Twelve Months Twelve Months or More TotalLess Than Twelve Months Twelve Months or More Total
(in thousands)Gross Unrealized Losses Estimated Fair Value Gross Unrealized Losses Estimated Fair Value Gross Unrealized Losses Estimated Fair ValueGross Unrealized Losses Estimated Fair Value Gross Unrealized Losses Estimated Fair Value Gross Unrealized Losses Estimated Fair Value
Securities available for sale:                      
Mortgage-backed securities:                      
Residential agency$—
 $—
 $(6,364) $1,026,095
 $(6,364) $1,026,095
$(1,829) $447,333
 $(2,101) $299,396
 $(3,930) $746,729
Commercial agency—
 —
 (1,107) 122,450
 (1,107) 122,450
(83) 8,961
 (96) 10,994
 (179) 19,955
Other securities—
 —
 (92) 5,015
 (92) 5,015
(6) 13,368
 (99) 4,802
 (105) 18,170
Total securities available for sale$—
 $—
 $(7,563) $1,153,560
 $(7,563) $1,153,560
$(1,918) $469,662
 $(2,296) $315,192
 $(4,214) $784,854
                      
Securities held to maturity:                      
Mortgage-backed securities:                      
Residential agency$—
 $—
 $(342) $17,039
 $(342) $17,039
$(2) $924
 $(194) $9,551
 $(196) $10,475
Total securities held to maturity$—
 $—
 $(342) $17,039
 $(342) $17,039
$(2) $924
 $(194) $9,551
 $(196) $10,475

 December 31, 2018
 Less Than Twelve Months Twelve Months or More Total
(in thousands)Gross Unrealized Losses Estimated Fair Value Gross Unrealized Losses Estimated Fair Value Gross Unrealized Losses Estimated Fair Value
Securities available for sale:           
Obligations of state and political subdivisions$(9) $4,112
 $(714) $30,268
 $(723) $34,380
Mortgage-backed securities:           
           Residential agency(816) 197,057
 (56,257) 2,193,862
 (57,073) 2,390,919
           Commercial agency(43) 18,190
 (14,756) 483,565
 (14,799) 501,755
Other securities(94) 18,025
 (693) 32,577
 (787) 50,602
Total securities available for sale$(962) $237,384
 $(72,420) $2,740,272
 $(73,382) $2,977,656
            
Securities held to maturity:           
Obligations of state and political subdivisions$(3) $2,059
 $(2,494) $151,699
 $(2,497) $153,758
Mortgage-backed securities:           
          Residential agency—
 —
 (1,011) 17,478
 (1,011) 17,478
Total securities held to maturity$(3) $2,059
 $(3,505) $169,177
 $(3,508) $171,236











The Company held certain investment securities where amortized cost exceeded fair value, resulting in unrealized loss positions, as shown in the tables above. Management evaluates securities for other-than-temporary impairment on at least a quarterly basis, and more frequently when economic or market concerns warrant such evaluation. Impairment is considered to be other-than-temporary if the Company (1) intends to sell the security, (2) more likely than not will be required to sell the security before recovering its cost, or (3) does not expect to recover the security's entire amortized cost basis. As of JuneSeptember 30, 2019, the Company did not intend to sell any of these securities, did not expect to be required to sell these securities, and expected to recover the entire amortized cost of all these securities.
At JuneSeptember 30, 2019, 189107 debt securities had unrealized losses of 0.67%0.55% of the securities’ amortized cost basis. At December 31, 2018, 488 debt securities had unrealized losses of 2.38% of the securities’ amortized cost basis. The unrealized losses for each of the securities related to market interest rate changes and not credit concerns of the issuers. Additional information on securities that were in a continuous loss position for over twelve months at JuneSeptember 30, 2019 and December 31, 2018 is presented in the following table.
(in thousands)June 30, 2019 December 31, 2018September 30, 2019 December 31, 2018
Number of securities      
Mortgage-backed securities:      
Residential agency159
 302
66
 302
Commercial agency26
 72
6
 72
Obligations of state and political subdivisions—
 60
—
 60
Other securities4
 7
4
 7
189
 441
76
 441
Amortized Cost Basis      
Mortgage-backed securities:      
Residential agency$1,049,840
 $2,268,608
$311,242
 $2,268,608
Commercial agency123,557
 498,321
11,090
 498,321
Obligations of state and political subdivisions—
 185,175
—
 185,175
Other securities5,107
 33,270
4,901
 33,270
$1,178,504
 $2,985,374
$327,233
 $2,985,374
Unrealized Loss      
Mortgage-backed securities:      
Residential agency$6,706
 $57,268
$2,295
 $57,268
Commercial agency1,107
 14,756
96
 14,756
Obligations of state and political subdivisions—
 3,208
—
 3,208
Other securities92
 693
99
 693
$7,905
 $75,925
$2,490
 $75,925


The amortized cost and estimated fair value of investment securities by maturity at JuneSeptember 30, 2019 are presented in the following table. Securities are classified according to their contractual maturities without consideration of principal amortization, potential prepayments or call options. Accordingly, actual maturities may differ from contractual maturities. Weighted average yields are calculated on the basis of the yield to maturity based on the amortized cost of each security.
Securities Available for Sale Securities Held to MaturitySecurities Available for Sale Securities Held to Maturity
(in thousands)Weighted
Average
Yield		 Amortized
Cost		 Estimated
Fair
Value		 Weighted
Average
Yield		 Amortized
Cost		 Estimated
Fair
Value		Weighted
Average
Yield		 Amortized
Cost		 Estimated
Fair
Value		 Weighted
Average
Yield		 Amortized
Cost		 Estimated
Fair
Value
Within one year or less3.67% $1,554
 $1,558
 2.34% $952
 $955
2.55% $10,720
 $10,787
 2.33% $948
 $949
One through five years2.66
 112,248
 113,915
 2.63
 4,484
 4,524
2.62
 123,447
 125,721
 2.63
 4,483
 4,518
After five through ten years2.72
 769,216
 789,351
 2.43
 45,338
 46,508
2.76
 760,325
 786,040
 2.35
 43,085
 44,653
Over ten years2.84
 3,518,983
 3,550,484
 2.60
 142,143
 146,025
2.67
 3,281,041
 3,315,534
 2.58
 136,491
 142,466
2.82% $4,402,001
 $4,455,308
 2.56% $192,917
 $198,012
2.68% $4,175,533
 $4,238,082
 2.53% $185,007
 $192,586



The following is a summary of realized gains and losses from the sale of securities classified as available for sale. Gains or losses on securities sold are recorded on the trade date, using the specific identification method.
Three Months Ended June 30, Six Months Ended June 30,Three Months Ended September 30, Nine Months Ended September 30,
(in thousands)2019 2018 2019 20182019 2018 2019 2018
Realized gains$1,297
 $30
 $1,297
 $39
$27
 $—
 $1,324
 $39
Realized losses(2,311) (27) (2,311) (95)—
 —
 (2,311) (95)
$(1,014) $3
 $(1,014) $(56)$27
 $—
 $(987) $(56)

In addition to the gains above, the Company realized certain gains on calls of securities held to maturity that were not significant to the consolidated financial statements.
Other Equity Securities
The Company accounts for the following securities at cost less impairment plus or minus any observable price changes, which approximates fair value, with the exception of CRA and Community Development Investment Funds, which are recorded at fair value. Other equity securities, which are presented in other assets on the consolidated balance sheets, were as follows:
(in thousands)June 30, 2019 December 31, 2018September 30, 2019 December 31, 2018
Federal Home Loan Bank stock$108,396
 $95,213
$87,156
 $95,213
Federal Reserve Bank stock85,630
 85,630
85,630
 85,630
CRA and Community Development Investment Funds2,192
 1,884
1,962
 1,884
Other investments15,319
 9,709
21,023
 9,709
$211,537
 $192,436
$195,771
 $192,436



NOTE 4 – LOANS AND LEASES
Loans and leases by portfolio segment and class consistconsisted of the following for the periods indicated:
(in thousands)June 30, 2019 December 31, 2018September 30, 2019 December 31, 2018
Commercial loans and leases:      
Real estate - construction$1,342,984
 $1,196,366
$1,330,014
 $1,196,366
Real estate - owner-occupied2,373,143
 2,395,822
2,468,061
 2,395,822
Real estate - non-owner-occupied6,102,143
 5,796,117
6,011,681
 5,796,117
Commercial and industrial (1)
6,161,759
 5,737,017
6,490,125
 5,737,017
Total commercial loans and leases15,980,029
 15,125,322
16,299,881
 15,125,322
Residential mortgage loans4,538,194
 4,359,156
4,649,745
 4,359,156
Consumer and other loans:      
Home equity2,147,897
 2,304,694
2,053,588
 2,304,694
Other689,191
 730,643
673,323
 730,643
Total consumer and other loans2,837,088
 3,035,337
2,726,911
 3,035,337
Total loans and leases$23,355,311
 $22,519,815
$23,676,537
 $22,519,815
(1) 
Includes equipment financing leases
Net deferred loan origination fees were $30.1$37.8 million and $30.2 million at JuneSeptember 30, 2019 and December 31, 2018, respectively. Total net discount on the Company's loans was $114.3$97.8 million and $136.8 million at JuneSeptember 30, 2019 and December 31, 2018, respectively, of which $71.6$61.8 million and $81.6 million was related to non-impaired loans.
In addition to loans issued in the normal course of business, the Company considers overdrafts on customer deposit accounts to be loans and reclassifies these overdrafts as loans in its consolidated balance sheets. At JuneSeptember 30, 2019 and December 31, 2018, overdrafts of $5.6$7.0 million and $9.2 million, respectively, had been reclassified to loans.
Loans with carrying values of $8.0$8.5 billion and $7.6 billion were pledged as collateral for borrowings at JuneSeptember 30, 2019 and December 31, 2018, respectively.


Aging Analysis
The following tables provide an analysis of the aging of loans and leases as of JuneSeptember 30, 2019 and December 31, 2018. Past due and non-accrual loan amounts exclude acquired impaired loans, even if contractually past due or if the Company does not expect to receive payment in full, as the Company is currently accreting interest income over the expected life of the loans. For additional information on the determination of past due status and the Company's policies for recording payments received, placing loans and leases on non-accrual status, and the resumption of interest accrual on non-accruing loans and leases, see Note 1, Summary of Significant Accounting Policies, in the 2018 10-K.

June 30, 2019September 30, 2019
Accruing      Accruing      
(in thousands)Current or Less Than 30 days Past Due 30-59 days 60-89 days > 90 days Total Past Due 
Non-accrual (1)
 Acquired Impaired TotalCurrent or Less Than 30 days Past Due 30-59 days 60-89 days > 90 days Total Past Due 
Non-accrual (1)
 Acquired Impaired Total
Real estate- construction$1,322,728
 $207
 $—
 $—
 $207
 $1,188
 $18,861
 $1,342,984
$1,307,793
 $3,851
 $—
 $—
 $3,851
 $1,381
 $16,989
 $1,330,014
Real estate- owner-occupied2,285,316
 7,274
 —
 —
 7,274
 15,789
 64,764
 2,373,143
2,389,631
 2,294
 1,031
 —
 3,325
 17,158
 57,947
 2,468,061
Real estate- non-owner-occupied6,007,594
 2,456
 6,345
 —
 8,801
 22,028
 63,720
 6,102,143
5,930,480
 2,093
 2,672
 426
 5,191
 20,201
 55,809
 6,011,681
Commercial and industrial6,086,983
 3,035
 437
 —
 3,472
 48,747
 22,557
 6,161,759
6,417,203
 3,614
 1,769
 2,696
 8,079
 43,494
 21,349
 6,490,125
Residential mortgage4,393,649
 4,914
 5,941
 851
 11,706
 50,046
 82,793
 4,538,194
4,502,109
 1,252
 13,463
 1,668
 16,383
 50,439
 80,814
 4,649,745
Consumer - home equity2,067,280
 7,123
 1,616
 —
 8,739
 18,646
 53,232
 2,147,897
1,967,342
 10,448
 6,792
 —
 17,240
 18,311
 50,695
 2,053,588
Consumer - other680,595
 2,972
 701
 —
 3,673
 2,548
 2,375
 689,191
663,561
 2,839
 2,500
 —
 5,339
 2,129
 2,294
 673,323
Total$22,844,145
 $27,981
 $15,040
 $851
 $43,872
 $158,992
 $308,302
 $23,355,311
$23,178,119
 $26,391
 $28,227
 $4,790
 $59,408
 $153,113
 $285,897
 $23,676,537

(1) 
Of the total non-accrual loans at JuneSeptember 30, 2019, $11.3$10.7 million were past due 30-59 days, $4.2$4.5 million were past due 60-89 days, and $68.6$73.4 million were past due more than 90 days.

 December 31, 2018
 Accruing      
(in thousands)Current or Less Than 30 days Past Due 30-59 days 60-89 days > 90 days Total Past Due 
Non-accrual (1)
 Acquired Impaired Total
Real estate- construction$1,167,795
 $1,054
 $—
 $—
 $1,054
 $1,094
 $26,423
 $1,196,366
Real estate- owner-occupied2,305,743
 7,167
 —
 —
 7,167
 10,260
 72,652
 2,395,822
Real estate- non-owner-occupied5,703,131
 7,473
 360
 —
 7,833
 15,898
 69,255
 5,796,117
Commercial and industrial5,645,304
 5,139
 1,320
 553
 7,012
 57,860
 26,841
 5,737,017
Residential mortgage4,218,146
 2,768
 13,063
 1,575
 17,406
 30,396
 93,208
 4,359,156
Consumer - home equity2,200,517
 10,283
 2,409
 —
 12,692
 18,830
 72,655
 2,304,694
Consumer - other719,122
 4,695
 1,601
 —
 6,296
 2,846
 2,379
 730,643
Total$21,959,758
 $38,579
 $18,753
 $2,128
 $59,460
 $137,184
 $363,413
 $22,519,815
(1) 
Of the total non-accrual loans at December 31, 2018, $7.0 million were past due 30-59 days, $3.7 million were past due 60-89 days, and $66.9 million were past due more than 90 days.



Acquired Loans
The Company acquired certain loans from Sabadell United to customers with addresses outside of the United States. Foreign loans, denominated in U.S. dollars, totaled $200.9$194.6 million and $202.6 million at JuneSeptember 30, 2019 and December 31, 2018, respectively.
The following is a summary of changes in the accretable difference for all loans accounted for under ASC 310-30 during the sixnine months ended JuneSeptember 30:
(in thousands) 2019 2018 2019 2018
Balance at beginning of period $133,342
 $152,623
 $133,342
 $152,623
Additions —
 2,371
 —
 2,371
Transfers from non-accretable difference to accretable yield (2,563) (467) (1,740) (4)
Accretion (19,580) (25,140) (29,506) (37,115)
Changes in expected cash flows not affecting non-accretable differences (1)
 (4,341) 7,597
 (2,927) 21,092
Balance at end of period $106,858
 $136,984
 $99,169
 $138,967

(1) 
Includes changes in cash flows expected to be collected due to the impact of changes in actual or expected timing of liquidation events, modifications, changes in interest rates and changes in prepayment assumptions.


Troubled Debt Restructurings
Information about the Company’s TDRs at JuneSeptember 30, 2019 and 2018 is presented in the following tables. Modifications of loans that are accounted for within a pool under ASC Topic 310-30 are excluded as TDRs. Accordingly, such modifications do not result in the removal of those loans from the pool, even if the modification of those loans would otherwise be considered a TDR. As a result, all such acquired loans that would otherwise meet the criteria for classification as a TDR are excluded from the tables below.
TDRs totaling $37.4$61.0 million and $46.7$46.0 million occurred during the sixnine months ended JuneSeptember 30, 2019 and 2018, respectively, through modification of the original loan terms.
The following table provides information on how the TDRs were modified during the periods indicated:
Three Months Ended June 30, Six Months Ended June 30,Three Months Ended September 30, Nine Months Ended September 30,
(in thousands)2019 2018 2019 20182019 2018 2019 2018
Extended maturities$7,633
 $1,790
 $11,175
 $7,193
$2,476
 $3,658
 $13,097
 $10,020
Maturity and interest rate adjustment224
 —
 617
 102
288
 267
 715
 368
Movement to or extension of interest-rate only payments1,771
 1,316
 1,783
 1,364
48
 —
 1,827
 48
Interest rate adjustment74
 —
 74
 103
—
 —
 71
 101
Forbearance—
 1,405
 5,742
 13,936
22,202
 802
 25,068
 14,386
Other concession(s) (1)
10,950
 15,597
 18,018
 23,993
3,724
 1,810
 20,250
 21,031
Total$20,652
 $20,108
 $37,409
 $46,691
$28,738
 $6,537
 $61,028
 $45,954
(1) 
Other concessions may include covenant waivers, forgiveness of principal or interest associated with a customer bankruptcy, or a combination of any of the above concessions.








Of the $37.4$61.0 million of TDRs occurring during the sixnine months ended JuneSeptember 30, 2019, $13.9$25.5 million were on accrual status and $23.5$35.5 million were on non-accrual status. Of the $46.7$46.0 million of TDRs occurring during the sixnine months ended JuneSeptember 30 2018, $20.6$20.2 million were on accrual status and $26.1$25.8 million were on non-accrual status. The following table presents the end of period balance for loans modified in a TDR during the periods indicated:

Three Months Ended June 30,Three Months Ended September 30,
2019 20182019 2018
(in thousands, except number of loans)Number of Loans Pre-Modification Outstanding Recorded Investment Post-Modification Outstanding Recorded Investment Number of Loans Pre-Modification Outstanding Recorded Investment Post-Modification Outstanding Recorded InvestmentNumber of Loans Pre-Modification Outstanding Recorded Investment Post-Modification Outstanding Recorded Investment Number of Loans Pre-Modification Outstanding Recorded Investment Post-Modification Outstanding Recorded Investment
Real estate- construction1
 $6,331
 $7,602
 —
 $—
 $—
Real estate- owner-occupied4
 $339
 $338
 5
 $2,230
 $2,201
7
 8,936
 8,691
 1
 2,312
 2,312
Real estate- non-owner-occupied7
 4,687
 4,628
 5
 823
 780
6
 1,553
 1,210
 6
 1,818
 1,790
Commercial and industrial19
 13,757
 13,607
 16
 21,103
 13,618
14
 1,954
 1,952
 9
 829
 804
Residential mortgage10
 847
 836
 7
 688
 633
10
 7,210
 6,870
 3
 257
 255
Consumer - home equity22
 1,159
 1,056
 19
 2,361
 2,350
19
 2,375
 2,237
 15
 1,152
 1,124
Consumer - other20
 210
 187
 35
 556
 526
17
 202
 176
 11
 352
 252
Total82
 $20,999
 $20,652
 87
 $27,761
 $20,108
74
 $28,561
 $28,738
 45
 $6,720
 $6,537

Six Months Ended June 30,Nine Months Ended September 30,
2019 20182019 2018
(in thousands, except number of loans)Number of Loans Pre-modification Outstanding Recorded Investment Post-modification Outstanding Recorded Investment Number of Loans Pre-modification Outstanding Recorded Investment Post-modification Outstanding Recorded InvestmentNumber of Loans Pre-modification Outstanding Recorded Investment Post-modification Outstanding Recorded Investment Number of Loans Pre-modification Outstanding Recorded Investment Post-modification Outstanding Recorded Investment
Real estate- construction1
 $39
 $37
 1
 $1,950
 $1,013
1
 $6,331
 $7,602
 1
 $1,950
 $976
Real estate- owner-occupied6
 1,435
 1,402
 7
 12,921
 11,290
11
 10,153
 9,869
 8
 15,233
 13,373
Real estate- non-owner-occupied13
 7,756
 7,651
 14
 1,912
 1,854
16
 7,931
 7,233
 13
 3,228
 3,064
Commercial and industrial38
 29,785
 20,670
 32
 35,338
 26,684
48
 29,156
 19,594
 32
 32,827
 22,769
Residential mortgage19
 1,687
 1,669
 7
 688
 633
28
 8,897
 8,524
 9
 898
 837
Consumer - home equity54
 5,312
 5,137
 33
 4,170
 4,133
69
 7,629
 7,268
 47
 4,130
 4,047
Consumer - other51
 918
 843
 51
 1,126
 1,084
63
 1,065
 938
 53
 1,056
 888
Total182
 $46,932
 $37,409
 145
 $58,105
 $46,691
236
 $71,162
 $61,028
 163
 $59,322
 $45,954










Information detailing TDRs that defaulted during the three-month and six-monthnine-month periods ended JuneSeptember 30, 2019 and 2018, and were modified in the previous twelve months (i.e., the twelve months prior to the default) is presented in the following tables. The Company has defined a default as any loan with a payment that is currently past due greater than 30 days, or was past due greater than 30 days at any point during the respective periods, or since the date of modification, whichever is shorter.
Three Months Ended June 30,Three Months Ended September 30,
2019 20182019 2018
(in thousands, except number of loans)Number of Loans Recorded Investment Number of Loans Recorded InvestmentNumber of Loans Recorded Investment Number of Loans Recorded Investment
Real estate- construction1
 $37
 —
 $—
Real estate- owner-occupied4
 1,232
 5
 461
—
 $—
 1
 $929
Real estate- non-owner-occupied11
 2,341
 9
 1,448
2
 2,460
 1
 7
Commercial and industrial17
 5,475
 8
 1,437
8
 1,429
 2
 127
Residential mortgage12
 1,012
 7
 775
1
 101
 —
 —
Consumer - home equity17
 1,411
 11
 1,129
1
 64
 4
 380
Consumer - other34
 515
 21
 232
5
 57
 6
 86
Total96
 $12,023
 61
 $5,482
17
 $4,111
 14
 $1,529

Six Months Ended June 30,Nine Months Ended September 30,
2019 20182019 2018
(in thousands, except number of loans)Number of Loans Recorded Investment Number of Loans Recorded InvestmentNumber of Loans Recorded Investment Number of Loans Recorded Investment
Real estate- construction1
 $37
 —
 $—
Real estate- owner-occupied6
 1,232
 6
 9,455
6
 $1,225
 6
 $10,101
Real estate- non-owner-occupied17
 2,913
 15
 1,813
16
 5,176
 6
 1,084
Commercial and industrial25
 6,152
 21
 7,100
25
 6,859
 12
 3,632
Residential mortgage21
 1,597
 10
 1,081
18
 1,394
 8
 912
Consumer - home equity27
 2,401
 26
 2,242
21
 1,873
 17
 1,978
Consumer - other41
 591
 48
 1,003
38
 557
 39
 488
Total138
 $14,923
 126
 $22,694
124
 $17,084
 88
 $18,195




NOTE 5 – ALLOWANCE FOR CREDIT LOSSES AND CREDIT QUALITY
Allowance for Credit Losses Activity
A summary of changes in the allowance for credit losses for the sixnine months ended JuneSeptember 30 iswas as follows:
(in thousands) 2019 2018 2019 2018

    
Allowance for loan and lease losses at beginning of period $140,571
 $140,891
 $140,571
 $140,891
Provision for loan and lease losses 24,067
 15,581
 32,190
 26,678
Transfer of balance to OREO and other (2,863) (3,943) (2,696) (5,709)
Charge-offs (19,194) (22,734) (29,971) (34,740)
Recoveries 3,805
 6,781
 6,141
 9,830
Allowance for loan and lease losses at end of period $146,386
 $136,576
 $146,235
 $136,950
        
Reserve for unfunded commitments at beginning of period $14,830
 $13,208
 $14,830
 $13,208
Balance created in acquisition accounting —
 900
 —
 900
Provision for unfunded lending commitments 451
 325
 1,314
 613
Reserve for unfunded commitments at end of period $15,281
 $14,433
 $16,144
 $14,721
Allowance for credit losses at end of period $161,667
 $151,009
 $162,379
 $151,671
A summary of changes in the allowance for credit losses, by loan portfolio type, for the sixnine months ended JuneSeptember 30 iswas as follows:
20192019
(in thousands)Commercial Real Estate Commercial and Industrial Residential Mortgage Consumer and Other TotalCommercial Real Estate Commercial and Industrial Residential Mortgage Consumer and Other Total
Allowance for loan and lease losses at beginning of period$51,806
 $54,096
 $12,998
 $21,671
 $140,571
$51,806
 $54,096
 $12,998
 $21,671
 $140,571
Provision for (Reversal of) loan and lease losses15,204
 5,077
 (584) 4,370
 24,067
9,205
 15,819
 (152) 7,318
 32,190
Transfer of balance to OREO and other(256) (1) (2,862) 256
 (2,863)(309) 236
 (2,879) 256
 (2,696)
Charge-offs(641) (11,880) (168) (6,505) (19,194)(2,179) (17,799) (219) (9,774) (29,971)
Recoveries318
 1,796
 157
 1,534
 3,805
474
 3,163
 169
 2,335
 6,141
Allowance for loan and lease losses at end of period$66,431
 $49,088
 $9,541
 $21,326
 $146,386
$58,997
 $55,515
 $9,917
 $21,806
 $146,235
                  
Reserve for unfunded commitments at beginning of period$4,869
 $6,198
 $866
 $2,897
 $14,830
$4,869
 $6,198
 $866
 $2,897
 $14,830
Provision for (Reversal of) unfunded commitments603
 (313) (206) 367
 451
357
 493
 (216) 680
 1,314
Reserve for unfunded commitments at end of period$5,472
 $5,885
 $660
 $3,264
 $15,281
$5,226
 $6,691
 $650
 $3,577
 $16,144
Allowance on loans individually evaluated for impairment$4,673
 $7,656
 $349
 $3,176
 $15,854
$2,721
 $7,974
 $281
 $3,039
 $14,015
Allowance on loans collectively evaluated for impairment56,251

39,854
 5,127
 18,008
 119,240
50,809

45,990
 5,393
 18,630
 120,822
Allowance on loans acquired with deteriorated credit quality5,507
 1,578
 4,065
 142
 11,292
5,467
 1,551
 4,243
 137
 11,398
Loans and leases, net of unearned income:                  
Balance at end of period$9,818,270
 $6,161,759
 $4,538,194
 $2,837,088
 $23,355,311
$9,809,756
 $6,490,125
 $4,649,745
 $2,726,911
 $23,676,537
Balance at end of period individually evaluated for impairment74,331
 54,860
 41,363
 39,127
 209,681
73,715
 51,350
 42,423
 37,907
 205,395
Balance at end of period collectively evaluated for impairment9,596,594
 6,084,342
 4,414,038
 2,742,354
 22,837,328
9,605,296
 6,417,426
 4,526,508
 2,636,015
 23,185,245
Balance at end of period acquired with deteriorated credit quality147,345
 22,557
 82,793
 55,607
 308,302
130,745
 21,349
 80,814
 52,989
 285,897


20182018
(in thousands)Commercial Real Estate Commercial and Industrial Residential Mortgage Consumer and Other TotalCommercial Real Estate Commercial and Industrial Residential Mortgage Consumer and Other Total
Allowance for loan and lease losses at beginning of period$54,201
 $53,916
 $9,117
 $23,657
 $140,891
$54,201
 $53,916
 $9,117
 $23,657
 $140,891
Provision for (Reversal of) loan and lease losses(3,404) 10,083
 1,112
 7,790
 15,581
(4,020) 20,372
 2,318
 8,008
 26,678
Transfer of balance to OREO and other(506) (18) 6
 (3,425) (3,943)(1,556) (814) (45) (3,294) (5,709)
Charge-offs(1,258) (13,575) (196) (7,705) (22,734)(1,281) (22,447) (365) (10,647) (34,740)
Recoveries384
 4,403
 44
 1,950
 6,781
1,019
 5,665
 53
 3,093
 9,830
Allowance for loan and lease losses at end of period$49,417
 $54,809
 $10,083
 $22,267
 $136,576
$48,363
 $56,692
 $11,078
 $20,817
 $136,950
                  
Reserve for unfunded commitments at beginning of period$4,531
 $5,309
 $555
 $2,813
 $13,208
$4,531
 $5,309
 $555
 $2,813
 $13,208
Balance created in acquisition accounting129
 81
 —
 690
 900
129
 81
 —
 690
 900
Provision for (Reversal of) unfunded commitments467
 (306) 160
 4
 325
(134) 169
 246
 332
 613
Reserve for unfunded commitments at end of period$5,127
 $5,084
 $715
 $3,507
 $14,433
$4,526
 $5,559
 $801
 $3,835
 $14,721
Allowance on loans individually evaluated for impairment$2,274
 $11,946
 $168
 $3,199
 $17,587
$2,650
 $10,471
 $154
 $2,973
 $16,248
Allowance on loans collectively evaluated for impairment40,763
 40,540
 3,816
 18,742
 103,861
40,519
 44,727
 5,063
 17,661
 107,970
Allowance on loans acquired with deteriorated credit quality6,380
 2,323
 6,099
 326
 15,128
5,194
 1,494
 5,861
 183
 12,732
                  
Loans and leases, net of unearned income:                  
Balance at end of period$9,292,304
 $5,512,416
 $4,124,538
 $3,146,525
 $22,075,783
$9,381,883
 $5,581,040
 $4,300,163
 $3,080,820
 $22,343,906
Balance at end of period individually evaluated for impairment84,217
 66,683
 5,873
 35,550
 192,323
73,469
 75,625
 6,230
 33,863
 189,187
Balance at end of period collectively evaluated for impairment9,017,756
 5,415,093
 3,984,086
 3,029,027
 21,445,962
9,126,653
 5,478,377
 4,174,524
 2,970,301
 21,749,855
Balance at end of period acquired with deteriorated credit quality190,331
 30,640
 134,579
 81,948
 437,498
181,761
 27,038
 119,409
 76,656
 404,864

Portfolio Segment Risk Factors
Commercial real estate loans include loans to commercial customers for long-termmedium-term financing of land and buildings or for land development or construction of a building. These loans are repaid throughfrom revenues fromthrough operations of the businesses, rents of properties, sales of properties and refinances. Commercial and industrial loans and leases represent loans to commercial customers to finance general working capital needs, equipment purchases and leases and other projects where repayment is derived from cash flows resulting from business operations. The Company originates commercial businessand industrial loans on a secured and, to a lesser extent, unsecured basis.
Residential mortgage loans consist of loans to consumers to finance a primary residence. The vast majority of the residential mortgage loan portfolio is comprised of non-conforming 1-4 family mortgage loans secured by properties located in the Company's market areas and originated under terms and documentation that permit their sale in a secondary market.
Consumer loans are offered by the Company in order to provide a full range of retail financial services to its customers and include home equity, credit card and other direct consumer installment loans. The Company originates substantially all of its consumer loans in its primary market areas. Loans in the consumer segment are sensitive to unemployment and other key consumer economic measures.
Credit Quality Indicators
For commercial loans and leases, the Company utilizes regulatory classification ratings to monitor credit quality. Loans with a "pass" rating are those that the Company believes will be fully repaid in accordance with the contractual loan terms. Commercial loans and leases that are "criticized" are those that have some weakness or potential weakness that indicate an increased probability of future loss. "Criticized" loans are grouped into three categories: "special mention", "substandard", and "doubtful". Special mention loans have potential weaknesses that, if left uncorrected, may result in deterioration of the Company's credit position at some future date.


