CADE 10-Q Quarterly Report Sept. 30, 2017

CADENCE BANCORPORATION

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10-Q 1 cade-10q_20170930.htm 10-Q cade-10q_20170930.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended September 30, 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 001-38058

Cadence Bancorporation

(Exact name of registrant as specified in its charter)

Delaware		47-1329858
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

2800 Post Oak Boulevard, Suite 3800

Houston, Texas 77056

(Address of principal executive offices) (Zip Code)

(713)-871-4000

(Registrant’s telephone number, including area code)

Not Applicable

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

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

Indicate by check mark whether the registrant has submitted electronically 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 ☐ No

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

☐	Large accelerated filer	☐	Accelerated filer

☒	Non-accelerated filer	☐	Smaller reporting company

		☒	Emerging growth company

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

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

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

Class A Common Stock, $0.01 Par Value		83,625,000
Class		Outstanding as of November 14, 2017

Cadence Bancorporation

FORM 10-Q

For the Quarter Ended September 30, 2017

INDEX

PART I: FINANCIAL INFORMATION		3

ITEM 1.	FINANCIAL STATEMENTS	3

	Condensed Consolidated Balance Sheets as of September 30, 2017 (Unaudited) and December 31, 2016	3
	Unaudited Condensed Consolidated Statements of Income for the Three and Nine Months Ended September 30, 2017 and 2016	4
	Unaudited Condensed Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2017 and 2016	5
	Unaudited Condensed Consolidated Statements of Changes in Shareholders' Equity for the Nine Months Ended September 30, 2017	6
	Unaudited Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2017 and 2016	7
	Unaudited Notes to Condensed Consolidated Financial Statements	8

ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	44

ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK	86

ITEM 4.	CONTROLS AND PROCEDURES	89

PART II: OTHER INFORMATION		90

ITEM 1.	LEGAL PROCEEDINGS	90

ITEM 1A.	RISK FACTORS	90

ITEM 2.	UNREGISTERED SALES OF EQUITY AND USE OF PROCEEDS	90

ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	90

ITEM 4.	MINE SAFETY DISCLOSURES	90

ITEM 5.	OTHER INFORMATION	90

ITEM 6.	EXHIBITS	90

PART I: FINANCI AL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

CADENCE BANCORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

	September 30, 2017			December 31, 2016
(In thousands, except share data)	(unaudited)
ASSETS
Cash and due from banks	$	68,248		$	48,017
Interest-bearing deposits with banks		515,556			199,747
Federal funds sold		5,578			1,161
Total cash and cash equivalents		589,382			248,925
Securities available-for-sale		1,198,032			1,139,347
Securities held-to-maturity (estimated fair value of $451 and $463 at September 30, 2017 and December 31, 2016, respectively)		425			425
Other securities - FRB and FHLB stock		54,246			41,493
Loans held for sale		21,835			17,822
Loans		8,028,938			7,432,711
Less: allowance for credit losses		(94,765	)		(82,268	)
Net loans		7,934,173			7,350,443
Interest receivable		42,030			39,889
Premises and equipment, net		64,425			66,676
Other real estate owned		18,836			18,875
Cash surrender value of life insurance		107,393			105,834
Net deferred tax asset		61,395			83,662
Goodwill		317,817			317,817
Other intangible assets, net		11,307			14,874
Other assets		80,965			84,806
Total Assets	$	10,502,261		$	9,530,888
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Noninterest-bearing deposits	$	2,071,594		$	1,840,955
Interest-bearing deposits		6,429,508			6,175,794
Total deposits		8,501,102			8,016,749
Securities sold under agreements to repurchase		3,146			3,494
Federal Home Loan Bank advances		250,000			—
Senior debt		184,557			193,788
Subordinated debt		98,627			98,441
Junior subordinated debentures		36,353			35,989
Other liabilities		87,628			101,929
Total liabilities		9,161,413			8,450,390
Shareholders' Equity:
Common Stock $0.01 par value, authorized 300,000,000 shares; 83,625,000 and 75,000,000 shares issued and outstanding at September 30, 2017 and December 31, 2016, respectively		836			750
Additional paid-in capital		1,036,585			879,665
Retained earnings		320,276			232,614
Accumulated other comprehensive loss ("OCI")		(16,849	)		(32,531	)
Total shareholders' equity		1,340,848			1,080,498
Total Liabilities and Shareholders' Equity	$	10,502,261		$	9,530,888

See accompanying notes to the unaudited condensed consolidated financial statements.

