UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark one)

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

For the quarterly period ended March 31, ~~2022~~2023

☐ 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: 001-36872

HANCOCK WHITNEY CORPORATION

(Exact name of registrant as specified in its charter)


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

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

(~~(228)~~228) 868-4000

(Registrant’s telephone number, including area code)

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


Title of each class	Trading symbol(s)	Name of each exchange on which registered
Common stock, par value $3.33 per share	HWC	Nasdaq
6.25% Subordinated Notes	HWCPZ	Nasdaq

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

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions 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

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

~~86,369,000~~86,077,069 common shares were outstanding at April 30, ~~2022.~~2023.

Table of Contents

Hancock Whitney Corporation

Index


Part I. Financial Information		Page Number
ITEM 1.	Financial Statements	5
	Consolidated Balance Sheets (unaudited) – March 31, ~~2022~~2023 and December 31, ~~2021~~2022	5
	Consolidated Statements of Income (unaudited) – Three Months Ended March 31, ~~2022~~2023 and ~~2021~~2022	6
	Consolidated Statements of Comprehensive Income (unaudited) – Three Months Ended March 31, ~~2022~~2023 and ~~2021~~2022	7
	Consolidated Statements of Changes in Stockholders’ Equity (unaudited) – Three Months Ended March 31, ~~2022~~2023 and ~~2021~~2022	8
	Consolidated Statements of Cash Flows (unaudited) – Three Months Ended March 31, ~~2022~~2023 and ~~2021~~2022	9
	Notes to Consolidated Financial Statements (unaudited) – March 31, ~~2022~~2023 and ~~2021~~2022	10
ITEM 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	3938
ITEM 3.	Quantitative and Qualitative Disclosures about Market Risk	6263
ITEM 4.	Controls and Procedures	6465
Part II. Other Information
ITEM 1.	Legal Proceedings	6566
ITEM 1A.	Risk Factors	6566
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	6566
ITEM 3.	Default on Senior Securities	N/A
ITEM 4.	Mine Safety Disclosures	N/A
ITEM 5.	Other Information	N/A
ITEM 6.	Exhibits	6667
Signatures		6768

Table of Contents

Hancock Whitney Corporation

Glossary of Defined Terms

Entities:

Hancock Whitney Corporation – a financial holding company registered with the Securities and Exchange Commission

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

Company – Hancock Whitney Corporation and its consolidated subsidiaries

Parent – Hancock Whitney Corporation, exclusive of its subsidiaries

Bank – Hancock Whitney Bank

Other Terms:

ACL – allowance for credit losses

AFS – available for sale securities

AMERIBOR - Index created by the American Financial Exchange as a potential replacement for LIBOR; calculated daily as the volume-weighted average interest rate of the overnight unsecured loans on American Financial Exchange

AOCI – accumulated other comprehensive income or loss

ALCO – Asset Liability Management Committee

ALLL – allowance for loan and lease losses

ARRC – Alternative Reference Rates Committee

ASC – Accounting Standards Codification

ASU – Accounting Standards Update

ATM – automated teller machine

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

Beta – amount by which deposit or loan costs change in response to movement in short-term interest rates

BOLI – bank-owned life insurance

bp(s) – basis point(s)

C&I – commercial and industrial loans

CARES Act – Coronavirus Aid, Relief, and Economic Security Act

CD – certificate of deposit

CDE – Community Development Entity

CECL – Current Expected Credit Losses the term commonly used to refer to the methodology of estimating credit losses required by ASC 326, “Financial Instruments – Credit Losses.” ASC 326 was adopted by the Company on January 1, 2020, superseding the methodology prescribed by ASC 310.

CEO – Chief Executive Officer

CFPB– Consumer Financial Protection Bureau

CFO – Chief Financial Officer

CME – Chicago Mercantile Exchange

CMO – collateralized mortgage obligation

Core ~~Loans~~client deposits – ~~loans~~total deposits excluding ~~Paycheck Protection Program (PPP) loans~~public funds and brokered deposits

Core deposits – total deposits excluding certificates of deposits of $250,000 or more and brokered deposits

Coronavirus – the novel coronavirus declared a pandemic during the first quarter of 2020, resulting in prolonged market disruptions

~~COSO~~ ~~– Committee of Sponsoring Organizations of the Treadway Commission~~

COVID-19 – disease caused by the novel coronavirus

CRE – commercial real estate

DEI – Diversity, equity and inclusion

DIF – Deposit Insurance Fund

ESG – Environmental, Social and Governance; term used in discussion of risks and corporate policies related to those items

Excess Liquidity – deposits held at the Federal Reserve above ~~$200 million, plus excess investments in the securities portfolio above~~ normal ~~cash flows~~levels

FASB – Financial Accounting Standards Board

FDIC – Federal Deposit Insurance Corporation

FDICIA – Federal Deposit Insurance Corporation Improvement Act of 1991

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

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

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

Federal Reserve System – The 12 Federal Reserve Banks, with each one serving member banks in its own district. This system, supervised by the Federal Reserve Board, has broad regulatory powers over the money supply and the

credit structure. They implement the policies of the Federal Reserve Board and also conduct economic research.

FFIEC – Federal Financial Institutions Examination Council

FHA – Federal Housing Administration

FHLB – Federal Home Loan Bank

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

HTM – held to maturity securities

ICS – Insured cash sweep

Table of Contents

~~HTM~~IRA 2022 – ~~held to maturity securities~~Inflation Reduction Act of 2022

IRS – Internal Revenue Service

LIBOR – London Interbank Offered Rate

LIHTC – Low Income Housing Tax Credit

LTIP – long-term incentive plan

MBS – mortgage-backed securities

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

MDBCF – Mississippi Department of Banking and Consumer Finance

MEFD - reportable modified loans to borrowers experiencing financial difficulty as defined by accounting guidance effective January 1, 2023

NAICS – North American Industry Classification System

NII – net interest income

n/m – not meaningful

NSF – Non-sufficient funds

OCI – other comprehensive income or loss

OD – Overdraft

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

PCD – purchased credit deteriorated loans, as defined by ASC 326

PPNR – Pre-provision net revenue

PPP – Paycheck Protection Program, a loan program administered by the Small Business Administration designed to provide a direct incentive for small businesses to keep workers on payroll during interruptions caused by the COVID-19 pandemic

Reference rate reform – refers to the global transition away from LIBOR and other interbank offered rates toward new reference rates that are more reliable and robust

Repos – securities sold under agreements to repurchase

SBA – Small Business Administration

SBIC – Small Business Investment Company

SEC – U.S. Securities and Exchange Commission

Securities Act – Securities Act of 1933, as amended

Short-term Investments – the sum of Interest-bearing bank deposits and Federal funds sold

SOFR – secured overnight financing rate

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

TDR – troubled debt restructuring, as defined by accounting guidance that was superseded effective January 1, 2023

TSR – total shareholder return

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

~~VERIP~~ ~~– Voluntary Early Retirement Incentive Program~~

~~Volcker Rule~~ ~~– Section 619 of the Dodd-Frank Act and regulations promulgated thereunder, as applicable~~

Table of Contents

Part I. Financial Information

Item 1. Financial Statements

Hancock Whitney Corporation and Subsidiaries

Consolidated Balance Sheets

(Unaudited)


		March 31,			December 31,			March 31,			December 31,
(in thousands, except per share data)		2022			2021			2023			2022
ASSETS
Cash and due from banks		$	703,421		$	401,201		$	594,372		$	564,459
Interest-bearing bank deposits	��		3,132,551			3,830,177			2,287,438			323,332
Federal funds sold			459			458			711			728
Securities available for sale, at fair value (amortized cost of $6,380,002 and $6,984,530)			5,993,007			6,986,698
Securities held to maturity (fair value of $2,429,049 and $1,631,482)			2,488,088			1,565,751
Loans held for sale (includes $25,046 and $41,022 measured at fair value)			59,877			93,069
Securities available for sale, at fair value (amortized cost of $6,238,835 and $6,310,214)									5,565,620			5,556,041
Securities held to maturity (fair value of $2,623,760 and $2,615,398 )									2,825,064			2,852,495
Loans held for sale (includes $14,923 and $10,843 measured at fair value)									23,436			26,385
Loans			21,323,341			21,134,282			23,404,523			23,114,046
Less: allowance for loan losses			(317,843	)		(342,065	)		(309,385	)		(307,789	)
Loans, net			21,005,498			20,792,217			23,095,138			22,806,257
Property and equipment, net of accumulated depreciation of $286,052 and $280,065			353,441			350,309
Right of use assets, net of accumulated amortization of $37,511 and $34,425			100,889			102,239
Property and equipment, net of accumulated depreciation of $304,305 and $303,451									324,107			328,605
Right of use assets, net of accumulated amortization of $46,939 and $44,901									101,449			96,884
Prepaid expenses			43,572			38,793			54,540			44,632
Other real estate and foreclosed assets, net			6,345			7,533			1,976			2,017
Accrued interest receivable			98,873			96,938			141,704			131,849
Goodwill			855,453			855,453			855,453			855,453
Other intangible assets, net			66,479			70,226			53,080			56,193
Life insurance contracts			726,308			664,535			736,979			729,774
Funded pension assets, net			233,195			227,870			218,389			216,818
Deferred tax asset, net			59,606			—			187,975			211,418
Other assets			390,229			447,738			479,652			380,485
Total assets		$	36,317,291		$	36,531,205		$	37,547,083		$	35,183,825
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits
Noninterest-bearing		$	14,976,670		$	14,392,808		$	12,860,027		$	13,645,113
Interest-bearing			15,523,039			16,073,089			16,753,043			15,425,236
Total deposits			30,499,709			30,465,897			29,613,070			29,070,349
Short-term borrowings			1,620,302			1,665,061			3,519,497			1,871,271
Long-term debt			240,454			244,220			242,115			242,077
Accrued interest payable			2,999			3,103			21,823			9,935
Lease liabilities			120,788			122,079			120,871			116,422
Deferred tax liability, net			—			19,434
Other liabilities			382,088			341,059			498,475			531,143
Total liabilities			32,866,340			32,860,853			34,015,851			31,841,197
Stockholders' equity:
Common stock			309,513			309,513			309,513			309,513
Capital surplus			1,742,021			1,755,701			1,720,623			1,716,884
Retained earnings			1,758,693			1,659,073			2,188,561			2,088,413
Accumulated other comprehensive loss, net			(359,276	)		(53,935	)		(687,465	)		(772,182	)
Total stockholders' equity			3,450,951			3,670,352			3,531,232			3,342,628
Total liabilities and stockholders' equity		$	36,317,291		$	36,531,205		$	37,547,083		$	35,183,825
Preferred shares authorized (par value of $20.00 per share)			50,000			50,000			50,000			50,000
Preferred shares issued and outstanding			—			—			—			—
Common shares authorized (par value of $3.33 per share)			350,000			350,000			350,000			350,000
Common shares issued			92,947			92,947			92,947			92,947
Common shares outstanding			86,460			86,749			86,066			85,941

See notes to unaudited consolidated financial statements.

Table of Contents

Hancock Whitney Corporation and Subsidiaries

Consolidated Statements of Income

(Unaudited)


	Three Months Ended						Three Months Ended
	March 31,						March 31,
(in thousands, except per share data)	2022			2021			2023		2022
Interest income:
Loans, including fees	$	192,750		$	213,713		$	314,601	$	192,750
Loans held for sale		691			671			295		691
Securities-taxable		37,164			31,203			47,646		37,164
Securities-tax exempt		4,655			4,783			4,721		4,655
Short-term investments		1,526			415			5,340		1,526
Total interest income		236,786			250,785			372,603		236,786
Interest expense:
Deposits		3,778			9,227			64,451		3,778
Short-term borrowings		1,419			1,533			20,063		1,419
Long-term debt		3,126			5,438			3,095		3,126
Total interest expense		8,323			16,198			87,609		8,323
Net interest income		228,463			234,587			284,994		228,463
Provision for credit losses		(22,527	)		(4,911	)		6,020		(22,527	)
Net interest income after provision for credit losses		250,990			239,498			278,974		250,990
Noninterest income:
Service charges on deposit accounts		21,674			19,146			20,622		21,674
Trust fees		15,279			15,003			16,734		15,279
Bank card and ATM fees		20,396			18,120			20,721		20,396
Investment and annuity fees and insurance commissions		7,427			7,458			8,867		7,427
Secondary mortgage market operations		3,746			11,710			2,168		3,746
Securities transactions, net		(87	)		—			—		(87	)
Other income		14,997			15,652			11,218		14,997
Total noninterest income		83,432			87,089			80,330		83,432
Noninterest expense:
Compensation expense		85,993			95,846			92,403		85,993
Employee benefits		21,403			23,769			22,920		21,403
Personnel expense		107,396			119,615			115,323		107,396
Net occupancy expense		11,680			12,910			12,206		11,680
Equipment expense		4,867			4,781			4,736		4,867
Data processing expense		24,239			22,947			28,182		24,239
Professional services expense		7,793			11,251			9,131		7,793
Amortization of intangible assets		3,748			4,419			3,114		3,748
Deposit insurance and regulatory fees		3,740			3,395			5,920		3,740
Other real estate and foreclosed assets expense (income)		(1,764	)		6
Other real estate and foreclosed assets expense (income), net								155		(1,764	)
Other expense		18,240			13,748			22,117		18,240
Total noninterest expense		179,939			193,072			200,884		179,939
Income before income taxes		154,483			133,515			158,420		154,483
Income taxes expense		31,005			26,343			31,953		31,005
Net income	$	123,478		$	107,172		$	126,467	$	123,478
Earnings per common share-basic	$	1.40		$	1.21		$	1.45	$	1.40
Earnings per common share-diluted	$	1.40		$	1.21		$	1.45	$	1.40
Dividends paid per share	$	0.27		$	0.27		$	0.30	$	0.27
Weighted average shares outstanding-basic		86,660			86,752			86,018		86,660
Weighted average shares outstanding-diluted		86,936			86,805			86,282		86,936

See notes to unaudited consolidated financial statements.

Table of Contents

Hancock Whitney Corporation and Subsidiaries

Consolidated Statements of Comprehensive Income

(Unaudited)

Three Months Ended

March 31,

(in thousands)
2022

2021

Net income
$
123,478

$
107,172

Other comprehensive income (loss) before income taxes:

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

(390,904
)

(145,490
)
Reclassification of net (income) loss realized and included in earnings

(3,838
)

286

Amortization of unrealized net gain (loss) on securities transferred to held to maturity

261

(56
)
Other comprehensive loss before income taxes

(394,481
)

(145,260
)
Income tax benefit

(89,140
)

(33,748
)
Other comprehensive loss net of income taxes

(305,341
)

(111,512
)
Comprehensive loss
$
(181,863
)

$
(4,340
)


	Three Months Ended
	March 31,
($ in thousands)	2023			2022
Net income	$	126,467		$	123,478
Other comprehensive income (loss) before income taxes:
Net change in unrealized gain or (loss) on securities available for sale cash flow hedges and equity method investment		100,944			(390,904	)
Reclassification of (income) or loss realized and included in earnings		9,520			(3,838	)
Other valuation adjustments to employee benefit plans		(1,836	)		—
Amortization of unrealized net loss on securities transferred to held to maturity		494			261
Other comprehensive income (loss) before income taxes		109,122			(394,481	)
Income tax expense (benefit)		24,405			(89,140	)
Other comprehensive income (loss) net of income taxes		84,717			(305,341	)
Comprehensive income (loss)	$	211,184		$	(181,863	)

See notes to unaudited consolidated financial statements.

Table of Contents

Hancock Whitney Corporation and Subsidiaries

Consolidated Statements of Changes in Stockholders’ Equity

(Unaudited)


Three Months Ended March 31, 2022 and 2021											Accumulated

Three Months Ended March 31, 2023 and 2022																	Three Months Ended March 31, 2023 and 2022											Accumulated
	Common Stock										Other							Common Stock										Other
(in thousands, except parenthetical share data)	Shares Issued		Amount		Capital Surplus			Retained Earnings			Comprehensive Income (Loss)			Total				Shares Issued		Amount		Capital Surplus			Retained Earnings			Comprehensive Income (Loss)			Total
Balance, December 31, 2022																			92,947	$	309,513	$	1,716,884		$	2,088,413		$	(772,182	)	$	3,342,628
Net income																			—		—		—			126,467			—			126,467
Other comprehensive income																			—		—		—			—			84,717			84,717
Comprehensive income																			—		—		—			126,467			84,717			211,184
Dividends declared ($0.30 per common share)																			—		—		—			(26,387	)		—			(26,387	)
Common stock activity, long-term incentive plans																			—		—		2,804			68			—			2,872
Issuance of stock from dividend reinvestment and stock purchase plans																			—		—		935			—			—			935
Balance, March 31, 2023																			92,947	$	309,513	$	1,720,623		$	2,188,561		$	(687,465	)	$	3,531,232

Balance, December 31, 2021		92,947	$	309,513	$	1,755,701		$	1,659,073		$	(53,935	)	$	3,670,352				92,947	$	309,513	$	1,755,701		$	1,659,073		$	(53,935	)	$	3,670,352
Net income		—		—		—			123,478			—			123,478				—		—		—			123,478			—			123,478
Other comprehensive loss		—		—		—			—			(305,341	)		(305,341	)			—		—		—			—			(305,341	)		(305,341	)
Comprehensive loss		—		—		—			123,478			(305,341	)		(181,863	)
Comprehensive income (loss)																			—		—		—			123,478			(305,341	)		(181,863	)
Dividends declared ($0.27 per common share)		—		—		—			(23,909	)		—			(23,909	)			—		—		—			(23,909	)		—			(23,909	)
Common stock activity, long-term incentive plans		—		—		3,929			51			—			3,980				—		—		3,929			51			—			3,980
Repurchase of common stock (350,000 shares)		—		—		(18,490	)		—			—			(18,490	)			—		—		(18,490	)		—			—			(18,490	)
Issuance of stock from dividend reinvestment and stock purchase plans		—		—		881			—			—			881				—		—		881			—			—			881
Balance, March 31, 2022		92,947	$	309,513	$	1,742,021		$	1,758,693		$	(359,276	)	$	3,450,951				92,947	$	309,513	$	1,742,021		$	1,758,693		$	(359,276	)	$	3,450,951
Balance, December 31, 2020		92,947	$	309,513	$	1,757,937		$	1,291,506		$	80,069		$	3,439,025
Net income		—		—		—			107,172			—			107,172
Other comprehensive loss		—		—		—			—			(111,512	)		(111,512	)
Comprehensive loss		—		—		—			107,172			(111,512	)		(4,340	)
Dividends declared ($0.27 per common share)		—		—		—			(24,021	)		—			(24,021	)
Common stock activity, long-term incentive plans		—		—		5,204			31			—			5,235
Issuance of stock from dividend reinvestment and stock purchase plans		—		—		1,004			—			—			1,004
Balance, March 31, 2021		92,947	$	309,513	$	1,764,145		$	1,374,688		$	(31,443	)	$	3,416,903

See notes to unaudited consolidated financial statements.

Table of Contents

Hancock Whitney Corporation and Subsidiaries

Consolidated Statements of Cash Flows

(Unaudited)


	Three Months Ended						Three Months Ended
	March 31,						March 31,
(in thousands)	2022			2021
($ in thousands)							2023			2022
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	123,478		$	107,172		$	126,467		$	123,478
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		7,177			7,083			8,565			7,177
Provision for credit losses		(22,527	)		(4,911	)		6,020			(22,527	)
Gain on other real estate and foreclosed assets		(3,014	)		(253	)		(20	)		(3,014	)
Loss on sale of securities		87			—			—			87
Deferred tax expense		10,099			2,300
Deferred tax (benefit) expense								(801	)		10,099
Increase in cash surrender value of life insurance contracts		(634	)		(9,400	)		(2,995	)		(634	)
Loss on disposal of assets								30			—
Net decrease in loans held for sale		27,250			8,031			3,028			27,250
Net amortization of securities premium/discount		11,356			13,211			5,103			11,356
Amortization of intangible assets		3,748			4,419			3,114			3,748
Stock-based compensation expense		5,292			5,517			5,726			5,292
Net change in liability from variation margin collateral		15,828			56,744
Increase (decrease) in interest payable and other liabilities		18,512			(23,472	)
Decrease in other assets		91,643			98,052
Net change in derivative collateral liability								76,152			15,828
Net (decrease) increase in interest payable and other liabilities								(28,313	)		18,512
(Increase) decrease in other assets								(112,916	)		91,643
Other, net		(7,761	)		(9,453	)		(3,272	)		(7,761	)
Net cash provided by operating activities		280,534			255,040			85,888			280,534
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from the sale of available for sale securities		73,219			—			—			73,219
Proceeds from maturities of securities available for sale		167,949			311,232			77,339			167,949
Purchases of securities available for sale		(228,454	)		(1,164,798	)		—			(228,454	)
Proceeds from maturities of securities held to maturity		28,125			37,830			30,900			28,125
Purchases of securities held to maturity		(391,761	)		(59,362	)		(6,023	)		(391,761	)
Proceeds received upon termination of fair value hedge instruments								16,550			—
Net (increase) decrease in short-term investments		697,625			(1,005,325	)		(1,964,089	)		697,625
Net purchases of Federal Home Loan Bank stock								(68,057	)		—
Proceeds from sales of loans and leases		18,890			7,373			11,006			18,890
Net (increase) decrease in loans		(227,948	)		101,924
Net increase in loans								(306,873	)		(227,948	)
Purchase of life insurance contracts		(60,000	)		(45,000	)		—			(60,000	)
Proceeds from the surrender of life insurance contracts		—			44,045
Purchases of property and equipment		(11,353	)		(4,269	)		(5,498	)		(11,353	)
Proceeds from sales of other real estate		6,227			4,191
Proceeds from sales of other real estate and foreclosed assets								235			6,227
Other, net		3,002			5,809			(4,252	)		3,002
Net cash provided by (used in) investing activities		75,521			(1,766,350	)		(2,218,762	)		75,521
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposits		33,812			1,512,643			542,721			33,812
Net decrease in short-term borrowings		(44,759	)		(14,766	)
Proceeds from the issuance of long-term debt		—			22,388
Net increase (decrease) in short-term borrowings								1,648,226			(44,759	)
Repayments of long-term debt		(79	)		(3,209	)		—			(79	)
Dividends paid		(23,804	)		(24,021	)		(26,173	)		(23,804	)
Payroll tax remitted on net share settlement of equity awards		(1,396	)		(494	)		(2,922	)		(1,396	)
Proceeds from exercise of stock options		—			132
Proceeds from dividend reinvestment and stock purchase plans		881			1,004			935			881
Repurchase of shares		(18,490	)		—
Repurchase of common stock								—			(18,490	)
Net cash provided by (used in) financing activities		(53,835	)		1,493,677			2,162,787			(53,835	)
NET INCREASE (DECREASE) IN CASH AND DUE FROM BANKS		302,220			(17,633	)
NET INCREASE IN CASH AND DUE FROM BANKS								29,913			302,220
CASH AND DUE FROM BANKS, BEGINNING		401,201			526,306			564,459			401,201
CASH AND DUE FROM BANKS, ENDING	$	703,421		$	508,673		$	594,372		$	703,421
SUPPLEMENTAL INFORMATION FOR NON-CASH
INVESTING AND FINANCING ACTIVITIES
Assets acquired in settlement of loans	$	118		$	1,799		$	202		$	118

See notes to unaudited consolidated financial statements.

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HANCOCK WHITNEY CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1. Basis of Presentation

The consolidated financial statements include the accounts of Hancock Whitney Corporation and all other entities in which it has a controlling interest (the “Company”). The financial statements include all adjustments that are, in the opinion of management, necessary to fairly state the Company’s financial condition, results of operations, changes in stockholders’ equity and cash flows for the interim periods presented. The Company has also evaluated all subsequent events for potential recognition and disclosure through the date of the filing of this Quarterly Report on Form 10-Q. Some financial information and disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the U.S. (“GAAP”) have been condensed or omitted in this Quarterly Report on Form 10-Q pursuant to Securities and Exchange Commission rules and regulations. These financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022. Financial information reported in these financial statements is not necessarily indicative of the Company’s financial condition, results of operations, or cash flows for any other interim or annual period.

Certain prior period amounts have been reclassified to conform to the current period presentation. Such changes include expanding the presentation of the credit quality metrics by vintage to portfolio class from portfolio segment in Note 3 – Loans. These changes in presentation did not have a material impact on the ~~Company’s~~Company's financial condition or operating results.

Use of Estimates

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

Accounting Policies

There were no material changes or developments during the reporting period with respect to methodologies that the Company uses when applying what management believes are critical accounting policies and developing critical accounting estimates as disclosed in its Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022.

On January 1, 2023, the Company adopted Accounting Standards Update (“ASU”) 2022-02 "Financial Instruments: Credit Losses (Topic 326) - Troubled Debt Restructurings and Vintage Disclosures." The amendments in this update eliminated the recognition and measurement guidance as prescribed by Accounting Standards Codification (“ASC”) 310-40 for troubled debt restructurings (“TDRs”) and introduced new requirements for certain modifications of loans to borrowers experiencing financial difficulty (“MEFDs”). Qualifying modifications are interest rate reductions, other-than-insignificant payment delays, term extensions, or any combination of these terms. Our MEFD policy generally considers six months or less to be the time frame that is considered insignificant for payment delays and/or term extensions. Multiple payment delays and/or term extensions to borrowers experiencing financial difficulty within a twelve month period are evaluated collectively. Qualifying modified loans are subject to reporting requirements for the twelve month period following the modification. This standard was adopted on a prospective basis and therefore, only modifications on or after January 1, 2023 are evaluated and reported under the new requirements.

Like TDRs, MEFDs can remain on nonaccrual, move to nonaccrual, return to accrual, or continue to accrue interest, depending on the individual facts and circumstances of the borrower. As allowed by the standard, the Company has elected to evaluate these modified loans for credit loss consistent with policies for the non-modified portfolio, which includes individually evaluating for specific reserves all nonaccrual MEFDs over our existing materiality threshold and collectively evaluating credit loss for all other MEFDs, including those that continue to accrue interest. The credit loss methodology for MEFDs is the same as described in the Allowance for Credit Losses section in the Summary of Significant Accounting Policies disclosed in the Note 1 of the 2022 Form 10-K.

Refer to Note 3 – Loans for disclosures related to reportable MEFDs entered into since adoption, as well as gross charge-offs by class in our vintage disclosures, also required by this standard.

Refer to Note 14 – Recent Accounting Pronouncements for afurther discussion of accounting standards adopted and issued but not yet adopted at March 31, ~~2022~~2023 and the anticipated impact to the Company’s financial statements.

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2. Securities

The following tables set forth the amortized cost, gross unrealized gains and losses, and estimated fair value of debt securities classified as available for sale and held to maturity at March 31, ~~2022~~2023 and December 31, ~~2021.~~2022. Amortized cost of securities does not include accrued interest which is reflected in the accrued interest line item on the consolidated balance sheets totaling $~~25.9~~28.3 million at March 31, 2023 and $29.1 million at ~~March 31, 2022 and $25.5~~ ~~million at~~ December 31, ~~2021. During the three months ended March 31, 2022, the Company transferred securities with an aggregate fair value of $561.8~~ ~~million, inclusive of an unrealized loss of $15.4~~ ~~million, from the available for sale portfolio to the held to maturity portfolio; as such, the securities were recorded with an amortized cost of $561.8~~ ~~million within the~~

~~Table of Contents~~

~~held to maturity portfolio. The unrealized loss is reflected in accumulated other comprehensive income and will be amortized to interest income over the remaining lives of the securities.~~2022.


	March 31, 2022								December 31, 2021								March 31, 2023								December 31, 2022
			Gross		Gross						Gross		Gross						Gross		Gross						Gross		Gross
Securities Available for Sale	Amortized		Unrealized		Unrealized		Fair		Amortized		Unrealized		Unrealized		Fair		Amortized		Unrealized		Unrealized		Fair		Amortized		Unrealized		Unrealized		Fair
(in thousands)	Cost		Gains		Losses		Value		Cost		Gains		Losses		Value
($ in thousands)																	Cost		Gains		Losses		Value		Cost		Gains		Losses		Value
U.S. Treasury and government agency securities	$	10,037	$	—	$	406	$	9,631	$	420,857	$	3,781	$	5,340	$	419,298	$	113,016	$	287	$	1,788	$	111,515	$	113,211	$	—	$	2,346	$	110,865
Municipal obligations		214,611		1,542		519		215,634		304,536		13,184		3,562		314,158		206,219		247		1,997		204,469		207,014		59		3,981		203,092
Residential mortgage-backed securities		2,949,998		4,535		193,111		2,761,422		3,056,763		29,158		50,123		3,035,798		2,583,935		240		364,911		2,219,264		2,655,381		224		398,619		2,256,986
Commercial mortgage-backed securities		3,089,562		2,587		197,976		2,894,173		3,064,828		61,645		48,614		3,077,859		3,239,281		2,899		299,575		2,942,605		3,234,278		2,032		342,880		2,893,430
Collateralized mortgage obligations		94,294		—		3,074		91,220		119,046		1,837		—		120,883		72,884		—		5,241		67,643		76,830		—		6,242		70,588
Corporate debt securities		21,500		32		605		20,927		18,500		210		8		18,702		23,500		—		3,376		20,124		23,500		—		2,420		21,080
	$	6,380,002	$	8,696	$	395,691	$	5,993,007	$	6,984,530	$	109,815	$	107,647	$	6,986,698	$	6,238,835	$	3,673	$	676,888	$	5,565,620	$	6,310,214	$	2,315	$	756,488	$	5,556,041


	March 31, 2022								December 31, 2021								March 31, 2023								December 31, 2022
			Gross		Gross						Gross		Gross						Gross		Gross						Gross		Gross
Securities Held to Maturity	Amortized		Unrealized		Unrealized		Fair		Amortized		Unrealized		Unrealized		Fair		Amortized		Unrealized		Unrealized		Fair		Amortized		Unrealized		Unrealized		Fair
(in thousands)	Cost		Gains		Losses		Value		Cost		Gains		Losses		Value
($ in thousands)																	Cost		Gains		Losses		Value		Cost		Gains		Losses		Value
U.S. Treasury and government agency securities	$	368,334	$	—	$	14,745	$	353,589	$	14,857	$	—	$	20	$	14,837	$	427,643	$	824	$	41,538	$	386,929	$	426,454	$	21	$	49,044	$	377,431
Municipal obligations		696,275		5,986		7,492		694,769		621,405		37,941		205		659,141		696,471		1,987		19,262		679,196		698,908		753		26,558		673,103
Residential mortgage-backed securities		525,039		211		23,814		501,436		268,907		682		1,499		268,090		715,499		—		63,526		651,973		734,478		—		72,532		661,946
Commercial mortgage-backed securities		836,060		1,775		19,998		817,837		603,156		28,679		669		631,166		944,292		—		77,653		866,639		948,691		—		87,211		861,480
Collateralized mortgage obligations		62,380		47		1,009		61,418		57,426		822		—		58,248		41,159		—		2,136		39,023		43,964		—		2,526		41,438
	$	2,488,088	$	8,019	$	67,058	$	2,429,049	$	1,565,751	$	68,124	$	2,393	$	1,631,482	$	2,825,064	$	2,811	$	204,115	$	2,623,760	$	2,852,495	$	774	$	237,871	$	2,615,398

The following tables present the amortized cost and fair value of debt securities available for sale and held to maturity at March 31, ~~2022~~2023 by contractual maturity. Actual maturities will differ from contractual maturities because of rights to call or repay obligations with or without penalties and scheduled and unscheduled principal payments on mortgage-backed securities and collateralized mortgage obligations.


Debt Securities Available for Sale	Amortized		Fair		Amortized		Fair
(in thousands)	Cost		Value
($ in thousands)					Cost		Value
Due in one year or less	$	691	$	694	$	72	$	72
Due after one year through five years		687,364		681,925		1,024,989		979,364
Due after five years through ten years		2,902,497		2,715,517		2,980,929		2,699,847
Due after ten years		2,789,450		2,594,871		2,232,845		1,886,337
Total available for sale debt securities	$	6,380,002	$	5,993,007	$	6,238,835	$	5,565,620


Debt Securities Held to Maturity	Amortized		Fair		Amortized		Fair
(in thousands)	Cost		Value
($ in thousands)					Cost		Value
Due in one year or less	$	11,225	$	11,248	$	11,637	$	11,573
Due after one year through five years		379,981		379,671		538,020		520,589
Due after five years through ten years		891,327		873,478		918,433		851,024
Due after ten years		1,205,555		1,164,652		1,356,974		1,240,574
Total held to maturity securities	$	2,488,088	$	2,429,049	$	2,825,064	$	2,623,760

The Company held 0no securities classified as trading at March 31, ~~2022~~2023 and December 31, ~~2021.~~2022.

Table of Contents

The following table presents the proceeds from, gross gains on, and gross losses on sales of securities during the three months ended March 31, ~~2022~~2023 and ~~2021.~~2022. Net gains or losses are reflected in the ~~Securities Transactions, Net~~"Securities transactions, net" line ~~items~~item on the Consolidated Statements of Income.


	Three Months Ended March 31,					Three Months Ended March 31,
(in thousands)	2022			2021
($ in thousands)						2023		2022
Proceeds	$	73,219		$	—	$	—	$	73,219
Gross gains		—			—		—		—
Gross losses		87			—		—		87
Net loss	$	(87	)	$	—
Net gain (loss)						$	—	$	(87	)

Securities with carrying values totaling $~~4.2~~6.1 billion ~~billion~~ and $~~4.0~~4.9 billionwere pledged as collateral at March 31, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively, primarily to secure public deposits or securities sold under agreements to ~~repurchase.~~repurchase and as collateral for an available line of credit with the Federal Reserve Bank.

Credit Quality

The Company’s policy is to invest only in securities of investment grade quality. These investments are largely limited to U.S. agency securities and municipal securities. Management has concluded, based on the long history of no credit losses, that the expectation of nonpayment of the held to maturity securities carried at amortized cost is zero for securities that are backed by the full faith and credit of and/or guaranteed by the U.S. government. As such, 0no allowance for credit losses has been recorded for these securities. The municipal portfolio is analyzed separately for allowance for credit loss in accordance with the applicable guidance for each portfolio as noted below.

The Company evaluates credit impairment for individual securities available for sale whose fair value was below amortized cost with a more than inconsequential risk of default and where the Company had assessed whether the decline in fair value was significant enough to suggest a credit event occurred. There were 0no securities ~~that met the criteria of~~with a material credit loss event and, therefore, 0no allowance for credit loss was recorded in any period presented.

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


Available for Sale
March 31, 2022	Losses < 12 months				Losses 12 months or >				Total
(in thousands)	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
March 31, 2023													Losses < 12 months				Losses 12 months or >				Total
($ in thousands)													Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
U.S. Treasury and government agency securities	$	9,631	$	406	$	—	$	—	$	9,631	$	406	$	49,332	$	382	$	8,070	$	1,406	$	57,402	$	1,788
Municipal obligations		63,349		519		—		—		63,349		519		85,570		649		86,444		1,348		172,014		1,997
Residential mortgage-backed securities		1,359,065		65,035		1,195,222		128,076		2,554,287		193,111		137,406		4,437		2,071,526		360,474		2,208,932		364,911
Commercial mortgage-backed securities		1,762,250		91,931		802,289		106,045		2,564,539		197,976		318,876		14,695		2,570,771		284,880		2,889,647		299,575
Collateralized mortgage obligations		91,220		3,074		—		—		91,220		3,074		—		—		67,643		5,241		67,643		5,241
Corporate debt securities		15,895		605		—		—		15,895		605		1,820		180		17,804		3,196		19,624		3,376
	$	3,301,410	$	161,570	$	1,997,511	$	234,121	$	5,298,921	$	395,691	$	593,004	$	20,343	$	4,822,258	$	656,545	$	5,415,262	$	676,888


Available for Sale
December 31, 2022	Losses < 12 months				Losses 12 months or >				Total
			Gross				Gross				Gross
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
($ in thousands)	Value		Losses		Value		Losses		Value		Losses
U.S. Treasury and government agency securities	$	102,607		754	$	8,258	$	1,592	$	110,865	$	2,346
Municipal obligations		192,334		3,981		—		—		192,334		3,981
Residential mortgage-backed securities		636,060		49,790		1,611,832		348,829		2,247,892		398,619
Commercial mortgage-backed securities		1,489,974		114,195		1,351,530		228,685		2,841,504		342,880
Collateralized mortgage obligations		41,703		3,275		28,884		2,967		70,587		6,242
Corporate debt securities		13,194		1,306		7,386		1,114		20,580		2,420
	$	2,475,872	$	173,301	$	3,007,890	$	583,187	$	5,483,762	$	756,488

Table of Contents

Available for Sale

December 31, 2021

Losses < 12 months

Losses 12 months or >

Total

Gross

Gross

Gross

Fair

Unrealized

Fair

Unrealized

Fair

Unrealized

(in thousands)

Value

Losses

Value

Losses

Value

Losses

U.S. Treasury and government agency securities

$
198,318

2,305

$
63,534

$
3,035

$
261,852

$
5,340

Municipal obligations

43,021

2,372

25,126

1,190

68,147

3,562

Residential mortgage-backed securities

1,293,179

20,581

819,596

29,541

2,112,775

50,122

Commercial mortgage-backed securities

786,206

14,819

665,687

33,796

1,451,893

48,615

Collateralized mortgage obligations

—

—

—

—

—

—

Corporate debt securities

6,992

8

—

—

6,992

8

$
2,327,716

$
40,085

$
1,573,943

$
67,562

$
3,901,659

$
107,647

At e~~ach~~each reporting period, the Company evaluates its held to maturity municipal obligation portfolio for credit loss using probability of default and loss given default models. The models were run using a long-term average probability of default migration and with a probability weighting of Moody’s economic forecasts. The resulting credit ~~loss,~~losses, if any, were negligible and no allowance for credit loss was recorded.