Substandard commercial loans have well-defined weaknesses and are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected. Doubtful commercial loans have the same weaknesses as substandard loans with the added characteristics that the probability of loss is high and collection of the full amount is improbable. Substandard and doubtful loans are collectively referred to as "classified" loans. For residential mortgage loans and consumer loans, the Company primarily uses the loan's payment and delinquency status to monitor credit quality. These credit quality indicators are continually updated and monitored.
The recorded investment in loans and leases by credit quality indicator is presented in the following tables. Asset risk classifications for commercial loans and leases reflect the classification as of JuneSeptember 30, 2019 and December 31, 2018. Credit quality information in the tables below includes total loans acquired (including acquired impaired loans) at the net loan balance, after the application of premiums and discounts. Loan premiums and discounts represent the adjustment of acquired loans to fair value at the acquisition date, as adjusted for income accretion and changes in cash flow estimates in subsequent periods.
June 30, 2019 December 31, 2018September 30, 2019 December 31, 2018
(in thousands)Pass Special Mention Sub-
standard		 Doubtful Total Pass Special Mention Sub-
standard		 Doubtful TotalPass Special Mention Sub-
standard		 Doubtful Loss Total Pass Special Mention Sub-
standard		 Doubtful Total
Real estate - construction$1,320,007
 $12,262
 $10,715
 $—
 $1,342,984
 $1,182,554
 $1,062
 $12,740
 $10
 $1,196,366
$1,300,847
 $19,631
 $9,536
 $—
 $—
 $1,330,014
 $1,182,554
 $1,062
 $12,740
 $10
 $1,196,366
Real estate - owner-occupied2,308,176
 25,114
 37,126
 2,727
 2,373,143
 2,328,999
 25,526
 41,297
 —
 2,395,822
2,409,221
 19,786
 38,214
 840
 —
 2,468,061
 2,328,999
 25,526
 41,297
 —
 2,395,822
Real estate - non-owner-occupied6,011,800
 48,323
 39,832
 2,188
 6,102,143
 5,687,963
 78,009
 26,512
 3,633
 5,796,117
5,926,537
 47,494
 37,193
 447
 10
 6,011,681
 5,687,963
 78,009
 26,512
 3,633
 5,796,117
Commercial and industrial6,018,866
 53,075
 73,667
 16,151
 6,161,759
 5,586,482
 52,632
 73,853
 24,050
 5,737,017
6,340,738
 71,431
 63,303
 14,653
 —
 6,490,125
 5,586,482
 52,632
 73,853
 24,050
 5,737,017
Total$15,658,849
 $138,774
 $161,340
 $21,066
 $15,980,029
 $14,785,998
 $157,229
 $154,402
 $27,693
 $15,125,322
$15,977,343
 $158,342
 $148,246
 $15,940
 $10
 $16,299,881
 $14,785,998
 $157,229
 $154,402
 $27,693
 $15,125,322
June 30, 2019 December 31, 2018September 30, 2019 December 31, 2018
(in thousands)Current 30+ Days Past Due Total Current 30+ Days Past Due TotalCurrent 30+ Days Past Due Total Current 30+ Days Past Due Total
Residential mortgage$4,459,706
 $78,488
 $4,538,194
 $4,290,152
 $69,004
 $4,359,156
$4,567,633
 $82,112
 $4,649,745
 $4,290,152
 $69,004
 $4,359,156
Consumer - home equity2,113,237
 34,660
 2,147,897
 2,258,659
 46,035
 2,304,694
2,011,913
 41,675
 2,053,588
 2,258,659
 46,035
 2,304,694
Consumer - other682,860
 6,331
 689,191
 721,231
 9,412
 730,643
665,702
 7,621
 673,323
 721,231
 9,412
 730,643
Total$7,255,803
 $119,479
 $7,375,282
 $7,270,042
 $124,451
 $7,394,493
$7,245,248
 $131,408
 $7,376,656
 $7,270,042
 $124,451
 $7,394,493



Impaired Loans
Information on the Company’s investment in impaired loans, which include all TDRs and all other non-accrual loans evaluated or measured individually for impairment for purposes of determining the ALLL, is presented in the following tables as of and for the periods indicated.
June 30, 2019 December 31, 2018September 30, 2019 December 31, 2018
Unpaid Principal Balance Recorded Investment Related Allowance Unpaid Principal Balance Recorded Investment Related AllowanceUnpaid Principal Balance Recorded Investment Related Allowance Unpaid Principal Balance Recorded Investment Related Allowance
(in thousands)  
With no related allowance recorded:                      
Real estate - construction$12,138
 $11,139
 $—
 $10,261
 $9,262
 $—
$9,540
 $8,531
 $—
 $10,261
 $9,262
 $—
Real estate - owner-occupied27,142
 27,064
 —
 25,037
 19,044
 —
33,985
 33,590
 —
 25,037
 19,044
 —
Real estate - non-owner-occupied21,234
 20,271
 —
 15,265
 14,288
 —
23,964
 22,652
 —
 15,265
 14,288
 —
Commercial and industrial33,989
 30,157
 —
 55,554
 43,886
 —
21,813
 17,771
 —
 55,554
 43,886
 —
Residential mortgage32,448
 31,645
 —
 1,244
 1,221
 —
36,182
 35,089
 —
 1,244
 1,221
 —
Consumer - home equity1,995
 1,998
 —
 4,183
 4,176
 —
4,736
 4,734
 —
 4,183
 4,176
 —
Consumer - other—
 —
 —
 —
 —
 —
                      
With an allowance recorded:                      
Real estate - construction140
 127
 (2) 228
 140
 (11)98
 85
 (1) 228
 140
 (11)
Real estate - owner-occupied8,811
 8,248
 (4,061) 5,032
 4,773
 (520)5,135
 4,921
 (2,529) 5,032
 4,773
 (520)
Real estate - non-owner-occupied7,683
 7,482
 (610) 6,445
 6,398
 (105)4,149
 3,936
 (191) 6,445
 6,398
 (105)
Commercial and industrial37,969
 24,703
 (7,656) 46,387
 27,915
 (12,646)45,409
 33,579
 (7,974) 46,387
 27,915
 (12,646)
Residential mortgage10,366
 9,718
 (349) 5,870
 5,358
 (145)8,010
 7,334
 (281) 5,870
 5,358
 (145)
Consumer - home equity33,194
 32,702
 (2,662) 29,284
 28,818
 (2,427)29,773
 29,124
 (2,577) 29,284
 28,818
 (2,427)
Consumer - other4,743
 4,427
 (514) 4,956
 4,446
 (488)4,308
 4,049
 (462) 4,956
 4,446
 (488)
Total$231,852
 $209,681
 $(15,854) $209,746
 $169,725
 $(16,342)$227,102
 $205,395
 $(14,015) $209,746
 $169,725
 $(16,342)
Total commercial loans and leases$149,106
 $129,191
 $(12,329) $164,209
 $125,706
 $(13,282)$144,093
 $125,065
 $(10,695) $164,209
 $125,706
 $(13,282)
Total residential mortgage loans42,814
 41,363
 (349) 7,114
 6,579
 (145)44,192
 42,423
 (281) 7,114
 6,579
 (145)
Total consumer and other loans39,932
 39,127
 (3,176) 38,423
 37,440
 (2,915)38,817
 37,907
 (3,039) 38,423
 37,440
 (2,915)















Three Months Ended June 30, 2019 Three Months Ended June 30, 2018 Six Months Ended June 30, 2019 Six Months Ended June 30, 2018Three Months Ended September 30, 2019 Three Months Ended September 30, 2018 Nine Months Ended September 30, 2019 Nine Months Ended September 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 RecognizedAverage
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)  
With no related allowance recorded:                              
Real estate - construction$21,339
 $341
 $12,952
 $198
 $21,340
 $678
 $12,597
 $393
$7,333
 $82
 $10,806
 $164
 $7,145
 $242
 $10,371
 $460
Real estate - owner-occupied24,134
 326
 30,899
 209
 27,314
 569
 31,265
 609
33,895
 355
 34,118
 209
 34,437
 1,235
 34,505
 903
Real estate - non-owner-occupied20,305
 100
 15,929
 121
 20,360
 207
 16,558
 250
22,794
 72
 22,091
 249
 22,910
 301
 22,988
 746
Commercial and industrial29,315
 151
 37,859
 389
 29,816
 331
 37,806
 836
20,594
 108
 43,409
 523
 20,727
 401
 40,564
 1,543
Residential mortgage27,129
 235
 1,272
 13
 18,804
 374
 1,280
 27
35,896
 136
 1,254
 9
 31,315
 391
 1,271
 36
Consumer - home equity1,998
 22
 1,910
 28
 1,943
 44
 1,922
 52
4,736
 47
 705
 2
 4,613
 137
 708
 16
With an allowance recorded:                              
Real estate - construction131
 1
 152
 —
 135
 2
 152
 —
87
 —
 148
 —
 93
 —
 151
 1
Real estate - owner-occupied8,578
 57
 19,582
 82
 8,628
 116
 19,696
 192
4,952
 10
 4,006
 83
 5,050
 113
 4,044
 102
Real estate - non-owner-occupied7,557
 42
 1,631
 14
 7,643
 122
 1,705
 39
4,155
 46
 2,398
 20
 4,090
 137
 2,442
 76
Commercial and industrial23,891
 177
 38,134
 158
 21,400
 371
 38,981
 357
36,824
 173
 40,357
 150
 36,765
 582
 47,098
 720
Residential mortgage9,833
 73
 4,657
 47
 9,881
 169
 4,678
 92
7,414
 74
 5,014
 50
 7,502
 232
 5,066
 149
Consumer - home equity32,885
 332
 28,595
 304
 32,341
 656
 28,173
 600
29,200
 298
 28,577
 305
 28,982
 890
 27,905
 892
Consumer - other4,533
 63
 5,220
 67
 4,597
 128
 5,267
 139
4,175
 59
 4,710
 65
 4,326
 184
 4,884
 208
Total$211,628
 $1,920
 $198,792
 $1,630
 $204,202
 $3,767
 $200,080
 $3,586
$212,055
 $1,460
 $197,593
 $1,829
 $207,955
 $4,845
 $201,997
 $5,852
Total commercial loans and leases$135,250
 $1,195
 $157,138
 $1,171
 $136,636
 $2,396
 $158,760
 $2,676
$130,634
 $846
 $157,333
 $1,398
 $131,217
 $3,011
 $162,163
 $4,551
Total residential mortgage loans36,962
 308
 5,929
 60
 28,685
 543
 5,958
 119
43,310
 210
 6,268
 59
 38,817
 623
 6,337
 185
Total consumer and other loans39,416
 417
 35,725
 399
 38,881
 828
 35,362
 791
38,111
 404
 33,992
 372
 37,921
 1,211
 33,497
 1,116
As of JuneSeptember 30, 2019 and December 31, 2018, the Company was not committed to lend a material amount of additional funds to any customer whose loan was classified as impaired or as a TDR.


NOTE 6 – GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill
Changes to the carrying amount of goodwill by reporting unit for the sixnine months ended JuneSeptember 30, 2019, and the year ended December 31, 2018 are provided in the following table:
(in thousands)IBERIABANK Mortgage LTC TotalIBERIABANK Mortgage LTC Total
Balance, December 31, 2017$1,160,559
 $23,178
 $5,165
 $1,188,902
$1,160,559
 $23,178
 $5,165
 $1,188,902
Goodwill acquired and adjustments during the year43,251
 —
 3,380
 46,631
43,251
 —
 3,380
 46,631
Balance, December 31, 2018$1,203,810
 $23,178
 $8,545
 $1,235,533
$1,203,810
 $23,178
 $8,545
 $1,235,533
Goodwill acquired and adjustments during the year—
 —
 —
 —
—
 —
 —
 —
Balance, June 30, 2019$1,203,810
 $23,178
 $8,545
 $1,235,533
Balance, September 30, 2019$1,203,810
 $23,178
 $8,545
 $1,235,533

The goodwill acquired and adjustments made during 2018 were the result of the Sabadell United, Gibraltar, and SolomonParks acquisitions. There were no changes to goodwill during the sixnine months ended JuneSeptember 30, 2019.
The Company performed the required annual goodwill impairment test as of October 1, 2018. The Company’s annual impairment test did not indicate impairment in any of the Company’s reporting units as of the testing date. Following the testing date, management evaluated the events and changes that could indicate that goodwill might be impaired and concluded that a subsequent interim test was not necessary. The Company is currently in the process of performing its annual impairment test as of October 1, 2019.
Mortgage Servicing Rights
Mortgage servicing rights are recorded at the lower of cost or market value in other intangible assets on the Company's consolidated balance sheets and amortized over the remaining servicing life of the loans, with consideration given to prepayment assumptions. Mortgage servicing rights had the following carrying values as of the periods indicated:
June 30, 2019 December 31, 2018September 30, 2019 December 31, 2018
Gross Carrying Amount Accumulated Amortization Net Carrying Amount Gross Carrying Amount Accumulated Amortization Net Carrying AmountGross Carrying Amount Valuation Allowance Accumulated Amortization Net Carrying Amount Gross Carrying Amount Valuation Allowance Accumulated Amortization Net Carrying Amount
(in thousands)  
Mortgage servicing rights$16,885
 $(5,486) $11,399
 $13,612
 $(4,806) $8,806
$19,517
 $(195) $(5,994) $13,328
 $13,612
 $—
 $(4,806) $8,806

Title Plant
The Company held title plant assets recorded in other intangible assets on the Company's consolidated balance sheets totaling $6.8 million at both JuneSeptember 30, 2019 and December 31, 2018. No events or changes in circumstances occurred during the sixnine months ended JuneSeptember 30, 2019 to suggest the carrying value of the title plant was not recoverable.
Intangible assets subject to amortization
Definite-lived intangible assets had the following carrying values included in other intangible assets on the Company’s consolidated balance sheets as of the periods indicated:
June 30, 2019 December 31, 2018September 30, 2019 December 31, 2018
(in thousands)Gross Carrying Amount Accumulated Amortization Net Carrying Amount Gross Carrying Amount Accumulated Amortization Net Carrying AmountGross Carrying Amount Accumulated Amortization Net Carrying Amount Gross Carrying Amount Accumulated Amortization Net Carrying Amount
Core deposit intangible assets$136,183
 $(72,870) $63,313
 $136,183
 $(63,213) $72,970
$136,183
 $(77,256) $58,927
 $136,183
 $(63,213) $72,970
Customer relationship intangible asset1,385
 (1,354) 31
 1,385
 (1,323) 62
1,385
 (1,363) 22
 1,385
 (1,323) 62
Non-compete agreement206
 (94) 112
 206
 (72) 134
206
 (102) 104
 206
 (72) 134
Total$137,774
 $(74,318) $63,456
 $137,774
 $(64,608) $73,166
$137,774
 $(78,721) $59,053
 $137,774
 $(64,608) $73,166




NOTE 7 – DERIVATIVE INSTRUMENTS AND OTHER HEDGING ACTIVITIES
The Company enters into derivative financial instruments to manage interest rate risk, exposures related to liquidity and credit risk, and to facilitate customer transactions. The primary types of derivatives utilized by the Company for its risk management strategies include interest rate swap agreements, interest rate collars, interest rate floors, foreign exchange contracts, interest rate lock commitments, forward sales commitments, written and purchased options, and credit derivatives. All derivative instruments are recognized on the consolidated balance sheets as other assets or other liabilities at fair value, regardless of whether a right of offset exists.
Cash flow hedge relationships mitigate exposure to the variability of future cash flows or other forecasted transactions. The Company enters into interest rate swap agreements in a cash flow hedge to convert forecasted variable interest payments to a fixed rate on its junior subordinated debt. In addition, the Company has entered into interest rate collars and interest rate floors and designated the instruments as cash flow hedges of the risk of fluctuations in interest rates, thereby reducing the Company's exposure to variability in cash flows from variable-rate loans.
For cash flow hedges, the effective and ineffective portions of the gain or loss related to the derivative instrument is initially reported as a component of other comprehensive income and subsequently reclassified into earnings when the forecasted transaction affects earnings or when the hedge is terminated. In applying hedge accounting for derivatives, the Company establishes and documents a method for assessing the effectiveness of the hedging derivative and a measurement approach for determining the ineffective aspect of the hedge upon the inception of the hedge.
For derivative instruments that are not designated as hedging instruments, changes in the fair value of the derivatives are recognized in earnings immediately.
Information pertaining to outstanding derivative instruments iswas as follows:
 Derivative Assets - Fair Value Derivative Liabilities - Fair Value Derivative Assets - Fair Value Derivative Liabilities - Fair Value
(in thousands) June 30, 2019 December 31, 2018 June 30, 2019 December 31, 2018 September 30, 2019 December 31, 2018 September 30, 2019 December 31, 2018
Derivatives designated as hedging instruments:                
Interest rate contracts $21,015
 $3,469
 $—
 $—
 $23,339
 $3,469
 $—
 $—
Total derivatives designated as hedging instruments $21,015
 $3,469
 $—
 $—
 $23,339
 $3,469
 $—
 $—
Derivatives not designated as hedging instruments:                
Interest rate contracts:                
Customer swaps - upstream $24
 $474
 $5,041
 $191
 $12
 $474
 $6,104
 $191
Customer swaps - downstream 76,944
 16,946
 1,760
 17,812
 104,779
 16,946
 206
 17,812
Foreign exchange contracts —
 18
 —
 18
 —
 18
 —
 18
Forward sales contracts 146
 630
 1,834
 750
 485
 630
 654
 750
Written and purchased options 9,574
 5,490
 3,871
 3,310
 7,549
 5,490
 3,695
 3,310
Other contracts 44
 21
 93
 43
 71
 21
 192
 43
Total derivatives not designated as hedging instruments $86,732
 $23,579
 $12,599
 $22,124
 $112,896
 $23,579
 $10,851
 $22,124
Total $107,747
 $27,048
 $12,599
 $22,124
 $136,235
 $27,048
 $10,851
 $22,124




 Derivative Assets - Notional Amount Derivative Liabilities - Notional Amount Derivative Assets - Notional Amount Derivative Liabilities - Notional Amount
(in thousands) June 30, 2019 December 31, 2018 June 30, 2019 December 31, 2018 September 30, 2019 December 31, 2018 September 30, 2019 December 31, 2018
Derivatives designated as hedging instruments:                
Interest rate contracts $800,000
 $408,500
 $108,500
 $—
 $800,000
 $408,500
 $108,500
 $—
Total derivatives designated as hedging instruments $800,000
 $408,500
 $108,500
 $—
 $800,000
 $408,500
 $108,500
 $—
                
Derivatives not designated as hedging instruments:                
Interest rate contracts:                
Customer swaps - upstream $375,805
 $919,653
 $1,885,919
 $701,257
 $142,425
 $919,653
 $2,259,248
 $701,257
Customer swaps - downstream 1,885,919
 701,257
 375,805
 919,653
 2,259,248
 701,257
 142,425
 919,653
Foreign exchange contracts —
 1,202
 —
 1,202
 —
 1,202
 —
 1,202
Forward sales contracts 46,143
 1,140
 262,566
 143,179
 144,368
 1,140
 211,049
 143,179
Written and purchased options 350,875
 229,333
 137,167
 140,645
 339,569
 229,333
 128,150
 140,645
Other contracts 54,568
 50,527
 113,396
 85,623
 74,085
 50,527
 145,443
 85,623
Total derivatives not designated as hedging instruments $2,713,310
 $1,903,112
 $2,774,853
 $1,991,559
 $2,959,695
 $1,903,112
 $2,886,315
 $1,991,559
Total $3,513,310
 $2,311,612
 $2,883,353
 $1,991,559
 $3,759,695
 $2,311,612
 $2,994,815
 $1,991,559


The Company has entered into risk participation agreements with counterparties to transfer or assume credit exposures related to interest rate derivatives. The notional amounts of risk participation agreements sold were $113.4$145.4 million and $85.6 million at JuneSeptember 30, 2019 and December 31, 2018, respectively. Assuming all underlying third party customers referenced in the swap contracts defaulted at JuneSeptember 30, 2019 and December 31, 2018, the exposure from these agreements would not be material based on the fair value of the underlying swaps.
The Company is party to collateral agreements with certain derivative counterparties. Such agreements require that the Company maintain collateral based on the fair values of individual derivative transactions. In the event of default by the Company, the counterparty would be entitled to the collateral.
At JuneSeptember 30, 2019 and December 31, 2018, the Company was not required to post collateral due to the Company's derivative position at the balance sheet date. At JuneSeptember 30, 2019 and December 31, 2018, the Company was required to post $78.4$106.5 million and $35.8 million, respectively, in variation margin payments for its derivative transactions, which is required to be netted against the fair value of the derivatives in other assets or other liabilities on the consolidated balance sheets. The Company does not anticipate additional assets will be required to be posted as collateral, nor does it believe additional assets would be required to settle its derivative instruments immediately if contingent features were triggered at JuneSeptember 30, 2019. The Company’s master netting agreements represent written, legally enforceable bilateral agreements that (1) create a single legal obligation for all individual transactions covered by the master agreement and (2) in the event of default, provide the non-defaulting counterparty the right to accelerate, terminate, and close-out on a net basis all transactions under the agreement and to promptly liquidate or set-off collateral posted by the defaulting counterparty. As permitted by GAAP, the Company does not offset fair value amounts recognized for the right to reclaim cash collateral or the obligation to return cash collateral against recognized fair value amounts of derivatives executed with the same counterparty under a master netting agreement.


The following table reconciles the gross amounts presented in the consolidated balance sheets to the net amounts that would result in the event of offset.
June 30, 2019September 30, 2019
Gross Amounts Presented in the Balance Sheet Gross Amounts Not Offset in the Balance Sheet NetGross Amounts Presented in the Balance Sheet Gross Amounts Not Offset in the Balance Sheet Net
(in thousands) Derivatives Collateral   Derivatives Collateral  
Derivatives subject to master netting arrangements              
Derivative assets              
Interest rate contracts designated as hedging instruments$21,015
 $—
 $—
 $21,015
$23,338
 $—
 $—
 $23,338
Interest rate contracts not designated as hedging instruments76,968
 (5,129) —
 71,839
104,791
 (6,119) —
 98,672
Written and purchased options3,832
 —
 —
 3,832
3,581
 —
 —
 3,581
Total derivative assets subject to master netting arrangements$101,815
 $(5,129) $—
 $96,686
$131,710
 $(6,119) $—
 $125,591


 

 

 



 

 

 

Derivative liabilities              
Interest rate contracts not designated as hedging instruments$6,801
 $(5,129) $—
 $1,672
$6,310
 $(6,119) $—
 $191
Written and purchased options3,832
 —
 —
 3,832
3,581
 —
 —
 3,581
Total derivative liabilities subject to master netting arrangements$10,633
 $(5,129) $—
 $5,504
$9,891
 $(6,119) $—
 $3,772

 December 31, 2018
 Gross Amounts Presented in the Balance Sheet Gross Amounts Not Offset in the Balance Sheet Net
(in thousands) Derivatives Collateral 
Derivatives subject to master netting arrangements       
Derivative assets       
Interest rate contracts designated as hedging instruments$3,469
 $—
 $—
 $3,469
Interest rate contracts not designated as hedging instruments17,420
 (619) —
 16,801
Written and purchased options3,285
 —
 —
 3,285
Total derivative assets subject to master netting arrangements$24,174
 $(619) $—
 $23,555
        
Derivative liabilities       
Interest rate contracts not designated as hedging instruments$18,003
 $(619) $—
 $17,384
Written and purchased options3,285
 —
 —
 3,285
Total derivative liabilities subject to master netting arrangements$21,288
 $(619) $—
 $20,669
During the three and sixnine months ended JuneSeptember 30, 2019 and 2018, the Company did not reclassify into earnings any gain or loss as a result of the discontinuance of cash flow hedges because it was probable the original forecasted transaction would not occur by the end of the originally specified term.
At JuneSeptember 30, 2019, the Company did not expect to reclassify a material amount from accumulated other comprehensive income into interest income over the next twelve months for derivatives that will be settled.


