Iberiabank (IBKC) 10-Q 2017 Q2 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended June 30, 2017

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

For the transition period from to

Commission File Number 001-37532

IBERIABANK Corporation

(Exact name of registrant as specified in its charter)

Louisiana	72-1280718
(State or other jurisdiction of incorporation or organization	(I.R.S. Employer Identification Number)

200 West Congress Street
Lafayette, Louisiana	70501
(Address of principal executive office)	(Zip Code)

(337) 521-4003

(Registrant’s telephone number, including area code)

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

Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files).    Yes  x    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	x	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  x

At July 31, 2017, the Registrant had 53,627,330 shares of common stock, $1.00 par value, which were issued and outstanding.

IBERIABANK CORPORATION AND SUBSIDIARIES

TABLE OF CONTENTS

	Page
Part I. Financial Information
Item 1.       Financial Statements (unaudited)
Consolidated Balance Sheets as of June 30, 2017 and December 31, 2016	4
Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2017 and 2016	5
Consolidated Statements of Shareholders’ Equity for the six months ended June 30, 2017 and 2016	7
Consolidated Statements of Cash Flows for the six months ended June 30, 2017 and 2016	8
Notes to Unaudited Consolidated Financial Statements	10
Item 2.        Management’s Discussion and Analysis of Financial Condition and Results of Operations	55
Item 3.       Quantitative and Qualitative Disclosures About Market Risk	86
Item 4.       Controls and Procedures	86
Part II. Other Information	87
Item 1.       Legal Proceedings	87
Item 1A.     Risk Factors	87
Item 2.       Unregistered Sales of Equity Securities and Use of Proceeds	88
Item 3.       Defaults Upon Senior Securities	88
Item 4.       Mine Safety Disclosures	88
Item 5.       Other Information	88
Item 6.       Exhibits	89
Signatures	90

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Part I. FINANCIAL INFORMATION

Item 1. Financial Statements

IBERIABANK CORPORATION AND SUBSIDIARIES

Consolidated Balance Sheets

	(unaudited)
(Dollars in thousands, except share data)	June 30, 2017			December 31, 2016
Assets
Cash and due from banks	$	301,910		$	295,896
Interest-bearing deposits in banks	167,450			1,066,230
Total cash and cash equivalents	469,360			1,362,126
Securities available for sale, at fair value	4,009,299			3,446,097
Securities held to maturity (fair values of $85,448 and $89,932, respectively)	84,517			89,216
Mortgage loans held for sale, at fair value	140,959			157,041
Loans, net of unearned income	15,556,016			15,064,971
Allowance for loan losses	(146,225		)	(144,719		)
Loans, net	15,409,791			14,920,252
Premises and equipment, net	318,167			306,373
Goodwill	726,856			726,856
Other assets	631,778			651,229
Total Assets	$	21,790,727		$	21,659,190
Liabilities
Deposits:
Non-interest-bearing	$	5,020,195		$	4,928,878
Interest-bearing	11,832,921			12,479,405
Total deposits	16,853,116			17,408,283
Short-term borrowings	583,935			509,136
Long-term debt	667,243			628,953
Other liabilities	183,191			173,124
Total Liabilities	18,287,485			18,719,496
Shareholders’ Equity
Preferred stock, $1 par value - 5,000,000 shares authorized
Non-cumulative perpetual, liquidation preference $10,000 per share; 13,750 shares and 13,750 shares issued and outstanding, respectively, including related surplus	132,097			132,097
Common stock, $1 par value - 100,000,000 shares authorized; 51,014,880 and 44,795,386 shares issued and outstanding, respectively	51,015			44,795
Additional paid-in capital	2,568,474			2,084,446
Retained earnings	765,582			704,391
Accumulated other comprehensive income (loss)	(13,926		)	(26,035		)
Total Shareholders’ Equity	3,503,242			2,939,694
Total Liabilities and Shareholders’ Equity	$	21,790,727		$	21,659,190

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

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IBERIABANK CORPORATION AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income

(unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
(Dollars in thousands, except per share data)	2017			2016			2017			2016
Interest and Dividend Income
Loans, including fees	$	179,266		$	165,569		$	348,242		$	329,560
Mortgage loans held for sale, including fees	1,248			1,850			2,219			3,251
Investment securities:
Taxable interest	20,246			12,994			38,110			26,542
Tax-exempt interest	2,060			1,670			4,124			3,334
Amortization of FDIC loss share receivable	—			(4,163		)	—			(8,549		)
Other	1,755			774			4,413			1,492
Total interest and dividend income	204,575			178,694			397,108			355,630
Interest Expense
Deposits:
NOW and MMDA	12,207			7,310			23,306			14,668
Savings	329			297			649			519
Time deposits	4,576			4,309			9,214			8,663
Short-term borrowings	227			662			504			1,147
Long-term debt	3,593			3,363			6,974			6,477
Total interest expense	20,932			15,941			40,647			31,474
Net interest income	183,643			162,753			356,461			324,156
Provision for loan losses	12,050			11,866			18,204			26,771
Net interest income after provision for loan losses	171,593			150,887			338,257			297,385
Non-interest Income
Mortgage income	19,730			25,991			33,845			45,931
Service charges on deposit accounts	11,410			10,940			22,563			21,891
Title revenue	6,190			6,135			10,931			10,880
Broker commissions	2,744			3,712			5,482			7,535
ATM/debit card fee income	3,800			3,650			7,385			7,153
Credit card and merchant-related income	3,519			2,732			6,746			5,387
Income from bank owned life insurance	1,241			1,411			2,552			2,613
Gain on sale of available for sale securities	59			1,789			59			1,985
Other non-interest income	7,273			8,557			13,749			17,387
Total non-interest income	55,966			64,917			103,312			120,762
Non-interest Expense
Salaries and employee benefits	86,317			85,105			168,170			165,847
Net occupancy and equipment	16,292			16,813			32,313			33,720
Communication and delivery	2,956			3,281			6,000			6,340
Marketing and business development	3,238			3,142			6,662			6,644
Data processing	7,306			6,101			14,247			12,019
Professional services	11,219			4,939			16,553			8,719
Credit and other loan related expense	3,780			2,931			8,306			5,602
Insurance	4,486			4,449			9,016			8,633
Travel and entertainment	2,753			1,938			5,237			4,321
Other non-interest expense	9,161			10,805			22,022			25,111
Total non-interest expense	147,508			139,504			288,526			276,956
Income before income tax expense	80,051			76,300			153,043			141,191
Income tax expense	28,033			25,490			50,552			47,612
Net Income	52,018			50,810			102,491			93,579
Preferred stock dividends	(949		)	(854		)	(4,548		)	(3,430		)
Net Income Available to Common Shareholders	$	51,069		$	49,956		$	97,943		$	90,149

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Income available to common shareholders - basic	$	51,069		$	49,956		$	97,943		$	90,149
Earnings allocated to unvested restricted stock	(361		)	(540		)	(707		)	(1,003		)
Earnings allocated to common shareholders	$	50,708		$	49,416		$	97,236		$	89,146
Earnings per common share - Basic	$	1.00		$	1.21		$	2.01		$	2.19
Earnings per common share - Diluted	0.99			1.21			1.99			2.18
Cash dividends declared per common share	0.36			0.34			0.72			0.68
Comprehensive Income
Net Income	$	52,018		$	50,810		$	102,491		$	93,579
Other comprehensive income (loss), net of tax:
Unrealized gains (losses) on securities:
Unrealized holding gains (losses) arising during the period (net of tax effects of $4,537, $5,313, $6,958, and $19,015, respectively)	8,426			9,867			12,922			35,314
Reclassification adjustment for gains included in net income (net of tax effects of $21, $626, $21, and $695, respectively)	(38		)	(1,163		)	(38		)	(1,290		)
Unrealized gains (losses) on securities, net of tax	8,388			8,704			12,884			34,024
Fair value of derivative instruments designated as cash flow hedges:
Change in fair value of derivative instruments designated as cash flow hedges during the period (net of tax effects of $426, $1,252, $338, and $3,475, respectively)	(790		)	(2,328		)	(627		)	(6,455		)
Reclassification adjustment for gains included in net income (net of tax effects of $55, $0, $80, and $0, respectively)	(103		)	—			(148		)	—
Fair value of derivative instruments designated as cash flow hedges, net of tax	(893		)	(2,328		)	(775		)	(6,455		)
Other comprehensive income (loss), net of tax	7,495			6,376			12,109			27,569
Comprehensive income	$	59,513		$	57,186		$	114,600		$	121,148

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

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IBERIABANK CORPORATION AND SUBSIDIARIES

Consolidated Statements of Shareholders’ Equity

(unaudited)

									Additional Paid in Capital			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total
	Preferred Stock			Common Stock
(Dollars in thousands, except share and per share data)	Shares	Amount		Shares		Amount
Balance, December 31, 2015	8,000	$	76,812	41,139,537		$	41,140		$	1,797,982		$	584,486		$	(1,585	)	$	2,498,835
Net income	—	—		—		—			—			93,579			—			93,579
Other comprehensive income/(loss)	—	—		—		—			—			—			27,569			27,569
Cash dividends declared, $0.68 per share	—	—		—		—			—			(28,016		)	—			(28,016		)
Preferred stock dividends	—	—		—		—			—			(3,430		)	—			(3,430		)
Common stock issued under incentive plans, net of shares surrendered in payment, including tax benefit	—	—		101,802		102			(2,364		)	—			—			(2,262		)
Preferred stock issued	5,750	55,285		—		—			—			—			—			55,285
Common stock repurchases	—	—		(202,506	)	(203		)	(11,463		)	—			—			(11,666		)
Share-based compensation cost	—	—		—		—			7,702			—			—			7,702
Balance, June 30, 2016	13,750	$	132,097	41,038,833		$	41,039		$	1,791,857		$	646,619		$	25,984		$	2,637,596
Balance, December 31, 2016	13,750	$	132,097	44,795,386		$	44,795		$	2,084,446		$	704,391		$	(26,035	)	$	2,939,694
Net income	—	—		—		—			—			102,491			—			102,491
Other comprehensive income/(loss)	—	—		—		—			—			—			12,109			12,109
Cash dividends declared, $0.72 per share	—	—		—		—			—			(36,752		)	—			(36,752		)
Preferred stock dividends	—	—		—		—			—			(4,548		)	—			(4,548		)
Common stock issued under incentive plans, net of shares surrendered in payment	—	—		119,494		120			(2,177		)	—			—			(2,057		)
Common stock issued	—	—		6,100,000		6,100			479,094			—			—			485,194
Share-based compensation cost	—	—		—		—			7,111			—			—			7,111
Balance, June 30, 2017	13,750	$	132,097	51,014,880		$	51,015		$	2,568,474		$	765,582		$	(13,926	)	$	3,503,242

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

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IBERIABANK CORPORATION AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(unaudited)

	For the Six Months Ended June 30,
(Dollars in thousands)	2017			2016
Cash Flows from Operating Activities
Net income	$	102,491		$	93,579
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization, and accretion	9,282			3,115
Amortization of purchase accounting and market value adjustments	(20,142		)	(8,551		)
Provision for loan losses	18,204			26,771
Share-based compensation cost - equity awards	7,111			7,702
(Gain)/loss on sale of assets, net	(44		)	3
(Gain)/loss on sale of available for sale securities	(59		)	(1,985		)
(Gain)/loss on sale of OREO, net	(2,906		)	(4,711		)
Amortization of premium/discount on securities, net	12,685			10,222
Derivative losses (gain) on swaps	(228		)	—
Expense (benefit) for deferred income taxes	10,040			(1,620		)
Originations of mortgage loans held for sale	(919,207		)	(1,227,825		)
Proceeds from sales of mortgage loans held for sale	965,042			1,206,323
Realized and unrealized (gain)/loss on mortgage loans held for sale, net	(33,110		)	(45,563		)
Other operating activities, net	(2,127		)	(11,814		)
Net Cash Provided by Operating Activities	147,032			45,646
Cash Flows from Investing Activities
Proceeds from sales of available for sale securities	64,144			197,733
Proceeds from maturities, prepayments and calls of available for sale securities	236,468			215,115
Purchases of available for sale securities	(856,187		)	(341,790		)
Proceeds from maturities, prepayments and calls of held to maturity securities	4,267			5,603
Purchases of held to maturity securities	—			—
Purchases of equity securities	(1,180		)	(31,292		)
Proceeds from sales of equity securities	5,059			300
Reimbursement of recoverable covered asset losses (to) from the FDIC	—			(4,234		)
Increase in loans, net of loans acquired	(481,482		)	(381,367		)
Proceeds from sale of premises and equipment	2,365			1,188
Purchases of premises and equipment, net of premises and equipment acquired	(24,001		)	(6,518		)
Proceeds from disposition of OREO	9,949			20,365
Cash paid for investments in tax credit entities	(2,827		)	(5,916		)
Other investing activities, net	1,267			(750		)
Net Cash Used in Investing Activities	(1,042,158		)	(331,563		)
Cash Flows from Financing Activities
Increase/(decrease) in deposits, net of deposits acquired	(554,983		)	(316,483		)
Net change in short-term borrowings, net of borrowings acquired	74,799			439,019
Proceeds from long-term debt	50,000			360,000
Repayments of long-term debt	(11,252		)	(12,351		)
Cash dividends paid on common stock	(34,476		)	(28,006		)
Cash dividends paid on preferred stock	(4,548		)	(2,576		)
Net share-based compensation stock transactions	(2,374		)	(2,275		)
Payments to repurchase common stock	—			(11,666		)
Net proceeds from issuance of common stock	485,194			—
Net proceeds from issuance of preferred stock	—			55,286

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Net Cash Provided by Financing Activities	2,360			480,948
Net Increase (Decrease) In Cash and Cash Equivalents	(892,766		)	195,031
Cash and Cash Equivalents at Beginning of Period	1,362,126			510,267
Cash and Cash Equivalents at End of Period	$	469,360		$	705,298
Supplemental Schedule of Non-cash Activities
Acquisition of real estate in settlement of loans	$	6,467		$	3,910
Supplemental Disclosures
Cash paid for:
Interest on deposits and borrowings	$	40,778		$	30,244
Income taxes, net	$	40,872		$	54,453

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

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IBERIABANK CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

NOTE 1 - BASIS OF PRESENTATION

General

The accompanying unaudited consolidated financial statements have been prepared in accordance with GAAP for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all information or footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments, consisting of normal and recurring items, necessary for a fair presentation of the consolidated financial statements have been made. These interim financial statements should be read in conjunction with the audited consolidated financial statements and footnote disclosures for the Company previously filed with the SEC in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016. Operating results for the period ended June 30, 2017 are not necessarily indicative of the results that may be expected for the year ending December 31, 2017.

When we refer to the “Company,” “we,” “our,” or “us” in this Report, we mean IBERIABANK Corporation and subsidiaries (consolidated). When we refer to the “Parent,” we mean IBERIABANK Corporation. See the Glossary of Acronyms at the end of this Report for terms used throughout this Report.

Principles of Consolidation

The Company’s consolidated financial statements include all entities in which the Company has a controlling financial interest under either the voting interest or variable interest model. The assessment of whether or not the Company has a controlling interest (i.e., the primary beneficiary) in a variable interest entity ("VIE") is performed on an on-going basis. All equity investments in non-consolidated VIEs are included in "other assets" in the Company’s consolidated balance sheets. The Company’s maximum exposure to loss as a result of its involvement with non-consolidated VIEs was approximately $94 million and $91 million at June 30, 2017 and December 31, 2016, respectively. The Company's maximum exposure to loss was equivalent to the carrying value of its investments and any related outstanding loans to the non-consolidated VIEs.

Investments in entities that are not consolidated are accounted for under either the equity, cost, or proportional amortization method of accounting. Investments for which the Company has the ability to exercise significant influence over the operating and financing decisions of the entity are accounted for under the equity method. Investments for which the Company does not hold such ability are accounted for under the cost method. Investments in qualified affordable housing projects, which meet certain criteria, are accounted for under the proportional amortization method.

The consolidated financial statements include the accounts of the Company and its subsidiaries, IBERIABANK; Lenders Title Company; IBERIA Capital Partners, LLC; 1887 Leasing, LLC; IBERIA Asset Management, Inc.; 840 Denning, LLC; and IBERIA CDE, LLC. Effective January 1, 2017, IBERIABANK Mortgage Company, previously a subsidiary of IBERIABANK, merged into IBERIABANK. All significant intercompany balances and transactions have been eliminated in consolidation.

Nature of Operations

The Company offers commercial and retail banking products and services to customers throughout locations in eight states through IBERIABANK. The Company also operates mortgage production offices in 10 states and offers a full line of title insurance and closing services throughout Arkansas and Louisiana through LTC and its subsidiaries. ICP provides equity research, institutional sales and trading, and corporate finance services throughout the energy industry. 1887 Leasing, LLC owns an aircraft used by management of the Company. IAM provides wealth management and trust services for commercial and private banking clients. 840 Denning, LLC invests in a commercial rental property. CDE is engaged in the purchase of tax credits.

Reclassifications

Certain amounts reported in prior periods have been reclassified to conform to the current period presentation. These reclassifications did not have a material effect on previously reported consolidated financial statements.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. Material estimates that are susceptible to significant change in the near term are the allowance for credit losses, valuation of and accounting for acquired loans, goodwill and other intangibles, and income taxes.

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Concentrations of Credit Risk

Most of the Company’s business activity is with customers located in the southeastern United States. The Company’s lending activity is concentrated in its market areas in those states. The Company has emphasized originations of commercial loans and private banking loans, defined as loans to higher net worth clients. Repayments on loans are expected to come from cash flows of the borrower and/or guarantor. Losses on secured loans are limited by the net realizable value of the collateral upon default of the borrowers and guarantor support. Concentrations in commercial real estate have increased as a result of the Company's organic growth and recent acquisitions of banks with significant CRE portfolios. Additionally, as the Company has executed its risk-off strategy over the past two years, CRE concentrations have naturally increased as a percentage of the total portfolio. The Company believes it does not have any excessive concentrations to any one industry or customer.

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NOTE 2 - RECENT ACCOUNTING PRONOUNCEMENTS

Pronouncements adopted during the six months ended June 30, 2017:

ASU No. 2016-09

The Company adopted the amendments of ASU No. 2016-09, Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting, effective January 1, 2017 as follows: (i) prospective adoption of the recognition of excess tax benefits associated with awards which vested or settled during the six months ended June 30, 2017 in the statement of comprehensive income; (ii) prospective adoption of the exclusion of excess tax benefits from assumed proceeds for the calculation of diluted EPS for the six months ended June 30, 2017; (iii) modified retrospective adoption of the minimum statutory withholdings requirements; (iv) modified retrospective adoption of the accounting policy election to account for forfeitures as they occur; and (v) prospective adoption of the classifications of certain cash flows associated with stock compensation. The adoption of these amendments did not, either individually or in aggregate, have a significant impact to the consolidated financial statements.

ASU No. 2017-01

In January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business, which introduces amendments that are intended to clarify the definition of a business to assist companies and other reporting organizations in evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The amendments will be applied prospectively and are effective for annual reporting periods beginning after December 15, 2017, including interim reporting periods within those periods, with early adoption permitted.

The Company early-adopted the amendments effective January 1, 2017. The adoption of this ASU did not and is not expected to have a significant impact on the Company’s consolidated financial statements.

Pronouncements issued but not yet adopted:

ASU No. 2014-09

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers, which implements a common revenue standard and clarifies the principles used for recognizing revenue. The amendments in the ASU clarify that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.

The amendments in ASU No. 2014-09 will be effective for annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. The amendments will be applied through the election of one of two retrospective methods.

The Company will adopt the amendments beginning January 1, 2018 through the modified-retrospective transition method. A significant amount of the Company’s revenues are derived from net interest income on financial assets and liabilities, which are excluded from the scope of the amended guidance. Preliminary results indicate that certain noninterest income financial statement line items, including service charges on deposit accounts, trust and investment management income, and other noninterest income, contain revenue streams that are in scope of these updates. Based on the Company’s preliminary scoping, walkthroughs, and contract reviews, it does not expect to recognize a significant cumulative adjustment to equity upon implementation of the standard; however, the Company is still finalizing its reviews of contracts related to certain revenue streams. Further, the Company is still evaluating the standard’s guidance for assessment of gross versus net reporting of revenues and expenses related to certain arrangements such as card interchange fees and rewards programs. The Company does not expect a significant impact to the Company’s consolidated statements of comprehensive income or consolidated balance sheets from either a presentation or timing perspective, but the Company will be subject to expanded disclosure requirements.  The Company is in the process of developing additional quantitative and qualitative disclosures that will be required upon adoption of the new revenue recognition standard.

ASU No. 2016-01

In January 2016, the FASB issued ASU No. 2016-01, Financial Statements - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. The amendments will not change the guidance for classifying and measuring investments in debt securities or loans; however, the ASU will impact how the Company measures certain equity investments and discloses and presents certain financial instruments through the application of the “exit price” notion.

ASU No. 2016-01 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. An entity will record a cumulative-effect adjustment to beginning retained earnings as of the beginning of the first

12

reporting period in which the guidance is adopted, with two exceptions. The amendments related to equity investments without readily determinable fair values (including disclosure requirements) will be applied prospectively. The requirement to use the “exit price” notion to measure the fair value of financial instruments for disclosure purposes will also be applied prospectively.

The Company does not expect a significant cumulative-effect adjustment to be recorded at adoption or any significant impact to the consolidated financial statements associated with the accounting for its current equity investments. The Company does anticipate financial statement disclosures to be impacted, specifically related to financial instruments measured at amortized cost whose fair values are disclosed under the “entry price” notion, but is currently still in the process of developing the appropriate methodology to measure fair value under the “exit price” notion and determining the impact.

ASU No. 2016-02

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). The most significant amendment to existing GAAP is the recognition of lease assets (i.e., right of use assets) and liabilities on the balance sheet for leases that are classified as operating leases by lessees. The lessor model remains similar to the current accounting model in existing GAAP. Additional amendments include, but are not limited to, the elimination of leveraged leases; modification to the definition of a lease; amendments on sale and leaseback transactions; and disclosure of additional quantitative and qualitative information.

ASU 2016-02 will be effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, with early adoption permitted. Lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. The Company will adopt the amendments on January 1, 2019.

The Company occupies certain banking offices and equipment under operating lease agreements, which currently are not recognized in the consolidated balance sheets. Based on the Company’s preliminary analysis of its current portfolio, the impact to the Company’s consolidated balance sheets is estimated to result in less than a 1% increase in assets and liabilities. The Company is also currently assessing the practical expedients it may elect at adoption, the final determination of the incremental borrowing rate, and the impact to the regulatory capital ratios; amongst other matters associated with the standard.

The adjustment to retained earnings is not expected to be significant based on the transition guidance associated with current sale-leaseback agreements. The Company also anticipates additional disclosures to be provided at adoption.

ASU No. 2016-13

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The amendments introduce an impairment model that is based on expected credit losses (“ECL”), rather than incurred losses, to estimate credit losses on certain types of financial instruments (e.g., loans and held-to-maturity securities), including certain off-balance sheet financial instruments (e.g., loan commitments). The ECL should consider historical information, current information, and reasonable and supportable forecasts, including estimates of prepayments, over the contractual term. Financial instruments with similar risk characteristics may be grouped together when estimating the ECL.

The ASU also amends the current AFS security impairment model for debt securities. The new model will require an estimate of ECL when the fair value is below the amortized cost of the asset through the use of an allowance to record estimated credit losses (and subsequent recoveries). Non-credit related losses will continue to be recognized through OCI.

In addition, the amendments provide for a simplified accounting model for purchased financial assets with a more-than-insignificant amount of credit deterioration since their origination. The initial estimate of expected credit losses would be recognized through an ALL with an offset (i.e., increase) to the cost basis of the related financial asset at acquisition.

ASU 2016-13 will be effective for fiscal years beginning after December 15, 2019, including interim periods. The amendments will be applied through a modified-retrospective approach, resulting in a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective. A prospective transition approach is required for debt securities for which OTTI had been recognized before the effective date. Amounts previously recognized in AOCI as of the date of adoption that relate to improvements in cash flows expected to be collected should continue to be accreted into income over the remaining life of the asset. Recoveries of amounts previously written off relating to improvements in cash flows after the date of adoption should be recorded in earnings when received.

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

13

ASU No. 2017-04

In January 2017, the FASB issued ASU No. 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, which simplifies how an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test.  Therefore, any carrying amount which exceeds the reporting unit’s fair value (up to the amount of goodwill recorded) will be recognized as an impairment loss.

ASU No. 2017-04 will be effective for annual reporting periods beginning after December 15, 2019, including interim reporting periods within those periods.  The amendments will be applied prospectively on or after the effective date.  Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017.  Based on recent goodwill impairments tests, which did not require the application of Step 2, the Company does not expect the adoption of this ASU to have an immediate impact.

14

NOTE 3 – INVESTMENT SECURITIES

The amortized cost and fair values of investment securities, with gross unrealized gains and losses, consist of the following:

	June 30, 2017
(Dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
Securities available for sale:
U.S. Government-sponsored enterprise obligations	$	161,544	$	164	$	(317	)	$	161,391
Obligations of state and political subdivisions	296,062		5,902		(1,694		)	300,270
Mortgage-backed securities	3,464,253		6,597		(31,118		)	3,439,732
Other securities	107,796		666		(556		)	107,906
Total securities available for sale	$	4,029,655	$	13,329	$	(33,685	)	$	4,009,299
Securities held to maturity:
Obligations of state and political subdivisions	$	61,342	$	1,588	$	(57	)	$	62,873
Mortgage-backed securities	23,175		51		(651		)	22,575
Total securities held to maturity	$	84,517	$	1,639	$	(708	)	$	85,448

	December 31, 2016
(Dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
Securities available for sale:
U.S. Government-sponsored enterprise obligations	$	212,662	$	245	$	(549	)	$	212,358
Obligations of state and political subdivisions	286,458		1,948		(5,207		)	283,199
Mortgage-backed securities	2,888,180		4,820		(41,291		)	2,851,709
Other securities	98,974		361		(504		)	98,831
Total securities available for sale	$	3,486,274	$	7,374	$	(47,551	)	$	3,446,097
Securities held to maturity:
Obligations of state and political subdivisions	$	64,726	$	1,609	$	(133	)	$	66,202
Mortgage-backed securities	24,490		57		(817		)	23,730
Total securities held to maturity	$	89,216	$	1,666	$	(950	)	$	89,932

Securities with carrying values of $1.7 billion and $1.5 billion were pledged to secure public deposits and other borrowings at June 30, 2017 and December 31, 2016, respectively.