CADENCE BANCORPORATION AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME

	Three Months Ended September 30,				Nine Months Ended September 30,
(In thousands, except per share data)	2017		2016		2017			2016
INTEREST INCOME
Interest and fees on loans	$	90,161	$	77,067	$	261,400		$	226,503
Interest and dividends on securities:
Taxable		4,610		3,866		13,089			12,420
Tax-exempt		3,280		2,386		10,079			5,623
Other interest income		1,452		1,335		3,929			3,636
Total interest income		99,503		84,654		288,497			248,182
INTEREST EXPENSE
Interest on time deposits		5,665		4,676		15,084			12,867
Interest on other deposits		7,413		4,604		19,530			13,170
Interest on borrowed funds		5,262		4,948		15,578			15,204
Total interest expense		18,340		14,228		50,192			41,241
Net interest income		81,163		70,426		238,305			206,941
Provision for credit losses		1,723		29,627		14,210			54,570
Net interest income after provision for credit losses		79,440		40,799		224,095			152,371
NONINTEREST INCOME
Service charges on deposit accounts		3,920		3,555		11,519			10,179
Other service fees		1,174		797		3,217			2,263
Credit related fees		3,306		2,690		8,794			7,870
Trust services revenue		4,613		3,959		14,428			12,000
Mortgage banking income		965		1,459		3,044			3,644
Investment advisory revenue		5,283		4,733		15,260			13,990
Securities gains (losses), net		1		1,386		(162	)		2,469
Other income		7,862		4,212		18,118			13,628
Total noninterest income		27,124		22,791		74,218			66,043
NONINTEREST EXPENSE
Salaries and employee benefits		35,007		31,086		103,956			96,929
Premises and equipment		7,419		7,130		21,292			20,507
Intangible asset amortization		1,136		1,607		3,567			4,977
Other expense		12,968		15,053		38,170			42,373
Total noninterest expense		56,530		54,876		166,985			164,786
Income before income taxes		50,034		8,714		131,328			53,628
Income tax expense		17,457		2,107		43,666			16,839
Net income	$	32,577	$	6,607	$	87,662		$	36,789
Weighted average common shares outstanding (Basic)		83,625,000		75,000,000		80,212,912			75,000,000
Weighted average common shares outstanding (Diluted)		83,955,685		75,258,375		80,558,337			75,258,375
Earnings per common share (Basic)	$	0.39	$	0.09	$	1.09		$	0.49
Earnings per common share (Diluted)	$	0.39	$	0.09	$	1.09		$	0.49

See accompanying notes to the unaudited condensed consolidated financial statements.

CADENCE BANCORPORATION AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

	Three Months Ended September 30,						Nine Months Ended September 30,
(In thousands)	2017			2016			2017			2016
Net income	$	32,577		$	6,607		$	87,662		$	36,789
Other comprehensive income (loss), net of tax:
Net unrealized gains (losses) on securities available-for-sale:
Unrealized gains (losses) arising during the period (net of $(2,153), $3,352, $(8,844), and $(5,081) tax effect, respectively)		3,745			(5,741	)		15,308			8,704
Reclassification adjustments for (gains) losses realized in net income (net of $0, $511, $(60), and $910 tax effect, respectively)		(1	)		(875	)		102			(1,559	)
Net unrealized gains (losses) on securities available-for-sale		3,744			(6,616	)		15,410			7,145
Net unrealized gains (losses) on derivative instruments designated as cash flow hedges:
Unrealized gains (losses) arising during the period (net of $(202), $1,679, $(1,427), and $(10,196) tax effect, respectively)		344			(2,877	)		2,445			17,465
Reclassification adjustments for gains realized in net income (net of $151, $1,086, $1,269, and $3,070 tax effect, respectively)		(258	)		(1,859	)		(2,173	)		(5,258	)
Net change in unrealized gains (losses) on derivative instruments		86			(4,736	)		272			12,207
Other comprehensive income (loss), net of tax		3,830			(11,352	)		15,682			19,352
Comprehensive income (loss)	$	36,407		$	(4,745	)	$	103,344		$	56,141

See accompanying notes to the unaudited condensed consolidated financial statements.