At JuneSeptember 30, 2019 and 2018, and for the three and sixnine months then ended, information pertaining to the effect of the hedging instruments on the consolidated financial statements was as follows:
 Amount of Gain (Loss) Recognized in OCI, net of taxes Location of Gain (Loss) Reclassified from AOCI into Income Amount of Gain (Loss) Reclassified from AOCI into Income, net of taxes Location of Gain (Loss) Recognized in Income on Derivatives (Amount Excluded from Effectiveness Testing) Amount of Gain (Loss) Recognized in Income on Derivatives (Amount Excluded from Effectiveness Testing) Amount of Gain (Loss) Recognized in OCI, net of taxes Location of Gain (Loss) Reclassified from AOCI into Income Amount of Gain (Loss) Reclassified from AOCI into Income, net of taxes Location of Gain (Loss) Recognized in Income on Derivatives (Amount Excluded from Effectiveness Testing) Amount of Gain (Loss) Recognized in Income on Derivatives (Amount Excluded from Effectiveness Testing)
  
  
 Total Including Component Excluding Component Total Including Component Excluding Component Total Including Component Excluding Component Total Including Component Excluding Component Total Including Component Excluding Component Total Including Component Excluding Component
(in thousands)(in thousands) For the Three Months Ended June 30,(in thousands) For the Three Months Ended September 30,
Derivatives in Cash Flow Hedging RelationshipsDerivatives in Cash Flow Hedging Relationships 2019 2019  2019Derivatives in Cash Flow Hedging Relationships 2019 2019  2019

Interest rate contracts $4,441
 $5,982
 $(1,541) Interest expense $(78) $179
 $(257) Interest expense $—
 $—
 $—
Interest rate contracts $(264) $312
 $(576) Interest expense $(162) $102
 $(264) Interest expense $—
 $—
 $—
                                    
                                    
 2018 2018 2018  2018 2018 2018

Interest rate contracts $1,395
 $1,395
 $—
 Interest expense $(40) $(40) $—
 Interest expense $—
 $—
 $—
Interest rate contracts $818
 $818
 $—
 Interest expense $(22) $(22) $—
 Interest expense $—
 $—
 $—
 Amount of Gain (Loss) Recognized in OCI, net of taxes Location of Gain (Loss) Reclassified from AOCI into Income Amount of Gain (Loss) Reclassified from AOCI into Income, net of taxes Location of Gain (Loss) Recognized in Income on Derivatives (Amount Excluded from Effectiveness Testing) Amount of Gain (Loss) Recognized in Income on Derivatives (Amount Excluded from Effectiveness Testing) Amount of Gain (Loss) Recognized in OCI, net of taxes Location of Gain (Loss) Reclassified from AOCI into Income Amount of Gain (Loss) Reclassified from AOCI into Income, net of taxes Location of Gain (Loss) Recognized in Income on Derivatives (Amount Excluded from Effectiveness Testing) Amount of Gain (Loss) Recognized in Income on Derivatives (Amount Excluded from Effectiveness Testing)
  
  
 Total Including Component Excluding Component Total Including Component Excluding Component Total Including Component Excluding Component Total Including Component Excluding Component Total Including Component Excluding Component Total Including Component Excluding Component
(in thousands)(in thousands) For the Six Months Ended June 30,(in thousands) For the Nine Months Ended September 30,
Derivatives in Cash Flow Hedging RelationshipsDerivatives in Cash Flow Hedging Relationships 2019 2019  2019Derivatives in Cash Flow Hedging Relationships 2019 2019  2019

Interest rate contracts $2,256
 $2,884
 $(628) Interest expense $(305) $110
 $(415) Interest expense $—
 $—
 $—
Interest rate contracts $1,992
 $3,196
 $(1,204) Interest expense $(467) $212
 $(679) Interest expense $—
 $—
 $—
                                    
                                    
 2018 2018 2018  2018 2018 2018

Interest rate contracts $3,944
 $3,944
 $—
 Interest expense $(156) $(156) $—
 Interest expense $—
 $—
 $—
Interest rate contracts $4,762
 $4,762
 $—
 Interest expense $(178) $(178) $—
 Interest expense $—
 $—
 $—












Information pertaining to the effect of derivatives not designated as hedging instruments on the consolidated financial statements as of JuneSeptember 30, was as follows:
Location of Gain (Loss) Recognized in Income on Derivatives Amount of Gain (Loss) Recognized in Income on DerivativesLocation of Gain (Loss) Recognized in Income on Derivatives Amount of Gain (Loss) Recognized in Income on Derivatives
For the Three Months Ended June 30, For the Six Months Ended June 30,For the Three Months Ended September 30, For the Nine Months Ended September 30,
(in thousands)2019 2018 2019 201820192018 2019 2018
Interest rate contracts (1)
Commission income $2,513
 $1,458
 $6,694
 $2,507
Commission income $4,067
$2,586
 $10,761
 $5,093
Foreign exchange contractsOther income 1
 5
 6
 10
Other income 8
7
 14
 17
Forward sales contractsMortgage income (3,111) 228
 (6,320) 3,615
Mortgage income (1,765)948
 (8,085) 4,563
Written and purchased optionsMortgage income 1,660
 517
 3,523
 1,165
Mortgage income (1,848)(692) 1,675
 473
Other contractsOther income (18) (2) (27) (5)Other income (72)1
 (99) (4)
Total $1,045
 $2,206
 $3,876
 $7,292
 $390
$2,850
 $4,266
 $10,142

(1) Includes fees associated with customer interest rate contracts. 


NOTE 8 – LEASES

IBERIABANK as Lessee
The Company leases certain branch and corporate offices, land and ATM facilities through operating leases with terms ranging from less than one year to 4544 years. The Company has no financing leases (formerly capital leases). As discussed in Note 2, Recent Accounting Pronouncements, the Company adopted new guidance for leases on January 1, 2019 which requires that leases, whether classified as operating leases or financing leases, to be accounted for as the acquisition of a right-of-use asset (ROU asset) and a related lease liability recorded at the present value of the lease payments less any lease incentives. The ROU asset represents the Company’s right to use an underlying asset for the lease term and is included in other assets on the Company’s consolidated balance sheets. The lease liability represents the Company’s obligation to make lease payments and is included in other liabilities in the Company’s consolidated balance sheets. The cost of the lease is recognized on a straight-line basis over the lease term as lease expense. Prior to January 1, 2019, operating leases were not recorded on the balance sheet. See Note 2, Recent Accounting Pronouncements, for further discussion of the adoption ofon this new guidance.
Subsequent to the adoption of ASC 842 on January 1, 2019, the Company reviews new lease and service contracts to determine if the contracts contain an embedded lease. For leases that do not provide an implicit rate, the Company uses the corresponding FHLB Advance rate based on the lease term at commencement in determining the present value of lease payments. For leases with variable lease payments, the present value will beis determined using the index at the lease commencement date. Changes in variable rent payments due to subsequent changes in the index or rate do not result in a re-measurement of the ROU asset or lease liability, but are recognized as expense in the period in which they occur. Certain of the Company’s leases contain options to either renew, extend or terminate the lease. AsDuring the third quarter of June 30, 2019, no material extensions or terminations were consideredthe exercise of existing renewal options became reasonably certain for several of the Company’s leases with current noncancelable terms ending in 2020. These renewal options have varying term lengths ranging from 1 to 5 years, and as such,the payments associated with the renewal options were not included in the measurement of the lease liability and ROU asset.asset as of September 30, 2019. The Company also has lease agreements with lease and non-lease components, which are generally accounted for separately. Non-lease components, which primarily consist of common area maintenance, utilities, and janitorial services, are based on the stand-alone price of the services and expensed as incurred.
Operating lease expense for the three and sixnine months ended JuneSeptember 30, 2019 totaled $6.9 million and $13.6$20.5 million, respectively. During the three and sixnine months ended JuneSeptember 30, 2019, the Company paid $7.7$6.7 million and $14.4$21.1 million, respectively, for amounts included in the measurement of lease liabilities and $8.0$18.1 million and $13.2$31.3 million, respectively, to obtain ROU assets.
The following summarizes the ROU asset and lease liabilities as of JuneSeptember 30, 2019:
(in thousands)June 30, 2019September 30, 2019
Right-of-use assets$98,723
$112,156
Lease liabilities119,463
131,800
Weighted average remaining lease term7.9 years
7.95
Weighted average discount rate3.3%3.14%


Maturities of operating lease liabilities as of JuneSeptember 30, 2019 were as follows:
(in thousands)  
2019$13,345
$6,732
202025,055
25,895
202121,221
23,847
202218,154
21,414
202313,522
16,659
2024 and thereafter45,371
55,296
Total operating lease payments$136,668
$149,843
Less: Imputed interest17,205
18,043
Total lease liabilities$119,463
$131,800








As of JuneSeptember 30, 2019, the Company had not entered into any material leases that had not yet commenced.


IBERIABANK as Lessor
As a lessor, the Company engages in the leasing of equipment to commercial customers primarily through direct financing and sales-type leases. Direct financing and sales-type leases are similar to other forms of installment lending in that lessors generally do not retain benefits and risks incidental to ownership of the property subject to leases. Such arrangements are essentially financing transactions that permit lessees to acquire and use property. The new guidance on leases discussed above did not have a significant impact on the lessor model of accounting. As lessor, the sum of all minimum lease payments over the lease term and the estimated residual value, less unearned interest income, is recorded as the net investment in the lease on the commencement date and is included in loans and leases, net of unearned income in the consolidated balance sheet.sheets. Interest income is accrued as earned over the term of the lease based on the net investment in leases. Fees incurred to originate the lease are deferred on the commencement date and recognized as an adjustment of the yield on the lease.
The Company’s portfolio of direct financing and sales-type leases contains terms of 43 to 20 years. Some of these leases contain options to extend the leases for up to 12 months and/or to terminate the lease within one year. These direct financing and sales-type leases typically include a payment structure set at lease inception and do not provide any additional services. Expenses associated with the leased equipment, such as maintenance and insurance, are paid by the lessee directly to third parties. The lease agreement typically contains an option for the purchase of the leased property by the lessee at the end of the lease term at either the property’s residual value or a specified price. In all cases, the Company expects to sell or re-lease the equipment at the end of the lease term. Due to the nature and structure of the Company’s direct financing and sales-type leases, there is no selling profit or loss on these transactions.
At a lease’s inception, the Company determines the expected residual value of the leased property at the end of the lease term based on the type of equipment leased, location and usage, as well as the contractual return provisions in the lease agreement. Additionally, the Company utilizes multiple market sources of data to establish equipment values and in many cases engages certified appraisers to provide valuation analyses. In order to manage the risk associated with the residual value of its leased assets, lease agreements typically include various provisions designed to protect the value of the leased property, such as contractual equipment maintenance, use and return provisions;provisions, remarketing agreements;agreements, and lessee guarantees. In a few cases, the Company also obtains third-party guarantees to further manage residual risk in the portfolio. On an annual basis, leased properties with material residual values are reviewed for impairment.
The components of the Company’s net investment in leases were as follows:
(in thousands)June 30, 2019September 30, 2019
Lease payment receivable$259,103
$363,224
Unguaranteed residual assets28,903
34,991
Total net investment in leases$288,006
$398,215


For the three and sixnine months ended JuneSeptember 30, 2019, interest income for direct financing or sales-type leases totaled $2.3$3.1 million and $4.3$7.4 million. During the three and sixnine months ended JuneSeptember 30, 2019, there was no profit or loss recognized at the commencement date for direct financing or sales-type leases.

Maturities of the Company's lease receivables as of JuneSeptember 30, 2019 were as follows:
(in thousands)

2019$21,556
$21,480
202042,696
82,993
202142,619
68,163
202237,866
62,809
202330,344
48,670
2024 and thereafter93,482
90,277
Total future minimum lease payments$268,563
$374,392
Less: Imputed interest9,460
11,168
Lease receivables$259,103
$363,224




NOTE 9 – SHAREHOLDERS' EQUITY, CAPITAL RATIOS AND OTHER REGULATORY MATTERS

Preferred Stock
On April 4, 2019, the Company issued and sold an aggregate of 4,000,000 depositary shares (the “Series D Depositary Shares”), each representing a 1/400th ownership interest in a share of the Company’s 6.100% Fixed-to-Floating Non-Cumulative Perpetual Preferred Stock, Series D, par value $1.00 per share, (“Series D Preferred Stock”), with a liquidation preference of $10,000 per share of Series D Preferred Stock (equivalent to $25 per depositary share), which represents $100 million in aggregate liquidation preference.
Dividends will accrue and be payable on the Series D Preferred Stock, if declared by the Company's Board of Directors, and (i) will be paid semi-annually on May 1 and November 1, in arrears, at an annual rate equal to (i) 6.100% for each period from the issuance date to May 1, 2024 and (ii) will be paid quarterly on February 1, May 1, August 1, and November 1 at an annual rate equal to three-month LIBOR plus 3.859% for each period on or after August 1, 2024. The Company may redeem the Series D Preferred Stock at its option, subject to regulatory approval, as described in the Company’s Registration Statement on Form 8-A, filed with the Securities and Exchange Commission on April 4, 2019.
The following table presents a summary of the Company's non-cumulative perpetual preferred stock:
     June 30, 2019 December 31, 2018     September 30, 2019 December 31, 2018
Issuance Date Earliest Redemption Date Annual Dividend Rate Liquidation Amount Carrying Amount Carrying AmountIssuance Date Earliest Redemption Date Annual Dividend Rate Liquidation Amount Carrying Amount Carrying Amount
(in thousands)(in thousands)   (in thousands)   
Series B Preferred Stock8/5/2015 8/1/2025 6.625% $80,000
 $76,812
 $76,812
8/5/2015 8/1/2025 6.625% $80,000
 $76,812
 $76,812
Series C Preferred Stock5/9/2016 5/1/2026 6.600% 57,500
 55,285
 55,285
5/9/2016 5/1/2026 6.600% 57,500
 55,285
 55,285
Series D Preferred Stock4/4/2019 5/1/2024 6.100% 100,000
 96,388
 —
4/4/2019 5/1/2024 6.100% 100,000
 96,388
 —
   $237,500
 $228,485
 $132,097
   $237,500
 $228,485
 $132,097

Common Stock
In 2018, the Company's Board of Directors authorized the repurchase of up to 2,765,000 shares of IBERIABANK Corporation's outstanding common stock.
During The remaining 117,230 shares available under this plan were repurchased during the secondthird quarter of 2019. Also during the third quarter of 2019, the Company repurchased 1,759,849 common shares for approximately $134.8 million at a weighted average cost of $76.59 per share. For the six months ended June 30, 2019, the Company repurchased 2,147,770 common shares for approximately $164.7 million at a weighted average cost of $76.70 per share. During the six months ended June 30 2018, the Company repurchased 400,000 common shares for approximately $30.7 million at a weighted average cost of $76.67 per share. At June 30, 2019, the remaining common shares that could be repurchased under the plan approved by the Board in 2018 was 117,230 shares.

Subsequent to quarter-end, the Company repurchased the remaining shares available and announced in July 2019 a new Board-approved share repurchase program for up to 1,600,000 shares, or approximately 3% of total common shares outstanding at June 30, 2019.the time of the announcement. Stock repurchases under this program will be made from time to time, on the open market or in privately negotiated transactions. The timing of these repurchases will depend on market conditions and other requirements. The share repurchase program does not obligate the Company to repurchase any dollar amount or number of shares, and expires during the third quarter of 2021. The program may be extended, modified, suspended, or discontinued at any time. Subsequent to quarter-end and through August 6,
During the third quarter of 2019, the Company repurchased 307,230552,230 common shares for approximately $23.0 million.$40.0 million at a weighted average cost of $72.46 per share. During the third quarter of 2018, the Company repurchased 363,210 common shares for approximately $30.4 million at a weighted average cost of $83.63. During the nine months ended September 30, 2019, the Company repurchased 2,700,000 common shares for approximately $204.7 million at a weighted average cost of $75.83 per share. During the nine months ended September 30, 2018, the Company repurchased 763,210 common shares for approximately $61.0 million at a weighted average cost of $79.99 per share.

At September 30, 2019, the remaining number of common shares that could be repurchased under the new plan was 1,165,000 shares.






Regulatory Capital
The Company and IBERIABANK are subject to various regulatory capital requirements administered by the federal and state banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company’s consolidated financial statements. Under capital adequacy regulations and the regulatory framework for prompt corrective action, the Company and IBERIABANK, as applicable, must meet specific capital guidelines that involve quantitative measures of their assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting practices. The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors.


As of JuneSeptember 30, 2019, the Company and IBERIABANK met all capital adequacy requirements to which they are subject.
As of JuneSeptember 30, 2019, the most recent notification from the FRB categorized IBERIABANK as well-capitalized under the regulatory framework for prompt corrective action (the prompt corrective action requirements are not applicable to the Company). To be categorized as well-capitalized, an institution must maintain minimum total risk-based, Tier 1 risk-based, Common Equity Tier 1, and Tier 1 leverage ratios as set forth in the following table. There are no conditions or events since the notification that management believes have changed that categorization.
The Company’s and IBERIABANK’s actual capital amounts and ratios as of JuneSeptember 30, 2019 and December 31, 2018 are presented in the following tables:
(in thousands)June 30, 2019September 30, 2019
Minimum Well-Capitalized ActualMinimum Well-Capitalized Actual
Amount Ratio Amount Ratio Amount RatioAmount Ratio Amount Ratio Amount Ratio
Tier 1 Leverage                      
Consolidated$1,199,612
 4.00% N/A
 N/A $2,913,362
 9.71%$1,208,894
 4.00% N/A
 N/A $2,955,775
 9.78%
IBERIABANK1,196,979
 4.00
 1,496,224
 5.00 2,857,238
 9.55
1,206,257
 4.00
 1,507,821
 5.00 2,861,883
 9.49
Common Equity Tier 1 (CET1)                  
Consolidated$1,164,678
 4.50% N/A
 N/A $2,684,877
 10.38%$1,179,356
 4.50% N/A
 N/A $2,727,290
 10.41%
IBERIABANK1,161,409
 4.50
 1,677,591
 6.50 2,857,238
 11.07
1,175,984
 4.50
 1,698,643
 6.50 2,861,883
 10.95
Tier 1 Risk-Based Capital                  
Consolidated$1,552,904
 6.00% N/A
 N/A $2,913,362
 11.26%$1,572,475
 6.00% N/A
 N/A $2,955,775
 11.28%
IBERIABANK1,548,546
 6.00
 2,064,728
 8.00 2,857,238
 11.07
1,567,978
 6.00
 2,090,638
 8.00 2,861,883
 10.95
Total Risk-Based Capital                  
Consolidated$2,070,539
 8.00% N/A
 N/A $3,191,529
 12.33%$2,096,633
 8.00% N/A
 N/A $3,234,654
 12.34%
IBERIABANK2,064,728
 8.00
 2,580,910
 10.00 3,018,905
 11.70
2,090,638
 8.00
 2,613,297
 10.00 3,024,262
 11.57



 December 31, 2018
 Minimum Well-Capitalized Actual
 Amount Ratio Amount Ratio Amount Ratio
Tier 1 Leverage           
Consolidated$1,168,343
 4.00% N/A
 N/A $2,812,863
 9.63%
IBERIABANK1,165,537
 4.00
 1,456,921
 5.00 2,733,099
 9.38
Common Equity Tier 1 (CET1)           
Consolidated$1,125,405
 4.50% N/A
 N/A $2,680,766
 10.72%
IBERIABANK1,122,712
 4.50
 1,621,695
 6.50 2,733,099
 10.95
Tier 1 Risk-Based Capital           
Consolidated$1,500,540
 6.00% N/A
 N/A $2,812,863
 11.25%
IBERIABANK1,496,949
 6.00
 1,995,932
 8.00 2,733,099
 10.95
Total Risk-Based Capital           
Consolidated$2,000,720
 8.00% N/A
 N/A $3,084,764
 12.33%
IBERIABANK1,995,932
 8.00
 2,494,915
 10.00 2,888,500
 11.58

(in thousands)December 31, 2018
Minimum Well-Capitalized Actual
Amount Ratio Amount Ratio Amount Ratio
Tier 1 Leverage           
Consolidated$1,168,343
 4.00% N/A
 N/A $2,812,863
 9.63%
IBERIABANK1,165,537
 4.00
 1,456,921
 5.00 2,733,099
 9.38
Common Equity Tier 1 (CET1)           
Consolidated$1,125,405
 4.50% N/A
 N/A $2,680,766
 10.72%
IBERIABANK1,122,712
 4.50
 1,621,695
 6.50 2,733,099
 10.95
Tier 1 Risk-Based Capital           
Consolidated$1,500,540
 6.00% N/A
 N/A $2,812,863
 11.25%
IBERIABANK1,496,949
 6.00
 1,995,932
 8.00 2,733,099
 10.95
Total Risk-Based Capital           
Consolidated$2,000,720
 8.00% N/A
 N/A $3,084,764
 12.33%
IBERIABANK1,995,932
 8.00
 2,494,915
 10.00 2,888,500
 11.58

Minimum capital ratios are subject to a capital conservation buffer. In order to avoid limitations on distributions, including dividend payments, and certain discretionary bonus payments to executive officers, an institution must hold a capital conservation buffer above its minimum risk-based capital requirements. This capital conservation buffer is calculated as the lowest of the differences between the actual CET1 ratio, Tier 1 Risk-Based Capital Ratio, and Total Risk-Based Capital ratio and the corresponding minimum ratios. At JuneSeptember 30, 2019, the required minimum capital conservation buffer was 2.50%. At JuneSeptember 30, 2019, the capital conservation buffers of the Company and IBERIABANK were 4.33%4.34% and 3.70%3.57%, respectively.




NOTE 10 – EARNINGS PER SHARE
The computations of basic and diluted earnings per share were as follows:
Three Months Ended June 30, Six Months Ended June 30,Three Months Ended September 30, Nine Months Ended September 30,
(in thousands, except per share data)2019 2018 2019 20182019 2018 2019 2018
Earnings Per Common Share - Basic:              
Net income$101,598
 $75,124
 $201,729
 $138,745
$99,850
 $101,465
 $301,579
 $240,210
Less: Preferred stock dividends949
 949
 4,547
 4,547
3,599
 3,599
 8,146
 8,146
Less: Dividends and undistributed earnings allocated to unvested restricted shares999
 767
 1,931
 1,409
874
 908
 2,806
 2,341
Earnings allocated to common shareholders - basic$99,650
 $73,408
 $195,251
 $132,789
$95,377
 $96,958
 $290,627
 $229,723
Weighted average common shares outstanding53,345
 55,931
 53,758
 54,780
51,984
 55,571
 53,160
 55,047
Earnings per common share - basic$1.87
 $1.31
 $3.63
 $2.42
$1.83
 $1.74
 $5.47
 $4.17
Earnings Per Common Share - Diluted:              
Earnings allocated to common shareholders - basic$99,650
 $73,408
 $195,251
 $132,789
$95,377
 $96,958
 $290,627
 $229,723
Adjustment for undistributed earnings allocated to unvested restricted shares24
 (7) (21) (26)(17) (25) (37) (49)
Earnings allocated to common shareholders - diluted$99,674
 $73,401
 $195,230
 $132,763
$95,360
 $96,933
 $290,590
 $229,674
Weighted average common shares outstanding53,345
 55,931
 53,758
 54,780
51,984
 55,571
 53,160
 55,047
Dilutive potential common shares328
 356
 346
 353
308
 374
 333
 360
Weighted average common shares outstanding - diluted53,674
 56,287
 54,104
 55,133
52,292
 55,945
 53,493
 55,407
Earnings per common share - diluted$1.86
 $1.30
 $3.61
 $2.41
$1.82
 $1.73
 $5.43
 $4.14

For the three months ended JuneSeptember 30, 2019 and 2018, the calculations for basic shares outstanding excluded weighted average shares owned by the RRP of 521,591491,977 and 595,856,542,796, respectively. For the sixnine months ended JuneSeptember 30, 2019 and 2018, the calculations for basic shares outstanding excluded weighted average shares owned by the RRP of 542,769525,652 and 601,018,581,397, respectively.
The effects from the assumed exercises of 154,780152,991 and 156,98860,931 stock options were not included in the computation of diluted earnings per share for the three months ended JuneSeptember 30, 2019 and 2018, respectively, because they were antidilutive. For the sixnine months ended JuneSeptember 30, 2019 and 2018, the effects from the assumed exercises of 154,780152,991 and 156,988147,834 stock options, respectively, were not included in the computation of diluted earnings per share because they were antidilutive.


NOTE 11 – SHARE-BASED COMPENSATION
The Company has various types of share-based compensation plans that permit the granting of awards in the form of stock options, restricted stock, restricted share units and phantom stock. These plans are administered by the Compensation Committee of the Board of Directors, which selects persons eligible to receive awards and determines the terms, conditions and other provisions of the awards. At JuneSeptember 30, 2019, awards of 3,448,6503,450,647 shares could be made under approved incentive compensation plans. The Company issues shares to fulfill stock option exercises and restricted share units and restricted stock awards vesting from available authorized common shares. At JuneSeptember 30, 2019, the Company believes there are adequate authorized shares to satisfy anticipated stock option exercises and restricted share unit and restricted stock award vesting.
Stock option awards
The Company issues stock options under various plans to directors, officers and other key employees. The option exercise price cannot be less than the fair value of the underlying common stock as of the date of the option grant and the maximum option term cannot exceed ten years.
The following table represents the activity related to stock options during the periods indicated:
Number of Shares Weighted Average Exercise PriceNumber of Shares Weighted Average Exercise Price
Outstanding options, December 31, 2017686,366
 $58.24
686,366
 $58.24
Granted96,507
 81.99
97,620
 82.02
Exercised(34,745) 53.48
(41,697) 53.12
Forfeited or expired(22,524) 66.80
(27,328) 68.19
Outstanding options, June 30, 2018725,604
 $61.36
Exercisable options, June 30, 2018505,477
 $56.55
Outstanding options, September 30, 2018714,961
 $61.41
Exercisable options, September 30, 2018500,349
 $56.70
      
Outstanding options, December 31, 2018714,420
 $61.41
714,420
 $61.41
Granted127,090
 70.34
127,090
 70.34
Exercised(21,575) 53.98
(50,375) 52.99
Forfeited or expired(8,787) 70.80
(12,227) 72.79
Outstanding options, June 30, 2019811,148
 $62.90
Exercisable options, June 30, 2019561,789
 $58.26
Outstanding options, September 30, 2019778,908
 $63.23
Exercisable options, September 30, 2019533,784
 $58.60

The Company uses the Black-Scholes option pricing model to estimate the fair value of stock option awards. The following weighted-average assumptions were used for option awards issued during the following periods:
For the Six Months Ended June 30,For the Nine Months Ended September 30,
2019 20182019 2018
Expected dividends2.3% 1.8%2.3% 1.8%
Expected volatility24.5% 24.3%24.5% 24.3%
Risk-free interest rate2.5% 2.7%2.5% 2.7%
Expected term (in years)5.7
 5.8
5.7
 5.8
Weighted-average grant-date fair value$14.44
 $18.44
$14.44
 $18.48

The assumptions above are based on multiple factors, including historical stock option exercise patterns and post-vesting employment termination behaviors, expected future exercise patterns and the expected volatility of the Company’s stock price.


The following table represents the compensation expense that is included in non-interest expense and related income tax benefits in the accompanying consolidated statements of comprehensive income related to stock options for the following periods:
For the Three Months Ended June 30, For the Six Months Ended June 30,For the Three Months Ended September 30, For the Nine Months Ended September 30,
(in thousands)2019 2018 2019 20182019 2018 2019 2018
Compensation expense related to stock options$336
 $319
 $685
 $631
$373
 $321
 $1,058
 $952
Income tax benefit related to stock options24
 23
 50
 46
28
 23
 78
 70

At JuneSeptember 30, 2019, there was $2.7$2.4 million of unrecognized compensation expense related to stock options that is expected to be recognized over a weighted-average period of 2.92.7 years.
Restricted stock awards
The Company issues restricted stock under various plans for certain officers and directors. The restricted stock awards may not be sold or otherwise transferred until certain restrictions have lapsed. The holders of the restricted stock receive dividends and have the right to vote the shares. The compensation expense for these awards is determined based on the market price of the Company's common stock at the date of grant applied to the total number of shares granted and is recognized over the vesting period (generally three to five years). As of JuneSeptember 30, 2019 and 2018, unrecognized share-based compensation expense associated with these awards totaled $28.1$24.3 million and $35.5$30.9 million, respectively. The unrecognized compensation expense related to restricted stock awards at JuneSeptember 30, 2019 is expected to be recognized over a weighted-average period of 1.41.3 years.
Restricted share units
The Company issues restricted share units to certain of its executive officers. Restricted share units vest after the end of a three year performance period, based on satisfaction of the market and performance conditions set forth in the restricted share unit agreements. Recipients do not possess voting or investment power over the common stock underlying such units until vesting. The grant date fair value of these restricted share units is the same as the value of the corresponding number of shares of common stock, adjusted for assumptions surrounding the market-based conditions contained in the respective agreements. See Note 1, Summary of Significant Accounting Policies, in the 2018 Annual Report on Form 10-K for the year ended December 31, 2018, for further discussion of restricted share units with market or performance conditions.
The following table represents the compensation expense that was included in non-interest expense and related income tax benefits in the accompanying consolidated statements of comprehensive income related to restricted stock awards and restricted share units for the periods indicated:
For the Three Months Ended June 30, For the Six Months Ended June 30,For the Three Months Ended September 30, For the Nine Months Ended September 30,
(in thousands)2019 2018 2019 20182019 2018 2019 2018
Compensation expense related to restricted stock awards and restricted share units$5,931
 $4,927
 $11,154
 $9,349
$5,088
 $4,843
 $16,242
 $14,192
Income tax benefit related to restricted stock awards and restricted share units1,245
 1,035
 2,342
 1,963
1,068
 1,017
 3,411
 2,980

The following table represents unvested restricted stock award and restricted share unit activity for the following periods:
For the Six Months Ended June 30,For the Nine Months Ended September 30,
2019 20182019 2018
Number of shares at beginning of period700,628
 738,187
700,628
 738,187
Granted212,038
 224,170
217,078
 229,181
Forfeited(15,199) (56,653)(18,955) (70,981)
Vested(199,156) (138,952)(248,047) (192,217)
Number of shares at end of period698,311
 766,752
650,704
 704,170






Phantom stock awards
The Company issues phantom stock awards to certain key officers and employees. The awards are subject to a vesting period of five years and are paid out in cash upon vesting. The amount paid per vesting period is calculated as the number of vested “share equivalents” multiplied by the closing market price of a share of the Company’s common stock on the vesting date. Share equivalents are calculated on the date of grant as the total award’s dollar value divided by the closing market price of a share of the Company’s common stock on the grant date.
The following table represents compensation expense recorded for phantom stock based on the number of share equivalents vested at JuneSeptember 30 of the periods indicated and the current market price of the Company’s stock at that time:
For the Three Months Ended June 30, For the Six Months Ended June 30,For the Three Months Ended September 30, For the Nine Months Ended September 30,
(in thousands)2019 2018 2019 20182019 2018 2019 2018
Compensation expense related to phantom stock$2,451
 $2,017
 $5,645
 $5,013
$2,257
 $2,375
 $7,902
 $7,388

The following table represents phantom stock award activity during the periods indicated:
(in thousands)
Number of share equivalents (1)
 
Value of share equivalents (2)
Number of share equivalents (1)
 
Value of share equivalents (2)
Balance, December 31, 2017393,844
 $30,523
393,844
 $30,523
Granted140,804
 10,673
151,908
 12,358
Forfeited share equivalents(45,821) 3,473
(59,550) 4,844
Vested share equivalents(126,019) 10,519
(130,497) 10,871
Balance, June 30, 2018362,808
 $27,501
Balance, September 30, 2018355,705
 $28,937
      
Balance, December 31, 2018353,407
 $22,717
353,407
 $22,717
Granted174,991
 13,273
183,879
 13,890
Forfeited share equivalents(20,407) 1,548
(30,283) 2,288
Vested share equivalents(101,318) 7,647
(107,592) 8,116
Balance, June 30, 2019406,673
 $30,846
Balance, September 30, 2019399,411
 $30,171
(1) 
Number of share equivalents includes all reinvested dividend equivalents for the periods indicated.
(2) 
Except for share equivalents at the beginning of each period, which are based on the value at that time, and vested share payments, which are based on the cash paid at the time of vesting, the value of share equivalents is calculated based on the market price of the Company’s stock at the end of the respective periods. The market price of the Company’s stock was $75.85$75.54 and $75.80$81.35 on JuneSeptember 30, 2019, and 2018, respectively.