15

Information pertaining to securities with gross unrealized losses, aggregated by investment category and length of time that individual securities have been in a continuous loss position, is as follows:

	June 30, 2017
	Less Than Twelve Months					Over Twelve Months					Total
(Dollars in thousands)	Gross Unrealized Losses			Estimated Fair Value		Gross Unrealized Losses			Estimated Fair Value		Gross Unrealized Losses			Estimated Fair Value
Securities available for sale:
U.S. Government-sponsored enterprise obligations	$	(317	)	$	110,276	$	—		$	—	$	(317	)	$	110,276
Obligations of state and political subdivisions	(1,580		)	82,187		(114		)	4,541		(1,694		)	86,728
Mortgage-backed securities	(27,763		)	2,330,909		(3,355		)	165,156		(31,118		)	2,496,065
Other Securities	(540		)	38,666		(16		)	1,417		(556		)	40,083
Total securities available for sale	$	(30,200	)	$	2,562,038	$	(3,485	)	$	171,114	$	(33,685	)	$	2,733,152
Securities held to maturity:
Obligations of state and political subdivisions	$	(57	)	$	5,014	$	—		$	—	$	(57	)	$	5,014
Mortgage-backed securities	(200		)	11,844		(451		)	10,308		(651		)	22,152
Total securities held to maturity	$	(257	)	$	16,858	$	(451	)	$	10,308	$	(708	)	$	27,166

	December 31, 2016
	Less Than Twelve Months					Over Twelve Months					Total
(Dollars in thousands)	Gross Unrealized Losses			Estimated Fair Value		Gross Unrealized Losses			Estimated Fair Value		Gross Unrealized Losses			Estimated Fair Value
Securities available for sale:
U.S. Government-sponsored enterprise obligations	$	(549	)	$	150,554	$	—		$	—	$	(549	)	$	150,554
Obligations of state and political subdivisions	(5,207		)	148,059		—			—		(5,207		)	148,059
Mortgage-backed securities	(38,667		)	2,191,563		(2,624		)	98,912		(41,291		)	2,290,475
Other Securities	(451		)	36,484		(53		)	3,850		(504		)	40,334
Total securities available for sale	$	(44,874	)	$	2,526,660	$	(2,677	)	$	102,762	$	(47,551	)	$	2,629,422
Securities held to maturity:
Obligations of state and political subdivisions	$	(133	)	$	10,602	$	—		$	—	$	(133	)	$	10,602
Mortgage-backed securities	(330		)	12,288		(487		)	10,960		(817		)	23,248
Total securities held to maturity	$	(463	)	$	22,890	$	(487	)	$	10,960	$	(950	)	$	33,850

The Company assessed the nature of the unrealized losses in its portfolio as of June 30, 2017 and December 31, 2016 to determine if there are losses that should be deemed other-than-temporary. In its analysis of these securities, management considered numerous factors to determine whether there were instances where the amortized cost basis of the debt securities would not be fully recoverable, including, but not limited to:

• The length of time and extent to which the estimated fair value of the securities was less than their amortized cost;

• Whether adverse conditions were present in the operations, geographic area, or industry of the issuer;

• The payment structure of the security, including scheduled interest and principal payments, including the issuer’s failures to make scheduled payments, if any, and the likelihood of failure to make scheduled payments in the future;

• Changes to the rating of the security by a rating agency; and

• Subsequent recoveries or additional declines in fair value after the balance sheet date.

16

Management believes it has considered these factors, as well as all relevant information available, when determining the expected future cash flows of the securities in question. In each instance, management has determined the cost basis of the securities would be fully recoverable. Management also has the intent to hold debt securities until their maturity or anticipated recovery if the security is classified as available for sale. In addition, management does not believe the Company will be required to sell debt securities before the anticipated recovery of the amortized cost basis of the security. As a result of the Company's analysis, no declines in the estimated fair value of the Company's investment securities were deemed to be other-than-temporary at June 30, 2017 or December 31, 2016.

At June 30, 2017, 386 debt securities had unrealized losses of 1.23% of the securities’ amortized cost basis. At December 31, 2016, 397 debt securities had unrealized losses of 1.79% of the securities’ amortized cost basis. The unrealized losses for each of the securities related to market interest rate changes and not credit concerns of the issuers. Additional information on securities that have been in a continuous loss position for over twelve months at June 30, 2017 and December 31, 2016 is presented in the following table.

(Dollars in thousands)	June 30, 2017		December 31, 2016
Number of securities:
Issued by U.S. Government-sponsored enterprises	43		28
Other	2		3
	45		31
Amortized Cost Basis:
Issued by U.S. Government-sponsored enterprises	$	183,926	$	112,983
Other	1,432		3,903
	$	185,358	$	116,886
Unrealized Loss:
Issued by U.S. Government-sponsored enterprises	$	3,920	$	3,111
Other	16		53
	$	3,936	$	3,164

The U.S. Government-sponsored enterprises securities are rated AA+ by S&P and Aaa by Moodys.

The amortized cost and estimated fair value of investment securities by maturity at June 30, 2017 are presented in the following table. Securities are classified according to their contractual maturities without consideration of principal amortization, potential prepayments or call options. Accordingly, actual maturities may differ from contractual maturities. Weighted average yields are calculated on the basis of the yield to maturity based on the amortized cost of each security.

	Securities Available for Sale						Securities Held to Maturity
(Dollars in thousands)	Weighted Average Yield		Amortized Cost		Estimated Fair Value		Weighted Average Yield		Amortized Cost		Estimated Fair Value
Within one year or less	1.61	%	$	22,066	$	22,008	2.65	%	$	1,622	$	1,626
One through five years	1.78		250,400		250,806		2.75		10,234		10,378
After five through ten years	2.34		837,818		840,128		3.24		21,161		21,836
Over ten years	2.27		2,919,371		2,896,357		2.98		51,500		51,608
	2.25	%	$	4,029,655	$	4,009,299	3.01	%	$	84,517	$	85,448

The following is a summary of realized gains and losses from the sale of securities classified as available for sale. Gains or losses on securities sold are recorded on the trade date, using the specific identification method.

	Three Months Ended June 30						Six Months Ended June 30,
(Dollars in thousands)	2017			2016			2017			2016
Realized gains	$	242		$	2,473		$	242		$	2,935
Realized losses	(183		)	(684		)	(183		)	(950		)
	$	59		$	1,789		$	59		$	1,985

17

In addition to the gains above, the Company realized certain gains on calls of securities held to maturity that were not significant to the consolidated financial statements.

Other Equity Securities

The Company accounts for the following securities at amortized cost, which approximates fair value, in “other assets” on the consolidated balance sheets:

(Dollars in thousands)	June 30, 2017		December 31, 2016
Federal Home Loan Bank (FHLB) stock	$	38,539	$	42,326
Federal Reserve Bank (FRB) stock	48,584		48,584
Other investments	3,008		2,808
	$	90,131	$	93,718

18

NOTE 4 – LOANS

Loans consist of the following, segregated into legacy and acquired loans, for the periods indicated:

	June 30, 2017
(Dollars in thousands)	Legacy Loans		Acquired Loans		Total
Commercial loans:
Commercial real estate- construction	$	1,010,479	$	89,709	$	1,100,188
Commercial real estate- owner-occupied	1,815,167		390,241		2,205,408
Commercial real estate- non-owner-occupied	3,289,284		546,723		3,836,007
Commercial and industrial	3,390,699		293,382		3,684,081
Energy-related	550,162		1,806		551,968
	10,055,791		1,321,861		11,377,652
Residential mortgage loans:	970,961		375,506		1,346,467
Consumer and other loans:
Home equity	1,838,841		320,107		2,158,948
Indirect automobile	92,106		24		92,130
Other	535,711		45,108		580,819
	2,466,658		365,239		2,831,897
Total	$	13,493,410	$	2,062,606	$	15,556,016

	December 31, 2016
(Dollars in thousands)	Legacy Loans		Acquired Loans		Total
Commercial loans:
Commercial real estate- construction	$	740,761	$	61,408	$	802,169
Commercial real estate- owner-occupied	1,784,624		450,012		2,234,636
Commercial real estate- non-owner-occupied	3,097,929		667,532		3,765,461
Commercial and industrial	3,194,796		348,326		3,543,122
Energy-related	559,289		1,904		561,193
	9,377,399		1,529,182		10,906,581
Residential mortgage loans:	854,216		413,184		1,267,400
Consumer and other loans:
Home equity	1,783,421		372,505		2,155,926
Indirect automobile	131,048		4		131,052
Other	548,840		55,172		604,012
	2,463,309		427,681		2,890,990
Total	$	12,694,924	$	2,370,047	$	15,064,971

Net deferred loan origination fees were $24.1 million and $22.6 million at June 30, 2017 and December 31, 2016, respectively. In addition to loans issued in the normal course of business, the Company considers overdrafts on customer deposit accounts to be loans and reclassifies these overdrafts as loans in its consolidated balance sheets. At June 30, 2017 and December 31, 2016, overdrafts of $5.9 million and $4.2 million, respectively, have been reclassified to loans.

Loans with carrying values of $4.5 billion were pledged as collateral for borrowings at both June 30, 2017 and December 31, 2016, respectively.

19

Aging Analysis

The following tables provide an analysis of the aging of loans as of June 30, 2017 and December 31, 2016. Due to the difference in accounting for acquired loans, the tables below further segregate the Company’s loans between loans originated, or renewed and underwritten by the Company ("legacy loans") and acquired loans.

	June 30, 2017
	Legacy loans
	Accruing
(Dollars in thousands)	Current or less than 30 days past due		30-59 days		60-89 days		> 90 days		Total Past Due		Non-accrual Loans		Total Loans
Commercial real estate - construction	$	1,008,834	$	214	$	—	$	—	$	214	$	1,431	$	1,010,479
Commercial real estate - owner-occupied	1,804,289		343		1,687		33		2,063		8,815		1,815,167
Commercial real estate- non-owner-occupied	3,277,719		3,245		3,046		267		6,558		5,007		3,289,284
Commercial and industrial	3,349,442		10,633		1,429		—		12,062		29,195		3,390,699
Energy-related	453,357		2,240		—		—		2,240		94,565		550,162
Residential mortgage	955,343		1,933		1,693		310		3,936		11,682		970,961
Consumer - home equity	1,819,163		4,983		4,161		—		9,144		10,534		1,838,841
Consumer - indirect automobile	89,590		1,353		261		—		1,614		902		92,106
Consumer - credit card	85,690		168		117		—		285		612		86,587
Consumer - other	444,743		2,809		567		—		3,376		1,005		449,124
Total	$	13,288,170	$	27,921	$	12,961	$	610	$	41,492	$	163,748	$	13,493,410

	December 31, 2016
	Legacy loans
	Accruing
(Dollars in thousands)	Current or less than 30 days past due		30-59 days		60-89 days		> 90 days		Total Past Due		Non-accrual Loans		Total Loans
Commercial real estate - construction	$	740,761	$	—	$	—	$	—	$	—	$	—	$	740,761
Commercial real estate - owner-occupied	1,775,695		959		127		—		1,086		7,843		1,784,624
Commercial real estate- non-owner-occupied	3,088,207		902		224		—		1,126		8,596		3,097,929
Commercial and industrial	3,158,700		3,999		870		—		4,869		31,227		3,194,796
Energy-related	407,434		—		1,526		—		1,526		150,329		559,289
Residential mortgage	836,509		2,012		1,577		1,104		4,693		13,014		854,216
Consumer - home equity	1,768,763		5,249		1,430		—		6,679		7,979		1,783,421
Consumer - indirect automobile	127,054		2,551		405		—		2,956		1,038		131,048
Consumer - credit card	81,602		199		99		—		298		624		82,524
Consumer - other	462,650		2,155		618		—		2,773		893		466,316
Total	$	12,447,375	$	18,026	$	6,876	$	1,104	$	26,006	$	221,543	$	12,694,924

20

	June 30, 2017
	Acquired loans (1) (2)
	Accruing
(Dollars in thousands)	Current or Less Than 30 days past due		30-59 days		60-89 days		> 90 days		Total Past Due		Non-accrual Loans		Discount/Premium			Acquired Impaired Loans		Total Loans
Commercial real estate - construction	$	53,564	$	216	$	—	$	—	$	216	$	1,118	$	(183	)	$	34,994	$	89,709
Commercial real estate - owner-occupied	284,841		—		—		—		—		3,684		(2,670		)	104,386		390,241
Commercial real estate- non-owner-occupied	441,193		2,067		319		—		2,386		4,035		(94		)	99,203		546,723
Commercial and industrial	256,584		47		4,651		—		4,698		1,382		(712		)	31,430		293,382
Energy-related	1,657		154		—		—		154		—		(5		)	—		1,806
Residential mortgage	263,658		14		403		192		609		1,598		(1,609		)	111,250		375,506
Consumer - home equity	242,091		407		1,279		—		1,686		1,947		(4,497		)	78,880		320,107
Consumer - indirect automobile	18		—		—		—		—		—		—			6		24
Consumer - credit card	—		—		—		—		—		—		—			501		501
Consumer - other	40,644		307		94		—		401		444		(859		)	3,977		44,607
Total	$	1,584,250	$	3,212	$	6,746	$	192	$	10,150	$	14,208	$	(10,629	)	$	464,627	$	2,062,606

	December 31, 2016
	Acquired loans (1) (2)
	Accruing
(Dollars in thousands)	Current or Less Than 30 days past due		30-59 days		60-89 days		> 90 days		Total Past Due		Non-accrual Loans		Discount/Premium			Acquired Impaired Loans		Total Loans
Commercial real estate - construction	$	26,714	$	—	$	—	$	—	$	—	$	1,946	$	(243	)	$	32,991	$	61,408
Commercial real estate - owner-occupied	326,761		493		55		—		548		166		(3,084		)	125,621		450,012
Commercial real estate- non-owner-occupied	544,731		223		—		32		255		1,055		(565		)	122,056		667,532
Commercial and industrial	314,990		73		51		—		124		1,317		(837		)	32,732		348,326
Energy-related	1,910		—		—		—		—		—		(6		)	—		1,904
Residential mortgage	290,031		328		989		—		1,317		719		(1,835		)	122,952		413,184
Consumer - home equity	286,411		1,078		189		250		1,517		1,395		(5,237		)	88,419		372,505
Consumer - indirect automobile	—		—		—		—		—		—		—			4		4
Consumer - credit card	468		—		—		—		—		—		—			—		468
Consumer - other	49,449		391		97		—		488		360		(1,004		)	5,411		54,704
Total	$	1,841,465	$	2,586	$	1,381	$	282	$	4,249	$	6,958	$	(12,811	)	$	530,186	$	2,370,047

⁽¹⁾  Past due and non-accrual information presents acquired loans at the gross loan balance, prior to application of discounts.

⁽²⁾  Past due and non-accrual loan amounts exclude acquired impaired loans, even if contractually past due or if the Company does not expect to receive payment in full, as the Company is currently accreting interest income over the expected life of the loans.

21

Loans Acquired

The following is a summary of changes in the accretable difference for all loans accounted for under ASC 310-30 during the six months ended June 30:

(Dollars in thousands)	2017			2016
Balance at beginning of period	$	175,054		$	227,502
Transfers from non-accretable difference to accretable yield	2,544			4,425
Accretion	(28,496		)	(36,256		)
Changes in expected cash flows not affecting non-accretable differences (1)	2,439			8,949
Balance at end of period	$	151,541		$	204,620

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

Troubled Debt Restructurings

Information about the Company’s troubled debt restructurings ("TDRs") at June 30, 2017 and 2016 is presented in the following tables. Modifications of loans that are accounted for within a pool under ASC Topic 310-30 are excluded as TDRs. Accordingly, such modifications do not result in the removal of those loans from the pool, even if the modification of those loans would otherwise be considered a TDR. As a result, all such acquired loans that would otherwise meet the criteria for classification as a TDR are excluded from the tables below.

TDRs totaling $28.4 million and $165.3 million occurred during the six months ended June 30, 2017 and June 30, 2016, respectively, through modification of the original loan terms.

The following table provides information on how the TDRs were modified during the periods indicated:

	Three Months Ended June 30				Six Months Ended June 30
(Dollars in thousands)	2017		2016		2017		2016
Extended maturities	$	8,488	$	54,758	$	15,014	$	57,533
Maturity and interest rate adjustment	3,886		30,781		6,502		31,048
Movement to or extension of interest-rate only payments	38		440		138		440
Interest rate adjustment	26		134		26		134
Forbearance	3,466		33,426		4,687		38,367
Other concession(s) (1)	1,988		15,985		2,031		37,761
Total	$	17,892	$	135,524	$	28,398	$	165,283

⁽¹⁾  Other concessions may include covenant waivers, forgiveness of principal or interest associated with a customer bankruptcy, or a combination of any of the above concessions.

Of the $28.4 million of TDRs occurring during the six months ended June 30, 2017, $22.8 million are on accrual status and $5.6 million are on non-accrual status. Of the $165.3 million of TDRs occurring during the six months ended June 30, 2016, $126.6 million were on accrual status and $38.7 million were on non-accrual status.

22

The following table presents the end of period balance for loans modified in a TDR during the periods indicated:

	Three Months Ended June 30
	2017					2016
(In thousands, except number of loans)	Number of Loans	Pre-modification Outstanding Recorded Investment		Post-modification Outstanding Recorded Investment		Number of Loans	Pre-modification Outstanding Recorded Investment		Post-modification Outstanding Recorded Investment
Commercial real estate- construction	1	$	275	$	275	—	$	—	$	—
Commercial real estate- owner-occupied	1	32		31		3	794		785
Commercial real estate- non-owner-occupied	6	2,721		2,795		6	10,777		10,047
Commercial and industrial	24	9,028		8,551		16	19,496		19,353
Energy-related	—	—		—		19	82,882		100,205
Residential mortgage	6	521		492		10	1,438		1,438
Consumer - home equity	33	4,820		4,807		36	2,750		2,750
Consumer - indirect	23	224		114		—	—		—
Consumer - other	30	832		827		61	946		946
Total	124	$	18,453	$	17,892	151	$	119,083	$	135,524

	Six Months Ended June 30
	2017					2016
(In thousands, except number of loans)	Number of Loans	Pre-modification Outstanding Recorded Investment		Post-modification Outstanding Recorded Investment		Number of Loans	Pre-modification Outstanding Recorded Investment		Post-modification Outstanding Recorded Investment
Commercial real estate- construction	1	$	275	$	275	1	$	28	$	26
Commercial real estate- owner-occupied	2	1,730		1,698		5	1,069		1,050
Commercial real estate- non-owner-occupied	11	4,409		4,465		10	11,516		10,749
Commercial and industrial	33	9,254		8,747		28	24,018		23,632
Energy-related	—	—		—		25	110,443		119,890
Residential mortgage	10	780		730		25	4,733		4,692
Consumer - home equity	66	10,851		10,771		57	3,928		3,916
Consumer - indirect	33	360		222		—	—		—
Consumer - other	50	1,547		1,490		85	1,386		1,328
Total	206	$	29,206	$	28,398	236	$	157,121	$	165,283

23

Information detailing TDRs that defaulted during the three-month and six-month periods ended June 30, 2017 and 2016, and were modified in the previous twelve months (i.e., the twelve months prior to the default) is presented in the following tables. The Company has defined a default as any loan with a loan payment that is currently past due greater than 30 days, or was past due greater than 30 days at any point during the respective periods, or since the date of modification, whichever is shorter.

	Three Months Ended June 30
	2017			2016
(In thousands, except number of loans)	Number of Loans	Recorded Investment		Number of Loans	Recorded Investment
Commercial real estate- construction	—	$	—	—	$	—
Commercial real estate- owner-occupied	5	2,297		—	—
Commercial real estate- non-owner-occupied	9	5,640		4	1,358
Commercial and industrial	17	8,081		5	758
Energy-related	—	—		1	2,250
Residential mortgage	5	454		4	480
Consumer - home equity	19	1,532		17	1,112
Consumer - indirect automobile	9	75		—	—
Consumer - other	17	592		34	482
Total	81	$	18,671	65	$	6,440

	Six Months Ended June 30
	2017			2016
(In thousands, except number of loans)	Number of Loans	Recorded Investment		Number of Loans	Recorded Investment
Commercial real estate- construction	2	$	132	—	$	—
Commercial real estate- owner-occupied	7	2,404		—	—
Commercial real estate- non-owner-occupied	14	6,406		8	1,377
Commercial and industrial	25	8,239		8	3,273
Energy-related	—	—		1	2,250
Residential mortgage	21	1,854		7	536
Consumer - home equity	37	2,488		24	1,608
Consumer - indirect automobile	33	328		—	—
Consumer - other	29	893		67	598
Total	168	$	22,744	115	$	9,642

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NOTE 5 – ALLOWANCE FOR CREDIT LOSSES AND CREDIT QUALITY

Allowance for Credit Losses Activity

A summary of changes in the allowance for credit losses for the six months ended June 30 is as follows:

	2017
(Dollars in thousands)	Legacy Loans			Acquired Loans			Total
Allowance for credit losses
Allowance for loan losses at beginning of period	$	105,569		$	39,150		$	144,719
Provision for (Reversal of) loan losses	18,315			(111		)	18,204
Transfer of balance to OREO and other	—			258			258
Loans charged-off	(18,098		)	(1,382		)	(19,480		)
Recoveries	1,824			700			2,524
Allowance for loan losses at end of period	$	107,610		$	38,615		$	146,225
Reserve for unfunded commitments at beginning of period	$	11,241		$	—		$	11,241
Provision for (Reversal of) unfunded lending commitments	(779		)	—			(779		)
Reserve for unfunded commitments at end of period	$	10,462		$	—		$	10,462
Allowance for credit losses at end of period	$	118,072		$	38,615		$	156,687

	2016
	Legacy Loans			Acquired Loans			Total
Allowance for credit losses
Allowance for loan losses at beginning of period	$	93,808		$	44,570		$	138,378
Provision for (Reversal of) loan losses before benefit attributable to FDIC loss share agreements	28,390			(2,416		)	25,974
Adjustment attributable to FDIC loss share arrangements	—			797			797
Net provision for (Reversal of) loan losses	28,390			(1,619		)	26,771
Adjustment attributable to FDIC loss share arrangements	—			(797		)	(797		)
Transfer of balance to OREO and other	—			(967		)	(967		)
Loans charged-off	(17,359		)	(1,196		)	(18,555		)
Recoveries	2,022			600			2,622
Allowance for loan losses at end of period	$	106,861		$	40,591		$	147,452
Reserve for unfunded commitments at beginning of period	$	14,145		$	—		$	14,145
Provision for (Reversal of) unfunded lending commitments	(319		)	—			(319		)
Reserve for unfunded commitments at end of period	$	13,826		$	—		$	13,826
Allowance for credit losses at end of period	$	120,687		$	40,591		$	161,278

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A summary of changes in the allowance for credit losses for legacy loans, by loan portfolio type, for the six months ended June 30 is as follows:

	2017
(Dollars in thousands)	Commercial Real Estate			Commercial and Industrial			Energy-related			Residential Mortgage			Consumer			Total
Allowance for loan losses at beginning of period	$	25,408		$	35,434		$	22,486		$	3,835		$	18,406		$	105,569
Provision for (Reversal of) loan losses	4,323			5,181			3,387			(884		)	6,308			18,315
Loans charged-off	(256		)	(8,366		)	(2,845		)	(45		)	(6,586		)	(18,098		)
Recoveries	189			269			—			77			1,289			1,824
Allowance for loan losses at end of period	$	29,664		$	32,518		$	23,028		$	2,983		$	19,417		$	107,610
Reserve for unfunded commitments at beginning of period	$	3,206		$	3,535		$	1,003		$	657		$	2,840		$	11,241
Provision for (Reversal of) unfunded commitments	294			(46		)	(856		)	(89		)	(82		)	(779		)
Reserve for unfunded commitments at end of period	$	3,500		$	3,489		$	147		$	568		$	2,758		$	10,462
Allowance on loans individually evaluated for impairment	$	1,316		$	7,192		$	16,094		$	137		$	2,181		$	26,920
Allowance on loans collectively evaluated for impairment	28,348			25,326			6,934			2,846			17,236			80,690
Loans, net of unearned income:
Balance at end of period	$	6,114,930		$	3,390,699		$	550,162		$	970,961		$	2,466,658		$	13,493,410
Balance at end of period individually evaluated for impairment	42,204			36,836			89,814			4,631			25,983			199,468
Balance at end of period collectively evaluated for impairment	6,072,726			3,353,863			460,348			966,330			2,440,675			13,293,942

26

	2016
(Dollars in thousands)	Commercial Real Estate			Commercial and Industrial			Energy-related			Residential Mortgage			Consumer			Total
Allowance for loan losses at beginning of period	$	24,658		$	23,283		$	23,863		$	3,947		$	18,057		$	93,808
Provision for (Reversal of) loan losses	(715		)	5,874			16,819			264			6,148			28,390
Loans charged-off	(1,549		)	(1,154		)	(7,715		)	(173		)	(6,768		)	(17,359		)
Recoveries	644			35			—			27			1,316			2,022
Allowance for loan losses at end of period	$	23,038		$	28,038		$	32,967		$	4,065		$	18,753		$	106,861
Reserve for unfunded commitments at beginning of period	$	4,160		$	3,448		$	2,665		$	830		$	3,042		$	14,145
Provision for (Reversal of) unfunded commitments	(26		)	(60		)	(442		)	(23		)	232			(319		)
Reserve for unfunded commitments at end of period	$	4,134		$	3,388		$	2,223		$	807		$	3,274		$	13,826
Allowance on loans individually evaluated for impairment	$	691		$	969		$	11,925		$	100		$	800		$	14,485
Allowance on loans collectively evaluated for impairment	22,347			27,069			21,042			3,965			17,953			92,376
Loans, net of unearned income:
Balance at end of period	$	5,097,689		$	3,027,590		$	659,510		$	794,701		$	2,405,359		$	11,984,849
Balance at end of period individually evaluated for impairment	26,152			34,298			148,317			3,451			9,140			221,358
Balance at end of period collectively evaluated for impairment	5,071,537			2,993,292			511,193			791,250			2,396,219			11,763,491

A summary of changes in the allowance for loan losses for acquired loans, by loan portfolio type, for the six months ended June 30 is as follows:

	2017
(Dollars in thousands)	Commercial Real Estate			Commercial and Industrial			Energy-related			Residential Mortgage			Consumer			Total
Allowance for loan losses at beginning of period	$	23,574		$	3,230		$	39		$	7,412		$	4,895		$	39,150
Provision for (Reversal of) loan losses	1,407			(46		)	(21		)	(578		)	(873		)	(111		)
Transfer of balance to OREO and other	135			(69		)	—			2			190			258
Loans charged-off	(1,026		)	(71		)	—			(30		)	(255		)	(1,382		)
Recoveries	145			77			—			65			413			700
Allowance for loan losses at end of period	$	24,235		$	3,121		$	18		$	6,871		$	4,370		$	38,615
Allowance on loans individually evaluated for impairment	$	402		$	678		$	—		$	32		$	92		$	1,204
Allowance on loans collectively evaluated for impairment	23,833			2,443			18			6,839			4,278			37,411
Loans, net of unearned income:
Balance at end of period	$	1,026,673		$	293,382		$	1,806		$	375,506		$	365,239		$	2,062,606
Balance at end of period individually evaluated for impairment	10,225			2,851			—			660			2,856			16,592
Balance at end of period collectively evaluated for impairment	777,865			259,101			1,806			263,596			279,019			1,581,387
Balance at end of period acquired with deteriorated credit quality	238,583			31,430			—			111,250			83,364			464,627

27

	2016
(Dollars in thousands)	Commercial Real Estate			Commercial and Industrial			Energy-related			Residential Mortgage			Consumer			Total
Allowance for loan losses at beginning of period	$	25,979		$	2,819		$	125		$	7,841		$	7,806		$	44,570
Provision for (Reversal of) loan losses	(1,804		)	350			(52		)	896			(1,009		)	(1,619		)
Increase (Decrease) in FDIC loss share receivable	45			(28		)	—			(562		)	(252		)	(797		)
Transfer of balance to OREO and other	(880		)	323			—			22			(432		)	(967		)
Loans charged-off	(31		)	(700		)	—			—			(465		)	(1,196		)
Recoveries	85			112			—			29			374			600
Allowance for loan losses at end of period	$	23,394		$	2,876		$	73		$	8,226		$	6,022		$	40,591
Allowance on loans individually evaluated for impairment	$	—		$	22		$	—		$	2		$	44		$	68
Allowance on loans collectively evaluated for impairment	23,394			2,854			73			8,224			5,978			40,523
Loans, net of unearned income:
Balance at end of period	$	1,374,312		$	408,219		$	2,524		$	454,361		$	498,296		$	2,737,712
Balance at end of period individually evaluated for impairment	1,145			2,075			—			245			4,412			7,877
Balance at end of period collectively evaluated for impairment	1,038,737			368,283			2,524			321,879			386,080			2,117,503
Balance at end of period acquired with deteriorated credit quality	334,430			37,861			—			132,237			107,804			612,332

Portfolio Segment Risk Factors

Commercial real estate loans include loans to commercial customers for long-term financing of land and buildings or for land development or construction of a building. These loans are repaid through revenues from operations of the businesses, rents of properties, sales of properties and refinances. Commercial and industrial loans represent loans to commercial customers to finance general working capital needs, equipment purchases and other projects where repayment is derived from cash flows resulting from business operations. The Company originates commercial business loans on a secured and, to a lesser extent, unsecured basis.