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


Held to maturity
March 31, 2022	Losses < 12 months				Losses 12 months or >				Total
March 31, 2023													Losses < 12 months				Losses 12 months or >				Total
			Gross				Gross				Gross				Gross				Gross				Gross
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized		Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
(in thousands)	Value		Losses		Value		Losses		Value		Losses
($ in thousands)													Value		Losses		Value		Losses		Value		Losses
U.S. Treasury and government agency securities	$	282,780	$	11,386	$	70,808	$	3,360	$	353,588	$	14,746	$	49,176	$	2,085	$	305,813	$	39,453	$	354,989	$	41,538
Municipal obligations		124,523		3,410		42,807		4,082		167,330		7,492		240,561		1,452		183,368		17,810		423,929		19,262
Residential mortgage-backed securities		482,145		22,993		6,727		820		488,872		23,813		225,019		9,134		426,955		54,392		651,974		63,526
Commercial mortgage-backed securities		551,422		18,637		10,931		1,361		562,353		19,998		159,220		6,140		707,420		71,513		866,640		77,653
Collateralized mortgage obligations		50,719		1,009		—		—		50,719		1,009		2,662		30		36,360		2,106		39,022		2,136
	$	1,491,589	$	57,435	$	131,273	$	9,623	$	1,622,862	$	67,058	$	676,638	$	18,841	$	1,659,916	$	185,274	$	2,336,554	$	204,115


Held to maturity
December 31, 2021	Losses < 12 months				Losses 12 months or >				Total
December 31, 2022													Losses < 12 months				Losses 12 months or >				Total
			Gross				Gross				Gross				Gross				Gross				Gross
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized		Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
(in thousands)	Value		Losses		Value		Losses		Value		Losses
($ in thousands)													Value		Losses		Value		Losses		Value		Losses
U.S. Treasury and government agency securities	$	14,837	$	20	$	—	$	—	$	14,837	$	20	$	145,893	$	13,245	$	226,499	$	35,799	$	372,392	$	49,044
Municipal obligations		7,795		205		—		—		7,795		205		560,288		8,878		64,346		17,680		624,634		26,558
Residential mortgage-backed securities		253,661		1,499		—		—		253,661		1,499		391,146		30,515		270,800		42,017		661,946		72,532
Commercial mortgage-backed securities		56,366		205		11,837		464		68,203		669		697,827		56,899		163,653		30,312		861,480		87,211
Collateralized mortgage obligations		—		—		—		—		—		—		41,438		2,526		—		—		41,438		2,526
	$	332,659	$	1,929	$	11,837	$	464	$	344,496	$	2,393	$	1,836,592	$	112,063	$	725,298	$	125,808	$	2,561,890	$	237,871

As of March 31, ~~2022~~2023 and December 31, ~~2021,~~2022, the Company had709 ~~462~~and ~~142~~757 securities, respectively, with market values below their cost basis. ~~None of the~~There were no material unrealized losses ~~relate primarily~~related to the marketability of the securities or the issuer’s ability to meet contractual obligations. In all cases, the indicated impairment on these debt securities would be recovered no later than the security’s maturity date or possibly earlier if the market price for the security increases with a reduction in the yield required by the market. The unrealized losses were deemed to be materially non-credit related at March 31, ~~2022~~2023 and December 31, ~~2021.~~2022. The Company has adequate liquidity and, therefore, ~~does not plan~~neither plans to ~~and more likely than not, will not~~nor expects to be required to liquidate these securities before recovery of the ~~indicated impairment.~~amortized cost basis.

Table of Contents

3. Loans and Allowance for Credit Losses

The Company generally makes loans in its market areas of south and central Mississippi; southern and central Alabama; northwest, central and south Louisiana; the northern, central and panhandle regions of Florida; certain areas of east and northeast Texas, including Houston, ~~Beaumont,~~ Dallas, Austin, and San Antonio; Nashville, Tennessee; and ~~Nashville, Tennessee.~~the metropolitan area of Atlanta, Georgia.

Loans, net of unearned income, by portfolio are presented at amortized cost basis in the table below. Amortized cost does not include accrued interest, which is reflected in the accrued interest line item in the Consolidated Balance Sheets, totaling $~~69.3~~107.9 million and $~~67.8~~100.2 million at March 31, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively. ~~Included in commercial non-real estate loans at March 31, 2022 and December 31, 2021~~ ~~was $334.8~~ ~~million and $531.1~~ ~~million, respectively, of Paycheck Protection Program loans, described in more detail below.~~ The following table presents loans, net of unearned income, by portfolio class at March 31, ~~2022~~2023 and December 31, ~~2021.~~2022.


	March 31,		December 31,		March 31,		December 31,
(in thousands)	2022		2021
($ in thousands)					2023		2022
Commercial non-real estate	$	9,584,480	$	9,612,460	$	10,013,482	$	10,146,453
Commercial real estate - owner occupied		2,868,233		2,821,246		3,050,748		3,033,058
Total commercial and industrial		12,452,713		12,433,706		13,064,230		13,179,511
Commercial real estate - income producing		3,563,299		3,464,626		3,758,455		3,560,991
Construction and land development		1,286,655		1,228,670		1,726,916		1,703,592
Residential mortgages		2,462,900		2,423,890		3,329,793		3,092,605
Consumer		1,557,774		1,583,390		1,525,129		1,577,347
Total loans	$	21,323,341	$	21,134,282	$	23,404,523	$	23,114,046

The following briefly describes the composition of each loan category and portfolio class.

Commercial and industrial

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

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

Commercial non-real estate loans also include loans made under the Small Business Administration’s (SBA) Paycheck Protection Program (PPP). PPP loans are guaranteed by the SBA and are forgivable to the debtor upon satisfaction of certain criteria. The loans bear interest at 1~~% per annum and have~~ ~~two~~ or ~~five year~~ ~~terms, depending on the date of origination.~~ ~~These loans also earn an origination fee of~~ 1~~%, 3%, or~~ 5~~%, depending on the loan size,~~ ~~which is deferred and amortized over the estimated life of the loan using the effective yield method.~~

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

Commercial real estate – income producing

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

~~Table of Contents~~

Construction and land development

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

Residential mortgages

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

Table of Contents

Consumer

Consumer loans include second lien mortgage home loans, home equity lines of credit and nonresidential consumer purpose loans. Nonresidential consumer loans include both direct and indirect loans. Direct nonresidential consumer loans are made to finance the purchase of personal property, including automobiles, recreational vehicles and boats, and for other personal purposes (secured and unsecured), and deposit account secured loans. Indirect nonresidential consumer loans include automobile financing provided to the consumer through an agreement with automobile dealerships, though the Company is no longer engaged in this type of lending and the remaining portfolio is in runoff. Consumer loans also include a small portfolio of credit card receivables issued on the basis of applications received through referrals from the Bank’s branches, online and other marketing efforts.

Allowance for Credit Losses

The calculation of the allowance for credit losses is performed using two primary approaches: a collective approach for pools of loans that have similar risk characteristics using a loss rate analysis, and a specific reserve analysis for credits individually evaluated. The allowance for credit losses was developed using multiple Moody’s Analytics (“Moody’s") macroeconomic forecasts applied to internally developed credit models for a two year reasonable and supportable period. The following tables present activity in the allowance for credit losses (ACL) by portfolio class for the three months ended March 31, ~~2022~~2023 and ~~2021,~~2022, as well as the corresponding recorded investment in loans at the end of each period.

~~Table of Contents~~

Commercial

Total

Commercial

Commercial

real estate-

commercial

real estate-

Construction

non-real

owner

and

income

and land

Residential

(in thousands)

estate

occupied

industrial

producing

development

mortgages

Consumer

Total

Three Months Ended March 31, 2022

Allowance for credit losses

Allowance for loan losses:

Beginning balance

$
95,888

$
53,433

$
149,321

$
108,058

$
22,102

$
30,623

$
31,961

$
342,065

Charge-offs

(2,659
)

—

(2,659
)

(4
)

—

(42
)

(2,680
)

(5,385
)
Recoveries

2,142

389

2,531

878

68

61

1,528

5,066

Net provision for loan losses

(8,072
)

(5,361
)

(13,433
)

(3,565
)

(1,082
)

(4,307
)

(1,516
)

(23,903
)
Ending balance - allowance for loan losses

$
87,299

$
48,461

$
135,760

$
105,367

$
21,088

$
26,335

$
29,293

$
317,843

Reserve for unfunded lending commitments:

Beginning balance

$
4,522

$
323

$
4,845

$
1,694

$
21,907

$
22

$
866

$
29,334

Provision for losses on unfunded commitments

(246
)

108

(138
)

453

474

(3
)

590

1,376

Ending balance - reserve for unfunded lending commitments

4,276

431

4,707

2,147

22,381

19

1,456

30,710

Total allowance for credit losses

$
91,575

$
48,892

$
140,467

$
107,514

$
43,469

$
26,354

$
30,749

$
348,553

Allowance for loan losses:

Individually evaluated

$
112

$
32

$
144

$
20

$
20

$
408

$
174

$
766

Collectively evaluated

87,187

48,429

135,616

105,347

21,068

25,927

29,119

317,077

Allowance for loan losses

$
87,299

$
48,461

$
135,760

$
105,367

$
21,088

$
26,335

$
29,293

$
317,843

Reserve for unfunded lending commitments:

Individually evaluated

$
—

$
—

$
—

$
—

$
—

$
—

$
—

$
—

Collectively evaluated

4,276

431

4,707

2,147

22,381

19

1,456

30,710

Reserve for unfunded lending commitments:

$
4,276

$
431

$
4,707

$
2,147

$
22,381

$
19

$
1,456

$
30,710

Total allowance for credit losses

$
91,575

$
48,892

$
140,467

$
107,514

$
43,469

$
26,354

$
30,749

$
348,553

Loans:

Individually evaluated

$
1,742

$
951

$
2,693

$
1,309

$
122

$
4,534

$
929

$
9,587

Collectively evaluated

9,582,738

2,867,282

12,450,020

3,561,990

1,286,533

2,458,366

1,556,845

21,313,754

Total loans

$
9,584,480

$
2,868,233

$
12,452,713

$
3,563,299

$
1,286,655

$
2,462,900

$
1,557,774

$
21,323,341


				Commercial			Total			Commercial
	Commercial			real estate-			commercial			real estate-		Construction
	non-real			owner			and			income		and land			Residential
($ in thousands)	estate			occupied			industrial			producing		development			mortgages			Consumer			Total
	Three Months Ended March 31, 2023
Allowance for credit losses
Allowance for loan losses:
Beginning balance	$	96,461		$	48,284		$	144,745		$	71,961	$	30,498		$	32,464		$	28,121		$	307,789
Charge-offs		(4,528	)		—			(4,528	)		—		(61	)		(20	)		(3,363	)		(7,972	)
Recoveries		1,033			195			1,228			—		6			181			838			2,253
Net provision for loan losses		(320	)		(813	)		(1,133	)		4,231		459			1,916			1,842			7,315
Ending balance - allowance for loan losses	$	92,646		$	47,666		$	140,312		$	76,192	$	30,902		$	34,541		$	27,438		$	309,385
Reserve for unfunded lending commitments:
Beginning balance	$	4,984		$	302		$	5,286		$	1,395	$	25,110		$	31		$	1,487		$	33,309
Provision for losses on unfunded commitments		(191	)		22			(169	)		493		(1,487	)		(14	)		(118	)		(1,295	)
Ending balance - reserve for unfunded lending commitments		4,793			324			5,117			1,888		23,623			17			1,369			32,014
Total allowance for credit losses	$	97,439		$	47,990		$	145,429		$	78,080	$	54,525		$	34,558		$	28,807		$	341,399
Allowance for loan losses:
Individually evaluated	$	—		$	—		$	—		$	—	$	—		$	—		$	—		$	—
Collectively evaluated		92,646			47,666			140,312			76,192		30,902			34,541			27,438			309,385
Allowance for loan losses	$	92,646		$	47,666		$	140,312		$	76,192	$	30,902		$	34,541		$	27,438		$	309,385
Reserve for unfunded lending commitments:
Individually evaluated	$	—		$	—		$	—		$	—	$	—		$	—		$	—		$	—
Collectively evaluated		4,793			324			5,117			1,888		23,623			17			1,369			32,014
Reserve for unfunded lending commitments:	$	4,793		$	324		$	5,117		$	1,888	$	23,623		$	17		$	1,369		$	32,014
Total allowance for credit losses	$	97,439		$	47,990		$	145,429		$	78,080	$	54,525		$	34,558		$	28,807		$	341,399
Loans:
Individually evaluated	$	10,273		$	684		$	10,957		$	1,120	$	—		$	1,135		$	—		$	13,212
Collectively evaluated		10,003,209			3,050,064			13,053,273			3,757,335		1,726,916			3,328,658			1,525,129			23,391,311
Total loans	$	10,013,482		$	3,050,748		$	13,064,230		$	3,758,455	$	1,726,916		$	3,329,793		$	1,525,129		$	23,404,523

In arriving at the March 31, ~~2022~~2023 allowance for credit losses, the Company weighted the March ~~2022~~2023 baseline economic forecast, which Moody’s defines as the “most likely outcome” based on current conditions and its view of where the economy is headed, with a 40% probability. The March ~~31, 2022~~2023 baseline scenario ~~assumes~~maintains a generally optimistic outlook in its assumptions surrounding the drivers of economic growth, including its expectations of the effectiveness of the Federal Reserve's monetary policy in easing inflationary conditions, though at a slower pace than previously forecasted. The baseline forecast includes sustained economic growth with forecasted annual GDP growth of ~~COVID-19 infections have already abated; the disruption to the U.S. economy from the Russian invasion of Ukraine will be limited and temporary; the legislature passes a $600~~ ~~billion social and climate package; full-employment economy being achieved in late 2022 or early 2023; GDP continues to grow between~~ 31.9%- for both 2023 and 2024, and 2.7% for 2025, and only a modest increase in unemployment, forecasted at 3.5% ~~in 2022~~for 2023, 3.9% for 2024, and ~~2023;~~4.0% for 2025. Under the baseline forecast, the recent bank failures are not considered symptomatic of a serious broader problem and do not weaken the ~~Federal Reserve has~~ ~~four 25-basis point~~ ~~interest rate increases in 2022. Alternative Moody’s forecast scenarios have varying depictions of economic performance as compared to~~financial system or the ~~baseline. Consistent with our December 31, 2021 calculation, management~~economy. Management determined that assumptions provided for in the downside slower near-term ~~growth~~growth/mild recessionary scenario (S-2) ~~to be somewhat more likely than~~were also reasonably possible and weighted that scenario at 50%, and further weighted the ~~baseline scenario; as such, the S-2~~(S-3) moderate recessionary scenario ~~was given a~~at 6010% ~~probability weighting in the allowance for credit losses calculation at March 31, 2022.~~due to additional downside risk. The S-2 scenario assumes that ~~when compared to baseline, the conflict between Russian and Ukraine spans longer than anticipated and that~~interest rates remain elevated, global supply chain issues ~~worsen, prompting~~keep inflation elevated and the recent bank failures reduce consumer confidence and cause banks to tighten lending standards. This leads to a higher rate of inflation, and as a result, the Federal Reserve raises interest rates more often, generating corrections in equity markets and declines in spending. Further, the S-2 scenario assumes the economic legislation package will be less effective; unemployment begins to risemild recession that starts in the second quarter of ~~2022,~~2023 lasting three quarters, with a peak to trough decline of 1.3% resulting in forecasted annual GDP growth of only0.9% for 2023, 0.3% for 2024, and 3.2% for 2025; and unemployment of 4.8% in 2023, 5.8% in 2024, and 4.2% in 2025. The S-3 scenario assumes a more severe recession with annual GDP growth of 0.3% in 2023, a decline of 0.3% in 2024, and then back to growth of 2.6% in 2025; and unemployment of 5.6%, 7.6%, and 6.3% in 2023, 2024, and 2025, respectively.

Table of Contents

While economic uncertainty continues, including the ~~return to full employment not occurring until~~possibility of a recession in the ~~fourth quarter of 2023; and~~near-term, the number of COVID-19 cases slows consumer spending on retail goods and travel and leisure activities. Despite the lingering economic effects of the COVID-19 pandemic and the emergence of new risks stemming from geopolitical conflict, overall credit loss outlook on ~~our~~the loan portfolio as a whole has not changed materially since year-end. Positive economic indicators of growth within the Company's footprint, relatively stable asset quality metrics and modest credit losses in recent periods led to relatively flat reserves for the three months ended March 31, 2023.


				Commercial			Total			Commercial
	Commercial			real estate-			commercial			real estate-			Construction
	non-real			owner			and			income			and land			Residential
($ in thousands)	estate			occupied			industrial			producing			development			mortgages			Consumer			Total
	Three Months Ended March 31, 2022
Allowance for credit losses
Allowance for loan losses:
Beginning balance	$	95,888		$	53,433		$	149,321		$	108,058		$	22,102		$	30,623		$	31,961		$	342,065
Charge-offs		(2,659	)		—			(2,659	)		(4	)		—			(42	)		(2,680	)		(5,385	)
Recoveries		2,142			389			2,531			878			68			61			1,528			5,066
Net provision for loan losses		(8,072	)		(5,361	)		(13,433	)		(3,565	)		(1,082	)		(4,307	)		(1,516	)		(23,903	)
Ending balance - allowance for loan losses	$	87,299		$	48,461		$	135,760		$	105,367		$	21,088		$	26,335		$	29,293		$	317,843
Reserve for unfunded lending commitments:
Beginning balance	$	4,522		$	323		$	4,845		$	1,694		$	21,907		$	22		$	866		$	29,334
Provision for losses on unfunded commitments		(246	)		108			(138	)		453			474			(3	)		590			1,376
Ending balance - reserve for unfunded lending commitments		4,276			431			4,707			2,147			22,381			19			1,456			30,710
Total allowance for credit losses	$	91,575		$	48,892		$	140,467		$	107,514		$	43,469		$	26,354		$	30,749		$	348,553

Allowance for loan losses:
Individually evaluated	$	112		$	32		$	144		$	20		$	20		$	408		$	174		$	766
Collectively evaluated		87,187			48,429			135,616			105,347			21,068			25,927			29,119			317,077
Allowance for loan losses	$	87,299		$	48,461		$	135,760		$	105,367		$	21,088		$	26,335		$	29,293		$	317,843
Reserve for unfunded lending commitments:
Individually evaluated	$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	—
Collectively evaluated		4,276			431			4,707			2,147			22,381			19			1,456			30,710
Reserve for unfunded lending commitments:	$	4,276		$	431		$	4,707		$	2,147		$	22,381		$	19		$	1,456		$	30,710
Total allowance for credit losses	$	91,575		$	48,892		$	140,467		$	107,514		$	43,469		$	26,354		$	30,749		$	348,553
Loans:
Individually evaluated	$	1,742		$	951		$	2,693		$	1,309		$	122		$	4,534		$	929		$	9,587
Collectively evaluated		9,582,738			2,867,282			12,450,020			3,561,990			1,286,533			2,458,366			1,556,845			21,313,754
Total loans	$	9,584,480		$	2,868,233		$	12,452,713		$	3,563,299		$	1,286,655		$	2,462,900		$	1,557,774		$	21,323,341

The release of credit reserves across all portfolios during the three months ended March 31, 2022 reflected positive economic indicators in our ~~markets,~~market, continued ~~improvements~~improvement in our asset quality metrics, and a sustained period of minimal credit ~~losses in recent periods allowed for a release of credit loss reserves across all portfolios at March 31, 2022.~~

~~Table of Contents~~

Commercial

Total

Commercial

Commercial

real estate-

commercial

real estate-

Construction

non-real

owner

and

income

and land

Residential

(in thousands)

estate

occupied

industrial

producing

development

mortgages

Consumer

Total

Three Months Ended March 31, 2021

Allowance for credit losses

Allowance for loan losses:

Beginning balance

$
149,693

$
69,134

$
218,827

$
109,474

$
26,462

$
48,842

$
46,572

$
450,177

Charge-offs

(17,512
)

(347
)

(17,859
)

(194
)

(248
)

(109
)

(3,694
)

(22,104
)
Recoveries

1,899

37

1,936

—

159

206

1,549

3,850

Net provision for loan losses

(5,144
)

(2,301
)

(7,445
)

6,899

(1,200
)

(6,420
)

603

(7,563
)
Ending balance - allowance for loan losses

$
128,936

$
66,523

$
195,459

$
116,179

$
25,173

$
42,519

$
45,030

$
424,360

Reserve for unfunded lending commitments:

Beginning balance

$
4,529

$
381

$
4,910

$
1,099

$
22,694

$
19

$
1,185

$
29,907

Provision for losses on unfunded commitments

2,642

131

2,773

439

(617
)

3

54

2,652

Ending balance - reserve for unfunded lending commitments

7,171

512

7,683

1,538

22,077

22

1,239

32,559

Total allowance for credit losses

$
136,107

$
67,035

$
203,142

$
117,717

$
47,250

$
42,541

$
46,269

$
456,919

Allowance for loan losses:

Individually evaluated for impairment

$
4,564

$
1,242

$
5,806

$
22

$
21

$
486

$
739

$
7,074

Collectively evaluated for impairment

124,372

65,281

189,653

116,157

25,152

42,033

44,291

417,286

Allowance for loan losses

$
128,936

$
66,523

$
195,459

$
116,179

$
25,173

$
42,519

$
45,030

$
424,360

Reserve for unfunded lending commitments:

Individually evaluated

$
190

$
51

$
241

$
—

$
—

$
—

$
—

$
241

Collectively evaluated

6,981

461

7,442

1,538

22,077

22

1,239

32,318

Reserve for unfunded lending commitments:

$
7,171

$
512

$
7,683

$
1,538

$
22,077

$
22

$
1,239

$
32,559

Total allowance for credit losses

$
136,107

$
67,035

$
203,142

$
117,717

$
47,250

$
42,541

$
46,269

$
456,919

Loans:

Individually evaluated for impairment

$
20,132

$
10,047

$
30,179

$
4,363

$
131

$
5,241

$
2,779

$
42,693

Collectively evaluated for impairment

10,071,210

2,785,057

12,856,267

3,406,665

1,122,010

2,483,551

1,753,673

21,622,166

Total loans

$
10,091,342

$
2,795,104

$
12,886,446

$
3,411,028

$
1,122,141

$
2,488,792

$
1,756,452

$
21,664,859

The modest release across most portfolios during the first quarter of 2021 reflects the improvements in the economic forecast. The continued elevated allowance level was a result of uncertainty surrounding future performance as the impact of stimulus diminishes and modifications expire.losses. In arriving at the allowance for credit losses at March 31, ~~2021,~~2022, the Company weighted the baseline economic forecast at 6540% and the downside slower near-term growth scenario S-2 at 3560%.

~~Table of Contents~~

Nonaccrual loans and ~~loans~~certain reportable modified ~~in troubled debt restructurings~~loan disclosures

The following table shows the composition of nonaccrual loans and those without an allowance for loan loss, by portfolio class.



		March 31,						December 31,						March 31, 2023						December 31, 2022
	2022							2021
(in thousands)		Total nonaccrual			Nonaccrual without allowance for loan loss			Total nonaccrual			Nonaccrual without allowance for loan loss
($ in thousands)														Total nonaccrual			Nonaccrual without allowance for loan loss			Total nonaccrual			Nonaccrual without allowance for loan loss
Commercial non-real estate	$		5,312	$		1,247	$		6,974	$		1,264	$		13,302	$		10,273	$		4,020	$		941
Commercial real estate - owner occupied			2,749			716			4,921			729			2,393			684			1,461			692
Total commercial and industrial			8,061			1,963			11,895			1,993			15,695			10,957			5,481			1,633
Commercial real estate - income producing			1,956			1,233			5,458			5,207			1,501			1,120			1,240			1,174
Construction and land development			584			—			844			—			340			—			309			—
Residential mortgages			22,744			1,287			25,439			1,997			30,111			1,135			25,269			1,884
Consumer			9,094			5			11,887			48			6,697			—			6,692			—
Total loans	$		42,439	$		4,488	$		55,523	$		9,245	$		54,344	$		13,212	$		38,991			4,691

As a part of our loss mitigation efforts, we may provide modifications to borrowers experiencing financial difficulty to improve long-term collectability of the loans and to avoid the need for repossession or foreclosure of collateral. As described in Note 1 – Accounting Policy, accounting and reporting requirements changed related to such modifications effective January 1, 2023, impacting the comparability between periods of the disclosures that follow.

Nonaccrual loans include reportable nonaccruing modified loans to borrowers experiencing financial difficulty (“MEFDs”) totaling $1.6 million at March 31, 2023 and loans modified in troubled debt restructurings (“TDRs”) oftotaling $~~3.6~~ ~~million and $6.8~~2.6 million at ~~March 31, 2022 and~~ December 31, ~~2021, respectively.~~2022. Total ~~TDRs,~~reportable MEFDs, both accruing and nonaccruing, were $~~6.5~~1.6 million at March 31, ~~2022~~2023 and total TDRs were $~~10.6~~4.5

Table of Contents

million at December 31, ~~2021. All TDRs are individually evaluated for credit loss.~~2022. At March 31, ~~2022~~2023 and December 31, ~~2021,~~2022, the Company had 0no unfunded commitments to borrowers whose loan terms have been modified inas a ~~TDR.~~reportable MEFD or TDR, respectively.

The table below provides detail by portfolio class ~~TDRs that were modified~~for reportable MEFDs entered into during the three months ended March 31, ~~2022 and 2021. All such loans are individually evaluated for credit loss.~~2023.


	Three Months Ended												March 31, 2023
($ in thousands)	March 31, 2022						March 31, 2021						Balance		Percentage of portfolio class
Troubled Debt Restructurings:	Number of Contracts		Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment		Number of Contracts		Pre- Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment
Commercial non-real estate		—	$	—	$	—		3	$	6,935	$	6,935	$	934		0.01	%
Commercial real estate - owner occupied		—		—		—		—		—		—		684		0.02	%
Total commercial and industrial		—		—		—		3		6,935		6,935		1,618		0.01	%
Commercial real estate - income producing		—		—		—		—		—		—		—		—
Construction and land development		—		—		—		—		—		—		—		—
Residential mortgages		2		110		115		1		210		210		—		—
Consumer		2		73		73		1		54		54		—		—
Total loans		4	$	183	$	188		5	$	7,199	$	7,199
Total reportable modified loans													$	1,618		0.01	%

Reportable modifications to borrowers experiencing financial difficulty during the three months ended March 31, 2023 consisted of term extensions ranging from 9 months to 5 years. As of March 31, 2023, all reportable MEFDs entered into during the three months ended March 31, 2023 had a payment status of current. There were no post modification payment defaults within the three month period ended March 31, 2023. A payment default occurs if the loan is either 90 days or more delinquent or has been charged off as of the end of the period presented.

During the three months ended March 31, 2022, two residential mortgage loans with pre and post modification balances of $0.1 million and two consumer loans with pre and post modification balances totaling $0.1 million were classified as TDRs. The TDRs modified during the three months ended March 31, 2022, ~~reflected in the table above include~~included $0.1 million of loans with interest rate reduction and $0.1 million with other modifications. ~~The TDRs modified during the three months ended March 31, 2021 include $1.9~~ ~~million of loans with extended amortization terms or other payment concessions, and $5.3~~ ~~million with other modifications.~~

~~NaN~~Two commercial non-real estate loans totaling $3.1 million that defaulted during the three months period ended March 31, 2022 had been modified in a TDR during the twelve months prior to default.~~NaN~~ ~~residential loan totaling $0.6~~ ~~million that defaulted during the three months ended March 31, 2021 had been modified in a TDR during the twelve months prior to default.~~

~~Table of Contents~~

~~The~~ TDR disclosures for the three months ended March 31, 2021 do not include loans eligible for exclusion from TDR assessment under Section 4013 of the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), which expired on December 31, 2021. Any such loan having an eligible modification was reported in the aging analysis that follows based on the modified terms.

Aging Analysis

The tables below present the aging analysis of past due loans by portfolio class at March 31, ~~2022~~2023 and December 31, ~~2021.~~2022.


March 31, 2023	30-59 days past due		60-89 days past due		Greater than 90 days past due		Total past due		Current		Total Loans		Recorded investment > 90 days and still accruing
($ in thousands)
Commercial non-real estate	$	31,691	$	17,026	$	11,029	$	59,746	$	9,953,736	$	10,013,482	$	8,492
Commercial real estate - owner occupied		2,670		2,029		2,567		7,266		3,043,482		3,050,748		1,399
Total commercial and industrial		34,361		19,055		13,596		67,012		12,997,218		13,064,230		9,891
Commercial real estate - income producing		175		—		2,653		2,828		3,755,627		3,758,455		1,214
Construction and land development		2,304		359		217		2,880		1,724,036		1,726,916		126
Residential mortgages		29,903		8,055		13,684		51,642		3,278,151		3,329,793		167
Consumer		6,590		4,506		4,695		15,791		1,509,338		1,525,129		1,757
Total	$	73,333	$	31,975	$	34,845	$	140,153	$	23,264,370	$	23,404,523	$	13,155

March 31, 2022

30-59
days
past due

60-89
days
past due

Greater
than
90 days
past due

Total
past due

Current

Total
Loans

Recorded
investment
> 90 days
and still
accruing

(in thousands)

Commercial non-real estate

$
7,206

$
2,033

$
5,247

$
14,486

$
9,569,994

$
9,584,480

$
701

Commercial real estate - owner occupied

2,443

1,245

3,153

6,841

2,861,392

2,868,233

1,721

Total commercial and industrial

9,649

3,278

8,400

21,327

12,431,386

12,452,713

2,422

Commercial real estate - income producing

1,769

9

1,870

3,648

3,559,651

3,563,299

—

Construction and land development

8,470

99

333

8,902

1,277,753

1,286,655

3

Residential mortgages

29,874

2,766

9,723

42,363

2,420,537

2,462,900

209

Consumer

7,093

2,743

4,666

14,502

1,543,272

1,557,774

1,634

Total

$
56,855

$
8,895

$
24,992

$
90,742

$
21,232,599

$
21,323,341

$
4,268

December 31, 2021

30-59
days
past due

60-89
days
past due

Greater
than
90 days
past due

Total
past due

Current

Total
Loans

Recorded
investment
> 90 days
and still
accruing

(in thousands)

Commercial non-real estate

$
8,381

$
3,123

$
7,041

$
18,545

$
9,593,915

$
9,612,460

$
2,818

Commercial real estate - owner occupied

704

653

1,563

2,920

2,818,326

2,821,246

142

Total commercial and industrial

9,085

3,776

8,604

21,465

12,412,241

12,433,706

2,960

Commercial real estate - income producing

281

107

5,307

5,695

3,458,931

3,464,626

—

Construction and land development

2,624

1,022

587

4,233

1,224,437

1,228,670

83

Residential mortgages

23,306

4,638

15,339

43,283

2,380,607

2,423,890

310

Consumer

6,806

2,805

7,447

17,058

1,566,332

1,583,390

2,171

Total

$
42,102

$
12,348

$
37,284

$
91,734

$
21,042,548

$
21,134,282

$
5,524


December 31, 2022	30-59 days past due		60-89 days past due		Greater than 90 days past due		Total past due		Current		Total Loans		Recorded investment > 90 days and still accruing
($ in thousands)
Commercial non-real estate	$	4,050	$	21,329	$	3,418	$	28,797	$	10,117,656	$	10,146,453	$	996
Commercial real estate - owner occupied		19,069		3,346		1,894		24,309		3,008,749		3,033,058		1,623
Total commercial and industrial		23,119		24,675		5,312		53,106		13,126,405		13,179,511		2,619
Commercial real estate - income producing		879		—		1,174		2,053		3,558,938		3,560,991		—
Construction and land development		4,029		242		133		4,404		1,699,188		1,703,592		54
Residential mortgages		28,208		11,056		17,346		56,610		3,035,995		3,092,605		293
Consumer		8,845		2,806		4,407		16,058		1,561,289		1,577,347		1,619
Total	$	65,080	$	38,779	$	28,372	$	132,231	$	22,981,815	$	23,114,046	$	4,585

1917

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Credit Quality Indicators

The following tables present the credit quality indicators by segment and portfolio class of loans at March 31, ~~2022~~2023 and December 31, ~~2021.~~2022. The Company routinely assesses the ratings of loans in its portfolio through an established and comprehensive portfolio management process.


	March 31, 2023
($ in thousands)	Commercial non-real estate		Commercial real estate - owner- occupied		Total commercial and industrial		Commercial real estate - income producing		Construction and land development		Total commercial
Grade:
Pass	$	9,511,047	$	2,937,286	$	12,448,333	$	3,633,440	$	1,716,329	$	17,798,102
Pass-Watch		277,067		52,691		329,758		116,360		9,860		455,978
Special Mention		54,998		7,552		62,550		1,534		191		64,275
Substandard		170,370		53,219		223,589		7,121		536		231,246
Doubtful		—		—		—		—		—		—
Total	$	10,013,482	$	3,050,748	$	13,064,230	$	3,758,455	$	1,726,916	$	18,549,601

March 31, 2022

(in thousands)

Commercial
non-real
estate

Commercial
real estate -
owner-
occupied

Total
commercial
and industrial

Commercial
real estate -
income
producing

Construction
and land
development

Total
commercial

Grade:

Pass

$
9,223,834

$
2,707,795

$
11,931,629

$
3,494,699

$
1,260,421

$
16,686,749

Pass-Watch

186,008

72,436

258,444

50,088

24,916

333,448

Special Mention

52,307

19,770

72,077

3,615

566

76,258

Substandard

122,331

68,232

190,563

14,897

752

206,212

Doubtful

—

—

—

—

—

—

Total

$
9,584,480

$
2,868,233

$
12,452,713

$
3,563,299

$
1,286,655

$
17,302,667


	December 31, 2021												December 31, 2022
(in thousands)	Commercial non-real estate		Commercial real estate - owner- occupied		Total commercial and industrial		Commercial real estate - income producing		Construction and land development		Total commercial
($ in thousands)													Commercial non-real estate		Commercial real estate - owner- occupied		Total commercial and industrial		Commercial real estate - income producing		Construction and land development		Total commercial
Grade:
Pass	$	9,279,719	$	2,650,399	$	11,930,118	$	3,373,099	$	1,216,177	$	16,519,394	$	9,641,117	$	2,912,057	$	12,553,174	$	3,440,648	$	1,690,756	$	17,684,578
Pass-Watch		157,815		86,133		243,948		67,157		9,289		320,394		284,843		49,093		333,936		111,587		12,097		457,620
Special Mention		43,344		23,377		66,721		4,466		1,909		73,096		79,980		6,267		86,247		3,810		196		90,253
Substandard		131,582		61,337		192,919		19,904		1,295		214,118		140,513		65,641		206,154		4,946		543		211,643
Doubtful		—		—		—		—		—		—		—		—		—		—		—		—
Total	$	9,612,460	$	2,821,246	$	12,433,706	$	3,464,626	$	1,228,670	$	17,127,002	$	10,146,453	$	3,033,058	$	13,179,511	$	3,560,991	$	1,703,592	$	18,444,094


	March 31, 2022						December 31, 2021						March 31, 2023						December 31, 2022
(in thousands)	Residential mortgage		Consumer		Total		Residential mortgage		Consumer		Total
($ in thousands)													Residential mortgage		Consumer		Total		Residential mortgage		Consumer		Total
Performing	$	2,438,792	$	1,547,751	$	3,986,543	$	2,396,282	$	1,570,516	$	3,966,798	$	3,299,682	$	1,518,431	$	4,818,113	$	3,066,319	$	1,570,186	$	4,636,505
Nonperforming		24,108		10,023		34,131		27,608		12,874		40,482		30,111		6,698		36,809		26,286		7,161		33,447
Total	$	2,462,900	$	1,557,774	$	4,020,674	$	2,423,890	$	1,583,390	$	4,007,280	$	3,329,793	$	1,525,129	$	4,854,922	$	3,092,605	$	1,577,347	$	4,669,952

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

Commercial:

•

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

•

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

•

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

•

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

~~Table of Contents~~

•

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

•

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

Table of Contents

Residential and Consumer:

•

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

•

Nonperforming – loans for which there are good reasons to doubt that payments will be made in full. ~~All~~Nonperforming loans include all loans with nonaccrual status and, prior to January 1, 2023, all loans that ~~have been~~were modified in a troubled debt ~~restructuring are classified as nonperforming.~~restructuring.

Vintage Analysis

The following tables ~~presents~~present credit quality disclosures of amortized cost by ~~segment~~portfolio class and vintage for term loans and by revolving and revolving converted to amortizing at March 31, ~~2022~~2023 and December 31, ~~2021.~~2022. The Company defines vintage as the later of origination, renewal or ~~restructure~~modification date. The gross charge-offs presented in the table are for the three months ended March 31, 2023.