NOTE 12 – FAIR VALUE MEASUREMENTS
Recurring fair value measurements
The following table presents information about the Company's assets and liabilities that are measured at fair value on a recurring basis as of JuneSeptember 30, 2019 and December 31, 2018 and their classification within the fair value hierarchy. See Note 1, Summary of Significant Accounting Policies, in the Annual Report on Form 10-K for the year ended December 31, 2018, for a description of how fair value measurements are determined.
June 30, 2019September 30, 2019
(in thousands)Level 1 Level 2 Level 3 TotalLevel 1 Level 2 Level 3 Total
Assets              
Securities available for sale$—
 $4,455,308
 $—
 $4,455,308
$—
 $4,238,082
 $—
 $4,238,082
Mortgage loans held for sale—
 187,987
 —
 187,987
—
 255,276
 —
 255,276
Mortgage loans held for investment, at fair value option—
 —
 1,945
 1,945
—
 —
 4,138
 4,138
Derivative instruments—
 107,747
 —
 107,747
—
 136,235
 —
 136,235
Total$—
 $4,751,042
 $1,945
 $4,752,987
$—
 $4,629,593
 $4,138
 $4,633,731
Liabilities              
Derivative instruments$—
 $12,599
 $—
 $12,599
$—
 $10,851
 $—
 $10,851
Total$—
 $12,599
 $—
 $12,599
$—
 $10,851
 $—
 $10,851
              
December 31, 2018December 31, 2018
Level 1 Level 2 Level 3 TotalLevel 1 Level 2 Level 3 Total
Assets              
Securities available for sale$—
 $4,783,579
 $—
 $4,783,579
$—
 $4,783,579
 $—
 $4,783,579
Mortgage loans held for sale—
 107,734
 —
 107,734
—
 107,734
 —
 107,734
Mortgage loans held for investment, at fair value option—
 —
 3,143
 3,143
—
 —
 3,143
 3,143
Derivative instruments—
 27,048
 —
 27,048
—
 27,048
 —
 27,048
Total$—
 $4,918,361
 $3,143
 $4,921,504
$—
 $4,918,361
 $3,143
 $4,921,504
Liabilities              
Derivative instruments$—
 $22,124
 $—
 $22,124
$—
 $22,124
 $—
 $22,124
Total$—
 $22,124
 $—
 $22,124
$—
 $22,124
 $—
 $22,124

During the sixnine months ended JuneSeptember 30, 2019, there were no0 transfers between the Level 1 and Level 2 fair value categories.


Non-recurring fair value measurements
The Company holds certain assets that are measured at fair value but only in certain circumstances, such as impairment. The following table presents information about the Company's assets that are measured at fair value and still held as of JuneSeptember 30, 2019 and December 31, 2018 for which a non-recurring fair value adjustment was recorded during the periods then ended. See Note 1, Summary of Significant Accounting Policies, in the Annual Report on Form 10-K for the year ended December 31, 2018, for a description of how fair value measurements are determined.
June 30, 2019September 30, 2019
(in thousands)Level 1 Level 2 Level 3 TotalLevel 1 Level 2 Level 3 Total
Assets              
Impaired loans$—
 $—
 $73,003
 $73,003
$—
 $—
 $79,442
 $79,442
OREO, net—
 —
 5,076
 5,076
—
 —
 4,008
 4,008
Total$—
 $—
 $78,079
 $78,079
$—
 $—
 $83,450
 $83,450
              
December 31, 2018December 31, 2018
(in thousands)Level 1 Level 2 Level 3 TotalLevel 1 Level 2 Level 3 Total
Assets              
Impaired loans$—
 $—
 $65,914
 $65,914
$—
 $—
 $65,914
 $65,914
OREO, net—
 —
 6,433
 6,433
—
 —
 6,433
 6,433
Total$—
 $—
 $72,347
 $72,347
$—
 $—
 $72,347
 $72,347

The tables above exclude the initial measurement of assets and liabilities that were acquired as part of business combinations. These assets and liabilities were recorded at their fair value upon acquisition in accordance with GAAP and were not re-measured during the periods presented unless specifically required by GAAP. Acquisition date fair values represent either Level 2 fair value measurements (investment securities, deposits, and premises and equipment) or Level 3 fair value measurements (loans, core deposit intangible assets, and debt). Refer to Note 3, Acquisition Activity, in the Annual Report on Form 10-K for the year ended December 31, 2018, for further detail.
The Company did not record any liabilities at fair value for which measurement of the fair value was made on a non-recurring basis as of JuneSeptember 30, 2019 and December 31, 2018.
Fair value option
The Company has elected the fair value option for originated residential mortgage loans held for sale, which allows for a more effective offset of the changes in fair values of the loans and the derivative instruments used to hedge them without the burden of complying with the requirements for hedge accounting. The Company also has a portion of mortgage loans held for investment for which the fair value option was elected upon origination and which continue to be accounted for at fair value at JuneSeptember 30, 2019 and December 31, 2018, respectively.
The following table summarizes the difference between the aggregate fair value and the aggregate unpaid principal balance for mortgage loans held for sale and mortgage loans held for investment measured at fair value:
June 30, 2019 December 31, 2018September 30, 2019 December 31, 2018
(in thousands)Aggregate Fair Value Aggregate Unpaid Principal Aggregate Fair Value Less Unpaid Principal Aggregate Fair Value Aggregate Unpaid Principal Aggregate Fair Value Less Unpaid PrincipalAggregate Fair Value Aggregate Unpaid Principal Aggregate Fair Value Less Unpaid Principal Aggregate Fair Value Aggregate Unpaid Principal Aggregate Fair Value Less Unpaid Principal
Mortgage loans held for sale, at fair value$187,987
 $181,067
 $6,920
 $107,734
 $104,345
 $3,389
$255,276
 $248,256
 $7,020
 $107,734
 $104,345
 $3,389
Mortgage loans held for investment, at fair value1,945
 2,099
 (154) 3,143
 3,595
 (452)4,138
 4,306
 (168) 3,143
 3,595
 (452)








Interest income on mortgage loans held for sale and mortgage loans held for investment at fair value option is recognized based on contractual rates and is reflected in interest income on loans held for sale in the consolidated statements of comprehensive income. The following table details net gains (losses) resulting from the change in fair value of loans that were recorded in mortgage income in the consolidated statements of comprehensive income for the three and sixnine months ended JuneSeptember 30, 2019 and 2018. The changes in fair value are mostly offset by economic hedging activities, with an insignificant portion of these changes attributable to changes in instrument-specific credit risk.
Net Gains (Losses) Resulting From Changes in Fair ValueNet Gains (Losses) Resulting From Changes in Fair Value
For the Three Months Ended June 30, For the Six Months Ended June 30,For the Three Months Ended September 30, For the Nine Months Ended September 30,
(in thousands)2019 2018 2019 20182019 2018 2019 2018
Fair value option              
Mortgage loans held for sale, at fair value$2,879
 $(331) $3,531
 $(1,472)$100
 $(1,041) $3,631
 $(2,513)
Mortgage loans held for investment, at fair value(104) (172) 87
 (921)(14) (296) 73
 (1,217)




NOTE 13 – FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair value of a financial instrument is the current amount that would be exchanged between willing parties, other than in a forced liquidation. Fair value is best determined based upon quoted market prices. However, in many instances, there are no quoted market prices for the Company’s various financial instruments. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the instrument. ASC Topic 825, Financial Instruments, excludes certain financial instruments and all non-financial instruments from its disclosure requirements. Consequently, the aggregate fair value amounts presented may not necessarily represent the underlying fair value of the Company.
The carrying amount and estimated fair values of the Company’s financial instruments, as well as the level within the fair value hierarchy, are included in the tables below. See Note 1, Summary of Significant Accounting Policies, and Note 2, Recent Accounting Pronouncements, in the Annual Report on Form 10-K for the year ended December 31, 2018, for a description of how fair value measurements are determined.
 June 30, 2019 September 30, 2019
(in thousands) Carrying  Amount Fair Value Level 1 Level 2 Level 3 Carrying  Amount Fair Value Level 1 Level 2 Level 3
Measurement Category                    
Fair Value                    
Financial Assets         Financial Assets         
Securities available for sale$4,455,308
 $4,455,308
 $—
 $4,455,308
 $—
Securities available for sale$4,238,082
 $4,238,082
 $—
 $4,238,082
 $—
Mortgage loans held for sale187,987
 187,987
 —
 187,987
 —
Mortgage loans held for sale255,276
 255,276
 —
 255,276
 —
Mortgage loans held for investment, at fair value option1,945
 1,945
 —
 —
 1,945
Mortgage loans held for investment, at fair value option4,138
 4,138
 —
 —
 4,138
Derivative instruments107,747
 107,747
 —
 107,747
 —
Derivative instruments136,235
 136,235
 —
 136,235
 —
                    
Financial Liabilities         Financial Liabilities         
Derivative instruments12,599
 12,599
 —
 12,599
 —
Derivative instruments10,851
 10,851
 —
 10,851
 —
                    
Amortized Cost                    
Financial Assets         Financial Assets         
Cash and cash equivalents$789,315
 $789,315
 $789,315
 $—
 $—
Cash and cash equivalents$930,933
 $930,933
 $930,933
 $—
 $—
Securities held to maturity192,917
 198,012
 —
 198,012
 —
Securities held to maturity185,007
 192,586
 —
 192,586
 —
Loans and leases, carried at amortized cost, net of unearned income and allowance for loan and lease losses23,206,980
 22,939,128
 —
 —
 22,939,128
Loans and leases, carried at amortized cost, net of unearned income and allowance for loan and lease losses23,526,164
 23,290,286
 —
 —
 23,290,286
                    
Financial Liabilities         Financial Liabilities         
Deposits24,295,331
 24,295,695
 —
 24,295,695
 —
Deposits24,977,285
 24,985,510
 —
 24,985,510
 —
Short-term borrowings997,507
 997,507
 184,507
 813,000
 —
Short-term borrowings498,049
 498,049
 223,049
 275,000
 —
Long-term debt1,374,759
 1,381,572
 —
 —
 1,381,572
Long-term debt1,394,202
 1,391,857
 —
 —
 1,391,857




  December 31, 2018
(in thousands) Carrying Amount Fair Value Level 1 Level 2 Level 3
Measurement Category          
Fair Value          
 Financial Assets         
 Securities available for sale$4,783,579
 $4,783,579
 $—
 $4,783,579
 $—
 Mortgage loans held for sale107,734
 107,734
 —
 107,734
 —
 Mortgage loans held for investment, at fair value option3,143
 3,143
 —
 —
 3,143
 Derivative instruments27,048
 27,048
 —
 27,048
 —
           
 Financial Liabilities         
 Derivative instruments22,124
 22,124
 —
 22,124
 —
           
Amortized Cost          
 Financial Assets         
 Cash and cash equivalents$690,453
 $690,453
 $690,453
 $—
 $—
 Securities held to maturity207,446
 204,277
 —
 204,277
 —
 Loans and leases, carried at amortized cost, net of unearned income and allowance for loan and lease losses22,376,101
 22,088,236
 —
 —
 22,088,236
           
 Financial Liabilities         
 Deposits23,763,431
 23,752,139
 —
 23,752,139
 —
 Short-term borrowings1,482,882
 1,482,882
 315,882
 1,167,000
 —
 Long-term debt1,166,151
 1,154,062
 —
 —
 1,154,062

The fair value estimates presented herein are based upon pertinent information available to management as of JuneSeptember 30, 2019 and December 31, 2018. Although management is not aware of any factors that would significantly affect the estimated fair value amounts, such amounts have not been comprehensively revalued for purposes of these financial statements since these dates and, therefore, current estimates of fair value may differ significantly from the amounts presented herein.


NOTE 14 – BUSINESS SEGMENTS
Each of the Company’s reportable operating segments serves the specific needs of the Company’s customers based on the products and services it offers. The reportable segments are based upon those revenue-producing components for which separate financial information is produced internally and primarily reflect the manner in which resources are allocated and performance is assessed. Further, the reportable operating segments are also determined based on the quantitative thresholds prescribed within ASC Topic 280, Segment Reporting, and consideration of the usefulness of the information to the users of the consolidated financial statements.
The Company reports the results of its operations through three3 reportable segments: IBERIABANK, Mortgage, and LTC. The IBERIABANK segment represents the Company’s commercial and retail banking functions, including its lending, investment, and deposit activities. IBERIABANK also includes the Company’s wealth management, capital markets, and other corporate functions. The Mortgage segment represents the Company’s origination, funding, and subsequent sale of one-to-four family residential mortgage loans. The LTC segment represents the Company’s title insurance and loan closing services.
Certain expenses not directly attributable to a specific reportable segment are allocated to segments based on pre-determined methods that reflect utilization. Also within IBERIABANK are certain reconciling items that translate reportable segment results into consolidated results. The following tables present certain information regarding operations by reportable segment, including a reconciliation of segment results to reported consolidated results for the periods presented. Reconciling items between segment results and reported results include:
Elimination of interest income and interest expense representing interest earned by IBERIABANK on interest-bearing checking accounts held by related companies, as well as the elimination of the related deposit balances at the IBERIABANK segment;
Elimination of investment in subsidiary balances on certain operating segments included in total and average segment assets; and
Elimination of intercompany due to and due from balances on certain operating segments that are included in total and average segment assets.

Three Months Ended June 30, 2019Three Months Ended September 30, 2019
(in thousands)IBERIABANK Mortgage LTC ConsolidatedIBERIABANK Mortgage LTC Consolidated
Interest and dividend income$334,055
 $1,912
 $—
 $335,967
$330,896
 $2,282
 $—
 $333,178
Interest expense80,628
 —
 —
 80,628
83,845
 —
 —
 83,845
Net interest income253,427
 1,912
 —
 255,339
247,051
 2,282
 —
 249,333
Provision for (reversal of) credit losses10,742
 13
 —
 10,755
8,974
 12
 —
 8,986
Mortgage income—
 18,444
 —
 18,444
—
 17,432
 —
 17,432
Title revenue—
 —
 6,895
 6,895
—
 —
 7,170
 7,170
Other non-interest income (expense)33,496
 (10) —
 33,486
35,881
 3,194
 (3) 39,072
Allocated expenses (income)(4,414) 3,250
 1,164
 —
(4,068) 2,991
 1,077
 —
Non-interest expense151,139
 13,590
 4,889
 169,618
152,988
 14,676
 4,998
 172,662
Income before income tax expense129,456
 3,493
 842
 133,791
125,038
 5,229
 1,092
 131,359
Income tax expense31,134
 836
 223
 32,193
29,938
 1,282
 289
 31,509
Net income$98,322
 $2,657
 $619
 $101,598
$95,100
 $3,947
 $803
 $99,850
Total loans, leases, and loans held for sale, net of unearned income$23,330,738
 $212,560
 $—
 $23,543,298
$23,650,057
 $281,756
 $—
 $23,931,813
Total assets31,165,205
 255,106
 26,221
 31,446,532
31,386,350
 320,994
 27,254
 31,734,598
Total deposits24,279,416
 15,915
 —
 24,295,331
24,946,708
 30,577
 —
 24,977,285
Average assets31,024,832
 221,891
 25,099
 31,271,822
31,256,216
 271,817
 26,258
 31,554,291




Three Months Ended June 30, 2018Three Months Ended September 30, 2018
(in thousands)IBERIABANK Mortgage LTC ConsolidatedIBERIABANK Mortgage LTC Consolidated
Interest and dividend income$302,387
 $1,436
 $—
 $303,823
$315,467
 $1,599
 $1
 $317,067
Interest expense47,710
 —
 —
 47,710
57,842
 —
 —
 57,842
Net interest income254,677
 1,436
 —
 256,113
257,625
 1,599
 1
 259,225
Provision for (reversal of) credit losses7,715
 (19) —
 7,696
11,386
 (2) —
 11,384
Mortgage income—
 13,721
 —
 13,721
—
 12,729
 —
 12,729
Title revenue—
 —
 6,846
 6,846
—
 —
 6,280
 6,280
Other non-interest income (expense)33,481
 (105) (3) 33,373
33,594
 (16) 500
 34,078
Allocated expenses (income)(3,873) 2,868
 1,005
 —
(3,691) 2,680
 1,011
 —
Non-interest expense179,831
 11,966
 4,979
 196,776
154,000
 10,223
 4,839
 169,062
Income before income tax expense104,485
 237
 859
 105,581
129,524
 1,411
 931
 131,866
Income tax expense30,211
 17
 229
 30,457
29,765
 386
 250
 30,401
Net income$74,274
 $220
 $630
 $75,124
$99,759
 $1,025
 $681
 $101,465
Total loans, leases, and loans held for sale, net of unearned income$22,026,914
 $127,712
 $—
 $22,154,626
$22,302,679
 $84,203
 $—
 $22,386,882
Total assets29,928,360
 173,415
 24,387
 30,126,162
29,974,065
 119,322
 25,000
 30,118,387
Total deposits23,419,382
 11,076
 —
 23,430,458
23,179,549
 13,897
 —
 23,193,446
Average assets29,599,468
 148,210
 23,174
 29,770,852
29,863,742
 158,464
 24,025
 30,046,231

Six Months Ended June 30, 2019Nine Months Ended September 30, 2019
(in thousands)IBERIABANK Mortgage LTC ConsolidatedIBERIABANK Mortgage LTC Consolidated
Interest and dividend income$658,699
 $3,351
 $1
 $662,051
$989,595
 $5,633
 $1
 $995,229
Interest expense156,228
 —
 —
 156,228
240,073
 —
 —
 240,073
Net interest income502,471
 3,351
 1
 505,823
749,522
 5,633
 1
 755,156
Provision for (reversal of) credit losses24,565
 (47) —
 24,518
33,539
 (35) —
 33,504
Mortgage income—
 30,293
 —
 30,293
—
 47,725
 —
 47,725
Title revenue—
 —
 12,120
 12,120
—
 —
 19,290
 19,290
Other non-interest income (expense)68,959
 (22) (16) 68,921
104,840
 3,172
 (19) 107,993
Allocated expenses (income)(6,447) 4,750
 1,697
 —
(10,515) 7,741
 2,774
 —
Non-interest expense294,894
 24,131
 9,346
 328,371
447,882
 38,807
 14,344
 501,033
Income before income tax expense258,418
 4,788
 1,062
 264,268
383,456
 10,017
 2,154
 395,627
Income tax expense61,109
 1,143
 287
 62,539
91,047
 2,425
 576
 94,048
Net income$197,309
 $3,645
 $775
 $201,729
$292,409
 $7,592
 $1,578
 $301,579
Total loans, leases, and loans held for sale, net of unearned income$23,330,738
 $212,560
 $—
 $23,543,298
$23,650,057
 $281,756
 $—
 $23,931,813
Total assets31,165,205
 255,106
 26,221
 31,446,532
31,386,350
 320,994
 27,254
 31,734,598
Total deposits24,279,416
 15,915
 —
 24,295,331
24,946,708
 30,577
 —
 24,977,285
Average assets30,838,856
 190,205
 24,811
 31,053,872
30,981,906
 215,306
 25,299
 31,222,511




Six Months Ended June 30, 2018Nine Months Ended September 30, 2018
(in thousands)IBERIABANK Mortgage LTC ConsolidatedIBERIABANK Mortgage LTC Consolidated
Interest and dividend income$571,162
 $3,203
 $1
 $574,366
$886,629
 $4,802
 $2
 $891,433
Interest expense85,364
 —
 —
 85,364
143,206
 ���
 —
 143,206
Net interest income485,798
 3,203
 1
 489,002
743,423
 4,802
 2
 748,227
Provision for (reversal of) credit losses15,931
 (24) —
 15,907
27,316
 (26) —
 27,290
Mortgage income—
 23,316
 —
 23,316
—
 36,045
 —
 36,045
Title revenue—
 —
 11,873
 11,873
—
 —
 18,153
 18,153
Other non-interest income (expense)63,387
 (67) (3) 63,317
96,981
 (83) 497
 97,395
Allocated expenses (income)(5,352) 4,034
 1,318
 —
(9,043) 6,714
 2,329
 —
Non-interest expense351,422
 23,882
 9,543
 384,847
505,423
 34,105
 14,382
 553,910
Income (loss) before income tax expense187,184
 (1,440) 1,010
 186,754
316,708
 (29) 1,941
 318,620
Income tax expense (benefit)48,751
 (393) (349) 48,009
78,516
 (7) (99) 78,410
Net income (loss)$138,433
 $(1,047) $1,359
 $138,745
$238,192
 $(22) $2,040
 $240,210
Total loans, leases, and loans held for sale, net of unearned income$22,026,914
 $127,712
 $—
 $22,154,626
$22,302,679
 $84,203
 $—
 $22,386,882
Total assets29,928,360
 173,415
 24,387
 30,126,162
29,974,065
 119,322
 25,000
 30,118,387
Total deposits23,419,382
 11,076
 —
 23,430,458
23,179,549
 13,897
 —
 23,193,446
Average assets28,766,655
 166,872
 22,535
 28,956,062
29,136,369
 164,039
 23,037
 29,323,445







NOTE 15 – COMMITMENTS AND CONTINGENCIES
Off-balance sheet commitments
In the normal course of business, to meet the financing needs of its customers, the Company is a party to credit-related financial instruments, with risk not reflected in the consolidated financial statements. These financial instruments include commitments to extend credit, standby letters of credit, and commercial letters of credit. Such commitments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the consolidated balance sheets. The credit policies used for these commitments are consistent with those used for on-balance sheet instruments. The Company’s exposure to credit loss in the event of non-performance by its customers under such commitments or letters of credit represents the contractual amount of the financial instruments as indicated in the table below. At JuneSeptember 30, 2019 and December 31, 2018, the fair value of guarantees under commercial and standby letters of credit was $2.2 million and $2.4 million.million, respectively. This fair value will decrease as the existing commercial and standby letters of credit approach their expiration dates.
At JuneSeptember 30, 2019 and December 31, 2018, respectively, the Company had the following financial instruments outstanding and related reserves, whose contract amounts represent credit risk:
(in thousands)June 30, 2019 December 31, 2018September 30, 2019 December 31, 2018
Commitments to extend credit$690,267
 $642,162
$883,615
 $642,162
Unfunded commitments under lines of credit7,149,479
 6,883,963
7,252,052
 6,883,963
Commercial and standby letters of credit246,622
 240,436
215,664
 240,436
Reserve for unfunded lending commitments15,281
 14,830
16,144
 14,830

Commitments to extend credit are agreements to lend to a customer 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 by the borrower. Since many of the commitments are expected to be drawn upon, the total commitment amounts generally represent future cash requirements. The Company evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral, if any, is based on management’s credit evaluation of the customer.
Unfunded commitments under commercial lines of credit, revolving credit lines, and overdraft protection agreements are commitments for possible future extensions of credit to existing customers. Many of these types of commitments do not contain a specified maturity date and may not be drawn upon to the total extent to which the Company is committed. See Note 5, Allowance for Credit Losses and Credit Quality, for additional information related to the Company’s reserve for unfunded lending commitments.
Commercial and standby letters of credit are conditional 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 issuance, bond financing, and similar transactions. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. When necessary, they are collateralized, generally in the form of marketable securities and cash equivalents.
Legal proceedings
The nature of the business of the Company’s banking and other subsidiaries ordinarily results in a certain amount of claims, litigation, investigations, and legal and administrative cases and proceedings, which are considered incidental to the normal conduct of business. Some of these claims are against entities or assets of which the Company is a successor or acquired in business acquisitions. The Company has asserted defenses to these claims and, with respect to such legal proceedings, intends to continue to defend itself vigorously, litigating or settling cases according to management’s judgment as to what is in the best interest of the Company and its shareholders.







In July of 2016, the Company received a subpoena from the Office of Inspector General of the U.S. Department of Housing and Urban Development (“HUD”) requesting information on certain previously originated loans insured by the Federal Housing Administration ("FHA") as well as other documents regarding the Company's FHA-related policies and practices. After the Company complied with the subpoena, attorneys from the Department of Justice (“DOJ”) informed the Company in late March of 2017 that a civil qui tam suit had been filed against the Company in federal court involving the subject matter of the HUD subpoena. The HUD lawsuit was settled on December 11, 2017 in the amount of $11.7 million. On February 2, 2018, IBERIABANK filed a lawsuit in the United States District Court for the Eastern District of Louisiana (New Orleans) against Illinois Union Insurance Company and Travelers Casualty and Surety Company of America in an effort to recover the $11.7 million it paid to settle the HUD matter. IBERIABANK filed that lawsuit to recover the insurance proceeds to which it claims to be entitled under certain Bankers’ Professional Liability insurance policies issued by defendants Illinois Union and Travelers. More specifically, IBERIABANK alleges that the insurers have failed to honor their obligations under the policies to pay IBERIABANK’s losses in connection with the $11.7 million settlement of disputed allegations relating to IBERIABANK’s professional services in connection with certain mortgage loans insured by the FHA. The judge in the federal lawsuit granted motion for summary judgment thereby dismissing the case. The Company has appealed that decision to the United States Court of Appeals for the Fifth Circuit. The appeal seeks reversal of the summary judgment such that the case can be remanded to the district court in an effort to recover the $11.7 million the Company is suing to recover.million.
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 on a quarterly basis. Where a loss is not probable or the amount of loss is not estimable, the Company does not accrue legal reserves. While the outcome of legal proceedings is inherently uncertain, based on information currently available and available insurance coverage, the Company’s management believes that it has established appropriate legal reserves. Any incremental liabilities arising from pending legal proceedings are not expected to have a material adverse effect on the Company’s consolidated financial position, consolidated results of operations, or consolidated cash flows. However, it is possible that the ultimate resolution of these matters, if unfavorable, may be material to the Company’s consolidated financial position, consolidated results of operations, or consolidated cash flows.
As of the date of this filing, the Company believes the amount of losses associated with legal proceedings that it is reasonably possible to incur above amounts already accrued and reported as of JuneSeptember 30, 2019 is not material.


NOTE 16 – RELATED PARTY TRANSACTIONS
In the ordinary course of business, the Company may execute transactions with various related parties. Examples of such transactions may include lending or deposit arrangements, transfers of financial assets, services for administrative support, and other miscellaneous items.
The Company has granted loans to executive officers and directors and their affiliates. These loans, including the related principal additions, principal payments, and unfunded commitments are not material to the consolidated financial statements at JuneSeptember 30, 2019 and December 31, 2018. There were no outstanding loans to such related parties classified as non-accrual, past due, or troubled debt restructurings at JuneSeptember 30, 2019.
Deposits from related parties held by the Company were not material at JuneSeptember 30, 2019 and December 31, 2018.

NOTE 17 - SUBSEQUENT EVENTS

On November 3, 2019, the Company entered into a definitive agreement with First Horizon National Corporation (“First Horizon”) under which the companies will combine in an all-stock merger of equals. As a result of the merger, each share of the Company's common stock will be exchanged for 4.584 shares of First Horizon common stock. Under the terms of the agreement, which was unanimously approved by the Boards of Directors of both companies, the combined organization will operate under the First Horizon name and will be headquartered in Memphis, Tennessee. The merger is expected to close in the second quarter of 2020, subject to satisfaction of customary closing conditions, including receipt of customary regulatory approvals and approval by the shareholders of each company.




Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis is intended to assist readers in understanding the consolidated financial condition and results of operations of IBERIABANK Corporation and its wholly-owned subsidiaries (collectively, the “Company”) as of and for the period ended JuneSeptember 30, 2019, and updates the Annual Report on Form 10-K for the year ended December 31, 2018. This discussion should be read in conjunction with the unaudited consolidated financial statements, accompanying footnotes and supplemental financial data included herein. The emphasis of this discussion will be amounts as of JuneSeptember 30, 2019 compared to December 31, 2018 for the balance sheets and the three and sixnine months ended JuneSeptember 30, 2019 compared to JuneSeptember 30, 2018 for the statements of comprehensive income. Certain amounts in prior year presentations have been reclassified to conform to the current year presentation.
When we refer to the “Company,” “we,” “our” or “us” in this Report, we mean IBERIABANK Corporation and subsidiaries (consolidated). When we refer to the “Parent,” we mean IBERIABANK Corporation. See the Glossary of Defined Terms at the end of this Report for terms used throughout this Report.
CAUTION ABOUT FORWARD-LOOKING STATEMENTS
To the extent that statements in this Report relate to future plans, objectives, financial results or performance of the Company, these statements are deemed to be “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements, which are based on management’s current information, estimates and assumptions and the current economic environment, are generally identified by use of the words “may,” “plan,” “believe,” “expect,” “intend,” “will,” “should,” “continue,” “potential,” “anticipate,” “estimate,” “predict,” “project” or similar expressions, or the negative of these terms or other comparable terminology. The Company’s actual strategies and results in future periods may differ materially from those currently expected due to various risks and uncertainties.
Forward-looking statements represent management’s beliefs, based upon information available at the time the statements are made, with regard to the matters addressed; they are not guarantees of future performance. Forward-looking statements are subject to numerous assumptions, risks and uncertainties that change over time and could cause actual results or financial condition to differ materially from those expressed in or implied by such statements. Factors that could cause or contribute to such differences include, but are not limited to: the level of market volatility, our ability to execute our growth strategy, including the availability of future bank acquisition opportunities, our ability to execute on our revenue and efficiency improvement initiatives, unanticipated delays, losses, business disruptions and diversion of management time related to the completion and integration of mergers and acquisitions, refinements to purchase accounting adjustments for acquired businesses and assets and assumed liabilities in these transactions, adjustments of fair values of acquired assets and assumed liabilities and of deferred taxes in acquisitions, actual results deviating from the Company’s current estimates and assumptions of timing and amounts of cash flows, credit risk of our customers, effects of low energy and commodity prices, effects of residential real estate prices and levels of home sales, our ability to satisfy capital and liquidity standards, sufficiency of our allowance for credit losses, changes in interest rates, access to funding sources, reliance on the services of executive management, competition for loans, deposits and investment dollars, competition from competitors with greater financial resources than the Company, threats of fintech innovation, reputational risks and social factors, changes in government regulations and legislation, increases in FDIC insurance assessments, geographic concentration of our markets, economic or business conditions in our markets or nationally, rapid changes in the financial services industry, significant litigation, cyber-security risks including dependence on our operational, technological, and organizational systems and infrastructure and those of third party providers of those services, hurricanes and other adverse weather events, and valuation of intangible assets.

Factors that may cause actual results to differ materially from these forward-looking statements are discussed in the Company’s Annual Report on Form 10-K and other filings with the Securities and Exchange Commission (the “SEC”), available at the SEC’s website, www.sec.gov, and the Company’s website, www.iberiabank.com, under the heading “Investor Relations” and then “Financial Information.” All information is as of the date of this Report unless otherwise noted. Except to the extent required by applicable law or regulation, the Company undertakes no obligation to revise or update publicly any forward-looking statement for any reason.



EXECUTIVE SUMMARY
Corporate Profile
IBERIABANK Corporation is a financial holding company based in Lafayette, Louisiana. Through its subsidiaries, the Company provides a full range of commercial and consumer banking services, including private banking, small business, wealth and trust management, retail brokerage, mortgage, commercial leasing and equipment financing, and title insurance services through locations in Louisiana, Arkansas, Tennessee, Alabama, Texas, Florida, Georgia, South Carolina, North Carolina, Mississippi, Missouri, and New York.
Quarterly Financial Performance Summary:
•
Net income available to common shareholders for the quarter ended JuneSeptember 30, 2019 totaled $100.6$96.3 million, or $1.86$1.82 diluted EPS, compared to $74.2$97.9 million, or $1.30$1.73 diluted EPS, for the same period of 2018. Non-GAAP core EPS, which excludes merger-related costs and other items disclosed in Table 17 - Non-GAAP measures, was $1.87$1.82 for the secondthird quarter of 2019 compared to $1.71$1.74 for the same period of 2018.
Net interest income was $255.3$249.3 million for the secondthird quarter of 2019, a $0.8$9.9 million, or 0.3%4%, decrease compared to the same quarter of 2018. Net interest margin on a tax-equivalent basis decreased 1930 basis points to 3.57%3.44% from 3.76%3.74%, primarily attributable to a higher cost of funds infunding costs when comparing the second quarter of 2019.periods.
The Company recorded a provision for credit losses of $10.8$9.0 million for the quarter ended JuneSeptember 30, 2019, a $3.1$2.4 million increasedecrease from the provision recorded for the same period of 2018, primarily driven by loan growth when comparingan overall improvement in asset quality and lower net charge-offs in the periods.third quarter of 2019 compared to the corresponding 2018 period.
Non-interest income increased $4.9$10.6 million, or 9%20%, to $58.8$63.7 million duringfor the quarter ended JuneSeptember 30, 2019. This increase was primarily driven by higher mortgage income when comparing the periods.periods and a $3.2 million gain on non-mortgage loan sales.
Non-interest expense for the secondthird quarter of 2019 decreased $27.2increased $3.6 million, or 14%2%, to $169.6$172.7 million compared to the same period of 2018. This decrease was2018, primarily the result offrom an increase in occupancy and equipment expense from a decrease in impairment ofwrite-off on certain long-lived assets and other losses due to branch consolidations and closures that took place during the second quarter of 2018 and a decline in salaries and employee benefits expense.
The Company recorded income tax expense of $32.2 million and $30.5 million, respectively, for the quarters ended June 30, 2019 and 2018, which resulted in an effective income tax rate of 24.1% and 28.8%, respectively.assets.
Year-to-Date Financial Performance Summary:
•
Net income available to common shareholders for the sixnine months ended JuneSeptember 30, 2019 totaled $197.2was $293.4 million, or $3.61$5.43 diluted EPS, compared to $134.2$232.1 million, or $2.41$4.14 diluted EPS, for the same period of 2018. Non-GAAP core EPS, which excludes merger-related costs and other items disclosed in Table 17 - Non-GAAP measures, was $3.595.41 infor the first halfyear-to-date period of 2019 compared to $3.094.83 for the same period of 2018.
Net interest income was $505.8$755.2 million for the first half ofnine months ended September 30, 2019, a $16.8$6.9 million, or 3%1%, increase compared to the same period of 2018. Net interest margin on a tax-equivalent basis decreased 1418 basis points to 3.58%3.54% from 3.72%, primarily attributable to a higher cost of fundsfunding costs in 2019.
The Company recorded a provision for credit losses of $24.5$33.5 million for the first half ofnine months ended September 30, 2019, an $8.6a $6.2 million increase from the provision recorded for the same period of 2018, primarily driven by loan growth when comparing the periods.
Non-interest income increased $12.8$23.4 million, or 13%15%, to $111.3$175.0 million during the sixnine months ended JuneSeptember 30, 2019. This increase was2019 compared to the same period of 2018, primarily driven by higher mortgage income and customer swap commissions income.commissions.
Non-interest expense for the first sixnine months ofended September 30, 2019, decreased $56.5$52.9 million, or 15%10%, to $328.4$501.0 million compared to the same period of 2018. This decrease was primarilypartially attributable to a decreasebranch consolidation and closure expenses that were incurred in impairment of long-lived assets and other losses due to branch consolidations and closures that took place during the first six months of 2018 and lower2018. Additionally, salaries and employee benefits expense was lower due to merger-related costs incurred in 2018.
The Company recorded income tax expense of $62.5 million and $48.0 million, respectively, for the six months ended June 30, 2019 and 2018, which resulted in an effective income tax rate of 23.7% and 25.7%, respectively.




Financial Condition Summary:
Total assets at JuneSeptember 30, 2019 were $31.4$31.7 billion, up $613.5$901.6 million, or 2%3%, from December 31, 2018.
Loans and leases increased $835.5 million,$1.2 billion, or 4%5%, from December 31, 2018, driven by strong growth in the Energy and Corporate Asset Finance Groups and the Birmingham, Dallas, and AtlantaNew Orleans markets.
Total deposits increased $531.9 million,$1.2 billion, or 2%5%, from December 31, 2018.
Credit quality remained strong and stable. Non-performing assets to total assets were 0.60%0.58% at JuneSeptember 30, 2019 compared to 0.55% at December 31, 2018. Net charge-offs to average loans and leases, on an annualized basis, decreased onetwo basis pointpoints to 0.14% for the sixnine months ended JuneSeptember 30, 2019 compared to 0.15%0.16% for the comparable 2018 period.
Shareholders’ equity increased $181.7$227.0 million, or 4%6%, primarily driven by undistributed income and proceeds from year-end 2018. On April 4, 2019, the Company issued and sold 4.0 million depositary shares of non-cumulative perpetual preferredPreferred Stock Series D issuance, offset by common stock for $96.4 million in net proceeds.
Duringrepurchases during the second quarter of 2019, the Company repurchased 1.8 million common shares for $134.8 million at a weighted average price of $76.59 per common share. For the six months ended June 30, 2019, the Company repurchased 2.1 million common shares for $164.7 million at a weighted average cost of $76.70 per share.period.



FINANCIAL OVERVIEW
The following table sets forth selected financial ratios and other relevant data used by management to analyze the Company's performance.
TABLE 1—SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA
As of and For the Three Months Ended June 30,As of and For the Three Months Ended September 30,
2019 20182019 2018
Key Ratios (1)
      
Return on average assets1.30% 1.01%1.26% 1.34%
Core return on average assets (Non-GAAP) (2)
1.31
 1.32
1.26
 1.35
Return on average common equity10.05
 7.87
9.46
 10.21
Core return on average tangible common equity (Non-GAAP) (2) (3)
15.58
 16.70
14.48
 16.34
Equity to assets at end of period13.48
 12.99
13.50
 13.09
Earning assets to interest-bearing liabilities at end of period142.78
 145.38
142.73
 143.56
Interest rate spread (4)
3.09
 3.44
2.95
 3.37
Net interest margin (TE) (4) (5)
3.57
 3.76
3.44
 3.74
Non-interest expense to average assets (annualized)2.18
 2.65
2.17
 2.23
Efficiency ratio (6)
54.0
 63.5
55.2
 54.1
Core tangible efficiency ratio (TE) (Non-GAAP) (2) (3) (5) (6)
52.0
 54.3
53.4
 51.9
Common stock dividend payout ratio22.6
 28.9
24.4
 21.8
Asset Quality Data      
Non-performing assets to total assets at end of period (7)
0.60% 0.54%0.58% 0.63%
Allowance for credit losses to non-performing loans at end of period (7)
101.14
 107.50
102.83
 97.20
Allowance for credit losses to total loans at end of period0.69
 0.68
0.69
 0.68
Consolidated Capital Ratios      
Tier 1 leverage ratio9.71% 9.54%9.78% 9.65%
Common equity tier 1 (CET1)10.38
 10.72
10.41
 10.79
Tier 1 risk-based capital ratio11.26
 11.27
11.28
 11.33
Total risk-based capital ratio12.33
 12.37
12.34
 12.42
(1) 
With the exception of end-of-period ratios, all ratios are based on average daily balances during the respective periods.
(2) 
See Table 17 for GAAP to Non-GAAP reconciliations.
(3) 
Tangible calculations eliminate the effect of goodwill and acquisition-related intangible assets and the corresponding amortization expense on a tax-effected basis where applicable.
(4) 
Interest rate spread represents the difference between the weighted average yield on earning assets and the weighted average cost of interest-bearing liabilities. Net interest margin represents net interest income as a percentage of average earning assets.
(5) 
Fully taxable equivalent ("TE") calculations include the tax benefit associated with related income sources that are tax-exempt using a rate of 21%.
(6) 
The efficiency ratio represents non-interest expense as a percentage of total revenues. Total revenues are the sum of net interest income and non-interest income.
(7) 
Non-performing loans consist of non-accruing loans and accruing loans 90 days or more past due. Non-performing assets consist of non-performing loans and other real estate owned, including repossessed assets.


ANALYSIS OF RESULTS OF OPERATIONS
Net Interest Income/Net Interest margin
Net interest income is the difference between interest realized on earning assets and interest accrued on interest-bearing liabilities and is also the largest driver of earnings. As such, it is subject to constant scrutiny by management. The rate of return and relative risk associated with earning assets are weighed to determine the appropriateness and mix of earning assets. Additionally, the need for lower cost funding sources is weighed against relationships with clients and future growth opportunities. The Company’s net interest spread, which is the difference between the yields earned on average earning assets and the rates paid on average interest-bearing liabilities, was 3.09%2.95% and 3.44%3.37%, during the three months ended JuneSeptember 30, 2019 and 2018, respectively, and 3.12%3.07% and 3.42%3.40% for the sixnine months ended JuneSeptember 30, 2019 and 2018, respectively. The Company’s net interest margin on a taxable equivalent basis, which is net interest income as a percentage of average earning assets, was 3.57%3.44% and 3.76%3.74%, respectively, for the three months ended JuneSeptember 30, 2019 and 2018, and 3.58%3.54% and 3.72%, respectively, for the sixnine months ended JuneSeptember 30, 2019 and 2018.


The following table sets forth information regarding (i) the total dollar amount of interest income from earning assets and the resultant average yields; (ii) the total dollar amount of interest expense on interest-bearing liabilities and the resultant average rates; (iii) net interest income; (iv) net interest spread; and (v) net interest margin. Information is based on average daily balances during the indicated periods. Investment security market value adjustments and trade-date accounting adjustments are not considered to be earning assets and, as such, the net effect of these adjustments is included in non-earning assets.
TABLE 2—QUARTERLY AVERAGE BALANCES, NET INTEREST INCOME AND INTEREST YIELDS / RATES
Three Months Ended June 30,Three Months Ended September 30,
2019 20182019 2018
(in thousands)Average
Balance		 
Interest
Income/Expense (1)
 
Yield/ Rate (TE)(2)
 Average
Balance		 
Interest
Income/Expense (1)
 
Yield/ Rate (TE)(2)
Average
Balance		 
Interest
Income/Expense (1)
 
Yield/ Rate (TE)(2)
 Average
Balance		 
Interest
Income/Expense (1)
 
Yield/ Rate (TE)(2)
Earning Assets:                      
Loans and leases:                      
Commercial loans and leases$15,766,423
 $205,093
 5.24% $14,631,985
 $178,830
 4.92%$16,155,962
 $205,350
 5.06% $14,825,572
 $191,014
 5.13%
Residential mortgage loans4,482,150
 49,388
 4.41% 4,041,259
 47,215
 4.67%4,588,549
 50,939
 4.44% 4,230,471
 48,145
 4.55%
Consumer and other loans2,872,116
 42,205
 5.89% 3,157,476
 44,431
 5.64%2,778,381
 40,501
 5.78% 3,106,330
 43,966
 5.62%
Total loans and leases23,120,689
 296,686
 5.16% 21,830,720
 270,476
 4.98%23,522,892
 296,790
 5.03% 22,162,373
 283,125
 5.09%
Mortgage loans held for sale159,931
 1,588
 3.97% 72,917
 836
 4.59%209,778
 1,936
 3.69% 87,823
 1,037
 4.72%
Investment securities(3)
4,853,858
 33,803
 2.83% 4,958,769
 29,325
 2.42%4,493,789
 29,932
 2.71% 5,016,163
 29,793
 2.43%
Other earning assets639,232
 3,890
 2.44% 580,477
 3,186
 2.20%733,305
 4,520
 2.44% 456,120
 3,112
 2.71%
Total earning assets28,773,710
 335,967
 4.70% 27,442,883
 303,823
 4.46%28,959,764
 333,178
 4.59% 27,722,479
 317,067
 4.57%
Allowance for loan and lease losses(145,854)     (145,565)    (148,203)     (139,075)    
Non-earning assets2,643,966
     2,473,534
    2,742,730
     2,462,827
    
Total assets$31,271,822
     $29,770,852
    $31,554,291
     $30,046,231
    
Interest-bearing liabilities                      
Deposits:                      
NOW accounts$4,488,691
 $11,623
 1.04% $4,494,064
 $8,620
 0.77%$4,451,579
 $11,305
 1.01% $4,296,392
 $8,841
 0.82%
Savings and money market accounts9,014,822
 30,845
 1.37% 9,146,302
 18,434
 0.81%9,188,186
 32,959
 1.42% 9,237,614
 23,076
 0.99%
Time deposits4,156,974
 23,398
 2.26% 2,719,627
 9,105
 1.34%4,523,555
 26,489
 2.32% 3,023,180
 12,484
 1.64%
Total interest-bearing deposits (4)
17,660,487
 65,866
 1.50% 16,359,993
 36,159
 0.89%18,163,320
 70,753
 1.55% 16,557,186
 44,401
 1.06%
Short-term borrowings996,606
 5,197
 2.09% 1,037,473
 3,327
 1.29%794,044
 3,880
 1.94% 1,196,165
 4,727
 1.57%
Long-term debt1,465,685
 9,565
 2.62% 1,381,625
 8,224
 2.39%1,360,492
 9,212
 2.69% 1,381,010
 8,714
 2.50%
Total interest-bearing liabilities20,122,778
 80,628
 1.61% 18,779,091
 47,710
 1.02%20,317,856
 83,845
 1.64% 19,134,361
 57,842
 1.20%
Non-interest-bearing deposits6,442,217
     6,795,878
    6,425,026
     6,684,343
    
Non-interest-bearing liabilities463,803
     281,820
    545,838
     292,445
    
Total liabilities27,028,798
     25,856,789
    27,288,720
     26,111,149
    
Shareholders’ equity4,243,024
     3,914,063
    4,265,571
     3,935,082
    
Total liabilities and shareholders’ equity$31,271,822
     $29,770,852
    $31,554,291
     $30,046,231
    
Net earning assets$8,650,932
     $8,663,792
    $8,641,908
     $8,588,118
    
Net interest income/ Net interest spread  $255,339
 3.09%   $256,113
 3.44%  $249,333
 2.95%   $259,225
 3.37%
Net interest income (TE) /
Net interest margin (TE) (1)
  $256,677
 3.57%   $257,562
 3.76%  $250,653
 3.44%   $260,686
 3.74%

(1) 
Interest income includes loan fees of $0.8$0.9 million for the three-month periods ended JuneSeptember 30, 2019 and 2018.
(2) 
Fully taxable equivalent (TE) calculations include the tax benefit associated with related income sources that are tax-exempt using a rate of 21%.
(3) 
Balances exclude unrealized gains or losses on securities available for sale and the impact of trade date accounting.
(4) 
Total deposit costs for the three months ended JuneSeptember 30, 2019 and 2018 were 1.10%1.14% and 0.63%0.76%, respectively.


TABLE 3—YEAR-TO-DATE AVERAGE BALANCES, NET INTEREST INCOME AND INTEREST YIELDS / RATES
Six Months Ended June 30,Nine Months Ended September 30,
2019 20182019 2018
(in thousands)Average Balance 
Interest
Income/Expense (1)
 
Yield/ Rate (TE)(2)
 Average Balance 
Interest
Income/Expense (1)
 
Yield/ Rate (TE)(2)
Average Balance 
Interest
Income/Expense (1)
 
Yield/ Rate (TE)(2)
 Average Balance 
Interest
Income/Expense (1)
 
Yield/ Rate (TE)(2)
Earning Assets:                      
Loans and leases:                      
Commercial loans and leases$15,511,456
 $399,603
 5.22% $14,361,314
 $343,490
 4.84%$15,728,652
 $604,953
 5.16% $14,517,767
 $534,504
 4.94%
Residential mortgage loans4,434,159
 97,217
 4.38% 3,598,974
 81,709
 4.54%4,486,188
 148,156
 4.40% 3,811,786
 129,854
 4.54%
Consumer and other loans2,916,013
 84,745
 5.86% 3,050,324
 83,346
 5.51%2,869,631
 125,246
 5.84% 3,069,198
 127,312
 5.55%
Total loans and leases22,861,628
 581,565
 5.14% 21,010,612
 508,545
 4.89%23,084,471
 878,355
 5.10% 21,398,751
 791,670
 4.96%
Mortgage loans held for sale127,937
 2,642
 4.13% 90,873
 1,990
 4.38%155,517
 4,578
 3.93% 89,845
 3,027
 4.49%
Investment securities(3)
4,952,840
 69,928
 2.87% 4,901,427
 57,419
 2.40%4,798,142
 99,860
 2.82% 4,940,093
 87,212
 2.41%
Other earning assets586,780
 7,916
 2.72% 629,915
 6,412
 2.05%636,158
 12,436
 2.61% 571,346
 9,524
 2.23%
Total earning assets28,529,185
 662,051
 4.69% 26,632,827
 574,366
 4.36%28,674,288
 995,229
 4.66% 27,000,035
 891,433
 4.43%
Allowance for loan and lease losses(143,398)     (144,934)    (145,017)     (142,960)    
Non-earning assets2,668,085
     2,468,169
    2,693,240
     2,466,370
    
Total assets$31,053,872
     $28,956,062
    $31,222,511
     $29,323,445
    
Interest-bearing liabilities                      
Deposits:                      
NOW accounts$4,473,746
 $23,020
 1.04% $4,429,171
 $15,701
 0.71%$4,466,275
 $34,325
 1.03% $4,384,425
 $24,542
 0.75%
Savings and money market accounts9,051,755
 59,606
 1.33% 8,906,526
 33,013
 0.75%9,097,732
 92,565
 1.36% 9,018,101
 56,089
 0.83%
Time deposits4,008,986
 43,475
 2.19% 2,596,241
 15,689
 1.22%4,182,394
 69,964
 2.24% 2,740,119
 28,173
 1.37%
Total interest-bearing deposits (4)
17,534,487
 126,101
 1.45% 15,931,938
 64,403
 0.82%17,746,401
 196,854
 1.48% 16,142,645
 108,804
 0.90%
Short-term borrowings1,073,485
 10,913
 2.05% 1,010,843
 5,851
 1.17%979,315
 14,793
 2.02% 1,073,296
 10,578
 1.32%
Long-term debt1,464,779
 19,214
 2.65% 1,379,487
 15,110
 2.21%1,429,634
 28,426
 2.66% 1,380,000
 23,824
 2.31%
Total interest-bearing liabilities20,072,751
 156,228
 1.57% 18,322,268
 85,364
 0.94%20,155,350
 240,073
 1.59% 18,595,941
 143,206
 1.03%
Non-interest-bearing deposits6,357,237
     6,538,622
    6,380,082
     6,587,729
    
Non-interest-bearing liabilities449,240
     278,861
    481,794
     283,438
    
Total liabilities26,879,228
     25,139,751
    27,017,226
     25,467,108
    
Shareholders’ equity4,174,644
     3,816,311
    4,205,285
     3,856,337
    
Total liabilities and shareholders’ equity$31,053,872
     $28,956,062
    $31,222,511
     $29,323,445
    
Net earning assets$8,456,434
     $8,310,559
    $8,518,938
     $8,404,094
    
Net interest income/ Net interest spread  $505,823
 3.12%   $489,002
 3.42%  $755,156
 3.07%   $748,227
 3.40%
Net interest income (TE) /
Net interest margin (TE) (1)
  $508,502
 3.58%   $491,912
 3.72%  $759,150
 3.54%   $752,584
 3.72%

(1) 
Interest income includes loan fees of $1.8$2.7 million and $1.6$2.5 million for the six-monthnine-month periods ended JuneSeptember 30, 2019 and 2018, respectively.
(2) 
Fully taxable equivalent (TE) calculations include the tax benefit associated with related income sources that are tax-exempt using a rate of 21%.
(3) 
Balances exclude unrealized gains or losses on securities available for sale and the impact of trade date accounting.
(4) 
Total deposit costs for the sixnine months ended JuneSeptember 30, 2019 and 2018 were 1.06%1.09% and 0.58%0.64%, respectively.




Net interest income decreased $0.8$9.9 million to $255.3$249.3 million in the secondthird quarter of 2019 when compared to the same quarter of 2018. Net interest margin on a tax-equivalent basis decreased 1930 basis points to 3.57%3.44% from 3.76%3.74% when comparing the periods. NetOn a year-to-date basis, net interest income increased $16.8$6.9 million, or 3%1%, to $505.8$755.2 million in the first half of 2019 when compared to the same period of 2018. Net interest margin on a tax-equivalent basis decreased 1418 basis points to 3.58%3.54% from 3.72% when comparing the year-to-date periods.
Earning asset yields and funding costsAverage earning assets were impacted by four FOMC interest rate increases of 25 basis points each from March 2018 through June 2019.
Interest income increased $32.1 million in$29.0 billion for the secondthird quarter of 2019, when compared to the same quarteran increase of 2018. Rate changes contributed to 58% of this increase, as the yield on average earning assets rose 24 basis points to 4.70% from 4.46% when comparing the periods. The remaining 42% of the increase was volume-driven from a $1.3 $1.2 billion, or 5%4%, increase in average earning assets. Total interest income increased $87.7 million in the first six months of 2019 when compared to the same period of 2018. Rate changes contributedAverage loans and leases increased $1.4 billion, or 6%, when comparing the quarterly periods, driven by organic loan growth throughout the Company's footprint, most notably from the Energy and Corporate Asset Finance Groups, as well as the New Orleans, Dallas, and Birmingham markets. Average investment securities were $4.5 billion for the third quarter of 2019 compared to 54%$5.0 billion for the third quarter of this2018.
For the nine months ended September 30, 2019, average earning assets were $28.7 billion, an increase asof $1.7 billion, or 6%, compared to the same period of 2018. Average loans and leases increased $1.7 billion, or 8%, when comparing the periods. Average investment securities were $4.8 billion for the year-to-date period of 2019, compared to $4.9 billion for the same period of 2018.
Average interest-bearing liabilities were $20.3 billion for the third quarter of 2019, an increase of $1.2 billion, or 6%, compared to the same period of 2018. The Company realized growth of $1.6 billion in the average balance of interest-bearing deposits when comparing the quarters, primarily due to brokered deposit issuances and market growth, especially in the Miami-Dade, Acadiana, Palm Beach/Broward and Atlanta markets.
For the nine months ended September 30, 2019, average interest-bearing liabilities were $20.2 billion, an increase of $1.6 billion, or 8%, compared to the same period of 2018. Average interest-bearing deposits were $17.7 billion, an increase of $1.6 billion when comparing the year-to-date periods, primarily due to brokered deposit issuances and market growth.
For the third quarter of 2019, the yield on average earning assets rose 33 basis pointswas 4.59% compared to 4.69% from 4.36% when comparing the periods. The remaining 46% of the increase was volume-driven from a $1.9 billion, or 7%, increase in average earning assets. The drivers of the increases in earning asset yields for both the three and six months ended June 30, 2019 included the repricing of variable rate legacy loans and origination coupons above existing portfolio rates.
Average loans and leases made up 80% of average earning assets4.57% for the second quartersthird quarter of 2019 and 2018, and 80% and 79% for the first six months of 2019 and 2018, respectively. Loan interest income increased $26.2 million, as average loans and leases increased $1.3 billion, or 6%, when comparing the second quarters of 2019 and 2018. On a year-to-date basis, loan interest income increased $73.0 million, as average loans and leases increased $1.9 billion, or 9%. The increases when comparing the quarterly and year-to-date periods were driven by both organic and acquired loan growth. Average loan yields increased 18decreased 6 basis points when comparing the second quarters, primarily driven by lower purchase accounting accretion and recoveries on certain acquired loans. The yield on average investment securities increased 28 basis points due to a portfolio restructuring in the fourth quarter of 2018.
For the nine months ended September 30, 2019, and 2018 andthe yield on average interest earning assets rose 23 basis points to 4.66% from 4.43% for the same period of 2018. Average loan yields increased 2514 basis points when comparing the year-to-date periods. The increase in loan yields wasperiods, primarily driven by the repricing of variable rate loans and higher recoveriespurchase accounting accretion. In addition, the yield on average investment securities increased 41 basis points due to the portfolio restructuring in the acquired loan portfolio as well asfourth quarter of 2018.
The average rate increasespaid on variable rate loans.
Average investment securities were 17% and 18%interest-bearing liabilities was 1.64% for the third quarter of average earning assets during2019, an increase of 44 basis points compared to the three and sixthird quarter of 2018. For the nine months ended JuneSeptember 30, 2019, and 2018, respectively. Interest income from investmentsthe average rate paid on interest-bearing liabilities was 1.59%, an increase of 56 basis points compared to the same period of 2018. Total deposit costs increased $4.5 million38 basis points when comparing the second quarters of 2019 and 2018, and increased $12.5 million when comparing the year-to-date periods.
Interest expense increased $32.9 million when comparing the second quarters of 2019 and 2018, primarily due to a $29.7 million increase in interest expense on deposits. Interest expense increased $70.9 million when comparing the first half of 2019 and 2018, primarily due to a $61.7 million increase in interest expense on deposits. The increases in interest expense were primarily a result of a 6145 basis point increase in the rate paid on deposits when comparing the second quarters of 2019 and 2018 and a 63 basis point increasepoints when comparing the year-to-date periods. Deposit costs were driven upward by the repricing of deposits, as well ashigher-cost brokered deposit issuances, and higher rates paid on promotional deposit offerings as a result of market competition. Deposit costs also increased from the impact of acquired Gibraltar deposits, which tended to be higher relative to the Company's legacy business. The Company realized growth of $1.3 billion when compared to the same quarter of 2018 and $1.6 billion when compared to the first half of 2018 in the average balance of interest-bearing deposits, primarily due to time deposit issuances, market growth, and the aforementioned Gibraltar acquired accounts.
Interest expense on the Company's borrowings increased $3.2 million when comparing the second quarters of 2019 and 2018, and $9.2 million when comparing the first half of 2019 and 2018. The increases were a result of both an increase in average borrowings and basis point increases in the cost of average interest-bearing borrowings when comparing the periods.