Residential mortgage loans consist of loans to consumers to finance a primary residence. The vast majority of the residential mortgage loan portfolio is comprised of non-conforming 1-4 family mortgage loans secured by properties located in the Company's market areas and originated under terms and documentation that permit their sale in a secondary market.

Consumer loans are offered by the Company in order to provide a full range of retail financial services to its customers and include home equity, credit card and other direct consumer installment loans. The Company originates substantially all of its consumer loans in its primary market areas. Loans in the consumer segment are sensitive to unemployment and other key consumer economic measures.

Credit Quality

The Company utilizes an asset risk classification system in accordance with guidelines established by the Federal Reserve Board as part of its efforts to monitor commercial asset quality. “Special mention” loans are defined as loans where known information about possible credit problems of the borrower cause management to have some doubt as to the ability of these borrowers to comply with the present loan repayment terms which may result in future disclosure of these loans as non-performing. For problem assets with identified credit issues, the Company has two primary classifications: “substandard” and “doubtful.”

Substandard assets have one or more defined weaknesses and are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected. Doubtful assets have the weaknesses of substandard assets with the additional characteristic that the weaknesses make collection or liquidation in full satisfaction of the loan balance outstanding questionable, which makes probability of loss higher based on currently existing facts, conditions, and values. Loans classified as “Pass” do not meet the criteria set forth for special mention, substandard, or doubtful classification and are not considered criticized. Asset risk classifications are determined at origination or acquisition and reviewed on an ongoing basis. Risk

28

classifications are changed if, in the opinion of management, the risk profile of the customer has changed since the last review of the loan relationship.

The Company’s investment in loans by credit quality indicator is presented in the following tables. The tables below further segregate the Company’s loans between loans that were originated, or renewed and underwritten by the Company (legacy loans) and acquired loans. Loan premiums/discounts in the tables below represent the adjustment of acquired loans to fair value at the acquisition date, as adjusted for income accretion and changes in cash flow estimates in subsequent periods. Asset risk classifications for commercial loans reflect the classification as of June 30, 2017 and December 31, 2016. Credit quality information in the tables below includes total loans acquired (including acquired impaired loans) at the gross loan balance, prior to the application of premiums/discounts, at June 30, 2017 and December 31, 2016.

Loan delinquency is the primary credit quality indicator that the Company utilizes to monitor consumer asset quality.

	Legacy loans
	June 30, 2017										December 31, 2016
(Dollars in thousands)	Pass		Special Mention		Sub- standard		Doubtful		Total		Pass		Special Mention		Sub- standard		Doubtful		Total
Commercial real estate - construction	$	997,264	$	7,917	$	5,298	$	—	$	1,010,479	$	734,687	$	2,203	$	3,871	$	—	$	740,761
Commercial real estate - owner-occupied	1,740,717		39,772		34,210		468		1,815,167		1,738,024		17,542		29,058		—		1,784,624
Commercial real estate- non-owner-occupied	3,251,368		8,696		29,220		—		3,289,284		3,063,470		8,617		25,842		—		3,097,929
Commercial and industrial	3,287,383		42,422		58,527		2,367		3,390,699		3,112,300		29,763		35,199		17,534		3,194,796
Energy-related	373,342		49,097		74,620		53,103		550,162		242,123		80,084		225,724		11,358		559,289
Total	$	9,650,074	$	147,904	$	201,875	$	55,938	$	10,055,791	$	8,890,604	$	138,209	$	319,694	$	28,892	$	9,377,399

	Legacy loans
	June 30, 2017						December 31, 2016
(Dollars in thousands)	Current		30+ Days Past Due		Total		Current		30+ Days Past Due		Total
Residential mortgage	$	955,343	$	15,618	$	970,961	$	836,509	$	17,707	$	854,216
Consumer - home equity	1,819,163		19,678		1,838,841		1,768,763		14,658		1,783,421
Consumer - indirect automobile	89,590		2,516		92,106		127,054		3,994		131,048
Consumer - credit card	85,690		897		86,587		81,602		922		82,524
Consumer - other	444,743		4,381		449,124		462,650		3,666		466,316
Total	$	3,394,529	$	43,090	$	3,437,619	$	3,276,578	$	40,947	$	3,317,525

	Acquired loans
	June 30, 2017													December 31, 2016
(Dollars in thousands)	Pass		Special Mention		Sub-standard		Doubtful		Premium/(Discount)			Total		Pass		Special Mention		Sub-standard		Doubtful		Loss		Premium/(Discount)			Total
Commercial real estate - construction	$	71,157	$	1,208	$	3,431	$	14	$	13,899		$	89,709	$	46,498	$	459	$	3,118	$	2,574	$	—	$	8,759		$	61,408
Commercial real estate - owner-occupied	384,411		3,275		14,627		—		(12,072		)	390,241		426,492		7,664		17,584		1,356		—		(3,084		)	450,012
Commercial real estate- non-owner-occupied	541,724		3,434		26,188		119		(24,742		)	546,723		663,571		11,620		31,552		101		23		(39,335		)	667,532
Commercial and industrial	275,350		5,440		11,315		2,601		(1,324		)	293,382		323,154		1,416		27,749		494		—		(4,487		)	348,326
Energy-related	1,811		—		—		—		(5		)	1,806		1,910		—		—		—		—		(6		)	1,904
Total	$	1,274,453	$	13,357	$	55,561	$	2,734	$	(24,244	)	$	1,321,861	$	1,461,625	$	21,159	$	80,003	$	4,525	$	23	$	(38,153	)	$	1,529,182

29

	Acquired loans
	June 30, 2017									December 31, 2016
(Dollars in thousands)	Current		30+ Days Past Due		Premium (Discount)			Total		Current		30+ Days Past Due		Premium (Discount)			Total
Residential mortgage	$	378,204	$	22,121	$	(24,819	)	$	375,506	$	424,300	$	20,914	$	(32,030	)	$	413,184
Consumer - home equity	322,658		13,051		(15,602		)	320,107		377,021		12,807		(17,323		)	372,505
Consumer - indirect automobile	24		—		—			24		12		—		(8		)	4
Consumer - other	48,168		1,225		(4,285		)	45,108		58,141		1,423		(4,392		)	55,172
Total	$	749,054	$	36,397	$	(44,706	)	$	740,745	$	859,474	$	35,144	$	(53,753	)	$	840,865

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Legacy Impaired Loans

Information on the Company’s investment in legacy impaired loans, which include all TDRs and all other non-accrual loans evaluated or measured individually for impairment for purposes of determining the allowance for loan losses, is presented in the following tables as of and for the periods indicated.

	June 30, 2017							December 31, 2016
	Unpaid Principal Balance		Recorded Investment		Related Allowance			Unpaid Principal Balance		Recorded Investment		Related Allowance
(Dollars in thousands)
With no related allowance recorded:
Commercial real estate- construction	$	2,123	$	2,123	$	—		$	38	$	38	$	—
Commercial real estate- owner-occupied	13,932		13,932		—			4,593		4,593		—
Commercial real estate- non-owner-occupied	4,443		4,443		—			12,668		11,876		—
Commercial and industrial	16,016		16,016		—			14,202		13,189		—
Energy-related	32,013		32,013		—			152,424		143,239		—
Residential mortgage	1,123		1,123		—			—		—		—
Consumer - home equity	3,336		3,336		—			—		—		—
Consumer -other	—		—		—			—		—		—
With an allowance recorded:
Commercial real estate- construction	36		36		(1		)	—		—		—
Commercial real estate- owner-occupied	17,945		17,945		(690		)	17,580		17,429		(640		)
Commercial real estate- non-owner-occupied	3,725		3,725		(625		)	108		95		(1		)
Commercial and industrial	20,820		20,820		(7,192		)	28,829		28,329		(10,864		)
Energy-related	57,801		57,801		(16,094		)	53,967		53,088		(9,769		)
Residential mortgage	3,543		3,508		(137		)	4,627		4,312		(144		)
Consumer - home equity	18,865		18,757		(1,805		)	13,906		13,257		(993		)
Consumer - indirect automobile	668		668		(83		)	1,037		758		(114		)
Consumer - other	3,222		3,222		(293		)	2,447		2,442		(251		)
Total	$	199,611	$	199,468	$	(26,920	)	$	306,426	$	292,645	$	(22,776	)
Total commercial loans	$	168,854	$	168,854	$	(24,602	)	$	284,409	$	271,876	$	(21,274	)
Total mortgage loans	4,666		4,631		(137		)	4,627		4,312		(144		)
Total consumer loans	26,091		25,983		(2,181		)	17,390		16,457		(1,358		)

31

	Three Months Ended June 30, 2017				Three Months Ended June 30, 2016				Six Months Ended June 30, 2017				Six Months Ended June 30, 2016
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
(Dollars in thousands)
With no related allowance recorded:
Commercial real estate- construction	$	2,123	$	13	$	27	$	—	$	2,123	$	39	$	30	$	—
Commercial real estate- owner-occupied	14,054		158		2,072		20		14,179		404		2,085		41
Commercial real estate- non-owner-occupied	4,409		39		13,395		123		4,433		67		13,454		237
Commercial and industrial	21,116		106		36,212		467		21,998		232		41,074		947
Energy-related	32,370		44		106,692		912		34,330		102		102,364		1,857
Residential mortgage	1,130		12		825		10		1,136		24		825		19
Consumer - home equity	3,347		32		—		—		3,356		65		—		—
With an allowance recorded:
Commercial real estate- construction	37		1		—		—		37		1		—		—
Commercial real estate- owner-occupied	17,908		86		10,636		83		17,998		186		10,694		166
Commercial real estate- non-owner-occupied	3,761		13		53		—		3,774		57		60		1
Commercial and industrial	21,028		284		2,125		23		21,504		555		2,191		48
Energy-related	58,399		2		15,486		10		58,868		4		12,290		47
Residential mortgage	3,528		34		2,642		18		3,549		68		2,657		38
Consumer - home equity	18,359		196		7,550		74		17,443		375		7,290		146
Consumer - indirect automobile	750		6		650		6		797		14		723		18
Consumer - other	3,100		51		846		15		2,921		96		702		25
Total	$	205,419	$	1,077	$	199,211	$	1,761	$	208,446	$	2,289	$	196,439	$	3,590
Total commercial loans	$	175,205	$	746	$	186,698	$	1,638	$	179,244	$	1,647	$	184,242	$	3,344
Total mortgage loans	4,658		46		3,467		28		4,685		92		3,482		57
Total consumer loans	25,556		285		9,046		95		24,517		550		8,715		189

As of June 30, 2017 and December 31, 2016, the Company was not committed to lend a material amount of additional funds to any customer whose loan was classified as impaired or as a troubled debt restructuring.

32

NOTE 6 – GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill

Changes to the carrying amount of goodwill by reporting unit for the six months ended June 30, 2017, and the year ended December 31, 2016 are provided in the following table.

(Dollars in thousands)	IBERIABANK		IMC		LTC		Total
Balance, December 31, 2015	$	696,260	$	23,178	$	5,165	$	724,603
Goodwill adjustments during the year	2,253		—		—		2,253
Balance, December 31, 2016	$	698,513	$	23,178	$	5,165	$	726,856
Goodwill adjustments during the year	—		—		—		—
Balance, June 30, 2017	$	698,513	$	23,178	$	5,165	$	726,856

The goodwill adjustments during 2016 were the result of the finalization of fair value estimates related to the 2015 acquisitions of Florida Bank Group, Old Florida, and Georgia Commerce during the respective measurement periods.

The Company performed the required annual goodwill impairment test as of October 1, 2016. The Company’s annual impairment test did not indicate impairment in any of the Company’s reporting units as of the testing date. Following the testing date, management evaluated the events and changes that could indicate that goodwill might be impaired and concluded that a subsequent interim test was not necessary.

Mortgage Servicing Rights

Mortgage servicing rights are recorded at the lower of cost or market value in “other assets” on the Company's consolidated balance sheets and amortized over the remaining servicing life of the loans, with consideration given to prepayment assumptions. Mortgage servicing rights had the following carrying values as of the periods indicated:

	June 30, 2017							December 31, 2016
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
(Dollars in thousands)
Mortgage servicing rights	$	8,265	$	(3,576	)	$	4,689	$	7,202	$	(3,144	)	$	4,058

In addition, there was an insignificant amount of non-mortgage servicing rights related to SBA loans as of June 30, 2017 and December 31, 2016, respectively.

Title Plant

The Company held title plant assets recorded in “other assets” on the Company's consolidated balance sheets totaling $6.7 million at both June 30, 2017 and December 31, 2016. No events or changes in circumstances occurred during the six months ended June 30, 2017 to suggest the carrying value of the title plant was not recoverable.

Intangible assets subject to amortization

Definite-lived intangible assets had the following carrying values included in “other assets” on the Company’s consolidated balance sheets as of the periods indicated:

	June 30, 2017							December 31, 2016
(Dollars in thousands)	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Core deposit intangibles	$	74,001	$	(55,501	)	$	18,500	$	74,001	$	(52,165	)	$	21,836
Customer relationship intangible asset	1,143		(942		)	201		1,348		(1,064		)	284
Non-compete agreement	63		(31		)	32		63		(22		)	41
Total	$	75,207	$	(56,474	)	$	18,733	$	75,412	$	(53,251	)	$	22,161

33

NOTE 7 – DERIVATIVE INSTRUMENTS AND OTHER HEDGING ACTIVITIES

The Company enters into derivative financial instruments to manage interest rate risk, exposures related to liquidity and credit risk, and to facilitate customer transactions. The primary types of derivatives used by the Company include interest rate swap agreements, foreign exchange contracts, interest rate lock commitments, forward sales commitments, written and purchased options and credit derivatives. All derivative instruments are recognized on the consolidated balance sheets as "other assets" or "other liabilities" at fair value, as required by ASC Topic 815, Derivatives and Hedging.

For cash flow hedges, the effective portion of the gain or loss related to the derivative instrument is initially reported as a component of other comprehensive income and subsequently reclassified into earnings when the forecasted transaction affects earnings or when the hedge is terminated. The ineffective portion of the gain or loss is reported in earnings immediately. In applying hedge accounting for derivatives, the Company establishes and documents a method for assessing the effectiveness of the hedging derivative and a measurement approach for determining the ineffective aspect of the hedge upon the inception of the hedge. The Company has designated interest rate swaps in a cash flow hedge to convert forecasted variable interest payments to a fixed rate on its junior subordinated debt and has concluded that the forecasted transactions are probable of occurring.

For derivative instruments that are not designated as hedging instruments, changes in the fair value of the derivatives are recognized in earnings immediately.

Information pertaining to outstanding derivative instruments is as follows:

	Balance Sheet Location	Derivative Assets - Fair Value				Balance Sheet Location	Derivative Liabilities - Fair Value
(Dollars in thousands)		June 30, 2017		December 31, 2016			June 30, 2017		December 31, 2016
Derivatives designated as hedging instruments under ASC Topic 815:
Interest rate contracts	Other assets	$	—	$	—	Other liabilities	$	1,041	$	525
Total derivatives designated as hedging instruments under ASC Topic 815		$	—	$	—		$	1,041	$	525
Derivatives not designated as hedging instruments under ASC Topic 815:
Interest rate contracts	Other assets	$	20,432	$	20,719	Other liabilities	$	18,384	$	20,719
Foreign exchange contracts	Other assets	73		27		Other liabilities	73		26
Forward sales contracts	Other assets	860		6,014		Other liabilities	706		794
Written and purchased options	Other assets	11,535		12,125		Other liabilities	8,439		8,098
Other contracts	Other assets	—		1		Other liabilities	41		47
Total derivatives not designated as hedging instruments under ASC Topic 815		$	32,900	$	38,886		$	27,643	$	29,684
Total		$	32,900	$	38,886		$	28,684	$	30,209

34

	Derivative Assets - Notional Amount				Derivative Liabilities - Notional Amount
(Dollars in thousands)	June 30, 2017		December 31, 2016		June 30, 2017		December 31, 2016
Derivatives designated as hedging instruments under ASC Topic 815:
Interest rate contracts	$	—	$	—	$	108,500	$	108,500
Total derivatives designated as hedging instruments under ASC Topic 815	$	—	$	—	$	108,500	$	108,500
Derivatives not designated as hedging instruments under ASC Topic 815:
Interest rate contracts	$	1,120,278	$	1,033,955	$	1,120,278	$	1,033,955
Foreign exchange contracts	1,724		4,474		1,724		4,474
Forward sales contracts	214,925		229,181		131,915		120,567
Written and purchased options	369,582		289,115		177,921		154,170
Other contracts	8,630		8,784		103,055		106,518
Total derivatives not designated as hedging instruments under ASC Topic 815	$	1,715,139	$	1,565,509	$	1,534,893	$	1,419,684
Total	$	1,715,139	$	1,565,509	$	1,643,393	$	1,528,184

The Company has entered into risk participation agreements with counterparties to transfer or assume credit exposures related to interest rate derivatives. The notional amounts of risk participation agreements sold were $103.1 million and $106.5 million at June 30, 2017 and December 31, 2016, respectively. Assuming all underlying third party customers referenced in the swap contracts defaulted at June 30, 2017 and December 31, 2016, the exposure from these agreements would not be material based on the fair value of the underlying swaps.

The Company is party to collateral agreements with certain derivative counterparties. Such agreements require that the Company maintain collateral based on the fair values of individual derivative transactions. In the event of default by the Company, the counterparty would be entitled to the collateral.

At June 30, 2017 and December 31, 2016, the Company was required to post $1.5 million and $1.9 million, respectively, in cash or securities as collateral for its derivative transactions, which is included in "interest-bearing deposits in banks" on the Company’s consolidated balance sheets. Effective January 3, 2017, the Chicago Mercantile Exchange and LCH.Clearnet Limited amended their rulebooks to legally characterize variation margin payments for over-the-counter derivatives they clear as settlements of the derivatives' exposure rather than collateral against the exposures. As of June 30, 2017, the Company was required to post $2.7 million in variation margin payments for its derivative transactions, which is now required to be netted against the fair value of the derivatives in "other assets/other liabilities" on the consolidated balance sheet. The Company does not anticipate additional assets will be required to be posted as collateral, nor does it believe additional assets would be required to settle its derivative instruments immediately if contingent features were triggered at June 30, 2017. The Company’s master netting agreements represent written, legally enforceable bilateral agreements that (1) create a single legal obligation for all individual transactions covered by the master agreement and (2) in the event of default, provide the non-defaulting counterparty the right to accelerate, terminate, and close-out on a net basis all transactions under the agreement and to promptly liquidate or set-off collateral posted by the defaulting counterparty. As permitted by U.S. GAAP, the Company does not offset fair value amounts recognized for the right to reclaim cash collateral or the obligation to return cash collateral against recognized fair value amounts of derivatives executed with the same counterparty under a master netting agreement.

35

The following table reconciles the gross amounts presented in the consolidated balance sheets to the net amounts that would result in the event of offset.

	June 30, 2017
	Gross Amounts Presented in the Balance Sheet		Gross Amounts Not Offset in the Balance Sheet						Net
(Dollars in thousands)			Derivatives			Collateral  (1)
Derivatives subject to master netting arrangements
Derivative assets
Interest rate contracts not designated as hedging instruments	$	20,432	$	(8,747	)	$	—		$	11,685
Written and purchased options	8,329		—			—			8,329
Total derivative assets subject to master netting arrangements	$	28,761	$	(8,747	)	$	—		$	20,014
Derivative liabilities
Interest rate contracts designated as hedging instruments	$	1,041	$	—		$	—		$	1,041
Interest rate contracts not designated as hedging instruments	18,384		(8,747		)	(1,513		)	8,124
Total derivative liabilities subject to master netting arrangements	$	19,425	$	(8,747	)	$	(1,513	)	$	9,165

^{(1)  Consists of cash collateral recorded at cost, which approximates fair value, and investment securities.} 

	December 31, 2016
	Gross Amounts Presented in the Balance Sheet		Gross Amounts Not Offset in the Balance Sheet						Net
(Dollars in thousands)			Derivatives			Collateral (1)
Derivatives subject to master netting arrangements
Derivative assets
Interest rate contracts not designated as hedging instruments	$	20,719	$	(9,677	)	$	—		$	11,042
Written and purchased options	8,085		—			—			8,085
Total derivative assets subject to master netting arrangements	$	28,804	$	(9,677	)	$	—		$	19,127
Derivative liabilities
Interest rate contracts designated as hedging instruments	$	525	$	—		$	(181	)	$	344
Interest rate contracts not designated as hedging instruments	20,719		(9,677		)	(1,711		)	9,331
Total derivative liabilities subject to master netting arrangements	$	21,244	$	(9,677	)	$	(1,892	)	$	9,675

^{(1)  Consists of cash collateral recorded at cost, which approximates fair value, and investment securities.} 

During the six months ended June 30, 2017 and 2016, the Company has not reclassified into earnings any gain or loss as a result of the discontinuance of cash flow hedges, because it was probable the original forecasted transaction would not occur by the end of the originally specified term.

At June 30, 2017, the Company does not expect to reclassify a material amount from accumulated other comprehensive income into interest income over the next twelve months for derivatives that will be settled.

36

At June 30, 2017 and 2016, and for the three and six months then ended, information pertaining to the effect of the hedging instruments on the consolidated financial statements is as follows:

														Location of Gain (Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing)	Amount of Gain (Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing)
			Amount of Gain (Loss) Recognized in OCI net of taxes (Effective Portion)					Location of Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)		Amount of Gain (Loss) Reclassified from Accumulated OCI into Income net of taxes (Effective Portion)
(Dollars in thousands)
			For the Three Months Ended June 30
Derivatives in ASC Topic 815 Cash Flow Hedging Relationships		2017			2016				2017			2016			2017		2016
	Interest rate contracts	$	(790	)	$	(2,328	)	Other income (expense)	$	(103	)	$	—	Other income (expense)	$	—	$	—
Total		$	(790	)	$	(2,328	)		$	(103	)	$	—		$	—	$	—

														Location of Gain (Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing)	Amount of Gain (Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing)
			Amount of Gain (Loss) Recognized in OCI net of taxes (Effective Portion)					Location of Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)		Amount of Gain (Loss) Reclassified from Accumulated OCI into Income net of taxes (Effective Portion)
(Dollars in thousands)
			For the Six Months Ended June 30
Derivatives in ASC Topic 815 Cash Flow Hedging Relationships		2017			2016				2017			2016			2017		2016
	Interest rate contracts	$	(627	)	$	(6,455	)	Other income (expense)	$	(148	)	$	—	Other income (expense)	$	—	$	—
Total		$	(627	)	$	(6,455	)		$	(148	)	$	—		$	—	$	—

37

At June 30, 2017 and 2016, and for the three and six months then ended, information pertaining to the effect of derivatives not designated as hedging instruments on the consolidated financial statements is as follows:

	Location of Gain (Loss) Recognized in  Income on Derivatives	Amount of Gain (Loss) Recognized in Income on Derivatives
		For the Three Months Ended June 30						For the Six Months Ended June 30
(Dollars in thousands)		2017			2016			2017			2016
Interest rate contracts (1)	Other income	$	1,299		$	2,332		$	2,416		$	5,294
Foreign exchange contracts	Other income	7			2			14			3
Forward sales contracts	Mortgage income	(1,526		)	(4,787		)	(1,886		)	(10,130		)
Written and purchased options	Mortgage income	(1,586		)	2,488			(931		)	6,470
Other contracts	Other income	5			—			9			—
Total		$	(1,801	)	$	35		$	(378	)	$	1,637

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

38

NOTE 8 – SHAREHOLDERS' EQUITY, CAPITAL RATIOS AND OTHER REGULATORY MATTERS

Preferred Stock

The following table presents a summary of the Company's non-cumulative perpetual preferred stock:

							June 30, 2017		December 31, 2016
	Issuance Date	Earliest Redemption Date	Annual Dividend Rate		Liquidation Amount		Carrying Amount		Carrying Amount
					(Dollars in thousands)
Series B Preferred Stock	8/5/2015	8/1/2025	6.625	%	$	80,000	$	76,812	$	76,812
Series C Preferred Stock	5/9/2016	5/1/2026	6.600	%	57,500		55,285		55,285
					$	137,500	$	132,097	$	132,097

Common Stock

During the second quarter of 2016, the Company's Board of Directors authorized the repurchase of up to 950,000 shares of IBERIABANK Corporation's outstanding common stock. Stock repurchases under this program will be made from time to time, on the open market or in privately negotiated transactions. The timing of these repurchases will depend on market conditions and other requirements. The share repurchase program does not obligate the Company to repurchase any dollar amount or number of shares, and the program may be extended, modified, suspended, or discontinued at any time. At June 30, 2017, the remaining common shares that could be repurchased under the plan approved by the Board was 747,494 shares. The Company has not repurchased any common shares during 2017.

On March 7, 2017, the Company issued an additional 6,100,000 shares of its common stock at a price of $83.00 per common share. Net proceeds from the offering, after deduction of underwriting discounts, commissions, and direct issuance costs, were $485.2 million.

Regulatory Capital

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

Management believes that, as of June 30, 2017, the Company and IBERIABANK met all capital adequacy requirements to which they are subject.

As of June 30, 2017, the most recent notification from the FRB categorized IBERIABANK as well-capitalized under the regulatory framework for prompt corrective action (the prompt corrective action requirements are not applicable to the Company). To be categorized as well-capitalized, an institution must maintain minimum total risk-based, Tier 1 risk-based and Tier 1 leverage ratios as set forth in the following table. There are no conditions or events since the notification that management believes have changed that categorization.

39

The Company’s and IBERIABANK’s actual capital amounts and ratios as of June 30, 2017 and December 31, 2016 are presented in the following table.