CADENCE BANCORPORATION AND SUBSIDIARIES

UNAUDITED CONDENSED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(In thousands)	Common Stock		Additional Paid-in Capital		Retained Earnings		Accumulated OCI			Total Shareholders' Equity
Balance, December 31, 2016	$	750	$	879,665	$	232,614	$	(32,531	)	$	1,080,498
Equity-based compensation cost		—		1,425		—		—			1,425
Net income		—		—		87,662		—			87,662
Other comprehensive income		—		—		—		15,682			15,682
Issuance of 8,625,000 common shares, net of issuance costs		86		155,495		—		—			155,581
Balance, September 30, 2017	$	836	$	1,036,585	$	320,276	$	(16,849	)	$	1,340,848

See accompanying notes to the unaudited condensed consolidated financial statements.

CADENCE BANCORPORATION AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

	Nine Months Ended September 30,
(In thousands)	2017			2016
NET CASH FLOWS PROVIDED BY OPERATING ACTIVITIES	$	149,841		$	71,661
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of securities available-for-sale		(278,339	)		(743,203	)
Proceeds from sales of securities available-for-sale		152,256			259,250
Proceeds from maturities, calls and paydowns of securities available-for-sale		72,137			103,566
Proceeds from sale of commercial loans held for sale		—			328,840
Increase in loans, net		(613,993	)		(654,485	)
Purchase of premises and equipment		(5,734	)		(3,700	)
Proceeds from disposition of foreclosed property		6,721			24,872
Other, net		(22,430	)		14,890
Net cash used in investing activities		(689,382	)		(669,970	)
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in deposits, net		484,365			930,011
Net change in securities sold under agreements to repurchase		(348	)		(909	)
Net change in short-term FHLB advances		250,000			(370,000	)
Purchase of senior debt		(9,600	)		(78	)
Proceeds from issuance of common stock		155,581			—
Net cash provided by financing activities		879,998			559,024
Net increase (decrease) in cash and cash equivalents		340,457			(39,285	)
Cash and cash equivalents at beginning of period		248,925			467,207
Cash and cash equivalents at end of period	$	589,382		$	427,922

See accompanying notes to the unaudited condensed consolidated financial statements.

CADENCE BANCORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Cadence Bancorporation (the “Company”) is a Delaware corporation and a bank holding company whose primary asset is its investment in its wholly owned subsidiary bank, Cadence Bank, N.A., a national banking association (the “Bank”).

Note 1—Summary of Accounting Policies

Basis of Presentation and Consolidation

The accompanying unaudited condensed consolidated financial statements for the Company have been prepared in accordance with instructions to the SEC Form 10-Q and Article 10 of Regulation S-X; therefore, they do not include all information and footnotes necessary for a fair presentation of financial position, results of operations, comprehensive income, and cash flows in conformity with accounting principles generally accepted in the United States of America (“GAAP”). All adjustments consisting of normally recurring accruals that, in the opinion of management, are necessary for a fair presentation of the consolidated financial position and results of operations for the periods covered by this report have been included. 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 prospectus filed with the Securities and Exchange Commission on November 9, 2017 pursuant to Rule 424(b) of the Securities Act. Operating results for the period ended September 30, 2017 are not necessarily indicative of the results that may be expected for the year ending December 31, 2017.

The Company and its subsidiaries follow accounting principles generally accepted in the United States of America, including, where applicable, general practices within the banking industry. The consolidated financial statements include the accounts of the Company and its subsidiaries. Significant intercompany accounts and transactions have been eliminated in consolidation. 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 (Note 20).

Certain amounts reported in prior years have been reclassified to conform to the 2017 presentation. These reclassifications did not materially impact the Company’s consolidated balance sheets or consolidated statements of income.

Stock Split

On March 30, 2017, the Board of Directors approved a 75-for-one stock split of the Company’s common stock. The stock split occurred on April 7, 2017. The effect of the stock split on outstanding shares and earnings per share has been retroactively applied to all periods presented.

Nature of Operations

The Company’s subsidiaries include:

•

Town & Country Insurance Agency, Inc., dba Cadence Insurance—full service insurance agency

•

The Bank

The Bank operates under a national bank charter and is subject to regulation by the Office of the Comptroller of the Currency (OCC). The Bank provides lending services in Georgia and full banking services in five southern states: Alabama, Florida, Mississippi, Tennessee, and Texas.