	Term Loans														Revolving Loans
March 31, 2023	Amortized Cost Basis by Origination Year												Revolving		Converted to
($ in thousands)	2023		2022		2021		2020		2019		Prior		Loans		Term Loans		Total
Commercial Non-Real Estate:
Pass	$	443,067	$	2,385,284	$	1,362,105	$	592,762	$	505,331	$	958,298	$	3,214,349	$	49,851	$	9,511,047
Pass-Watch		18,434		54,455		32,893		30,343		7,487		58,113		73,146		2,196		277,067
Special Mention		32,611		5,560		522		1,837		4,198		1,145		8,984		141		54,998
Substandard		21,424		21,686		14,027		30,909		21,450		12,123		47,928		823		170,370
Doubtful		—		—		—		—		—		—		—		—		—
Total Commercial Non- Real Estate	$	515,536	$	2,466,985	$	1,409,547	$	655,851	$	538,466	$	1,029,679	$	3,344,407	$	53,011	$	10,013,482
Gross Charge-offs	$	—	$	309	$	170	$	463	$	12	$	33	$	2,993	$	548	$	4,528
Commercial Real Estate - Owner Occupied:
Pass	$	86,006	$	643,498	$	641,601	$	526,654	$	315,352	$	677,090	$	34,237	$	12,848	$	2,937,286
Pass-Watch		1,985		8,785		4,558		3,668		15,513		17,228		954		—		52,691
Special Mention		—		46		—		543		603		6,360		—		—		7,552
Substandard		18,506		6,957		680		7,453		4,734		13,889		1,000		—		53,219
Doubtful		—		—		—		—		—		—		—		—		—
Total Commercial Real Estate - Owner Occupied	$	106,497	$	659,286	$	646,839	$	538,318	$	336,202	$	714,567	$	36,191	$	12,848	$	3,050,748
Gross Charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Commercial Real Estate - Income Producing:
Pass	$	122,528	$	887,881	$	889,960	$	705,277	$	398,028	$	514,955	$	114,746	$	65	$	3,633,440
Pass-Watch		18,723		1,191		37		59,847		22,922		13,238		402		—		116,360
Special Mention		985		—		—		178		—		371		—		—		1,534
Substandard		3,535		397		319		1,214		8		1,648		—		—		7,121
Doubtful		—		—		—		—		—		—		—		—		—
Total Commercial Real Estate - Income Producing	$	145,771	$	889,469	$	890,316	$	766,516	$	420,958	$	530,212	$	115,148	$	65	$	3,758,455
Gross Charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Construction and Land Development:
Pass	$	155,497	$	748,153	$	545,932	$	103,183	$	7,786	$	24,241	$	126,158	$	5,379	$	1,716,329
Pass-Watch		2,408		3,185		2,670		96		522		611		368		—		9,860
Special Mention		—		—		—		—		191		—		—		—		191
Substandard		—		51		51		—		11		423		—		—		536
Doubtful		—		—		—		—		—		—		—		—		—
Total Construction and Land Development	$	157,905	$	751,389	$	548,653	$	103,279	$	8,510	$	25,275	$	126,526	$	5,379	$	1,726,916
Gross Charge-offs	$	—	$	7	$	54	$	—	$	—	$	—	$	—	$	—	$	61
Residential Mortgage:
Performing	$	173,196	$	628,643	$	800,082	$	516,534	$	187,232	$	990,957	$	3,038		—	$	3,299,682
Nonperforming		70		2,452		3,052		338		1,610		22,589		—		—		30,111
Total Residential Mortgage	$	173,266	$	631,095	$	803,134	$	516,872	$	188,842	$	1,013,546	$	3,038	$	—	$	3,329,793
Gross Charge-offs	$	—	$	—	$	—	$	—	$	—	$	20	$	—	$	—	$	20
Consumer Loans:
Performing	$	31,666	$	83,306	$	53,900	$	40,880	$	53,213	$	69,745	$	1,182,108	$	3,613	$	1,518,431
Nonperforming		32		172		362		573		610		4,081		162		706		6,698
Total Consumer	$	31,698	$	83,478	$	54,262	$	41,453	$	53,823	$	73,826	$	1,182,270	$	4,319	$	1,525,129
Gross Charge-offs	$	—	$	294	$	329	$	43	$	152	$	236	$	2,013	$	296	$	3,363

Term Loans

Amortized Cost Basis by Origination Year

March 31, 2022

2022

2021

2020

2019

2018

Prior

Revolving Loans

Revolving Loans Converted to Term Loans

Total

(in thousands)

Commercial Loans:

Pass

$
1,326,731

$
4,549,370

$
2,750,447

$
1,801,058

$
1,068,711

$
2,043,133

$
3,072,931

$
74,369

$
16,686,749

Pass-Watch

21,757

57,011

24,746

42,969

43,367

79,352

59,453

4,792

333,448

Special Mention

4,110

13,566

5,128

8,612

12,472

12,378

19,536

456

76,258

Substandard

31,450

24,783

36,877

37,591

15,382

36,110

23,046

973

206,212

Doubtful

—

—

—

—

—

—

—

—

—

Total Commercial Loans

$
1,384,048

$
4,644,730

$
2,817,198

$
1,890,230

$
1,139,932

$
2,170,973

$
3,174,966

$
80,590

$
17,302,667

Residential Mortgage and Consumer Loans:

Performing

$
170,543

$
557,335

$
486,997

$
314,321

$
197,414

$
1,131,990

$
1,123,451

$
4,492

$
3,986,543

Nonperforming

30

1,250

1,027

2,299

3,360

25,096

746

323

34,131

Total Consumer Loans

$
170,573

$
558,585

$
488,024

$
316,620

$
200,774

$
1,157,086

$
1,124,197

$
4,815

$
4,020,674

2119

Table of Contents

Term Loans

Amortized Cost Basis by Origination Year

December 31, 2021

2021

2020

2019

2018

2017

Prior

Revolving
Loans

Revolving
Loans
Converted
to Term
Loans

Total

(in thousands)

Commercial Loans:

Pass

$
4,946,459

$
3,008,160

$
2,035,849

��
$
1,212,306

$
937,639

$
1,296,382

$
3,002,064

$
80,535

$
16,519,394

Pass-Watch

68,421

19,467

31,598

45,846

27,188

69,310

52,850

5,714

320,394

Special
   Mention

17,536

2,683

10,296

12,410

10,669

3,656

9,603

6,243

73,096

Substandard

43,895

43,494

36,763

14,664

28,337

16,125

20,358

10,482

214,118

Doubtful

—

—

—

—

—

—

—

—

—

Total Commercial
   Loans

$
5,076,311

$
3,073,804

$
2,114,506

$
1,285,226

$
1,003,833

$
1,385,473

$
3,084,875

$
102,974

$
17,127,002

Residential Mortgage and Consumer Loans:

Performing

$
580,813

$
467,497

$
355,833

$
223,494

$
320,344

$
892,361

$
1,120,461

$
5,995

$
3,966,798

Nonperforming

565

951

2,018

4,465

4,719

24,365

1,432

1,967

40,482

Total Consumer
   Loans

$
581,378

$
468,448

$
357,851

$
227,959

$
325,063

$
916,726

$
1,121,893

$
7,962

$
4,007,280


	Term Loans														Revolving Loans
December 31, 2022	Amortized Cost Basis by Origination Year												Revolving		Converted to
($ in thousands)	2022		2021		2020		2019		2018		Prior		Loans		Term Loans		Total
Commercial Non-Real Estate:
Pass	$	2,600,656	$	1,450,689	$	679,355	$	569,842	$	267,025	$	763,122	$	3,193,769	$	116,659	$	9,641,117
Pass-Watch		68,307		38,949		31,841		11,757		8,237		49,577		66,339		9,836		284,843
Special Mention		30,276		13,625		2,443		4,406		322		1,654		25,184		2,070		79,980
Substandard		29,667		13,807		11,766		21,667		12,792		1,250		39,213		10,351		140,513
Doubtful		—		—		—		—		—		—		—		—		—
Total Commercial Non- Real Estate	$	2,728,906	$	1,517,070	$	725,405	$	607,672	$	288,376	$	815,603	$	3,324,505	$	138,916	$	10,146,453

Commercial Real Estate - Owner Occupied:
Pass	$	630,121	$	650,742	$	537,849	$	328,364	$	265,437	$	447,707	$	46,730	$	5,107	$	2,912,057
Pass-Watch		7,129		5,299		3,743		13,301		10,872		7,706		893		150		49,093
Special Mention		—		—		544		822		1,231		3,670		—		—		6,267
Substandard		19,899		547		6,715		7,663		7,543		21,465		1,000		809		65,641
Doubtful		—		—		—		—		—		—		—		—		—
Total Commercial Real Estate - Owner Occupied	$	657,149	$	656,588	$	548,851	$	350,150	$	285,083	$	480,548	$	48,623	$	6,066	$	3,033,058

Commercial Real Estate - Income Producing:
Pass	$	894,522	$	795,378	$	660,235	$	420,435	$	232,145	$	317,446	$	113,487	$	7,000	$	3,440,648
Pass-Watch		1,027		18,070		58,256		20,865		12,066		836		467		—		111,587
Special Mention		235		—		708		2,325		166		376		—		—		3,810
Substandard		415		—		2,785		8		1,240		498		—		—		4,946
Doubtful		—		—		—		—		—		—		—		—		—
Total Commercial Real Estate - Income Producing	$	896,199	$	813,448	$	721,984	$	443,633	$	245,617	$	319,156	$	113,954	$	7,000	$	3,560,991

Construction and Land Development:
Pass	$	663,735	$	711,731	$	148,579	$	9,198	$	15,360	$	10,854	$	128,842	$	2,457	$	1,690,756
Pass-Watch		8,233		1,944		643		559		199		450		69		—		12,097
Special Mention		—		—		—		196		—		—		—		—		196
Substandard		35		55		—		12		61		380		—		—		543
Doubtful		—		—		—		—		—		—		—		—		—
Total Construction and Land Development	$	672,003	$	713,730	$	149,222	$	9,965	$	15,620	$	11,684	$	128,911	$	2,457	$	1,703,592

Residential Mortgage:
Performing	$	631,339	$	694,104	$	518,705	$	192,431	$	107,675	$	918,918	$	3,147	$	—	$	3,066,319
Nonperforming		1,058		2,434		716		1,196		2,080		18,802		—		—		26,286
Total Residential Mortgage	$	632,397	$	696,538	$	519,421	$	193,627	$	109,755	$	937,720	$	3,147	$	—	$	3,092,605

Consumer Loans:
Performing	$	103,742	$	58,248	$	45,641	$	62,715	$	41,559	$	40,489	$	1,212,958	$	4,834	$	1,570,186
Nonperforming		193		198		228		758		381		3,341		459		1,603		7,161
Total Consumer	$	103,935	$	58,446	$	45,869	$	63,473	$	41,940	$	43,830	$	1,213,417	$	6,437	$	1,577,347

Residential Mortgage Loans in Process of Foreclosure

Loans in process of foreclosure include those for which formal foreclosure proceedings are in process according to local requirements of the applicable jurisdiction. Included in loans at March 31, ~~2022~~2023 and December 31, ~~2021~~2022 were $~~5.6~~3.8 million and $~~4.4~~4.9 million, respectively, of consumer loans secured by single family residential real estate that were in process of foreclosure. In addition to the single family residential real estate loans in process of foreclosure, the Company also held $~~2.4~~0.4 million of foreclosed single family residential properties in other real estate owned at both March 31, ~~2022~~2023 and December 31, ~~2021.~~2022.

Loans Held for Sale

Loans held for sale totaled $~~59.9~~23.4 million and $~~93.1~~26.4 million at March 31, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively. Loans held for sale is composed primarily of residential mortgage loans originated for sale in the secondary market. At March 31, 2023, residential mortgage loans carried at the fair value option totaled $14.9 million with an unpaid principal balance of $14.6 million. At December 31, 2022, residential mortgage loans carried at the fair value option totaled $~~25.0~~10.8 million with an unpaid principal balance of $~~25.1~~ ~~million. At December 31, 2021, residential mortgage loans carried at the fair value option totaled $41.0~~ ~~million with an unpaid principal balance of $40.1~~10.6 million. All other loans held for sale are carried at the lower of cost or market.

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4. ~~Securities Sold under Agreements to Repurchase~~Short-Term Borrowings

The following table presents information concerning short-term borrowings at March 31, 2023 and December 31, 2022.


	March 31,			December 31,
($ in thousands)	2023			2022
Federal funds purchased:
Amount outstanding at period end	$	350		$	1,850
Weighted-average interest at period end		4.40	%		3.90	%
Securities sold under agreements to repurchase:
Amount outstanding at period end	$	419,147		$	444,421
Weighted-average interest at period end		0.95	%		0.53	%
FHLB borrowings:
Amount outstanding at period end	$	3,100,000		$	1,425,000
Weighted-average interest at period end		4.99	%		4.70	%

The following table presents information concerning short-term borrowings for the three months ended March 31, 2023 and 2022.


	Three Months Ended
	March 31,
($ in thousands)	2023			2022
Federal funds purchased:
Average amount outstanding during period	$	8,411		$	2,387
Maximum amount at any month end during period	$	1,850		$	2,350
Weighted-average interest rate during period		5.11	%		0.28	%
Securities sold under agreements to repurchase:
Average amount outstanding during period	$	445,773		$	587,508
Maximum amount at any month end during period	$	499,011		$	640,592
Weighted-average interest rate during period		0.69	%		0.06	%
FHLB borrowings:
Average amount outstanding during period	$	1,644,444		$	1,100,011
Maximum amount at any month end during period	$	3,100,000		$	1,100,000
Weighted-average interest rate during period		4.74	%		0.49	%

Federal funds purchased represent unsecured borrowings from other banks, generally on an overnight basis.

~~Included in short-term borrowings are securities~~Securities sold under agreements to repurchase ~~that mature daily and~~("repurchase agreements") are ~~secured by U.S. agency securities totaling $518.0~~ ~~million and $563.2~~ ~~million at March 31, 2022 and December 31, 2021, respectively. The Company borrows~~ funds borrowed on a secured basis by selling securities under agreements to repurchase, mainly in connection with ~~treasury management~~treasury-management services offered to ~~its~~ deposit customers. The customer repurchase agreements mature daily and are secured by agency securities. As the Company maintains effective control over assets sold under agreements to repurchase, the securities continue to be ~~carried on~~presented in the ~~consolidated statements of financial condition.~~Consolidated Balance Sheets. Because the Company acts as a borrower transferring assets to the counterparty, and the agreements mature daily, the ~~Company’s~~Company's risk is limited.

The $3.1 billion of Federal Home Loan Bank ("FHLB") borrowings at March 31, 2023 consisted of five fixed rate advances with maturity dates in April and May 2023. The $1.4 billion of FHLB borrowings at December 31, 2022 consisted of one fixed rate note entered into on December 30, 2022, that matured on January 3, 2023.

Subsequent to quarter end, in early May 2023, the Company repaid $1.45 billion of FHLB borrowings at maturity using available excess liquidity, and continues to carry FHLB borrowings that will vary based on cash needs.

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5. Derivatives

Risk Management Objective of Using Derivatives

The Company enters into derivative financial instruments to manage risks related to differences in the amount, timing, and duration of the Company’s known or expected cash receipts and its known or expected cash payments. The Bank also enters into interest rate derivative agreements as a service to certain qualifying customers. The Bank manages a matched book with respect to these customer derivatives in order to minimize its net interest rate risk exposure resulting from such agreements. In addition, the Bank also enters into risk participation agreements under which it may either sell or buy credit risk associated with a customer’s performance under certain interest rate derivative contracts related to loans in which participation interests have been sold to or purchased from other banks.

~~Table of Contents~~

Fair Values of Derivative Instruments on the Balance Sheet

The table below presents the notional or contractual amounts and fair values of the Company’s derivative financial instruments as well as their classification on the consolidated balance sheets at March 31, ~~2022~~2023 and December 31, ~~2021.~~2022.


		March 31, 2022								December 31, 2021									March 31, 2023								December 31, 2022
				Derivative (1)								Derivative (1)									Derivative (1)								Derivative (1)
(in thousands)	Type of Hedge	Notional or Contractual Amount		Assets			Liabilities			Notional or Contractual Amount		Assets			Liabilities
($ in thousands)																		Type of Hedge	Notional or Contractual Amount		Assets			Liabilities			Notional or Contractual Amount		Assets			Liabilities
Derivatives designated as hedging instruments:
Interest rate swaps - variable rate loans	Cash Flow	$	1,325,000	$	1,336		$	36,930		$	1,125,000	$	5,884		$	4,421		Cash Flow	$	1,550,000	$	—		$	77,137		$	2,100,000	$	2,301		$	112,262
Interest rate swaps - securities	Fair Value		1,694,650		60,693			—			1,837,650		22,138			10,690		Fair Value		513,500		18,953			—			716,000		43,501			-
			3,019,650		62,029			36,930			2,962,650		28,022			15,111				2,063,500		18,953			77,137			2,816,000		45,802			112,262
Derivatives not designated as hedging instruments:
Interest rate swaps	N/A		5,188,151		84,071			82,835			5,193,991		75,819			75,861		N/A		4,909,754		137,404			135,584			4,620,544		172,242			169,712
Risk participation agreements	N/A		235,301		5			16			217,437		11			35		N/A		279,357		2			18			298,729		1			13
Interest rate-lock commitments on residential mortgage loans	N/A		66,675		585			132			82,037		1,525			1		N/A		34,048		720			—			10,930		8			113
Forward commitments to sell residential mortgage loans	N/A		31,306		55			168			46,739		1			645		N/A		13,705		—			276			13,819		161			8
To Be Announced (TBA) securities	N/A		42,750		736			7			55,000		15			53		N/A		20,500		1			165			10,000		78			7
Foreign exchange forward contracts	N/A		57,213		452			358			48,364		778			758		N/A		125,390		1,692			1,645			123,106		1,643			1,594
Visa Class B derivative contract	N/A		43,439		—			3,516			43,439		—			4,116		N/A		42,930		—			1,403			43,111		—			1,883
			5,664,835		85,904			87,032			5,687,007		78,149			81,469				5,425,684		139,819			139,091			5,120,239		174,133			173,330
Total derivatives		$	8,684,485	$	147,933		$	123,962		$	8,649,657	$	106,171		$	96,580			$	7,489,184	$	158,772		$	216,228		$	7,936,239	$	219,935		$	285,592
Less: netting adjustment (2)					(88,275	)		(45,705	)				(30,304	)		(61,534	)					(66,827	)		(27	)				(110,438	)		(81,471	)
Total derivative assets/liabilities				$	59,658		$	78,257				$	75,867		$	35,046					$	91,945		$	216,201				$	109,497		$	204,121

(1)

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

(2)

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

Cash Flow Hedges of Interest Rate Risk

The Company is party to various interest rate swap agreements designated and qualifying as cash flow hedges of the Company’s forecasted variable cash flows for pools of variable rate loans. For each agreement, the Company receives interest at a fixed rate and pays at a variable rate. The Company terminated sixswap agreements in ~~2021~~2023 and ~~received~~paid cash of approximately $~~23.7~~2.9 million, which was recorded as accumulated other comprehensive ~~income~~loss and is being ~~accreted~~amortized into earnings through the original maturity dates of the respective contracts. In 2023, the Company also converted all of its LIBOR-based swaps to SOFR with minimal impact to financial results. The notional amounts of the swap agreements in place at March 31, ~~2022~~2023 expire as follows:$~~425~~50 million in ~~2022~~2025; $~~150~~ ~~million in~~ ~~2023; $250~~475 million in 2026; $~~400~~925 million in 2027; and $100 million thereafter.

Fair Value Hedges of Interest Rate Risk

Interest rate swaps on securities available for sale

The Company is party to forward-starting fixed payer swaps that convert the latter portion of the term of certain available for sale securities to a floating rate. These derivative instruments are designated as fair value hedges of interest rate risk. This strategy provides the Company with a fixed rate coupon during the front-end unhedged tenor of the bonds and results in a floating rate security during the back-end hedged ~~tenor with hedged~~tenor. At March 31, 2023, these single layer instruments have hedge start dates between ~~October 2023 through~~January 2025 and July 2026, and maturity dates from December 2027 through March ~~2032.~~2031. The fair value of the hedged item attributable to interest rate risk ~~will be~~is presented in interest income along with the change in the fair value of the hedging instrument.

2322

Table of Contents

The ~~majority of the~~ hedged available for sale securities ~~is a~~are part of closed ~~portfolio~~portfolios of pre-payable commercial mortgage backed securities. In accordance with ASC 815, prepayment risk may be excluded when measuring the change in fair value of such hedged items attributable to interest rate risk under the ~~last-of-layer approach.~~portfolio layer method (formerly referred to as last-of-layer). At March 31, ~~2022,~~2023, the amortized cost basis of the closed portfolio of pre-payable commercial mortgage backed securities totaled $~~1.9~~559.2 ~~billion.~~million, excluding any basis adjustment. The amount that represents the hedged items was $~~1.6~~494.5 ~~billion~~million and the basis adjustment associated with the hedged items totaled $~~60.2~~19.0 million.

The Company terminated three ~~four~~ fair value swap agreements during the three months ended March 31, ~~2022~~2023 and received cash of approximately $~~6.5~~16.6 million. At the time of termination, the value of the swap was recorded as an adjustment to the book value of the underlying security, thereby changing its current book yield and extending its duration.

Derivatives Not Designated as Hedges

Customer interest rate derivative program

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

Risk participation agreements

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

Mortgage banking derivatives

The Bank also enters into certain derivative agreements as part of its mortgage banking activities. These agreements include interest rate lock commitments on prospective residential mortgage loans and forward commitments to sell loans to investors on either a best efforts or a mandatory delivery basis. The Company uses these forward sales commitments, which may include To Be Announced (“TBA”) security contracts, on the open market to protect the value of its rate locks and mortgage loans held for sale from changes in interest rates and pricing between the origination of the rate lock and the final sale of these loans. These instruments meet the definition of derivative financial instruments and are reflected in other assets and other liabilities in the Consolidated Balance Sheets, with changes to the fair value recorded in noninterest income within the secondary mortgage market operations line item in the Consolidated Statements of Income.

The loans sold on a mandatory basis commit the Company to deliver a specific principal amount of mortgage loans to an investor at a specified price, by a specified date. If the Company fails to deliver the amount of mortgages necessary to fulfill the commitment by the specified date, we may be obligated to pay a pair-off fee, based on then-current market prices, to the investor/counterparty to compensate the investor for the shortfall. Mandatory delivery forward commitments include TBA security contracts on the open market to provide protection against changes in interest rates on the locked mortgage pipeline. The Company expects that mandatory delivery contracts, including TBA security contracts, will experience changes in fair value opposite to the changes in the fair value of derivative loan commitments. Certain assumptions, including pull through rates and rate lock periods, are used in managing the existing and future hedges. The accuracy of underlying assumptions could impact the ultimate effectiveness of any hedging strategies.

Forward commitments under best effort contracts commit the Company to deliver a specific individual mortgage loan to an investor if the loan to the underlying borrower closes. Generally, best efforts cash contracts have no pair-off risk regardless of market movement. The price the investor will pay the seller for an individual loan is specified prior to the loan being funded, generally the same day the Company enters into the interest rate lock commitment with the potential borrower. The Company expects that these best efforts forward loan sale commitments will experience a net neutral shift in fair value with related derivative loan commitments.

~~Table of Contents~~

At the closing of the loan, the rate lock commitment derivative expires and the Company generally records a loan held for sale at fair value under the election of fair value option.

Table of Contents

Customer foreign exchange forward contract derivatives

The Company enters into foreign exchange forward derivative agreements, primarily forward foreign currency contracts, with commercial banking customers to facilitate their risk management strategies. The Bank manages its risk exposure from such transactions by entering into offsetting agreements with unrelated financial institutions. The Bank has not elected to designate these foreign exchange forward contract derivatives as hedges; as such, changes in the fair value of both the customer derivatives and the offsetting derivatives are recognized directly in earnings.

Visa Class B derivative contract

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

The contract includes a contingent accelerated termination clause based on the credit ratings of the Company. At March 31, ~~2022~~2023 and December 31, ~~2021,~~2022, the fair value of the liability associated with this contract was $~~3.5~~1.4 million and$~~4.1~~1.9 million, respectively. Refer to Note 13 – Fair Value of Financial Instruments for discussion of the valuation inputs and process for this derivative liability.

Effect of Derivative Instruments on the Statements of Income

The effects of derivative instruments on the ~~consolidated statements~~Consolidated Statements of ~~income~~Income for the three months ended March 31, ~~2022~~2023 and ~~2021~~2022 are presented in the table below.


		Three Months Ended						Three Months Ended
		March 31,
($ in thousands)								March 31,
Derivative Instruments:	Location of Gain (Loss) Recognized in the Statements of Income:	2022		2021			Location of Gain (Loss) Recognized in the Statements of Income:	2023			2022
Cash flow hedges:
Variable rate loans	Interest income - loans	$	6,754	$	6,136		Interest income - loans	$	(8,001	)	$	6,754
Fair value hedges:
Securities	Interest income - securities - taxable		1,158		83		Interest income - securities - taxable		2,750			1,158
Securities - termination	Noninterest income - securities transactions, net		1,620		—
Securities- terminations							Noninterest income - securities transactions, net		—			1,620
Derivatives not designated as hedging:						Derivatives not designated as hedging:
Residential mortgage banking	Noninterest income - secondary mortgage market operations		1,192		—		Noninterest income - secondary mortgage market operations		484			1,192
Customer and all other instruments	Noninterest income - other noninterest income		2,349		5,035		Noninterest income - other noninterest income		583			2,349
Total gain		$	13,073	$	11,254
Total gain (loss)								$	(4,184	)	$	13,073

Credit Risk-Related Contingent Features

Certain of the Bank’s derivative instruments contain provisions allowing the financial institution counterparty to terminate the contracts in certain circumstances, such as a downgrade of the Bank’s credit ratings below specified levels, a default by the Bank on its indebtedness, or the failure of the Bank to maintain specified minimum regulatory capital ratios or its regulatory status as a well-capitalized institution. These derivative agreements also contain provisions regarding the posting of collateral by each party. At March 31, ~~2022,~~2023, the Company iswas not in violation of any such provisions. The aggregate fair value of derivative instruments with credit

~~Table of Contents~~

risk-related contingent features that were in a net liability position at March 31, ~~2022~~2023 and December 31, ~~2021~~2022 was $~~0.6~~70.0 million and $~~49.4~~8.7 million, respectively, for which the Company had posted collateral of $~~0.7~~73.0 million and $~~15.0~~8.5 million, respectively.

Offsetting Assets and Liabilities

The Bank’s derivative instruments with certain counterparties contain legally enforceable netting provisions that allow for net settlement of multiple transactions to a single amount, which may be positive, negative, or zero. Agreements with certain bilateral

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counterparties require both parties to maintain collateral in the event that the fair values of derivative instruments exceed established exposure thresholds. For centrally cleared derivatives, the Company is subject to initial margin posting and daily variation margin exchange with the central clearinghouses.Offsetting information in regards to all derivative assets and liabilities, including accrued interest, subject to these master netting agreements at March 31, ~~2022~~2023 and December 31, ~~2021~~2022 is presented in the following ~~tables.~~tables.

(in thousands)

Gross
Amounts

Net Amounts

Gross Amounts Not Offset in the
Statement of Financial Condition

Description

Gross
Amounts
Recognized

Offset in
the Statement
of Financial Condition

Presented in
the Statement
of Financial Condition

Financial
Instruments

Cash
Collateral

Net
Amount

As of March 31, 2022

Derivative Assets

$
133,175

$
(87,894
)

$
45,281

$
3,796

$
48,163

$
89,648

Derivative Liabilities

$
49,810

$
(46,014
)

$
3,796

$
3,796

$
0

$
0


(in thousands)				Gross Amounts			Net Amounts		Gross Amounts Not Offset in the Statement of Financial Condition
($ in thousands)																		Gross Amounts			Net Amounts		Gross Amounts Not Offset in the Statement of Financial Condition
Description		Gross Amounts Recognized		Offset in the Statement of Financial Condition			Presented in the Statement of Financial Condition		Financial Instruments		Cash Collateral		Net Amount			Gross Amounts Recognized		Offset in the Statement of Financial Condition			Presented in the Statement of Financial Condition		Financial Instruments		Cash Collateral		Net Amount
As of December 31, 2021
As of March 31, 2023
Derivative Assets	$		36,790	$	(29,882	)	$	6,908	$	6,908	$	0	$	0		$	158,214	$	(69,032	)	$	89,182	$	85,772	$	109,617	$	113,027
Derivative Liabilities	$		85,448	$	(63,204	)	$	22,244	$	6,908	$	66,207	$	(50,871	)	$	85,797	$	(25	)	$	85,772	$	85,772	$	—	$	—


($ in thousands)			Gross Amounts			Net Amounts		Gross Amounts Not Offset in the Statement of Financial Condition
Description	Gross Amounts Recognized		Offset in the Statement of Financial Condition			Presented in the Statement of Financial Condition		Financial Instruments		Cash Collateral		Net Amount
As of December 31, 2022
Derivative Assets	$	223,072	$	(112,338	)	$	110,734	$	32,601	$	27,852	$	105,985
Derivative Liabilities	$	116,395	$	(83,794	)	$	32,601	$	32,601	$	—	$	—

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

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6. Stockholders’ Equity

Common Shares Outstanding

Common shares outstanding excludes treasury shares totaling ~~5.4~~6.2 millionand 6.3 million, ~~at March 31, 2022 and~~ ~~5.1~~ ~~million at December 31, 2021,~~ with a first-in-first-out cost basis of $~~193.8~~236.2 millionand $~~175.8~~238.6 million, at March 31, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively. Shares outstanding also excludes unvested restricted share awards totaling ~~1.1~~0.6 million and 0.7 million at March 31, ~~2022~~2023 and December 31, ~~2021.~~2022.

Stock Buyback Program

On ~~April 22, 2021,~~January 26, 2023, the Company’s board of directors approved a stock buyback program whereby the Company is authorized to repurchase up to 4.3 million shares of its common stock through the program’s expiration date of December 31, ~~2022~~2024. The program allows the Company to repurchase its common shares in the open market, by block purchase, through accelerated share repurchase programs, in privately negotiated transactions, or otherwise, in one or more transactions. The Company is not obligated to purchase any shares under this program, and the board of directors has the ability to terminate or amend the program at any time prior to the expiration date. To date, the Company has not repurchased shares under this program.

Prior to its expiration on December 31, 2022, the Company had in place a stock repurchase program authorized by the board of directors on April 22, 2021, whereby the Company was authorized to repurchase up to 4.3 million shares of its common stock. The program allowed the Company to repurchase its common shares in the open market, by block purchase, through accelerated share repurchase programs, in privately negotiated transactions, or otherwise, in one or more transactions. During the first quarter of 2022, the Company repurchased 350,000 shares of its common stock at an average cost of $52.82 per share, inclusive of commissions. ~~To date,~~In total, the Company ~~has~~ repurchased ~~799,876~~1.7 million shares at an average cost of $~~50.36~~48.77 per share under this ~~program.~~plan.

Accumulated Other Comprehensive Income (Loss)

A ~~roll forward~~roll-forward of the components of ~~AOCI~~Accumulated Other Comprehensive Income (Loss) is ~~included as~~presented in the table that follows:


	Available for Sale Securities			HTM Securities Transferred from AFS			Employee Benefit Plans			Cash Flow Hedges			Equity Method Investment			Total
($ in thousands)
Balance, December 31, 2021	$	11,037		$	153		$	(80,946	)	$	16,284		$	(463	)	$	(53,935	)
Net change in unrealized gain (loss)		(358,190	)		—			—			(33,182	)		468			(390,904	)
Reclassification of net income or loss realized and included in earnings		1,707			—			1,209			(6,754	)		—			(3,838	)
Transfer of net unrealized loss from AFS to HTM securities portfolio		15,405			(15,405	)		—			—			—			—
Amortization of unrealized net gain on securities transferred to HTM		—			261			—			—			—			261
Income tax (expense) benefit		76,981			3,418			(273	)		9,014			—			89,140
Balance, March 31, 2022	$	(253,060	)	$	(11,573	)	$	(80,010	)	$	(14,638	)	$	5		$	(359,276	)
Balance, December 31, 2022	$	(584,408	)	$	(10,734	)	$	(97,952	)	$	(79,093	)	$	5		$	(772,182	)
Net change in unrealized gain		80,958			—			—			19,280			706			100,944
Reclassification of net loss realized and included in earnings		—			—			1,519			8,001			—			9,520
Valuation adjustments to employee benefit plans		—			—			(1,836	)		—			—			(1,836	)
Amortization of unrealized net gain or loss on securities transferred to HTM		—			494			—			—			—			494
Income tax (expense) benefit		(18,224	)		(111	)		71			(6,141	)		—			(24,405	)
Balance, March 31, 2023	$	(521,674	)	$	(10,351	)	$	(98,198	)	$	(57,953	)	$	711		$	(687,465	)

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Available
for Sale
Securities

HTM Securities
Transferred
from AFS

Employee
Benefit Plans

Cash
Flow Hedges

Equity Method Investment

Total

(in thousands)

Balance, December 31, 2020

$
171,224

$
276

$
(125,573
)

$
39,511

$
(5,369
)

$
80,069

Net change in unrealized gain or loss

(141,800
)

—

—

(4,152
)

462

(145,490
)
Reclassification of net income or loss realized and included in earnings

—

—

1,954

(6,136
)

4,468

286

Amortization of unrealized net gain on securities transferred to HTM

—

(56
)

—

—

—

(56
)
Income tax expense (benefit)

(31,862
)

(13
)

439

(2,312
)

—

(33,748
)
Balance, March 31, 2021

$
61,286

$
233

$
(124,058
)

$
31,535

$
(439
)

$
(31,443
)
Balance, December 31, 2021

$
11,037

$
153

$
(80,946
)

$
16,284

$
(463
)

$
(53,935
)
Net change in unrealized gain or loss

(358,190
)

—

—

(33,182
)

468

(390,904
)
Reclassification of net income or loss realized and included in earnings

1,707

—

1,209

(6,754
)

—

(3,838
)
Transfer of net unrealized loss from AFS to HTM securities portfolio

15,405

(15,405
)

—

—

—

—

Amortization of unrealized net gain or loss on securities transferred to HTM

—

261

—

—

—

261

Income tax expense (benefit)

(76,981
)

(3,418
)

273

(9,014
)

—

(89,140
)
Balance, March 31, 2022

$
(253,060
)

$
(11,573
)

$
(80,010
)

$
(14,638
)

$
5

$
(359,276
)

Accumulated Other Comprehensive Income or Loss (“AOCI”) is reported as a component of stockholders’ equity. AOCI can include, among other items, unrealized holding gains and losses on securities available for sale (“AFS”), including the Company’s share of unrealized gains and losses reported by a partnership accounted for under the equity method, gains and losses associated with pension or other post-retirement benefits that are not recognized immediately as a component of net periodic benefit cost, and gains and losses on derivative instruments that are designated as, and qualify as, cash flow hedges. Net unrealized gains and losses on AFS securities reclassified as securities held to maturity (“HTM”) also continue to be reported as a component of AOCI and will be amortized over the estimated remaining life of the securities as an adjustment to interest income. Subject to certain thresholds, unrealized losses on employee benefit plans will be reclassified into income as pension and post-retirement costs are recognized over the remaining service period of plan participants. Accumulated gains or losses on cash flow hedges of variable rate loans described in Note 5 will be reclassified into income over the life of the hedge. Accumulated other comprehensive loss resulting from the terminated interest rate swaps will be amortized over the remaining maturities of the designated instruments. Gains and losses within AOCI are net of deferred income taxes, where applicable.

~~Table of Contents~~

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


	Three Months Ended							Three Months Ended
Amount reclassified from AOCI (a)	March 31,						Affected line item on	March 31,						Affected line item on
(in thousands)	2022			2021			the statement of income
($ in thousands)								2023			2022			the statement of income
Loss on sale of AFS securities	$	(1,707	)	$	—		Noninterest income	$	—		$	(1,707	)	Noninterest income
Tax effect		385			—		Income taxes		—			385		Income taxes
Net of tax		(1,322	)		—		Net income		—			(1,322	)	Net income
Amortization of unrealized net gain (loss) on securities transferred to HTM		(261	)		56		Interest income
Amortization of unrealized net loss on securities transferred to HTM									(494	)		(261	)	Interest income
Tax effect		59			(13	)	Income taxes		111			59		Income taxes
Net of tax		(202	)		43		Net income		(383	)		(202	)	Net income
Amortization of defined benefit pension and post-retirement items		(1,209	)		(1,954	)	Other noninterest expense (b)		(1,519	)		(1,209	)	Other noninterest expense (b)
Tax effect		273			439		Income taxes		340			273		Income taxes
Net of tax		(936	)		(1,515	)	Net income		(1,179	)		(936	)	Net income
Reclassification of unrealized gain on cash flow hedges		3,875			6,136		Interest income
Reclassification of unrealized gain/(Loss) on cash flow hedges									(10,629	)		3,875		Interest income
Tax effect		(875	)		(1,379	)	Income taxes		2,393			(875	)	Income taxes
Net of tax		3,000			4,757		Net income		(8,236	)		3,000		Net income
Amortization of gain (loss) on terminated cash flow hedges		2,879			—		Interest income
Amortization of gain on terminated cash flow hedges									2,628			2,879		Interest income
Tax effect		(650	)		—		Income taxes		(592	)		(650	)	Income taxes
Net of tax		2,229			—		Net income		2,036			2,229		Net income
Reclassification of unrealized loss on equity method investment		(468	)		(4,468	)	Noninterest income		—			(468	)	Noninterest income
Tax effect		—			—		Income taxes		—			—		Income taxes
Net of tax		(468	)		(4,468	)	Net income		—			(468	)	Net income
Total reclassifications, net of tax	$	2,301		$	(1,183	)	Net income	$	(7,762	)	$	2,301		Net income

(a)

Amounts in parentheses indicate reduction in net ~~income.~~income

(b)

These AOCI components are included in the computation of net periodic pension and post-retirement cost that is reported with other noninterest
expense (see Note 10 – Retirement Plans for additional details)

7. Other Noninterest Income

Components of other noninterest income are as follows:


	Three Months Ended				Three Months Ended
	March 31,				March 31,
(in thousands)	2022		2021
($ in thousands)					2023		2022
Income from bank-owned life insurance	$	3,545	$	7,281	$	3,286	$	3,545
Credit related fees		2,669		2,844		2,765		2,669
Income from derivatives		2,349		5,035		583		2,349
Other miscellaneous		6,434		492		4,584		6,434
Total other noninterest income	$	14,997	$	15,652	$	11,218	$	14,997

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8. Other Noninterest Expense

Components of other noninterest expense are as follows:


	Three Months Ended						Three Months Ended
	March 31,						March 31,
(in thousands)	2022			2021
Corporate value and franchise taxes	$	4,248		$	4,464
($ in thousands)							2023			2022
Corporate value and franchise taxes and other non-income taxes							$	5,253		$	4,248
Advertising								3,256			3,166
Telecommunications and postage		2,925			3,318			3,071			2,925
Advertising		3,166			2,486
Entertainment and contributions		2,961			1,448			2,631			2,961
Tax credit investment amortization		1,004			1,112			1,401			1,004
Printing and supplies		1,003			978			990			1,003
Travel expense		660			357			1,046			660
Net other retirement expense		(6,772	)		(6,545	)		(3,655	)		(6,772	)
Other miscellaneous		9,045			6,130			8,124			9,045
Total other noninterest expense	$	18,240		$	13,748		$	22,117		$	18,240

9. Earnings Per Common Share

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

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


	Three Months Ended				Three Months Ended
	March 31,				March 31,
(in thousands, except per share data)	2022		2021
($ in thousands, except per share data)					2023		2022
Numerator:
Net income to common shareholders	$	123,478	$	107,172	$	126,467	$	123,478
Net income allocated to participating securities - basic and diluted		1,918		2,337		1,358		1,918
Net income allocated to common shareholders - basic and diluted	$	121,560	$	104,835	$	125,109	$	121,560
Denominator:
Weighted-average common shares - basic		86,660		86,752		86,018		86,660
Dilutive potential common shares		276		53		264		276
Weighted-average common shares - diluted		86,936		86,805		86,282		86,936
Earnings per common share:
Basic	$	1.40	$	1.21	$	1.45	$	1.40
Diluted	$	1.40	$	1.21	$	1.45	$	1.40

Potential common shares consist of stock options, nonvested performance-based awards, nonvested restricted stock units, and ~~nonvested~~ restricted share awards deferred under the Company’s nonqualified deferred compensation plan. These potential common shares do not enter into the calculation of diluted earnings per share if the impact would be antidilutive, i.e., increase earnings per share or reduce a loss per share. ~~For~~Potential common shares totaling 34,157for the three months ended March 31, 2023, and 231for the three months ended March 31, 2022, ~~and 2021, antidilutive potential common shares with weighted averages~~did not enter the calculation of ~~231~~ ~~and~~ ~~7,191, respectively,were excluded from the computation of~~diluted earnings per ~~common share.~~share as the impact would have been anti-dilutive.

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10. Retirement Plans

The Company offers a qualified defined benefit pension plan, the Hancock Whitney Corporation Pension Plan and Trust Agreement (“Pension Plan”), covering certain eligible associates. Eligibility is based on minimum age and service-related requirements. The Pension Plan excludes any individual hired or rehired by the Company after June 30, 2017 from eligibility to participate, and the accrued benefits of any participant in the Pension Plan whose combined age plus years of service as of January 1, 2018 totaled less than 55 were frozen as of January 1, 2018 and will not thereafter increase. The Company makes contributions to the Pension Plan in amounts sufficient to meet funding requirements set forth in federal employee benefit and tax laws, plus such additional amounts as the Company may determine to be appropriate.