(Dollars in thousands)	June 30, 2017
	Minimum				Well-Capitalized		Actual
	Amount		Ratio		Amount	Ratio	Amount		Ratio
Tier 1 Leverage
Consolidated	$	845,167	4.00	%	N/A	N/A	$	2,787,729	13.19	%
IBERIABANK	842,313		4.00		1,052,892	5.00	1,994,073		9.47
Common Equity Tier 1 (CET1) (1)
Consolidated	$	822,980	4.50	%	N/A	N/A	$	2,655,632	14.52	%
IBERIABANK	820,978		4.50		1,185,857	6.50	1,994,073		10.93
Tier 1 Risk-Based Capital (1)
Consolidated	$	1,097,306	6.00	%	N/A	N/A	$	2,787,729	15.24	%
IBERIABANK	1,094,637		6.00		1,459,516	8.00	1,994,073		10.93
Total Risk-Based Capital (1)
Consolidated	$	1,463,075	8.00	%	N/A	N/A	$	3,060,916	16.74	%
IBERIABANK	1,459,516		8.00		1,824,395	10.00	2,150,760		11.79

	December 31, 2016
	Minimum				Well-Capitalized		Actual
	Amount		Ratio		Amount	Ratio	Amount		Ratio
Tier 1 Leverage
Consolidated	$	818,440	4.00	%	N/A	N/A	$	2,221,528	10.86	%
IBERIABANK	816,152		4.00		1,020,190	5.00	1,878,703		9.21
Common Equity Tier 1 (CET1) (1)
Consolidated	$	794,334	4.50	%	N/A	N/A	$	2,089,431	11.84	%
IBERIABANK	792,111		4.50		1,144,160	6.50	1,878,703		10.67
Tier 1 Risk-Based Capital (1)
Consolidated	$	1,059,112	6.00	%	N/A	N/A	$	2,221,528	12.59	%
IBERIABANK	1,056,147		6.00		1,408,197	8.00	1,878,703		10.67
Total Risk-Based Capital (1)
Consolidated	$	1,412,149	8.00	%	N/A	N/A	$	2,493,988	14.13	%
IBERIABANK	1,408,197		8.00		1,760,246	10.00	2,034,663		11.56

⁽¹⁾ Minimum capital ratios are subject to a capital conservation buffer. In order to avoid limitations on distributions, including dividend payments, and certain discretionary bonus payments to executive officers, an institution must hold a capital conservation buffer above its minimum risk-based capital requirements. This capital conservation buffer is calculated as the lowest of the differences between the actual CET1 ratio, Tier 1 Risk-Based Capital Ratio, and Total Risk-Based Capital ratio and the corresponding minimum ratios. At June 30, 2017, the required minimum capital conservation buffer was 1.250%, and will increase in subsequent years by 0.625% until it is fully phased in on January 1, 2019 at 2.50%. At June 30, 2017, the capital conservation buffers of the Company and IBERIABANK were 8.74% and 3.79%, respectively.

40

NOTE 9 – EARNINGS PER SHARE

Share-based payment awards that entitle holders to receive non-forfeitable dividends before vesting are considered participating securities that are included in the calculation of earnings per share using the two-class method. The two-class method is an earnings allocation formula under which earnings per share is calculated for common stock and participating securities according to dividends declared and participating rights in undistributed earnings. Under this method, all earnings, distributed and undistributed, are allocated to common shares and participating securities based on their respective rights to receive dividends.

The following table presents the calculation of basic and diluted earnings per share for the periods indicated.

	Three Months Ended June 30,						Six Months Ended June 30,
(In thousands, except per share data)	2017			2016			2017			2016
Earnings per common share - basic:
Net income	$	52,018		$	50,810		$	102,491		$	93,579
Preferred stock dividends	(949		)	(854		)	(4,548		)	(3,430		)
Dividends and undistributed earnings allocated to unvested restricted shares	(361		)	(540		)	(707		)	(1,003		)
Net income allocated to common shareholders - basic	$	50,708		$	49,416		$	97,236		$	89,146
Weighted average common shares outstanding	50,630			40,771			48,389			40,741
Earnings per common share - basic	1.00			1.21			2.01			2.19
Earnings per common share - diluted:
Net income allocated to common shareholders - basic	$	50,708		$	49,416		$	97,236		$	89,146
Dividends and undistributed earnings allocated to unvested restricted shares	(2		)	(12		)	(39		)	(13		)
Net income allocated to common shareholders - diluted	$	50,706		$	49,404		$	97,197		$	89,133
Weighted average common shares outstanding	50,630			40,771			48,389			40,741
Dilutive potential common shares	354			137			362			86
Weighted average common shares outstanding - diluted	50,984			40,908			48,751			40,827
Earnings per common share - diluted	$	0.99		$	1.21		$	1.99		$	2.18

For the three months ended June 30, 2017, and 2016, the calculations for basic shares outstanding exclude the weighted average shares owned by the Recognition and Retention Plan (“RRP”) of 365,087 and 461,124, respectively. For the six months ended June 30, 2017, and 2016, basic shares outstanding exclude 385,876 and 468,273 shares owned by the RRP, respectively.

The effects from the assumed exercises of 69,289 and 262,853 stock options were not included in the computation of diluted earnings per share for the three months ended June 30, 2017 and 2016, respectively, because such amounts would have had an antidilutive effect on earnings per common share. For the six months ended June 30, 2017, and 2016, the effects from the assumed exercise of 69,289 and 482,272 stock options, respectively, were not included in the computation of diluted earnings per share because such amounts would have had an antidilutive effect on earnings per common share.

41

NOTE 10 – SHARE-BASED COMPENSATION

The Company has various types of share-based compensation plans that permit the granting of awards in the form of stock options, restricted stock, restricted share units, phantom stock, and performance units. These plans are administered by the Compensation Committee of the Board of Directors, which selects persons eligible to receive awards and determines the terms, conditions and other provisions of the awards. At June 30, 2017, awards of 2,081,303 shares could be made under approved incentive compensation plans. The Company issues shares to fulfill stock option exercises and restricted share units and restricted stock awards vesting from available authorized common shares. At June 30, 2017, the Company believes there are adequate authorized shares to satisfy anticipated stock option exercises and restricted share unit and restricted stock award vesting.

Stock option awards

The Company issues stock options under various plans to directors, officers and other key employees. The option exercise price cannot be less than the fair value of the underlying common stock as of the date of the option grant and the maximum option term cannot exceed ten years.

The following table represents the activity related to stock options during the periods indicated:

	Number of Shares		Weighted Average Exercise Price
Outstanding options, December 31, 2015	813,777		$	56.99
Granted	149,932		47.46
Exercised	(8,811	)	55.62
Forfeited or expired	(45,723	)	60.97
Outstanding options, June 30, 2016	909,175		$	55.23
Exercisable options, June 30, 2016	598,469		$	56.31
Outstanding options, December 31, 2016	721,538		$	55.38
Granted	71,491		85.42
Exercised	(64,163	)	55.05
Forfeited or expired	(15,091	)	74.72
Outstanding options, June 30, 2017	713,775		$	58.01
Exercisable options, June 30, 2017	470,841		$	55.79

The Company uses the Black-Scholes option pricing model to estimate the fair value of stock option awards. The following weighted-average assumptions were used for option awards issued during the following periods:

	For the Six Months Ended June 30
	2017			2016
Expected dividends	1.7		%	2.9		%
Expected volatility	24.9		%	29.1		%
Risk-free interest rate	2.1		%	1.4		%
Expected term (in years)	5.6			6.5
Weighted-average grant-date fair value	$	18.76		$	10.10

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

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The following table represents the compensation expense that is included in non-interest expense and related income tax benefits in the accompanying consolidated statements of comprehensive income related to stock options for the following periods:

	For the Three Months Ended June 30				For the Six Months Ended June 30
(Dollars in thousands)	2017		2016		2017		2016
Compensation expense related to stock options	$	344	$	502	$	789	$	987
Income tax benefit related to stock options	47		81		115		162

At June 30, 2017, there was $2.5 million of unrecognized compensation cost related to stock options that is expected to be recognized over a weighted-average period of 2.8 years.

Restricted stock awards

The Company issues restricted stock under various plans for certain officers and directors. The restricted stock awards may not be sold or otherwise transferred until certain restrictions have lapsed. The holders of the restricted stock receive dividends and have the right to vote the shares. The compensation expense for these awards is determined based on the market price of the Company's common stock at the date of grant applied to the total number of shares granted and is recognized over the vesting period (generally three to seven years). As of June 30, 2017 and 2016, unrecognized share-based compensation associated with these awards totaled $20.0 million and $21.1 million, respectively. The unrecognized compensation cost related to restricted stock awards at June 30, 2017 is expected to be recognized over a weighted-average period of 1.6 years.

Restricted share units

During the first six months of 2017 and 2016, the Company issued restricted share units to certain of its executive officers. Restricted share units vest after the end of a three year performance period, based on satisfaction of the performance conditions set forth in the restricted share unit agreement. Recipients do not possess voting or investment power over the common stock underlying such units until vesting. The grant date fair value of these restricted share units is the same as the value of the corresponding number of shares of common stock, adjusted for assumptions surrounding the market-based conditions contained in the respective agreements.

The following table represents the compensation expense that was included in non-interest expense and related income tax benefits in the accompanying consolidated statements of comprehensive income related to restricted stock awards and restricted share units for the periods indicated:

	For the Three Months Ended June 30				For the Six Months Ended June 30
(Dollars in thousands)	2017		2016		2017		2016
Compensation expense related to restricted stock awards and restricted share units	$	3,045	$	3,329	$	6,322	$	6,715
Income tax benefit related to restricted stock awards and restricted share units	1,066		1,165		2,213		2,350

The following table represents unvested restricted stock award and restricted share unit activity for the following periods:

	For the Six Months Ended June 30
	2017		2016
Balance at beginning of period	543,258		507,130
Granted	163,353		240,699
Forfeited	(9,951	)	(9,040	)
Earned and issued	(185,092	)	(172,356	)
Balance at end of period	511,568		566,433

Phantom stock awards

The Company issues phantom stock awards to certain key officers and employees. The awards are subject to a vesting period of five years and are paid out in cash upon vesting. The amount paid per vesting period is calculated as the number of vested “share equivalents” multiplied by the closing market price of a share of the Company’s common stock on the vesting date. Share equivalents are calculated on the date of grant as the total award’s dollar value divided by the closing market price of a share of the Company’s common stock on the grant date. Award recipients are also entitled to a “dividend equivalent” on each

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unvested share equivalent held by the award recipient. A dividend equivalent is a dollar amount equal to the cash dividends that the participant would have been entitled to receive if the participant’s share equivalents were issued in shares of common stock. Dividend equivalents are reinvested as share equivalents that will vest and be paid out on the same date as the underlying share equivalents on which the dividend equivalents were paid. The number of share equivalents acquired with a dividend equivalent is determined by dividing the aggregate of dividend equivalents paid on the unvested share equivalents by the closing price of a share of the Company’s common stock on the dividend payment date.

Performance units

Performance units are tied to the value of shares of the Company's common stock, are payable in cash, and vest in increments of one-third per year after attainment of one or more performance measures. The value of performance units is the same as the value of the corresponding number of shares of common stock. There were no performance units granted in 2017 or 2016.

The following table indicates compensation expense recorded for phantom stock and performance units based on the number of share equivalents vested at June 30 of the years indicated and the current market price of the Company’s stock at that time:

	For the Three Months Ended June 30				For the Six Months Ended June 30
(Dollars in thousands)	2017		2016		2017		2016
Compensation expense related to phantom stock and performance units	$	2,889	$	2,793	$	5,942	$	5,198

The following table represents phantom stock award and performance unit activity during the periods indicated.

(Dollars in thousands)	Number of share equivalents (1)		Value of share equivalents (2)
Balance, December 31, 2015	462,430		$	25,466
Granted	192,359		11,490
Forfeited share equivalents	(16,283	)	973
Vested share equivalents	(147,511	)	7,452
Balance, June 30, 2016	490,995		$	29,327
Balance, December 31, 2016	472,830		$	39,600
Granted	105,048		8,561
Forfeited share equivalents	(15,104	)	1,231
Vested share equivalents	(150,409	)	14,246
Balance, June 30, 2017	412,365		$	33,608

⁽¹⁾  Number of share equivalents includes all reinvested dividend equivalents for the periods indicated.

⁽²⁾  Except for share equivalents at the beginning of each period, which are based on the value at that time, and vested share payments, which are based on the cash paid at the time of vesting, the value of share equivalents is calculated based on the market price of the Company’s stock at the end of the respective periods. The market price of the Company’s stock was $81.50 and $59.73 on June 30, 2017, and 2016, respectively.

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NOTE 11 – FAIR VALUE MEASUREMENTS

Recurring fair value measurements

The Company has segregated all financial assets and liabilities that are measured at fair value on a recurring basis into the most appropriate level within the fair value hierarchy based on the inputs used to estimate the fair value at the measurement date in the tables below. See Note 1, Summary of Significant Accounting Policies, in the Annual Report on Form 10-K for the year ended December 31, 2016, for a description of how fair value measurements are determined.

	June 30, 2017
(Dollars in thousands)	Level 1		Level 2		Level 3		Total
Assets
Securities available for sale	$	—	$	4,009,299	$	—	$	4,009,299
Mortgage loans held for sale	—		140,959		—		140,959
Derivative instruments	—		32,900		—		32,900
Total	$	—	$	4,183,158	$	—	$	4,183,158
Liabilities
Derivative instruments	$	—	$	28,684	$	—	$	28,684
Total	$	—	$	28,684	$	—	$	28,684
	December 31, 2016
	Level 1		Level 2		Level 3		Total
Assets
Securities available for sale	$	—	$	3,446,097	$	—	$	3,446,097
Mortgage loans held for sale	—		157,041		—		157,041
Derivative instruments	—		38,886		—		38,886
Total	$	—	$	3,642,024	$	—	$	3,642,024
Liabilities
Derivative instruments	$	—	$	30,209	$	—	$	30,209
Total	$	—	$	30,209	$	—	$	30,209

During the six months ended June 30, 2017, there were no transfers between the Level 1 and Level 2 fair value categories.

Non-recurring fair value measurements

The Company has segregated all assets and liabilities that are measured at fair value on a non-recurring basis into the most appropriate level within the fair value hierarchy based on the inputs used to determine the fair value at the measurement date in the tables below.

	June 30, 2017
(Dollars in thousands)	Level 1		Level 2		Level 3		Total
Assets
Loans	$	—	$	—	$	97,363	$	97,363
OREO, net	—		—		2,871		2,871
Total	$	—	$	—	$	100,234	$	100,234
	December 31, 2016
(Dollars in thousands)	Level 1		Level 2		Level 3		Total
Assets
Loans	$	—	$	—	$	93,485	$	93,485
OREO, net	—		—		185		185
Total	$	—	$	—	$	93,670	$	93,670

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In accordance with the provisions of ASC Topic 310, the Company records certain loans considered impaired at their estimated fair value. A loan is considered impaired if it is probable the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement. Fair value is measured at the estimated fair value of the collateral for collateral-dependent loans.

The Company did not record any liabilities at fair value for which measurement of the fair value was made on a non-recurring basis at June 30, 2017 and December 31, 2016.

Fair value option

The Company has elected the fair value option for certain originated residential mortgage loans held for sale, which allows for a more effective offset of the changes in fair values of the loans and the derivative instruments used to hedge them without the burden of complying with the requirements for hedge accounting. The Company has $13.3 million and $12.7 million of mortgage loans held for investment for which the fair value option was elected upon origination and continue to be accounted for at fair value at June 30, 2017 and December 31, 2016, respectively. Net gains (losses) resulting from the change in fair value of these loans that were recorded in mortgage income in the consolidated statements of comprehensive income for the three and six months ended June 30, 2017 totaled $343.3 thousand and $(65.4) thousand, respectively. These loans were transferred from loans held for sale to loans held for investment during the third quarter of 2016.

The following table summarizes the difference between the aggregate fair value and the aggregate unpaid principal balance for mortgage loans held for sale measured at fair value:

	June 30, 2017						December 31, 2016
(Dollars in thousands)	Aggregate Fair Value		Aggregate Unpaid Principal		Aggregate Fair Value Less Unpaid Principal		Aggregate Fair Value		Aggregate Unpaid Principal		Aggregate Fair Value Less Unpaid Principal
Mortgage loans held for sale, at fair value	$	140,959	$	137,524	$	3,435	$	157,041	$	153,801	$	3,240

Interest income on mortgage loans held for sale is recognized based on contractual rates and is reflected in interest income on loans held for sale in the consolidated statements of comprehensive income. Net gains (losses) resulting from the change in fair value of these loans that were recorded in mortgage income in the consolidated statements of comprehensive income for the three and six months ended June 30, 2017 totaled $32.1 thousand and $871.0 thousand, respectively, while net gains resulting from the change in fair value of these loans were $2.0 million and $3.9 million for the three and six months ended June 30, 2016, respectively. The changes in fair value are mostly offset by economic hedging activities, with an insignificant portion of these changes attributable to changes in instrument-specific credit risk.

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NOTE 12 – FAIR VALUE OF FINANCIAL INSTRUMENTS

The estimated fair value of a financial instrument is the current amount that would be exchanged between willing parties, other than in a forced liquidation. Fair value is best determined based upon quoted market prices. However, in many instances, there are no quoted market prices for the Company’s various financial instruments. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the instrument. ASC Topic 825, Financial Instruments, excludes certain financial instruments and all non-financial instruments from its disclosure requirements. Consequently, the aggregate fair value amounts presented may not necessarily represent the underlying fair value of the Company.

The carrying amount and estimated fair values, as well as the level within the fair value hierarchy, of the Company’s financial instruments are included in the tables below. See Note 1, Summary of Significant Accounting Policies, in the 2016 Annual Report on Form 10-K for the year ended December 31, 2016 for a description of how fair value measurements are determined.

	June 30, 2017
(Dollars in thousands)	Carrying  Amount		Fair Value		Level 1		Level 2		Level 3
Financial Assets
Cash and cash equivalents	$	469,360	$	469,360	$	469,360	$	—	$	—
Investment securities	4,093,816		4,094,747		—		4,094,747		—
Loans and loans held for sale, net of unearned income and allowance for loan losses	15,550,750		15,667,569		—		140,959		15,526,610
Derivative instruments	32,900		32,900		—		32,900		—
Financial Liabilities
Deposits	$	16,853,116	$	15,817,343	$	—	$	—	$	15,817,343
Short-term borrowings	583,935		583,935		333,935		250,000		—
Long-term debt	667,243		658,483		—		—		658,483
Derivative instruments	28,684		28,684		—		28,684		—
	December 31, 2016
(Dollars in thousands)	Carrying Amount		Fair Value		Level 1		Level 2		Level 3
Financial Assets
Cash and cash equivalents	$	1,362,126	$	1,362,126	$	1,362,126	$	—	$	—
Investment securities	3,535,313		3,536,029		—		3,536,029		—
Loans and loans held for sale, net of unearned income and allowance for loan losses	15,077,293		15,066,055		—		157,041		14,909,014
Derivative instruments	38,886		38,886		—		38,886		—
Financial Liabilities
Deposits	$	17,408,283	$	16,762,475	$	—	$	—	$	16,762,475
Short-term borrowings	509,136		509,136		334,136		175,000		—
Long-term debt	628,953		617,656		—		—		617,656
Derivative instruments	30,209		30,209		—		30,209		—

The fair value estimates presented herein are based upon pertinent information available to management as of June 30, 2017 and December 31, 2016. Although management is not aware of any factors that would significantly affect the estimated fair value amounts, such amounts have not been comprehensively revalued for purposes of these financial statements since that date and, therefore, current estimates of fair value may differ significantly from the amounts presented herein.

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NOTE 13 – BUSINESS SEGMENTS

Each of the Company’s reportable operating segments serves the specific needs of the Company’s customers based on the products and services it offers. The reportable segments are based upon those revenue-producing components for which separate financial information is produced internally and primarily reflect the manner in which resources are allocated and performance is assessed. Further, the reportable operating segments are also determined based on the quantitative thresholds prescribed within ASC Topic 280, Segment Reporting, and consideration of the usefulness of the information to the users of the consolidated financial statements.

The Company reports the results of its operations through three reportable segments: IBERIABANK, IMC, and LTC. The IBERIABANK segment represents the Company’s commercial and retail banking functions, including its lending, investment, and deposit activities. IBERIABANK also includes the Company’s wealth management, capital markets, and other corporate functions. The IMC segment represents the Company’s origination, funding, and subsequent sale of one-to-four family residential mortgage loans. The LTC segment represents the Company’s title insurance and loan closing services.

Certain expenses not directly attributable to a specific reportable segment are allocated to segments based on pre-determined methods that reflect utilization. Also within IBERIABANK are certain reconciling items that translate reportable segment results into consolidated results. The following tables present certain information regarding our operations by reportable segment, including a reconciliation of segment results to reported consolidated results for the periods presented. Reconciling items between segment results and reported results include:

• Elimination of interest income and interest expense representing interest earned by IBERIABANK on interest-bearing checking accounts held by related companies, as well as the elimination of the related deposit balances at the IBERIABANK segment;

• Elimination of investment in subsidiary balances on certain operating segments included in total and average segment assets; and

• Elimination of intercompany due to and due from balances on certain operating segments that are included in total and average segment assets.

	Three Months Ended June 30, 2017
(Dollars in thousands)	IBERIABANK			IMC			LTC		Consolidated
Interest and dividend income	$	202,694		$	1,881		$	—	$	204,575
Interest expense	20,932			—			—		20,932
Net interest income	181,762			1,881			—		183,643
Provision for/(reversal of) loan losses	12,134			(84		)	—		12,050
Mortgage income	—			19,730			—		19,730
Service charges on deposit accounts	11,410			—			—		11,410
Title revenue	—			—			6,190		6,190
Other non-interest income	18,647			(11		)	—		18,636
Allocated expenses	(3,322		)	2,490			832		—
Non-interest expense	120,698			22,417			4,393		147,508
Income/(loss) before income tax expense	82,309			(3,223		)	965		80,051
Income tax expense/(benefit)	28,745			(1,094		)	382		28,033
Net income/(loss)	$	53,564		$	(2,129	)	$	583	$	52,018
Total loans and loans held for sale, net of unearned income	$	15,504,171		$	192,804		$	—	$	15,696,975
Total assets	21,549,557			215,862			25,308		21,790,727
Total deposits	16,852,620			496			—		16,853,116
Average assets	21,593,026			226,326			24,185		21,843,537

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	Three Months Ended June 30, 2016
(Dollars in thousands)	IBERIABANK			IMC		LTC		Consolidated
Interest and dividend income	$	176,564		$	2,130	$	—	$	178,694
Interest expense	14,782			1,159		—		15,941
Net interest income	161,782			971		—		162,753
Provision for loan losses	11,866			—		—		11,866
Mortgage income	7			25,984		—		25,991
Service charges on deposit accounts	10,940			—		—		10,940
Title revenue	—			—		6,135		6,135
Other non-interest income	21,843			8		—		21,851
Allocated expenses	(3,885		)	2,947		938		—
Non-interest expense	120,268			14,820		4,416		139,504
Income/(loss) before income tax expense	66,323			9,196		781		76,300
Income tax expense/(benefit)	21,558			3,625		307		25,490
Net income/(loss)	$	44,765		$	5,571	$	474	$	50,810
Total loans and loans held for sale, net of unearned income	$	14,702,843		$	249,371	$	—	$	14,952,214
Total assets	19,807,507			326,397		26,951		20,160,855
Total deposits	15,855,908			6,119		—		15,862,027
Average assets	19,668,456			308,647		26,814		20,003,917

	Six Months Ended June 30, 2017
(Dollars in thousands)	IBERIABANK			IMC			LTC			Consolidated
Interest and dividend income	$	393,517		$	3,590		$	1		$	397,108
Interest expense	40,647			—			—			40,647
Net interest income	352,870			3,590			1			356,461
Provision for/(reversal of) loan losses	18,292			(88		)	—			18,204
Mortgage income	—			33,845			—			33,845
Service charges on deposit accounts	22,563			—			—			22,563
Title revenue	—			—			10,931			10,931
Other non-interest income	36,000			(21		)	(6		)	35,973
Allocated expenses	(5,496		)	4,146			1,350			—
Non-interest expense	242,349			37,584			8,593			288,526
Income/(loss) before income tax expense	156,288			(4,228		)	983			153,043
Income tax expense/(benefit)	51,574			(1,416		)	394			50,552
Net income/(loss)	$	104,714		$	(2,812	)	$	589		$	102,491
Total loans and loans held for sale, net of unearned income	$	15,504,171		$	192,804		$	—		$	15,696,975
Total assets	21,549,557			215,862			25,308			21,790,727
Total deposits	16,852,620			496			—			16,853,116
Average assets	21,572,094			256,343			24,032			21,852,469

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	Six Months Ended June 30, 2016
(Dollars in thousands)	IBERIABANK			IMC		LTC		Consolidated
Interest and dividend income	$	351,888		$	3,741	$	1	$	355,630
Interest expense	29,436			2,038		—		31,474
Net interest income	322,452			1,703		1		324,156
Provision for loan losses	26,771			—		—		26,771
Mortgage income	6			45,925		—		45,931
Service charges on deposit accounts	21,891			—		—		21,891
Title revenue	—			—		10,880		10,880
Other non-interest income	42,053			7		—		42,060
Allocated expenses	(6,554		)	4,997		1,557		—
Non-interest expense	240,295			28,018		8,643		276,956
Income/(loss) before income tax expense	125,890			14,620		681		141,191
Income tax expense/(benefit)	41,559			5,778		275		47,612
Net income/(loss)	$	84,331		$	8,842	$	406	$	93,579
Total loans and loans held for sale, net of unearned income	$	14,702,843		$	249,371	$	—	$	14,952,214
Total assets	19,807,507			326,397		26,951		20,160,855
Total deposits	15,855,908			6,119		—		15,862,027
Average assets	19,525,087			280,464		27,063		19,832,614

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NOTE 14 – COMMITMENTS AND CONTINGENCIES

Off-balance sheet commitments

In the normal course of business, to meet the financing needs of its customers, the Company is a party to credit related financial instruments, with risk not reflected in the consolidated financial statements. These financial instruments include commitments to extend credit, standby letters of credit, and commercial letters of credit. Such commitments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the consolidated balance sheets. The credit policies used for these commitments are consistent with those used for on-balance sheet instruments. The Company’s exposure to credit loss in the event of non-performance by its customers under such commitments or letters of credit represents the contractual amount of the financial instruments as indicated in the table below. At June 30, 2017 and December 31, 2016, the fair value of guarantees under commercial and standby letters of credit was $1.8 million and $1.6 million, respectively. This fair value will decrease as the existing commercial and standby letters of credit approach their expiration dates.

At June 30, 2017 and December 31, 2016, respectively, the Company had the following financial instruments outstanding and related reserves, whose contract amounts represent credit risk:

(Dollars in thousands)	June 30, 2017		December 31, 2016
Commitments to grant loans	$	518,934	$	355,558
Unfunded commitments under lines of credit	5,051,175		4,899,930
Commercial and standby letters of credit	183,031		163,560
Reserve for unfunded lending commitments	10,462		11,241

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to be drawn upon, the total commitment amounts generally represent future cash requirements. The Company evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral, if any, is based on management’s credit evaluation of the customer.

Unfunded commitments under commercial lines of credit, revolving credit lines, and overdraft protection agreements are commitments for possible future extensions of credit to existing customers. Many of these types of commitments do not contain a specified maturity date and may not be drawn upon to the total extent to which the Company is committed. See Note 5 for additional information related to the Company’s unfunded lending commitments.

Commercial and standby letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. These guarantees are primarily issued to support public and private borrowing arrangements, including commercial paper issuance, bond financing, and similar transactions. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. When necessary they are collateralized, generally in the form of marketable securities and cash equivalents.

Legal proceedings

The nature of the business of the Company’s banking and other subsidiaries ordinarily results in a certain amount of claims, litigation, investigations, and legal and administrative cases and proceedings, which are considered incidental to the normal conduct of business. Some of these claims are against entities or assets of which the Company is a successor or acquired in business acquisitions. The Company has asserted defenses to these litigations and, with respect to such legal proceedings, intends to continue to defend itself vigorously, litigating or settling cases according to management’s judgment as to what is in the best interest of the Company and its shareholders.