The Bank’s subsidiaries include:

•

Linscomb & Williams Inc. —financial advisory firm; and

•

Cadence Investment Services, Inc.—provides investment and insurance products,

The Company and the Bank also have certain other non-operating and immaterial subsidiaries.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those

estimates. Ma terial estimates that are susceptible to significant change in the near term are the allowance for credit losses, valuation of and accounting for acquired credit impaired loans, valuation of goodwill, intangible assets and deferred income taxes.

Recently Adopted Accounting Pronouncements

In March 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-09, “Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting.” Under ASU 2016-09, all excess tax benefits and tax deficiencies related to share-based payment awards should be recognized as income tax expense or benefit in the income statement during the period in which they occur. Previously, such amounts were recorded in the pool of excess tax benefits included in additional paid-in capital, if such pool was available. Because excess tax benefits are no longer recognized in additional paid-in capital, the assumed proceeds from applying the treasury stock method when computing earnings per share should exclude the amount of excess tax benefits that would have previously been recognized in additional paid-in capital. Additionally, excess tax benefits should be classified along with other income tax cash flows as an operating activity rather than a financing activity, as was previously the case. ASU 2016-09 also provides that an entity can make an entity-wide accounting policy election to either estimate the number of awards that are expected to vest (current GAAP) or account for forfeitures when they occur. ASU 2016-09 changes the threshold to qualify for equity classification (rather than as a liability) to permit withholding up to the maximum statutory tax rates (rather than the minimum as was previously the case) in the applicable jurisdictions. The adoption at January 1, 2017 of ASU 2016-09 did not have a significant impact on our financial position, results of operations or cash flows.

Pending Accounting Pronouncements

In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606),” (ASU 2014-09), which is intended to improve and converge the financial reporting requirements for revenue contracts with customers. Previous accounting guidance comprised broad revenue recognition concepts along with numerous industry-specific requirements. The new guidance establishes a five-step model which entities must follow to recognize revenue and removes inconsistencies and weaknesses in existing guidance. The banking industry does not expect significant changes because major sources of revenue are from financial instruments that have been excluded from the scope of the new standard (including loans, derivatives, debt and equity securities, etc.). ASU 2014-09 is effective for annual and interim periods beginning after December 15, 2017, and must be retrospectively applied. Entities will have the option of presenting prior periods as impacted by the new guidance or presenting the cumulative effect of initial application along with supplementary disclosures. We expect that ASU 2014-09 will require us to change how we recognize certain recurring revenue streams within insurance commissions and fees and other categories of noninterest income; however, we do not expect these changes to have a significant impact on our consolidated financial statements. We expect to adopt the standard in the first quarter of 2018 with a cumulative effect adjustment to opening retained earnings, if such adjustment is deemed to be significant.

In January 2016, the FASB issued ASU 2016-01, “Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities”. ASU 2016-1, among other things, (i) requires equity investments, with certain exceptions, to be measured at fair value with changes in fair value recognized in net income, (ii) simplifies the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment, (iii) eliminates the requirement for public business entities to disclose the methods and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheets, (iv) requires public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes, (v) requires an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments, (vi) requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset on the balance sheets or the accompanying notes to the financial statements and (viii) clarifies that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale. ASU 2016-01 will be effective for fiscal years and interim periods beginning after December 15, 2017. The Company does not expect this guidance will have a material effect on the Company’s consolidated balance sheets and consolidated statements of income.

In February 2016, the FASB issued ASU 2016-02, “Leases” . This ASU requires lessees to recognize lease assets and lease liabilities generated by contracts longer than a year on their balance sheets. The ASU also requires companies to disclose in the footnotes to their financial statements information about the amount, timing, and uncertainty for the payments they make for the lease agreements. ASU 2016-02 will be effective for annual periods and interim periods within those annual periods beginning after December 31, 2018. The Company is evaluating the effect of adopting this new accounting guidance.

In June 2016, the FASB has issued ASU No. 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments”. The guidance is intended to improve financial reporting by requiring timelier recording of credit losses on loans and other financial instruments. The guidance will replace the current incurred loss accounting model with an expected loss approach and requires the measurement of all expected credit losses for financial assets held at the reporting date

based on historical experience, current conditions, and reasonable and supportable forecasts. The guidance requires enhanced disclosures to help investor s and other financial statement users better understand significant estimates and judgments used in estimating credit losses, as well as the credit quality and underwriting standards of an organization’s portfolio. The ASU is effective for fiscal years, an d interim periods within those fiscal years, beginning after December 15, 2019. The Company is evaluating the effect of adopting this new accounting guidance.