The Company also offers a defined contribution retirement benefit plan (401(k) plan), the Hancock Whitney Corporation 401(k) Savings Plan and Trust Agreement (“401(k) Plan”), that covers substantially all associates who have been employed 60 days and meet a minimum age requirement and employment classification criteria. The Company matches 100% of the first 1% of compensation saved by a participant, and 50% of the next 5% of compensation saved. Newly eligible associates are automatically enrolled at an initial 3% savings rate unless the associate actively opts out of participation in the plan. Beginning January 1, 2018, the Company makes an additional basic contribution to associates hired or rehired after June 30, 2017 in an amount equal to 2% of the associate’s eligible compensation. For Pension Plan participants whose benefits were frozen as of January 1, 2018, the 401(k) Plan provides an enhanced Company contribution in the amount of 2%, 4% or 6% of such participant’s eligible compensation, based on the participant’s current age and years of service with the Company. Participants vest in basic and enhanced Company contributions upon completion of three years of service.

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

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

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


							Other Post-												Other Post-
(in thousands)	Pension Benefits						Retirement Benefits
($ in thousands)													Pension Benefits						Retirement Benefits
For the Three Months Ended March 31,	2022			2021			2022			2021			2023			2022			2023			2022
Service cost	$	2,800		$	3,450		$	25		$	27		$	1,980		$	2,800		$	(31	)	$	25
Interest cost		3,417			3,460			77			99			5,788			3,417			216			77
Expected return on plan assets		(11,475	)		(12,058	)		—		—				(11,178	)		(11,475	)		—			—
Amortization of net (gain) or loss and prior service costs		1,348			2,100			(139	)		(146	)		1,770			1,348			(251	)		(139	)
Net reduction of periodic benefit cost	$	(3,910	)	$	(3,048	)	$	(37	)	$	(20	)
Net periodic benefit cost													$	(1,640	)	$	(3,910	)	$	(66	)	$	(37	)

~~During 2021, the Company completed a Voluntary Early Retirement Incentive Program (VERIP), which was accepted by approximately~~ ~~260~~ eligible Pension Plan participants. The event constituted a curtailment of the Pension Plan and resulted in a re-measurement of the projected benefit obligation at April 30, 2021. The program had two components: a supplemental cash incentive, substantially all of which was paid through the Pension Plan with existing plan assets, and coverage in a post-retirement medical plan, with each component having specific age and years of service requirements.

��

11. Share-Based Payment Arrangements

The Company maintains incentive compensation plans that provide for awards of share-based compensation to employees and directors. These plans have been approved by the Company’s shareholders. Detailed descriptions of these plans were included in Note 18 to the consolidated financial statements in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022.

At March 31, ~~2022,~~2023, the Company had ~~9,106~~1,476 outstanding and exercisable stock options, with a weighted average exercise price of $~~33.62~~53.73, weighted average remaining contractual term of less than one year and anno aggregate intrinsic ~~value of $0.2~~ ~~million.~~value. During the three months ended March 31, ~~2022, there~~2023, no stock options were 0 ~~exercises of stock options.~~exercised.

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The Company’s restricted and performance-based share awards to certain employees and directors are subject to service requirements. A summary of the status of the Company’s nonvested restricted stock units and restricted and performance-based share awards at March 31, ~~2022~~2023 are presented in the following table.


				Weighted					Weighted
				Average					Average
	Number of			Grant Date		Number of			Grant Date
	Shares			Fair Value		Shares			Fair Value
Nonvested at January 1, 2022		1,453,085		$	34.58
Nonvested at January 1, 2023							1,431,515		$	40.95
Granted		505,735			52.77		582,348			50.08
Vested		(81,592	)		34.74		(182,901	)		47.42
Forfeited		(64,180	)		33.14		(71,086	)		39.65
Nonvested at March 31, 2022		1,813,048		$	39.70
Nonvested at March 31, 2023							1,759,876		$	43.36

At March 31, ~~2022,~~2023, there was $~~61.5~~66.3 million of total unrecognized compensation expense related to nonvested restricted and performance share awards and units expected to vest in the future. This compensation is expected to be recognized in expense over a weighted average period of ~~3.3~~3.4 years. The total fair value of shares that vested during the three months ended March 31, ~~2022~~2023 was $~~2.2~~7.1 million.

During the three months ended March 31, ~~2022,~~2023, the Company granted ~~411,711~~463,604 restricted stock units (RSUs) to certain eligible employees. Unlike restricted share awards (RSAs), which still comprise the majority of the unvested share-based compensation awards, the holders of unvested restricted stock units have no rights as a shareholder of the Company, including voting or dividend rights. The Company has elected to award dividend equivalents on each restricted stock unit. Such dividend equivalents are forfeited should the employee terminate employment prior to the vesting of the RSU.

During the three months ended March 31, ~~2022,~~2023, the Company granted41,495 ~~36,475~~performance share awards subject to a total shareholder return (“TSR”) performance metric with a grant date fair value of $~~61.47~~51.14 per share and ~~36,475~~41,495 performance ~~shares~~share awards subject to an operating earnings per share performance metric with a grant date fair value of $~~47.36~~46.73 per share to key members of executive management. The number of performance shares subject to TSR that ultimately vest at the end of the three-year performance period, if any, will be based on the relative rank of the Company’s three-year TSR among the TSRs of a peer group of 50 regional banks. The fair value of the performance shares subject to TSR at the grant date was determined using a Monte Carlo simulation method. The number of performance shares subject to operating earnings per share that ultimately vest will be based on the Company’s attainment of certain operating earnings per share goals over the two-year performance period. The maximum number of performance shares that could vest is 200% of the target award. Compensation expense for these performance shares is recognized on a straight line basis over the three-year service period.

12. Commitments and Contingencies

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

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

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

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

~~Table of Contents~~

require collateral or other credit support. The Company had a reserve for unfunded lending commitments of $~~30.7~~32.0 millionand $~~29.3~~33.3 million at March 31, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively.

Table of Contents

The following table presents a summary of the Company’s off-balance sheet financial instruments as of March 31, ~~2022~~2023 and December 31, ~~2021:~~2022:


	March 31,		December 31,		March 31,		December 31,
(in thousands)	2022		2021
($ in thousands)					2023		2022
Commitments to extend credit	$	9,612,025	$	9,444,803	$	10,285,535	$	10,202,464
Letters of credit		382,067		396,956		430,026		400,505

Legal Proceedings

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

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13. Fair Value Measurements

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

~~Table of Contents~~

Fair Value of Assets and Liabilities Measured on a Recurring Basis

The following tables present for each of the fair value hierarchy levels the Company’s financial assets and liabilities that are measured at fair value on a recurring basis in the consolidated balance sheets at March 31, ~~2022~~2023 and December 31, ~~2021:~~2022:


	March 31, 2023
($ in thousands)	Level 1		Level 2		Level 3		Total
Assets
Available for sale debt securities:
U.S. Treasury and government agency securities	$	—	$	111,515	$	—	$	111,515
Municipal obligations		—		204,469		—		204,469
Corporate debt securities		—		20,124		—		20,124
Residential mortgage-backed securities		—		2,219,264		—		2,219,264
Commercial mortgage-backed securities		—		2,942,605		—		2,942,605
Collateralized mortgage obligations		—		67,643		—		67,643
Total available for sale securities		—		5,565,620		—		5,565,620
Mortgage loans held for sale		—		14,923		—		14,923
Derivative assets (1)		—		91,945		—		91,945
Total recurring fair value measurements - assets	$	—	$	5,672,488	$	—	$	5,672,488
Liabilities
Derivative liabilities (1)	$	—	$	214,798	$	1,403	$	216,201
Total recurring fair value measurements - liabilities	$	—	$	214,798	$	1,403	$	216,201


	December 31, 2022
($ in thousands)	Level 1		Level 2		Level 3		Total
Assets
Available for sale debt securities:
U.S. Treasury and government agency securities	$	—	$	110,865	$	—	$	110,865
Municipal obligations		—		203,092		—		203,092
Corporate debt securities		—		21,080		—		21,080
Residential mortgage-backed securities		—		2,256,986		—		2,256,986
Commercial mortgage-backed securities		—		2,893,430		—		2,893,430
Collateralized mortgage obligations		—		70,588		—		70,588
Total available for sale securities		—		5,556,041		—		5,556,041
Mortgage loans held for sale				10,843		—		10,843
Derivative assets (1)		—		109,497		—		109,497
Total recurring fair value measurements - assets	$	—	$	5,676,381	$	—	$	5,676,381
Liabilities
Derivative liabilities (1)	$	—	$	202,238	$	1,883	$	204,121
Total recurring fair value measurements - liabilities	$	—	$	202,238	$	1,883	$	204,121

March 31, 2022

(in thousands)

Level 1

Level 2

Level 3

Total

Assets

Available for sale debt securities:

U.S. Treasury and government agency securities

$
—

$
9,631

$
—

$
9,631

Municipal obligations

—

215,634

—

215,634

Corporate debt securities

—

20,927

—

20,927

Residential mortgage-backed securities

—

2,761,422

—

2,761,422

Commercial mortgage-backed securities

—

2,894,173

—

2,894,173

Collateralized mortgage obligations

—

91,220

—

91,220

Total available for sale securities

—

5,993,007

—

5,993,007

Mortgage loans held for sale

—

25,046

—

25,046

Derivative assets (1)

—

59,658

—

59,658

Total recurring fair value measurements - assets

$
—

$
6,077,711

$
—

$
6,077,711

Liabilities

Derivative liabilities (1)

$
—

$
74,741

$
3,516

$
78,257

Total recurring fair value measurements - liabilities

$
—

$
74,741

$
3,516

$
78,257

December 31, 2021

(in thousands)

Level 1

Level 2

Level 3

Total

Assets

Available for sale debt securities:

U.S. Treasury and government agency securities

$
—

$
419,298

$
—

$
419,298

Municipal obligations

—

314,158

—

314,158

Corporate debt securities

—

18,702

—

18,702

Residential mortgage-backed securities

—

3,035,798

—

3,035,798

Commercial mortgage-backed securities

—

3,077,859

—

3,077,859

Collateralized mortgage obligations

—

120,883

—

120,883

Total available for sale securities

—

6,986,698

—

6,986,698

Mortgage loans held for sale

41,022

41,022

Derivative assets (1)

—

75,867

—

75,867

Total recurring fair value measurements - assets

$
—

$
7,103,587

$
—

$
7,103,587

Liabilities

Derivative liabilities (1)

$
—

$
30,930

$
4,116

$
35,046

Total recurring fair value measurements - liabilities

$
—

$
30,930

$
4,116

$
35,046

(1)

For further disaggregation of derivative assets and liabilities, see Note 5 - Derivatives.

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

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

Loans held for sale consist of residential mortgage loans carried under the fair value option. The fair value for these instruments is classified as level 2 based on market prices obtained from potential buyers.

~~Table of Contents~~

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

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

The Company’s ~~Level~~level 3 liability consists of a derivative contract with the purchaser of 192,163 shares of Visa Class B common stock. Pursuant to the agreement, the Company retains the risks associated with the ultimate conversion of the Visa Class B common shares into shares of Visa Class A common stock, such that the counterparty will be compensated for any dilutive adjustments to the conversion ratio and the Company will be compensated for any anti-dilutive adjustments to the ratio. The agreement also requires periodic payments by the Company to the counterparty calculated by reference to the market price of Visa Class A common shares at the time of sale and a fixed rate of interest that steps up once after the eighth scheduled quarterly payment. The fair value of the liability is determined using a discounted cash flow methodology. The significant unobservable inputs used in the fair value measurement are the Company’s own assumptions about estimated changes in the conversion rate of the Visa Class B common shares into Visa Class A common shares, the date on which such conversion is expected to occur and the estimated growth rate of the Visa Class A common share price. Refer to Note 5 – Derivatives for information about the derivative contract with the counterparty.

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

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

The table below presents a rollforward of the amounts on the consolidated balance sheets for the three months ended March 31, ~~2022~~2023 and the year ended December 31, ~~2021~~2022 for financial instruments of a material nature that are classified within ~~Level~~level 3 of the fair value hierarchy and are measured at fair value on a recurring basis:


(in thousands)
Balance at December 31, 2020	$	5,645
Cash settlement		(1,767	)
Losses included in earnings		238
($ in thousands)
Balance at December 31, 2021		4,116		$	4,116
Cash settlement		(634	)		(2,429	)
Losses included in earnings		34			196
Balance at March 31, 2022	$	3,516
Balance at December 31, 2022					1,883
Conversion rate adjustment					(283	)
Cash settlement					(430	)
Losses included in earnings					233
Balance at March 31, 2023				$	1,403

Table of Contents

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

~~Table of Contents~~

($ in thousands)

Fair Value

Level 3 Class

March 31, 2022

December 31, 2021

Derivative liability

$
3,516

$
4,116

Valuation technique

Discounted cash flow

Discounted cash flow

Unobservable inputs:

Visa Class A appreciation - range

6%-12%

6%-12%

Visa Class A appreciation - weighted average

9%

9%

Conversion rate - range

1.62x-1.60x

1.62x-1.60x

Conversion rate -weighted average

1.6091x

1.6091x

Time until resolution

3-21 months

3-24 months


($ in thousands)
	Fair Value
Level 3 Class	March 31, 2023		December 31, 2022
Derivative liability	$	1,403	$	1,883
Valuation technique	Discounted cash flow		Discounted cash flow
Unobservable inputs:
Visa Class A appreciation - range	6-12%		6-12%
Visa Class A appreciation - weighted average	9%		9%
Conversion rate - range	1.60x-1.59x		1.61x-1.60x
Conversion rate -weighted average	1.5950x		1.6030x
Time until resolution	3-9 months		3-12 months

The Company’s policy is to recognize transfers between valuation hierarchy levels as of the end of a reporting period.

Fair Value of Assets Measured on a Nonrecurring Basis

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

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

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

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


	March 31, 2023
($ in thousands)	Level 1		Level 2		Level 3		Total
Collateral-dependent loans individually evaluated for credit loss	$	—	$	13,212	$	—	$	13,212
Other real estate owned and foreclosed assets, net		—		—		1,976		1,976
Total nonrecurring fair value measurements	$	—	$	13,212	$	1,976	$	15,188


	December 31, 2022
($ in thousands)	Level 1		Level 2		Level 3		Total
Collateral-dependent loans individually evaluated for credit loss	$	—	$	4,692	$	—	$	4,692
Other real estate owned and foreclosed assets, net		—		—		2,017		2,017
Total nonrecurring fair value measurements	$	—	$	4,692	$	2,017	$	6,709

March 31, 2022

(in thousands)

Level 1

Level 2

Level 3

Total

Collateral-dependent loans individually evaluated for credit loss

$
—

$
4,861

$
—

$
4,861

Other real estate owned and foreclosed assets, net

—

—

6,345

6,345

Total nonrecurring fair value measurements

$
—

$
4,861

$
6,345

$
11,206

December 31, 2021

(in thousands)

Level 1

Level 2

Level 3

Total

Collateral-dependent loans individually evaluated for credit loss

$
—

$
13,253

$
—

$
13,253

Other real estate owned and foreclosed assets, net

—

—

7,533

7,533

Total nonrecurring fair value measurements

$
—

$
13,253

$
7,533

$
20,786

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

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

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

~~Table of Contents~~

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

Loans Held for Sale – These loans are either carried under the fair value option or at the lower of cost or market. Given the short duration of these instruments, the carrying amount is considered a reasonable estimate of fair value.

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

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

Short-Term FHLB Borrowings – ~~The~~At March 31, 2023, short-term FHLB borrowings was comprised of several fixed-rate instruments for which the fair value iswas estimated by discounting the future contractual cash flows using current market rates at which borrowings with similar terms and options could be ~~obtained.~~obtained and, therefore, is reflected as level 2 in respective the table below. At December 31, 2022, short-term FHLB borrowings was comprised of one fixed-rate instrument entered into on December 30, 2022, and maturing on January 3, 2023; as such, the carrying amount of the instrument is a reasonable estimate of the fair value and is reflected as level 1 in the respective table below.

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

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

3635

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The following tables present the estimated fair values of the Company’s financial instruments by fair value hierarchy levels and the corresponding carrying ~~amounts:~~amounts.


	March 31, 2023
							Total Fair		Carrying
($ in thousands)	Level 1		Level 2		Level 3		Value		Amount
Financial assets:
Cash, interest-bearing bank deposits, and federal funds sold	$	2,882,521	$	—	$	—	$	2,882,521	$	2,882,521
Available for sale securities		—		5,565,620		—		5,565,620		5,565,620
Held to maturity securities		—		2,623,760		—		2,623,760		2,825,064
Loans, net		—		13,212		22,970,797		22,984,009		23,095,138
Loans held for sale		—		23,436		—		23,436		23,436
Derivative financial instruments		—		91,945		—		91,945		91,945
Financial liabilities:
Deposits	$	—	$	—	$	29,587,071	$	29,587,071	$	29,613,070
Federal funds purchased		350		—		—		350		350
Securities sold under agreements to repurchase		419,147		—		—		419,147		419,147
FHLB short-term borrowings		—		3,100,275		—		3,100,275		3,100,000
Long-term debt		—		206,659		—		206,659		242,115
Derivative financial instruments		—		214,798		1,403		216,201		216,201

March 31, 2022

Total Fair

Carrying

(in thousands)

Level 1

Level 2

Level 3

Value

Amount

Financial assets:

Cash, interest-bearing bank deposits, and federal funds sold

$
3,836,431

$
—

$
—

$
3,836,431

$
3,836,431

Available for sale securities

—

5,993,007

—

5,993,007

5,993,007

Held to maturity securities

—

2,429,049

—

2,429,049

2,488,088

Loans, net

—

4,861

20,501,931

20,506,792

21,005,498

Loans held for sale

—

59,877

—

59,877

59,877

Derivative financial instruments

—

59,658

—

59,658

59,658

Financial liabilities:

Deposits

$
—

$
—

$
30,454,443

$
30,454,443

$
30,499,709

Federal funds purchased

2,350

—

—

2,350

2,350

Securities sold under agreements to repurchase

517,952

—

—

517,952

517,952

FHLB short-term borrowings

—

1,105,633

—

1,105,633

1,100,000

Long-term debt

—

231,781

—

231,781

240,454

Derivative financial instruments

—

74,741

3,516

78,257

78,257


	December 31, 2021										December 31, 2022
(in thousands)	Level 1		Level 2		Level 3		Total Fair Value		Carrying Amount
($ in thousands)											Level 1		Level 2		Level 3		Total Fair Value		Carrying Amount
Financial assets:
Cash, interest-bearing bank deposits, and federal funds sold	$	4,231,836	$	—	$	—	$	4,231,836	$	4,231,836	$	888,519	$	—	$	—	$	888,519	$	888,519
Available for sale securities		—		6,986,698		—		6,986,698		6,986,698		—		5,556,041		—		5,556,041		5,556,041
Held to maturity securities		—		1,631,482		—		1,631,482		1,565,751		—		2,615,398		—		2,615,398		2,852,495
Loans, net		—		13,253		20,720,568		20,733,821		20,792,217		—		4,692		22,132,683		22,137,375		22,806,257
Loans held for sale		—		93,069		—		93,069		93,069		—		26,385		—		26,385		26,385
Derivative financial instruments		—		75,867		—		75,867		75,867		—		109,497		—		109,497		109,497
Financial liabilities:
Deposits	$	—	$	—	$	30,432,646	$	30,432,646	$	30,465,897	$	—	$	—	$	29,041,635	$	29,041,635	$	29,070,349
Federal funds purchased		1,850		—		—		1,850		1,850		1,850		—		—		1,850		1,850
Securities sold under agreements to repurchase		563,211		—		—		563,211		563,211		444,421		—		—		444,421		444,421
FHLB short-term borrowings		—		1,119,026		—		1,119,026		1,100,000		1,425,000		—		—		1,425,000		1,425,000
Long-term debt		—		253,677		—		253,677		244,220		—		200,060		—		200,060		242,077
Derivative financial instruments		—		30,930		4,116		35,046		35,046		—		202,238		1,883		204,121		204,121

14. Recent Accounting Pronouncements

Accounting Standards ~~Issued But Not Yet~~ Adopted During the Three Months Ended March 31, 2023

In March 2022, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2022-01, "Derivatives and Hedging (Topic 815): Fair Value Hedging - Portfolio Layer Method," to provide clarification of and expand upon certain provisions of Topic 815 that became effective with the issuance of ASU 2017-12. The amendments in this update include the following provisions: (1) expand the current last-of-layer method to allow multiple hedged layers of a single closed portfolio and, accordingly, renaming the last-of-layer method to the portfolio layer method; (2) expand the scope of the portfolio layer method to include nonprepayable financial assets; (3) specify that eligible hedging instruments in a single-layer hedge may include spot-starting or forward-starting constant-notional swaps, or spot or forward-starting amortizing-notional swaps and that the number of hedged layers corresponds with the number of hedges designated; (4) provide additional guidance on the accounting for and disclosure of hedge basis adjustments that are applicable to the portfolio layer method whether a single hedged layer or multiple hedged layers are designated, and; (5) specify how hedge basis adjustments should be considered when determining credit losses for the assets included in the closed portfolio. The amendments in this update apply to all entities that elect to apply the portfolio layer method of hedge accounting in accordance with Topic 815.

~~Table of Contents~~

The amendments in this ~~Update are~~update were effective for fiscal years beginning after December 15, 2022, and interim periods within those fiscal years. Early adoption is permitted on any date on or after the issuance of this update, with the effect of adopting the amendments related to basis adjustments reflected as of the beginning of the fiscal year of adoption (that is, the initial application date). Upon adoption, any entity may designate multiple hedged layers of a single closed portfolio solely on a prospective basis. All entities are required to apply the amendments related to hedge basis adjustments under the portfolio layer method, except for those related to disclosures, on a modified retrospective basis by means of a cumulative-effect adjustment to the opening balance of retained earnings on the initial application date. Entities have the option to apply the amendments related to disclosures on a prospective basis

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from the initial application date or on a retrospective basis to each prior period presented after the date of adoption of the amendments in Update 2017-12. Within 30 days after the adoption, an entity may reclassify debt securities classified in the held-to-maturity category at the date of adoption to the available-for-sale category only if the entity applies portfolio layer method hedging to one or more closed portfolios that include those debt securities. The Company ~~is currently evaluating~~adopted this standard ~~including consideration~~effective January 1, 2023, and elected to apply amendments to disclose on a prospective basis with no reclassification of ~~early adoption, however, the~~debt securities from held to maturity to available for sale. The impact of adoption iswas not ~~expected to be~~ material to the Company's consolidated financial position or results of ~~operation.~~operations.

In March ~~2002,~~2022, the FASB issued ASU 2022-02, "Financial Instruments: Credit Losses (Topic 326) - Troubled Debt Restructurings and Vintage Disclosures." The amendments in this update cover two issues: (1) the elimination of TDR recognition and measurement guidance as prescribed by ASC 310-40 and, instead, require that an entity evaluate (consistent with the accounting for other loan modifications) whether the modification represents a new loan or a continuation of an existing loan. The amendments enhance existing disclosure requirements and introduce new requirements related to certain modifications of receivables made to borrowers experiencing financial difficulty; and, (2) for public business entities, the requirement that an entity disclose current-period gross write-offs by year of origination for financing receivables and net investment in leases within the scope of Subtopic 326-20. Gross write-off information must be included in the vintage disclosures required for public business entities in accordance with paragraph 326-20-50-6, which requires that an entity disclose the amortized cost basis of financing receivables by credit quality indicator and class of financing receivable by year of origination.

The amendments in this update ~~are~~were effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. For the elimination of recognition and measurement guidance on troubled debt restructurings by creditors in Subtopic 310-40, an entity may elect to apply a modified retrospective transition by means of a cumulative-effect adjustment to the opening retained earnings as of the beginning of the fiscal year of adoption, or a prospective approach applied to modifications occurring after the date of adoption. The remainder of amendments should be applied prospectively. The Company adopted this standard effective January 1, 2023, on a prospective basis for all amendments. The adoption of this standard was not material to the Company's consolidated financial position or results of operations.

Accounting Standards Issued But Not Yet Adopted

In March 2023, FASB issued ASU 2023-02, “Investments – Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method,” to allow reporting entities to have the option to elect and expand the use of the proportional amortization method of accounting for qualifying tax credit equity investments structures that meet certain criteria. Existing guidance under Subtopic 323-70 provides the option to apply the proportional amortization method only to investments in low-income-housing tax credit structures; equity investments in other tax credit structures are typically accounted for under Topic 321, Investments – Equity Securities. Under the provisions of this update, the accounting policy election to apply the proportional amortization method can be made on a tax-credit-program-by-tax-credit-program basis for programs that meeting certain conditions and is not made at the reporting entity or individual investment level. Application of the proportional amortization method to any eligible tax credit investments will result in the cost of the investment being amortized in proportion to the income tax credits and other income tax benefits received, with the amortization being presented as a component of income tax expense (benefit), as opposed to current guidance under Topic 321, where any investment income, gains and losses and tax credits are all presented gross in the statement of income.

For public business entities, the amendments are effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted for all entities in any interim period; if an entity adopts the amendments in an interim period, it shall adopt them as of the beginning of the fiscal year that includes that interim period. The amendments in this update is permitted, including adoption in an interim period. An entity may elect to early adopt the amendments about TDRs and related disclosure enhancements separately from the amendments related to vintage disclosures.must be applied on either a modified retrospective or a retrospective basis. The Company is currently ~~evaluating~~assessing the provisions of this ~~standard, however, the~~guidance, but does not expect adoption to have a material impact ~~of adoption is not expected~~ to ~~be material to the~~its consolidated financial position or results of ~~operation.~~operations.

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

FORWARD-LOOKING STATEMENTS

The objective of this discussion and analysis is to provide material information relevant to the assessment of the financial condition and results of operations of Hancock Whitney Corporation and subsidiaries during the three months ended March 31, ~~2022~~2023 and selected comparable prior periods, including an evaluation of the amounts and certainty of cash flows from operations and outside sources. This discussion and analysis is intended to highlight and supplement financial and operating data and information presented elsewhere in this report, including the consolidated financial statements and related notes. The discussion contains forward-looking statements within the meaning and protections of section 27A of the Securities Act of 1933, as amended, and section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are subject to risks and uncertainties. Should one or more of these risks or uncertainties materialize, our actual results may differ from those expressed or implied by the forward-looking statements. Important factors that could cause actual results to differ materially from the forward-looking statements we make in this Quarterly Report on Form 10-Q and in other reports or documents that we file from time to time with the SEC include, but are not limited to, the following:

•

general economic and business conditions in our local markets, including conditions affecting employment levels, interest rates, inflation, supply chains, the threat of recession, volatile equity capital markets, collateral values, customer income, creditworthiness and confidence, spending and savings that may affect customer bankruptcies, defaults, charge-offs and deposit activity; and the impact of the foregoing on customer and client behavior (including the velocity and levels of deposit withdrawals and loan repayments);

•

recent adverse developments in the ~~ongoing~~banking industry highlighted by high-profile bank failures and the potential impact of such developments on customer confidence, liquidity and regulatory responses to these developments (including increases in the ~~COVID-19 pandemic on~~cost of our deposit insurance assessments), the ~~economy~~Company's ability to effectively manage its liquidity risk and ~~our operations;~~any growth plans, and the availability of capital and funding;

•

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

•

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

•

loan growth expectations;

•

~~the impact of Paycheck Protection Program (PPP) loans and forgiveness on our results;~~

•

management’s predictions about charge-offs;

•

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

•

the impact of future business combinations upon our performance and financial condition including our ability to successfully integrate the businesses;

•

deposit ~~trends;~~trends, including growth, pricing and betas;

•

credit quality trends;

•

changes in interest rates;

•

the impact of reference rate reform;

•

net interest margin trends, including the impact of changes in interest rates;

•

changes in the cost and availability of funding due to changes in the deposit and credit markets;

•

success of revenue-generating and cost reducing initiatives;

•

future expense levels;

•

improvements in expense to revenue (efficiency ratio), including the risk that we may not realize and/or sustain the expected benefits from our efficiency and growth initiatives or that we may not be able to realize these cost savings or revenue benefits in the time period expected, which could negatively affect our future profitability;

•

~~success of revenue-generating and cost reduction initiatives;~~

•

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

•

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

•

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

•

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

•

the extensive use, reliability, disruption, and accuracy of the models and data we rely on;

•

risks related to our implementation of new lines of business, new products and services, or new ~~technologies;~~technologies, and expansion of our existing business opportunities;

•

projected tax rates;

•

future profitability;

•

purchase accounting impacts, such as accretion levels;

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•

our ability to identify and address potential cybersecurity risks on our systems and/or third party vendors and service providers on which we rely, heightened by ~~the~~ increased use of our virtual private network platform, including data security breaches, credential stuffing, malware, “denial-of-service” attacks, “hacking” and identity theft, a failure of which could disrupt our business and result in the disclosure of and/or misuse or misappropriation of confidential or proprietary information, disruption or damage to our systems, increased costs, losses, or adverse effects to our reputation;

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

39•

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the risk that we may be required to make substantial expenditures to keep pace with regulatory initiatives and the rapid technology changes in the financial services market;

•

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

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

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our ability to maintain adequate internal controls over financial reporting;

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potential claims, damages, penalties, fines and reputational damage resulting from pending or future litigation, regulatory proceedings and enforcement actions, including costs and effects of litigation related to our participation in stimulus programs associated with the government’s response to the COVID-19 pandemic;

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the financial impact of future tax legislation;

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the effects of war or other conflicts, including Russia's military action in Ukraine, acts of terrorism, climate change, natural disasters such as hurricanes, freezes, flooding, ~~and other~~ man-made disasters, such as oil spills in the Gulf of Mexico, health emergencies, epidemics or pandemics, or other catastrophic events that may affect general economic conditions;

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risks related to environmental, social and governance ("ESG") legislation, rulemaking, activism and litigation, the scope and pace of which could alter our reputation and shareholder, associate, customer and third-party affiliations; and

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changes in laws and regulations affecting our businesses, including governmental monetary and fiscal policies, legislation and regulations relating to bank products and services, increased regulatory scrutiny resulting from recent bank failures, the possibility that the U.S. could default on its debt obligations, as well as changes in the enforcement and interpretation of such laws and regulations by applicable governmental and self-regulatory agencies, which could require us to change certain business practices, increase compliance risk, reduce our revenue, impose additional costs on us, or otherwise negatively affect our businesses.

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

Forward-looking statements are subject to significant risks and uncertainties. Investors are cautioned against placing undue reliance on such statements. Actual results may differ materially from those set forth in the forward looking statements. Additional factors that could cause actual results to differ materially ~~from those described in the forward-looking statements~~ can be found in Part II, Item 1A. "Risk Factors" herein, in Part I, Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, ~~2021 and~~2022, or in other periodic reports that we file with the SEC.

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

OVERVIEW

Non-GAAP Financial Measures

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

A reconciliation of those measures to GAAP measures are provided in the Consolidated Financial Results table later in this item. The following is a summary of these non-GAAP measures and an explanation as to why they are deemed useful.

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Consistent with the provisions of subpart 229.1400 of the Securities and Exchange Commission’s Regulation S-K, “Disclosures by Bank and Savings and Loan Registrants,” we present net interest income, net interest margin and efficiency ratios on a fully taxable equivalent (“te”) basis. The te basis adjusts for the tax-favored status of net interest income from certain loans and investments using a statutory federal tax rate of 21% to increase tax-exempt interest income to a taxable equivalent basis. We believe this measure to be the preferred industry measurement of net interest income, and that it enhances comparability of net interest income arising from taxable and tax-exempt sources.

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

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

Current Economic Environment

~~During~~The persistent high level of inflation remained the center of economic focus in the first quarter of ~~2022, the U.S. economy contracted for the first time since the second quarter 2020, as Gross Domestic Product (GDP) declined 1.4% on an annualized basis.~~2023. The decline in real GDP reflected a decline in Federal national defense spending, a decline in net exports, and a decline in private inventory investment. There were, however, bright spots, as consumer spending, a primary driver of economic activity, grew 2.7%, slightly above the fourth quarter 2021 rate of 2.5%. Business spending, as measured by residential and nonresidential investment increased 7.3% at an annualized rate, above the fourth quarter 2021 rate of 2.7%. According to the U.S. Bureau of Labor and Statistics, the rate of unemployment again declined, falling to 3.6% in March 2022 from 3.9% in December 2021. At present, the epidemiological risks of COVID-19 have lessened and most of the social restrictions in response to those risks have been removed. However, lingering and pervasive economic effects of the pandemic remain, including supply chain backlogs, labor shortages and increased input costs, resulting in escalating inflationary conditions. Further, the recent military conflict between Russia and Ukraine has prompted concern over global commodity supply, intensifying inflationary pressures. In response to these conditions, in March 2022, the Federal Reserve ~~approved the first interest rate increase in over three years. The~~continued its aggressive approach to tempering inflation, issuing additional 25-basis point interest rate ~~increase is expected~~increases in February and March. Thus far, there have been mixed indications as to whether the Federal Reserve will be successful in its efforts to combat inflation and slow economic growth. The U.S Treasury yield curve remained inverted throughout the first quarter, historically an indication of ~~potentially several increases in the next year.~~

~~Our markets continued~~an impending recession. Signs of inflation cooling began to show ~~moderate signs of improvement~~ in ~~the quarter. Tourism has improved, driven by the return of several events for the first time since the onset of the pandemic. Our credit quality metrics~~late 2022 and continued ~~to improve and remain at historically low levels. In~~in the first quarter of ~~2022,~~2023, but the rate remained elevated at 5% on an annual basis in March, far above the Federal Reserve's target of 2%. Positive economic indicators in the first quarter of 2023 include gains in the U.S. stock market and modest gross domestic product (GDP) growth of 1.1% on an annual basis. The U.S. remains at the full-employment level of 3.5% and, while the strong labor market may help temper recessionary concerns, consistent high wage growth indicates that additional rate increases may be forthcoming before reaching the terminal rate.

In March 2023, the financial services industry was significantly impacted by fallout from what were the second and third largest bank failures in U.S. history in the span of three days. Those failures were eclipsed in May by a third bank failure which now stands as the second largest in U.S. history. The factors that played a role in the ultimate failure of these institutions, including the impact of the rapid rise in interest rates, are affecting many financial institutions. However, the circumstances leading to the run on deposits and insufficient liquidity to meet the demand appear to be somewhat unique to those institutions. Fear and speculation that these events are indicative of a broader-reaching problem within the industry created a ripple effect and continue to impact the financial services sector generally. A number of other institutions experienced smaller-scale deposit runoff in the days that followed the March failures, and stock prices fell rapidly for most of the financial services industry, which remain depressed for many regional banks. Regulators responded by fully protecting all depositors of the failed institutions through a systemic risk exception in order to strengthen public confidence in the banking system. Further, the Federal Reserve established a Bank Term Funding Program, available to eligible depository institutions, to provide an additional source of liquidity secured by U.S. Treasury and Agency and mortgage-backed securities, and other eligible assets at par. While markets have somewhat stabilized, a great deal of uncertainty and concern around financial institution liquidity remains. A sustained lack of depositor confidence and stability could result in continued stress in the industry and lead to a broad tightening of lending standards across financial institutions.

We believe our core client deposit base is stable and well diversified. We have not experienced rapid deposit runoff or lack of depositor confidence; to the contrary, core client deposits, defined as total deposits excluding public funds and brokered deposits, increased during the first quarter of 2023. We have experienced limited declines in April 2023, attributed in part to tax-related seasonal outflows. We believe we have sufficient liquidity to meet depositor demands. As a cautionary measure, we added $568 million in brokered certificates of deposit and drew an incremental $1.2 billion in FHLB borrowings during the first quarter to hold excess on-balance sheet liquidity should further upheaval in the industry occur. We held the excess liquidity through early May 2023. Further, we experienced ~~core~~a sizable shift in deposit portfolio mix from noninterest-bearing accounts to higher cost interest-bearing products, which contributed to compression in the net interest margin in the first quarter.

Outside of these events, loan growth ~~across most of our portfolio,~~during the quarter was in line with ~~an increased loan pipeline~~expectations, and ~~an uptick in credit line utilization that led to a 2% linked-quarter growth rate in core loans (excluding PPP). Core loan growth~~higher yields on new and ~~an improving asset mix have~~repricing assets contributed favorably to ~~our~~the net interest margin, although offset by an increase in funding costs. Asset quality metrics remain stable and ~~income, while excess~~capital levels remain solid. We are continuously monitoring industry developments, deposit metrics, including the level of

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uninsured deposits, liquidity ~~from PPP loan forgiveness~~position and ~~elevated deposit~~capital levels ~~remained a headwind.~~to ensure the ability to weather the current state of macroeconomic and industry-specific conditions.

Economic Outlook

We utilize economic forecasts produced by Moody’s Analytics (Moody’s) that provide various scenarios to assist in the development of our economic outlook. This outlook discussion utilizes the March ~~2022~~2023 Moody’s forecast, the most current available at March 31, ~~2022.~~2023. The forecasts are anchored on a baseline forecast scenario, which Moody’s defines as the “most likely outcome” of where the economy is headed based on current conditions. Several upside and downside scenarios are produced that are derived from the baseline scenario. Since the onset of the COVID-19 pandemic, conditions such as infection and morbidity rates and social, commercial and governmental response thereto have been the primary drivers of the assumptions underlying the forecasts. As geopolitical and economic conditions have evolved, the narratives used in forming March 2022 economic scenarios shifted to a focus on supply chain issues, rising oil prices and inflation.

While remaining overall positive, the assumptions underlying the March 2022 baseline forecast are slightly less optimistic in certain areas than the December 2021 baseline, and certain new risks have been incorporated. Key assumptions within the March 2022 baseline forecast include the following: (1) Russian invasion will go no further than Ukraine and, as such, disruption to the U.S. economy will be limited and temporary; (2) the passage of a $600 billion Building a Better America legislation package; (3) unemployment forecasted at 3.6% in 2022 and 3.4% in 2023, with full-employment being achieved in late 2022 or early 2023; (4) forecasted GDP growth of 3.5% in 2022 and 3.1% in 2023; (5) four 25-basis point interest rate increases in 2022; and (6) COVID-19 infections abated in March 2022.

~~The alternative Moody’s forecast scenarios have~~scenario that display varying depictions of economic performance as compared to the baseline. ~~Consistent with~~

While the ~~prior quarter, management determined that assumptions provided for~~credit loss outlook on our portfolio has not changed significantly, changes in the ~~downside slower near-term growth (S-2)~~Moody’s scenarios have led to ~~be somewhat more likely than~~a shift in our weighting. At December 31, 2022, management applied a weighting of 75% to the mild recessionary S-2 scenario and 25% to the baseline ~~scenario; as such,~~scenario. Assumptions underlying the March 2023 baseline scenario shifted somewhat pessimistically from those included in the December 2022 scenario. Conversely, the assumptions underlying the downside S-2 scenario ~~was given a 60% probability~~shifted somewhat optimistically. To align the assumptions underlying the March 2023 macroeconomic forecasts to our economic outlook, management applied weighting of 40% to the baseline, 50% to the mild recessionary S-2 scenario and 10% to the moderate recessionary S-3 scenario in ~~our~~the computation of the allowance for credit losses ~~calculation~~ at March 31, ~~2022.~~2023.