In July of 2016, the Company received a subpoena from the Office of Inspector General of the U.S. Department of Housing and Urban Development (“HUD”) requesting information on certain previously originated loans insured by the Federal Housing Administration ("FHA") as well as other documents regarding the Company's FHA-related policies and practices. After the Company complied with the subpoena, attorneys from the Department of Justice (“DOJ”) informed the Company in late March of 2017 that a civil qui tam suit had been filed against the Company in federal court involving the subject matter of the HUD subpoena (collectively, “the mortgage lawsuit”).  The complaint was under partial seal by the district court judge, but the judge has now removed the seal order and thus the lawsuit is public. However, the Company has not been formally served with process. The Company began preliminary discussions with representatives from the DOJ regarding the mortgage lawsuit in mid-April of 2017 and began early-stage settlement discussions in late May that have continued through the date of this filing.  Based on the developments late in the second quarter of 2017, the Company concluded that a loss is reasonably possible, the range of which is between $6 million and $17 million.  As of the date of this filing, the Company is unable to conclude on an

51

amount of probable loss within this range, and accordingly, IBERIABANK recorded a $6 million accrual during the second quarter. IBERIABANK has insurance policies and will pursue coverage under those policies.

The Company assesses its liabilities and contingencies in connection with outstanding legal proceedings utilizing the latest information available. Where it is probable that the Company will incur a loss and the amount of the loss can be reasonably estimated, the Company records a liability in its consolidated financial statements. These legal reserves may be increased or decreased to reflect any relevant developments on a quarterly basis. Where a loss is not probable or the amount of loss is not estimable, the Company does not accrue legal reserves. While the outcome of legal proceedings is inherently uncertain, based on information currently available and available insurance coverage, the Company’s management believes that it has established appropriate legal reserves. Any liabilities arising from pending legal proceedings are not expected to have a material adverse effect on the Company’s consolidated financial position, consolidated results of operations, or consolidated cash flows other than the HUD matter disclosed above. However, it is possible that the ultimate resolution of these matters, if unfavorable, may be material to the Company’s consolidated financial position, consolidated results of operations, or consolidated cash flows.

As of the date of this filing, the Company believes the amount of losses associated with legal proceedings that it is reasonably possible to incur above amounts already accrued is not material, other than the HUD matter discussed above.

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NOTE 15 – RELATED PARTY TRANSACTIONS

In the ordinary course of business, the Company may execute transactions with various related parties. These transactions are consummated at terms equivalent to the prevailing market rates and terms at the time. Examples of such transactions may include lending or deposit arrangements, transfers of financial assets, services for administrative support, and other miscellaneous items.

The Company has granted loans to executive officers and directors and their affiliates. These loans, including the related principal additions, principal payments, and unfunded commitments are not material to the consolidated financial statements at June 30, 2017 and December 31, 2016. None of the related party loans were classified as non-accrual, past due, troubled debt restructurings, or potential problem loans at June 30, 2017 and December 31, 2016, with the exception of the loan discussed below.

IBERIABANK and several other financial institutions previously extended credit (the “Credit Facility”) under a multi-bank syndicated credit facility to Stone Energy Corporation (the “Borrower"). At the time of origination and subsequent restructure, one of the Company’s directors, David H. Welch, was the Chairman, President and Chief Executive Officer of the Borrower. IBERIABANK held approximately 6 percent of the total commitments from twelve banks under the Credit Facility. On December 14, 2016, the Borrower filed for Chapter 11 Bankruptcy with the U.S. Bankruptcy Court in the Southern District of Texas. On February 28, 2017, the Borrower’s confirmed Amended Joint Prepackaged Plan of Reorganization became effective, and the Borrower satisfied the entire amount due and owing to the financial institutions, which was the principal amount outstanding under the Credit Facility at the time of the bankruptcy filing. On that date, the Borrower emerged from the Chapter 11 bankruptcy and entered into a new Exit Facility with the lenders, including IBERIABANK. The new Exit Facility, which replaced the Credit Facility, provides for a $200 million reserve-based credit facility with a maturity date of February 21, 2021. Interest on advances under the Exit Facility is calculated using the London Interbank Offering Rate ("LIBOR") or the base rate, at the election of the Borrower, plus, in each case an applicable margin. IBERIABANK holds a 5.9 percent pro-rata share, or $11.8 million, of the $200 million total committed under the new Exit Facility. At June 30, 2017, there were no draws or outstanding amounts under the Exit Facility. Effective April 28, 2017, David H. Welch retired as Chairman, President and Chief Executive Officer of the Borrower.

Deposits from related parties held by the Company were not material at June 30, 2017 and December 31, 2016.

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NOTE 16 – SUBSEQUENT EVENTS

On July 31, 2017, the Company completed its acquisition of Sabadell United Bank, N.A. ("Sabadell United") from Banco de Sabadell, S.A. ("Banco Sabadell"). Under the terms of the Stock Purchase Agreement, Banco Sabadell received $796 million in cash and approximately 2.6 million shares of the Company's common stock for total consideration of approximately $1.0 billion based on the Company's closing stock price on July 31, 2017. The cash consideration was financed through two public common stock offerings completed on December 7, 2016, and March 7, 2017. In connection with the closing of the acquisition, the Company entered into a Registration Rights Agreement, dated as of July 31, 2017, pursuant to which the Company has agreed to provide Banco Sabadell with certain customary registration rights with respect to the shares of IBKC common stock issued as consideration for the acquisition. The Registration Rights Agreement contains customary terms and conditions, including certain customary indemnification obligations. The registration obligations will terminate upon the earliest of six months after the completion of the acquisition, the sale of all registrable shares pursuant to an effective registration statement or the sale or transfer of all registrable shares to any person who is not an affiliate of Banco Sabadell.

At June 30, 2017, Sabadell United had total assets of $5.7 billion, gross loans of $4.1 billion, and total deposits of $4.4 billion. Upon completion of the acquisition, the Company had approximately $28 billion in total assets. The branch and operating systems conversions associated with the acquisition are expected to be completed in October 2017. Due to the timing of the Sabadell United acquisition, the Company is continuing its evaluation of the fair value adjustments necessary to adjust the acquired assets and assumed liabilities to estimated fair value, as well as the related intangible assets associated with the transaction. The acquired assets and assumed liabilities, fair value adjustments, and required supplemental pro forma information will be disclosed in subsequent filings.

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Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis is intended to assist readers in understanding the consolidated financial condition and results of operations of IBERIABANK Corporation and its wholly owned subsidiaries (collectively, the “Company”) as of and for the period ended June 30, 2017, and updates the Annual Report on Form 10-K for the year ended December 31, 2016. This discussion should be read in conjunction with the unaudited consolidated financial statements, accompanying footnotes and supplemental financial data included herein. The emphasis of this discussion will be amounts as of June 30, 2017 compared to December 31, 2016 for the balance sheets and the three and six months ended June 30, 2017 compared to June 30, 2016 for the statements of comprehensive income. Certain amounts in prior year presentations have been reclassified to conform to the current year presentation.

When we refer to the “Company,” “we,” “our” or “us” in this Report, we mean IBERIABANK Corporation and subsidiaries (consolidated). When we refer to the “Parent,” we mean IBERIABANK Corporation. See the Glossary of Acronyms at the end of this Report for terms used throughout this Report.

To the extent that statements in this Report relate to future plans, objectives, financial results or performance of the Company, these statements are deemed to be "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements, which are based on management’s current information, estimates and assumptions and the current economic environment, are generally identified by use of the words “may,” “plan,” “believe,” “expect,” “intend,” “will,” “should,” “continue,” “potential,” “anticipate,” “estimate,” “predict,” “project” or similar expressions, or the negative of these terms or other comparable terminology. The Company’s actual strategies and results in future periods may differ materially from those currently expected due to various risks and uncertainties.

Forward-looking statements represent management’s beliefs, based upon information available at the time the statements are made, with regard to the matters addressed; they are not guarantees of future performance.  Forward-looking statements are subject to numerous assumptions, risks and uncertainties that change over time and could cause actual results or financial condition to differ materially from those expressed in or implied by such statements.  Factors that could cause or contribute to such differences include, but are not limited to: the level of market volatility, our ability to execute our growth strategy, including the availability of future bank acquisition opportunities, our ability to execute on our revenue and efficiency improvement initiatives, unanticipated losses related to the completion and integration of mergers and acquisitions, refinements to purchase accounting adjustments for acquired businesses and assets and assumed liabilities in these transactions, adjustments of fair values of acquired assets and assumed liabilities and of deferred taxes in acquisitions, actual results deviating from the Company’s current estimates and assumptions of timing and amounts of cash flows, credit risk of our customers, effects of low energy and commodity prices, effects of residential real estate prices and levels of home sales, our ability to satisfy capital and liquidity standards such as those imposed by the Dodd-Frank Wall Street Reform and Consumer Protection Act and those adopted by the Basel Committee on Banking Supervision and federal banking regulators, sufficiency of our allowance for loan losses, changes in interest rates, access to funding sources, reliance on the services of executive management, competition for loans, deposits and investment dollars, competition from competitors with greater financial resources than the Company, reputational risk and social factors, changes in government regulations and legislation, increases in FDIC insurance assessments, geographic concentration of our markets, economic or business conditions in our markets or nationally, rapid changes in the financial services industry, significant litigation, cyber-security risks including dependence on our operational, technological, and organizational systems and infrastructure and those of third party providers of those services, hurricanes and other adverse weather events, and valuation of intangible assets. Factors that may cause actual results to differ materially from these forward-looking statements are discussed in the Company’s Annual Report on Form 10-K and other filings with the Securities and Exchange Commission (the “SEC”), available at the SEC’s website, www.sec.gov, and the Company’s website, www.iberiabank.com, under the heading “Investor Relations” and then "Financial Information." All information in this discussion is as of the date of this Report. Except to the extent required by applicable law or regulation, the Company undertakes no obligation to revise or update publicly any forward-looking statement for any reason.

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EXECUTIVE SUMMARY

Corporate Profile

The Company is a $21.8 billion bank holding company primarily concentrated in commercial banking in the southeastern United States. The Company has been fulfilling the commercial and retail banking needs of our customers for 130 years through our subsidiary, IBERIABANK, with products and services currently offered in eight states. The Company operates mortgage production offices in 10 states through IMC, which was merged into IBERIABANK effective January 1, 2017, and offers a full line of title insurance and closing services throughout Arkansas and Louisiana through LTC and its subsidiaries. ICP provides equity research, institutional sales and trading, and corporate finance services throughout the energy industry. 1887 Leasing, LLC owns an aircraft used by management of the Company. IAM provides wealth management and trust services for commercial and private banking clients. 840 Denning, LLC invests in a commercial rental property. CDE is engaged in the purchase of tax credits.

Highlights of the Company's performance for the second quarter and first six months of 2017 are discussed below. Refer to subsequent sections of Management's Discussion and Analysis for further detail regarding the fluctuations noted below.

Summary of 2Q 2017 Compared to 2Q 2016 Results of Operations

• Net income available to common shareholders for the three months ended June 30, 2017 totaled $51.1 million, or $0.99 per diluted common share, compared to $50.0 million, or $1.21, for the same period of 2016. The decrease in diluted EPS was driven by the issuance of 3.6 million shares of common stock in December 2016 and the issuance of 6.1 million shares of common stock in March 2017.

• Net interest income was $183.6 million for the second quarter of 2017, a $20.9 million, or 13%, increase compared to the same quarter of 2016. Net interest margin on a tax-equivalent basis increased six basis points to 3.71% from 3.65%.

• Non-interest income decreased $8.9 million, or 14%, to $56.0 million during the quarter ended June 30, 2017, driven primarily by lower mortgage income.

• Non-interest expense for the second quarter of 2017 increased $8.0 million, or 6%, to $147.5 million compared to the same period of 2016. The increase was primarily due to a $6 million legal accrual.

• The Company recorded a provision for loan losses of $12.1 million during the quarter ended June 30, 2017, $0.2 million higher than the provision recorded during the quarter ended June 30, 2016.

• The Company recorded income tax expense of $28.0 million and $25.5 million, respectively, for the three months ended June 30, 2017 and 2016, which resulted in an effective income tax rate of 35.0% and 33.4%, respectively.

Summary of Year-to-Date 2017 Compared to 2016 Results of Operations

• Net income available to common shareholders for the six months ended June 30, 2017 totaled $97.9 million, or $1.99 per diluted common share, compared to $90.1 million, or $2.18, for the same period of 2016. The decrease in diluted EPS was driven by the issuance of 3.6 million shares of common stock in December 2016 and the issuance of 6.1 million shares of common stock in March 2017.

• Net interest income was $356.5 million for the first half of 2017, a $32.3 million, or 10%, increase compared to the same period of 2016. Net interest margin on a tax-equivalent basis decreased five basis points to 3.62% from 3.67% when comparing the periods.

• Non-interest income decreased $17.5 million, or 14%, to $103.3 million for the six months ended June 30, 2017, driven primarily by lower mortgage income.

• Non-interest expense for the first six months of 2017 increased $11.6 million, or 4%, to $288.5 million compared to the same period of 2016.

• The Company recorded a provision for loan losses of $18.2 million during the first half of 2017, a decrease of $8.6 million, or 32%, when compared to the same period of 2016.

• The Company recorded income tax expense of $50.6 million and $47.6 million, respectively, for the six months ended June 30, 2017 and 2016, which resulted in an effective income tax rate of 33.0% and 33.7%, respectively.

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Summary of Financial Condition at June 30, 2017 Compared to December 31, 2016

• Total assets at June 30, 2017 were $21.8 billion, up $131.5 million, or 1%, from December 31, 2016. A $563.2 million increase in available for sale securities and a $491.0 million increase in loans drove the increase in total assets, which was partially offset by an $892.8 million decrease in cash and cash equivalents.

• Total loans net of unearned income at June 30, 2017 were $15.6 billion, an increase of $491.0 million, or 3%, from December 31, 2016. The Company grew legacy loans by $798.5 million, or 6%, during the first six months of 2017, offset by a $307.4 million, or 13%, decrease in acquired loans.

• Asset quality improved as criticized legacy loans to total legacy loans decreased to 3.0% at June 30, 2017, from 3.8% at December 31, 2016. In addition, annualized legacy net charge-offs to average legacy loans decreased to 0.25% for the six months ended June 30, 2017 from 0.27% for the six months ended June 30, 2016.

• Total deposits decreased $555.2 million, or 3%, to $16.9 billion at June 30, 2017, while non-interest-bearing deposits increased $91.3 million, or 2%, and comprised 30% of total deposits at June 30, 2017, compared to 28% at December 31, 2016.

• Shareholders’ equity increased $563.5 million, or 19%, from year-end 2016 primarily due to the Company's March 2017 issuance of 6.1 million shares of common stock (net proceeds of $485.2 million) in anticipation of the acquisition of Sabadell United Bank, N.A., which closed on July 31, 2017.

2017 Outlook

The Company's long-term financial goals are as follows:

• Return on Average Tangible Common Equity of 13% to 17% (core basis);

• Core Tangible Efficiency Ratio of less than 60%; and

• Legacy Asset Quality in the top 10% of our peers.

Management's expectations for the Company in 2017 include the following key assumptions:

• High single-digit to low double-digit net loan growth in the second half of 2017 (excluding Sabadell United Bank acquisition);

• Headwinds to loan growth from risk-off trade continue to decline materially;

• Mid-single-digit deposit growth in the second half of 2017 (excluding Sabadell United Bank acquisition);

• An improvement in the Company's net interest margin on a stand-alone basis to 3.70% for the remainder of 2017 assuming no additional loan recoveries and no additional Fed Fund rate increases. Consolidated margin will decline by approximately 5% from the impact of the Sabadell acquisition;

• An improvement in overall credit metrics throughout 2017;

• A decline in the provision for loan losses from 2016 levels in conjunction with improving credit in the energy portfolio;

• A $10 million decline in non-interest income for the full-year of 2017 as compared to the full-year of 2016. The overall decline in non-interest income will depend on the volumes of mortgage loan originations and related gains within mortgage income, as well as customer interest rate swap-related income;

• Continued cost containment with a core tangible efficiency ratio below 60%;

• An effective tax rate in the second half of 2017 of approximately 33.5% assuming no change in the statutory rate; and

• Based on asset sensitivity modeling for the Company, each 25 basis point increase in the Fed Funds rate is estimated to increase quarterly EPS by five cents.

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On February 28, 2017, the Company announced the signing of a definitive agreement under which the Company will acquire Sabadell United Bank, N.A., in a stock and cash transaction valued at $1.025 billion. The Company received regulatory approvals to complete the acquisition on May 31, 2017 and closed the transaction on July 31, 2017. The branch and operating systems conversions associated with the acquisition are expected to be completed in October 2017.

FINANCIAL OVERVIEW

The following table sets forth selected financial ratios and other relevant data used by management to analyze the Company's performance.

TABLE 1—SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA

	As of and For the Three Months Ended June 30
	2017		2016
Key Ratios (1)
Return on average assets	0.96	%	1.02	%
Core return on average assets (Non-GAAP) (2)	1.06		1.00
Return on average common equity	6.08		8.05
Core return on average tangible common equity (Non-GAAP) (2) (3)	8.86		11.64
Equity to assets at end of period	16.08		13.08
Earning assets to interest-bearing liabilities at end of period	153.37		143.39
Interest rate spread (4)	3.49		3.50
Net interest margin (TE) (4) (5)	3.71		3.65
Non-interest expense to average assets (annualized)	2.71		2.80
Efficiency ratio (6)	61.6		61.3
Core tangible efficiency ratio (TE) (Non-GAAP) (2) (3) (5) (6)	57.6		60.0
Common stock dividend payout ratio	36.2		28.0
Asset Quality Data (Legacy)
Non-performing assets to total assets at end of period (7)	0.87	%	0.63	%
Allowance for credit losses to non-performing loans at end of period (7)	71.84		126.44
Allowance for credit losses to total loans at end of period	0.88		1.01
Consolidated Capital Ratios
Tier 1 leverage capital ratio	13.19	%	9.70	%
Common Equity Tier 1 (CET1)	14.52		10.09
Tier 1 risk-based capital ratio	15.24		10.85
Total risk-based capital ratio	16.74		12.47

⁽¹⁾  With the exception of end-of-period ratios, all ratios are based on average daily balances during the respective periods.

⁽²⁾  See Table 18 for GAAP to Non-GAAP reconciliations.

⁽³⁾  Tangible calculations eliminate the effect of goodwill and acquisition-related intangible assets and the corresponding amortization expense on a tax-effected basis where applicable.

⁽⁴⁾  Interest rate spread represents the difference between the weighted average yield on earning assets and the weighted average cost of interest-bearing liabilities. Net interest margin represents net interest income as a percentage of average net earning assets.

⁽⁵⁾  Fully taxable equivalent ("TE") calculations include the tax benefit associated with related income sources that are tax-exempt using a rate of 35%, which approximates the marginal tax rate.

⁽⁶⁾  The efficiency ratio represents non-interest expense as a percentage of total revenues. Total revenues are the sum of net interest income and non-interest income.

⁽⁷⁾  Non-performing loans consist of non-accruing loans and loans 90 days or more past due. Non-performing assets consist of non-performing loans and repossessed assets.

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ANALYSIS OF RESULTS OF OPERATIONS

Net Interest Income/Net Interest margin

Net interest income is the difference between interest realized on earning assets and interest paid on interest-bearing liabilities and is also the largest driver of earnings. As such, it is subject to constant scrutiny by management. The rate of return and relative risk associated with earning assets are weighed to determine the appropriateness and mix of earning assets. Additionally, the need for lower cost funding sources is weighed against relationships with clients and future growth opportunities. The Company’s net interest spread, which is the difference between the yields earned on average earning assets and the rates paid on average interest-bearing liabilities, was 3.49% and 3.50%, during the three months ended June 30, 2017 and 2016, respectively, and 3.41% and 3.51% for the six months ended June 30, 2017 and 2016, respectively. The Company’s net interest margin on a taxable equivalent (“TE”) basis, which is net interest income (TE) as a percentage of average earning assets, was 3.71% and 3.65%, respectively, for the three months ended June 30, 2017 and 2016, and 3.62% and 3.67% respectively, for the six months ended June 30, 2017 and 2016.

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The following table sets forth information regarding (i) the total dollar amount of interest income from earning assets and the resultant average yields; (ii) the total dollar amount of interest expense on interest-bearing liabilities and the resultant average rates; (iii) net interest income; (iv) net interest spread; and (v) net interest margin. Information is based on average daily balances during the indicated periods. Investment security market value adjustments and trade-date accounting adjustments are not considered to be earning assets and, as such, the net effect of these adjustments is included in non-earning assets.

TABLE 2—QUARTERLY AVERAGE BALANCES, NET INTEREST INCOME AND INTEREST YIELDS / RATES

	Three Months Ended June 30
	2017							2016
(Dollars in thousands)	Average Balance			Interest Income/Expense (2)		Yield/ Rate (TE)		Average Balance			Interest Income/Expense (2)			Yield/ Rate (TE)
Earning Assets:
Loans(1):
Commercial loans	$	11,136,842		$	127,301	4.64	%	$	10,458,822		$	114,588		4.46	%
Residential mortgage loans	1,319,207			14,345		4.35	%	1,221,254			13,781			4.51	%
Consumer and other loans	2,827,958			37,619		5.34	%	2,890,869			37,200			5.18	%
Total loans	15,284,007			179,265		4.74	%	14,570,945			165,569			4.61	%
Loans held for sale	145,274			1,249		3.44	%	211,468			1,850			3.50	%
Investment securities	4,029,491			22,307		2.32	%	2,856,805			14,663			2.17	%
FDIC loss share receivable	—			—		—	%	32,189			(4,163		)	(52.01	)%
Other earning assets	650,083			1,754		1.08	%	483,597			775			0.64	%
Total earning assets	20,108,855			204,575		4.13	%	18,155,004			178,694			4.01	%
Allowance for loan losses	(146,448		)					(149,037		)
Non-earning assets	1,881,130							1,997,950
Total assets	$	21,843,537						$	20,003,917
Interest-bearing liabilities
Deposits:
NOW accounts	$	3,124,243		$	3,507	0.45	%	$	2,911,510		$	2,080		0.29	%
Savings and money market accounts	7,079,773			9,030		0.51	%	6,486,242			5,527			0.34	%
Certificates of deposit	1,964,234			4,576		0.93	%	2,117,711			4,309			0.82	%
Total interest-bearing deposits	12,168,250			17,113		0.56	%	11,515,463			11,916			0.42	%
Short-term borrowings	352,410			226		0.26	%	624,302			662			0.43	%
Long-term debt	628,632			3,593		2.29	%	593,305			3,363			2.28	%
Total interest-bearing liabilities	13,149,292			20,932		0.64	%	12,733,070			15,941			0.51	%
Non-interest-bearing demand deposits	4,992,598							4,463,928
Non-interest-bearing liabilities	200,673							203,050
Total liabilities	18,342,563							17,400,048
Shareholders’ equity	3,500,974							2,603,869
Total liabilities and shareholders’ equity	$	21,843,537						$	20,003,917
Net earning assets	$	6,959,563						$	5,421,934
Net interest income/ Net interest spread				$	183,643	3.49	%				$	162,753		3.50	%
Net interest income (TE) / Net interest margin (TE) (3)				$	186,135	3.71	%				$	165,043		3.65	%

⁽¹⁾  Total loans include non-accrual loans for all periods presented.

⁽²⁾  Interest income includes loan fees of $0.7 million for the three-month periods ended June 30, 2017 and 2016.

⁽³⁾  Taxable equivalent yields are calculated using a rate of 35%, which approximates the marginal tax rate.

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TABLE 3—YEAR-TO-DATE AVERAGE BALANCES, NET INTEREST INCOME AND INTEREST YIELDS / RATES

	Six Months Ended June 30
	2017							2016
(Dollars in thousands)	Average Balance			Interest Income/ Expense (2)		Yield/ Rate (TE)		Average Balance			Interest Income/ Expense (2)			Yield/ Rate (TE)
Earning Assets:
Loans(1):
Commercial loans	$	11,027,883		$	246,906	4.57	%	$	10,354,688		$	228,005		4.48	%
Residential mortgage loans	1,296,266			27,193		4.20	%	1,211,973			27,210			4.49	%
Consumer and other loans	2,841,390			74,143		5.26	%	2,896,016			74,345			5.16	%
Total loans	15,165,539			348,242		4.67	%	14,462,677			329,560			4.62	%
Loans held for sale	160,309			2,219		2.77	%	186,170			3,251			3.49	%
Investment securities	3,886,106			42,234		2.28	%	2,861,890			29,875			2.21	%
FDIC loss share receivable	—			—		—	%	34,775			(8,549		)	(49.44	)%
Other earning assets	885,278			4,413		1.01	%	468,667			1,493			0.64	%
Total earning assets	20,097,232			397,108		4.03	%	18,014,179			355,630			4.02	%
Allowance for loan losses	(145,890		)					(145,215		)
Non-earning assets	1,901,127							1,963,650
Total assets	$	21,852,469						$	19,832,614
Interest-bearing liabilities
Deposits:
NOW accounts	$	3,181,347		$	6,597	0.42	%	$	2,885,726		$	4,021		0.28	%
Savings and money market accounts	7,145,295			17,359		0.49	%	6,542,540			11,166			0.34	%
Certificates of deposit	2,023,661			9,213		0.92	%	2,107,871			8,663			0.83	%
Total interest-bearing deposits	12,350,303			33,169		0.54	%	11,536,137			23,850			0.42	%
Short-term borrowings	381,407			504		0.27	%	559,486			1,147			0.41	%
Long-term debt	623,591			6,974		2.26	%	558,404			6,477			2.33	%
Total interest-bearing liabilities	13,355,301			40,647		0.62	%	12,654,027			31,474			0.51	%
Non-interest-bearing demand deposits	4,984,815							4,426,093
Non-interest-bearing liabilities	211,274							185,430
Total liabilities	18,551,390							17,265,550
Shareholders’ equity	3,301,079							2,567,064
Total liabilities and shareholders’ equity	$	21,852,469						$	19,832,614
Net earning assets	$	6,741,931						$	5,360,152
Net interest income/ Net interest spread				$	356,461	3.41	%				$	324,156		3.51	%
Net interest income (TE) / Net interest margin (TE)(3)				$	361,408	3.62	%				$	328,735		3.67	%

⁽¹⁾  Total loans include non-accrual loans for all periods presented.

⁽²⁾  Interest income includes loan fees of $1.4 million for the six-month periods ended June 30, 2017 and 2016.

⁽³⁾  Taxable equivalent yields are calculated using a rate of 35%, which approximates the marginal tax rate.

Net interest income increased $20.9 million, or 13%, to $183.6 million in the second quarter of 2017 when compared to the same quarter of 2016. The increase in net interest income for the second quarter of 2017 is the result of a $2.0 billion, or 11%, increase in average earning assets as well as a 12 basis point increase in yield. This increase is partially offset by a $416.2 million, or 3%, increase in average interest-bearing liabilities compared to the second quarter of 2016, and a 13 basis point increase in funding costs to 0.64% when compared to the second quarter of 2016. The drivers of the increase in the earning asset yield included resets on variable loan production in addition to new origination rates exceeding portfolio rate levels, as well as the elimination of the negative yield related to the amortization of FDIC loss share receivables. The primary driver of the increase in the funding costs was due to increases in rates on indexed deposits as well as higher rates on promotional

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deposit offerings. These yield/rate increases were impacted by the Federal Open Market Committee's interest rate increases of 25 basis points in both December of 2016 and March of 2017 (the subsequent FOMC rate increase of 25 basis points in June of 2017 has not yet materially impacted the Company's results). Net interest margin on a tax-equivalent basis increased six basis points to 3.71% from 3.65% when comparing the periods.