In August 2016, the FASB issued ASU No. 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments”, in order to reduce current diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. ASU 2016-15 will be effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. The amendments should be applied using a retrospective transition method to each period presented. The Company is currently evaluating the impact of the ASU on the Company’s consolidated statement of cash flows. The Company is not expecting to early adopt the ASU.

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 with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The amendments are intended to narrow the current interpretation of a business. ASU No. 2017-01 will be effective for annual reporting periods beginning after December 15, 2017, including interim reporting periods within those periods. The amendments will be applied prospectively on or after the effective date. Early application of the amendments in this ASU is allowed for transactions, including when a subsidiary or group of assets is deconsolidated/derecognized, in which the acquisition date occurs before the issuance date or effective date of the amendments, only when the transaction has not been reported in financial statements that have been issued or made available for issuance. The Company is currently evaluating the effect of the ASU.

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.

In March 2017, the FASB issued ASU No. 2017-08, “Receivables-Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities”, which will shorten the amortization period for callable debt securities held at a premium to the earliest call date instead of the maturity date. The amendments do not require an accounting change for securities held at a discount, which will continue to be amortized to the maturity date. ASU No. 2017-08 will be effective for annual reporting periods beginning after December 15, 2018, including interim reporting periods within those periods. The amendments should be applied using a modified-retrospective transition method as of the beginning of the period of adoption. Early adoption is permitted, including adoption in an interim period. The Company is currently assessing this pronouncement and it is not expected to have a material impact on the Company’s financial condition or results of operations.

In August 2017, the FASB issued ASU 2017-12, “Derivatives and Hedging (Topic 815) - Targeted Improvements to Accounting for Hedging Activities.” ASU 2017-12 amends the hedge accounting recognition and presentation requirements in ASC 815 to improve the transparency and understandability of information conveyed to financial statement users about an entity’s risk management activities to better align the entity’s financial reporting for hedging relationships with those risk management activities and to reduce the complexity of and simplify the application of hedge accounting. ASU 2017-12 will be effective for periods beginning after December 15, 2018 and is not expected to have a significant impact on the Company’s financial condition or results of operations.

Note 2—Securities

A summary of amortized cost and estimated fair value of securities available-for-sale and securities held-to-maturity at September 30, 2017 and December 31, 2016 is as follows:

			Gross		Gross
	Amortized		Unrealized		Unrealized		Estimated
(In thousands)	Cost		Gains		Losses		Fair Value
September 30, 2017
Securities available-for-sale:
U.S. Treasury securities	$	100,615	$	—	$	2,927	$	97,688
Obligations of U.S. government agencies		83,508		760		103		84,165
Mortgage-backed securities issued or guaranteed by U.S. agencies (MBS)
Residential pass-through:
Guaranteed by GNMA		112,328		1,049		842		112,535
Issued by FNMA and FHLMC		383,375		2,154		1,487		384,042
Other residential mortgage-backed securities		41,095		234		761		40,568
Commercial mortgage-backed securities		64,776		—		3,786		60,990
Total MBS		601,574		3,437		6,876		598,135
Obligations of states and municipal subdivisions		420,011		3,690		11,485		412,216
Other securities		5,714		248		134		5,828
Total securities available-for-sale	$	1,211,422	$	8,135	$	21,525	$	1,198,032
Securities held-to-maturity:
Obligations of states and municipal subdivisions	$	425	$	26	$	—	$	451

(In thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
December 31, 2016
Securities available-for-sale:
U.S. Treasury securities	$	100,736	$	—	$	3,951	$	96,785
Obligations of U.S. government agencies		97,340		508		320		97,528
Mortgage-backed securities issued or guaranteed by U.S. agencies (MBS)
Residential pass-through:
Guaranteed by GNMA		152,918		1,401		1,166		153,153
Issued by FNMA and FHLMC		267,035		1,499		3,206		265,328
Other residential mortgage-backed securities		48,076		375		890		47,561
Commercial mortgage-backed securities		66,720		—		4,107		62,613
Total MBS		534,749		3,275		9,369		528,655
Obligations of states and municipal subdivisions		438,655		870		28,713		410,812
Other securities		5,580		149		162		5,567
Total securities available-for-sale	$	1,177,060	$	4,802	$	42,515	$	1,139,347
Securities held-to-maturity:
Obligations of states and municipal subdivisions	$	425	$	38	$	—	$	463