The following table displays the dollar amount of changes in interest income and interest expense for major components of earning assets and interest-bearing liabilities. The table distinguishes between (i) changes attributable to volume (changes in average volume between periods times the average yield/rate for the two periods), (ii) changes attributable to rate (changes in average rate between periods times the average volume for the two periods), and (iii) total increase (decrease). Changes attributable to both volume and rate are allocated ratably between the volume and rate categories.
TABLE 4 - SUMMARY OF CHANGES IN NET INTEREST INCOME
Three months ended June 30, 2019 compared to June 30, 2018 Six months ended June 30, 2019 compared to June 30, 2018Three months ended September 30, 2019 compared to September 30, 2018 Nine months ended September 30, 2019 compared to September 30, 2018
  
Change Attributable To   Change Attributable To  Change Attributable To   Change Attributable To  
(in thousands)Volume Rate Net Increase
(Decrease)		 Volume Rate Net Increase
(Decrease)		Volume Rate Net Increase
(Decrease)		 Volume Rate Net Increase
(Decrease)
Earning assets:                      
Loans and leases:                      
Commercial loans and leases$11,818
 $14,445
 $26,263
 $24,693
 $31,420
 $56,113
$16,292
 $(1,956) $14,336
 $41,372
 $29,077
 $70,449
Residential mortgage loans4,958
 (2,785) 2,173
 18,395
 (2,887) 15,508
3,998
 (1,204) 2,794
 22,376
 (4,074) 18,302
Consumer and other loans(3,955) 1,729
 (2,226) (3,598) 4,997
 1,399
(4,679) 1,214
 (3,465) (8,256) 6,190
 (2,066)
Mortgage loans held for sale878
 (126) 752
 771
 (119) 652
1,168
 (269) 899
 1,974
 (423) 1,551
Investment securities(652) 5,130
 4,478
 585
 11,924
 12,509
(3,250) 3,389
 139
 (2,610) 15,258
 12,648
Other earning assets360
 344
 704
 (289) 1,793
 1,504
1,723
 (315) 1,408
 1,196
 1,716
 2,912
Net change in income on earning assets13,407
 18,737
 32,144
 40,557
 47,128
 87,685
15,252
 859
 16,111
 56,052
 47,744
 103,796
Interest-bearing liabilities:                      
Deposits:                      
NOW accounts(10) 3,013
 3,003
 160
 7,159
 7,319
328
 2,136
 2,464
 465
 9,318
 9,783
Savings and money market accounts(226) 12,637
 12,411
 624
 25,969
 26,593
124
 9,759
 9,883
 837
 35,639
 36,476
Time deposits6,245
 8,048
 14,293
 11,295
 16,491
 27,786
7,603
 6,402
 14,005
 19,073
 22,718
 41,791
Borrowings1,222
 1,989
 3,211
 3,342
 5,824
 9,166
(1,564) 1,215
 (349) 1,851
 6,966
 8,817
Net change in expense on interest-bearing liabilities7,231
 25,687
 32,918
 15,421
 55,443
 70,864
6,491
 19,512
 26,003
 22,226
 74,641
 96,867
Change in net interest income$6,176
 $(6,950) $(774) $25,136
 $(8,315) $16,821
$8,761
 $(18,653) $(9,892) $33,826
 $(26,897) $6,929

Provision for Credit Losses
The provision for credit losses represents the expense necessary to maintain the ACL at a level that in management's judgment is appropriate to absorb probable losses inherent in the portfolio at the balance sheet date.
The provision for credit losses totaled $10.8$9.0 million for the secondthird quarter of 2019, a $3.1$2.4 million, or 40%21%, increasedecrease compared to the same period in 2018.2018, attributable to an improvement in asset quality and lower net charge-offs. For the sixnine months ended JuneSeptember 30 2019, the provision for credit losses of $24.5$33.5 million was an $8.6a $6.2 million increase from the comparable 2018 period. The increase in the provision for credit losses during the year-to-date period was largely due to non-acquisition relatedorganic loan growth when comparing the periods.growth.
The Company's provision for loan and lease losses covered 156%135% of net charge-offs in the first sixnine months of 2019 compared to 98%107% coverage for the same period of 2018.
Refer to the "Asset Quality" section for further discussion on past due loans, non-performing assets, troubled debt restructurings and the allowance for credit losses.


Non-interest Income
The Company's operating resultsNon-interest income was $63.7 million for the three months ended JuneSeptember 30, 2019 included non-interest income of $58.8 million compared to $53.9$53.1 million for the same period of 2018, a $4.9$10.6 million, or 9%20%, increase. The increase was primarily attributable to a $4.7 million increase in mortgage income, primarily driven by both an increase inhigher sales volume and favorable fair value adjustments during the secondthird quarter of 2019. Additionally,2019 and a $3.2 million gain on non-mortgage loan sales. In addition, commission income increased $1.0$1.5 million due to an increase inhigher customer swap income. These increases were partially offset by $1.0 million in losses on sales of available-for-sale securities.commissions.
On a year-to-date basis, non-interest income totaled $111.3was $175.0 million compared to $98.5$151.6 million for the same period of 2018, a $12.8$23.4 million, or 13%15%, increase. The increase was primarily driven by a $7.0$11.7 million increase in mortgage income, the result of bothan increase in sales volume, higher margins on the sale of mortgage loans, and favorable fair value adjustments. Additionally, commission income increased $4.1$5.6 million due to an increase inhigher customer swap income of $4.2commissions. The Company also realized a $3.2 million and an increase in income from bank owned life insurance which increased $1.0 million as a result of additional policies purchased in the third quarter of 2018. These increases were partially offset by $1.0 million in lossesgain on sales of available-for-sale securities.non-mortgage loan sales.

Non-interest Expense
The Company's operating resultsNon-interest expense was $172.7 million for the secondthird quarter of 2019, included non-interest expensean increase of $169.6$3.6 million, a decrease of $27.2 million, or14%or 2%, when compared to the same period of 2018. For the quarter, the Company’s efficiency ratio was 54.0%, compared to 63.5% in the second quarter of 2018.
Impairment of long-lived assets and other losses decreased $15.2 million, primarily due to branch consolidations and closures that took place in the second quarter of 2018.
In addition, salariesSalaries and employee benefits, decreased $4.1the largest category of non-interest expense, increased $2.1 million infor the secondthird quarter of 2019 when compared to the same period of 2018, as full-time equivalent employees decreased2018. An additional business day during the quarter, off-cycle pay increases, and higher share-based compensation expenses from current period grants contributed to a $2.5 million increase in compensation expense. Benefit expenses increased $1.6 million due to lower medical insurance expense in 2018. These increases were partially offset by 125 from efficiency initiatives. Severance,a $1.6 million decrease in severance, retention, and other merger-related compensation expenses decreased $5.9when comparing the periods.
Occupancy and equipment expense increased $2.4 million driven by the Gibraltar acquisition in 2018 and efficiency initiatives. These decreases were offset by merit raises and off-cycle pay increases, higher annual bonus accruals, and higher share-based compensation expenseprimarily from current period grants.a write-off on certain long-lived assets.
Other significant decreasesnon-interest expense increased $2.1 million primarily from a $1.8 million credit valuation adjustment on customer swaps.
These increases in non-interest expense when comparing the second quarter of 2019 to the second quarter of 2018 included:
$2.7were partially offset by a $1.7 million decrease in insurance expense, driven by the removalelimination of athe FDIC large bank surcharge assessment by the FDIC and a lower assessment rate in 2019;
$1.5 million in marketing and business development expense, primarily driven by a decrease in CRA expenses; and
$1.3 million in the amortization of acquisition intangibles.2019.
Non-interest expense was $501.0 million for the first sixnine months ofended September 30, 2019, totaled $328.4 million, a decrease of $56.5$52.9 million, or 15%10%, fromcompared to the same period of 2018. On a year-to-date basis, the Company's efficiency ratio decreased from 65.5% in 2018 to 53.2% in 2019.
Impairment of long-lived assets and other losses decreased $22.9 million due to the branch consolidations and closures in 2018.
Salaries and employee benefits decreased $10.4$8.3 million infor the first halfyear-to-date period of 2019 when compared to the same period of 2018 as severance, retention, and other merger-related compensation expenses decreased $10.6$12.1 million. Additionally, in 2018, the Company awarded certain associates a one-time cash bonus of $2.3 million following the enactment of tax reform legislation. These decreases were partially offset by higher annual bonus accruals and highera $2.8 million increase in share-based compensation expense.
Impairment of long-lived assets and other (gains) losses decreased $23.7 million due to branch consolidation and closure expenses incurred in 2018.
Insurance expense decreased $5.6$7.3 million, driven by the removalelimination of athe FDIC large bank surcharge assessment by the FDIC and a lower assessment rate in 2019. Decreases of $3.9Professional services expense decreased $3.1 million in professional services, $3.2 million inand computer services expense and $2.4decreased $2.6 million, in net occupancy and equipment expense were theas a result of system conversion and other merger-related expenses incurred in 2018. Credit and other loan-related expense decreased $2.5 million primarily from lower loan collection expenses, lower mortgage loan servicing fees, and lower credit bureau expenses.




Income Taxes
For the three months ended June 30, 2019 and 2018, theThe Company recorded income tax expense of $32.2$31.5 million for the three months ended September 30, 2019 and $30.5$30.4 million respectively,for the three months ended September 30, 2018, which resulted in an effective income tax rate of 24.1%24.0% and 28.8%23.1%, respectively. For the sixnine months ended JuneSeptember 30, 2019, and 2018, the Company recorded income tax expense of $62.5$94.0 million and $48.0$78.4 million respectively,for the same period of 2018, which resulted in an effective income tax rate of 23.7% for the first half of 201923.8% and 25.7% for the same period of 2018. The decrease in the effective income tax rate was primarily related to the discrete item of $6.6 million in income tax expense recorded during the second quarter of 2018, due to the write-down of deferred tax assets associated with the finalization of purchase accounting for the Sabadell United acquisition and the related impact of the Tax Act on those adjustments.24.6%, respectively.

The difference between the Company's effective tax rate for the three and six months ended June 30, 2019 and 2018 and the U.S. statutory tax rates of 21% primarily relates to tax-exempt income, non-deductible expenses, state income taxes (net of federal income tax benefit), and the recognition of tax credits. The effective tax rate may vary significantly due to fluctuations in the amount and source of pretax income, changes in amounts of non-deductible expenses, and timing of the recognition of tax credits.

The Company is currently under audit by the Internal Revenue Service for the years 2014 to 2017.

ANALYSIS OF FINANCIAL CONDITION
Loans and Leases
The Company had total loans and leases of $23.4$23.7 billion at JuneSeptember 30, 2019, an increase of $835.5 million,$1.2 billion, or 4%5%, from December 31, 2018. The increase was a result of legacy loan growth of $1.4$2.3 billion, or 8%13%, offset by pay-downs and pay-offs on loans, primarily from prior period acquisitions.
Loans and leases outstanding at JuneSeptember 30, 2019 and December 31, 2018 are presented in the following table.
TABLE 5—SUMMARY OF LOANS
June 30, 2019 December 31, 2018 $ Change % ChangeSeptember 30, 2019 December 31, 2018 $ Change % Change
(in thousands)Balance Mix Balance Mix    Balance Mix Balance Mix    
Commercial loans and leases:                      
Real estate- construction$1,342,984
 6% $1,196,366
 5% 146,618
 12
$1,330,014
 6% $1,196,366
 5% 133,648
 11
Real estate- owner-occupied2,373,143
 10
 2,395,822
 11
 (22,679) (1)2,468,061
 10
 2,395,822
 11
 72,239
 3
Real estate- non-owner occupied6,102,143
 26
 5,796,117
 26
 306,026
 5
6,011,681
 25
 5,796,117
 26
 215,564
 4
Commercial and industrial (1)
6,161,759
 26
 5,737,017
 25
 424,742
 7
6,490,125
 27
 5,737,017
 25
 753,108
 13
Total commercial loans and leases15,980,029
 68
 15,125,322
 67
 854,707
 6
16,299,881
 68
 15,125,322
 67
 1,174,559
 8
                      
Residential mortgage loans4,538,194
 20
 4,359,156
 19
 179,038
 4
4,649,745
 20
 4,359,156
 19
 290,589
 7
                      
Consumer and other loans:                      
Home equity2,147,897
 9
 2,304,694
 10
 (156,797) (7)2,053,588
 9
 2,304,694
 10
 (251,106) (11)
Other689,191
 3
 730,643
 4
 (41,452) (6)673,323
 3
 730,643
 4
 (57,320) (8)
Total consumer and other loans2,837,088
 12
 3,035,337
 14
 (198,249) (7)2,726,911
 12
 3,035,337
 14
 (308,426) (10)
Total loans and leases$23,355,311
 100% $22,519,815
 100% 835,496
 4
$23,676,537
 100% $22,519,815
 100% 1,156,722
 5
(1)Includes equipment financing leases


Loan Portfolio Segments
The Company believes its loan portfolio is diversified by product and geography throughout its footprint. Loan growth thus far in 2019 was strongest in the the Energy Group (primarily reserve-based and midstream lending), Corporate Asset Finance Group (equipment financing and leasing business), and the Birmingham, Dallas and AtlantaNew Orleans markets. Loans in the Energy Group increased $284.0$429.9 million, or 31%47% since December 31, 2018. The Corporate Asset Finance Group grew loans and leases $178.0$268.4 million, or 35%53%, thus far in 2019. In the first nine months of 2019, the Birmingham market grew loans $118.1 million, or 12%. The Dallas market had loan growth of $99.2grew loans $109.0 million, or 15%16%, and the AtlantaNew Orleans market had growth of $95.6grew loans $106.0 million, or 7%, in the first six months of 2019.5%.
The Company’s loan to deposit ratio was 96%95% at Juneboth September 30, 2019 and 95% at December 31, 2018. The percentage of fixed-rate loans to total loans was 37%approximately 39% at JuneSeptember 30, 2019 compared to 39% at the end of 2018.


In order to assess the risk characteristics of the loan portfolio, the Company considers the current U.S. economic environment and that of its primary market areas. See Note 5, Allowance for Credit Losses, to the unaudited consolidated financial statements for credit quality factors by loan portfolio segment.
Commercial Loans and Leases
Total commercial loans and leases increased $854.7 million,$1.2 billion, or 6%8%, from December 31, 2018. Commercial loans and leases increased to 68% of the total portfolio at JuneSeptember 30, 2019 compared to 67% at December 31, 2018. Unfunded commitments on commercial loans including approved loan commitments not yet funded were $6.3$6.6 billion at JuneSeptember 30, 2019, an increase of $266.7$543.6 million, or 4%9%, when compared to the end of the prior year.

Commercial real estate loans include loans to commercial customers for medium-term financing of land and buildings or for land development or construction of a building. These loans are repaid from revenues through operations of the businesses, rents of properties, sales of properties and refinances. The Company's underwriting standards generally provide for loan terms of three to seven years, with amortization schedules of generally no more than twenty-five years. Low loan-to-value ratios are generally maintained and usually limited to no more than 80% at the time of origination. The commercial real estate portfolio is comprised of approximately 14% construction loans, 24%25% owner-occupied loans, and 62%61% non-owner-occupied loans as of JuneSeptember 30, 2019, relatively consistent with 13%, 25%, and 62%, respectively, at December 31, 2018. Commercial real estate loans increased $430.0$421.5 million, or 5%4%, during the first sixnine months of 2019, from loan growth across multiple markets, primarily in the Atlanta, Dallas, Naples, New Orleans, and South Florida Naples, and New Orleans markets.
Commercial and industrial ("C&I") loans and leases represent loans to commercial customers to finance general working capital needs, equipment purchases and leases and other projects where repayment is derived from cash flows resulting from business operations. The Company originates C&I loans and leases on a secured and, to a lesser extent, unsecured basis. C&I loans may be term loans or revolving lines of credit. Term loans are generally structured with terms of no more than three to seven years, with amortization schedules of generally no more than fifteen years. C&I term loans and leases are generally secured by equipment, machinery, or other corporate assets. Revolving lines of credit are generally structured as advances upon perfected security interests in accounts receivable and inventory and generally have annual maturities.
As of JuneSeptember 30, 2019, commercial and industrial loans and leases totaled $6.2$6.5 billion, a $424.7$753.1 million, or 7%13%, increase from December 31, 2018, primarily driven by growth in the Company's Energy and Corporate Assets Finance Groups. Commercial and industrial loans and leases comprised 26%27% of the total portfolio at JuneSeptember 30, 2019 and 25% at December 31, 2018.


The following table details the Company’s commercial loans and leases by state.
TABLE 6—COMMERCIAL LOANS AND LEASES BY STATE OF ORIGINATION
(in thousands)June 30, 2019 December 31, 2018 $ Change % ChangeSeptember 30, 2019 December 31, 2018 $ Change % Change
Louisiana$3,539,355
 $3,521,596
 17,759
 1
$3,601,291
 $3,521,596
 79,695
 2
Florida4,806,650
 4,756,957
 49,693
 1
4,779,476
 4,756,957
 22,519
 —
Alabama1,354,424
 1,289,146
 65,278
 5
1,427,892
 1,289,146
 138,746
 11
Texas (1)
2,666,869
 2,310,642
 356,227
 15
2,773,770
 2,310,642
 463,128
 20
Georgia1,139,602
 1,078,983
 60,619
 6
1,121,622
 1,078,983
 42,639
 4
Arkansas773,333
 711,484
 61,849
 9
753,634
 711,484
 42,150
 6
Tennessee548,361
 584,119
 (35,758) (6)555,281
 584,119
 (28,838) (5)
New York51,003
 44,026
 6,977
 16
66,072
 44,026
 22,046
 50
South Carolina and North Carolina136,458
 92,800
 43,658
 47
155,064
 92,800
 62,264
 67
Other (2)
963,974
 735,569
 228,405
 31
1,065,779
 735,569
 330,210
 45
Total$15,980,029
 $15,125,322
 854,707
 6
$16,299,881
 $15,125,322
 1,174,559
 8

(1) 
Texas loans include $1.2$1.3 billion and $911.5 million in Energy Group loans at JuneSeptember 30, 2019 and December 31, 2018, respectively.
(2) 
Other loans include primarily equipment financing and corporate asset financing leases, which the Company does not classify by state.



Residential Mortgage Loans
Residential mortgage loans consist of loans to consumers to finance a primary residence. The residential mortgage loan portfolio is comprised of non-conforming 1-4 family mortgage loans secured by properties located in the Company's market areas. The residential mortgage loan portfolio is originated under terms and documentation that permit their sale in a secondary market. The larger mortgage loans of current and prospective private banking clients are generally retained to enhance relationships, but also tend to be more profitable due to the expected shorter durations and relatively lower servicing costs associated with loans of this size. The Company does not originate or hold negative amortization, option ARM, or other exotic mortgage loans in its portfolio. The Company makes insignificant investments in loans that would be considered sub-prime (e.g., loans with a credit score of less than 620) in order to facilitate compliance with relevant Community Reinvestment Act regulations.
Total residential mortgage loans increased $179.0$290.6 million, or 4%7%, compared to December 31, 2018, primarily the result of growth in the Houston, Atlanta, New Orleans, Atlanta,Dallas and Tampa markets.
Consumer and Other Loans
The Company offers consumer loans in order to provide a full range of retail financial services to customers in the communities in which it operates. The Company originates substantially all of its consumer loans in its primary market areas. At JuneSeptember 30, 2019, $2.8$2.7 billion, or 12%, of the total loan and lease portfolio was comprised of consumer loans, compared to $3.0 billion, or 14%, at the end of 2018.
The majority of the consumer loan portfolio is comprised of home equity loans, which allow customers to borrow against the equity in their home and are secured by a first or second mortgage on the borrower’s residence. Home equity loans were $2.1 billion at JuneSeptember 30, 2019, a decrease of $156.8$251.1 million from December 31, 2018. Unfunded commitments related to home equity loans and lines were $1.1 billion at JuneSeptember 30, 2019, an increase of $37.5$49.4 million, or 4%5%, from the end of 2018.
All other consumer loans, which consist of credit card loans, automobile loans and other personal loans, decreased $41.5$57.3 million, or 6%8%, from December 31, 2018, primarily from decreases in other personal loans and indirect automobile loans, a product that is no longer offered.


Additional information on the Company’s consumer loan portfolio is presented in the following tables. For the purposes of Table 8, unscoreable consumer loans have been included with loans with credit scores below 660. Credit scores reflect the most recent information available as of the dates indicated.
TABLE 7—CONSUMER LOANS BY STATE OF ORIGINATION
(in thousands)June 30, 2019 December 31, 2018 $ Change % ChangeSeptember 30, 2019 December 31, 2018 $ Change % Change
Louisiana$1,041,315
 $1,072,628
 (31,313) (3)$1,005,490
 $1,072,628
 (67,138) (6)
Florida870,063
 956,159
 (86,096) (9)831,748
 956,159
 (124,411) (13)
Alabama246,993
 268,998
 (22,005) (8)239,903
 268,998
 (29,095) (11)
Texas107,882
 126,562
 (18,680) (15)109,010
 126,562
 (17,552) (14)
Georgia142,027
 142,067
 (40) —
124,584
 142,067
 (17,483) (12)
Arkansas206,461
 216,817
 (10,356) (5)195,697
 216,817
 (21,120) (10)
Tennessee69,349
 78,013
 (8,664) (11)65,077
 78,013
 (12,936) (17)
New York43,139
 46,146
 (3,007) (7)38,738
 46,146
 (7,408) (16)
South Carolina and North Carolina1,537
 214
 1,323
 618
3,378
 214
 3,164
 NM
Other (1)
108,322
 127,733
 (19,411) (15)113,286
 127,733
 (14,447) (11)
Total$2,837,088
 $3,035,337
 (198,249) (7)$2,726,911
 $3,035,337
 (308,426) (10)
(1) 
Other loans include primarily credit card and indirect consumer loans, which the Company does not classify by state.
NM - not meaningful


TABLE 8—CONSUMER LOANS BY CREDIT SCORE
(in thousands)June 30, 2019 December 31, 2018September 30, 2019 December 31, 2018
Above 720$1,638,048
 $1,708,417
$1,593,693
 $1,708,417
660-720599,563
 666,132
547,779
 666,132
Below 660599,477
 660,788
585,439
 660,788
Total consumer loans$2,837,088
 $3,035,337
$2,726,911
 $3,035,337

Mortgage Loans Held for Sale
Mortgage loans held for sale totaled $188.0$255.3 million at JuneSeptember 30, 2019, an increase of $80.3$147.5 million, or 74%137%, from $107.7 million at year-end 2018, as originations have outpaced sales activity during the first twothree quarters of 2019. The Company continues to sellsells the majority of conforming mortgage loan originations in the secondary market rather than assume the interest rate risk associated with these longer term assets. Upon the sale, the Company retains servicing on a limited portion of these loans. Loans held for sale haveare primarily been fixed-rate single-family residential mortgage loans under contracts to be sold in the secondary market. In most cases, loans in this category are sold within thirty days of closing. Buyers generally have recourse to return a purchased loan to the Company under limited circumstances.
See Note 1, Summary of Significant Accounting Policies, in the Annual Report on Form 10-K for the year ended December 31, 2018, for further discussion.
Investment Securities
Investment securities decreased $342.8$567.9 million, or 7%11%, since December 31, 2018 to $4.6$4.4 billion at JuneSeptember 30, 2019, primarily due to sales of available-for-sale securities, partially offset by favorable fair value adjustments.increases in unrealized gains on the AFS portfolio. Approximately 96% of the Company's investment portfolio is in available-for-sale securities, which experience unrealized gains when interest rates fall. Investment securities approximated 15%14% and 16% of total assets at JuneSeptember 30, 2019 and December 31, 2018, respectively.


All of the Company's mortgage-backed securities were issued by government-sponsored enterprises at JuneSeptember 30, 2019 and December 31, 2018. The Company does not hold any Fannie Mae or Freddie Mac preferred stock, corporate equity, collateralized debt obligations, collateralized loan obligations, or structured investment vehicles, nor does it hold any private label collateralized mortgage obligations, subprime, Alt-A, sovereign debt, or second lien elements in its investment portfolio. At JuneSeptember 30, 2019 and December 31, 2018, the Company's investment portfolio did not contain any securities that are directly backed by subprime or Alt-A mortgages.
Funds generated as a result of sales and prepayments of investment securities are used to fund loan growth and purchase other securities. The Company continues to monitor market conditions and take advantage of market opportunities with appropriate risk and return elements.
Asset Quality
The lending activities of the Company are governed by underwriting policies established by management and approved by the Board Risk Committee of the Board of Directors. For additional information on loan underwriting, loan origination, monitoring of loan payment performance, loan review, and the determination of past due and non-accrual status, as well as the Company's policies for recording payments received, placing loans and leases on non-accrual status, and the resumption of interest accrual on non-accruing loans and leases, see Note 1, Summary of Significant Accounting Policies, and the "Asset Quality" section of MD&A in the Annual Report on Form 10-K for the year ended December 31, 2018.
For commercial loans and leases, the Company utilizes regulatory classification ratings to monitor credit quality. For further discussion of regulatory classification ratings, see Note 5, Allowance for Credit Losses, to the unaudited consolidated financial statements. For residential mortgage loans and consumer loans, the Company primarily uses the loan's payment and delinquency status to monitor credit quality. These credit quality indicators are continually updated and monitored.
Real estate acquired by the Company through foreclosure or by deed-in-lieu of foreclosure is classified as OREO, and is recorded at the lesser of the related loan balance (the pro-rata carrying value for acquired loans) or estimated fair value less costs to sell. Closed bank branches are also classified as OREO and recorded at the lower of cost or market value.