Net interest income was $356.5 million for the first half of 2017, a $32.3 million, or 10%, increase compared to the same period of 2016. The increase in net interest income for the first six months of 2017 is the result of a $2.1 billion, or 12%, increase in average earning assets and the elimination of the negative yield related to the amortization of FDIC loss share receivable in prior periods. This increase is partially offset by a $0.7 billion, or 6%, increase in average interest-bearing liabilities compared to the first half of 2016. The earning asset yield increased one basis point to 4.03% when compared to the first six months of 2016, while funding costs increased 11 basis points to 0.62% when compared to the first six months of 2016. The primary driver of the increase in the earning asset yield was due to resets on variable loan production in addition to new origination rates exceeding portfolio rate levels. The primary driver of the increase in the funding costs was due to increases in rates on indexed deposits as well as higher rates on promotional deposit offerings. As noted above, the FOMC increased rates by 25 basis points in both December of 2016 and March of 2017. Net interest margin on a tax-equivalent basis decreased five basis points to 3.62%, from 3.67%, when comparing the periods.

Average loans made up 76% and 80% of average earning assets in the second quarters and six-month periods of 2017 and 2016, respectively. Average loans increased $713.1 million, or 5%, when comparing the second quarter of 2017 to 2016, and $702.9 million, or 5%, when comparing the six months of 2017 to the same period of 2016. The increase in loans was a result of the growth in the commercial real estate legacy loan portfolio. Investment securities made up 20% and 16% of average earning assets for the second quarters of 2017 and 2016, respectively, and 19% and 16% for the respective six-month periods. The increase in investment securities is due to the deployment of excess liquidity into the investment securities portfolio during the second half of 2016 and a significant portion during the first half of 2017.

Average interest-bearing deposits made up 92% and 90% of average interest-bearing liabilities in the second quarter of 2017 and 2016, respectively, and 92% and 92%, for the respective six-month periods. Average short-term borrowings made up 3% and 5% of average interest-bearing liabilities in the second quarter of 2017 and 2016, respectively, and 3% for the first six months of 2017, compared to 4% for the same period of 2016. Average long-term debt made up 5% and 5% of average interest-bearing liabilities in the second quarter of 2017 and 2016, respectively, and 5% and 4% for the respective six-month periods.

The following table sets forth information regarding average loan balances and average yields, segregated into the legacy and acquired portfolios, for the periods indicated.

TABLE 4—AVERAGE LOAN BALANCES AND YIELDS

	Three Months Ended June 30								Six Months Ended June 30
	2017				2016				2017				2016
(Dollars in thousands)	Average Balance		Average Yield (TE)		Average Balance		Average Yield (TE)		Average Balance		Average Yield (TE)		Average Balance		Average Yield (TE)
Legacy loans	$	13,149,705	4.31	%	$	11,737,394	4.09	%	$	12,955,950	4.25	%	$	11,528,043	4.11	%
Acquired loans	2,134,302		7.41		2,833,551		6.73		2,209,589		7.10		2,934,634		6.64
Total loans	15,284,007		4.74		14,570,945		4.61		15,165,539		4.67		14,462,677		4.62
FDIC loss share receivables	—		—		32,189		(52.01	)	—		—		34,775		(49.44	)
Total loans and FDIC loss share receivables	$	15,284,007	4.74	%	$	14,603,134	4.48	%	$	15,165,539	4.67	%	$	14,497,452	4.49	%

Provision for Loan Losses

Management of the Company formally assesses the ACL quarterly and will make provisions for loan losses and unfunded lending commitments as necessary in order to maintain the appropriateness of the ACL at the balance sheet date. The provision for loan losses exceeded net charge-offs by $1.2 million and $10.8 million in the first six months of 2017 and 2016, respectively.

On a consolidated basis, the Company recorded a provision for loan losses of $18.2 million for the six months ended June 30, 2017, an $8.6 million, or 32%, decrease from the provision recorded for the same period of 2016. The Company’s total provision for credit losses recorded during the six months ended June 30, 2017 was $17.4 million, which is $9.0 million, or 34%, below the total provision recorded in the first six months of 2016. The decrease in the provision was primarily due to a $13.4 million decrease in the provision for energy-related loans from $16.8 million in the first two quarters of 2016 to $3.4

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million for the same period of 2017, offset by a $7.2 million increase in the non-energy commercial loan provision during the first six months of 2017 compared to same period for 2016. The provision for energy-related loans decreased as certain energy-related classified assets have cycled through resolution. Classified energy loans decreased 48% to $127.7 million at June 30, 2017, compared to $243.9 million at June 30, 2016. Conversely, non-energy-related classified commercial loans increased 11% to $188.4 million at June 30, 2017. Net charge-offs to average loans in the legacy portfolio were 0.30% in the second quarter of 2017, compared to 0.38% in the second quarter of the prior year, and were 0.25% and 0.27% of average loans for the six months ended June 30, 2017 and 2016, respectively.

See the "Asset Quality" section for further discussion on past due loans, non-performing assets, troubled debt restructurings and the allowance for credit losses.

Non-interest Income

The Company’s operating results for the three months ended June 30, 2017 included non-interest income of $56.0 million compared to $64.9 million for the same period of 2016. This $8.9 million, or 14%, decrease in non-interest income included a $6.3 million, or 24%, decrease in mortgage income. Mortgage income was impacted by a $3.1 million decrease in gains on the sale of loans, as mortgage sales volume declined 25% in the second quarter of 2017 when compared to the same period in 2016. In addition, a $2.6 million decrease in favorable market value adjustments related to hedging, driven by a $95.8 million decrease in the locked pipeline volume compared to the same period of 2016, negatively impacted mortgage income in 2017.

Non-interest income in the second quarter of 2017 was also impacted by a $1.7 million, or 97%, decrease in gains on the sale of available for sale investment securities from the second quarter of 2016 due to a lower volume of bonds sold in 2017. In addition, broker commissions decreased by $1.0 million, or 26%, as the size of individual transactions declined on similar volumes period over period. Non-interest income as a percentage of total gross revenue (defined as total interest and non-interest income) was 21% in the second quarter of 2017 compared to 27% in the second quarter of 2016.

On a year-to-date basis, non-interest income decreased $17.5 million, or 14%, from the first six months of 2016 to $103.3 million, which included a decrease of $12.1 million, or 26%, in mortgage income, primarily the result of a $9 million decrease in gains on the sale of loans from a $226 million decrease in sales volume thus far in 2017. Mortgage income was also negatively impacted by higher unfavorable fair value adjustments relating to hedging activity compared to the first six months of 2016.

Other non-interest income decreased $3.6 million, or 21%, from the first six months of 2016, which was primarily the result of a decrease in income from customer swap activity. Other decreases from the first six months of 2016 included a $2.1 million, or 27%, decrease in broker commissions, the result of volume-driven decreases in both trading and research income, and a $1.9 million, or 97%, decrease in gains on the sale of available for sale securities from the corresponding 2016 period. These decreases were partially offset by increases of $1.4 million, or 25%, in credit card and merchant-related income and $0.7 million, or 3.1%, in service charges on deposit accounts.

Non-interest Expense

The Company’s results for the second quarter of 2017 included non-interest expense of $147.5 million, an increase of $8.0 million, or 6%, compared to the same quarter of 2016. For the quarter, the Company’s efficiency ratio was 61.6%, compared to 61.3% in the second quarter of 2016.

Professional services increased by $6.3 million, or 127%, in the second quarter of 2017 when compared to the second quarter of the prior year, primarily due to the estimated $6 million legal accrual associated with the previously disclosed U.S. Department of Housing and Urban Development lawsuit (See Note 14 "Commitments and Contingencies" for further discussion on the HUD matter). Data processing increased $1.2 million, or 20%, in the second quarter of 2017 when compared to the same period of 2016, as a result of the implementation of new software, including more cloud-based applications. Salaries and employee benefits increased $1.2 million, or 1%, in the second quarter of 2017 when compared to the same period of 2016, driven by an increase in merit raises, number of employees, off cycle raises, and an increase in the employer 401k match. This was partially offset by a significant decrease in incentive expense, which is the result of a decrease in mortgage loan production. Travel and entertainment expenses increased $0.8 million, or 42%, in the second quarter of 2017 when compared to the second quarter of the prior year, primarily due to an increase in travel and meal costs related to the acquisition of Sabadell United Bank.

These increases were partially offset by a decrease of $0.5 million, or 3%, in net occupancy and equipment expense during the second quarter of 2017. This decrease was primarily due to a change in ATM equipment from lease to owned resulting in lower equipment rental expenses. Additionally, lower insurance expenses and depreciation expenses due to branch closures in 2016 also contributed to lower occupancy and equipment expense. Other non-interest expense decreased $1.6 million, or 15%, due to

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a $1.9 million FDIC loss share reimbursement expense incurred during the second quarter of 2016, slightly offset by impairment related to new market tax credits when compared to the same quarter of the prior year.

Non-interest expense for the first half of 2017 increased $11.6 million, or 4%, to $288.5 million, when compared to the first half of 2016, due to increases in professional services of $7.8 million, or 90%, primarily related to the HUD legal matter, data processing of $2.2 million, or 19%, related to new cloud-based applications, and credit and other loan-related expenses of $2.7 million, or 48%, due to increased loan origination and maintenance expenses.

These increases were partially offset by a decrease of $1.4 million, or 4%, in net occupancy and equipment expense and a decrease in other non-interest expense of $3.1 million, or 12%, for the first six months of 2017. The decrease in other non-interest expense is the result of a $4.5 million FDIC loss share reimbursement expense incurred during the first six months of 2016, offset by an increase in passive losses from new market tax credits when compared to the same period of prior year.

Income Taxes

For the three months ended June 30, 2017 and 2016, the Company recorded income tax expense of $28.0 million and $25.5 million, respectively, which resulted in an effective income tax rate of 35.0% and 33.4%, respectively. For the six months ended June 30, 2017 and 2016, the Company recorded income tax expense of $50.6 million and $47.6 million, respectively, which resulted in an effective income tax rate of 33.0% for the first half of 2017 and 33.7% for the same period of 2016.

The difference between the effective tax rate and the statutory federal and state tax rates relates to items that are non-taxable or non-deductible, primarily the effect of tax-exempt income and various tax credits. The effective tax rate in 2017 was impacted by the increase in pre-tax income, the continued expiration of tax credits, and the increase in deductions from taxable income for certain incentive-based expenses (restricted stock and certain stock options) as a result of the implementation of ASU No. 2016-09 during the first quarter of 2017. This ASU requires the Company to recognize the excess tax benefits/(shortfalls) of exercised or vested awards as income tax benefit/(expense) through the income statement, whereas these excess tax benefits/(shortfalls) were previously recognized in additional paid-in-capital on the balance sheet.

FINANCIAL CONDITION

Earning Assets

Interest income associated with earning assets is the Company’s primary source of income. Earning assets are composed of interest-earning or dividend-earning assets, including loans, securities, short-term investments, and loans held for sale. Earning assets increased $104.0 million, or less than 1%, since December 31, 2016.

The following discussion highlights the Company’s major categories of earning assets.

Loans

The Company had total loans of $15.6 billion at June 30, 2017, an increase of $491.0 million from December 31, 2016. Legacy loans increased $798.5 million, or 6%, to $13.5 billion at June 30, 2017, while acquired loans decreased $307.4 million, or 13%, to $2.1 billion at June 30, 2017. The growth in the legacy portfolio included increases in commercial loans of $678.4 million, or 7%, mortgage loans of $116.7 million, or 14%, and home equity loans of $55.4 million, or 3%, offset by a decrease in other consumer loans of $52.1 million, or 8%, compared to December 31, 2016. The acquired portfolio decreased as pay-downs and pay-offs occurred. In addition, acquired loans are transferred to the legacy portfolio as they are refinanced, renewed, restructured, or otherwise underwritten to the Company's standards.

The Company’s loan to deposit ratio at June 30, 2017 was 92% compared to 87% at December 31, 2016. The percentage of fixed-rate loans to total loans decreased from 45% at the end of 2016 to 43% at June 30, 2017.

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The major categories of loans outstanding at June 30, 2017 and December 31, 2016 are presented in the following tables, segregated into legacy and acquired loans.

TABLE 5—SUMMARY OF LOANS

	June 30, 2017
(Dollars in thousands)	Commercial						Consumer and Other
	Real Estate		Commercial and Industrial		Energy-related		Residential Mortgage		Home equity		Indirect automobile		Credit Card		Other		Total
Legacy	$	6,114,930	$	3,390,699	$	550,162	$	970,961	$	1,838,841	$	92,106	$	86,587	$	449,124	$	13,493,410
Acquired	1,026,673		293,382		1,806		375,506		320,107		24		501		44,607		2,062,606
Total loans	$	7,141,603	$	3,684,081	$	551,968	$	1,346,467	$	2,158,948	$	92,130	$	87,088	$	493,731	$	15,556,016
	December 31, 2016
	Commercial						Consumer and Other
	Real Estate		Commercial and Industrial		Energy-related		Residential Mortgage		Home equity		Indirect automobile		Credit Card		Other		Total
Legacy	$	5,623,314	$	3,194,796	$	559,289	$	854,216	$	1,783,421	$	131,048	$	82,524	$	466,316	$	12,694,924
Acquired	1,178,952		348,326		1,904		413,184		372,505		4		468		54,704		2,370,047
Total loans	$	6,802,266	$	3,543,122	$	561,193	$	1,267,400	$	2,155,926	$	131,052	$	82,992	$	521,020	$	15,064,971

Commercial Loans

Total commercial loans increased $471.1 million, or 4%, from December 31, 2016, with $678.4 million, or 7%, in legacy loan growth and a decrease in acquired commercial loans of $207.3 million, or 14%. Commercial loans were 73% of the total loan portfolio at June 30, 2017 consistent with the composition at December 31, 2016. Unfunded commitments on commercial loans including approved loan commitments not yet funded were $4.3 billion at June 30, 2017, an increase of $212.9 million, or 5%, when compared to the end of the prior year.

Commercial real estate loans increased $339.3 million, or 5%, during the first six months of 2017, consisting of increases in legacy commercial real estate loans of $491.6 million, or 9%, offset by decreases in acquired commercial real estate loans of $152.3 million, or 13%. At June 30, 2017, commercial real estate loans totaled $7.1 billion, or 46%, of the total loan portfolio, consistent with December 31, 2016.

As of June 30, 2017, commercial and industrial loans totaled $3.7 billion, a $141.0 million, or 4%, increase from December 31, 2016. Commercial and industrial loans comprised approximately 24% of the total loan portfolio at both June 30, 2017 and December 31, 2016.

The following table details the Company’s commercial loans by state.

TABLE 6—COMMERCIAL LOANS BY STATE OF ORIGINATION

(Dollars in thousands)	Louisiana		Florida		Alabama		Texas		Arkansas		Georgia		Tennessee		Other (1)		Total
June 30, 2017
Legacy	$	3,181,010	$	1,791,676	$	1,220,408	$	1,922,598	$	679,557	$	614,055	$	536,024	$	110,463	$	10,055,791
Acquired	166,920		765,182		7,942		36,465		—		319,406		9,634		16,312		1,321,861
Total	$	3,347,930	$	2,556,858	$	1,228,350	$	1,959,063	$	679,557	$	933,461	$	545,658	$	126,775	$	11,377,652
December 31, 2016
Legacy	$	3,133,872	$	1,546,290	$	1,157,914	$	1,849,625	$	639,053	$	436,936	$	540,479	$	73,230	$	9,377,399
Acquired	193,059		843,191		19,050		39,391		—		395,299		12,868		26,324		1,529,182
Total	$	3,326,931	$	2,389,481	$	1,176,964	$	1,889,016	$	639,053	$	832,235	$	553,347	$	99,554	$	10,906,581

⁽¹⁾  Other loans include primarily equipment financing and corporate asset financing loans, which the Company does not classify by state.

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Energy-related Loans

The Company’s loan portfolio includes energy-related loans of $552.0 million at June 30, 2017, compared to $561.2 million at December 31, 2016, a $9.2 million decrease. Energy-related loans were 3.5% of total loans at June 30, 2017, compared to 3.7% at December 31, 2016. At June 30, 2017, exploration and production (“E&P”) loans accounted for 48% of energy-related loans and 55% of energy-related commitments. Midstream companies accounted for 19% of energy-related loans and 21% of energy loan commitments, while service company loans totaled 33% of energy-related loans and 24% of energy commitments.

The rapid and sustained decline in energy commodity prices that began in 2014 and culminated in early 2016 appears to be slowly recovering and reaching stabilization. While the vast majority of the Company's loan portfolio continues to have no exposure to these concerns, we took actions to mitigate the risks in the weakened economic environment by employing a risk-off strategy, reducing or exiting exposures in our highest risk credits and strengthening certain underwriting standards.

During 2016, many of the Company's criticized (defined as special mention or worse) energy credits deteriorated and cycled toward resolution, as expected. Management has been closely monitoring these loans since the decline in commodities prices in 2014.  Beginning in late 2016, and thus far in 2017, energy prices have shown some stabilization, and the Company expects that prices will remain stable or rise in the foreseeable future.  As a result, energy-related criticized assets have also stabilized, decreasing $140.3 million, or 44%, since December 31, 2016, to 32% of the total energy-related loan portfolio from 57% at December 31, 2016. The Company's historical focus on sound client selection, conservative credit underwriting, proactive portfolio management, and market and business diversification continue to serve the Company well. The strategic decision to expand into other markets across the southeast allows the Company to drive growth and profitability to offset declining positions in impacted energy segments of business. Based on the composition and detailed analysis of its energy portfolio at June 30, 2017, the Company believes most of its energy exposure is in areas of lower credit risk; however, a deterioration in prices of energy commodities or other factors could lead to increased losses in future periods.Additionally, the Company is monitoring a few problem credits within the Energy portfolio.  Should the actual resolution of these credits adversely differ from our expectations, we believe a maximum loss of $15 million would be incurred above reserves already accrued.

Residential Mortgage Loans

Residential mortgage loans consist of loans to consumers to finance a primary residence. The vast majority of the residential mortgage loan portfolio is comprised of non-conforming 1-4 family mortgage loans secured by properties located in the Company's market areas and originated under terms and documentation that permit their sale in a secondary market. Total residential mortgage loans increased $79.1 million, or 6.2%, compared to December 31, 2016, primarily the result of a $77.1 million increase in non-conforming single-family mortgage loan originations.

Consumer and Other Loans

The Company offers consumer loans in order to provide a full range of retail financial services to customers in the communities in which it operates. The Company originates substantially all of its consumer loans in its primary market areas. At June 30, 2017, $2.8 billion, or 18%, of the total loan portfolio was comprised of consumer loans, compared to $2.9 billion, or 19%, at the end of 2016. Total consumer loans at June 30, 2017 decreased $59.1 million, or 2%, from December 31, 2016, primarily due to a $38.9 million decrease in indirect automobile loans, a product that is no longer offered. The majority of the consumer loan portfolio is comprised of home equity loans, which were approximately $2.2 billion at both June 30, 2017 and December 31, 2016.

In order to assess the risk characteristics of the loan portfolio, the Company considers the current U.S. economic environment and that of its primary market areas. See Note 5, Allowance for Credit Losses, to the consolidated financial statements for credit quality factors by loan portfolio segment.

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Additional information on the Company’s consumer loan portfolio is presented in the following tables. For the purposes of Table 7, unscoreable consumer loans have been included with loans with credit scores below 660. Credit scores reflect the most recent information available as of the dates indicated.

TABLE 7—CONSUMER LOANS BY STATE OF ORIGINATION

(Dollars in thousands)	Louisiana		Florida		Alabama		Texas		Arkansas		Georgia		Tennessee		Other (1)		Total
June 30, 2017
Legacy	$	1,022,517	$	489,396	$	269,044	$	113,395	$	254,944	$	81,355	$	72,842	$	163,165	$	2,466,658
Acquired	113,655		170,838		2,419		25,271		—		43,146		9,889		21		365,239
Total	$	1,136,172	$	660,234	$	271,463	$	138,666	$	254,944	$	124,501	$	82,731	$	163,186	$	2,831,897
December 31, 2016
Legacy	$	1,033,358	$	437,316	$	264,293	$	119,366	$	266,443	$	68,167	$	69,736	$	204,630	$	2,463,309
Acquired	126,758		203,840		4,085		30,990		—		50,906		11,085		17		427,681
Total	$	1,160,116	$	641,156	$	268,378	$	150,356	$	266,443	$	119,073	$	80,821	$	204,647	$	2,890,990

⁽¹⁾  Other loans include primarily credit card and indirect consumer loans, which the Company does not classify by state.

TABLE 8—CONSUMER LOANS BY CREDIT SCORE

(Dollars in thousands)	Below 660		660-720		Above 720		Discount			Total
June 30, 2017
Legacy	$	520,812	$	617,052	$	1,328,794	$	—		$	2,466,658
Acquired	147,703		72,226		165,197		(19,887		)	365,239
Total	$	668,515	$	689,278	$	1,493,991	$	(19,887	)	$	2,831,897
December 31, 2016
Legacy	$	526,479	$	601,285	$	1,335,545	$	—		$	2,463,309
Acquired	169,980		84,100		195,324		(21,723		)	427,681
Total	$	696,459	$	685,385	$	1,530,869	$	(21,723	)	$	2,890,990

Mortgage Loans Held for Sale

The Company continues to sell the majority of conforming mortgage loan originations in the secondary market rather than assume the interest rate risk associated with these longer term assets. Upon the sale, the Company retains servicing on a limited portion of these loans. Loans held for sale totaled $141.0 million at June 30, 2017, a decrease of $16.1 million, or 10%, from $157.0 million at year-end 2016. The net decrease during the first six months of 2017 is the result of lower volumes and timing-related origination and sales activity, as mortgage loan sales outpaced originations activity in the first half of 2017.

Loans held for sale have primarily been fixed-rate single-family residential mortgage loans under contracts to be sold in the secondary market. In most cases, loans in this category are sold within thirty days of closing. Buyers generally have recourse to return a purchased loan to the Company under limited circumstances. See Note 1, Summary of Significant Accounting Policies, in the Annual Report on Form 10-K for the year ended December 31, 2016, for further discussion.

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Investment Securities

Investment securities increased by $558.5 million, or 16%, since December 31, 2016 to $4.1 billion at June 30, 2017. The increase in investment securities is primarily due to the deployment of excess liquidity into the investment securities portfolio during the first half of 2017. Investment securities approximated 19% and 16% of total assets at June 30, 2017 and December 31, 2016, respectively. Average investment securities were 19% of average earning assets in the first six months of 2017, up from 16% for the same period of 2016.

All of the Company's mortgage-backed securities were issued by government-sponsored enterprises at June 30, 2017. The Company does not hold any Fannie Mae or Freddie Mac preferred stock, corporate equity, collateralized debt obligations, collateralized loan obligations, or structured investment vehicles, nor does it hold any private label collateralized mortgage obligations, subprime, Alt-A, sovereign debt, or second lien elements in its investment portfolio. At June 30, 2017, the Company's investment portfolio did not contain any securities that are directly backed by subprime or Alt-A mortgages.

Funds generated as a result of sales and prepayments of investment securities are used to fund loan growth and purchase other securities. The Company continues to monitor market conditions and take advantage of market opportunities with appropriate risk and return elements. Note 3 to the consolidated financial statements provides further information on the Company’s investment securities.

Short-term Investments

Short-term investments primarily result from excess funds invested overnight in interest-bearing deposit accounts at the FRB and the FHLB of Dallas. These balances fluctuate daily depending on the funding needs of the Company and earn interest at the current FHLB and FRB discount rates. The balance in interest-bearing deposits at other institutions decreased $898.8 million, or 84%, from December 31, 2016 to $167.5 million at June 30, 2017. The Company’s cash activity is further discussed in the “Liquidity and Other Off-Balance Sheet Activities” section below.

Asset Quality

The lending activities of the Company are governed by underwriting policies established by management and approved by the Board Risk Committee of the Board of Directors. Commercial risk personnel, in conjunction with senior lending personnel, underwrite the vast majority of commercial business and commercial real estate loans. The Company provides centralized underwriting of substantially all residential mortgage, small business and consumer loans. Established loan origination procedures require appropriate documentation, including financial data and credit reports. For loans secured by real property, the Company generally requires property appraisals, title insurance or a title opinion, hazard insurance, and flood insurance, where appropriate.

Loan payment performance is monitored and late charges are generally assessed on past due accounts. Delinquent and problem loans are administered by functional teams of specialized risk officers. Risk ratings on commercial exposures (as described below) are reviewed on an ongoing basis and are adjusted as necessary based on the obligor’s risk profile and debt capacity. The central loan review department is responsible for independently assessing and validating risk ratings assigned to commercial exposures through a periodic sampling process.All other loans are also subject to loan reviews through a similar periodic sampling process. The Company exercises judgment in determining the risk classification of its commercial loans.

The Company utilizes an asset risk classification system in accordance with guidelines established by the FRB as part of its efforts to monitor commercial asset quality. In connection with their examinations of insured institutions, both federal and state examiners also have the authority to identify problem assets and, if appropriate, reclassify them. There are three classifications for problem assets: “substandard,” “doubtful,” and “loss”, all of which are considered adverse classifications. Substandard assets have one or more defined weaknesses and are characterized by the distinct possibility that the Company will sustain some loss if the weaknesses are not corrected. Doubtful assets have the weaknesses of substandard assets with the additional characteristic that the weaknesses make collection or liquidation in full questionable, and there is a high probability of loss based on currently existing facts, conditions and values. An asset classified as loss is considered not collectible and of such little value that continuance as an asset of the Company is not warranted.

In the first quarter of 2016, the banking regulatory agencies issued interpretive guidance on the valuation of collateral underlying E&P loans and how such valuations should impact the assessment of the inherent credit risk (and ultimately risk ratings and charge-offs) in such loans. The Company's implementation of this guidance in the first quarter of 2016 and subsequently through 2017, contributed to the increase in criticized assets within the Company's energy portfolio.

Commercial loans are placed on non-accrual status when any of the following occur: 1) the loan is maintained on a cash basis because of deterioration in the financial condition of the borrower; 2) collection of the full contractual amount of principal or

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interest is not expected (even if the loan is currently paying as agreed); or 3) when principal or interest has been in default for a period of 90 days or more, unless the loan is both well secured and in the process of collection. Factors considered in determining the collection of the full contractual amount of principal or interest include assessment of the borrower’s cash flow, valuation of underlying collateral, and the ability and willingness of guarantors to provide credit support.  Certain commercial loans are also placed on non-accrual status when payment is not past due and full payment of principal and interest is expected, but we have doubt about the borrower’s ability to comply with existing repayment terms. Consideration will be given to placing a loan on non-accrual due to the deterioration of the debtor’s repayment ability, the repayment of the loan becoming dependent on the liquidation of collateral, an existing collateral deficiency, the loan being classified as "Doubtful" or "Loss", the client filing for bankruptcy, and/or foreclosure being initiated. Regarding all classes within the C&I and CRE portfolios, the determination of a borrower’s ability to make the required principal and interest payments is based on an examination of the borrower’s current financial statements, industry, management capabilities, and other qualitative factors.

When a loan is placed on non-accrual status, the accrual of interest income ceases and accrued but unpaid interest is generally reversed against interest income.

Real estate acquired by the Company through foreclosure or by deed-in-lieu of foreclosure is classified as OREO, and is recorded at the lesser of the related loan balance (the pro-rata carrying value for acquired loans) or estimated fair value less costs to sell. Closed bank branches are also classified as OREO and recorded at the lower of cost or market value.