The baseline scenario continues to incorporate the belief that the Federal Reserve will accomplish its goal of slowing inflation without precipitating a recession. Key assumptions within the March 2023 baseline forecast include the following: (1) recent bank failures, while disruptive, are not symptomatic of a broader problem in the financial system; (2) the Federal Reserve will issue additional rate increases before reaching a terminal rate of 5% to 5.25% by mid-2023, with rate cuts forecasted to begin in early 2024; (3) the unemployment rate will increase from its current state of full-employment at 3.5% to 3.9% in 2024, and 4.0% in 2025; (4) GDP will display modest annual growth of 1.9% in 2023 and 2024, and 2.7% in 2025; and (5) the 10-year U.S. Treasury yield will slowly trend higher until near the year's end.

The S-2 scenario predicts a recession beginning in the second quarter of 2023 that lasts for three quarters, with the stock market contracting 21%. Contributing to that prediction is the assumption that conflict between Russia and Ukraine spans longer than anticipated in the baseline scenario and results in longer and larger interruption of global commodity supply; in turn, supply chain issues worsen, increasing shortages of affected goods and prolonging elevated inflation. Compounding these factors is the assumption that recent bank failures reduce consumer confidence and cause banks to tighten lending standards. Because of the fragility of the economy, the Federal Reserve will keep interest rates elevated in efforts to tame inflation, but not to the extent assumed in the baseline scenario. The S-2 scenario assumes that the ~~conflict between Russian~~unemployment rate averages 4.8% in 2023, 5.8% in 2024 (peaking at 6.4%), and ~~Ukraine spans longer than anticipated~~4.2% in 2025, with the return to full employment in the second quarter of 2025. Further, the S-2 scenario assumes GDP growth of only 0.9% in 2023 and 0.3% in 2024 before returning to a more moderate level of 3.2% in 2025.

The S-3 scenario predicts a slightly deeper recession beginning in the second quarter of 2023 that ~~global supply chain issues worsen,~~lasts for three quarters, with the stock market contracting 35%. Key risks included in the S-3 are similar to those in the S-2 scenario surrounding prolonged inflation and dampened depositor confidence prompting banks to tighten lending standards. The S-3 scenario assumes that the unemployment rate averages 5.6% in 2023, 7.6% in 2024 (peaking at 7.9%) and 6.3% in 2025, and does not return to full employment until early 2028. Further, the S-3 scenario assumes GDP growth of 0.3% in 2023 and contraction of 0.3% in 2024 before returning to modest growth of 2.6% in 2025.

As noted earlier, the credit loss outlook for our portfolio as a ~~higher~~whole has not changed materially since year-end. Our asset quality metrics have remained relatively stable over the preceding several quarters, with relatively modest variation in nonaccrual loans and commercial criticized loans and minimal net credit losses. We continue to closely monitor our portfolio for customers that are sensitive to prolonged inflation and the rising interest rate environment. We expect full year 2023 loan growth in the low-to-mid single digit range, reflecting the potential for economic slowdown and a focus on lending to resilient borrowers in light of current economic pressures.

There are a number of uncertainties in the current economic outlook. The effects of inflation ~~than~~and the Federal Reserve's actions to counter those effects in the ~~baseline scenario. As~~form of further interest rate increases and quantitative tightening have and are likely to continue to reduce economic growth in the near term. Recent disruption in the financial services industry has negatively affected equity markets, and a prolonged disruption could result in tightening of credit standards and pose risk of further volatility in equity markets. The full extent of the impact of these factors is uncertain and may have a negative impact on the U.S. economy, including the possibility of an economic recession in the near or mid-term.

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result, the Federal Reserve is expected to raise interest rates more than anticipated in the baseline scenario, generating corrections in equity markets and declines in spending. Further, the scenario assumes the economic legislation package will be less effective; unemployment begins to rise in the second quarter of 2022, with the return to full employment not occurring until the fourth quarter of 2023; and the number of COVID-19 cases, hospitalizations and deaths begin to rise in March 2022, slowing consumer spending on retail goods and travel and leisure activities.

Despite the lingering economic effects of the COVID-19 pandemic and the emergence of new risks stemming from geopolitical conflict, overall credit loss outlook on our portfolio has not changed significantly. Positive economic indicators of growth in our footprint, continued improvements in our asset quality metrics and minimal credit losses in recent periods allowed for a modest release of credit loss reserves during the period.

The effect of rising inflation and the Federal Reserve's actions to counter those effects are likely to reduce economic growth. While the operating environment remains challenging, we expect the planned interest rate increases will contribute favorably to our net interest margin and income, and we do not expect the rate increases to significantly impact core loan growth guidance. We continue to focus on effectively managing our asset/liability mix to maximize resources.

Forward-looking information based on management’s expectation of near-term performance is provided in the sections that follow. Given the economic volatility experienced over the past two years, the remaining economic effects of the pandemic and the risks and uncertainties surrounding geopolitical unrest, it is not possible to accurately predict the extent, severity or duration that these conditions may have upon our results of operation. We continuously seek to monitor and anticipate developments as they relate to our business.

Highlights of the First Quarter ~~2022~~

2023

We reported net income for the first quarter of ~~2022~~2023 of ~~$123.5~~$126.5 million, or ~~$1.40~~$1.45 per diluted common share, compared to ~~$137.7~~$143.8 million, or ~~$1.55~~$1.65 per diluted common share, in the fourth quarter of ~~2021~~2022 and ~~$107.2~~$123.5 million, or ~~$1.21~~$1.40 per diluted common share, in the first quarter of 2021. There were no nonoperating items in the first quarters of 2022 or 2021. There was $4.9 million, or $0.04 per share after-tax, of net nonoperating income items in the fourth quarter of 2021, mostly attributable to hurricane-related insurance proceeds.2022.

First quarter ~~2022~~2023 results compared to fourth quarter ~~2021:~~2022:

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Net income of ~~$123.5~~$126.5 million, or ~~$1.40~~$1.45 per diluted share, ~~was~~ down ~~$14.3~~$17.3 million, or ~~$0.15~~$0.20 per diluted ~~share; excluding the impact of nonoperating items, earnings per diluted~~ share ~~was down $0.11 linked quarter~~

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~~Operating pre-provision~~Pre-provision net revenue (PPNR), a non-GAAP measure, totaled ~~$134.5~~$167.0 million, ~~up $0.3~~down $18.0 million, or ~~less than 1%~~10%

•

~~Total loans~~Loans of ~~$21.3~~$23.4 billion increased ~~$189.1~~$290.5 million, or 1%1.3%

•

Criticized commercial loans and nonaccrual loans relatively stable linked quarter; net charge-offs remain modest

•

Deposits of $29.6 billion up $542.7 million, or 2%, ~~with~~and includes increases of $233.7 million in core ~~loan (excluding PPP) growth of $385.3~~client deposits and $567.6 million in brokered deposits, partially offset by a ~~decrease in PPP loans~~seasonal decline of ~~$196.2 million from loan forgiveness~~

•

~~Total deposits of $30.5 billion increased $33.8 million, or less than 1%, with a favorable shift in mix including an increase of $583.9~~$258.5 million in ~~noninterest bearing~~public fund deposits ~~and a decrease of $550.1 million in interest bearing deposits~~

•

Negative provision for credit losses of $22.5 million resulting from $22.8 million in reserve release and $0.3 million in net charge-offs; allowance for credit losses coverage remains strong at 1.63% of total loans, or 1.66% excluding PPP loans

•

~~Improved asset quality, with declines of 24% in nonperforming loans and 2% in criticized commercial loans~~

•

Net interest margin ~~increased 1~~decreased 13 basis ~~point (bp)~~points (bps) to ~~2.81%~~3.55%

•

Common equity tier 1 ratio of ~~11.12%,~~11.60% was up 319 bps, and tangible common equity ratio of ~~7.15%, down 56~~7.16% was up 7 bps

•

Efficiency ratio of 53.76% remains below 55% target

The first quarter of 2023 represents a solid start to the year, despite disruption from recent events within the financial services industry. We ~~reported solid~~maintained what we believe is a seasoned and diversified deposit base. Loan growth and additional interest rate increases contributed favorably to earning asset yield. However, increased deposit interest rates and incremental liquidity have compressed our net interest margin and efficiency ratio, though the ratio remains below our target of 55%. Asset quality metrics remained stable and capital levels remain solid. We believe we are well positioned to weather changes in economic conditions and industry trends.

Consolidated Financial Results

The following table contains the consolidated financial results for the first quarter of 2022 that are a good start to the year. We had core loan growth, stable deposits, and what we believe to be the beginning of a widening net interest margin. Our asset quality metrics are at historically low levels, our capital levels are solid, and we continue strategic expense management while investing for revenue growth.periods indicated.

During the quarter, we added ten new bankers across our footprint, including additions in Dallas, San Antonio, Austin, Houston, Beaumont, Nashville, Tampa and Lafayette. This is in addition to fifteen bankers hired in the second half of 2021, with additional hires planned during the remainder of 2022. Revenue enhancements funded through continued expense focus, along with expected interest rate increases, sets the path for our target of a 55% efficiency ratio (currently at 56.03%) by the fourth quarter of 2022 or possibly sooner.



(in thousands, except per share data)	March 31, 2023		December 31, 2022		September 30, 2022		June 30, 2022			March 31, 2022
Income Statement Data:
Interest income	$	372,603	$	345,676	$	299,737	$	254,864		$	236,786
Interest income (te) (a)		375,187		348,291		302,340		257,449			239,331
Interest expense		87,609		50,175		19,430		9,132			8,323
Net interest income (te)		287,578		298,116		282,910		248,317			231,008
Provision for credit losses		6,020		2,487		1,402		(9,761	)		(22,527	)
Noninterest income		80,330		77,064		85,337		85,653			83,432
Noninterest expense		200,884		190,154		193,502		187,097			179,939
Income before income taxes		158,420		179,924		170,740		154,049			154,483
Income tax expense		31,953		36,137		35,351		32,614			31,005
Net income	$	126,467	$	143,787	$	135,389	$	121,435		$	123,478

Balance Sheet Data:
Period end balance sheet data
Loans	$	23,404,523	$	23,114,046	$	22,585,585	$	21,846,068		$	21,323,341
Earning assets		34,106,792		31,873,027		31,213,449		31,292,910			32,997,323
Total assets		37,547,083		35,183,825		34,567,242		34,637,525			36,317,291
Noninterest-bearing deposits		12,860,027		13,645,113		14,290,817		14,676,342			14,976,670
Total deposits		29,613,070		29,070,349		28,951,274		29,866,432			30,499,709
Stockholders' equity		3,531,232		3,342,628		3,180,439		3,349,723			3,450,951
Average balance sheet data
Loans	$	23,086,529	$	22,723,248	$	22,138,709	$	21,657,528		$	21,122,038
Earning assets		32,753,781		32,244,681		31,783,801		32,780,813			33,201,926
Total assets		35,159,050		34,498,915		34,377,773		35,380,247			36,003,803
Noninterest-bearing deposits		12,963,133		13,854,625		14,323,646		14,655,800			14,363,324
Total deposits		28,792,851		28,816,338		29,180,626		29,979,940			30,029,793
Stockholders' equity		3,412,813		3,228,667		3,405,463		3,383,789			3,607,061
Common Shares Data:
Earnings per share - basic	$	1.45	$	1.65	$	1.56	$	1.39		$	1.40
Earnings per share - diluted		1.45		1.65		1.55		1.38			1.40
Cash dividends per common share		0.30		0.27		0.27		0.27			0.27
Book value per share (period end)		41.03		38.89		37.12		39.08			39.91
Tangible book value per share (period end)		30.47		28.29		26.44		28.37			29.25
Weighted average number of shares - diluted		86,282		86,249		86,020		86,354			86,936
Period end number of shares		86,066		85,941		85,686		85,714			86,460

Table of Contents

In March, we announced a strategic decision addressing recent trends in the banking industry to eliminate consumer (retail) non-sufficient funds fees and certain overdraft fees by the end of 2022. The annual impact upon fee income is estimated to be $10 million to $11 million. We believe these changes are in line with an evolving retail banking industry, as traditional banks adjust products to meet consumer needs and provide them with the tools needed to help manage their overall finances. We expect to see improving account acquisition rates in 2023 with this change and as we launch additional retail products and features.

~~Consolidated Financial Results~~

~~The following table contains the consolidated financial results for the periods indicated.~~

Three Months Ended

(in thousands, except per share data)

March 31, 2022

December 31, 2021

September 30, 2021

June 30, 2021

March 31, 2021

Income Statement Data:

Interest income

$

236,786

$

238,756

$

244,417

$

248,300

$

250,785

Interest income (te) (a)

239,331

241,391

247,185

251,154

253,707

Interest expense

8,323

9,460

9,708

13,657

16,198

Net interest income (te)

231,008

231,931

237,477

237,497

237,509

Provision for credit losses

(22,527
)

(28,399
)

(26,955
)

(17,229
)

(4,911
)
Noninterest income

83,432

89,612

93,361

94,272

87,089

Noninterest expense

179,939

182,462

194,703

236,770

193,072

Income before income taxes

154,483

164,845

160,322

109,374

133,515

Income tax expense

31,005

27,102

30,740

20,656

26,343

Net income

$

123,478

$

137,743

$

129,582

$

88,718

$

107,172

For informational purposes - included above, pre-tax

  Nonoperating item included in noninterest income:

   Gain on hurricane-related insurance settlement

$

—

$

3,600

$

—

$

—

$

—

   Gain on sale of Hancock Horizon Funds

—

—

4,576

—

—

   Gain on sale of Mastercard Class B common stock

—

—

—

2,800

—

  Nonoperating items included in noninterest expense:

   Efficiency initiatives

—

(649
)

(1,867
)

40,812

—

   Hurricane related expenses

—

(680
)

5,092

—

—

   Loss on redemption of subordinated notes

—

—

—

4,165

—

Balance Sheet Data:

Period end balance sheet data

Loans

$

21,323,341

$

21,134,282

$

20,886,015

$

21,148,530

$

21,664,859

Earning assets

32,997,323

33,610,435

32,348,036

32,075,450

32,134,637

Total assets

36,317,291

36,531,205

35,318,308

35,098,709

35,072,643

Noninterest-bearing deposits

14,976,670

14,392,808

13,653,376

13,406,385

13,174,911

Total deposits

30,499,709

30,465,897

29,208,157

29,273,107

29,210,520

Stockholders' equity

3,450,951

3,670,352

3,629,766

3,562,901

3,416,903

Average balance sheet data

Loans

$

21,122,038

$

20,770,130

$

20,941,173

$

21,388,814

$

21,745,298

Earning assets

33,201,926

32,913,659

32,097,381

32,195,515

31,015,637

Total assets

36,003,803

35,829,027

35,207,960

35,165,684

34,078,200

Noninterest-bearing deposits

14,363,324

14,126,335

13,535,961

13,237,796

12,374,235

Total deposits

30,029,793

29,750,665

29,237,306

29,228,809

28,138,763

Stockholders' equity

3,607,061

3,642,003

3,606,087

3,488,592

3,441,466

Common Shares Data:

Earnings per share - basic

$

1.40

$

1.56

$

1.46

$

1.00

$

1.21

Earnings per share - diluted

1.40

1.55

1.46

1.00

1.21

Cash dividends per common share

0.27

0.27

0.27

0.27

0.27

Book value per share (period end)

39.91

42.31

41.81

41.03

39.38

Tangible book value per share (period end)

29.25

31.64

31.10

30.27

28.57

Weighted average number of shares - diluted

86,936

87,132

87,006

86,990

86,805

Period end number of shares

86,460

86,749

86,823

86,847

86,777

~~Table of Contents~~


		Three Months Ended
($ in thousands)		March 31, 2022			December 31, 2021			September 30, 2021			June 30, 2021			March 31, 2021			March 31, 2023			December 31, 2022			September 30, 2022			June 30, 2022			March 31, 2022
Performance and other data:
Return on average assets			1.39	%		1.53	%		1.46	%		1.01	%		1.28	%		1.46	%		1.65	%		1.56	%		1.38	%		1.39	%
Return on average common equity			13.88	%		15.00	%		14.26	%		10.20	%		12.63	%		15.03	%		17.67	%		15.77	%		14.39	%		13.88	%
Return on average tangible common equity			18.66	%		20.13	%		19.22	%		13.94	%		17.38	%		20.49	%		24.64	%		21.58	%		19.77	%		18.66	%
Tangible common equity (b)			7.15	%		7.71	%		7.85	%		7.70	%		7.26	%		7.16	%		7.09	%		6.73	%		7.21	%		7.15	%
Tangible common equity Tier 1 (CET1) ratio			11.12	%		11.09	%		11.17	%		10.98	%		11.00	%		11.60	%		11.41	%		11.10	%		11.08	%		11.12	%
Net interest margin (te)			2.81	%		2.80	%		2.94	%		2.96	%		3.09	%		3.55	%		3.68	%		3.54	%		3.04	%		2.81	%
Noninterest income as a percentage of total revenue (te)			26.53	%		27.87	%		28.22	%		28.41	%		26.83	%		21.83	%		20.54	%		23.17	%		25.65	%		26.53	%
Efficiency ratio (c )			56.03	%		56.57	%		57.44	%		57.01	%		58.12	%		53.76	%		49.81	%		51.62	%		54.95	%		56.03	%
Allowance for credit loss as a percentage of total loans			1.63	%		1.76	%		1.92	%		2.03	%		2.11	%
Allowance for loan losses as a percentage of total loans																		1.32	%		1.33	%		1.36	%		1.41	%		1.49	%
Allowance for credit losses as a percentage of total loans																		1.46	%		1.48	%		1.50	%		1.55	%		1.63	%
Annualized net charge-offs to average loans			0.01	%		0.01	%		0.03	%		0.20	%		0.34	%		0.10	%		0.02	%		0.02	%		-0.01	%		0.01	%
Nonperforming assets as a percentage of loans, ORE and foreclosed assets			0.24	%		0.32	%		0.34	%		0.46	%		0.57	%
Nonaccrual loans as a percentage of loans																		0.23	%		0.17	%		0.18	%		0.17	%		0.20	%
FTE headcount			3,543			3,486			3,429			3,626			3,926			3,679			3,627			3,607			3,594			3,543

Reconciliation of operating revenue and operating pre-provision net revenue (non-GAAP measure) (te) (d)	Reconciliation of operating revenue and operating pre-provision net revenue (non-GAAP measure) (te) (d)																Reconciliation of operating revenue and operating pre-provision net revenue (non-GAAP measure) (te) (d)
Net interest income		$	228,463		$	229,296		$	234,709		$	234,643		$	234,587		$	284,994		$	295,501		$	280,307		$	245,732		$	228,463
Noninterest income			83,432			89,612			93,361			94,272			87,089			80,330			77,064			85,337			85,653			83,432
Total revenue			311,895			318,908			328,070			328,915			321,676			365,324			372,565			365,644			331,385			311,895
Taxable equivalent adjustment			2,545			2,635			2,768			2,854			2,922			2,584			2,615			2,603			2,585			2,545
Nonoperating revenue			—			(3,600	)		(4,576	)		(2,800	)		—			—			—			—			—			—
Total revenue (te)		$	314,440		$	317,943		$	326,262		$	328,969		$	324,598		$	367,908		$	375,180		$	368,247		$	333,970		$	314,440
Noninterest expense			(179,939	)		(182,462	)		(194,703	)		(236,770	)		(193,072	)		(200,884	)		(190,154	)		(193,502	)		(187,097	)		(179,939	)
Nonoperating expense			—			(1,329	)		3,225			44,977			—			—			—			—			—			—
Operating pre-provision net revenue (te)		$	134,501		$	134,152		$	134,784		$	137,176		$	131,526		$	167,024		$	185,026		$	174,745		$	146,873		$	134,501

(a)

For analytical purposes, management adjusts interest income and net interest income for tax-exempt items to a taxable equivalent basis using a federal income tax rate of 21%.

(b)

The tangible common equity ratio is common stockholders’ equity less intangible assets divided by total assets less intangible ~~assets~~assets.

(c)

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

(d)

Refer to the non-GAAP financial measures section of this analysis for a discussion of these ~~measures~~measures.

RESULTS OF OPERATIONS

Net Interest Income

Net interest income (te) for the first quarter of ~~2022~~2023 was ~~$231.0~~$287.6 million, down ~~$0.9~~$10.5 million, or ~~less than 1%~~4%, compared to the fourth quarter of ~~2021~~2022 and ~~down $6.5~~up $56.6 million, or 3%24%, from the first quarter of ~~2021.~~2022.

The decrease in net interest income (te) compared to the fourth quarter of ~~2021~~2022 is largely attributable to two fewer accrual days and ~~a decline~~an increase in ~~the accretion of PPP loan fees, and to a lesser extent, a decline~~interest expense on deposits, resulting from both an increase in ~~purchase accounting discount accretion and nonaccrual interest recoveries, largely offset by a lower cost of funds~~average balances and a favorable change in the earning asset mix. The reduction in the cost of funds reflects a favorable change in the deposit mix that includes increases in noninterest-bearing and lower-cost interest-bearing transaction deposits along with declines in higher-cost time deposits and a seasonal reduction of interest bearing public fund deposits. The favorable changeshift in the mix to higher cost products, as well as increased short-term borrowings, both of ~~average~~which outpaced earning ~~assets was the result of increases in loans and investment securities and a decrease in lower-yielding short-term investments.~~asset growth.

The net interest margin for the first quarter of ~~2022~~2023 was ~~2.81%~~3.55%, ~~up 1 bp~~down 13 bps from ~~2.80%~~3.68% in the fourth quarter of ~~2021, for~~2022. The decline in the ~~first quarterly increase since the onset of the pandemic. The slight widening of~~ net interest margin from the prior quarter was also largely ~~due~~driven by a change in the funding mix, with increases of $868 million in average interest-bearing deposits and $523 million in average short-term borrowings, mainly in FHLB advances. The increase in average interest-bearing deposits is primarily attributable to the $841 million increase in average time deposits, largely the result of growth driven by promotional rate offerings and, to a ~~7 bp improvement from a favorable shift~~lesser degree, the addition of brokered deposits that were added late in the ~~earning asset~~quarter. The change in funding mix ~~along with~~resulted in a ~~modest improvement~~46 bp increase in the cost of ~~funds. This improvement~~funds, which was partially offset by a 634 bp increase in the average earning asset yield. The yield on average earning assets was favorably impacted by increases of $363 million in average loans and $211 million in average short-term investments in a rising interest rate environment, partially offset by a decline ~~due to the impact~~in average securities of ~~almost $200 million~~$63 million.

Table of ~~PPP loan forgiveness during the current quarter.~~Contents

The ~~$6.5~~$56.6 million ~~decrease~~increase in net interest income (te) compared to the first quarter of ~~2021~~2022 is primarily attributable to a ~~$14.4~~$135.9 million ~~decline~~increase in interest income (te), partially offset by a $79.3 million increase in interest expense. The increase in interest income is largely due to the rising interest rate environment, a favorable change in the earning asset mix, and ~~fees as~~ a ~~result~~$5.7 million decrease in premium amortization on the securities portfolio. The favorable change in the average earning asset mix reflects a $2.0 billion increase in loans, $0.4 billion growth in the securities portfolio and a $2.8 billion decrease in short-term investments. The increase in interest income was partially offset by a decline of ~~lower average~~$5.3 million in PPP loan ~~balances and yields,~~fee accretion, a ~~$4.2~~$1.5 million decrease in nonaccrual interest recoveries and ~~$2.0~~a $0.7 million ~~of lower~~decrease in purchase accounting discount accretion. ~~These decreases were partially offset by income associated with a $1.2 billion~~The increase ~~in average securities, a $1.6 million increase in short-term investments, $1.7 million in lower securities premium amortization, and a $7.9 million decline in interest expense. The decline~~ in interest expense was driven by ~~lower rates paid on interest-bearing deposit accounts~~both an 86 bp increase in the cost of total deposits, as interest rate offerings were increased to remain competitive, and a ~~decline~~305 bp increase in the cost of borrowings, primarily attributable to FHLB advances, as low fixed-rate instruments were called and replaced with new instruments at prevailing interest ~~on long-term debt due~~rates.

The net interest margin was up 74 bps compared to the ~~redemption~~first quarter of ~~$150 million~~2022 as a result of ~~subordinated debt at~~the rising interest rate environment and a more favorable earning asset mix. Compared to the first quarter of 2022, the yield on earning assets was up 172 bps to 4.63%, while the cost of funds increased 98 bps to 1.08%.

We experienced significant margin widening in 2022 with the rising interest rate environment and our betas, defined as the amount by which deposit or loan costs change in response to movement in short-term interest rate, moved more quickly for loans than deposits. However, in the first quarter of 2023, there was a dramatic shift in deposit betas as pricing became more competitive and customers shifted to the higher cost products. We expect continued net interest margin compression in the second quarter of 2023 as deposit betas are anticipated to continue to increase. The net interest margin could stabilize in the second half of 2023 should deposit betas normalize.

The net interest margin for the month of March 2023 was 3.47%, and declined to 3.24% in April 2023. The margin for the month of April 2023 includes the impact of excess liquidity carried as a cautionary measure, which was largely eliminated in early May 2023. Excluding the impact of the excess liquidity, the net interest margin would have been 3.41% for the month of April.

We expect the net interest margin to improve in May 2023 following the repayment of incremental FHLB borrowings. We expect that net interest margin for the second quarter of 2023 will be down a similar amount as we experienced in the first quarter of 2023 compared to the fourth quarter of 2022.

Table of Contents

5.95% in the second quarter of 2021. The increase in securities and short-term investments average balances are the result of excess liquidity driven largely by a $1.9 billion increase in average deposits and PPP loan forgiveness.

The net interest margin was down 28 bps compared to the first quarter of 2021 as a result of the continued low interest rate environment resulting in a less favorable mix of average earning assets as inflows from PPP loan forgiveness and repayments were reinvested into lower-yielding assets, partially offset by a favorable change in the funding mix to lower cost products. Compared to the first quarter of 2021, the yield on earning assets was down 39 bps, while the cost of funds decreased 11 bps to 0.10%. The reduction in cost of funds reflects the previously mentioned shift in mix to lower cost products, the strategic reduction of promotional deposit rates and the redemption of $150 million of higher-cost subordinated notes.

We anticipate that the net interest margin will continue to widen during the remainder of 2022 as additional Federal Reserve interest rate increases are expected and through continued deployment of excess liquidity into higher-yielding loans and investment securities.

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


	Three Months Ended																					Three Months Ended
	March 31, 2022							December 31, 2021							March 31, 2021							March 31, 2023								December 31, 2022								March 31, 2022
(dollars in millions)	Volume		Interest (d)		Rate			Volume		Interest (d)		Rate			Volume		Interest (d)		Rate
($ in millions)																						Volume		Interest (d)			Rate			Volume		Interest (d)			Rate			Volume		Interest (d)		Rate
Average earning assets
Commercial & real estate loans (te) (a)	$	17,119.3	$	150.3		3.56	%	$	16,802.8	$	150.7		3.56	%	$	17,334.3	$	155.9		3.65	%	$	18,322.2	$	259.1			5.73	%	$	18,178.5	$	240.6			5.52	%	$	17,119.3	$	150.3		3.56	%
Residential mortgage loans		2,441.3		21.0		3.44	%		2,365.8		20.5		3.46	%		2,600.5		24.7		3.79	%		3,214.4		28.1			3.49	%		2,968.9		25.6			3.45	%		2,441.3		21.0		3.44	%
Consumer loans		1,561.4		18.4		4.77	%		1,601.5		18.9		4.68	%		1,810.5		21.4		4.79	%		1,549.9		29.2			7.63	%		1,575.9		27.2			6.86	%		1,561.4		18.4		4.77	%
Loan fees & late charges		—		4.4		0.00	%		—		10.3		0.00	%		—		13.4		0.00	%		—		(0.4	)		0.00	%		—		(0.2	)		0.00	%		—		4.4		0.00	%
Total loans (te) (b)		21,122.0		194.1		3.72	%		20,770.1		200.4		3.83	%		21,745.3		215.4		4.01	%		23,086.5		316.0			5.54	%		22,723.3		293.2			5.12	%		21,122.0		194.1		3.72	%
Loans held for sale		64.3		0.7		4.36	%		77.4		0.6		3.02	%		111.8		0.7		2.41	%		22.9		0.3			5.21	%		24.8		0.3			4.53	%		64.3		0.7		4.36	%
US Treasury and government agency securities		397.8		1.6		1.64	%		418.4		1.6		1.60	%		214.5		0.9		1.77	%		541.3		3.4			2.49	%		500.3		2.9			2.32	%		397.8		1.6		1.64	%
Mortgage-backed securities and collateralized mortgage obligations		7,352.5		34.5		1.88	%		7,019.6		30.5		1.74	%		6,307.9		29.4		1.86	%		7,668.0		43.3			2.26	%		7,769.1		42.8			2.20	%		7,352.5		34.5		1.88	%
Municipals (te)		916.5		6.7		2.93	%		924.1		6.8		2.93	%		934.5		6.8		2.93	%		904.3		6.7			2.98	%		907.5		6.8			2.97	%		916.5		6.7		2.93	%
Other securities		21.0		0.2		3.31	%		16.2		0.1		3.50	%		11.6		0.1		4.07	%		23.5		0.2			3.50	%		23.6		0.2			3.50	%		21.0		0.2		3.31	%
Total securities (te) (c)		8,687.8		43.0		1.98	%		8,378.3		39.0		1.86	%		7,468.5		37.2		2.00	%		9,137.1		53.6			2.35	%		9,200.5		52.7			2.29	%		8,687.8		43.0		1.98	%
Total short-term investments		3,327.8		1.5		0.19	%		3,687.9		1.4		0.15	%		1,690.0		0.4		0.10	%		507.3		5.3			4.27	%		296.1		2.1			2.88	%		3,327.8		1.5		0.19	%
Total earning assets (te)	$	33,201.9	$	239.3		2.91	%	$	32,913.7	$	241.4		2.92	%	$	31,015.6	$	253.7		3.30	%	$	32,753.8	$	375.2			4.63	%	$	32,244.7	$	348.3			4.29	%	$	33,201.9	$	239.3		2.91	%
Average interest-bearing liabilities
Interest-bearing transaction and savings deposits	$	11,423.4	$	1.1		0.04	%	$	11,405.1	$	1.3		0.04	%	$	10,796.0	$	3.4		0.13	%	$	10,650.4	$	27.3			1.04	%	$	10,810.7	$	14.6			0.53	%	$	11,423.4	$	1.1		0.04	%
Time deposits		1,088.5		0.6		0.24	%		1,161.4		0.8		0.27	%		1,757.4		3.0		0.69	%		2,018.6		13.4			2.70	%		1,178.0		3.2			1.09	%		1,088.5		0.6		0.24	%
Public funds		3,154.6		2.1		0.26	%		3,057.8		2.8		0.36	%		3,211.1		2.8		0.36	%		3,160.7		23.7			3.04	%		2,973.0		18.2			2.43	%		3,154.6		2.1		0.26	%
Total interest-bearing deposits		15,666.5		3.8		0.10	%		15,624.3		4.9		0.12	%		15,764.5		9.2		0.24	%		15,829.7		64.4			1.65	%		14,961.7		36.0			0.96	%		15,666.5		3.8		0.10	%
Repurchase agreements		587.5		0.1		0.06	%		589.4		0.1		0.06	%		583.7		0.1		0.13	%		445.8		0.8			0.69	%		520.8		0.8			0.60	%		587.5		0.1		0.06	%
Other short-term borrowings		1,102.4		1.3		0.49	%		1,102.2		1.4		0.49	%		1,104.7		1.4		0.49	%		1,652.8		19.3			4.74	%		1,055.0		10.3			3.86	%		1,102.4		1.3		0.49	%
Long-term debt		241.8		3.1		5.17	%		245.4		3.1		5.12	%		396.7		5.5		5.48	%		242.1		3.1			5.11	%		236.7		3.1			5.21	%		241.8		3.1		5.17	%
Total borrowings		1,931.7		4.5		0.95	%		1,937.0		4.6		0.95	%		2,085.1		7.0		1.34	%		2,340.7		23.2			4.00	%		1,812.5		14.2			3.10	%		1,931.7		4.5		0.95	%
Total interest-bearing liabilities		17,598.2		8.3		0.19	%		17,561.3		9.5		0.21	%		17,849.6		16.2		0.37	%		18,170.4		87.6			1.95	%		16,774.2		50.2			1.19	%		17,598.2		8.3		0.19	%
Net interest-free funding sources		15,603.7							15,352.4							13,166.0							14,583.4								15,470.5								15,603.7
Total cost of funds	$	33,201.9	$	8.3		0.10	%	$	32,913.7	$	9.5		0.11	%	$	31,015.6	$	16.2		0.21	%	$	32,753.8	$	87.6			1.08	%	$	32,244.7	$	50.2			0.62	%	$	33,201.9	$	8.3		0.10	%
Net interest spread (te)			$	231.0		2.72	%			$	231.9		2.70	%			$	237.5		2.94	%			$	287.6			2.67	%			$	298.1			3.11	%			$	231.0		2.72	%
Net interest margin	$	33,201.9	$	231.0		2.81	%	$	32,913.7	$	231.9		2.80	%	$	31,015.6	$	237.5		3.09	%	$	32,753.8	$	287.6			3.55	%	$	32,244.7	$	298.1			3.68	%	$	33,201.9	$	231.0		2.81	%

(a)

Taxable equivalent (te) amounts were calculated using a federal income tax rate of 21%.

(b)

Includes nonaccrual loans.

(c)

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

(d)

Included in interest income is net purchase accounting accretion of ~~$1.5~~$0.8 million, ~~$1.9~~$0.8 million, and ~~$3.5~~$1.5 million for the three months ended March 31, ~~2022,~~2023, December 31, ~~2021,~~2022, and March 31, ~~2021,~~2022, respectively.

Provision for Credit Losses

During the first quarter of 2023, we recorded a provision for credit losses of $6.0 million, compared to a provision for credit losses of $2.5 million in the fourth quarter of 2022 and a negative provision for credit losses of $22.5 million in the first quarter of 2022. The first quarter of 2023 provision included net charge-offs of $5.7 million and a reserve build of $0.3 million, compared to net charge-offs of $1.0 million and a reserve build of $1.5 million in the fourth quarter of 2022, and net charge-offs of $0.3 million and a reserve release of $22.8 million in the first quarter of 2022. The modest provision for loan loss in both the first quarter of 2023 and the fourth quarter of 2022 is reflective of our relatively stable credit metrics and economic outlook. The reserve release in the first quarter of 2022 was the result of improved overall credit performance and economic indicators, allowing for the release of reserves built in response to the pandemic.

Net charge-offs in the first quarter of 2023 were $5.7 million, or 0.10% of average total loans on an annualized basis, compared to net charge-offs of $1.0 million, or 0.02%, in the fourth quarter of 2022, and net charge-offs of $0.3 million, or 0.01%, in the first quarter of 2022. The first quarter of 2023 included net charge-offs of $3.4 million in the commercial portfolio, comprised of various smaller losses and lower recoveries compared to recent quarters, and $2.5 million in the consumer portfolio, partially offset by net recoveries of $0.2 million in the residential mortgage portfolio. The fourth quarter of 2022 included net recoveries of $1.2 million in the commercial portfolio and $0.3 million in the residential mortgage portfolio, partially offset by net charge-offs of $2.4 million in the consumer portfolio. The first quarter of 2022 included net recoveries of $0.8 million in the commercial portfolio and less than $0.1 million in the residential mortgage portfolio, partially offset by net charge-offs of $1.2 million in the consumer portfolio.

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~~Provision for Credit Losses~~

~~During the first quarter of 2022, we recorded a negative~~We currently expect to see low to modest charge-offs and provision for credit losses for the remainder of $22.5 million, compared to negative provisions for credit losses of $28.4 million in the fourth quarter of 2021, and $4.9 million in the first quarter of 2021. The first quarter of 2022 negative provision included net charge-offs of $0.3 million and a reserve release of $22.8 million. The fourth quarter of 2021 negative provision included net charge-offs of $0.7 million and a reserve release of $29.1 million. The first quarter of 2021 negative provision for credit loss included net charge-offs of $18.3 million and a reserve release of $23.2 million. The negative provision for credit losses recorded in the first quarter of 2022 and fourth quarter of 2021 were largely the result of continued improvement in2023. However, loan growth, portfolio mix, asset quality ~~with minimal losses over the past few quarters~~metrics and continued improvement in economic conditions in our footprint. The modest negative provision for credit loss in the first quarter of 2021 was the result of improvement in macroeconomic forecasts and the contraction in the core loan portfolio (excluding PPP).

Net charge-offs in the first quarter of 2022 were $0.3 million, or 0.01% of average total loans on an annualized basis, compared to $0.7 million, or 0.01% in the fourth quarter of 2021, and $18.3 million, or 0.34% in the first quarter of 2021. The first quarter of 2022 included $1.2 million of consumer net charge-offs, largely offset by net recoveries of $0.8 million for commercial and less than $0.1 million for residential mortgage, virtually unchanged from fourth quarter of 2021 levels. Net charge-offs in the first quarter of 2021 included $16.2 million of commercial net charge-offs, largely energy-related, $0.1 million of mortgage net recoveries and $2.5 million of consumer net charge-offs.

~~Future~~future assumptions in economic forecasts ~~and our own asset quality metrics~~ will drive ~~our outlook for~~ the level of ~~forecasted~~credit loss reserves. ~~We currently expect reserve releases will continue; however, we expect to see them taper off over the next few quarters.~~

The discussion labeled "Allowance for Credit Losses and Asset Quality" that appears later in this Item ~~and~~ provides additional information on these changes and on general credit quality.

Noninterest Income

Noninterest income totaled ~~$83.4~~$80.3 million for the first quarter of ~~2022, down $6.2~~2023, up $3.3 million, or 7%4%, from the fourth quarter of ~~2021,~~2022, and down ~~$3.7~~$3.1 million, or 4%, from the first quarter of ~~2021. There were no nonoperating items included~~2022. The increase in noninterest income ~~in the first quarters of 2022 and 2021. There was $3.6 million of nonoperating noninterest income in~~from the fourth quarter of ~~2021~~2022 was largely attributable to increases in investment and annuity fees and insurance commissions and income from derivatives, partially offset by a ~~gain~~decrease in service charges on ~~a hurricane-related insurance settlement. Excluding this item, operating noninterest income decreased $2.6 million, or 3%, linked quarter.~~deposit accounts. The decrease in ~~operating~~ noninterest income from the ~~prior~~first quarter ~~was~~of 2022 is largely ~~attributable to a decline in secondary mortgage market operations income. The decrease compared to the same quarter last year was~~ attributable to declines in secondary mortgage market operations income, ~~bank-owned life insurance (BOLI)~~service charges on deposit accounts and other income, including derivatives and ~~derivative~~specialty fees, partially offset by ~~an increase~~increases in ~~other income largely due to Small Business Investment Company (SBIC) income~~trust fees and ~~other revenue items described below.~~investment and annuity fees and insurance commissions.