The scheduled contractual maturities of securities available-for-sale and securities held-to-maturity at September 30, 2017 were as follows:

	Available-for-Sale				Held-to-Maturity
	Amortized		Estimated		Amortized		Estimated
(In thousands)	Cost		Fair Value		Cost		Fair Value
Due in one year or less	$	—	$	—	$	—	$	—
Due after one year through five years		108,620		105,798		425		451
Due after five years through ten years		20,818		21,133		—		—
Due after ten years		474,696		467,138		—		—
Mortgage-backed securities and other securities		607,288		603,963		—		—
Total	$	1,211,422	$	1,198,032	$	425	$	451

Proceeds from sales, gross gains and gross losses on sales of securities available for sale for the three and nine months ended September 30, 2017 and 2016 are presented below. There were no other-than-temporary impairment charges included in gross realized losses for the three and nine months ended September 30, 2017 and 2016. The specific identification method is used to reclassify gains and losses out of other comprehensive income at the time of sale.

	For the Three Months Ended					For the Nine Months Ended
	September 30,					September 30,
(In thousands)	2017		2016			2017			2016
Gross realized gains	$	1	$	1,724		$	151		$	2,905
Gross realized losses		—		(338	)		(313	)		(436	)
Realized gains (losses) on sale of securities available for sale, net	$	1	$	1,386		$	(162	)	$	2,469

Securities with a carrying value of $513.4 million and $380.4 million at September 30, 2017 and December 31, 2016, respectively, were pledged to secure public and trust deposits, FHLB borrowings, repurchase agreements and for other purposes as required or permitted by law.

The detail concerning securities classified as available-for-sale with unrealized losses as of September 30, 2017 and December 31, 2016 was as follows:

	Unrealized loss analysis
	Losses < 12 Months				Losses > 12 Months
			Gross				Gross
	Estimated		Unrealized		Estimated		Unrealized
(In thousands)	Fair Value		Losses		Fair Value		Losses
September 30, 2017
U.S. Treasury securities	$	—	$	—	$	97,688	$	2,927
Obligations of U.S. government agencies		138		—		25,784		103
Mortgage-backed securities		218,226		4,108		58,347		2,768
Obligations of states and municipal subdivisions		140,067		4,134		93,325		7,351
Other securities		—		—		4,313		134
Total	$	358,431	$	8,242	$	279,457	$	13,283

	Unrealized loss analysis
	Losses < 12 Months				Losses > 12 Months
			Gross				Gross
	Estimated		Unrealized		Estimated		Unrealized
(In thousands)	Fair Value		Losses		Fair Value		Losses
December 31, 2016
U.S. Treasury securities	$	96,785	$	3,951	$	—	$	—
Obligations of U.S. government agencies		51,463		277		12,150		43
Mortgage-backed securities		328,374		8,482		17,979		887
Obligations of states and municipal subdivisions		344,708		28,713		—		—
Other securities		—		—		4,216		162
Total	$	821,330	$	41,423	$	34,345	$	1,092

There were no securities classified as held-to-maturity with unrealized losses as of September 30, 2017 and December 31, 2016.

As of September 30, 2017 and December 31, 2016, approximately 53% and 75%, respectively, of the fair value of securities in the investment po rtfolio reflected an unrealized loss. As of September 30, 2017, there were 61 securities that had been in a loss position for more than twelve months, and 82 securities that had been in a loss position for less than 12 months. None of the unrealized losses relate to the marketability of the securities or the issuer’s ability to honor redemption of the obligations. The Company has adequate liquidity and, therefore, does not plan to sell and, more likely than not, will not be required to sell these securities before recovery of the indicated impairment. Accordingly, the unrealized losses on these securities have been determined to be temporary.

Note 3—Loans and Allowance for Credit Losses

The following table presents total loans outstanding by portfolio segment and class of financing receivable as of September 30, 2017 and December 31, 2016. Outstanding balances also include Acquired Noncredit Impaired (“ANCI”) loans, originated loans and Acquired Credit Impaired (“ACI”) loans net of any remaining purchase accounting adjustments. Information about ACI loans is presented separately in the “Acquired Credit-Impaired Loans” section of this Note.