Under GAAP, certain loan modifications or restructurings are designated as TDRs. In general, the modification or restructuring of a debt constitutes a TDR if the Company, for economic or legal reasons related to the borrower’s financial difficulties, grants a concession to the borrower that the Company would not otherwise consider under current market conditions. See Note 1, Summary of Significant Accounting Policies, in the Annual Report on Form 10-K for the year ended December 31, 2016 for further details.

Non-performing Assets

The Company defines non-performing assets as non-accrual loans, accruing loans more than 90 days past due, OREO, and foreclosed property. Management continuously monitors loans and transfers loans to non-accrual status when warranted.

The Company accounts for loans formerly covered by loss sharing agreements with the FDIC, other loans acquired with deteriorated credit quality, as well as all loans acquired with significant discounts that did not exhibit deteriorated credit quality at acquisition, in accordance with ASC Topic 310-30. Collectively, all loans accounted for under ASC 310-30 are referred to as "acquired impaired loans". Application of ASC Topic 310-30 results in significant accounting differences, compared to loans originated or acquired by the Company that are not accounted for under ASC 310-30. See Note 1, Summary of Significant Accounting Policies, in the Annual Report on Form 10-K for the year ended December 31, 2016 for further details.

Due to the significant difference in accounting for acquired impaired loans, the Company believes inclusion of these loans in certain asset quality ratios that reflect non-performing assets in the numerator or denominator (or both) results in significant distortion to these ratios. In addition, because loan level charge-offs related to acquired impaired loans are not recognized in the financial statements until the cumulative amounts exceed the original loss projections on a pool basis, the net charge-off ratio for acquired loans is not consistent with the net charge-off ratio for other loan portfolios. The inclusion of these loans in certain asset quality ratios could result in a lack of comparability across quarters or years, and could impact comparability with other portfolios that were not impacted by acquired impaired loan accounting. The Company believes that the presentation of certain asset quality measures excluding acquired impaired loans, as indicated below, and related amounts from both the numerator and denominator provides better perspective into underlying trends related to the quality of its loan portfolio. Accordingly, the asset quality measures in the tables below present asset quality information excluding acquired impaired loans, as indicated within each table, and related amounts.

Legacy non-performing assets decreased $60.4 million, or 26%, compared to December 31, 2016, as non-performing loans decreased $58.3 million. Including TDRs that are in compliance with their modified terms, legacy non-performing assets and TDRs decreased $99.2 million during the first six months of 2017.

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The following table sets forth the composition of the Company’s non-performing assets, including accruing loans 90 days or more past due and TDRs for the periods indicated.

TABLE 9—NON-PERFORMING ASSETS AND TROUBLED DEBT RESTRUCTURINGS

	June 30, 2017						December 31, 2016
(Dollars in thousands)	Legacy			Acquired (4)			Legacy			Acquired (4)
Non-accrual loans:
Commercial	$	44,448		$	10,219		$	47,666		$	4,484
Energy-related	94,565			—			150,329			—
Mortgage	11,682			1,598			13,014			719
Consumer and credit card	13,053			2,391			10,534			1,755
Total non-accrual loans	163,748			14,208			221,543			6,958
Accruing loans 90 days or more past due	610			192			1,104			282
Total non-performing loans (1)	164,358			14,400			222,647			7,240
OREO and foreclosed property (2)	7,106			12,612			9,264			11,935
Total non-performing assets (1)	171,464			27,012			231,911			19,175
Performing troubled debt restructurings (3)	57,150			6,516			95,951			8,418
Total non-performing assets and troubled debt restructurings (1)	$	228,614		$	33,528		$	327,862		$	27,593
Non-performing loans to total loans (1)	1.22		%	0.70		%	1.75		%	0.31		%
Non-performing assets to total assets (1)	0.87		%	1.32		%	1.20		%	0.81		%
Non-performing assets and troubled debt restructurings to total assets (1)	1.16		%	1.64		%	1.70		%	1.17		%
Allowance for credit losses to non-performing loans	71.84		%	268.16		%	52.46		%	540.75		%
Allowance for credit losses to total loans	0.88		%	1.87		%	0.92		%	1.65		%

⁽¹⁾  Non-performing loans and assets include accruing loans 90 days or more past due.

⁽²⁾  OREO and foreclosed property at June 30, 2017 and December 31, 2016 include $1.3 million and $4.8 million, respectively, of legacy former bank properties held for development or resale.

⁽³⁾  Performing troubled debt restructurings for June 30, 2017 and December 31, 2016 exclude $96.5 million and $136.8 million, respectively, of legacy loans, and $4.1 million and $2.2 million, respectively, of acquired loans that meet non-performing asset criteria.

⁽⁴⁾  Acquired non-performing loans exclude acquired impaired loans, even if contractually past due or if the Company does not expect to receive payment in full, as the Company is currently accreting interest income over the expected life of the loans.

Non-performing legacy loans were 1.22% of total legacy loans at June 30, 2017, 53 basis points lower than at December 31, 2016. Legacy non-performing assets were 0.87% of total legacy assets at June 30, 2017, 33 basis points below December 31, 2016. The decrease in legacy non-performing loans and assets was primarily due to payments totaling approximately $54.4 million on seven energy-related non-accrual loans during the first six months of 2017.

The allowance for credit losses as a percentage of non-performing legacy loans was 71.84% at June 30, 2017 compared to 52.46% at December 31, 2016. The Company’s allowance for credit losses as a percentage of total legacy loans decreased four basis points from 0.92% at December 31, 2016 to 0.88% at June 30, 2017. The Company has considered collateral support on non-performing assets in determining the allowance for credit losses.

At June 30, 2017, the Company had $201.9 million of legacy commercial assets classified as substandard and $55.9 million of commercial assets classified as doubtful. Accordingly, the aggregate of the Company’s legacy classified commercial assets was $257.8 million, or 1.18% of total assets, 1.66% of total loans, and 1.91% of legacy loans. At December 31, 2016, legacy classified commercial assets totaled $348.6 million, or 1.61% of total assets, 2.31% of total loans, and 2.75% of legacy loans.

In addition to the problem loans described above, there were $147.9 million of legacy commercial loans classified as special mention at June 30, 2017, which in management’s opinion were subject to potential future rating downgrades. Special mention loans are defined as loans where known information about possible credit problems of the borrowers causes management to

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have some doubt as to the ability of these borrowers to comply with the present loan repayment terms, which may result in future disclosure of these loans as non-performing. Special mention loans at June 30, 2017 increased $9.7 million, or 7%, from December 31, 2016, primarily due to a $40.7 million increase in non-energy-related special mention loans, offset by a $31.0 million decrease in energy-related special mention loans. Special mention loans were 1.47% of total legacy commercial loans at both June 30, 2017 and December 31, 2016.

Acquired non-performing assets increased $7.8 million, or 41%, when compared to December 31, 2016, as non-performing loans increased $7.2 million. Acquired non-performing assets were 1.32% of total acquired assets at June 30, 2017, 51 basis points higher than at December 31, 2016. The increase in acquired non-performing assets was primarily the result of the movement of three commercial loans totaling $7.1 million to non-accrual in the current year.

At June 30, 2017, $55.6 million of acquired commercial assets were classified as substandard and $2.7 million of acquired commercial assets were classified as doubtful. Accordingly, the aggregate of the Company's acquired classified commercial assets was $58.3 million, or 0.37% of total loans, a decrease of $26.3 million, or 31%, from $84.6 million at December 31, 2016. The decrease was primarily a result of five acquired loans totaling $15.6 million that were paid off or upgraded in the current year.

See "Allowance for Credit Losses" section of this MD&A and Note 5 "Allowance for Credit Losses and Credit Quality" for further details.

Past Due and Non-accrual Loans

Past due status is based on the contractual terms of loans. Total legacy past due and non-accrual loans were 1.52% of total legacy loans at June 30, 2017 compared to 1.95% at December 31, 2016. At June 30, 2017, total acquired past due and non-accrual loans were 1.18% of total acquired loans, an increase of 71 basis points from 0.47% at December 31, 2016. Additional information on past due loans is presented in the following table.

TABLE 10—PAST DUE AND NON-ACCRUAL LOAN SEGREGATION

	June 30, 2017
	Legacy				Acquired (1)				Total
(Dollars in thousands)	Amount		% of Outstanding Balance		Amount		% of Outstanding Balance		Amount		% of Outstanding Balance
Accruing loans:
30-59 days past due	$	27,921	0.21	%	$	3,212	0.15	%	$	31,133	0.20	%
60-89 days past due	12,961		0.10		6,746		0.33		19,707		0.13
90-119 days past due	426		—		192		0.01		618		—
120 days past due or more	184		—		—		—		184		—
	41,492		0.31		10,150		0.49		51,642		0.33
Non-accrual loans	163,748		1.21		14,208		0.69		177,956		1.14
Total past due and non-accrual loans	$	205,240	1.52	%	$	24,358	1.18	%	$	229,598	1.47	%

⁽¹⁾  Acquired past due and non-accrual loan amounts exclude acquired impaired loans, even if contractually past due or if the Company does not expect to receive payment in full, as the Company is currently accreting interest income over the expected life of the loans.

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	December 31, 2016
	Legacy				Acquired (1)				Total
(Dollars in thousands)	Amount		% of Outstanding Balance		Amount		% of Outstanding Balance		Amount		% of Outstanding Balance
Accruing loans:
30-59 days past due	$	18,026	0.14	%	$	2,586	0.11	%	$	20,612	0.14	%
60-89 days past due	6,876		0.05		1,381		0.06		8,257		0.05
90-119 days past due	880		0.01		250		0.01		1,130		0.01
120 days past due or more	224		—		32		—		256		—
	26,006		0.20		4,249		0.18		30,255		0.20
Non-accrual loans	221,543		1.75		6,958		0.29		228,501		1.52
Total past due and non-accrual loans	$	247,549	1.95	%	$	11,207	0.47	%	$	258,756	1.72	%

⁽¹⁾  Acquired past due and non-accrual loan amounts exclude acquired impaired loans, even if contractually past due or if the Company does not expect to receive payment in full, as the Company is currently accreting interest income over the expected life of the loans.

Total past due and non-accrual loans decreased $29.2 million from December 31, 2016 to $229.6 million at June 30, 2017. The change was primarily due to a decrease of $50.5 million in non-accrual loans from a $55.8 million decrease in legacy energy-related non-accrual loans, partially offset by increases in accruing loans 30-59 days past due of $10.5 million and 60-89 days past due of $11.5 million. The increase in accruing past due loans was a result of a limited number of commercial credits.

Allowance for Credit Losses

The allowance for credit losses represents management’s best estimate of probable credit losses inherent at the balance sheet date. Determination of the allowance for credit losses involves a high degree of complexity and requires significant judgment. Several factors are taken into consideration in the determination of the overall allowance for credit losses. Based on facts and circumstances available, management of the Company believes that the allowance for credit losses was appropriate at June 30, 2017 to cover probable losses in the Company’s loan portfolio. However, future adjustments to the allowance may be necessary, and the results of operations could be adversely affected, if circumstances differ substantially from the assumptions used by management in determining the allowance for credit losses. See the “Application of Critical Accounting Policies and Estimates” and Note 1, Summary of Significant Accounting Policies, in the Annual Report on Form 10-K for the year ended December 31, 2016 for more information.

The allowance for credit losses was $156.7 million at June 30, 2017, or 1.01% of total loans, $0.7 million higher than at December 31, 2016. The allowance for credit losses as a percentage of loans was 1.04% at December 31, 2016.

The allowance for credit losses on the legacy portfolio increased $1.3 million, or 1.1%, to $118.1 million since December 31, 2016. The acquired allowance for credit losses includes a reserve of $38.6 million for losses probable in the portfolio at June 30, 2017 above estimated expected credit losses at acquisition, a decrease of $0.5 million, or 1.4%, from December 31, 2016.

Net charge-offs on legacy loans during the first six months of 2017 were $16.3 million, or 0.25% annualized, of average loans as compared to net charge-offs of $15.3 million, or 0.27% annualized, for the first six months of 2016. The legacy provision for loan losses covered 113% and 185% of legacy net charge-offs for the first six months of 2017 and 2016, respectively.

At June 30, 2017 and December 31, 2016, the legacy allowance for loan losses covered 65% and 47% of total non-performing loans, respectively. Including acquired non-impaired loans, the allowance for loan losses covered 82% of total non-performing loans at June 30, 2017 and 63% at December 31, 2016.

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The following tables set forth the activity in the Company’s allowance for credit losses for the six-month periods ended June 30, 2017 and 2016.

TABLE 11—SUMMARY OF ACTIVITY IN THE ALLOWANCE FOR CREDIT LOSSES

	June 30, 2017									June 30, 2016
(Dollars in thousands)	Legacy Loans			Acquired Loans			Total			Legacy Loans			Acquired Loans			Total
Allowance for loan losses at beginning of period	$	105,569		$	39,150		$	144,719		$	93,808		$	44,570		$	138,378
Provision for (Reversal of) loan losses before benefit attributable to FDIC loss share agreements	18,315			(111		)	18,204			28,390			(2,416		)	25,974
Adjustment attributable to FDIC loss share arrangements	—			—			—			—			797			797
Net provision for (Reversal of) loan losses	18,315			(111		)	18,204			28,390			(1,619		)	26,771
Adjustment attributable to FDIC loss share arrangements	—			—			—			—			(797		)	(797		)
Transfer of balance to OREO and other	—			258			258			—			(967		)	(967		)
Loans charged-off	(18,098		)	(1,382		)	(19,480		)	(17,359		)	(1,196		)	(18,555		)
Recoveries	1,824			700			2,524			2,022			600			2,622
Allowance for loan losses at end of period	107,610			38,615			146,225			106,861			40,591			147,452
Reserve for unfunded commitments at beginning of period	11,241			—			11,241			14,145			—			14,145
Provision for (Reversal of) unfunded lending commitments	(779		)	—			(779		)	(319		)	—			(319		)
Reserve for unfunded lending commitments at end of period	10,462			—			10,462			13,826			—			13,826
Allowance for credit losses at end of period	$	118,072		$	38,615		$	156,687		$	120,687		$	40,591		$	161,278

FDIC Loss Share Receivable

As part of the FDIC-assisted acquisitions in 2009 and 2010, the Company recorded a receivable from the FDIC, which represented the fair value of the expected reimbursable losses covered by the loss share agreements as of the acquisition dates. The FDIC loss share receivable was written-off in December of 2016 when the Company entered into an agreement with the FDIC to terminate the Company's loss share agreements prior to their contractual maturities. The Company received a net payment of $6.5 million from the FDIC as consideration for this termination and subsequently derecognized the remaining FDIC indemnification asset and associated assets and liabilities, resulting in a pre-tax loss of $17.8 million.

The Company will benefit from all future recoveries, and be responsible for all future losses and expenses related to the assets previously subject to the loss share agreements. Amortization expense associated with the FDIC indemnification asset, which was expected to be $8 million in 2017 at the time of termination, will no longer be recognized and will positively impact the net interest margin. For the three-month and six-month periods ended June 30, 2017, acquired loan yields increased 133 basis points and 111 basis points, respectively, from the corresponding periods of 2016, partially attributable to the termination of these loss share agreements.

FUNDING SOURCES

Deposits obtained from clients in its primary market areas are the Company’s principal source of funds for use in lending and other business purposes. The Company attracts local deposit accounts by offering a wide variety of products, competitive interest rates and convenient branch office locations and service hours. Increasing core deposits is a continuing focus of the Company and has been accomplished through the development of client relationships and acquisitions. Short-term and long-term borrowings are also an important funding source for the Company. Other funding sources include subordinated debt and shareholders’ equity. Refer to the “Liquidity and Other Off-Balance Sheet Activities” section below for further discussion of the Company’s sources and uses of funding. The following discussion highlights the major changes in the mix of deposits and other funding sources during the first six months of 2017.

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Deposits

The Company’s ability to attract and retain customer deposits is critical to the Company’s continued success. Total deposits decreased $555.2 million, or 3%, to $16.9 billion at June 30, 2017, from $17.4 billion at December 31, 2016. This decrease was primarily the result of a strategic move by the Company to reduce certain wholesale funding balances to reduce excess liquidity. In addition, there was a seasonal outflow of deposits due to a surge of public funds in the fourth quarter that has declined over the remainder of 2017. Over the same period, non-interest-bearing deposits increased $91.3 million, or 2%, and equated to 30% and 28% of total deposits at June 30, 2017 and December 31, 2016, respectively. Additionally, interest-bearing deposits decreased $646.5 million, or 5%, from December 31, 2016.

The following table sets forth the composition of the Company’s deposits as of the dates indicated.

TABLE 12—DEPOSIT COMPOSITION BY PRODUCT

(Dollars in thousands)	June 30, 2017				December 31, 2016				$ Change		% Change
Non-interest-bearing deposits	$	5,020,195	30	%	$	4,928,878	28	%	91,317		2
NOW accounts	3,089,482		18		3,314,281		19		(224,799	)	(7	)
Money market accounts	6,017,654		36		6,219,532		36		(201,878	)	(3	)
Savings accounts	797,859		5		814,385		5		(16,526	)	(2	)
Certificates of deposit	1,927,926		11		2,131,207		12		(203,281	)	(10	)
Total deposits	$	16,853,116	100	%	$	17,408,283	100	%	(555,167	)	(3	)

Short-term Borrowings

The Company may obtain advances from the FHLB of Dallas based upon its ownership of FHLB stock and certain pledges of its real estate loans and investment securities, provided certain standards related to the Company’s creditworthiness have been met. These advances are made pursuant to several credit programs, each of which has its own interest rate and range of maturities. The level of short-term borrowings can fluctuate significantly on a daily basis depending on funding needs and the source of funds chosen to satisfy those needs.

The Company also enters into repurchase agreements to facilitate customer transactions that are accounted for as secured borrowings. These transactions typically involve the receipt of deposits from customers that the Company collateralizes with its investment portfolio and have an average rate of 14.5 basis points.

The following table details the average and ending balances of repurchase transactions as of and for the three months ended June 30:

TABLE 13—REPURCHASE TRANSACTIONS

(Dollars in thousands)	2017		2016
Average balance	$	314,090	$	265,465
Ending balance	333,935		288,017

Total short-term borrowings increased $74.8 million, or 15%, from December 31, 2016, to $583.9 million at June 30, 2017, a result of an increase of $75.0 million in outstanding FHLB advances offset by a decrease of $0.2 million in repurchase agreements. On a quarter-to-date average basis, short-term borrowings decreased $271.9 million, or 44%, from the second quarter of 2016, largely due to a decrease of $320.5 million in average short-term FHLB advances, partially offset by an increase of $48.6 million in average repurchase agreements from the second quarter of 2016.

Total short-term borrowings were 3% of total liabilities and 47% of total borrowings at June 30, 2017 compared to 3% and 45%, respectively, at December 31, 2016. On a quarter-to-date average basis, short-term borrowings were 2% of total liabilities and 36% of total borrowings in the second quarter of 2017, compared to 4% and 51%, respectively, during the same period of 2016.

Long-term Debt

Long-term debt increased to $667.2 million at June 30, 2017 from $629.0 million at December 31, 2016, due to an increase in FHLB advances. On a period-end basis, long-term debt was 4% and 3% of total liabilities at June 30, 2017 and December 31, 2016, respectively.

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On average, long-term debt increased to $628.6 million in the second quarter of 2017, $35.3 million, or 6%, higher than the second quarter of 2016 due to an increase in FHLB advances, partially offset by a decrease in notes payable. Average long-term debt was 3% of average total liabilities during the second quarter of both 2017 and 2016.

Long-term debt at June 30, 2017 included $518.3 million in fixed-rate advances from the FHLB of Dallas that cannot be prepaid without incurring substantial penalties. The remaining debt consisted of $120.1 million of the Company’s junior subordinated debt and $28.9 million in notes payable on investments in new market tax credit entities. Interest on the junior subordinated debt is payable quarterly and may be deferred at any time at the election of the Company for up to 20 consecutive quarterly periods. During any deferral period, the Company is subject to certain restrictions, including being prohibited from declaring dividends to its common shareholders. The junior subordinated debt is redeemable by the Company in whole or in part.

CAPITAL RESOURCES

On March 7, 2017, the Company issued an additional 6,100,000 shares of its common stock at a price of $83.00 per common share. Net proceeds from the offering, after deduction of underwriting discounts, commissions, and direct issuance costs, were $485.2 million. The Company intends to use the proceeds of the offering to fund a portion of the cash consideration payable in connection with its announced acquisition of Sabadell United Bank, N.A.

Federal regulations impose minimum regulatory capital requirements on all institutions with deposits insured by the FDIC. The FRB imposes similar capital regulations on bank holding companies. Compliance with bank and bank holding company regulatory capital requirements, which include leverage and risk-based capital guidelines, are monitored by the Company on an ongoing basis. Under the risk-based capital method, a risk weight is assigned to balance sheet and off-balance sheet items based on regulatory guidelines.

At June 30, 2017 and December 31, 2016, the Company exceeded all required regulatory capital ratios, and the regulatory capital ratios of IBERIABANK were in excess of the levels established for “well-capitalized” institutions, as shown in the following table and chart.

TABLE 14—REGULATORY CAPITAL RATIOS

Ratio	Entity	Well- Capitalized Minimums		June 30, 2017		December 31, 2016
				Actual		Actual
Tier 1 Leverage	IBERIABANK Corporation	N/A		13.19	%	10.86	%
	IBERIABANK	5.00	%	9.47		9.21
Common Equity Tier 1 (CET1)	IBERIABANK Corporation	N/A		14.52		11.84
	IBERIABANK	6.50	%	10.93		10.67
Tier 1 risk-based capital	IBERIABANK Corporation	N/A		15.24		12.59
	IBERIABANK	8.00	%	10.93		10.67
Total risk-based capital	IBERIABANK Corporation	N/A		16.74		14.13
	IBERIABANK	10.00	%	11.79		11.56

The increase in IBERIABANK Corporation's capital ratios from December 31, 2016 was primarily driven by an increase in regulatory capital from the additional common stock issued in March 2017, as well as undistributed earnings in the first six months of 2017. Effective June 30, 2017, the Company received regulatory approval to begin netting certain deferred tax liabilities against intangible assets in the calculation of risk-based capital. The netting of these deferred tax liabilities resulted in a moderate increase to the Company's and IBERIABANK's regulatory capital ratios.

Beginning January 1, 2016, minimum capital ratios were subject to a capital conservation buffer. In order to avoid limitations on distributions, including dividend payments, and certain discretionary bonus payments to executive officers, an institution must hold a capital conservation buffer above its minimum risk-based capital requirements. This capital conservation buffer is calculated as the lowest of the differences between the actual CET1 ratio, Tier 1 Risk-Based Capital Ratio, and Total Risk-Based Capital ratio and the corresponding minimum ratios. At June 30, 2017, the required minimum capital conservation buffer was 1.250%, and will increase in subsequent years by 0.625% until it is fully phased in on January 1, 2019 at 2.50%. At June 30, 2017, the capital conservation buffers of the Company and IBERIABANK were 8.74% and 3.79%, respectively.

The Company expects to meet all capital adequacy requirements, including excess capital conservation buffers, upon completion of the Sabadell United acquisition.

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Management believes that at June 30, 2017, the Company and IBERIABANK would have met all capital adequacy requirements on a fully phased-in basis if such requirements were then effective. There can be no assurances that the Basel III capital rules will not be revised before the expiration of the phase-in periods.

LIQUIDITY AND OTHER OFF-BALANCE SHEET ACTIVITIES

Liquidity refers to the Company’s ability to generate sufficient cash flows to support its operations and to meet its obligations, including the withdrawal of deposits by customers, commitments to originate loans, and its ability to repay its borrowings and other liabilities. Liquidity risk is the risk to earnings or capital resulting from the Company’s inability to fulfill its obligations as they become due. Liquidity risk also develops from the Company’s failure to timely recognize or address changes in market conditions that affect the ability to liquidate assets in a timely manner or to obtain adequate funding to continue to operate on a profitable basis.

The primary sources of funds for the Company are deposits and borrowings. Other sources of funds include repayments and maturities of loans and investment securities, securities sold under agreements to repurchase, and, to a lesser extent, off-balance sheet borrowing availability. Certificates of deposit scheduled to mature in one year or less at June 30, 2017 totaled $1.2 billion. Based on past experience, management believes that a significant portion of maturing deposits will remain with the Company. Additionally, the majority of the investment securities portfolio is classified as available for sale, which provides the ability to liquidate unencumbered securities as needed. Of the $4.1 billion in the investment securities portfolio, $2.4 billion is unencumbered and $1.7 billion has been pledged to support repurchase transactions and public funds deposits. Due to the relatively short implied duration of the investment securities portfolio, the Company has historically experienced consistent cash inflows on a regular basis. Securities cash flows are highly dependent on prepayment speeds and could change materially as economic or market conditions change. 

Scheduled cash flows from the amortization and maturities of loans and securities are relatively predictable sources of funds. Conversely, deposit flows, prepayments of loan and investment securities, and draws on customer letters and lines of credit are greatly influenced by general interest rates, economic conditions, competition, and customer demand. The FHLB of Dallas provides an additional source of liquidity to make funds available for general requirements and also to assist with the variability of less predictable funding sources. At June 30, 2017, the Company had $768.3 million of outstanding FHLB advances, $250.0 million of which was short-term and $518.3 million was long-term. Additional FHLB borrowing capacity available at June 30, 2017 amounted to $5.1 billion. At June 30, 2017, the Company also has various funding arrangements with commercial banks providing up to $180.0 million in the form of federal funds and other lines of credit. At June 30, 2017, there were no balances outstanding on these lines and all of the funding was available to the Company. During July of 2017, the Company borrowed from the FHLB short-term advances of approximately $1.1 billion primarily in anticipation of purchasing Sabadell United Bank. At July 31, 2017 the Company had $4.7 billion of FHLB borrowing capacity.

Liquidity management is both a daily and long-term function of business management. The Company manages its liquidity with the objective of maintaining sufficient funds to respond to the predicted needs of depositors and borrowers and to take advantage of investments in earning assets and other earnings enhancement opportunities. Excess liquidity is generally invested in short-term investments such as overnight deposits. On a longer-term basis, the Company maintains a strategy of investing in various lending and investment security products. The Company uses its sources of funds primarily to fund loan commitments and to meet its ongoing commitments associated with its operations. Based on its available cash at June 30, 2017 and current deposit modeling, the Company believes it has adequate liquidity to fund ongoing operations. The Company has adequate availability of funds from deposits, borrowings, repayments and maturities of loans and investment securities to provide the Company additional working capital if needed.

ASSET/LIABILITY MANAGEMENT, MARKET RISK AND COUNTERPARTY CREDIT RISK

The principal objective of the Company’s asset and liability management function is to evaluate the Company's interest rate risk included in certain balance sheet accounts, determine the appropriate level of risk given the Company’s business focus, operating environment, capital and liquidity requirements and performance objectives, establish prudent asset concentration guidelines and manage the risk consistent with Board approved guidelines. Through such management, the Company seeks to reduce the vulnerability of its operations to changes in interest rates. The Company’s actions in this regard are taken under the guidance of the Asset and Liability Committee. The Asset and Liability Committee normally meets monthly to review, among other things, the sensitivity of the Company’s assets and liabilities to interest rate changes, local and national market conditions, and interest rates. In connection therewith, the Asset and Liability Committee generally reviews the Company’s liquidity, cash flow needs, composition of investments, deposits, borrowings, and capital position.