Under GAAP, certain loan modifications or restructurings are designated as TDRs. In general, the modification or restructuring of a debt constitutes a TDR if the Company, for economic or legal reasons related to the borrower’s financial difficulties, grants a concession to the borrower that the Company would not otherwise consider under current market conditions. See Note 1, Summary of Significant Accounting Policies, in the 2018 10-K for further details.
Non-performing Assets and Troubled Debt Restructurings
The Company defines non-performing assets as non-accrual loans, accruing loans more than 90 days past due, OREO, and foreclosed property. Management continuously monitors and transfers loans to non-accrual status when warranted.
The Company accounts for loans formerly covered by loss sharing agreements with the FDIC, other loans acquired with deteriorated credit quality, as well as all loans acquired with significant discounts that did not exhibit deteriorated credit quality at acquisition, in accordance with ASC Topic 310-30. Collectively, all loans accounted for under ASC 310-30 are referred to as "acquired impaired loans." Application of ASC Topic 310-30 results in significant accounting differences, compared to loans originated or acquired by the Company that are not accounted for under ASC 310-30. See Note 1, Summary of Significant Accounting Policies, in the 2018 10-K for further details.
Due to the significant difference in accounting for acquired impaired loans, the Company believes inclusion of these loans in certain asset quality ratios that reflect non-performing assets in the numerator or denominator (or both) results in significant distortion to these ratios, as the inclusion of these loans could result in a lack of comparability across quarters or years, and could impact comparability with other portfolios that were not impacted by acquired impaired loan accounting. The Company believes that the presentation of certain asset quality measures excluding acquired impaired loans, as indicated below, and related amounts from both the numerator and denominator provides better perspective into underlying trends related to the quality of its loan portfolio. Accordingly, the asset quality measures in the tables below present asset quality information excluding acquired impaired loans, as indicated within each table, and related amounts.


table.
The following table sets forth the composition of the Company’s non-performing assets and TDRs for the periods indicated.
TABLE 9—NON-PERFORMING ASSETS AND TROUBLED DEBT RESTRUCTURINGS
(in thousands)June 30, 2019 December 31, 2018 $ Change % ChangeSeptember 30, 2019 December 31, 2018 $ Change % Change
Non-accrual loans and leases:              
Commercial$87,752
 $85,112
 2,640
 3
$82,234
 $85,112
 (2,878) (3)
Mortgage50,046
 30,396
 19,650
 65
50,439
 30,396
 20,043
 66
Consumer and other21,194
 21,676
 (482) (2)20,440
 21,676
 (1,236) (6)
Total non-accrual loans and leases158,992
 137,184
 21,808
 16
153,113
 137,184
 15,929
 12
Accruing loans and leases 90 days or more past due851
 2,128
 (1,277) (60)4,790
 2,128
 2,662
 125
Total non-performing loans and leases (2) (3)
159,843
 139,312
 20,531
 15
157,903
 139,312
 18,591
 13
OREO and foreclosed property (1)
28,106
 30,394
 (2,288) (8)27,075
 30,394
 (3,319) (11)
Total non-performing assets187,949
 169,706
 18,243
 11
184,978
 169,706
 15,272
 9
Performing troubled debt restructurings75,614
 80,807
 (5,193) (6)73,518
 80,807
 (7,289) (9)
Total non-performing assets and performing troubled debt restructurings$263,563
 $250,513
 13,050
 5
$258,496
 $250,513
 7,983
 3
Non-performing loans and leases to total loans and leases (3)
0.68% 0.62%    0.67% 0.62%    
Non-performing assets to total assets0.60% 0.55%    0.58% 0.55%    
Non-performing assets and performing troubled debt restructurings to total assets (1)
0.84% 0.81%    0.81% 0.81%    
Allowance for credit losses to non-performing loans and leases101.14% 111.55%    102.83% 111.55%    
Allowance for credit losses to total loans and leases0.69% 0.69%    0.69% 0.69%    

(1) 
OREO and foreclosed property at JuneSeptember 30, 2019 and December 31, 2018 include $4.4$3.1 million and $9.0 million, respectively, of former bank properties held for development or resale.
(2) 
Total non-performing loans and leases for JuneSeptember 30, 2019 and December 31, 2018 include $57.9$65.6 million and $61.5 million, respectively, of non-performing troubled debt restructurings.
(3) 
Non-performing loans exclude acquired impaired loans, even if contractually past due or if the Company does not expect to receive payment in full, as the Company is currently accreting interest income over the expected life of the loans.


Total non-performing assets increased $18.2$15.3 million, or 11%9%, compared to December 31, 2018, as non-performing loans and leases increased $20.5$18.6 million and OREO and foreclosed property decreased $2.3$3.3 million. Non-performing loans and leases increased 15%13% primarily driven byattributable to an increase in non-accrual mortgage loans, as a small number of mortgage loans moved to non-accrual in 2019.
Non-performing loans and leases were 0.68% of the total portfolio at June 30, 2019, 6 basis points higher than at December 31, 2018. Total non-performing assets were 0.60% of total assets at June 30, 2019, 5 basis points higher than at December 31, 2018.
The Company’s classified commercial loans totaled $182.4 million, or 0.58% of assets and 1.14% of total commercial loans. At December 31, 2018, classified commercial loans totaled $182.1 million, or 0.59% of assets and 1.20% of total commercial loans.
In addition to the problem loans described above, there were $138.8$158.3 million of commercial loans classified as special mention at JuneSeptember 30, 2019, which in management’s opinion were subject to potential future rating downgrades. Special mention loans have potential weaknesses that, if left uncorrected, may result in deterioration of the Company's credit position at some future date. Special mention loans decreased $18.5increased $1.1 million, or 12%1%, from year end 2019,year-end 2018, and were 0.87%0.97% of total commercial loans at JuneSeptember 30, 2019 and 1.04% at December 31, 2018.


Past Due and Non-accrual Loans
Past due status is based on the contractual terms of loans. Total past due and non-accrual loans were 0.87%0.90% of total loans and leases at JuneSeptember 30, 2019 compared to 0.87% at December 31, 2018. Additional information on past due loans and leases is presented in the following table.
TABLE 10—PAST DUE AND NON-ACCRUAL LOAN SEGREGATION (1) 
June 30, 2019 December 31, 2018  September 30, 2019 December 31, 2018  
(in thousands)Amount % of
Outstanding
Balance		 Amount % of
Outstanding
Balance		 $ Change % ChangeAmount % of
Outstanding
Balance		 Amount % of
Outstanding
Balance		 $ Change % Change
Accruing loans and leases                      
30-59 days past due$27,981
 0.12
 $38,579
 0.17
 (10,598) (27)$26,391
 0.11
 $38,579
 0.17
 (12,188) (32)
60-89 days past due15,040
 0.07
 18,753
 0.08
 (3,713) (20)28,227
 0.12
 18,753
 0.08
 9,474
 51
90-119 days past due851
 0.00
 2,128
 0.01
 (1,277) (60)4,645
 0.02
 2,128
 0.01
 2,517
 118
120 days past due or more—
 —
 —
 —
 —
 —
145
 —
 —
 —
 145
 100
43,872
 0.19
 59,460
 0.26
 (15,588) (26)59,408
 0.25
 59,460
 0.26
 (52) —
Non-accrual loans and leases158,992
 0.68
 137,184
 0.61
 21,808
 16
153,113
 0.65
 137,184
 0.61
 15,929
 12
Total past due and non-accrual loans and leases$202,864
 0.87
 $196,644
 0.87
 6,220
 3
$212,521
 0.90
 $196,644
 0.87
 15,877
 8

(1) 
Past due and non-accrual loan amounts exclude acquired impaired loans, even if contractually past due or if the Company does not expect to receive payment in full, as the Company is currently accreting interest income over the expected life of the loans.
Total past due and non-accrual loans and leases increased $6.2$15.9 million from December 31, 2018 to $202.9$212.5 million at JuneSeptember 30, 2019. The change was due to an increase of $21.8 million in non-accrual loans,2019, primarily from mortgage loans, largely offset by a $15.6 million decrease in accruing past due loans. The decrease in accruing past due loans was primarilyas a result of payments on loans 30-59 days past due.an increase in non-accrual loans. Of the total accruing past due loans, 64%44% were past due less than 60 days compared to 65% at December 31,year-end 2018, and 98%92% were past due less than 90 days compared to 96% at year-end 2018.
Allowance for Credit Losses
The allowance for credit losses represents management’s best estimate of probable credit losses inherent at the balance sheet date. Determination of the allowance for credit losses involves a high degree of complexity and requires significant judgment. Several factors are taken into consideration in the determination of the overall allowance for credit losses. Based on facts and circumstances available, management of the Company believes that the allowance for credit losses was appropriate at JuneSeptember 30, 2019 to cover probable losses in the Company’s loan portfolio. However, future adjustments to the allowance may be necessary, and the results of operations could be adversely affected, if circumstances differ substantially from the assumptions used by management in determining the allowance for credit losses. See “Application of Critical Accounting Policies and Estimates” included in MD&A and Note 1, Summary of Significant Accounting Policies, in the Annual Report on Form 10-K for the year ended December 31, 2018 for more information.


The following table sets forth the activity in the Company’s allowance for credit losses for the six-monthnine-month periods ended JuneSeptember 30, 2019 and 2018.
TABLE 11—SUMMARY OF ACTIVITY IN THE ALLOWANCE FOR CREDIT LOSSES
   
(in thousands)June 30, 2019 June 30, 2018September 30, 2019 September 30, 2018
Allowance for loan and lease losses at beginning of period$140,571
 $140,891
$140,571
 $140,891
Provision for loan and lease losses24,067
 15,581
32,190
 26,678
Transfer of balance to OREO and other(2,863) (3,943)(2,696) (5,709)
Charge-offs(19,194) (22,734)(29,971) (34,740)
Recoveries3,805
 6,781
6,141
 9,830
Allowance for loan and lease losses at end of period146,386
 136,576
$146,235
 $136,950
      
Reserve for unfunded commitments at beginning of period14,830
 13,208
14,830
 13,208
Balance created in acquisition accounting—
 900
—
 900
Provision for unfunded lending commitments451
 325
1,314
 613
Reserve for unfunded lending commitments at end of period15,281
 14,433
16,144
 14,721
Allowance for credit losses at end of period$161,667
 $151,009
$162,379
 $151,671
The allowance for credit losses totaled $161.7$162.4 million at JuneSeptember 30, 2019 compared to $155.4 million at December 31, 2018. The allowance for credit losses was 0.69% of total loans and leases at both JuneSeptember 30, 2019 and at December 31, 2018. The increase in the allowance for credit losses was primarily the result of organic loan growth during the current period.
Net charge-offs during the sixnine months ended JuneSeptember 30, 2019 were $15.4$23.8 million, a decrease of $0.6$1.1 million from the comparable 2018 period. Net charge-offs were 0.14% of average loans and leases on an annualized basis for the sixnine months ended JuneSeptember 30, 2019 compared to 0.15%0.16% for the comparable 2018 period. The provision for loan and lease losses covered 156%135% and 98%107% of net charge-offs for the first sixnine months of 2019 and 2018, respectively.
At JuneSeptember 30, 2019 and December 31, 2018, the ALLL covered 92%93% and 101% of total non-performing loans and leases, respectively.
FUNDING SOURCES
Deposits, both those obtained from clients in its primary market areas and those acquired, are the Company's principal source of funds for use in lending and other business purposes. The Company attracts local deposit accounts by offering a wide variety of products, competitive interest rates and convenient branch office locations and service hours, as well as on-line banking services at www.iberiabank.com and www.virtualbank.com. Increasing core deposits is a continuing focus of the Company and has been accomplished through the development of client relationships and acquisitions. Short-term and long-term borrowings are also important funding sources for the Company. Other funding sources include subordinated debt and shareholders’ equity. Refer to the “Liquidity and Other Off-Balance Sheet Activities” section below for further discussion of the Company’s sources and uses of funding. The following discussion highlights the major changes in the mix of deposits and other funding sources during the first sixnine months of 2019.
Deposits
Total deposits increased $531.9 million,$1.2 billion, or 2%5%, to $24.3$25.0 billion at JuneSeptember 30, 2019, from $23.8 billion at December 31, 2018, primarily driven by a $581.1$559.1 million increase in brokered and reciprocal deposits and a $302.2 million increase in jumbo time deposits. Deposit growth during the year thus far was strongest in the Miami-Dade and Southwest Louisiana markets.


The following table sets forth the composition of the Company’s deposits as of the dates indicated.
TABLE 12—DEPOSIT COMPOSITION BY PRODUCT
June 30, 2019 December 31, 2018    September 30, 2019 December 31, 2018    
(in thousands)Ending Balance Mix Ending Balance Mix $ Change % ChangeEnding Balance Mix Ending Balance Mix $ Change % Change
Non-interest-bearing deposits$6,474,394
 26% $6,542,490
 28% (68,096) (1)$6,518,783
 26% $6,542,490
 28% (23,707) NM
NOW accounts4,610,577
 19
 4,514,113
 19
 96,464
 2
4,503,353
 18
 4,514,113
 19
 (10,760) NM
Money market accounts8,192,752
 34
 8,237,291
 35
 (44,539) (1)8,654,605
 35
 8,237,291
 35
 417,314
 5
Savings accounts702,711
 3
 828,914
 3
 (126,203) (15)671,156
 3
 828,914
 3
 (157,758) (19)
Time deposits4,314,897
 18
 3,640,623
 15
 674,274
 19
4,629,388
 18
 3,640,623
 15
 988,765
 27
Total deposits$24,295,331
 100% $23,763,431
 100% 531,900
 2
$24,977,285
 100% $23,763,431
 100% 1,213,854
 5
           
NM - not meaningfulNM - not meaningful
Short-term Borrowings
The Company may obtain advances from the FHLB of Dallas based upon its ownership of FHLB stock and certain pledges of its real estate loans and investment securities, provided certain standards related to the Company’s creditworthiness have been met. These advances are made pursuant to several credit programs, each of which has its own interest rate and range of maturities. The level of short-term borrowings can fluctuate significantly on a daily basis depending on funding needs and the source of funds chosen to satisfy those needs.
The Company also enters into repurchase agreements to facilitate customer transactions that are accounted for as secured borrowings. These transactions typically involve the receipt of deposits from customers that the Company collateralizes with its investment portfolio and had an average rate of 42.4 basis points as of JuneSeptember 30, 2019.
Total short-term borrowings decreased $485.4$984.8 million, or 33%66%, from December 31, 2018, to $1.0 billion$498.0 million at JuneSeptember 30, 2019, primarily due to net advance repayments on short-term FHLB advances. On a period-end basis, short-term borrowings were 4%2% of total liabilities and 42%26% of total borrowings at JuneSeptember 30, 2019 compared to 6% and 56%, respectively, at December 31, 2018.
On a quarter-to-date average basis, short-term borrowings decreased $40.9$402.1 million, or 4%34%, from the secondthird quarter of 2018. On a quarter-to-date average basis, short-term borrowings2018 and were 4%3% of total liabilities and 40%37% of total borrowings in the secondthird quarter of 2019, compared to 4%5% and 43%46%, respectively, during the same period of 2018.
Long-term Debt
Long-term debt increased $208.6$228.1 million, or 18%20%, from December 31, 2018, to $1.4 billion at JuneSeptember 30, 2019, primarily due to additional long-term FHLB advances made in the first quarter of 2019. On a period-end basis, long-term debt was 5% and 4% of total liabilities at JuneSeptember 30, 2019 and December 31, 2018, respectively.
On a quarter-to-date average basis, long-term debt increaseddecreased to $1.5$1.4 billion in the secondthird quarter of 2019, $84.1$20.5 million, or 6%1%, higherlower than the secondthird quarter of 2018, mainly due to higherlower levels of long-term FHLB advances held by the Company in the first halfthird quarter of 2019. Average long-term debt was 5% of average total liabilities during the second quarter of both 2019 and 2018.
Long-term debt at JuneSeptember 30, 2019 included $1.2 billion in fixed-rate advances from the FHLB of Dallas that cannot be prepaid without incurring substantial penalties. The remaining debt consisted of $120.1 million of the Company’s junior subordinated debt and $60.0$35.0 million in notes payable on investments in new market tax credit entities.


CAPITAL RESOURCES

Shareholders' Equity

Shareholders' equity increased $181.7$227.0 million, or 4%6%, during the first halfnine months of 2019. Shareholders'The increase in shareholders' equity at June 30, 2019 includesduring the period was driven by undistributed income to common shareholders of $151.0 million during the period.$223.7 million. In addition, during the second quarter of 2019, the Company issued and sold an aggregate of 4,000,000 depositary shares, each representing a 1/400th ownership interest in a share of the Company’s 6.100% Fixed-to-Floating Non-Cumulative Perpetual Preferred Stock, Series D, par value $1.00 per share, for $96.4 million in net proceeds. See Note 9, Shareholders' Equity, Capital Ratios, and Other Regulatory Matters, to the unaudited consolidated financial statements for more information. Shareholders' equity also increased during the period from an increase in accumulated other comprehensive income of $89.8$96.7 million, primarily resulting from unrealized gains on the Company's available-for-sale securities portfolio.
In 2018, the Company's Board of Directors authorized a share repurchase program of up to 2,765,000 shares of IBERIABANK CorporationThese increases in shareholders' equity were partially offset by common stock.stock repurchases. During the first sixnine months of 2019, the Company repurchased 2,147,7702,700,000 common shares for $164.7$204.7 million at a weighted average cost of $76.70$75.83 per share. At JuneSeptember 30, 2019, the remaining common shares that could be repurchased under the current Board-approved plan was 117,2301,165,000 shares. SubsequentRefer to June 30, 2019,Note 9, Shareholders' Equity, Capital Ratios, and Other Regulatory Matters, to the Company repurchasedunaudited consolidated financial statements for further detail on the remaining shares available and announced in July 2019 a new Board-approved shareCompany's common stock repurchase program for up to 1,600,000 shares, or approximately 3% of total common shares outstanding at June 30, 2019.plan.
The Company's quarterly dividend to common shareholders was $0.43$0.45 per common share in the secondthird quarter of 2019 compared to $0.38$0.39 in the secondthird quarter of 2018. For the sixnine months ended JuneSeptember 30, 2019, the Company's dividend of $0.86$1.31 per common share was an increase of $0.10$0.16 compared to $0.76$1.15 for the comparable six-monthnine-month period of 2018, which equated to a dividend payout ratio of 23.4%23.8% for the current year, down from 32.0%27.7% in 2018.
Regulatory Capital

Federal regulations impose minimum regulatory capital requirements on all institutions with deposits insured by the FDIC. The FRB imposes similar capital regulations on bank holding companies. Compliance with bank and bank holding company regulatory capital requirements, which include leverage and risk-based capital guidelines, are monitored by the Company on an ongoing basis. Under the risk-based capital method, a risk weight is assigned to balance sheet and off-balance sheet items based on regulatory guidelines.
At JuneSeptember 30, 2019 and December 31, 2018, the Company exceeded all required regulatory capital ratios, and the regulatory capital ratios of IBERIABANK were in excess of the levels established for “well-capitalized” institutions, as shown in the following table.
TABLE 13—REGULATORY CAPITAL RATIOS
Ratio Entity Well- Capitalized Minimums June 30, 2019 December 31, 2018 Entity Well- Capitalized Minimums September 30, 2019 December 31, 2018
Actual ActualActual Actual
Tier 1 Leverage IBERIABANK Corporation N/A
 9.71% 9.63% IBERIABANK Corporation N/A
 9.78% 9.63%
 IBERIABANK 5.00% 9.55
 9.38
 IBERIABANK 5.00% 9.49
 9.38
Common Equity Tier 1 (CET1) IBERIABANK Corporation N/A
 10.38
 10.72
 IBERIABANK Corporation N/A
 10.41
 10.72
 IBERIABANK 6.50% 11.07
 10.95
 IBERIABANK 6.50% 10.95
 10.95
Tier 1 Risk-Based Capital IBERIABANK Corporation N/A
 11.26
 11.25
 IBERIABANK Corporation N/A
 11.28
 11.25
 IBERIABANK 8.00% 11.07
 10.95
 IBERIABANK 8.00% 10.95
 10.95
Total Risk-Based Capital IBERIABANK Corporation N/A
 12.33
 12.33
 IBERIABANK Corporation N/A
 12.34
 12.33
 IBERIABANK 10.00% 11.70
 11.58
 IBERIABANK 10.00% 11.57
 11.58
Minimum capital ratios are subject to a capital conservation buffer. In order to avoid limitations on distributions, including dividend payments, and certain discretionary bonus payments to executive officers, an institution must hold a capital conservation buffer above its minimum risk-based capital requirements. This capital conservation buffer is calculated as the lowest of the differences between the actual CET1 ratio, Tier 1 Risk-Based Capital Ratio, and Total Risk-Based Capital ratio and the corresponding minimum ratios. At JuneSeptember 30, 2019, the required minimum capital conservation buffer was 2.50%. At JuneSeptember 30, 2019, the capital conservation buffers of the Company and IBERIABANK were 4.33%4.34% and 3.70%3.57%, respectively.



LIQUIDITY AND OTHER OFF-BALANCE SHEET ACTIVITIES
Liquidity refers to the Company’s ability to generate sufficient cash flows to support its operations and to meet its obligations, including the withdrawal of deposits by customers, commitments to originate loans, and its ability to repay its borrowings and other liabilities. Liquidity risk is the risk to earnings or capital resulting from the Company’s inability to fulfill its obligations as they become due. Liquidity risk also develops from the Company’s failure to timely recognize or address changes in market conditions that affect the ability to liquidate assets in a timely manner or to obtain adequate funding to continue to operate on a profitable basis.
The primary sources of funds for the Company are deposits and borrowings. Other sources of funds include repayments and maturities of loans and investment securities, securities sold under agreements to repurchase, and, to a lesser extent, off-balance sheet borrowing availability. Time deposits scheduled to mature in one year or less at JuneSeptember 30, 2019 totaled $3.6$4.2 billion. Based on past experience, management believes that a significant portion of maturing deposits will remain with the Company. Additionally, the majority of the investment securities portfolio is classified as available for sale, which provides the ability to liquidate unencumbered securities as needed. Of the $4.6$4.4 billion in the investment securities portfolio, $2.4$2.3 billion is unencumbered and $2.2$2.1 billion has been pledged to support repurchase transactions, public funds deposits and certain long-term borrowings. Due to the relatively short implied duration of the investment securities portfolio, the Company has historically experienced consistent cash inflows on a regular basis. Securities cash flows are highly dependent on prepayment speeds and could change materially as economic or market conditions change. 
Scheduled cash flows from the amortization and maturities of loans and securities are relatively predictable sources of funds. Conversely, deposit flows, prepayments of loanloans and investment securities, and draws on customer letters and lines of credit are greatly influenced by general interest rates, economic conditions, competition, and customer demand. The FHLB of Dallas provides an additional source of liquidity to make funds available for general requirements and also to assist with the variability of less predictable funding sources. At JuneSeptember 30, 2019, the Company had $2.0$1.5 billion ofin outstanding FHLB advances, $813.0$275.0 million of which was short-term and $1.2 billion that was long-term. Additional FHLB borrowing capacity available at JuneSeptember 30, 2019 amounted to $7.5$8.4 billion. At JuneSeptember 30, 2019, the Company also had various funding arrangements with the Federal Reserve discount window and commercial banks providing up to $334.1$334.0 million in the form of federal funds and other lines of credit. At JuneSeptember 30, 2019, there were no balances outstanding on these lines and all of the funding was available to the Company.
Liquidity management is both a daily and long-term function of business management. The Company manages its liquidity with the objective of maintaining sufficient funds to respond to the predicted needs of depositors and borrowers and to take advantage of investments in earning assets and other earnings enhancement opportunities. Excess liquidity is generally invested in short-term investments such as overnight deposits. On a longer-term basis, the Company maintains a strategy of investing in various lending and investment security products. The Company uses its sources of funds primarily to fund loan commitments and meet its ongoing commitments associated with its operations. Based on its available cash at JuneSeptember 30, 2019 and current deposit modeling, the Company believes it has adequate liquidity to fund ongoing operations. The Company has adequate availability of funds from deposits, borrowings, repayments and maturities of loans and investment securities to provide the Company additional working capital if needed.
In the normal course of business, the Company is a party to a number of activities that contain credit, market and operational risk that are not reflected in whole or in part in the Company’s consolidated financial statements. Such activities include traditional off-balance sheet credit-related financial instruments. The Company provides customers with off-balance sheet credit support through loan commitments, lines of credit, and standby letters of credit. Many of the commitments are expected to expire unused or be only partially used; therefore, the total amount of commitments does not necessarily represent future cash requirements. Based on its available liquidity and available borrowing capacity, the Company anticipates it will continue to have sufficient funds to meet its current commitments.



ASSET/LIABILITY MANAGEMENT, MARKET RISK AND COUNTERPARTY CREDIT RISK
The principal objective of the Company’s asset and liability management function is to evaluate the Company's interest rate risk included in certain balance sheet accounts, determine the appropriate level of risk given the Company’s business focus, operating environment, capital and liquidity requirements, and performance objectives, establish prudent asset concentration guidelines and manage the risk consistent with Board approved guidelines. Through such management, the Company seeks to reduce the vulnerability of its operations to changes in interest rates. The Company’s actions in this regard are taken under the guidance of the Asset and Liability Committee. The Asset and Liability Committee reviews, among other things, the sensitivity of the Company’s assets and liabilities to interest rate changes, local and national market conditions, and interest rates. In connection therewith, the Asset and Liability Committee generally reviews the Company’s liquidity, cash flow needs, composition of investments, deposits, borrowings, and capital position.
The objective of interest rate risk management is to control the effects that interest rate fluctuations have on net interest income and on the net present value of the Company’s earning assets and interest-bearing liabilities. Management and the Board are responsible for managing interest rate risk and employing risk management policies that monitor and limit this exposure. Interest rate risk is measured using net interest income simulation and asset/liability net present value sensitivity analyses. The Company uses financial modeling to measure the impact of changes in interest rates on the net interest margin and to predict market risk. Estimates are based upon numerous assumptions including the nature and timing of interest rate levels including yield curve shape, prepayments on loans and securities, deposit decay rates, pricing decisions on loans and deposits, reinvestment/replacement of asset and liability cash flows, and others. These analyses provide a range of potential impacts on net interest income and portfolio equity caused by interest rate movements.
Included in the modeling are instantaneous parallel rate shift scenarios, which are utilized to establish exposure limits. These scenarios are known as “rate shocks” because all rates are modeled to change instantaneously by the indicated shock amount, rather than a gradual rate shift over a period of time.
The Company’s interest rate risk model indicates that the Company is asset sensitive in terms of interest rate sensitivity. Based on the Company’s interest rate risk model at JuneSeptember 30, 2019, the table below illustrates the impact of an immediate and sustained 100 and 200 basis points parallel increase or decrease in interest rates on net interest income over the next twelve months.
TABLE 14—INTEREST RATE SENSITIVITY
Shift in Interest Rates
(in bps)		 % Change in Projected
Net Interest Income		 % Change in Projected
Net Interest Income
+200 +3.4% +3.8%
+100 +2.3% +2.3%
-100 -5.4% -6.1%
-200 -12.2% -12.6%
The influence of using the forward curve as of JuneSeptember 30, 2019 as a basis for projecting the interest rate environment would approximate a 0.9%0.6% decrease in net interest income over the next 12 months. The computations of interest rate risk shown above are performed on a static balance sheet and do not necessarily include certain actions that management may undertake to manage this risk in response to unanticipated changes in interest rates and other factors to include shifts in deposit behavior.
The short-term interest rate environment is primarily a function of the monetary policy of the FRB. The principal tools of the FRB for implementing monetary policy are open market operations, or the purchases and sales of U.S. Treasury and Federal agency securities, as well as the establishment of a short-term target rate. The FRB’s objective for open market operations has varied over the years, but the focus has gradually shifted toward attaining a specified level of the Federal funds rate to achieve the long-run goals of price stability and sustainable economic growth. The Federal funds rate is the basis for overnight funding and drives the short end of the yield curve. Longer maturities are influenced by the market’s expectations for economic growth and inflation, but can also be influenced by FRB purchases and sales and expectations of monetary policy going forward.





The FOMC of the FRB, in an attempt to stimulate the overall economy, has, among other things, kept interest rates low through its targeted federal funds rate. In December 2016, the FOMC voted to raise the target federal funds rate for only the second time since 2006. The FOMC voted to raise the target federal funds rate multiple times in both 2017 and 2018. The FOMC has now raised rates by two-and-a-quarter percentage points since the financial crisis in 2008, a sign of its increased confidence in the health of the economy. While the FOMC continues to observe sustained economic activity, strong labor market conditions, and stable inflation, it has signaled a pause in its recent efforts to increase the federal funds rate. As a result, the potential for additional gradual increasesrate and made recent cuts of 25 basis points each in the federal funds rate in 2019 is uncertain,July and September of 2019. Additionally, recent FOMC rhetoric has pointed to loweringcontinuing to lower the federal funds rate given low inflation measures and overall global economic headwinds. Additional increasesDecreases in the federal funds rate could cause overall interest rates to fall, which may negatively impact financial performance from greater borrower refinancing incentives. Increases in the federal funds rate and the unwinding of its balance sheet could cause overall interest rates to rise, which may negatively impact the U.S. real estate markets and affect deposit growth and pricing. In addition, deflationary pressures, while possibly lowering our operating costs, could have a significant negative effect on our borrowers, especially our business borrowers, and the values of collateral securing loans, which could negatively affect our financial performance. Decreases in the federal funds rate could cause overall interest rates to fall, which may negatively impact financial performance from greater borrower refinancing incentives.

The Company’s commercial loan portfolio is also impacted by fluctuations in the level of one-month LIBOR, as a large portion of this portfolio reprices based on this index, and to a lesser extent Prime. Net interest income may be reduced if more interest-earning assets than interest-bearing liabilities reprice or mature during a period when interest rates are declining, or if more interest-bearing liabilities than interest-earning assets reprice or mature during a period when interest rates are rising, or if more interest-earning assets than interest-bearing liabilities reprice or mature during a period when interest rates are declining.rising.

In July 2017, the Financial Conduct Authority (the authority that regulates LIBOR) announced it intends to stop compelling banks to submit rates for the calculation of LIBOR after 2021. ARRC has proposed that SOFR is the rate that represents best practice as the alternative to LIBOR for use in derivatives and other financial contracts that are currently indexed to LIBOR. ARRC has proposed a paced market transition plan to SOFR from LIBOR and organizations are currently working on industry-wide and company-specific transition plans as it relates to derivatives and cash markets exposed to LIBOR. The Company has material contracts that are indexed to LIBOR and is monitoring this activity and evaluating the related risks.