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


	Three Months Ended							Three Months Ended
	March 31,			December 31,		March 31,		March 31,		December 31,			March 31,
(in thousands)	2022			2021		2021
($ in thousands)								2023		2022			2022
Service charges on deposit accounts	$	21,674		$	21,346	$	19,146	$	20,622	$	22,222		$	21,674
Trust fees		15,279			15,547		15,003		16,734		16,496			15,279
Bank card and ATM fees		20,396			20,638		18,120		20,721		20,913			20,396
Investment and annuity fees and insurance commissions		7,427			7,546		7,458		8,867		6,832			7,427
Secondary mortgage market operations		3,746			5,456		11,710		2,168		1,504			3,746
Income from bank-owned life insurance		3,545			3,795		7,281		3,286		3,279			3,545
Credit related fees		2,669			2,618		2,844		2,765		2,643			2,669
Income from customer and other derivatives		2,349			1,722		5,035		583		(554	)		2,349
Securities transactions, net		(87	)		—		—		—		—			(87	)
Gain on hurricane-related insurance settlement		—			3,600		—
Other miscellaneous		6,434			7,344		492		4,584		3,729			6,434
Total noninterest income	$	83,432		$	89,612	$	87,089	$	80,330	$	77,064		$	83,432

Service charges on deposit accounts are composed of overdraft and nonsufficient funds fees, business and corporate account analysis fees, overdraft protection fees and other customer transaction-related charges. Service charges on deposits totaled ~~$21.7~~$20.6 million for the first quarter of ~~2022, up $0.3~~2023, down $1.6 million, or 2%7%, from the fourth quarter of ~~2021,~~2022, and ~~up $2.5~~down $1.1 million, or ~~13%~~5%, from the first quarter of ~~2021.~~2022. The

~~Table of Contents~~

~~increase~~ decrease from the ~~fourth~~previous quarter ~~of 2021~~ is ~~primarily~~largely attributable to ~~an increase~~a $2.1 million decrease in ~~business account service charges,~~consumer overdraft and non-sufficient funds fees, largely due to the full quarter's impact of the elimination of certain consumer fees that started December 1, 2022, partially offset by a ~~decrease~~$0.5 million increase in ~~consumer overdraft fees.~~business analysis fees with higher activity and strong sales and balance changes. The ~~increase~~decrease from the first quarter of ~~2021 was largely due to both increased activity-related fees~~2022 includes a $1.7 million decrease in consumer overdraft and ~~higher overdraft fees, which have increased as consumer spending activity has returned to a more typical level. As noted previously, the Company has announced plans to eliminate consumer (retail)~~ non-sufficient funds fees, ~~and~~also reflecting the elimination of certain consumer fees, which was partially offset by $0.5 million of higher business overdraft fees ~~by the end~~and $0.3 million of ~~2022, which are currently reflected in this revenue line item. We expect these fees to decrease, on average, by approximately $2 to $3 million per quarter for 2023.~~check printing and other consumer service charges.

Trust fee income represents revenue generated from a full range of trust services, including asset management and custody services provided to individuals, businesses and institutions. Trust fees ~~decreased $0.3~~totaled $16.7 million, an increase of $0.2 million, or 2%1%, from the prior quarter and ~~increased $0.3~~$1.5 million, or 2%10%, when compared to the same quarter a year ago. The ~~decrease compared to the prior quarter is primarily due to a decline in employee benefits trust income. The~~ increase from the same quarter last year ~~was~~is largely due to an increase in personal trust income with the rebound of equity markets, and a new fee structure introduced during the second quarter of 2021. These increases were partially offset by a decline in Hancock Horizon mutual funds incomeinterest rate driven, as the ~~funds were sold~~rising interest rate environment allowed for the resumption of certain fee assessments that are generally waived in ~~late 2021.~~a lower interest rate environment.

Bank card and ATM fees include interchange and other income from credit and debit card transactions, fees earned from processing card transactions for merchants, and fees earned from ATM transactions. Bank card and ATM fees totaled ~~$20.4~~$20.7 million for the first quarter of ~~2022,~~2023, down $0.2 million, or 1%, from the fourth quarter of ~~2021~~2022 and up ~~$2.3~~$0.3 million, or ~~13%~~2%, from the same quarter last year. The decrease from the prior quarter reflects seasonal declines in debit and consumer credit card activity and merchant fees that were largely offset by increases in purchasing card and business card revenue. The increase from the first quarter of 2022 was largely ~~due~~attributable to ~~two fewer activity days. The~~an increase ~~compared to the same quarter last year~~in commercial credit card fees, which was ~~largely due to higher levels of activity as economic conditions related to the pandemic have returned to~~partially offset by a ~~more typical level.~~decline in merchant fees.

Investment and annuity fees and insurance commissions, ~~decreased $0.1~~which includes both fees earned from sales of annuity and insurance products, as well as managed account fees, totaled $8.9 million, an increase of $2.0 million, or 2%30%, compared to the fourth quarter of ~~2021~~2022 and ~~were virtually flat~~$1.4 million, or 19%, compared to the same quarter a year ago. The ~~decline from~~increase compared to the prior quarter ~~was largely due to lower underwriting activity, insurance~~includes $0.9

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million of higher annuity sales and fees, $0.5 million of higher managed account fees and investment commissions and ~~investment~~fees, and $0.5 million of fees associated with three corporate underwriting deals completed during the current period. The increase compared to the same quarter in the prior year includes higher annuity sales and fees of $1.2 million and $0.5 million of corporate underwriting fees, partially offset by ~~higher annuity fees. Compared to the same quarter a year ago,~~$0.3 million of lower ~~levels of underwriting~~investment fees and ~~insurance fees were offset by an increase in investment fees.~~commissions.

Income from secondary mortgage market operations is comprised of income produced from the origination and sales of residential mortgage loans in the secondary market. We offer a full range of mortgage products to our customers and typically sell longer-term ~~fixed rate~~fixed-rate loans while retaining the majority of ~~adjustable rate~~adjustable-rate loans, as well as loans generated through programs to support customer relationships. Income from secondary mortgage market operations was ~~$3.7~~$2.2 million in the first quarter of ~~2022, down $1.7~~2023, up $0.7 million, or ~~31%~~44%, from the fourth quarter of ~~2021~~2022 and down ~~$8.0~~$1.6 million, or ~~68%~~42%, from the first quarter of 2021. The decrease from the prior quarter and the same quarter last year was due largely to both a lower level of refinancing activity as interest rates have begun to rise, and a lower percentage of originated loans sold in the secondary market. The level of mortgage applications during the first quarter of 2022 was down approximately 15% when compared to the fourth quarter of 2021 and down 37% when compared to the first quarter of 2021. The percentage of originated loans sold in the secondary market declined to 27% in the first quarter of 2022 from 35% in the fourth quarter of 2021 and 64% in the same quarter last year.2022. Secondary mortgage market operations income will vary based on application volume and pull through rates. ~~We expect income~~The increase from the fourth quarter of 2022 is primarily attributable to an increase in application volume, as rates have stabilized somewhat, and in the percentage of loans sold in the secondary ~~mortgage~~market. The decline from the first quarter of 2022 is largely attributable to both a decline in application volume, driven by the sharp rise in interest rates that followed a two-year period of very favorable interest rates, and a lower percentage of originated loans sold in the secondary market, ~~operations to remain low~~ as ~~the demand for~~we are retaining a higher volume of mortgage loans in our held for investment portfolio. The level of mortgage applications during the first quarter of 2023 were up 69% compared to the prior quarter and ~~refinancing slows~~down approximately 35%when compared to the first quarter of 2022. The percentage of mortgage loans sold in the ~~rising interest rate environment.~~secondary market to total originations (as opposed to those held in our portfolio), was 24% in the first quarter of 2023, compared to 15% in the fourth quarter of 2022 and 27% in the first quarter of 2022.

Income from bank-owned life insurance (BOLI) is typically generated through insurance benefit proceeds as well as the growth of the cash surrender value of insurance contracts held. Income from ~~bank-owned life insurance~~BOLI was ~~$3.5~~$3.3 million for the first quarter of ~~2022,~~2023, virtually flat when compared to the prior quarter and down $0.3 million, or 7%, from the ~~fourth~~first quarter of ~~2021, and down $3.7 million, or 51%,~~2022. The decrease from the first quarter of ~~2021. The linked-quarter decrease is attributable to a higher level of benefit proceeds recorded~~2022 reflects small variances in ~~fourth quarter of 2021,~~both cash surrender value and ~~the decrease from the prior year is largely attributable to income received in connection with the purchase of policies in the first quarter of 2021.~~mortality gains.

Credit-related fees include fees assessed on letters of credit and unused portions of loan commitments. ~~Credit related~~Credit-related fees were ~~$2.7~~$2.8 million for the first quarter of ~~2022,~~2023, up $0.1 million, or 2%5%, from the fourth quarter of ~~2021~~2022 and ~~down $0.2~~up $0.1 million, or 6%4%, from the first quarter of 2021. The linked quarter increase is primarily attributable to an increase in letter of credit fees, partially offset by a decline in loan commitment fees, as credit line utilization increased during the period. The decrease from the first quarter of 2021 is primarily attributable to a decrease in both letters of credit fees and loan commitment fees.2022.

Income from customer and other derivatives is largely derived from our customer interest rate derivative program and totaled ~~$2.3~~$0.6 million for the first quarter of ~~2022~~2023, compared to ~~$1.7~~a loss of $0.6 million in the fourth quarter of ~~2021~~2022 and ~~$5.0~~income of $2.3 million ~~for~~in the first quarter of ~~2021.~~2022. The ~~decrease~~variances from ~~the same quarter last year is largely~~both comparative periods are primarily attributable to ~~the demand during the first quarter of 2021 for interest rate swap arrangements due to the long-term interest rate environment at the time.~~changes in valuation adjustments. Derivative income can be volatile and is dependent upon the composition of the portfolio, volume and mix of sales and termination activity, and market value adjustments due to market interest rate movement.

Other miscellaneous income is comprised of various items, including income from small business investment companies (SBIC), FHLB stock dividends and syndication fees. Other miscellaneous income ~~(excluding nonoperating items)~~ totaled ~~$6.4~~$4.6 million, up $0.9 million, or 23%, compared to the fourth quarter of 2022 and down $1.9 million, or 29%, from to the first quarter of 2022. The increase compared to the fourth quarter of 2022 was largely driven by an increase of $0.8 million resulting from a loss on sale of assets included in the prior quarter and a $0.4 million increase in dividends on FHLB stock, attributable to the stock purchased in connection with the incremental borrowings we made during the period. The decrease compared to the same quarter last year is primarily attributable to decreases of $0.9 million in SBIC income and $1.1 million from gains on sales of assets, partially offset by a $0.5 million increase in dividends on FHLB stock.

We expect noninterest income in 2023 to increase 3% to 4% from 2022, inclusive of the estimated $10 million to $11 million decrease in certain consumer nonsufficient funds and overdraft fees.

Noninterest Expense

Noninterest expense for the first quarter of 2023 was $200.9 million, up $10.7 million, or 6%, from the fourth quarter of 2022, and up $20.9 million, or 12%, from the first quarter of 2022. The increase in noninterest expense from the fourth quarter of 2022 was largely driven by increases in other retirement expense, deposit and regulatory fees, data processing expense, and bank share tax, and is also reflective of miscellaneous gains recorded in the fourth quarter. These increases were partially offset by a decrease in personnel expense. The increase when compared to the first quarter of 2022 is largely attributable to increases in personnel expense, data processing expense, other retirement expense, deposit and regulatory fees, franchise taxes and ORE expense. Approximately 54% and 25%, respectively, of the increase in noninterest expense from the quarters ended December 31, 2022 and March 31, 2022, is attributable to the increases in other retirement expense and deposit and regulatory fees. A more detailed discussion of these and other noninterest expense variances follows.

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$0.9 million compared to the fourth of 2021 and up $5.9 million compared to the first quarter of 2021. The decrease compared to the prior period was largely driven by a lower level of SBIC income and syndication fees, partially offset by an increase in gains on sales of assets. The increase compared to the prior year reflects increased SBIC income as a result of an approximately $4.7 million pandemic related write-down in the first quarter of 2021, and higher syndication fees.

~~Management expects our 2022 fee income, excluding nonoperating items, to decline 1% to 3%, from the 2021 level of $353.4 million, largely due to lower secondary mortgage fees.~~

~~Noninterest Expense~~

Noninterest expense for the first quarter of 2022 was $179.9 million, down $2.5 million, or 1%, from the fourth quarter of 2021, and down $13.1 million, or 7%, from the first quarter of 2021. There were no nonoperating noninterest expense items in the first quarters of 2022 and 2021. During the fourth quarter of 2021, there was a net negative $1.3 million of nonoperating noninterest expense largely resulting from accrual reversals related to both Hurricane Ida expenses and closed branch writedowns, partially offset by expense associated with efficiency initiatives. Excluding the nonoperating items, operating noninterest expense was down $3.9 million, or 2% from the prior quarter. The decrease in operating expense from the prior quarter was largely driven by lower professional services expense with lower consulting and legal fees, other real estate gains, lower data processing expense with fewer processing days and lower personnel expense with one less workday. Compared to the same quarter last year, the decrease was largely attributable to personnel expense savings as a result of reduced headcount, lower occupancy expense resulting from branch closures, and a decrease in professional services expense, partially offset by an increase in business development costs and data processing expense as a result of higher level of card activity. A more detailed discussion of the variances follows.

The components of noninterest expense for the periods indicated are presented in the following tables.


	Three Months Ended
	March 31,			December 31,			March 31,
($ in thousands)	2023			2022			2022
Compensation expense	$	92,403		$	99,349		$	85,993
Employee benefits		22,920			19,798			21,403
Personnel expense		115,323			119,147			107,396
Net occupancy expense		12,206			12,451			11,680
Equipment expense		4,736			4,476			4,867
Data processing expense		28,182			26,766			24,239
Professional services expense		9,131			10,170			7,793
Amortization of intangible assets		3,114			3,271			3,748
Deposit insurance and regulatory fees		5,920			4,050			3,740
Other real estate and foreclosed asset expense		155			(773	)		(1,764	)
Corporate value, franchise and other non-income taxes		5,253			3,928			4,248
Advertising		3,256			3,572			3,166
Telecommunications and postage		3,071			2,947			2,925
Entertainment and contributions		2,631			2,704			2,961
Tax credit investment amortization		1,401			1,756			1,004
Printing and supplies		990			903			1,003
Travel expense		1,046			1,314			660
Net other retirement expense		(3,655	)		(7,570	)		(6,772	)
Other miscellaneous		8,124			1,042			9,045
Total noninterest expense	$	200,884		$	190,154		$	179,939

Three Months Ended

March 31,

December 31,

March 31,

(in thousands)

2022

2021

2021

Compensation expense

$
85,993

$
89,555

$
95,846

Employee benefits

21,403

18,573

23,769

Personnel expense

107,396

108,128

119,615

Net occupancy expense

11,680

11,947

12,910

Equipment expense

4,867

4,100

4,781

Data processing expense

24,239

25,157

22,947

Professional services expense

7,793

11,206

11,251

Amortization of intangible assets

3,748

3,919

4,419

Deposit insurance and regulatory fees

3,740

3,540

3,395

Other real estate and foreclosed asset expense

(1,764
)

246

6

Advertising

3,166

4,041

2,486

Corporate value, franchise and other non-income taxes

4,248

3,178

4,464

Telecommunications and postage

2,925

3,078

3,318

Entertainment and contributions

2,961

2,653

1,448

Travel expense

660

908

357

Printing and supplies

1,003

895

978

Tax credit investment amortization

1,004

1,099

1,112

Other retirement expense

(6,772
)

(7,296
)

(6,545
)
Loss on facilities and equipment from consolidation

—

(1,599
)

—

Other miscellaneous

9,045

7,262

6,130

Total noninterest expense

$
179,939

$
182,462

$
193,072

~~Table of Contents~~

~~Nonoperating Expenses (included above)~~

Three Months Ended

March 31,

December 31,

March 31,

(in thousands)

2022

2021

2021

Nonoperating expense

Personnel expense

$
—

$
949

$
—

Equipment expense

—

3

—

Advertising

—

14

—

Loss on facilities and equipment from consolidation

—

(1,599
)

—

Other miscellaneous

—

(696
)

—

Total nonoperating expenses

$
—

$
(1,329
)

$
—

Personnel expense consists of salaries, incentive compensation, long-term incentives, payroll taxes, and other employee benefits such as 401(k), pension, and insurance for medical, life and disability. Personnel expense totaled ~~$107.4~~$115.3 million for the first quarter of ~~2022,~~2023, down ~~$0.7~~$3.8 million, or 1%3%, compared to the prior quarter and ~~down $12.2~~up $7.9 million, or ~~10%~~7%, compared to the same quarter last year. The decrease from the prior quarter was largely ~~due~~attributable to ~~one less payroll day~~a $6.6 million decrease in incentive-based compensation that was partly offset by a $3.1 million increase in benefit costs, including retirement and ~~lower bonus and incentives from a lower level of secondary mortgage production.~~insurance benefits. The ~~decrease~~increase from the same quarter last year is ~~largely~~ attributable to a decrease of 383 full-time equivalent employees (FTEs), primarily the result of the efficiency measures implemented during 2021, including a voluntary early retirement program and the closure of 20 financial centers, partially offset byhigher salaries resulting from annual merit ~~raises.~~increases, an increase in headcount and increases of $1.5 million in benefit costs.

Occupancy and equipment expenses are primarily composed of lease expenses, depreciation, maintenance and repairs, rent, taxes, and other equipment expenses. Occupancy and equipment expenses totaled ~~$16.5~~$16.9 million infor the first quarter of ~~2022,~~2023, virtually flat compared to the prior quarter, and up ~~$0.5~~$0.4 million, or 3%2%, from the fourth quarter of 2021 and down $1.1 million, or 6%, from the first quarter of 2021. The linked-quarter increase was largely related to higher equipment expense related to annual maintenance contract renewals, partially offset by a decrease in occupancy expense related to higher sublease rental income. The decrease from the same quarter last ~~year is primarily attributable to the closure of 26 financial centers during 2021 as a result of efficiency initiatives.~~year.

Data processing expense includes expenses related to third party technology processing and servicing costs, technology project costs and fees associated with bank card and ATM transactions. Data processing expense was ~~$24.2~~$28.2 million for the first quarter of ~~2022, down $0.9~~2023, up $1.4 million, or 4%5%, compared to the fourth quarter of ~~2021,~~2022, and up ~~$1.3~~$3.9 million, or 6%16%, compared to the first quarter of ~~2021.~~2022. The ~~decrease~~increases from both the fourth quarter of ~~2021 is largely due to a lower level of card activity with two fewer activity days. The increase from~~2022 and the first quarter of ~~2021 is largely due~~2022 are primarily attributable to ~~higher processing expense related to~~costs associated with the ~~increase in bank card activity.~~implementation of technology enhancement projects.

Professional services expense for the first quarter of ~~2022~~2023 totaled ~~$7.8~~$9.1 million, down ~~$3.4~~$1.0 million, or ~~30%~~10%, compared to the ~~previous~~fourth quarter of 2022, and ~~$3.5~~up $1.3 million, or ~~31%~~17%, from the first quarter of ~~2021.~~2022. The ~~decrease from~~variance compared to the ~~fourth~~prior quarter ~~of 2021~~includes declines in legal, audit and consulting fees, where the variance to the same quarter last year is ~~primarily attributable~~the result of higher consulting costs. Professional service expense may vary from period to ~~lower levels of expense~~period, generally related to ~~PPP~~ consulting ~~support, as well as a reduction in~~and legal ~~fees.~~needs.

Deposit insurance and regulatory fees totaled ~~$3.7~~$5.9 million, up ~~$0.2~~$1.9 million, or 6%46%, from the fourth quarter of ~~2021~~2022, and up ~~$0.3~~$2.2 million, or ~~10%~~58%, from the first quarter of ~~2021.~~2022. The increases from both comparative periods are primarily attributable to the two-basis point increase in the FDIC assessment effective for the first quarterly assessment period of 2023. The increase ~~from the prior quarter and the~~compared to prior year ~~is due largely to the impact on our~~also includes a higher risk based assessment rate. The increased assessment is expected to remain in effect until the Deposit Insurance Fund reserve ratio to insured deposits meets the FDIC’s long-term goal for reserve ratios of ~~declining levels~~the deposit insurance fund. The Company may also be subject to a special assessment related to the protection of ~~low-risk PPP loans and lower levels~~uninsured depositors under the Systemic Risk Exception in the March 2023 financial institution failures. Federal law requires that any losses to the FDIC’s Deposit Insurance Fund related to this action be repaid by a special assessment on banks. The impact of ~~excess liquidity~~this assessment to ~~our FDIC insurance cost. We expect our FDIC insurance cost to continue to increase as we continue to redeploy our excess liquidity and as our PPP loans pay down.~~the Company is not yet known.

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Other real estate and foreclosed ~~asset~~assets expense ~~reflected net income of $1.8~~totaled $0.2 million ~~for~~in the first quarter of 2023, compared to net gains of $0.8 million in the fourth quarter of 2022 ~~resulting~~and $1.8 million in the first quarter of 2022. The level of expense in the current period reflects a somewhat typical level of expense of maintaining the ORE portfolio; the unfavorable variances from both comparative periods is attributable to the fact that gains on the sales of ~~properties, compared to minimal activity~~assets outpaced the cost of maintaining the ORE portfolio in ~~both~~ the ~~prior quarter and~~two comparative periods. Gains or losses on the ~~same quarter last year. Other~~sale of other real estate ~~gain or losses~~and foreclosed assets may occur periodically and are dependent on the ~~volume~~number and type of ~~properties~~assets for sale and current market conditions.

Corporate value, franchise and other non-income tax expense for the first quarter of ~~2022~~2023 totaled ~~$4.2~~$5.3 million, up ~~$1.1~~$1.3 million, or 34%, ~~over~~from the prior quarter and ~~down $0.2~~up $1.0 million, or 5%24%, compared to the same quarter last year. The ~~increase~~increases from ~~the fourth quarter of 2021 reflects~~both comparative periods are largely attributable to an increase in bank share ~~tax as the benefit from the net loss recorded in 2020 concluded in 2021.~~tax. The ~~decrease from the same quarter last year is primarily due to a $1.2 million termination penalty on a BOLI transaction incurred in the first quarter~~calculation of ~~2021, partially offset by the~~ bank share tax ~~benefit realized during 2021 from~~is based on multiple variables, including average quarterly assets, earnings and stockholders’ equity to determine the ~~net loss recorded~~taxable assessment value that is either one or two years in ~~2020.~~arrears depending on the taxing jurisdiction.

Business development-related expenses (including advertising, travel, entertainment and contributions) totaled ~~$6.8~~$6.9 million for the first quarter of ~~2022,~~2023, down ~~$0.8~~$0.7 million, or ~~11%~~9%, from the fourth quarter of ~~2021,~~2022, and up ~~$2.5~~$0.1 million, or ~~58%~~2%, from the first quarter of ~~2021.~~2022. The ~~linked-quarter decrease~~timing and level of business development expense can vary based on business needs and promotional campaigns.

All other expenses, excluding amortization of intangibles, totaled $9.9 million for the first quarter of 2023, up $10.9 million from the fourth quarter of 2022, and up $2.7million, or 38%, from the first quarter of 2022. The variances from both comparative periods are partly attributable to an increase in pension-related other retirement expense that is largely driven by an increase in the discount rate and other actuarial assumptions for the current plan year. The increase compared to the fourth quarter of 2022 was ~~largely due~~also influenced by miscellaneous gains recorded in the fourth quarter.

We expect noninterest expense for the year 2023 to ~~a decrease~~increase 6% to 7% from 2022. The anticipated year-over-year increase includes increases in ~~advertising and travel,~~retirement (pension) expense and the FDIC assessment as described above. Excluding these items, noninterest expense is expected to increase ~~over last year was largely due~~4% to ~~entertainment and contributions, advertising and travel expense.~~5%.

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All other expenses, excluding amortization of intangibles and nonoperating items, totaled $7.2 million for the first quarter of 2022, an increase of $1.5 million from the fourth quarter of 2021, and $2.2 million from the first quarter of 2021. The increase for both periods is due in part to increases in noncredit losses of $0.9 million linked-quarter and $2.1 million from the same quarter last year, and other miscellaneous smaller items.

We expect our 2022 operating expense to be down approximately 2% to 3% from the 2021 level of $760.1 million, reflecting our continued focus on expense management. We expect our ongoing expense initiatives, including strategic procurement, combined with the full-year impact of initiatives completed through 2021, will support the strategy of using cost control measures to fund revenue enhancements, such as additional investments in technology and additional bankers, and reduce the overall impact of wage inflation.

Income Taxes

The effective income tax rate for the first quarter of ~~2022~~2023 was approximately ~~20.1%~~20.2% compared to ~~16.4%~~20.1% in both the fourth quarter of ~~2021~~2022 and ~~19.7% in~~ the first quarter of 2021. The linked-quarter increase in the effective income tax rate is due primarily to a $4.9 million income tax benefit in the fourth quarter of 2021 from an increase in the 2020 net operating loss (“NOL”).

Many factors impact the effective income tax rate including, but not limited to, the level of pre-tax income and relative impact of net tax benefits related to tax credit investments, tax-exempt interest income, bank-owned life insurance, and nondeductible expenses.2022. Based on the current forecast, management expects the effective income tax rate ~~for 2022 will~~to be approximately 21% in ~~the 19%-21% range, absent any changes in tax law.~~2023.

Our effective tax rate has historically varied from the federal statutory rate primarily because of tax-exempt income and tax credits. Interest income on bonds issued by or loans to state and municipal governments and authorities, and earnings from the bank-owned life insurance program are the major components of tax-exempt income. The main source of tax credits has been investments in tax-advantaged securities and tax credit projects. These investments are made primarily in the markets we serve and are directed at tax credits issued under the Federal and State New Market Tax Credit (“NMTC”) programs, Low-Income Housing Tax Credit (“LIHTC”) programs, as well as pre-2018 Qualified Zone Academy Bonds (“QZAB”) and Qualified School Construction Bonds (“QSCB”). These investments generate tax credits, which reduce current and future taxes and are recognized when earned as a benefit in the provision for income taxes.

We have invested in NMTC projects through investments in our own Community Development Entities (“CDE”), as well as other unrelated CDEs. Federal tax credits from NMTC investments are recognized over a seven-year period, while recognition of the benefits from state tax credits varies from three to five years. We have also invested in affordable housing projects that generate federal LIHTC tax credits that are recognized over a ten-year period, beginning in the year the rental activity begins. The amortization of the LIHTC investment cost is recognized as a component of income tax expense in proportion to the tax credits recognized over the ten-year credit period.

Based on tax credit investments that have been made to date in ~~2022,~~2023, we expect to realize benefits from federal and state tax credits over the next three years totaling ~~$10.0~~$11.7 million, ~~$10.1~~$9.1 million and ~~$7.4~~$7.7 million in ~~2023,~~ 2024, 2025 and ~~2025,~~2026, respectively. We intend to continue making investments in tax credit projects. However, our ability to access new credits will depend upon, among other factors, federal and state tax policies and the level of competition for such credits.

In August 2022, the Inflation Reduction Act of 2022 (IRA of 2022) was signed into law to address inflation, healthcare costs, climate change and renewal energy incentives, among other things. Included in the IRA of 2022 are provisions for the creation of a 15% corporate alternative minimum tax rate (CAMT) that is effective for tax years beginning January 1, 2023 for corporations with an average annual adjusted financial statement income in excess of $1 billion. Based on information available to date, we do not anticipate our consolidated corporate group to be subject to the 15% CAMT, absent any further changes in law.

LIQUIDITY AND CAPITAL RESOURCES

Liquidity

Liquidity management ensures that funds are available to meet the cash flow requirements of our depositors and borrowers, while also meeting the operating, capital and strategic cash flow needs of the Company, the Bank and other subsidiaries. As part of the overall asset and liability management process, liquidity management strategies and measurements have been developed to manage and monitor liquidity risk. The Company had access to sufficient liquidity at March 31, 2023, summarized as follows:


	March 31, 2023
($ in thousands)	Total Available		Amount Used		Net Availability
Available Sources of Funding:
Internal Sources:
Free securities	$	2,261,893	$	—	$	2,261,893
External Sources:
Federal Home Loan Bank (a)		6,587,916		3,200,034		3,387,882
Federal Reserve Bank		4,903,911		—		4,903,911
Brokered deposits		4,441,961		572,501		3,869,460
Other		1,369,000		—		1,369,000
Total Available Sources of Funding	$	19,564,681	$	3,772,535	$	15,792,146
Cash and other interest-bearing bank deposits						2,882,521
Total Liquidity					$	18,674,667

(a) Amount used includes funded advances and letters of credit.

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~~monitor~~The recent failures of three major regional U.S. banks that included large-scale deposit runs has brought the subject of bank liquidity ~~risk. The Company has access~~into high focus, particularly in relation to ~~sufficient~~an institution's asset and liability composition. At present, the FDIC guarantees a depositor coverage of cash on deposit of up to $250,000 per institution. Dampened depositor confidence over a financial institution's ability to protect deposit balances in excess of the federally insured limit is thought to pose a higher likelihood of a deposit run, and, in turn, the risk that the institution may have insufficient liquidity ~~for cash requirements, both on balance sheet and with $21.4 billion in net available sources of funds at~~to meet the demand. At March 31, ~~2022, summarized as follows:~~2023, our available on and off-balance sheet liquidity of $18.7 billion is well in excess of our estimated uninsured, noncollateralized deposits of approximately $10.7 billion.

March 31, 2022

(in thousands)

Total
Available

Amount
Used

Net
Availability

Internal Sources

Free Securities, cash and other

$
7,386,592

$
—

$
7,386,592

External Sources

Federal Home Loan Bank

5,739,451

1,200,814

4,538,637

Federal Reserve Bank

3,603,969

—

3,603,969

Brokered deposits

4,574,956

9,190

4,565,766

Other

1,294,000

—

1,294,000

Total Liquidity

$
22,598,968

$
1,210,004

$
21,388,964

The asset portion of the balance sheet provides liquidity primarily through loan principal repayments, maturities and repayments of investment securities and occasional sales of various assets. Short-term investments such as federal funds sold, securities purchased under agreements to resell and interest-bearing deposits with the Federal Reserve Bank or with other commercial banks are additional sources of liquidity to meet cash flow requirements. Free securities represent unpledged securities that can be sold or used as collateral for borrowings, and include unpledged securities assigned to short-term dealer repurchase agreements or to the Federal Reserve Bank discount window. Management has established an internal target for the ratio of free securities to total securities of 20% or greater. As shown in the table below, our ratio of free securities to total securities was ~~50.63%~~28.45% at March 31, ~~2022,~~2023, compared to ~~53.95%~~41.59% at December 31, ~~2021 and 62.98% at March 31, 2021.~~2022. Securities and FHLB letters of credit are pledged as collateral related to public funds and repurchase agreements. ~~Pledged securities at March 31, 2022 totaled $4.2 billion, up $250 million from December 31, 2021.~~ The ~~increase in pledged securities, as well as the decrease~~decline in the ratio of free securities to total securities ~~was~~from December 31, 2022 is the result of ~~utilizing~~pledging additional securities to ~~replace FHLB letters of credit~~the Federal Reserve Bank done as ~~pledged collateral.~~a cautionary measure to increase borrowing capacity under its discount window.

March 31,

December 31,

March 31,

Liquidity Metrics

2022

2021

2021

Free securities / total securities

50.63
%

53.95
%

62.98
%
Core deposits / total deposits

98.94
%

98.66
%

97.65
%
Wholesale funds / core deposits

6.21
%

6.45
%

7.45
%
Quarter-to-date average loans /quarter-to-date average deposits

70.34
%

69.81
%

77.28
%


	March 31,			December 31,			September 30,			June 30,			March 31,
Liquidity Metrics	2023			2022			2022			2022			2022
Free securities / total securities		28.45	%		41.59	%		49.79	%		52.61	%		50.63	%
Core deposits / total deposits		94.83	%		98.12	%		98.93	%		99.00	%		98.94	%
Wholesale funds / core deposits		15.43	%		7.43	%		6.23	%		2.97	%		6.21	%
Quarter-to-date average loans /quarter-to-date average deposits		80.18	%		78.86	%		75.87	%		72.24	%		70.34	%

The liability portion of the balance sheet provides liquidity mainly through the ability to use cash sourced from ~~various~~ customers’ interest-bearing and noninterest-bearing deposit ~~and sweep~~ accounts. At March 31, ~~2022,~~2023, deposits totaled ~~$30.5~~$29.6 billion, an increase of ~~$33.8~~$542.7 million, or ~~less than 1%~~2%, from December 31, ~~2021~~2022. The net increase was primarily due to the $567.6 million increase in brokered deposits and ana $233.7 million increase in core client deposits, partially offset by a $258.6 million seasonal outflows of $1.3 billion, or 4%, from March 31, 2021. The year over year increase is largely attributable to higher balances in consumer and business accounts, due in part to stimulus and hurricane-related insurance proceeds. Core deposits consist of total deposits excluding certificates of deposit of $250,000 or more and brokeredpublic funds deposits. Core deposits totaled $30.2 billion at March 31, 2022, up $120.2 million, or less than 1%, compared to December 31, 2021, and up $1.7 billion, or 6%, from March 31, 2021. The ratio of core deposits to total deposits was 98.94% at March 31, 2022, compared to 98.66% at December 31, 2021 and 97.65% at March 31, 2021. Brokered deposits totaled ~~$14.2~~$572.5 million as of March 31, ~~2022, a decrease of $16.0 million~~2023, compared to $4.9 million at December 31, ~~2021~~2022 and ~~a decrease of $61.3~~$14.2 million ~~compared to~~at March 31, ~~2021. The Company has had only limited~~2022. Following the recent events impacting the financial services industry, as a cautionary measure, we added $568 million of brokered certificates of deposit ~~activity over the periods disclosed due~~ to ~~our excess~~increase on-balance sheet liquidity. These instruments mature in December 2023 and bear interest plus fees of 5.45% per annum. The use of brokered deposits as a funding source is subject to certain policies regarding the amount, term and interest rate.

Core deposits consist of total deposits excluding certificates of deposit of $250,000 or more and brokered deposits. Core deposits totaled $28.1 billion at March 31, 2023, down $441.1 million, or 2%, compared to December 31, 2022. The decline in core deposits reflects the shift of deposits into certificates of deposits of $250,000 or more, up $416.2 million, largely due to attractive interest rates offered during the quarter. The ratio of core deposits to total deposits was 94.83% at March 31, 2023, compared to 98.12% at December 31, 2022 and 98.94% at March 31, 2022.

Purchases of federal funds, securities sold under agreements to repurchase and other short-term borrowings from customers provide additional sources of liquidity to meet short-term funding requirements. Besides funding from customer sources, the Bank has a line of credit with the FHLB that is secured by blanket pledges of certain mortgage loans. At March 31, ~~2022,~~2023, the Bank had borrowings of ~~approximately $1.1~~$3.1 billion and ~~had~~ approximately ~~$4.5~~$3.4 billion available under this line.The unused borrowing capacity at the Federal Reserve’s discount window is approximately ~~$3.6~~$4.9 billion. There were no outstanding borrowings with the Federal Reserve at any date during any period covered by this report. In response to the March 2023 bank failures and resulting liquidity concerns, the Federal Reserve established a Bank Term Funding Program, available to eligible depository institutions to provide an additional source of liquidity secured by U.S. Treasury and government agency and mortgage-backed securities, and other qualifying assets at par. As a cautionary measure, the Bank registered for the program at its inception, but has not, and does not intend to borrow under this program.

Wholesale funds, which are comprised of short-term borrowings, long-term debt and brokered deposits were ~~6.21%~~15.43% of core deposits at March 31, ~~2022,~~2023, compared to ~~6.45%~~7.43% at December 31, ~~2021~~2022 and ~~7.45%~~6.21% at March 31, ~~2021.~~2022. At March 31, ~~2022,~~2023, wholesale funds totaled ~~$1.9~~$4.3 billion, ~~a decrease~~an increase of ~~$64.5 million,~~$2.2 billion, or 3%105%, from December 31, ~~2021~~2022 and ~~a decrease of $250.9 million,~~$2.5 billion, or ~~12%~~131%, from March 31, ~~2021.~~2022. The ~~quarter~~linked-quarter and year over ~~quarter decline was~~year increases were primarily due to ~~decreased repurchase agreements~~a net increase in FHLB advances and the brokered ~~deposits. The year over year decrease was largely attributable to the redemption of $150 million of our 5.95% subordinated notes~~deposits added during the ~~second~~first quarter of

~~Table~~ 2023. The increase in wholesale funds were part of ~~Contents~~

~~2021, as well as decreased brokered~~a cautionary strategy to hold excess available funds should we see significant shifts in deposit activity. At March 31, 2023, the Company held $2.2 billion in interest-bearing bank deposits ~~repurchase agreements, and other short term borrowings.~~with the Federal Reserve. The Company has established an internal target for wholesale funds to be less than 25% of core deposits.

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Another ~~key~~ measure used to monitor our liquidity position is the loan-to-deposit ratio (average loans outstanding for the reporting period divided by average deposits outstanding). The loan-to-deposit ratio measures the amount of funds the Company lends for each dollar of deposits on hand. Our average loan-to-deposit ratio for the first quarter of ~~2022~~2023 was ~~70.34%~~80.18%, compared to ~~69.81%~~78.86% for the fourth quarter of ~~2021~~2022 and ~~77.28%~~70.34% for the first quarter of ~~2021.~~2022. Management has an established target range for the loan-to-deposit ratio of 87% to 89%, but will operate outside that range under certain circumstances, such as those caused by the continuing impact of the pandemic. Average loans outstanding for the first quarter of 2022, the fourth quarter of 2021, and the first quarter in 2021, included approximately $0.4 billion, $0.7 billion, and $2.2 billion, respectively, of low-risk SBA guaranteed PPP loans that are primarily repaid through the forgiveness process, which is expected to be substantially complete by end of the second quarter of 2022.pandemic where deposits became elevated.

Cash generated from operations is another important source of funds to meet liquidity needs. The ~~consolidated statements~~Consolidated Statements of ~~cash flows~~Cash Flows included in Part I.I, Item 1 of this document present operating cash flows and summarize all significant sources and uses of funds during the three months ended March 31, ~~2022~~2023 and ~~2021.~~2022.

Dividends received from the Bank have been the primary source of funds available to the Parent for the payment of dividends to our stockholders and for servicing its debt. The liquidity management process takes into account the various regulatory provisions that can limit the amount of dividends the Bank can distribute to the Parent. The Parent targets cash and other liquid assets to provide liquidity in an amount sufficient to fund approximately four quarters of ongoing cash or liquid asset needs, consisting primarily of common stockholder dividends, debt service requirements, and any expected share repurchase or early extinguishment of debt. The Parent may operate below the target level on a temporary basis if a return to the target can be achieved in the near-term, generally not to exceed four quarters. The Parent had cash and liquid assets of ~~$89.0~~$152.1 million at March 31, ~~2022.~~2023.