The objective of interest rate risk management is to control the effects that interest rate fluctuations have on net interest income and on the net present value of the Company’s earning assets and interest-bearing liabilities. Management and the Board are

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responsible for managing interest rate risk and employing risk management policies that monitor and limit this exposure. Interest rate risk is measured using net interest income simulation and asset/liability net present value sensitivity analyses. The Company uses financial modeling to measure the impact of changes in interest rates on the net interest margin and to predict market risk. Estimates are based upon numerous assumptions including the nature and timing of interest rate levels including yield curve shape, prepayments on loans and securities, deposit decay rates, pricing decisions on loans and deposits, reinvestment/replacement of asset and liability cash flows, and others. These analyses provide a range of potential impacts on net interest income and portfolio equity caused by interest rate movements.

Included in the modeling are instantaneous parallel rate shift scenarios, which are utilized to establish exposure limits. These scenarios are known as “rate shocks” because all rates are modeled to change instantaneously by the indicated shock amount, rather than a gradual rate shift over a period of time that has traditionally been more realistic.

The Company’s interest rate risk model indicates that the Company is asset sensitive in terms of interest rate sensitivity. Based on the Company’s interest rate risk model at June 30, 2017, the table below illustrates the impact of an immediate and sustained 100 and 200 basis point increase or decrease in interest rates on net interest income over the next twelve months.

TABLE 15—INTEREST RATE SENSITIVITY

Shift in Interest Rates (in bps)	% Change in Projected Net Interest Income
+200	9.2%
+100	4.9%
-100	(9.3)%
-200	(15.5)%

The influence of using the forward curve as of June 30, 2017 as a basis for projecting the interest rate environment would approximate a 1.4% increase in net interest income over the next 12 months. The computations of interest rate risk shown above are performed on a static balance sheet and do not necessarily include certain actions that management may undertake to manage this risk in response to unanticipated changes in interest rates and other factors to include shifts in deposit behavior.

The short-term interest rate environment is primarily a function of the monetary policy of the FRB. The principal tools of the FRB for implementing monetary policy are open market operations, or the purchases and sales of U.S. Treasury and Federal agency securities, as well as the establishment of a short-term target rate. The FRB’s objective for open market operations has varied over the years, but the focus has gradually shifted toward attaining a specified level of the Federal funds rate to achieve the long-run goals of price stability and sustainable economic growth. The Federal funds rate is the basis for overnight funding and drives the short end of the yield curve. Longer maturities are influenced by the market’s expectations for economic growth and inflation, but can also be influenced by FRB purchases and sales and expectations of monetary policy going forward.

The Federal Open Market Committee (“FOMC”) of the FRB, in an attempt to stimulate the overall economy, has, among other things, kept interest rates low through its targeted Federal funds rate. On June 15, 2017, the FOMC voted to raise the target Federal funds rate by 0.25% to a range of 1.00%-1.25%. As the FOMC increases the Federal funds rate, it is possible that overall interest rates could rise, which may negatively impact the housing markets and the U.S. economy. In addition, deflationary pressures, while possibly lowering our operating costs, could have a significant negative effect on our borrowers, especially our commercial borrowers, and the values of collateral securing loans, which could negatively affect our financial performance.

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

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The table below presents the Company’s anticipated repricing of loans and investment securities over the next four quarters.

TABLE 16—REPRICING OF CERTAIN EARNING ASSETS ⁽¹⁾ 

(Dollars in thousands)	3Q 2017		4Q 2017		1Q 2018		2Q 2018		Total less than one year
Investment securities	$	190,098	$	146,216	$	130,991	$	136,935	$	604,240
Fixed rate loans	739,408		542,316		493,062		482,781		2,257,567
Variable rate loans	8,274,778		205,893		129,256		114,488		8,724,415
Total loans	9,014,186		748,209		622,318		597,269		10,981,982
	$	9,204,284	$	894,425	$	753,309	$	734,204	$	11,586,222

⁽¹⁾ Amounts include expected maturities, scheduled paydowns, expected prepayments, and loans subject to floors and exclude the repricing of assets from prior periods, as well as non-accrual loans and market value adjustments.

As part of its asset/liability management strategy, the Company has seen greater levels of loan originations with adjustable or variable rates of interest as well as commercial and consumer loans, which typically have shorter terms than residential mortgage loans. The majority of fixed-rate, long-term residential loans are sold in the secondary market to avoid assumption of the interest rate risk associated with longer duration assets in the current low rate environment. As of June 30, 2017, $8.8 billion, or 57%, of the Company’s total loan portfolio had adjustable interest rates. The Company had no significant concentration to any single borrower or industry segment at June 30, 2017.

The Company’s strategy with respect to liabilities in recent periods has been to emphasize transaction accounts, particularly non-interest or low interest-bearing transaction accounts, which are significantly less sensitive to changes in interest rates. At June 30, 2017 and December 31, 2016, 89% of the Company’s deposits were in transaction and limited-transaction accounts. Non-interest-bearing transaction accounts were 30% of total deposits at June 30, 2017, compared to 28% of total deposits at December 31, 2016.

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

The table below presents the Company’s anticipated repricing of liabilities over the next four quarters.

TABLE 17—REPRICING OF LIABILITIES ⁽¹⁾ 

(Dollars in thousands)	3Q 2017		4Q 2017		1Q 2018		2Q 2018		Total less than one year
Time deposits	$	378,197	$	238,172	$	223,371	$	387,134	$	1,226,874
Short-term borrowings	583,935		—		—		—		583,935
Long-term debt	130,272		40,738		146,669		13,709		331,388
	$	1,092,404	$	278,910	$	370,040	$	400,843	$	2,142,197

⁽¹⁾ Amounts exclude the repricing of liabilities from prior periods.

As part of an overall interest rate risk management strategy, derivative instruments may also be used as an efficient way to modify the repricing or maturity characteristics of on-balance sheet assets and liabilities. Management may from time to time engage in interest rate swaps to effectively manage interest rate risk. The interest rate swaps of the Company would modify net interest sensitivity to levels deemed appropriate.

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IMPACT OF INFLATION OR DEFLATION AND CHANGING PRICES

The unaudited consolidated financial statements and related financial data presented herein have been prepared in accordance with GAAP, which generally require the measurement of financial position and operating results in terms of historical dollars, without considering changes in relative purchasing power over time due to inflation. Unlike most industrial companies, the majority of the Company’s assets and liabilities are monetary in nature. As a result, interest rates generally have a more significant impact on the Company’s performance than does the effect of inflation. Although fluctuations in interest rates are neither completely predictable nor controllable, the Company regularly monitors its interest rate position and oversees its financial risk management by establishing policies and operating limits. Interest rates do not necessarily move in the same direction or in the same magnitude as the prices of goods and services, since such prices are affected by inflation to a larger extent than interest rates. Although not as critical to the banking industry as to other industries, inflationary factors may have some impact on the Company’s growth, earnings, total assets and capital levels. Management does not expect inflation to be a significant factor in 2017.

Conversely, a period of deflation could affect our business, as well as all financial institutions and other industries. Deflation could lead to lower profits, higher unemployment, lower production and deterioration in overall economic conditions. In addition, deflation could depress economic activity, including loan demand and the ability of borrowers to repay loans, and consequently impair earnings through increasing the value of debt while decreasing the value of collateral for loans.

Management believes the most significant potential impact of deflation on financial results relates to the Company's ability to maintain a sufficient amount of capital to cushion against future losses. However, the Company could employ certain risk management tools to maintain its balance sheet strength in the event a deflationary scenario were to develop.

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Non-GAAP Measures

This discussion and analysis included herein contains financial information determined by methods other than in accordance with GAAP. The Company’s management uses these non-GAAP financial measures in their analysis of the Company’s performance. Non-GAAP measures include, but are not limited to, descriptions such as core, tangible, and pre-tax pre-provision. These measures typically adjust GAAP performance measures to exclude the effects of the amortization of intangibles and include the tax benefit associated with revenue items that are tax-exempt, as well as adjust income available to common shareholders for certain significant activities or transactions that, in management’s opinion, can distort period-to-period comparisons of the Company’s performance. Transactions that are typically excluded from non-GAAP performance measures include realized and unrealized gains/losses on former bank owned real estate, realized gains/losses on securities, income tax gains/losses, merger related charges and recoveries, litigation charges and recoveries, and debt repayment penalties. Management believes presentations of these non-GAAP financial measures provide useful supplemental information that is essential to a proper understanding of the operating results of the Company’s core businesses. These non-GAAP disclosures should not be viewed as a substitute for operating results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies. Reconciliations of GAAP to non-GAAP disclosures are presented in Table 18, with the exception of forward-looking information. The Company is unable to estimate GAAP EPS guidance without unreasonable efforts due to the nature of one-time or unusual items that cannot be predicted, and therefore has not provided this information under Regulation S-K Item 10(e)(1)(i)(B).

TABLE 18—RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES

	Three Months Ended
	June 30, 2017									June 30, 2016
(Dollars in thousands, except per share amounts)	Pre-tax			After-tax (1)			Per share (2)			Pre-tax			After-tax (1)			Per share (2)
Net income	$	80,051		$	52,018		$	1.01		$	76,300		$	50,810		$	1.23
Preferred stock dividends	—			(949		)	(0.02		)	—			(854		)	(0.02		)
Income available to common shareholders (GAAP)	80,051			51,069			0.99			76,300			49,956			1.21
Non-interest income adjustments (3):
Gain on sale of investments and other non-interest income	(59		)	(38		)	—			(1,789		)	(1,163		)	(0.03		)
Total non-core non-interest income	(59		)	(38		)	—			(1,789		)	(1,163		)	(0.03		)
Non-interest and other expense adjustments (3):
Merger-related expense	1,066			789			0.02			—			—			—
Severance expense	378			246			—			140			91			—
Impairment of long-lived assets, net of (gain) loss on sale	(1,306		)	(849		)	(0.02		)	(1,256		)	(816		)	(0.02		)
Litigation expense	6,000			5,481			0.11			—			—			—
Other non-core non-interest expense	—			—			—			1,177			765			0.02
Total non-core non-interest expense	6,138			5,667			0.11			61			40			—
Income tax expense (benefit)	—			—			—			—			—			—
Core earnings (Non-GAAP)	86,130			56,698			1.10			74,572			48,833			1.18
Provision for loan losses	12,050			7,833						11,866			7,712
Pre-provision earnings, as adjusted (Non-GAAP) (3)	$	98,180		$	64,531					$	86,438		$	56,545

⁽¹⁾  After-tax amounts, excluding preferred stock dividends, merger-related expense and litigation expense, are calculated using a tax rate of 35%, which approximates the marginal tax rate.

⁽²⁾  Diluted per share amounts may not appear to foot due to rounding.

⁽³⁾  Adjustments to GAAP results include certain significant activities or transactions that, in management's opinion, can distort period-to-period comparisons of the Company's performance. These adjustments include, but are not limited to, realized and unrealized gains or losses on former bank-owned real estate, realized gains or losses on the sale of investment securities, merger-related expenses, litigation charges and recoveries, debt prepayment penalties, and gains, losses, and impairment charges on long-lived assets.

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	Six Months Ended
	June 30, 2017									June 30, 2016
(Dollars in thousands, except per share amounts)	Pre-tax			After-tax (1)			Per share (2)			Pre-tax			After-tax (1)			Per share (2)
Net income	$	153,043		$	102,491		$	2.08		$	141,191		$	93,579		$	2.26
Preferred stock dividends	—			(4,548		)	(0.09		)	—			(3,430		)	(0.08		)
Income available to common shareholders (GAAP)	153,043			97,943			1.99			141,191			90,149			2.18
Non-interest income adjustments (3):
Gain on sale of investments and other non-interest income	(60		)	(38		)	—			(1,985		)	(1,290		)	(0.03		)
Total non-core non-interest income	(60		)	(38		)	—			(1,985		)	(1,290		)	(0.03		)
Non-interest and other expense adjustments (3):
Merger-related expense	1,120			824			0.02			3			2			—
Severance expense	476			309			0.01			594			386			0.01
Impairment of long-lived assets, net of (gain) loss on sale	123			80			—			(212		)	(137		)	(0.01		)
Litigation expense	6,000			5,481			0.11			—			—			—
Other non-core non-interest expense	—			—			—			2,268			1,474			0.04
Total non-core non-interest expense	7,719			6,694			0.14			2,653			1,725			0.04
Income tax benefits	—			—			—			—			—			—
Core earnings (Non-GAAP)	160,702			104,599			2.13			141,859			90,584			2.19
Provision for loan losses	18,204			11,833						26,771			17,400
Pre-provision earnings, as adjusted (Non-GAAP) (3)	$	178,906		$	116,432					$	168,630		$	107,984

⁽¹⁾  After-tax amounts, excluding preferred stock dividends, merger-related expense and litigation expense, are calculated using a tax rate of 35%, which approximates the marginal tax rate.

⁽²⁾  Diluted per share amounts may not appear to foot due to rounding.

⁽³⁾  Adjustments to GAAP results include certain significant activities or transactions that, in management's opinion, can distort period-to-period comparisons of the Company's performance. These adjustments include, but are not limited to, realized and unrealized gains or losses on former bank-owned real estate, realized gains or losses on the sale of investment securities, merger-related expenses, litigation charges and recoveries, debt prepayment penalties, and gains, losses, and impairment charges on long-lived assets.

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	As of and For the Three Months Ended June 30
(Dollars in thousands)	2017			2016
Net interest income (GAAP)	$	183,643		$	162,753
Add: Effect of tax benefit on interest income	2,492			2,290
Net interest income (TE) (Non-GAAP) (1)	$	186,135		$	165,043
Non-interest income (GAAP)	$	55,966		$	64,917
Add: Effect of tax benefit on non-interest income	668			760
Non-interest income (TE) (Non-GAAP) (1)	56,634			65,677
Taxable equivalent revenues (Non-GAAP) (1)	242,769			230,720
Securities gains and other non-interest income	(59		)	(1,789		)
Taxable equivalent core revenues (Non-GAAP) (1)	$	242,710		$	228,931
Non-interest expense (GAAP)	$	147,508		$	139,504
Less: Intangible amortization expense	1,651			2,109
Tangible non-interest expense (Non-GAAP) (2)	145,857			137,395
Less: Merger-related expense	1,066			—
Severance expense	378			140
(Gain) Loss on sale of long-lived assets, net of impairment	(1,306		)	(1,256		)
Litigation expense	6,000			—
Other non-core non-interest expense	—			1,177
Tangible core non-interest expense (Non-GAAP)(2)	$	139,719		$	137,334
Average assets (GAAP)	$	21,843,537		$	20,003,917
Less: Average intangible assets, net	753,088			761,354
Total average tangible assets (Non-GAAP) (2)	$	21,090,449		$	19,242,563
Total shareholders’ equity (GAAP)	$	3,503,242		$	2,637,597
Less: Goodwill and other intangibles	752,336			759,966
Preferred stock	132,097			132,097
Total tangible common shareholders’ equity (Non-GAAP) (2)	$	2,618,809		$	1,745,534
Average shareholders’ equity (GAAP)	$	3,500,974		$	2,603,869
Less: Average preferred equity	132,097			108,955
Average common equity	3,368,877			2,494,914
Less: Average intangible assets, net	753,088			761,354
Average tangible common shareholders’ equity (Non-GAAP) (2)	$	2,615,789		$	1,733,560
Return on average assets (GAAP)	0.96		%	1.02		%
Add: Effect of non-core revenues and expenses	0.10			(0.02		)
Core return on average assets (Non-GAAP)	1.06		%	1.00		%
Return on average common equity (GAAP)	6.08		%	8.05		%
Add: Effect of intangibles	1.92			3.85
Effect of non-core items	0.86			(0.26		)
Core return on average tangible common equity (Non-GAAP) (2)	8.86		%	11.64		%
Efficiency ratio (GAAP)	61.6		%	61.3		%
Less: Effect of tax benefit related to tax-exempt income	0.8			0.8
Efficiency ratio (TE) (Non-GAAP) (1)	60.8		%	60.5		%
Less: Effect of amortization of intangibles	0.7			0.9

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Effect of non-core items	2.5			(0.4		)
Core tangible efficiency ratio (TE) (Non-GAAP) (1) (2)	57.6		%	60.0		%
Total shareholders' equity (GAAP)	$	3,503,242		$	2,637,597
Less: Goodwill and other intangibles	752,336			759,966
Preferred stock	132,097			132,097
Tangible common equity (Non-GAAP) (2)	$	2,618,809		$	1,745,534
Total assets (GAAP)	$	21,790,727		$	20,160,855
Less: Goodwill and other intangibles	752,336			759,966
Tangible assets (Non-GAAP) (2)	$	21,038,391		$	19,400,889
Tangible common equity ratio (Non-GAAP) (2)	12.45		%	9.00		%
Cash Yield:
Earning assets average balance (GAAP)	$	20,108,855		$	18,155,004
Add: Adjustments	72,310			84,118
Earning assets average balance, as adjusted (Non-GAAP)	$	20,181,165		$	18,239,122
Net interest income (GAAP)	$	183,643		$	162,753
Add: Adjustments	(12,176		)	(8,573		)
Net interest income, as adjusted (Non-GAAP)	$	171,467		$	154,180
Yield, as reported	3.71		%	3.65		%
Add: Adjustments	(0.26		)	(0.21		)
Yield, as adjusted (Non-GAAP)	3.45		%	3.44		%

⁽¹⁾ Fully taxable-equivalent (TE) calculations include the tax benefit associated with related income sources that are tax-exempt using a rate of 35%, which approximates the marginal tax rate.

⁽²⁾ Tangible calculations eliminate the effect of goodwill and acquisition-related intangibles and the corresponding amortization expense on a tax-effected basis where applicable.

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Glossary of Defined Terms

Term	Definition
ACL	Allowance for credit losses
Acquired loans	Loans acquired in a business combination
AFS	Securities available for sale
ALL	Allowance for loan and lease losses
AOCI	Accumulated other comprehensive income (loss)
ASC	Accounting Standards Codification
ASU	Accounting Standards Update
Basel III	Global regulatory standards on bank capital adequacy and liquidity published by the BCBS
BCBS	Basel Committee on Banking Supervision
CDE	IBERIA CDE, LLC
CET1	Common Equity Tier 1 Capital defined by Basel III capital rules
CFPB	Consumer Financial Protection Bureau
Company	IBERIABANK Corporation and Subsidiaries
Dodd-Frank Act	Dodd-Frank Wall Street Reform and Consumer Protection Act
ECL	Expected credit losses
EPS	Earnings per common share
FASB	Financial Accounting Standards Board
FDIC	Federal Deposit Insurance Corporation
FHLB	Federal Home Loan Bank
FOMC	Federal Open Market Committee
FRB	Board of Governors of the Federal Reserve System
GAAP	Accounting principles generally accepted in the United States of America
GSE	Government-sponsored enterprises
HTM	Securities held-to-maturity
IAM	IBERIA Asset Management, Inc.
IBERIABANK	Banking subsidiary of IBERIABANK Corporation
ICP	IBERIA Capital Partners, LLC
IFS	IBERIA Financial Services
IMC	IBERIABANK Mortgage Company
IWA	IBERIA Wealth Advisors
Legacy loans	Loans that were originated directly or otherwise underwritten by the Company
LIBOR	London Interbank Borrowing Offered Rate
LIHTC	Low-income housing tax credit
LTC	Lenders Title Company
MSA	Metropolitan statistical area
Non-GAAP	Financial measures determined by methods other than in accordance with GAAP
NPA	Non-performing asset
OCI	Other comprehensive income
OREO	Other real estate owned
OTTI	Other than temporary impairment
Parent	IBERIABANK Corporation
PCD	Purchased Financial Assets with Credit Deterioration
RRP	Recognition and Retention Plan
RULC	Reserve for unfunded lending commitments

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SBA	Small Business Administration
SEC	Securities and Exchange Commission
TE	Fully taxable equivalent
TDR	Troubled debt restructuring
U.S.	United States of America

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

Quantitative and qualitative disclosures about market risk are presented at December 31, 2016 in Part II, Item 7A of the Company’s Annual Report on Form 10-K, filed with the Securities and Exchange Commission on February 21, 2017. Additional information at June 30, 2017 is included herein under Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”.

Item 4. Controls and Procedures

An evaluation of the effectiveness of the Company’s disclosure controls and procedures as of June 30, 2017 was carried out under the supervision, and with the participation of, the Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”). Based on that evaluation, the CEO and CFO have concluded that the Company’s disclosure controls and procedures are effective in alerting them in a timely manner to material information required to be disclosed by the Company in reports that it files or submits under the Securities Exchange Act of 1934 (the “Exchange Act”).

Disclosure controls and procedures are designed to ensure that information required to be disclosed in reports filed by the Company under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls are also designed with the objective of ensuring that such information is accumulated and communicated to the Company’s management, including the CEO and the CFO, as appropriate, to allow timely decisions regarding required disclosures. Disclosure controls include review of internal controls that are designed to provide reasonable assurance that transactions are properly authorized, assets are safeguarded against unauthorized or improper use and transactions are properly recorded and reported. There was no significant change in the Company’s internal controls over financial reporting during the last fiscal quarter that has materially affected, or is reasonably likely to materially affect, the internal control over financial reporting.

Any control system, no matter how well conceived and operated, can provide only reasonable assurance that its objectives are achieved. The design of a control system inherently has limitations, including the controls’ cost relative to their benefits. Additionally, controls can be circumvented. No cost-effective control system can provide absolute assurance that all control issues and instances of fraud, if any, will be detected.

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Part II. Other Information

Item 1. Legal Proceedings

See the "Legal Proceedings" section of "Note 14 – Commitments and Contingencies" of the Notes to the Unaudited Consolidated Financial Statements, incorporated herein by reference.

Item 1A. Risk Factors

For information regarding risk factors that could affect the Company's results of operations, financial condition and liquidity, see the risk factors disclosed in the "Risk Factors" section of the Company's Annual Report on Form 10-K for the year ended December 31, 2016, filed with the Securities and Exchange Commission on February 21, 2017.

The risk factors below relate to the recently announced acquisition of Sabadell United Bank, N.A., which we refer to as "Sabadell," from Banco de Sabadell, S.A., which we refer to as "Banco Sabadell," and are in addition to the risk factors previously disclosed in the Company's Annual Report on Form 10-K for the year ended December 31, 2016. The Company completed its acquisition of Sabadell on July 31, 2017.

We may be unable to successfully integrate Sabadell’s operations and retain its key employees.

We and Sabadell have operated and, until the completion of the Sabadell Acquisition, will continue to operate, independently. It is possible that the integration process could result in the loss of key employees, the disruption of either company’s ongoing businesses or inconsistencies in standards, controls, procedures and policies that could adversely affect our ability to maintain relationships with Sabadell’s customers, depositors and employees and our ability to achieve the anticipated benefits of the acquisitions. Integration efforts between the Company and Sabadell will also divert management attention and resources. These integration matters could have an adverse effect on the Company and Sabadell during the transition period and on the combined company after the completion of the proposed acquisition, and no assurance can be given that the operation of the combined company will not adversely affect our existing profitability, that we will be able to achieve results in the future similar to those achieved by our existing banking business, or that we will be able to manage any growth resulting from the Sabadell Acquisition effectively.

We may fail to realize all of the anticipated benefits of the Sabadell Acquisition.

The success of the proposed acquisition will depend, in part, on our ability to realize the anticipated benefits and cost savings from combining our business with the business of Sabadell. However, to realize these anticipated benefits and cost savings, we must successfully combine the businesses. If we are not able to achieve these objectives, the anticipated benefits and cost savings of the Sabadell Acquisition may not be realized fully or at all or may take longer to realize than expected.

We will incur significant transaction and acquisition-related integration costs in connection with the Sabadell Acquisition.

We expect to incur significant costs associated with completing the Sabadell Acquisition and integrating Sabadell’s operations, and are continuing to assess the impact of these costs. Although we believe that the elimination of duplicate costs, as well as the realization of other efficiencies related to the integration of Sabadell’s business, will offset incremental transaction and merger-related costs over time, this net benefit may not be achieved in the near term, or at all. If the proposed acquisition is not completed, these expenses will still be charged to earnings even though the Company would not have realized the expected benefits of the merger.

The market price of our common stock after the completion of the Sabadell Acquisition may be affected by factors different from those currently affecting our shares.

The businesses and current markets of the Company and Sabadell differ and, accordingly, the results of operations of the Company and the market price of our common stock after the Sabadell Acquisition may be affected by factors different from those currently affecting our independent results. For example, while the Company currently operates primarily in eight states (Louisiana, Arkansas, Tennessee, Alabama, Texas, Florida, Georgia and South Carolina), Sabadell’s operations are concentrated in Florida, with all of Sabadell’s branch and loan production offices being in Florida and approximately 95% of its deposits originating in the Miami-Fort Lauderdale-West Palm Beach metropolitan statistical area. After giving effect to the Sabadell Acquisition, Florida will become the Company’s largest state by deposits. Changes in geographic concentration, loan mix and client base present different risks. The success of the proposed acquisition will depend, in part, on our ability to manage those risks.

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

Information concerning Iberiabank Corporation's repurchases of its outstanding common stock during the three-month period ended June 30, 2017, is included in the following table:

Issuer Purchases of Equity Securities

Period	Total Number of Shares Purchased	Average Price Paid per Share	Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs
April 1-30, 2017	—	—	—	747,494
May 1-31, 2017	—	—	—	747,494
June 1-30, 2017	—	—	—	747,494
Total	—	—	—	747,494

On May 4, 2016, IBERIABANK Corporation's Board of Directors authorized the repurchase of up to 950,000 shares of the Company's outstanding common stock. Stock repurchases under this program will be made from time to time, on the open market or in privately negotiated transactions. The timing of these repurchases will depend on market conditions and other requirements. The Company anticipates the share repurchase program will extend over a two-year time frame, or earlier if the shares have been repurchased. The share repurchase program does not obligate the Company to repurchase any dollar amount or number of shares, and the program may be extended, modified, suspended, or discontinued at any time.

Restrictions on Dividends and Repurchase of Stock

Holders of IBERIABANK Corporation common stock are only entitled to receive such dividends as the Company's Board of Directors may declare out of funds legally available for such payments. Furthermore, holders of IBERIABANK Corporation common stock are subject to the prior dividend rights of any holders of the Company's preferred stock then outstanding. There were 13,750 shares of preferred stock outstanding at June 30, 2017.

IBERIABANK Corporation understands the importance of returning capital to shareholders. Management will continue to execute the capital planning process, including evaluation of the amount of the common stock dividend, with the Board of Directors and in conjunction with the regulators, subject to the Company's results of operations. Also, IBERIABANK Corporation is a bank holding company, and its ability to declare and pay dividends is dependent on certain federal regulatory considerations, including the guidelines of the Federal Reserve regarding capital adequacy and dividends.

Item 3. Defaults Upon Senior Securities

Not Applicable.

Item 4. Mine Safety Disclosures

Not Applicable.

Item 5. Other Information

None.

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Item 6. Exhibits

Exhibit No. 31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Exhibit No. 31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Exhibit No. 32.1	Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
Exhibit No. 32.2	Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
Exhibit No. 101.INS	XBRL Instance Document.
Exhibit No. 101.SCH	XBRL Taxonomy Extension Schema.
Exhibit No. 101.CAL	XBRL Taxonomy Extension Calculation Linkbase.
Exhibit No. 101.DEF	XBRL Taxonomy Extension Definition Linkbase.
Exhibit No. 101.LAB	XBRL Taxonomy Extension Label Linkbase.
Exhibit No. 101.PRE	XBRL Taxonomy Extension Presentation Linkbase.

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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.

	IBERIABANK Corporation
Date: August 9, 2017	By:	/s/ Daryl G. Byrd
	Daryl G. Byrd
	President and Chief Executive Officer
Date: August 9, 2017	By:	/s/ Anthony J. Restel
	Anthony J. Restel
	Senior Executive Vice President and Chief Financial Officer

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