The table below presents the Company’s anticipated repricing of loans and investment securities over the next four quarters.
TABLE 15—REPRICING OF CERTAIN EARNING ASSETS (1) 
(in thousands)3Q 2019 4Q 2019 1Q 2020 2Q 2020 Total less than one year4Q 2019 1Q 2020 2Q 2020 3Q 2020 Total less than one year
Investment securities$433,879
 $300,857
 $269,431
 $279,333
 $1,283,500
$490,876
 $315,018
 $316,487
 $309,927
 $1,432,308
Fixed rate loans981,459
 696,787
 662,529
 635,315
 2,976,090
737,365
 699,072
 675,137
 624,427
 2,736,001
Variable rate loans11,170,297
 483,461
 368,408
 345,343
 12,367,509
11,275,883
 422,065
 369,346
 339,291
 12,406,585
Total fixed and variable rate loans12,151,756
 1,180,248
 1,030,937
 980,658
 15,343,599
12,013,248
 1,121,137
 1,044,483
 963,718
 15,142,586
$12,585,635
 $1,481,105
 $1,300,368
 $1,259,991
 $16,627,099
$12,504,124
 $1,436,155
 $1,360,970
 $1,273,645
 $16,574,894
(1) Amounts include expected maturities, scheduled paydowns, expected prepayments, and loans subject to caps and floors and exclude the repricing of assets from prior periods, as well as non-accrual loans and market value adjustments.

As part of its asset/liability management strategy, the Company has seen greater levels of loan originations with adjustable or variable rates of interest in commercial and consumer loan products, which typically have shorter terms than residential mortgage loans. The majority of fixed-rate, long-term, agency-conforming residential loans are sold in the secondary market to avoid bearing the interest rate risk associated with longer duration assets in the current rate environment. However, the Sabadell and Gibraltar acquisitions brought a considerable amount of jumbo, non-agency-conforming residential mortgage loan exposure onto the balance sheet, both fixed rate and variable rate in nature, which increased the overall duration of the portfolio. Considering all of this, as of JuneSeptember 30, 2019, $14.6$14.4 billion, or 63%61%, of the Company’s total loan portfolio had variable interest rates, of which $2.7$2.8 billion, or 12%19%, had an expected repricing date beyond the next four quarters. The Company had no significant concentration to any single borrower or industry segment at JuneSeptember 30, 2019.
The Company’s strategy with respect to liabilities in recent periods has been to emphasize transaction accounts, particularly non-interest or low interest-bearing transaction accounts, which are significantly less sensitive to changes in interest rates. At JuneSeptember 30, 2019, 82%81% of the Company’s deposits were in transaction and limited-transaction accounts, compared to 85% at December 31, 2018. Non-interest-bearing transaction accounts were 27%26% of total deposits at JuneSeptember 30, 2019 compared to 28% at December 31, 2018.


The behavior of non-interest-bearing deposits and other types of demand deposits is one of the most important assumptions used in determining the interest rate and liquidity risk positions. A loss of these deposits in the future would reduce the asset sensitivity of the Company’s balance sheet as interest-bearing funds would most likely be increased to offset the loss of this favorable funding source.


The table below presents the Company’s anticipated repricing of liabilities over the next four quarters.
TABLE 16—REPRICING OF LIABILITIES (1) 
(in thousands)3Q 2019 4Q 2019 1Q 2020 2Q 2020 Total less than one year4Q 2019 1Q 2020 2Q 2020 3Q 2020 Total less than one year
Time deposits$811,131
 $951,196
 $1,026,345
 $815,474
 $3,604,146
$1,004,626
 $1,307,516
 $1,136,649
 $713,883
 $4,162,674
Short-term borrowings872,507
 125,000
 —
 —
 997,507
498,049
 —
 —
 —
 498,049
Long-term debt437,391
 63,958
 55,620
 120,391
 677,360
420,747
 55,643
 120,415
 150,376
 747,181
$2,121,029
 $1,140,154
 $1,081,965
 $935,865
 $5,279,013
$1,923,422
 $1,363,159
 $1,257,064
 $864,259
 $5,407,904
(1) Amounts exclude the repricing of liabilities from prior periods.
As part of an overall interest rate risk management strategy, derivative instruments may also be used as an efficient way to modify the repricing or maturity characteristics of on-balance sheet assets and liabilities. Management may from time to time engage in such derivative instruments to effectively manage interest rate risk. These derivative instruments of the Company would modify net interest sensitivity to levels deemed appropriate.
IMPACT OF INFLATION OR DEFLATION AND CHANGING PRICES
The unaudited consolidated financial statements and related financial data presented herein have been prepared in accordance with GAAP, which generally require the measurement of financial position and operating results in terms of historical dollars, without considering changes in relative purchasing power over time due to inflation. Unlike most industrial companies, the majority of the Company’s assets and liabilities are monetary in nature. As a result, interest rates generally have a more significant impact on the Company’s performance than does the effect of inflation. Although fluctuations in interest rates are neither completely predictable nor controllable, the Company regularly monitors its interest rate position and oversees its financial risk management by establishing policies and operating limits. Interest rates do not necessarily move in the same direction or in the same magnitude as the prices of goods and services, since such prices are affected by inflation to a larger extent than interest rates. Although not as critical to the banking industry as to other industries, inflationary factors may have some impact on the Company’s growth, earnings, total assets and capital levels. Management does not expect inflation to be a significant factor in 2019.
Conversely, a period of deflation could affect our business, as well as all financial institutions and other industries. Deflation could lead to lower profits, higher unemployment, lower production and deterioration in overall economic conditions. In addition, deflation could depress economic activity, including loan demand and the ability of borrowers to repay loans, and consequently impair earnings through increasing the value of debt while decreasing the value of collateral for loans.
Management believes the most significant potential impact of deflation on financial results relates to the Company's ability to maintain a sufficient amount of capital to cushion against future losses. However, the Company could employ certain risk management tools to maintain its balance sheet strength in the event a deflationary scenario were to develop.



Non-GAAP Measures
This discussion and analysis contains financial information determined by methods other than in accordance with GAAP. The Company’s management uses these non-GAAP financial measures in their analysis of the Company’s performance. Non-GAAP measures include, but are not limited to, descriptions such as core, tangible, and pre-tax pre-provision. These measures typically adjust GAAP performance measures to exclude the effects of the amortization of intangibles and include the tax benefit associated with revenue items that are tax-exempt, as well as adjust income available to common shareholders for certain significant activities or transactions that, in management’s opinion, can distort period-to-period comparisons of the Company’s performance. Transactions that are typically excluded from non-GAAP performance measures include realized and unrealized gains/losses on former bank owned real estate, realized gains/losses on securities, income tax gains/losses, merger related charges and recoveries, litigation charges and recoveries, and debt repayment penalties. Management believes presentations of these non-GAAP financial measures provide useful supplemental information that is essential to a proper understanding of the operating results of the Company’s core businesses. These non-GAAP disclosures should not be viewed as a substitute for operating results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies. Reconciliations of GAAP to non-GAAP disclosures are presented in Table 17, with the exception of forward-looking information. The Company is unable to estimate GAAP EPS guidance without unreasonable efforts due to the nature of one-time or unusual items that cannot be predicted, and therefore has not provided this information under Regulation S-K Item 10(e)(1)(i)(B).
TABLE 17—RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES
Three Months EndedThree Months Ended
June 30, 2019 June 30, 2018September 30, 2019 September 30, 2018
(in thousands, except per share amounts)Pre-tax 
After-tax 
 
Per share (2)
 Pre-tax After-tax 
Per share (2)
Pre-tax 
After-tax 
 
Per share (2)
 Pre-tax After-tax 
Per share (2)
Net income$133,791
 $101,598
 $1.88
 $105,581
 $75,124
 $1.32
$131,359
 $99,850
 $1.89
 $131,866
 $101,465
 $1.79
Less: Preferred stock dividends—
 949
 0.02
 —
 949
 0.02
—
 3,599
 0.07
 —
 3,599
 0.06
Income available to common shareholders (GAAP)$133,791
 $100,649
 $1.86
 $105,581
 $74,175
 $1.30
$131,359
 $96,251
 $1.82
 $131,866
 $97,866
 $1.73
                      
Non-interest income adjustments (1):
                      
Loss (gain) on sale of investments1,012
 769
 0.01
 (3) (2) —
(Gain) loss on sale of investments—
 —
 —
 (1) (1) —
                      
Non-interest expense adjustments (1):
                      
Merger-related expense(10) (7) —
 14,333
 11,012
 0.20
—
 —
 —
 973
 743
 0.01
Compensation-related expense—
 —
 —
 1,781
 1,354
 0.02
—
 —
 —
 1,104
 839
 0.01
Impairment of long-lived assets, net of (gain) loss on sale(22) (17) —
 5,413
 4,114
 0.07
—
 —
 —
 3,286
 2,497
 0.05
Gain on early termination of loss share agreements—
 —
 —
 (2,708) (2,058) (0.04)
Other non-core non-interest expense107
 81
 —
 (95) (72) —
—
 —
 —
 (1,955) (1,486) (0.02)
Total non-interest expense adjustments75
 57
 —
 21,432
 16,408
 0.29
—
 —
 —
 700
 535
 0.01
Income tax expense (benefit) - impact of TCJA—
 —
 —
 —
 6,572
 0.12
Core earnings (Non-GAAP)134,878
 101,475
 1.87
 127,010
 97,153
 1.71
131,359
 96,251
 1.82
 132,565
 98,400
 1.74
Provision for credit losses (1)
10,755
 8,174
   7,696
 5,849
  8,986
 6,829
   11,384
 8,652
  
Pre-provision earnings, as adjusted (Non-GAAP)$145,633
 $109,649
   $134,706
 $103,002
  $140,345
 $103,080
   $143,949
 $107,052
  
(1) 
Excluding preferred stock dividends and merger-related expense, after-tax amounts are calculated using a tax rate of 24%, which approximates the marginal tax rate.
(2) 
Diluted per share amounts may not appear to foot due to rounding.











Six Months EndedNine Months Ended
June 30, 2019 June 30, 2018September 30, 2019 September 30, 2018
(Dollars in thousands, except per share amounts)Pre-tax After-tax 
Per share (2)
 Pre-tax After-tax 
Per share (2)
(in thousands, except per share amounts)Pre-tax After-tax 
Per share (2)
 Pre-tax After-tax 
Per share (2)
Net income$264,268
 $201,729
 $3.69
 $186,754
 $138,745
 $2.49
$395,627
 $301,579
 $5.58
 $318,620
 $240,210
 $4.29
Less: Preferred stock dividends—
 4,547
 0.08
 —
 4,547
 0.08
—
 8,146
 0.15
 —
 8,146
 0.15
Income available to common shareholders (GAAP)$264,268
 $197,182
 $3.61
 $186,754
 $134,198
 $2.41
$395,627
 $293,433
 $5.43
 $318,620
 $232,064
 $4.14
                      
Non-interest income adjustments:           
(Gain) loss on sale of investments and other non-interest income1,012
 769
 0.01
 56
 42
 —
Non-interest income adjustments (1):
           
Loss (gain) on sale of investments1,012
 769
 0.01
 55
 41
 —
                      
Non-interest expense adjustments (1):
                      
Merger-related expense(344) (261) —
 30,560
 23,529
 0.43
(344) (261) —
 31,533
 24,272
 0.44
Compensation-related expense(9) (7) —
 3,002
 2,282
 0.04
(9) (7) —
 4,106
 3,121
 0.06
Impairment of long-lived assets, net of (gain) loss on sale964
 732
 0.01
 7,487
 5,690
 0.10
964
 732
 0.01
 10,773
 8,187
 0.15
Gain on early termination of loss share agreements—
 —
 —
 (2,708) (2,058) (0.04)
Other non-core non-interest expense(3,022) (2,297) (0.04) (778) (592) (0.01)(3,022) (2,297) (0.04) (2,733) (2,078) (0.04)
Total non-interest expense adjustments(2,411) (1,833) (0.03) 40,271
 30,909
 0.56
(2,411) (1,833) (0.03) 40,971
 31,444
 0.57
Income tax expense (benefit) - impact of TCJA—
 —
 —
 —
 6,572
 0.12
Income tax expense (benefit) - other—
 —
 —
 —
 173
 —
Income tax expense - impact of TCJA—
 —
 —
 —
 6,572
 0.12
Income tax expense - other—
 —
 —
 —
 173
 —
Core earnings (Non-GAAP)262,869
 196,118
 3.59
 227,081
 171,894
 3.09
394,228
 292,369
 5.41
 359,646
 270,294
 4.83
Provision for loan losses24,518
 18,634
   15,907
 12,089
  33,504
 25,463
   27,290
 20,740
  
Pre-provision earnings, as adjusted (Non-GAAP)$287,387
 $214,752
   $242,988
 $183,983
  $427,732
 $317,832
   $386,936
 $291,034
  
(1) 
Excluding preferred stock dividends and merger-related expense, after-tax amounts are calculated using a tax rate of 24%, which approximates the marginal tax rate.
(2) 
Diluted per share amounts may not appear to foot due to rounding.






























As of and For the Three Months Ended June 30,As of and For the Three Months Ended September 30,
(in thousands)2019 20182019 2018
Net interest income (GAAP)$255,339
 $256,113
$249,333
 $259,225
Taxable equivalent benefit1,338
 1,449
1,320
 1,461
Net interest income (TE) (Non-GAAP) (1)
$256,677
 $257,562
$250,653
 $260,686
      
Non-interest income (GAAP)$58,825
 $53,940
$63,674
 $53,087
Taxable equivalent benefit465
 336
468
 463
Non-interest income (TE) (Non-GAAP) (1)
59,290
 54,276
64,142
 53,550
Taxable equivalent revenues (Non-GAAP) (1)
315,967
 311,838
314,795
 314,236
Securities (gains) losses and other non-interest income1,012
 (3)—
 (1)
Core taxable equivalent revenues (Non-GAAP) (1)
$316,979
 $311,835
$314,795
 $314,235
      
Total non-interest expense (GAAP)$169,618
 $196,776
$172,662
 $169,062
Less: Intangible amortization expense4,786
 6,111
4,410
 5,382
Tangible non-interest expense (Non-GAAP) (2)
164,832
 190,665
168,252
 163,680
Less: Merger-related expense(10) 14,333
—
 973
Compensation-related expense—
 1,781
—
 1,104
Impairment of long-lived assets, net of (gain) loss on sale(22) 5,413
—
 3,286
Gain on early termination of loss share agreements—
 (2,708)
Other non-core non-interest expense107
 (95)—
 (1,955)
Core tangible non-interest expense (Non-GAAP)(2)
$164,757
 $169,233
$168,252
 $162,980
      
Average assets (GAAP)$31,271,822
 $29,770,852
$31,554,291
 $30,046,231
Less: Average intangible assets, net1,308,107
 1,332,220
1,303,636
 1,309,962
Total average tangible assets (Non-GAAP) (2)
$29,963,715
 $28,438,632
$30,250,655
 $28,736,269
      
Total shareholders’ equity (GAAP)$4,238,000
 $3,913,409
$4,283,300
 $3,942,361
Less: Goodwill and other intangibles1,305,752
 1,314,165
1,301,348
 1,305,915
Preferred stock228,485
 132,097
228,485
 132,097
Tangible common equity (Non-GAAP) (2)
$2,703,763
 $2,467,147
$2,753,467
 $2,504,349
      
Average shareholders’ equity (GAAP)$4,243,024
 $3,914,063
$4,265,571
 $3,935,082
Less: Average preferred equity225,375
 132,097
228,485
 132,097
Average common equity4,017,649
 3,781,966
4,037,086
 3,802,985
Less: Average intangible assets, net1,308,107
 1,332,220
1,303,636
 1,309,962
Average tangible common shareholders’ equity (Non-GAAP) (2)
$2,709,542
 $2,449,746
$2,733,450
 $2,493,023
      
Return on average assets (GAAP)1.30 % 1.01 %1.26 % 1.34 %
Effect of non-core revenues and expenses0.01
 0.31
—
 0.01
Core return on average assets (Non-GAAP)1.31 % 1.32 %1.26 % 1.35 %
      
Return on average common equity (GAAP)10.05 % 7.87 %9.46 % 10.21 %
Effect of non-core revenues and expenses0.08
 2.43
—
 0.06
Core return on average common equity (Non-GAAP)10.13 % 10.30 %9.46 % 10.27 %
Effect of intangibles (2)
5.45
 6.40
5.02
 6.07
Core return on average tangible common equity (Non-GAAP) (2)
15.58 % 16.70 %14.48 % 16.34 %
      
Efficiency ratio (GAAP)54.0 % 63.5 %55.2 % 54.1 %
Effect of tax benefit related to tax-exempt income(0.3) (0.4)(0.3) (0.3)
Efficiency ratio (TE) (Non-GAAP) (1)
53.7 % 63.1 %54.9 % 53.8 %
Effect of amortization of intangibles(1.5) (1.7)


Effect of amortization of intangibles(1.5) (1.9)
Effect of non-core items(0.2) (6.9)—
 (0.2)
Core tangible efficiency ratio (TE) (Non-GAAP) (1) (2)
52.0 % 54.3 %53.4 % 51.9 %
      
Total assets (GAAP)$31,446,532
 $30,126,162
$31,734,598
 $30,118,387
Less: Goodwill and other intangibles1,305,752
 1,314,165
1,301,348
 1,305,915
Tangible assets (Non-GAAP) (2)
$30,140,780
 $28,811,997
$30,433,250
 $28,812,472
Tangible common equity ratio (Non-GAAP) (2)
8.97 % 8.56 %9.05 % 8.69 %
      
Cash Yield:      
Earning assets average balance (GAAP)$28,773,710
 $27,442,883
$28,959,764
 $27,722,479
Add: Adjustments124,703
 142,013
111,075
 143,665
Earning assets average balance, as adjusted (Non-GAAP)$28,898,413
 $27,584,896
$29,070,839
 $27,866,144
      
Net interest income (GAAP)$255,339
 $256,113
$249,333
 $259,225
Add: Adjustments(13,291) (16,954)(13,715) (17,566)
Net interest income, as adjusted (Non-GAAP)$242,048
 $239,159
$235,618
 $241,659
      
Yield, as reported3.57 % 3.76 %3.44 % 3.74 %
Add: Adjustments(0.20) (0.27)(0.20) (0.27)
Yield, as adjusted (Non-GAAP)3.37 % 3.49 %3.24 % 3.47 %
(1) Fully taxable-equivalent (TE) calculations include the tax benefit associated with related income sources that are tax-exempt using a rate of 21%.
(2) Tangible calculations eliminate the effect of goodwill and acquisition-related intangibles and the corresponding amortization expense on a tax-effected basis where applicable.



Glossary of Defined Terms
TermDefinition
2018 10-KAnnual Report on Form 10-K for the year ended December 31, 2018
ACLAllowance for credit losses
Acquired loansLoans acquired in a business combination
AFSSecurities available for sale
ALLLAllowance for loan and lease losses
AOCIAccumulated other comprehensive income (loss)
ARRCAlternative Reference Rates Committee
ASCAccounting Standards Codification
ASUAccounting Standards Update
C&ICommercial and Industrial loans
CEOChief Executive Officer
CET1Common Equity Tier 1 Capital defined by Basel III capital rules
CFOChief Financial Officer
CRACommunity Reinvestment Act
CompanyIBERIABANK Corporation and Subsidiaries
DOJDepartment of Justice
ECLExpected credit losses
EPSEarnings per common share
Exchange ActSecurities Exchange Act of 1934
FASBFinancial Accounting Standards Board
FDICFederal Deposit Insurance Corporation
FHAFederal Housing Administration
FHLBFederal Home Loan Bank
FOMCFederal Open Market Committee
FRBBoard of Governors of the Federal Reserve System
GAAPAccounting principles generally accepted in the United States of America
GibraltarGibraltar Private Bank & Trust Co.
HUDU.S. Department of Housing and Urban Development
IBERIABANKBanking subsidiary of IBERIABANK Corporation
Legacy loansLoans that were originated directly or otherwise underwritten by the Company
LIBORLondon Interbank Borrowing Offered Rate
LTCLenders Title Company
Non-GAAPFinancial measures determined by methods other than in accordance with GAAP
OCIOther comprehensive income
OREOOther real estate owned
OTTIOther than temporary impairment
ParentIBERIABANK Corporation
ROURight-of-Use
RRPRecognition and Retention Plan
Sabadell UnitedSabadell United Bank, N.A.
SECSecurities and Exchange Commission
SIFMASecurities Industry and Financial Markets Association
SOFRSecured Overnight Financing Rate
SolomonParksSolomonParks Title & Escrow, LLC
TEFully taxable equivalent
Tax ActTax Cuts and Jobs Act
TDRTroubled debt restructuring
U.S.United States of America


USTUnited States Treasury


Item 3. Quantitative and Qualitative Disclosures About Market Risk
Quantitative and qualitative disclosures about market risk are presented at December 31, 2018 in Part II, Item 7A of the 2018 10-K, filed with the Securities and Exchange Commission on February 22, 2019. Additional information at JuneSeptember 30, 2019 is included herein under Part I, Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”.
Item 4. Controls and Procedures
An evaluation of the effectiveness of the Company’s disclosure controls and procedures as of JuneSeptember 30, 2019 was carried out under the supervision, and with the participation of, the Chief Executive Officer (CEO) and Chief Financial Officer (CFO). Based on that evaluation, the CEO and CFO have concluded that the Company’s disclosure controls and procedures are effective in alerting them in a timely manner to material information required to be disclosed by the Company in reports that it files or submits under the Securities Exchange Act of 1934 (the “Exchange Act”).
Disclosure controls and procedures are designed to ensure that information required to be disclosed in reports filed by the Company under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls are also designed with the objective of ensuring that such information is accumulated and communicated to the Company’s management, including the CEO and the CFO, as appropriate, to allow timely decisions regarding required disclosures. Disclosure controls include review of internal controls that are designed to provide reasonable assurance that transactions are properly authorized, assets are safeguarded against unauthorized or improper use and transactions are properly recorded and reported. There was no significant change in the Company’s internal controls over financial reporting during the last fiscal quarter that has materially affected, or is reasonably likely to materially affect, the internal control over financial reporting.
Any control system, no matter how well conceived and operated, can provide only reasonable assurance that its objectives are achieved. The design of a control system inherently has limitations, including the controls’ cost relative to their benefits. Additionally, controls can be circumvented. No cost-effective control system can provide absolute assurance that all control issues and instances of fraud, if any, will be detected.



Part II. Other Information
Item 1. Legal Proceedings
See the "Legal Proceedings" section of "Note 15 – Commitments and Contingencies" of the Notes to the Unaudited Consolidated Financial Statements, incorporated herein by reference.

Item 1A. Risk Factors
For information regarding risk factors that could affect the Company's results of operations, financial condition and liquidity, see the risk factors disclosed in the "Risk Factors" section of the Company's 2018 10-K, filed with the Securities and Exchange Commission on February 22, 2019.



Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Information concerning IBERIABANK Corporation's repurchases of its outstanding common stock during the three-month period ended JuneSeptember 30, 2019, is included in the following table:
Issuer Purchases of Equity Securities
Period
Total Number of Shares Purchased(1)
Average Price Paid per Share(1)
Total Number of Shares Purchased as Part of Publicly Announced Plans or ProgramsMaximum Number of Shares that May Yet Be Purchased Under the Plans or Programs
April 1-30, 2019130,749
79.83
130,000
1,747,079
May 1-31, 2019923,480
77.80
923,200
823,879
June 1-30, 2019706,842
74.39
706,649
117,230
Total1,761,071
76.58
1,759,849
117,230
(1) Includes shares of the Company's common stock acquired by the Company in connection with satisfaction of tax withholding obligations on vested restricted stock.
PeriodTotal Number of Shares Purchased Average Price Paid per ShareTotal Number of Shares Purchased as Part of Publicly Announced Plans or ProgramsMaximum Number of Shares that May Yet Be Purchased Under the Plans or Programs
July 1-31, 2019 (1)(2)
177,818
 76.57
177,230
1,540,000
August 1-31, 2019325,784
 71.12
310,000
1,230,000
September 1-30, 201965,098
 68.60
65,000
1,165,000
Total568,700
(3) 
72.53
552,230
1,165,000
During the second quarter of(1)     On July 12, 2019, the Company repurchased 1,759,849 common shares, at a weighted average price of $76.59 per common share. At June 30, 2019, the Company had approximately 117,230 remaining shares to be repurchasedcompleted its then current share repurchase program, which commenced in November 2018, and under the Board-approved plan. Additionally,which the Company repurchased 1,222 at $73.69 per common share with satisfactiona total of tax withholding obligations on vested restricted stock.
The Company's recently completed share repurchase program was announced on November 5, 2018 and completed on July 12, 2019. During that time, the Company purchased 2,765,000 shares of its common stock at a weighted average price of $75.52 per share, including 117,230 shares purchased in the third quarter at a weighted average price of $75.75 per share.
(2)On July 17, 2019, the Board of Directors authorized a new repurchase plan of up to 1,600,000 shares of the Company's common stock. This repurchase authorization equated to approximately 3% of total common shares outstanding. Stock repurchases under this program will be made from time to time, on the open market or in privately negotiated transactions at the discretion of the management of the Company. The timing of these repurchases will depend on market conditions and other requirements. The Company currently anticipates the share repurchase program will extend over a two-year period, or earlier if the shares have been repurchased.
Subsequent to quarter-end and through August 6, During the third quarter of 2019, the Company repurchased 307,230435,000 common shares forunder the current Board-approved plan at a weighted average price of $71.58 per common share. At September 30, 2019, the Company had approximately $23.0 million.1,165,000 remaining shares that may be repurchased under the current plan.
(3)     Includes 16,470 shares of the Company's common stock acquired by the Company during the three-month period in connection with satisfaction of tax withholding obligations on vested restricted stock.
Restrictions on Dividends and Repurchase of Stock

Holders of the Company's common stock are only entitled to receive dividends if, as, and when the Company's Board of Directors may declare out of funds legally available for such payments.
IBERIABANK Corporation understands the importance of returning capital to shareholders. Management will continue to execute the capital planning process, including evaluation of the amount of the common stock dividend, with the Board of Directors and in conjunction with the regulators, subject to the Company's results of operations. Also, IBERIABANK Corporation is a bank holding company, and its ability to declare and pay dividends is dependent on certain federal regulatory considerations, including the guidelines of the Federal Reserve regarding capital adequacy and dividends.


On April 4, 2019, the Company issued and sold an aggregate of 4,000,000 depositary shares (the “Series D Depositary Shares”), each representing a 1/400th ownership interest in a share of the Company’s 6.100% Fixed-to-Floating Non-Cumulative Perpetual Preferred Stock, Series D, par value $1.00 per share, (“Series D Preferred Stock”), with a liquidation preference of $10,000 per share of Series D Preferred Stock (equivalent to $25 per depositary share), which represents $100 million in aggregate liquidation preference.
Dividends will accrue and be payable on the Series D Preferred Stock, if declared by the Company's Board of Directors, and will be paid semi-annually on May 1 and November 1, in arrears, at an annual rate equal to (i) 6.100% for each period from the issuance date to May 1, 2024 and (ii) three-month LIBOR plus 3.859% for each period on or after August 1, 2024. The Company may redeem the Series D Preferred Stock at its option, subject to regulatory approval, as described in the Company’s Registration Statement on Form 8-A, filed with the Securities and Exchange Commission on April 4, 2019.


Holders of the common stock are subject to the prior dividend rights of any holders of the Company's preferred stock then outstanding. There were 23,750 shares of preferred stock outstanding at JuneSeptember 30, 2019. In addition, the terms of the Company’s outstanding junior subordinated debt securities prohibit it from declaring or paying any dividends or distributions on outstanding capital stock, or purchasing, acquiring, or making a liquidation payment on such stock, if the Company has elected to defer interest payments on such debt.
For additional information, see Note 9, Shareholders' Equity, Capital Ratios and Other Regulatory Matters.

Item 3. Defaults Upon Senior Securities
Not Applicable.

Item 4. Mine Safety Disclosures
Not Applicable.

Item 5. Other Information
None.



Item 6. Exhibits
Exhibit No. 31.1
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
  
Exhibit No. 31.2
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
  
Exhibit No. 32.1
Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
  
Exhibit No. 32.2
Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
  
Exhibit No. 101.INSXBRL Instance Document.
  
Exhibit No. 101.SCHXBRL Taxonomy Extension Schema.
  
Exhibit No. 101.CALXBRL Taxonomy Extension Calculation Linkbase.
  
Exhibit No. 101.DEFXBRL Taxonomy Extension Definition Linkbase.
  
Exhibit No. 101.LABXBRL Taxonomy Extension Label Linkbase.
  
Exhibit No. 101.PREXBRL Taxonomy Extension Presentation Linkbase.
Exhibit No. 104Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)



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.
     
  IBERIABANK Corporation
   
Date: August 7,November 8, 2019 By: /s/ Daryl G. Byrd
  Daryl G. Byrd
  President and Chief Executive Officer
   
Date: August 7,November 8, 2019 By: /s/ Anthony J. Restel
  Anthony J. Restel
  Vice Chairman and Chief Financial Officer


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