~~During~~Since quarter end, we have experienced minimal and expected seasonal core client deposit outflows, which were down $376 million, or approximately 1%, at April 30, 2023 when compared to March 31, 2023. In addition, in early May, we repaid approximately $1.4 billion of FHLB borrowings, including the incremental borrowings drawn during the first quarter ~~of 2022, we repurchased 350,000 shares of our common stock at an average cost of $52.82 per share, inclusive of commissions, under~~as a ~~Board authorization~~cautionary measure, to ~~repurchase up~~return to ~~4,338,000 shares of the company’s common stock, set to expire December 31, 2022. To-date, the Company has repurchased 799,876 shares under this plan at~~ a ~~total cost of $40.3 million.~~

~~On June 15, 2021, the Parent utilized excess~~more typical overall liquidity ~~to redeem all of its issued and outstanding 5.95% subordinated notes due with an aggregate principal amount of $150 million.~~level.

Capital Resources

Stockholders’ equity totaled $3.5 billion at March 31, ~~2022, down $219.4~~2023, up $188.6 million from December 31, ~~2021 and up $34.0 million from March 31, 2021.~~2022. The ~~decrease from December 31, 2021~~increase is ~~primarily~~ attributable to ~~a $305.3~~net income of $126.5 million, ~~decrease in accumulated~~ other comprehensive income ~~largely due~~of $84.7 million, net of tax, primarily attributable to fair value adjustments on securities available for sale and cash flow hedges, ~~$23.9 million of dividends,~~ and ~~the repurchase of $18.5 million of common stock. These factors were partially offset by $123.5 million in net income and $4.9~~$3.8 million of long-term incentive plan and dividend reinvestment activity. These factors were partially offset by dividends of $26.4 million.

The tangible common equity (TCE) ratio was 7.16% at March 31, 2023, compared to 7.09% at December 31, 2022. The increase ~~from March 31, 2021~~ is largely attributable to ~~$479.5 million of~~ net income and ~~$18.4 million of long term incentive plan and dividend reinvestment activity, partially offset by a decline of $327.8 million of accumulated~~ other comprehensive income ~~largely attributable to~~that resulted from fair value adjustments on the available for sale securities portfolio and ~~to a lesser degree,~~ cash flow hedges, and ~~$95.8 million of dividends and the repurchase of $40.3 million of common stock.~~

The tangible common equity (TCE) ratio was 7.15% at March 31, 2022, compared to 7.71% at December 31, 2021 and 7.26% at March 31, 2021. The decreases from both comparative periods are largely attributable to other comprehensive loss that resulted from fair value adjustments to the available for sale securities portfolio, as well as to dividends and common stock repurchases. These factors were partially offset by net income and long-termlong term incentive plan and dividend ~~reinvestment activity. The ratio as compared to December 31, 2021 was influenced~~reinvestments, partially offset by ~~tangible asset contraction, primarily in short-term investments. The ratio as compared to March 31, 2021 was influenced by growth~~the impact of an increase in tangible assets, ~~that resulted from deployment of~~and dividends. The excess liquidity ~~into short-term investments and investment securities.~~at March 31, 2023 negatively impacted the TCE ratio by 36 bps.

The regulatory capital ratios of the Company and the Bank at March 31, ~~2022~~2023 remained well in excess of current regulatory minimum requirements, including capital conservation buffers, by at least ~~$486~~$592 million. The Company and the Bank have been categorized as “well-capitalized” in the most recent notices received from our regulators. Refer to the Supervision and Regulation section in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2021~~2022 for further discussion of our capital requirements.

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The following table shows the regulatory capital ratios for the Company and the Bank as calculated under current rules for the indicated periods. The capital ratios reflect the election to use the CECL five-year transition rule that allowed for the option to delay for two years the estimated impact of CECL on regulatory capital (0% in 2020 and 2021), followed by a three-year transition (25% in 2022, 50% in 2023, 75% in 2024, and 100% thereafter). The two-year delay includes the full impact of January 1, 2020 cumulative effect impact plus an estimated impact of CECL calculated quarterly as 25% of the current ACL over the January 1, 2020 balance (modified transition amount). The modified transition amount was recalculated each quarter in 2020 and 2021, with the December 31,

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2021 impact of $24.9 million plus day one impact of $44.1 million (net of tax) carrying through the remaining three years of the transition, as adjusted by the applicable transition percentage.


	Well-			March 31,			December 31,			September 30,			June 30,			March 31,
	Capitalized			2023			2022			2022			2022			2022
Total capital (to risk weighted assets)
Hancock Whitney Corporation		10.00	%		13.21	%		12.97	%		12.67	%		12.70	%		12.82	%
Hancock Whitney Bank		10.00	%		12.54	%		12.39	%		12.16	%		12.28	%		12.33	%
Tier 1 common equity capital (to risk weighted assets)
Hancock Whitney Corporation		6.50	%		11.60	%		11.41	%		11.10	%		11.08	%		11.12	%
Hancock Whitney Bank		6.50	%		11.52	%		11.43	%		11.20	%		11.28	%		11.27	%
Tier 1 capital (to risk weighted assets)
Hancock Whitney Corporation		8.00	%		11.60	%		11.41	%		11.10	%		11.08	%		11.12	%
Hancock Whitney Bank		8.00	%		11.52	%		11.43	%		11.20	%		11.28	%		11.27	%
Tier 1 leverage capital
Hancock Whitney Corporation		5.00	%		9.63	%		9.53	%		9.27	%		8.68	%		8.38	%
Hancock Whitney Bank		5.00	%		9.57	%		9.54	%		9.35	%		8.83	%		8.49	%

Well-

March 31,

December 31,

September 30,

June 30,

March 31,

Capitalized

2022

2021

2021

2021

2021

Total capital (to risk weighted assets)

Hancock Whitney Corporation

10.00
%

12.82
%

12.84
%

13.06
%

12.94
%

13.60
%
Hancock Whitney Bank

10.00
%

12.33
%

12.33
%

12.51
%

12.45
%

12.52
%
Tier 1 common equity capital (to risk weighted assets)

Hancock Whitney Corporation

6.50
%

11.12
%

11.09
%

11.17
%

10.98
%

11.00
%
Hancock Whitney Bank

6.50
%

11.27
%

11.24
%

11.30
%

11.20
%

11.26
%
Tier 1 capital (to risk weighted assets)

Hancock Whitney Corporation

8.00
%

11.12
%

11.09
%

11.17
%

10.98
%

11.00
%
Hancock Whitney Bank

8.00
%

11.27
%

11.24
%

11.30
%

11.20
%

11.26
%
Tier 1 leverage capital

Hancock Whitney Corporation

5.00
%

8.38
%

8.25
%

8.15
%

7.83
%

7.89
%
Hancock Whitney Bank

5.00
%

8.49
%

8.36
%

8.25
%

7.98
%

8.08
%

~~Hancock Whitney Corporation total~~We regularly perform stress analysis on our capital ~~to risk weighted assets ratios after March 31, 2021 reflect~~levels. One such scenario included the hypothetical impact of including accumulated other comprehensive losses on market valuations of available for sale securities and cash flow hedges in regulatory capital and a further stress scenario that included both those losses plus losses on the ~~June 15, 2021 redemption of $150 million of subordinated notes of the Parent~~held to maturity investment portfolio in regulatory capital. We estimate that ~~qualified as tier 2 capital in the calculation of certain~~our regulatory capital ratios ~~reducing total capital to risk weighted assets ratio by approximately 60 bps. Our regulatory ratios also reflect~~would remain in excess of the ~~impact~~well-capitalized minimums under both of PPP loans, which are guaranteed by the SBA and, when meeting certain criteria, are subject to forgiveness to the debtor by the SBA. These loans carry a 0% risk-weighting in the tier 1 and total capital regulatory ratios due to the full guarantee by the SBA. However, these ~~loans are reflected in average assets used to compute tier 1 leverage. PPP loans totaled $335 million, $531 million and $2.3 billion as of~~stress scenarios at March 31, ~~2022, December 31, 2021 and March 31, 2021, respectively.~~2023.

On ~~April 22, 2021,~~January 26, 2023, our board of directors authorized the repurchase of up to ~~4,338,000~~4,297,000 shares of the Company’s common stock (approximately 5% of the shares of common stock outstanding as of ~~March~~December 31, ~~2021)~~2022). The authorization is ~~currently~~ set to expire on December 31, ~~2022.~~2024. The shares may be repurchased in the open market, by block purchase, through accelerated share repurchase plans, in privately negotiated transactions or otherwise, in one or more transactions, from time to time, depending upon market conditions and other factors, and in accordance with applicable regulations of the Securities and Exchange Commission. The Company is not obligated to purchase any shares under this program and the repurchase authorization may be terminated or amended by the Board at any time prior to the expiration date. ~~During the first quarter of 2022, 350,000~~No shares ~~were repurchased under this program at an average cost of $52.82 per share, inclusive of commissions. To date, 799,876 shares with an average cost of $50.36~~ have been repurchased under this program.

On January ~~27, 2022,~~26, 2023, our board of directors declared aan 11% increase in the regular first quarter cash dividend offrom $0.27 per share ~~consistent with the prior quarter.~~to $0.30 per share. The quarterly common stock cash dividend was paid on March 15, 2023 to shareholders of record on March 6, 2023. The Company has paid uninterrupted dividends to its shareholders since 1967.

The Inflation Reduction Act of 2022 signed into law during in August 2022 includes a provision for an excise tax equal to 1% of the fair market value of any stock repurchased by covered corporations during a taxable year, subject to certain limits and provisions. The excise tax is effective beginning in fiscal year 2023. While we may complete transactions subject to the new excise tax, we do not expect a material impact to our statement of condition or results of operations.

Table of Contents

BALANCE SHEET ANALYSIS

Short-Term Investments

Short-term assets are held to ensure funds are available to meet the cash flow needs of both borrowers and depositors. Short-term investments, including interest-bearing bank deposits and federal funds sold, were ~~$3.1~~$2.3 billion at March 31, ~~2022, down $0.7~~2023, up $2.0 billion from December 31, ~~2021 and up $0.8 billion from March 31, 2021.~~2022. Average short-term investments of ~~$3.3~~$0.5 billion for the first quarter of ~~2022~~2023 were ~~down $0.4~~up $0.2 billion compared to the fourth quarter of ~~2021, and up $1.6 billion compared to the first quarter of 2021.~~2022. Typically, these balances will change on a daily basis depending upon movement in customer loan and deposit accounts. ~~However,~~

~~Table~~The increase in short-term investments was largely funded through the addition of ~~Contents~~

~~excess~~$568 million of short-term brokered certificates of deposit and $1.2 billion in incremental FHLB advances funded in March of 2023 as a cautionary measure to provide additional on-balance sheet liquidity ~~that has stemmed from pandemic related conditions (refer~~in response to the ~~discussion of Liquidity above) continues to drive an elevated balance of short-terms investments, largely held at~~disruption in the ~~Federal Reserve.~~financial services industry caused by the bank failures.

Securities

Investment in securities totaled $8.5 billion at March 31, 2022, down $71.4 million, or 1%, from December 31, 2021, and up $475.1 million, or 6%, from March 31, 2021. The decrease from December 31, 2021 was the result of a negative market valuation adjustment of $389.2 million, partially offset by net purchases of $317.8 million. The increase from March 31, 2021 reflects net purchases of $882.9 million, partially offset by a negative valuation adjustment of $407.8 million. The net purchases from the prior quarter and the same quarter last year reflect investment of a portion of excess cash from federal funds into higher-yielding securities. Our securities portfolio includes securities categorized as available for sale and held to maturity. At March 31, 2022, securities available for sale totaled $6.0 billion and securities held to maturity totaled $2.5 billion. As a result of excess liquidity, and to provide some protection from the impact of future interest rate changes upon accumulated other comprehensive income, we reclassified securities available for sale with an aggregate fair value of $561.8 million to the securities held to maturity portfolio during the first quarter of 2022. The purpose of the securities portfolio is to increase profitability, mitigate interest rate risk, provide liquidity and comply with regulatory pledging requirements. Our securities portfolio includes securities categorized as available for sale and held to maturity. Available for sale securities are carried at fair value and may be sold prior to maturity. Unrealized gains or losses on available for sale securities, net of deferred taxes, are recorded as accumulated other comprehensive income or loss in ~~stockholders’~~stockholders' equity.

Investment in securities totaled $8.4 billion at March 31, 2023, down slightly from December 31, 2022. The decrease from December 31, 2022 is attributable to net payoffs and paydowns, part of a strategic decision to allow cash inflows from the securities portfolio to fund loan growth. The resulting decrease was partially offset by an $81.0 million favorable market valuation adjustment on the available for sale portfolio.

At March 31, 2023, securities available for sale totaled $5.6 billion and securities held to maturity totaled $2.8 billion.

Our securities portfolio consists mainly of residential and commercial mortgage-backed securities and collateralized mortgage obligations that are issued or guaranteed by U.S. government agencies. We invest only in high quality investment grade securities with a targeted portfolio effective duration generally between two and five and a half years. At March 31, ~~2022,~~2023, the average expected maturity of the portfolio was ~~5.86 years~~ 6.08 years with an effective duration of ~~4.47~~4.84 years and a nominal weighted-average yield of ~~1.93%~~ 2.31%. Under an immediate, parallel rate shock of 100 bps and 200 bps, the effective durations would be ~~4.60~~4.80 and 4.75 years, ~~in both scenarios.~~respectively. At December 31, ~~2021,~~2022, the average expected maturity of the portfolio was ~~5.80~~6.02 years with an effective duration of ~~4.25~~4.87 years and a nominal weighted-average yield of ~~1.87%. The average maturity of the portfolio at March 31, 2021 was 5.93 years, with an effective duration of 4.76 years and a nominal weighted-average yield of 1.95%~~2.27%. The changes in expected maturity, effective duration, and nominal weighted-average yield ~~compared to both December 31, 2021 and March 31, 2021 was~~were largely the result of ~~reinvestment of~~ maturities, ~~and~~ paydowns and ~~growth~~the impact from the ~~investment~~termination of ~~excess liquidity.~~fair value hedges on available for sale securities. At March 31, ~~2022,~~2023, approximately ~~$1.9 billion~~$560 million of our available for sale securities are hedged with ~~$1.7 billion~~$514 million in fair value hedges in order to provide protection and flexibility to reposition and/or reprice the portfolio in a rising interest rate environment, effectively reducing the duration (market price risk) on the hedged securities. Our strategy in the near term will be to ~~invest in~~utilize the securities portfolio ~~as rates rise~~cash flow to fund loan growth and monitor our hedge positions to adjust interest rate sensitivity.

At the end of each reporting period, we evaluate the securities portfolio for credit loss. Based on our assessments, expected credit loss was ~~negligible~~not material for ~~all periods in 2022 and 2021,~~any period presented, and therefore no allowance for credit loss was recorded.

Table of Contents

Loans

Total loans at March 31, ~~2022~~2023 were ~~$21.3~~$23.4 billion, up ~~$189.1~~$290.5 million, or 1%, from December 31, ~~2021,~~2022. New loans and ~~down $341.5 billion, or 2%, from March 31, 2021. The linked-quarter increase was primarily attributable~~fewer paydowns contributed to the growth, ~~of $385.3 million in core loans,~~with income-producing commercial real estate and residential mortgage as demand for traditional loan products increased, driven by our east and west regions and equipment finance specialty line, partially offset by a decrease of $196.2 million in PPP loans. The decline compared to March 31, 2021 is due to a net decrease in PPP loans of $2.0 billion, partially offset by growth of $1.7 billion in core loans.the main drivers.

The following table shows the composition of our loan portfolio at each date indicated:

March 31,

December 31,

September 30,

June 30,

March 31,

(in thousands)

2022

2021

2021

2021

2021

Total loans:

Commercial non-real estate

$
9,584,480

$
9,612,460

$
9,416,990

$
9,532,710

$
10,091,342

Commercial real estate - owner occupied

2,868,233

2,821,246

2,812,926

2,809,868

2,795,104

Total commercial and industrial

12,452,713

12,433,706

12,229,916

12,342,578

12,886,446

Commercial real estate - income producing

3,563,299

3,464,626

3,467,939

3,419,028

3,411,028

Construction and land development

1,286,655

1,228,670

1,213,991

1,295,036

1,122,141

Residential mortgages

2,462,900

2,423,890

2,351,053

2,412,459

2,488,792

Consumer

1,557,774

1,583,390

1,623,116

1,679,429

1,756,452

Total loans

$
21,323,341

$
21,134,282

$
20,886,015

$
21,148,530

$
21,664,859

~~Table of Contents~~


	March 31,		December 31,		September 30,		June 30,		March 31,
($ in thousands)	2023		2022		2022		2022		2022
Total loans:
Commercial non-real estate	$	10,013,482	$	10,146,453	$	9,905,427	$	9,645,092	$	9,584,480
Commercial real estate - owner occupied		3,050,748		3,033,058		3,033,133		2,964,474		2,868,233
Total commercial and industrial		13,064,230		13,179,511		12,938,560		12,609,566		12,452,713
Commercial real estate - income producing		3,758,455		3,560,991		3,686,540		3,641,243		3,563,299
Construction and land development		1,726,916		1,703,592		1,541,257		1,408,727		1,286,655
Residential mortgages		3,329,793		3,092,605		2,843,723		2,615,807		2,462,900
Consumer		1,525,129		1,577,347		1,575,505		1,570,725		1,557,774
Total loans	$	23,404,523	$	23,114,046	$	22,585,585	$	21,846,068	$	21,323,341

Commercial and industrial (“C&I”) loans, including both non-real estate and owner occupied real estate secured loans, totaled approximately ~~$12.5~~$13.1 billion, or ~~58%~~56% of the total loan portfolio, at March 31, ~~2022, an increase~~2023, a decrease of ~~$19~~$115.3 million, or ~~less than~~ 1%, from December 31, ~~2021,~~2022, as payoffs and a decrease of $434 million, or 3%, from March 31, 2021. The linked-quarter increase is primarily attributable to growth of $215 million, or 2%, in core loans, partially offset by a $196 million reduction in PPP loans, due to repayment primarily through the SBA’s forgiveness program. Core loan growth reflects increased production in our commercial portfolio and in our equipment finance portfolio, as well as an increase in the line utilization rate. The year over year decrease is attributable to a $2.0 billion net reduction in PPP loans, partially offset by $1.6 billion of core loan growth. PPP loans included in C&I portfolio totaled $335 million at March 31, 2022, $531 million at December 31, 2021, and $2.3 billion at March 31, 2021.paydowns outpaced originations.

The Bank lends mainly to middle market and smaller commercial entities, although it participates in larger shared credit loan facilities. Shared national credits funded at March 31, ~~2022~~2023 totaled approximately ~~$2.2~~$2.7 billion, or ~~10%~~12% of total loans, ~~an increase~~a decrease of ~~$64~~$9 million from December 31, ~~2021 and $554 million from March 31, 2021.~~2022. At March 31, ~~2022,~~2023, approximately ~~$375~~$459 million of our shared national credits were with healthcare-related customers, with the ~~remaining portfolio~~remainder in commercial real estate and other diverse industries.

Our loan portfolio is well diversified by product, client, and geography throughout our footprint. Nevertheless, we may be exposed to certain concentrations of credit risk which exist in relation to different borrowers or groups of borrowers, specific types of collateral, industries, loan products, or regions. The following table provides detail of the more significant industry concentrations for our commercial and industrial loan portfolio, which is based on NAICS codes for all industries, with the exceptions of energy, which is based on the borrower’s source of revenue (i.e. a manufacturer whose income is derived from energy-related business is reported as energy)~~, and PPP loans, as those are expected to be 100% SBA guaranteed and therefore have limited credit risk.~~.


	March 31,					December 31,					September 30,					June 30,					March 31,
	2023					2022					2022					2022					2022
			Pct of					Pct of					Pct of					Pct of					Pct of
( $ in thousands )	Balance		Total			Balance		Total			Balance		Total			Balance		Total			Balance		Total
Commercial & industrial loans:
Health care and social assistance	$	1,398,300		10	%	$	1,407,960		11	%	$	1,420,861		11	%	$	1,296,666		11	%	$	1,205,237		10	%
Real estate and rental and leasing		1,368,460		10	%		1,520,955		12	%		1,483,937		11	%		1,460,694		12	%		1,369,518		11	%
Retail trade		1,238,090		9	%		1,218,784		9	%		1,162,095		9	%		1,136,244		9	%		1,119,969		9	%
Manufacturing		1,149,578		9	%		1,145,947		8	%		1,123,087		9	%		1,046,900		8	%		1,007,612		8	%
Construction		1,025,582		8	%		1,034,860		8	%		1,021,365		8	%		1,047,686		8	%		1,075,497		9	%
Wholesale trade		999,258		8	%		997,930		8	%		1,001,960		8	%		999,589		8	%		868,886		7	%
Finance and insurance		914,033		7	%		966,683		7	%		981,823		8	%		914,570		7	%		915,851		7	%
Transportation and warehousing		852,153		7	%		872,234		7	%		856,599		7	%		837,701		7	%		785,411		6	%
Professional, scientific, and technical services		732,068		6	%		706,430		5	%		696,855		5	%		653,555		5	%		689,148		6	%
Accommodation, food services and entertainment		677,488		5	%		637,942		5	%		669,063		5	%		702,313		6	%		726,077		6	%
Public administration		507,291		4	%		542,698		4	%		556,938		4	%		570,069		5	%		589,503		5	%
Information		407,754		3	%		386,568		3	%		332,230		2	%		315,071		2	%		296,989		2	%
Other services (except public administration)		387,396		3	%		396,629		3	%		405,724		3	%		403,874		3	%		412,609		3	%
Admin, Support, Waste Mgmt, Remediation Services		326,667		3	%		314,921		2	%		244,399		2	%		262,326		2	%		249,090		2	%
Educational services		282,488		2	%		298,126		2	%		268,392		2	%		280,377		2	%		286,992		2	%
Energy		227,171		2	%		242,076		2	%		246,344		2	%		246,961		2	%		249,235		2	%
Other		570,453		4	%		488,768		4	%		466,888		4	%		434,970		3	%		605,089		5	%
Total commercial & industrial loans	$	13,064,230		100	%	$	13,179,511		100	%	$	12,938,560		100	%	$	12,609,566		100	%	$	12,452,713		100	%

March 31,

December 31,

September 30,

June 30,

March 31,

2022

2021

2021

2021

2021

Pct of

Pct of

Pct of

Pct of

Pct of

( $ in thousands )

Balance

Total

Balance

Total

Balance

Total

Balance

Total

Balance

Total

Commercial & industrial loans:

Real estate and rental and leasing

$
1,363,548

11
%

$
1,311,241

11
%

$
1,298,560

11
%

$
1,250,737

10
%

$
1,234,521

10
%
Health care and social assistance

1,182,345

10
%

1,284,578

10
%

1,219,769

10
%

1,086,845

9
%

1,140,616

9
%
Retail trade

1,104,686

9
%

1,086,204

9
%

1,069,225

9
%

1,051,317

9
%

1,033,822

8
%
Construction

1,027,469

8
%

923,040

7
%

861,075

7
%

753,049

6
%

648,379

5
%
Manufacturing

984,699

8
%

919,830

7
%

928,041

8
%

946,266

8
%

928,993

7
%
Finance and insurance

911,910

7
%

896,105

7
%

796,980

7
%

772,464

6
%

680,368

5
%
Wholesale trade

856,534

7
%

823,295

7
%

808,252

7
%

751,689

6
%

707,541

5
%
Transportation and warehousing

771,865

6
%

780,934

6
%

785,367

6
%

769,145

6
%

789,573

6
%
Professional, scientific, and technical services

662,559

5
%

621,739

5
%

521,965

4
%

503,425

4
%

486,970

4
%
Accommodation, food services and entertainment

644,919

5
%

595,698

5
%

604,550

5
%

605,728

5
%

625,352

5
%
Public administration

588,755

5
%

596,301

5
%

625,979

5
%

638,921

5
%

629,571

5
%
Other services (except public administration)

401,243

3
%

424,090

4
%

421,884

3
%

420,321

4
%

433,848

3
%
Energy

249,235

2
%

266,235

2
%

264,791

2
%

274,641

2
%

284,435

2
%
Educational services

274,848

2
%

255,127

2
%

251,383

2
%

260,366

2
%

268,305

2
%
Other

1,093,270

9
%

1,118,230

9
%

836,765

6
%

840,141

7
%

648,547

5
%
Total commercial & industrial loans

12,117,885

97
%

11,902,647

96
%

11,294,586

92
%

10,925,055

89
%

10,540,841

82
%
PPP loans

334,828

3
%

531,059

4
%

935,330

8
%

1,417,523

11
%

2,345,605

18
%
Total commercial & industrial loans

$
12,452,713

100
%

$
12,433,706

100
%

$
12,229,916

100
%

$
12,342,578

100
%

$
12,886,446

100
%

Table of Contents

Commercial real estate – income producing loans totaled approximately ~~$3.6~~$3.8 billion at March 31, ~~2022,~~2023, an increase of ~~$99~~$197 million, or 3%6%, from December 31, ~~2021 and $152 million, or 4%, from March 31, 2021.~~2022. Construction and land development loans ~~totaling~~totaled approximately ~~$1.3~~$1.7 billion at March 31, ~~2022, increased $58~~2023, an increase of $23 million, or 5%1%, from December 31, ~~2021 and increased $165 million, or 15%,~~2022. The increase in the commercial real estate – income producing loans was largely the result of completed construction projects moving to permanent financing, with the shift from ~~March 31, 2021.~~construction largely offset by continued funding on existing lines. We are continuing to limit our growth in income producing real estate with a focus on resilient projects given the current economic environment. The following table details the end-of-period aggregated commercial real estate – income producing and

~~Table of Contents~~

construction loan balances by property type. Loans reflected in 1-4 family residential construction include both loans to construction builders as well as single family borrowers.


	March 31,					December 31,					September 30,					June 30,					March 31,					March 31,					December 31,					June 30,					September 30,					March 31,
	2022					2021					2021					2021					2021					2023					2022					2022					2022					2022
			Pct of					Pct of					Pct of					Pct of					Pct of					Pct of					Pct of					Pct of					Pct of					Pct of
( $ in thousands )	Balance		Total			Balance		Total			Balance		Total			Balance		Total			Balance		Total			Balance		Total			Balance		Total			Balance		Total			Balance		Total			Balance		Total
Commercial real estate - income producing and construction loans:
Multifamily																										$	1,017,351		19	%	$	870,869		17	%	$	872,944		17	%	$	776,723		15	%	$	695,090		14	%
Healthcare related properties	$	815,090		17	%	$	766,338		16	%	$	677,137		15	%	$	676,587		14	%		614,510		14	%		865,414		16	%		854,563		16	%		851,998		16	%		879,474		18	%		815,090		17	%
Retail		793,126		17	%		777,594		17	%		756,619		16	%		781,143		16	%		742,649		16	%		802,220		15	%		811,990		15	%		803,300		15	%		780,454		16	%		793,126		17	%
Multifamily		695,090		14	%		647,300		14	%		696,924		15	%		688,900		15	%		648,097		14	%
Industrial		568,886		12	%		561,022		12	%		577,988		12	%		569,123		12	%		544,755		12	%		677,907		12	%		613,149		12	%		602,739		12	%		573,993		11	%		568,886		12	%
Office		554,005		11	%		501,771		11	%		487,510		10	%		501,885		11	%		506,661		11	%		561,248		10	%		569,452		11	%		585,614		11	%		569,055		11	%		554,005		11	%
1-4 family residential construction		516,580		11	%		469,690		10	%		441,925		9	%		426,745		9	%		426,124		9	%		623,293		11	%		602,867		11	%		588,122		11	%		548,286		11	%		516,580		11	%
Hotel/motel and restaurants		441,285		9	%		437,241		9	%		504,536		11	%		501,434		11	%		519,736		12	%		475,377		9	%		485,865		9	%		453,847		9	%		448,949		9	%		441,285		9	%
Other land loans		214,446		4	%		257,594		5	%		291,415		7	%		318,136		7	%		283,833		6	%		219,192		4	%		213,159		4	%		222,723		4	%		221,905		4	%		214,446		4	%
Other		251,446		5	%		274,746		6	%		247,876		5	%		250,111		5	%		246,804		6	%		243,369		4	%		242,669		5	%		246,510		5	%		251,131		5	%		251,446		5	%
Total commercial real estate - income producing and construction loans	$	4,849,954		100	%	$	4,693,296		100	%	$	4,681,930		100	%	$	4,714,064		100	%		4,533,169		100	%	$	5,485,371		100	%	$	5,264,583		100	%	$	5,227,797		100	%	$	5,049,970		100	%	$	4,849,954		100	%

Our residential mortgages loan portfolio totaled ~~$2.5~~$3.3 billion at March 31, ~~2022,~~2023, up ~~$39~~$237 million, or 2%8%, from December 31, ~~2021 and down $26 million, or 1%, from March 31, 2021. The increase~~2022. Growth in residential mortgage includes a combination of completed construction loans ~~from the prior quarter was due~~converting to a lower level of originated loans sold in the secondary market, down to 27% from 35% in the quarter ending December 31, 2021, partially offset by a 2% decline in production. The decrease from the same quarter last year was due to continued refinance activity due to the interest rate environment which led to demand for longer term, fixed rate mortgages, which we typically originate for sale in the secondary market, and,permanent financing as ~~such, we have experienced a decline in our residential mortgage portfolio.~~ well new loan growth.

The consumer loan portfolio totaled ~~$1.6~~$1.5 billion at March 31, ~~2022,~~2023, down ~~$26~~$52 million, or 2%3%, from December 31, ~~2021, and down $199 million, or 11%, from March 31, 2021. The decline~~2022. Changes in the consumer loan portfolio ~~is due in part to~~balance include the impact of our exit offrom the indirect automobile lending ~~and decreased~~market, where the existing portfolio is in run-off.

Management expects the 2023 loan ~~demand.~~growth percentage to be in the range of low to mid-single digits from the December 31, 2022 balance of $23.1 billion.

~~Management expects core loan growth (excluding PPP loans)~~56

Table of ~~6% to 8% for the full year 2022, with quarterly results reflecting normal seasonality. We expect the majority of our PPP loans to be forgiven by the end of the second quarter of 2022.~~Contents

Allowance for Credit Losses and Asset Quality

The Company's allowance for credit losses was ~~$348.6~~$341.4 million at March 31, ~~2022, compared to $371.4~~2023, up slightly from $341.1 million at December 31, ~~2021 and $456.9 million at March 31, 2021.~~2022.

The ~~$22.8~~$0.3 million ~~decrease~~linked-quarter increase in the ~~March 31, 2022~~ allowance for credit losses is ~~primarily~~ attributable to ~~lower collectively evaluated reserves driven by the economic forecast~~$5.7 million of net charge-offs and ~~improving asset quality,~~a provision for credit losses of $6.0 million, reflective of loan growth and lower individually evaluated reserves (generally used for nonperforming and troubled debt restructured loans) due largely to customer payment activity. The slower near-term growth S-2 scenario (anchoreda relatively consistent credit loss outlook on the ~~baseline) was weighted most heavily at 60%~~portfolio as a whole. Uncertainty related to inflationary pressure and the outcome of the Federal Reserve’s monetary policy continues to result in an elevated reserve relative to pre-pandemic levels. After considering the variables underlying each of the Moody's economic scenarios, management weighed the baseline scenario ~~was weighted~~at 40% ~~to incorporate reasonably possible alternative economic outcomes. Both economic~~, the downside S-2 mild recessionary scenario at 50% and the downside moderate recessionary scenario at 10% in the computation of the allowance for credit losses at March 31, 2023. Each of the scenarios utilized ~~reflect continued recovery from the economic downturn in the first half of 2020; however, each scenario has~~have varying degrees of severity and duration of inflationary ~~pressures and~~pressure, including volatility in commodities prices stemming from geopolitical ~~unrest.~~unrest, the consequences of the Federal Reserve's actions with regard to monetary policy, and the ultimate effects of recent disruption in the financial services industry on credit trends. Refer to the Economic Outlook section of this discussion and analysis for further information on the Moody’s scenarios and our weighting assumptions.

The March 2022 baseline forecast assumes that the Russian invasion of Ukraine will have a marginal impact on the U.S. economy and disruptions to commodity markets will be limited and temporary. The date for abatement of the pandemic, where total case growth is less than 0.05% per day, occurred in

In the first quarter of ~~2022 and~~2023, the ~~forecast assumes that COVID-19 will be endemic and seasonal. Congress will pass~~provision for credit losses included a ~~$600 billion Building a Better America plan by the third quarter~~reserve build of ~~2022, which will focus on clean-energy tax credits and other climate change programs. Inflation moderates and returns~~$0.3 million, compared to the Federal Reserve’s target of 2% in the first half of next year and the Federal Reserve raises the target range for the federal funds rate four times this year, 25 basis points each time. The slower near-term growth S-2 forecast reflects a slower economic recovery than the baseline forecast, with the conflict between Russia and Ukraine persisting longer than in the baseline, resulting in further supply-chain disruption and volatility in commodities prices. Additionally, new cases, hospitalizations and deaths from COVID-19 begin to rise again, and as a result, a slower return to spending on air travel, retail and hotels than baseline. The S-2 scenario also assumes less effective stimulus and a slower return to full employment. Additional information on the Moody’s forecast is provided in the “Economic Outlook” section of this document

~~The allowance release of $22.8~~$1.5 million in the ~~first~~fourth quarter ~~2022 and the release~~ of ~~$108.4 million when compared to March 31, 2021 are across most portfolios and reflect the continued improvement in the economic conditions in our market and overall asset quality.~~2022. Our allowance for credit loss coverage to total loans ~~remains strong at 1.63%~~was 1.46% at March 31, ~~2022, or 1.66% when excluding SBA~~

~~Table of Contents~~

~~guaranteed PPP loans,~~2023, compared to ~~1.76%~~1.48% at December 31, 2021, or 1.80% excluding PPP loans, and 2.11% at March 31, 2021, or 2.35% excluding PPP loans. While our reserve coverage to total loans continues to decline, it remains elevated compared to normalized levels,2022, with ~~borrower performance for select regions/industries not yet at pre-pandemic levels and uncertainty related to future payment performance as~~the modest change reflecting the impact of the federal stimulus tapers and modifications expire. The impact of the COVID-19 variants, inflationary pressures, global supply chain issues, and labor supply shortages in our markets adds uncertainty to the overall outlook.loan growth with relatively stable asset quality metrics.

The allowance for credit losses on the commercial portfolio ~~decreased to $291.5~~was relatively unchanged at $278.0 million, or ~~1.68%~~1.50% of that portfolio, at March 31, ~~2022~~2023, compared to the December 31, ~~2021~~2022 allowance of ~~$307.9~~$279.0 million, or ~~1.80%. The decrease in the commercial allowance is~~1.51%, primarily due to ~~improved economic conditions in our footprint and improved asset quality metrics, with several quarters of little to no net charge-offs.~~stable credit performance. Our residential mortgage allowance for credit loss ~~decreased~~increased modestly to ~~$26.4~~$34.6 million, ~~or 1.07%~~1.04% of that portfolio at March 31, ~~2022,~~2023, compared to ~~$30.6~~$32.5 million, or ~~1.26%~~1.05%, at December 31, ~~2021,~~2022, due ~~primarily~~largely to ~~a favorable movement~~growth in ~~forecasted variables for home prices.~~the portfolio. Our allowance for credit losses on the consumer portfolio was ~~$30.7~~$28.8 million, or ~~1.97%,~~1.89% at March 31, ~~2022,~~2023, compared to ~~$32.8~~$29.6 million, or ~~2.07%~~1.88%, at December 31, ~~2021.~~2022.

Criticized commercial loans totaled ~~$282.5~~$295.5 million at March 31, ~~2022,~~2023, down $6.4 million, or 2%, from ~~$287.2~~$301.9 million at December 31, ~~2021 and down 19% from $347.8 million at March 31, 2021.~~2022. The ~~reduction~~decrease in criticized commercial ~~criticized~~ loans ~~reflects~~ is the result of net activity wherepayoffs, paydowns, upgrades, and charge-offs ~~exceeding new downgrades.~~exceeded downgraded credits during the first quarter. Criticized loans are defined as those having potential weaknesses that deserve management’s close attention (risk-rated as special mention, substandard and doubtful), including both accruing and nonaccruing loans. The Company routinely assesses the ratings of loans in its portfolio through an established and comprehensive portfolio management process. In addition, the Company often ~~looks at~~reviews portfolios of loans to determine if there are areas of risk not specifically identified in its loan by loan approach. Criticized commercial loans comprised 1.59% of that portfolio at March 31, 2023, down from 1.64% at December 31, 2022 and remain near historically low levels. Our criticized commercial loans at March 31, 2022 are diversified across many industries, with the largest concentrations being construction, totaling $77.2 million; manufacturing, totaling $40.0 million; energy support services, totaling $31.3 million; and wholesale trade, totaling $30.7 million. Commercial loans risk rated pass-watch totaled $456.0 million at March 31, 2023, virtually unchanged when compared to December 31, 2022. The pass-watch risk rating includes credits with negative performance trends that reflect sufficient risk to cause concern, but have not risen to the level of criticized.

Net charge-offs were ~~$0.3~~$5.7 million, or ~~0.01%~~0.10% of average total loans on an annualized basis in the first quarter of ~~2022, virtually unchanged~~2023, compared to ~~$0.7~~$1.0 million, or 0.02% of average total loans in the fourth quarter of 2022, and $0.3 million, or 0.01% of average total loans in the ~~fourth quarter of 2021 and down from $18.3 million, or 0.34% in the~~ first quarter of ~~2021.~~2022. Our commercial portfolio had net ~~recoveries~~charge-offs of ~~$0.8 million and $0.5~~$3.4 million in the first quarter of ~~2022~~2023, and net recoveries of $1.2 million and $0.8 million in the fourth ~~quarter~~and first quarters of ~~2021,~~2022, respectively. ~~The first quarter of 2021 commercial net charge-offs totaled $16.2 million, consisting largely of charges related to energy-dependent credits.~~ Our residential mortgage portfolio ~~reflected minimal~~had net recoveries of $0.2 million in the first quarter of ~~2022~~2023, and $0.3 million and less than $0.1 million in the fourth and first ~~quarter~~quarters of ~~2021, and consumer~~2022, respectively. Consumer net charge-offs were $2.5 million in the first quarter of 2023, $2.4 million in the fourth quarter of 2022, and $1.2 million in the first quarter of ~~2022, virtually flat~~2022. Charge-off metrics, while up compared to ~~the~~ prior ~~quarter and down from $2.1 million in the first quarter of 2021.~~periods, remains relatively modest.

Table of Contents

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


	Three Months Ended									Three Months Ended
	March 31,			December 31,			March 31,			March 31,			December 31,			March 31,
(in thousands)	2022			2021			2021
($ in thousands)										2023			2022			2022
Provision and Allowance for Credit Losses
Allowance for loan losses:
Allowance for loan losses at beginning of period	$	342,065		$	371,521		$	450,177		$	307,789		$	306,116		$	342,065
Loans charged-off:
Commercial non real estate		2,659			1,154			17,512			4,528			1,271			2,659
Commercial real estate - owner-occupied		—			1,457			347			—			2			—
Total commercial & industrial		2,659			2,611			17,859			4,528			1,273			2,659
Commercial real estate - income producing		4			194			194			—			7			4
Construction and land development		—			7			248			61			—			—
Total commercial		2,663			2,812			18,301			4,589			1,280			2,663
Residential mortgages		42			495			109			20			35			42
Consumer		2,680			2,848			3,694			3,363			3,328			2,680
Total charge-offs		5,385			6,155			22,104			7,972			4,643			5,385
Recoveries of loans previously charged-off:
Commercial non real estate		2,142			2,406			1,899			1,033			2,352			2,142
Commercial real estate - owner-occupied		389			279			37			195			127			389
Total commercial & industrial		2,531			2,685			1,936			1,228			2,479			2,531
Commercial real estate - income producing		878			5			—			—			—			878
Construction and land development		68			624			159			6			2			68
Total commercial		3,477			3,314			2,095			1,234			2,481			3,477
Residential mortgages		61			526			206			181			286			61
Consumer		1,528			1,646			1,549			838			903			1,528
Total recoveries		5,066			5,486			3,850			2,253			3,670			5,066
Total net charge-offs		319			669			18,254			5,719			973			319
Provision for loan losses		(23,903	)		(28,787	)		(7,563	)		7,315			2,646			(23,903	)
Allowance for loan losses at end of period	$	317,843		$	342,065		$	424,360		$	309,385		$	307,789		$	317,843
Reserve for Unfunded Lending Commitments:
Reserve for unfunded lending commitments at beginning of period	$	29,334		$	28,946		$	29,907		$	33,309		$	33,468		$	29,334
Provision for losses on unfunded lending commitments		1,376			388			2,652			(1,295	)		(159	)		1,376
Reserve for unfunded lending commitments at end of period	$	30,710		$	29,334		$	32,559		$	32,014		$	33,309		$	30,710
Total Allowance for Credit Losses	$	348,553		$	371,399		$	456,919		$	341,399		$	341,098		$	348,553
Total Provision for Credit Losses	$	(22,527	)	$	(28,399	)	$	(4,911	)	$	6,020		$	2,487		$	(22,527	)
Coverage Ratios:
Allowance for loan losses to period-end loans		1.49	%		1.62	%		1.96	%		1.32	%		1.33	%		1.49	%
Allowance for credit losses to period-end loans		1.63	%		1.76	%		2.11	%		1.46	%		1.48	%		1.63	%
Charge-offs ratios:
Gross charge-offs to average loans		0.10	%		0.12	%		0.41	%		0.14	%		0.08	%		0.10	%
Recoveries to average loans		0.10	%		0.10	%		0.07	%		0.04	%		0.06	%		0.10	%
Net charge-offs to average loans		0.01	%		0.01	%		0.34	%		0.10	%		0.02	%		0.01	%
Net Charge-offs to average loans by portfolio
Commercial non real estate		0.02	%		(0.05	)%		0.63	%		0.14	%		(0.04	)%		0.02	%
Commercial real estate - owner-occupied		(0.06	)%		0.17	%		0.04	%		(0.03	)%		(0.02	)%		(0.06	)%
Total commercial & industrial		0.00	%		0.00	%		0.50	%		0.10	%		(0.04	)%		0.00	%
Commercial real estate - income producing		(0.10	)%		0.02	%		0.02	%		—			0.00	%		(0.10	)%
Construction and land development		(0.02	)%		(0.20	)%		0.03	%		0.01	%		(0.00	)%		(0.02	)%
Total commercial		(0.02	)%		(0.01	)%		0.38	%		0.07	%		(0.03	)%		(0.02	)%
Residential mortgages		(0.00	)%		(0.01	)%		(0.02	)%		(0.02	)%		(0.03	)%		(0.00	)%
Consumer		0.30	%		0.30	%		0.48	%		0.66	%		0.61	%		0.30	%

Table of Contents

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


	March 31,			December 31,			September 30,			June 30,			March 31,			March 31,			December 31,			September 30,			June 30,			March 31,
(in thousands)	2022			2021			2021			2021			2021
($ in thousands)																2023			2022			2022			2022			2022
Loans accounted for on a nonaccrual basis:
Commercial non-real estate	$	4,065		$	4,058		$	7,167		$	16,029		$	24,108		$	12,378		$	3,078		$	3,563		$	3,600		$	4,065
Commercial non-real estate - restructured		1,247			2,915			2,781			3,095			3,542
Commercial non-real estate - modified/restructured (a)																	924			942			965			1,230			1,247
Total commercial non-real estate		5,312			6,973			9,948			19,124			27,650			13,302			4,020			4,528			4,830			5,312
Commercial real estate - owner occupied		2,514			3,104			4,922			6,276			9,922			1,709			1,233			2,009			2,165			2,514
Commercial real estate - owner-occupied - restructured		235			1,817			1,798			1,839			1,882
Commercial real estate - owner-occupied - modified/restructured (a)																	684			228			228			228			235
Total commercial real estate - owner-occupied		2,749			4,921			6,720			8,115			11,804			2,393			1,461			2,237			2,393			2,749
Commercial real estate - income producing		1,880			5,377			4,167			4,975			4,729			1,501			1,174			1,814			1,842			1,880
Commercial real estate - income producing - restructured		76			81			82			86			89
Commercial real estate - income producing - modified/restructured (a)																	—			66			69			74			76
Total commercial real estate - income producing		1,956			5,458			4,249			5,061			4,818			1,501			1,240			1,883			1,916			1,956
Construction and land development		578			837			1,230			2,004			1,680			340			306			349			676			578
Construction and land development - restructured		6			7			8			8			9
Construction and land development - modified/restructured (a)																	—			3			4			4			6
Total construction and land development		584			844			1,238			2,012			1,689			340			309			353			680			584
Residential mortgage		20,709			23,483			23,423			30,995			39,066			30,110			23,946			22,753			18,649			20,709
Residential mortgage - restructured		2,036			1,956			2,541			1,780			1,649
Residential mortgage - modified/restructured (a)																	—			1,323			1,530			1,713			2,036
Total residential mortgage		22,745			25,439			25,964			32,775			40,715			30,110			25,269			24,283			20,362			22,745
Consumer		9,093			11,888			12,238			16,464			21,758			6,698			6,646			6,476			7,885			9,093
Consumer - restructured		—			—			—			—			—
Consumer - modified/restructured (a)																	—			46			47			—			—
Total consumer		9,093			11,888			12,238			16,464			21,758			6,698			6,692			6,523			7,885			9,093
Total nonaccrual loans	$	42,439		$	55,523		$	60,357		$	83,551		$	108,434		$	54,344		$	38,991		$	39,807		$	38,066		$	42,439
Restructured loans - still accruing:
ORE and foreclosed assets																	1,976			2,017			2,085			3,467			6,345
Total nonaccrual loans and ORE and foreclosed assets																$	56,320		$	41,008		$	41,892		$	41,533		$	48,784
Modified/Restructured loans - still accruing (a):
Commercial non-real estate	$	494		$	515		$	480		$	526		$	2,337		$	10		$	307		$	316		$	329		$	494
Commercial real estate - owner occupied		—			—			—			—			—			—			—			—			—			—
Commercial real estate - income producing		—			—			—			—			341			—			—			—			—			—
Construction and land development		117			118			119			120			121			—			113			114			116			117
Residential mortgage		1,363			2,169			1,407			2,103			2,457			—			1,018			1,016			1,142			1,363
Consumer		929			986			1,065			1,081			1,064			—			469			479			905			929
Total restructured loans - still accruing		2,903			3,788			3,071			3,830			6,320
Total nonperforming loans		45,342			59,311			63,428			87,381			114,754
ORE and foreclosed assets		6,345			7,533			8,423			10,201			9,467
Total nonperforming assets (a)	$	51,687		$	66,844		$	71,851		$	97,582		$	124,221
Loans 90 days past due still accruing (b)	$	4,258		$	5,524		$	9,970		$	8,925		$	5,090
Total restructured loans	$	6,503		$	10,564		$	10,281		$	10,638		$	13,491
Total Modified/restructured loans - still accruing (a)																$	10		$	1,907		$	1,925		$	2,492		$	2,903
Total reportable modified loans (a)																$	1,618
Total troubled debt restructured loans (a)																			$	4,515		$	4,768		$	5,741		$	6,503
Loans 90 days past due still accruing																$	13,155		$	4,585		$	2,600		$	4,697		$	4,258
Ratios:
Nonaccrual loans to total loans		0.20	%		0.26	%		0.29	%		0.40	%		0.50	%		0.23	%		0.17	%		0.18	%		0.17	%		0.20	%
Nonperforming assets to loans plus ORE and foreclosed assets		0.24	%		0.32	%		0.34	%		0.46	%		0.57	%
Nonaccrual loans plus ORE and foreclosed assets to loans plus ORE and foreclosed assets																	0.24	%		0.18	%		0.19	%		0.20	%		0.24	%
Allowance for loan losses to nonaccrual loans																	569.31	%		789.38	%		769.00	%		809.58	%		748.94	%
Allowance for loan losses to nonaccrual loans and accruing loans 90 days past due		680.65	%		560.33	%		528.28	%		432.19	%		373.81	%		458.35	%		706.33	%		721.85	%		720.66	%		680.65	%
Allowance for loan losses to nonperforming loans and accruing loans 90 days past due		640.81	%		527.59	%		506.17	%		415.00	%		354.09	%
Loans 90 days past due still accruing to loans		0.02	%		0.03	%		0.05	%		0.04	%		0.02	%		0.06	%		0.02	%		0.01	%		0.02	%		0.02	%

(a)

~~Includes total nonaccrual~~Loans presented in the March 31, 2023 column represent modified loans ~~total~~ to borrowers experiencing financial difficulties, and the columns for December 31, 2022, September 30, 2022, June 30, 2022, and March 31, 2022 represent troubled debt restructured loans. The definition of reportable modifications/restructured loans ~~- still accruing and~~changed for modifications made on or after January 1, 2023 with the adoption of ASU 2022-02. Refer to Note 1 included in Part 1 of this document for a discussion of this standard.

Nonaccrual loans plus ORE and foreclosed ~~assets.~~

~~(b)~~

~~Excludes 90+ accruing restructured loans already reflected in total nonperforming loans of $1.8 million at 3/31/2021.~~

~~Nonperforming~~ assets totaled ~~$51.7~~$56.3 million at March 31, ~~2022, down $15.2~~2023, up $15.3 million from December 31, ~~2021, and $72.5~~2022. Nonaccrual loans of $54.3 million ~~from March 31, 2021. Nonperforming loans decreased $14.0~~increased $15.4 million compared to December 31, ~~2021,~~2022, and ~~$69.4 million from March~~remains at a relatively low percentage of the total portfolio at 0.23%. The increase in nonaccrual loans compared to December 31, ~~2021. The declines in nonperforming loans~~2022 was largely attributable to downgrades, partially offset by payoffs and ~~charge-offs outpacing downgrades.~~charge-offs. ORE and foreclosed assets were ~~$6.3~~$2.0 million at March 31, ~~2022, down from $7.5 million at~~2023, flat to December 31, ~~2021,~~2022. Nonaccrual loans plus ORE and ~~$9.5 million at March 31, 2021. Nonperforming~~other foreclosed assets as a percentage of total loans, ORE and other foreclosed assets was 0.24% at March 31, ~~2022, down 8~~2023, up 6 bps from December 31, ~~2021, and 33 bps from March 31, 2021.~~2022.

~~Future~~We expect to see low to modest charge-offs and provision for credit losses throughout 2023. Loan growth, portfolio mix, asset quality metrics and future assumptions in economic forecasts ~~and our own asset quality metrics~~ will drive ~~our outlook for~~ the level of ~~forecasted~~credit loss reserves. ~~We currently expect reserve releases will continue, however, expect to see them taper off over the next few quarters.~~

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Deposits

Deposits provide the most significant source of funding for our interest earning assets. Generally, our ability to compete for market share depends on our deposit pricing and our wide range of products and services that are focused on customer needs. ~~In order to meet our customers’ needs, we~~We offer high-quality banking services with convenient delivery channels, including online and mobile banking. We provide specialized services to our commercial customers to promote commercial deposit growth. These services include treasury management, industry expertise and lockbox services. Since early 2020, deposit levels have also been influenced by ~~pandemic driven~~pandemic-driven factors, such as inflows from government stimulus payments, deposits related to funding PPP loans into business checking accounts and a slowdown in customer spending during the height of the pandemic. In late 2022, we began to see outflows of some of the deposit bases built over the preceding two years, as spending levels have increased amid inflationary conditions and an increase in competition for deposits, though deposits remain well above pre-pandemic levels.

The failure of two large U.S. banks in the span of three days in March 2023 created sustained disruption in the financial services industry, with yet another failure in early May. While many factors played a role in the ultimate failures, these institutions had significant industry/demographic concentration within their deposit bases and a high ratio of uninsured deposits. Lack of diversity in concentration within a deposit base may increase the risk of events or trends that could prompt a larger-scale demand for deposits outflow. Further, concerns over a financial institution's ability to protect deposit balances in excess of the federally insured limit may increase the risk of a deposit run. We consider our deposit base to be seasoned, stable and well-diversified. We also offer our customers an insured cash sweep product (ICS) that allows customers to insure deposits above FDIC insured limits. We have seen increased demand for the ICS product following the recent bank failures, with the balance totaling $111.4 million at March 31, 2023 compared to $12.2 million at December 31, 2022. At March 31, 2023, we have calculated our average deposit account size by dividing period-end deposits by the population of accounts with balances to be approximately $38,300, which includes $205,800 in our commercial and small business lines (excluding public funds), $140,100 in our wealth management business line, and $18,500 in our consumer business line.

Further, at March 31, 2023, our sources of liquidity exceed uninsured deposits. We have estimated the Bank’s amount of uninsured deposits using the methodologies and assumptions required for FDIC regulatory reporting to be approximately $14.2 billion at March 31, 2023, down from $14.7 billion at December 31, 2022. Our uninsured deposit total at March 31, 2023 includes approximately $3.5 billion of public funds that have pledged securities as collateral, leaving $10.7 billion of noncollateralized, uninsured deposits compared to total liquidity of $18.7 billion. Our ratio of noncollateralized, uninsured deposits to total deposits was approximately 36.2% at March 31, 2023 compared to 37.9% at December 31, 2022. As a cautionary measure, we are holding approximately $1.8 billion of excess liquidity in short-term investments to ensure we have readily available funds to meet our customers’ needs.

Total deposits were ~~$30.5~~$29.6 billion at March 31, ~~2022,~~2023, up ~~$34~~$542.7 million, or 2%, from December 31, 2022. Average deposits for the first quarter of 2023 were $28.8 billion, down $23.5 million, or less than 1%, from December 31, 2021, with a favorable change in the deposit mix that included a $584 million increase in noninterest-bearing deposits and a $550 million decrease in interest-bearing accounts, including an $81 million decrease in higher-cost time deposits. Total deposits increased $1.3 billion, or 4%, from March 31, 2021, with strong growth of $1.8 billion in noninterest-bearing and a $513 million decrease in interest-bearing transaction deposits. Growth in noninterest-bearing deposits includes both commercial and consumer accounts. The decrease in interest-bearing deposits is largely a function of the low interest rate environment and deposit pricing. Average deposits for the first quarter of 2022 were $30.0 billion, up $279 million, or 1%, from the fourth quarter of ~~2021~~2022. Through April 30, 2023, we experienced minimal and ~~up $1.9 billion,~~expected seasonal core client deposit outflows, down $376 million, or 7%approximately 1%, from ~~the first~~ quarter ~~of 2021.~~end.

The following table shows the composition of our deposits at each date indicated.

Three Months Ended

March 31,

December 31,

September 30,

June 30,

March 31,

(in thousands)

2022

2021

2021

2021

2021

Noninterest-bearing deposits

$
14,976,670

$
14,392,808

$
13,653,366

$
13,406,385

$
13,174,911

Interest-bearing retail transaction and savings deposits

11,488,607

11,677,333

11,306,731

11,325,942

11,218,208

Interest-bearing public fund deposits:

Public fund transaction and savings deposits

2,962,811

3,216,651

2,938,943

3,090,247

3,067,819

Public fund time deposits

51,496

77,956

116,445

116,552

130,704

Total interest-bearing public fund deposits

3,014,307

3,294,607

3,055,388

3,206,799

3,198,523

Retail time deposits

1,010,935

1,091,959

1,183,482

1,319,857

1,604,754

Brokered time deposits

9,190

9,190

9,190

14,124

14,124

Total interest-bearing deposits

15,523,039

16,073,089

15,554,791

15,866,722

16,035,609

Total deposits

$
30,499,709

$
30,465,897

$
29,208,157

$
29,273,107

$
29,210,520


	March 31,		December 31,		September 30,		June 30,		March 31,
($ in thousands)	2023		2022		2022		2022		2022

Noninterest-bearing deposits	$	12,860,027	$	13,645,113	$	14,290,817	$	14,676,342	$	14,976,670
Interest-bearing retail transaction and savings deposits		10,682,568		10,757,495		10,924,309		11,359,561		11,488,607
Interest-bearing public fund deposits:
Public fund transaction and savings deposits		2,987,565		3,132,828		2,737,074		2,832,720		2,962,811
Public fund time deposits		98,644		111,397		59,288		50,943		51,496
Total interest-bearing public fund deposits		3,086,209		3,244,225		2,796,362		2,883,663		3,014,307
Retail time deposits		2,411,765		1,418,596		934,866		937,676		1,010,935
Brokered time deposits		572,501		4,920		4,920		9,190		9,190
Total interest-bearing deposits		16,753,043		15,425,236		14,660,457		15,190,090		15,523,039
Total deposits	$	29,613,070	$	29,070,349	$	28,951,274	$	29,866,432	$	30,499,709

Noninterest-bearing demand deposits were ~~$15.0~~$12.9 billion at March 31, 2022, up $584 million, or 4%, from December 31, 2021, and $1.8 billion, or 14%, from March 31, 2021. The linked quarter increase reflects growth in noninterest-bearing commercial and public funds deposits due in part to typical seasonality related to taxes, while the year-over-year changes is likely the result of pandemic and hurricane related cash inflows. Noninterest-bearing demand deposits comprised 49% of total deposits at March 31, 2022, 47% at December 31, 2021 and 45% at March 31, 2021.

~~Interest-bearing transaction and savings accounts of $11.5 billion at March 31, 2022 were~~2023, down $189 million, or 2%, from December 31, 2021 and up $270 million, or 2%, from March 31, 2021. Interest-bearing public fund deposits totaled $3.0 billion at March 31, 2022, down $280.3 million, or 9%, from December 31, 2021, and down $184.2$785.1 million, or 6%, from ~~March 31, 2021. Time deposits other than public funds totaled $1.0 billion at March 31, 2022, down $81.0 million, or 7%, from~~ December 31, ~~2021, and $593.8 million, or 37%, from March 31, 2021.~~2022. The decrease includes declines in ~~time deposits from both periods was~~noninterest-bearing commercial and consumer accounts due in part to ~~maturing retail and jumbo certificates of deposit which were not renewed, likely due~~a to ~~prevailing rates that reflect management’s strategic approach~~shift to ~~lowering the cost of funds.~~interest-bearing

~~Management expects deposits to remain flat to down slightly from the December 31, 2021 level of $30.5 billion.~~

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products amid the rising interest rate environment and public funds deposits reflecting typical seasonality. Noninterest-bearing demand deposits comprised 43% of total deposits at March 31, 2023 and 47% at December 31, 2022.

Interest-bearing transaction and savings accounts of $10.7 billion at March 31, 2023 were down $66.3 million, or 1%, from December 31, 2022. Interest-bearing public fund deposits totaled $3.1 billion at March 31, 2023, down $158.0 million, or 5%, from December 31, 2022. The decrease in public funds is mostly reflective of typical seasonal outflows. Retail time deposits totaled $2.4 billion at March 31, 2023, up $1.0 billion, or 70%, from December 31, 2022. The increase in retail time deposits was due to promotional product offerings at rates that reflect management’s strategic approach to attract and maintain deposits. Brokered time deposits of $572.5 million at March 31, 2023 were up $567.6 million, which represents the addition of short-term brokered time deposits to fund excess liquidity. These instruments bear interest plus fees of 5.45% and mature in December 2023.

As previously noted, interest rates paid on deposit accounts continued to increase in the first quarter of 2023, particularly on time deposits where we have offered promotional rates. The following table sets forth average balances and weighted-average rates paid on deposits for the first quarter of 2023 and the fourth and first quarters of 2022.


	March 31, 2023								December 31, 2022								March 31, 2022
($ in millions)	Balance		Rate			Mix			Balance		Rate			Mix			Balance		Rate			Mix
Interest-bearing deposits:
Interest-bearing transaction deposits	$	2,468.9		0.46	%		8.6	%	$	2,604.5		0.07	%		9.0	%	$	2,574.9		0.07	%		8.6	%
Money market deposits		5,497.3		1.80			19.1			5,349.0		0.92			18.6			6,020.1		0.04			20.1
Savings deposits		2,684.2		0.01			9.3			2,857.2		0.01			9.9			2,828.5		0.01			9.4
Time deposits		2,018.6		2.70			7.0			1,178.0		1.09			4.1			1,088.5		0.24			3.6
Public Funds		3,160.7		3.04			11.0			2,973.0		2.43			10.3			3,154.5		0.26			10.5
Total interest-bearing deposits		15,829.7		1.65	%		55.0			14,961.7		0.96	%		51.9			15,666.5		0.10	%		52.2
Noninterest bearing demand deposits		12,963.2					45.0			13,854.6					48.1			14,363.3					47.8
Total deposits	$	28,792.9					100.0	%	$	28,816.3					100.0	%	$	30,029.8					100.0	%

The following sets forth the maturities of time certificates of deposit greater than $250,000 at March 31, 2023.


	March 31,
($ in thousands)	2023
Three months	$	139,855
Over three months through six months		270,903
Over six months through one year		515,746
Over one year		31,184
Total	$	957,688

Management expects relatively flat or low single digit end of period deposit growth for 2023 compared to the balance of $29.1 billion at December 31, 2022.

Short-Term Borrowings

At March 31, ~~2022,~~2023, short-term borrowings totaled $3.5 billion, up $1.6 billion, ~~down $45 million,~~ or 3%88%, from December 31, ~~2021 and down $32 million, or 2%,~~2022. The increase from December 31, 2022 is primarily attributable to a $1.7 billion increase in FHLB borrowings, approximately $1.2 billion of which was drawn as a cautionary measure to increase on-balance sheet liquidity in light of the current business environment following the March bank failures. FHLB borrowings totaled $3.1 billion at March 31, ~~2021, driven mainly by~~2023, and consisting of five fixed rate advances maturing between April 3, 2023 through May 3, 2023. Subsequent to quarter end, in early May, $1.4 billion of the borrowings were repaid at maturity, reducing cautionary excess liquidity. The remaining variance is largely due to changes in customer repurchase ~~agreements.~~agreements discussed below. Average short-term borrowings of ~~$1.7~~$2.1 billion in the first quarter of ~~2022~~2023 were ~~virtually flat when~~up $522.8 million, or 33%, compared to ~~both~~ the prior ~~quarter and same quarter last year.~~quarter.

Short-term borrowings are a core portion of the Company’s funding strategy and can fluctuate depending on our funding needs and the sources utilized. Customer repurchase agreements and FHLB borrowings are the major sources of short-term borrowings. Customer repurchase agreements are offered mainly to commercial customers to assist them with their cash management strategies or to provide a temporary investment vehicle for their excess liquidity pending redeployment for corporate or investment purposes. While customer repurchase agreements provide a recurring source of funds to the Bank, amounts available will vary. FHLB borrowings are funds from the Federal Home Loan Bank that are collateralized by certain residential mortgage and commercial real estate loans included in the Bank’s loan portfolio, subject to specific criteria.

~~Included in short-term borrowings at March 31, 2022 are $1.1 billion~~61

Table of ~~FHLB advances consisting of five fixed rate notes maturing between 2034 and 2035,~~ Contents

~~that are~~ classified as short-term as the FHLB has the option to put (terminate) the advance prior to maturity. The advances were entered into in late 2019 into early 2020 with average interest rates of 0.49%. The Company has access to sufficient liquidity should these advances be called.

Long-Term Debt

Long-term debt totaled ~~$240.5~~$242.1 million at March 31, ~~2022, down $3.8 million, or 2%,~~2023, virtually unchanged from December 31, ~~2021, and down $157.1 million, or 40%, from March 31, 2021. The decrease from March 31, 2021 is largely attributable to the redemption of $150 million of subordinated notes on June 15, 2021.~~2022.

Long-term debt at March 31, ~~2022~~2023 includes subordinated notes payable with an aggregate principal amount of $172.5 million, ~~with~~ a stated maturity of June 15, 2060, and a fixed rate of 6.25% per annum that qualify as Tier 2 capital of certain regulatory capital ratios. Subject to prior approval by the Federal Reserve, the Company may redeem these notes in whole or in part on any of its quarterly interest payment dates after June 15, 2025.

OFF-BALANCE SHEET ARRANGEMENTS

Loan Commitments and Letters of Credit

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

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The contract amounts of these instruments reflect our exposure to credit risk. The Bank undertakes the same credit evaluation in making loan commitments and assuming conditional obligations as it does for on-balance sheet instruments and may require collateral or other credit support. At March 31, ~~2022,~~2023, the Company had a reserve for unfunded lending commitments totaling ~~$30.7~~$32.0 million.

The following table shows the commitments to extend credit and letters of credit at March 31, ~~2022~~2023 according to expiration date.


			Expiration Date										Expiration Date
			Less than		1-3		3-5		More than				Less than		1-3		3-5		More than
(in thousands)	Total		1 year		years		years		5 years
($ in thousands)											Total		1 year		years		years		5 years
Commitments to extend credit	$	9,612,025	$	4,086,523	$	2,500,027	$	2,219,598	$	805,877	$	10,285,535	$	3,948,624	$	2,809,683	$	2,689,948	$	837,280
Letters of credit		382,067		287,586		82,761		11,720		—		430,026		360,265		69,513		248		—
Total	$	9,994,092	$	4,374,109	$	2,582,788	$	2,231,318	$	805,877	$	10,715,561	$	4,308,889	$	2,879,196	$	2,690,196	$	837,280

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CRITICAL ACCOUNTING POLICIES AND ESTIMATES

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

NEW ACCOUNTING PRONOUNCEMENTS

Refer to Note 14 to our consolidated financial statements included elsewhere in this report.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

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

The following table presents an analysis of our interest rate risk as measured by the estimated changes in net interest income resulting from an instantaneous and sustained parallel shift in rates at March 31, ~~2022.~~2023. Shifts are measured in 100 basis point increments in a range from -500 to +500 basis points from base case, with ~~+100~~-200 through +300 basis points presented in the table below. Our interest rate sensitivity modeling incorporates a number of assumptions including loan and deposit repricing characteristics, the rate of loan prepayments and other factors such as loan floors and the impact of off-balance sheet hedges. The base scenario assumes that the current interest rate environment is held constant over a 24-month forecast period and is the scenario to which all others are compared in order to measure the change in net interest income. Policy limits on the change in net interest income under a variety of interest rate scenarios are approved by the Board of Directors. All policy scenarios assume a static volume forecast where the balance sheet is held constant, although other scenarios are modeled.

Estimated Increase

(Decrease) in NII

Change in Interest Rates

Year 1

Year 2

(basis points)

+100

6.84
%

10.32
%
+200

14.54
%

21.24
%
+300

22.21
%

32.12
%

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	Estimated Increase
	(Decrease) in NII
Change in Interest Rates	Year 1			Year 2
(basis points)
-200		-7.75	%		-11.49	%
-100		-3.56	%		-5.44	%
+100		3.29	%		5.02	%
+200		6.38	%		9.73	%
+300		9.40	%		14.33	%

The results indicate ~~an increased level of~~a general asset sensitivity across most scenarios driven primarily by ~~a large short-term excess reserves position held at the Federal Reserve,~~ repricing in variable rate loans and a funding mix which ~~has~~includes a ~~higher composition~~large percentage of non-interest bearing and lower rate sensitive deposits. As rates have risen over the past year, the funding mix has experienced a shift to more rate sensitive deposit and wholesale funding which has resulted in a lower Net Interest Income at risk measurements compared to recent years. When deemed ~~to be~~ prudent, management has taken actions to mitigate exposure to interest rate risk with ~~on- or~~on-or off-balance sheet financial instruments and intends to do so in the future. Possible actions include, but are not limited to, changes in the pricing of loan and deposit products, modifying the composition of earning assets and interest-bearing liabilities, and adding to, modifying or terminating existing interest rate swap agreements or other financial instruments used for interest rate risk management purposes.

Even if interest rates change in the designated amounts, there can be no assurance that our assets and liabilities would perform as anticipated. Additionally, a change in the U.S. Treasury rates in the designated amounts accompanied by a change in the shape of the U.S. Treasury yield curve would cause significantly different changes to net interest income than indicated above. Strategic management of our balance sheet and earnings is fluid and would be adjusted to accommodate these movements. As with any method of measuring interest rate risk, certain shortcomings are inherent in the methods of analysis presented above. For example, although certain assets and liabilities may have similar maturities or periods to repricing, they may react in different degrees to changes in

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market interest rates. Also, the interest rates on certain types of assets and liabilities may fluctuate in advance of changes in market interest rates, while interest rates on other types may lag behind changes in market rates. Certain assets such as adjustable-rate loans have features which restrict changes in interest rates on a short-term basis and over the life of the asset. Also, the ability of many borrowers to service their debt may decrease in the event of an interest rate increase. ~~We consider all~~All of these factors are considered in monitoring exposure to interest rate risk.

LIBOR Transition

In 2017, the United Kingdom’s Financial Conduct Authority announced that after 2021 it would no longer compel banks to submit the rates required to calculate the London Interbank Offered Rate ~~(“LIBOR”)~~(LIBOR). In November 2020, the administrator of LIBOR announced it will consult on its intention to extend the retirement date of certain offered rates whereby the publication of the one week and two month LIBOR offered rates will cease after December 31, ~~2021,~~2021; but, the publication of the remaining LIBOR offered rates will continue until June 30, 2023. ~~Given consumer protection, litigation, and reputation risks,~~The Company discontinued the ~~bank regulatory agencies have indicated that entering into~~use of LIBOR for new contracts ~~that use LIBOR as a reference rate~~ after December 31, 2021, ~~would create safety~~with limited exceptions as permitted by regulatory guidance and soundness risks and that they will examine bank practices accordingly. Therefore, the agencies encouraged banks to cease entering into new contracts that use LIBOR as a reference rate as soon as practicable and in any event by December 31, 2021.internal policy.

Regulators, industry groups and certain committees (e.g., the Alternative Reference Rates Committee ~~("ARRC"~~(ARRC)) have, among other things, published recommended fallback language for LIBOR-linked financial instruments, identified recommended alternatives for certain LIBOR rates (e.g., AMERIBOR or the Secured Overnight Financing Rate ~~("SOFR")~~(SOFR) as the recommended alternative to U.S. Dollar LIBOR), and proposed implementations of the recommended alternatives in floating rate instruments. Further, the Adjustable Interest Rate (LIBOR) Act, enacted in March 2022, provides a statutory framework to replace U.S. dollar LIBOR with a benchmark rate based on the SOFR for contracts governed by U.S. law that have no or ineffective fallbacks, and in December 2022, the Federal Reserve Board adopted related implementing rules. In addition, where fallback language allows the Bank to select a benchmark rate, the statutory framework grants the authority to select the Board-selected benchmark replacement as the benchmark replacement, including the safe harbor provisions that, among other things, generally provide that such selection or use will not discharge or excuse performance under, give any person the right to unilaterally terminate or suspend performance under, or constitute a breach, of the contract.

We have a significant number of loans, derivative contracts, borrowings and other financial instruments with attributes that are either directly or indirectly dependent on LIBOR. The transition from LIBOR has resulted in and could continue to result in added costs and employee efforts and could present additional risk. Since proposed alternative rates are calculated differently, payments under contracts referencing new rates will differ from those referencing LIBOR. The transition will change our market risk profiles, requiring changes to risk and pricing models, valuation tools, product design and hedging strategies.

~~Management has established a~~Our LIBOR Transition Working Group (the “Group”), whose purpose is to direct the overall transition process for the ~~Company. The Group~~Company, is an internal, cross-functional team with representatives from business lines, support and control functions and legal counsel. Beginning in the third quarter of 2019, key provisions in our loan documents were modified to ensure new and renewed loans include appropriate pre-cessation trigger language and LIBOR fallback language for transition from LIBOR to the new benchmark when such transition occurs. All direct exposures resulting from existing financial contracts that mature after 2021 have been inventoried and are monitored on an ongoing basis. ~~Remediation of these exposures will be consistent with industry timing.~~ The Group has also inventoried indirect LIBOR exposures within the Company's systems, models and processes. ~~The results of this assessment will drive development~~Management has developed and ~~prioritization of~~prioritized remediation plans, and the Group is continuing to monitor developments and taking steps to ensure readiness when the LIBOR benchmark rate is discontinued. ~~Although we are currently unable to assess what~~The Group expects that the ~~ultimate impact~~majority of our existing LIBOR contracts will transition in accordance with the ~~transition from LIBOR will be, failure to adequately manage~~statutory framework established by the ~~transition could have a material adverse effect on our business, financial condition and results of operations.~~Federal Reserve.

The Bank has adopted several replacement benchmarks to use in place of LIBOR benchmark rates, ~~with AMERIBOR along with~~including Chicago Mercantile Exchange Inc. ~~(“CME”)~~(CME) Term SOFR, ~~and~~ FRB-NY SOFR and AMERIBOR as the primary rates. The replacement ~~benchmarks~~benchmark rates adopted by the Bank have been affirmed to comply with the 19 principles set forth by the International Organization of Securities Commissions ~~("IOSCO")~~(IOSCO) for Financial Benchmarks, and it further provides the Bank confidence these replacement benchmarks are

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based on transparent, market-based transactions. The Bank began using these replacement benchmarks towards the end of the third quarter of 2021. In the first quarter of 2023, the Company converted all of its LIBOR based cash flow hedges to SOFR with limited financial impact or cost.

We continue to have a significant number of loans, derivative contracts, borrowings and other financial instruments with attributes that are either directly or indirectly dependent on LIBOR. The transition from LIBOR has resulted in and could continue to result in added costs and employee efforts and could present additional risk. Since alternative rates are calculated differently, payments under contracts referencing new rates will differ from those referencing LIBOR. The transition will change our market risk profiles, requiring changes to risk and pricing models, valuation tools, product design and hedging strategies. Even with provisions allowing for designation of alternative benchmarks or “fallback” provisions, the discontinuance of LIBOR could result in customer uncertainty and disputes arising as a consequence of the transition from LIBOR. All of this could result in damage to our reputation and loss of customers.

At March 31, ~~2022,~~2023, approximately ~~31%~~16% of our loan portfolio ~~excluding PPP loans,~~ consisted of variable rate loans tied to LIBOR, along with related derivatives and other financial instruments.

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Item 4. Controls and Procedures

In connection with the preparation of this Quarterly Report on Form 10-Q, an evaluation was carried out by the Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Disclosure controls and procedures are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and that such information is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosures. Based on that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that, as of March 31, ~~2022,~~2023, the Company’s disclosure controls and procedures were effective.

Our management, including the Chief Executive Officer and Chief Financial Officer, identified no change in our internal control over financial reporting that occurred during the three month period ended March 31, ~~2022,~~2023, that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

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

Item 1A. Risk Factors

~~The Company disclosed~~There were no changes to the risk factors that were previously disclosed in ~~its~~our Annual Report on Form 10-K for the year ended December 31, ~~2021.~~ 2022, except for the addition of the item below.

Recent negative developments in the banking industry could adversely affect our current and projected business operations and our financial condition and results of operations.

The recent bank failures and related negative media attention have generated significant market trading volatility among publicly traded bank holding companies and, in particular, regional banks like the Company. These developments have negatively impacted customer confidence in regional banks, which could prompt customers to maintain their deposits with larger financial institutions. Further, competition for deposits has increased in recent periods, and the cost of funding has similarly increased, putting pressure on our net interest margin and results of operation.

The FDIC estimates that the two recent failures of Silicon Valley Bank and Signature Bank resulted in losses of approximately $22.5 billion, of which $19.2 billion is attributable to the protection of uninsured depositors under the Systemic Risk Exception. Federal law requires that any losses to the FDIC’s Deposit Insurance Fund related to this action be repaid by a special assessment on banks. The impact of the assessment to the Company for these failures or any potential future failures is not yet known, but is expected to negatively impact operating results.

The risks described herein and in our Annual Report on 10-K may not be the only risks ~~facing us.~~we face. Additional risks and uncertainties not currently known to us or that are currently considered to not be material also may materially adversely affect our business, financial condition, and/or operating results.

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

The Company has in place a Board approved stock buyback program whereby the Company is authorized to repurchase up to 4.3 million shares of its common stock through the program’s expiration date of December 31, ~~2022.~~2024. The program allows the Company to repurchase its common shares in the open market, by block purchase, through accelerated share repurchase programs, in privately negotiated transactions, or otherwise, in one or more transactions. Following is a summary of repurchases during the three months ended March 31, ~~2022.~~2023.

Total number of shares or units purchased

Average price paid per share

Total number of shares purchased as part of a publicly announced plan or program

Maximum number of shares that may yet be purchased under such plans or programs

January 1, 2022 - January 31, 2022

—

—

—

3,850,124

February 1, 2022 - February 28, 2022

165,767

$
53.08

165,767

3,684,357

March 1, 2022 - March 31, 2022

184,233

$
52.59

184,233

3,500,124

350,000

$
52.82

350,000


	Total number of shares or units purchased		Average price paid per share		Total number of shares purchased as part of a publicly announced plan or program		Maximum number of shares that may yet be purchased under such plans or programs
January 1, 2023 - January 31, 2023		—	$	—		—		4,297,000
February 1, 2023 - February 28, 2023		—	$	—		—		4,297,000
March 1, 2023 - March 31, 2023		—	$	—		—		4,297,000
		—	$	—		—

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Item 6. Exhibits

(a) Exhibits:


Exhibit Number	Description	Filed Herewith	Form	Exhibit	Filing Date
3.1	Second Amended and Restated Articles of Hancock Whitney Corporation		8-K	3.1	5/1/2020
3.2	Second Amended and Restated Bylaws of Hancock Whitney Corporation		8-K	3.2	5/1/2020
31.1	Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	X
31.2	Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	X
32.1	Certification of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	X
32.2	Certification of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	X
101.INS	Inline XBRL Instance Document	X
101.SCH	Inline XBRL Taxonomy Extension Schema Document	X
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document	X
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document	X
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document	X
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document	X
104	Cover Page Interactive Data File	X

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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.


	Hancock Whitney Corporation

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

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

			May 4, ~~2022~~2023

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