	As of September 30, 2017
(In thousands)	ACI		ANCI			Originated			Total
Commercial and Industrial
General C&I ⁽¹⁾	$	26,103	$	51,876		$	2,542,261		$	2,620,240
Energy sector		—		—			932,981			932,981
Restaurant industry		—		—			979,735			979,735
Healthcare		6,240		2,720			385,385			394,345
Total commercial and industrial		32,343		54,596			4,840,362			4,927,301
Commercial Real Estate
Income producing		82,634		14,735			1,048,441			1,145,810
Land and development		—		1,510			71,597			73,107
Total commercial real estate		82,634		16,245			1,120,038			1,218,917
Consumer
Residential real estate		157,632		117,801			1,340,724			1,616,157
Other		1,397		2,948			67,981			72,326
Total consumer		159,029		120,749			1,408,705			1,688,483
Small Business Lending		—		10,702			207,575			218,277
Total (Gross of unearned discount and fees)		274,006		202,292			7,576,680			8,052,978
Unearned discount and fees		—		(3,495	)		(20,545	)		(24,040	)
Total (Net of unearned discount and fees)	$	274,006	$	198,797		$	7,556,135		$	8,028,938

	As of December 31, 2016
(In thousands)	ACI		ANCI			Originated			Total
Commercial and Industrial
General C&I ⁽¹⁾	$	31,709	$	47,592		$	2,337,364		$	2,416,665
Energy sector		—		—			939,369			939,369
Restaurant industry		—		—			864,085			864,085
Healthcare		6,338		4,102			434,663			445,103
Total commercial and industrial		38,047		51,694			4,575,481			4,665,222
Commercial Real Estate
Income producing		96,673		18,354			886,676			1,001,703
Land and development		1,497		1,952			67,555			71,004
Total commercial real estate		98,170		20,306			954,231			1,072,707
Consumer
Residential real estate		186,375		145,747			1,125,048			1,457,170
Other		1,690		7,180			59,819			68,689
Total consumer		188,065		152,927			1,184,867			1,525,859
Small Business Lending		—		9,158			184,483			193,641
Total (Gross of unearned discount and fees)		324,282		234,085			6,899,062			7,457,429
Unearned discount and fees		—		(4,301	)		(20,417	)		(24,718	)
Total (Net of unearned discount and fees)	$	324,282	$	229,784		$	6,878,645		$	7,432,711

(1)	This category for ACI loans includes all pooled commercial and industrial loans which may contain certain restaurant, healthcare or services loan types.

Allowance for Credit Losses (“ACL”)

The ACL is management’s estimate of credit losses inherent in the loan portfolio at the balance sheet date. The Company has an established process to determine the adequacy of the ACL that assesses the losses inherent in our portfolio. While management attributes portions of the ACL to specific portfolio segments, the entire ACL is available to absorb credit losses inherent in the total loan portfolio.

The ACL process involves procedures that appropriately consider the unique risk characteristics of the loan portfolio segments based on management’s assessment of the underlying risks and cash flows. For each portfolio segment, losses are estimated collectively for groups of loans with similar characteristics, individually for impaired loans or, for ACI loans, based on the changes in cash flows expected to be collected on a pool or individual basis.

The level of the ACL is influenced by loan volumes, risk rating migration, historic loss experience influencing loss factors, and other conditions influencing loss expectations, such as economic conditions. The primary indicator of credit quality for the portfolio segments is its internal risk ratings. The assignment of loan risk ratings is the primary responsibility of the lending officer and is subject to independent review by internal credit review, which also performs ongoing, independent review of the risk management process. The risk management process includes underwriting, documentation and collateral control. Credit review is centralized and independent of the lending function. The credit review results are reported to senior management and the Board of Directors.

A summary of the activity in the ACL for the three and nine months ended September 30, 2017 and 2016:

	For the Three Months Ended September 30, 2017
(In thousands)	Commercial and Industrial			Commercial Real Estate			Consumer			Small Business			Total
As of June 30, 2017	$	62,235		$	13,260		$	13,385		$	4,335		$	93,215
Provision for loan losses:
ACI loans		278			(1,195	)		(345	)		—			(1,262	)
ANCI loans		31			—			(154	)		(69	)		(192	)
Originated loans		(432	)		811			2,689			109			3,177
Total provision		(123	)		(384	)		2,190			40			1,723
Charge-offs:
ACI loans		375			—			—			—			375
ANCI loans		65			—			9			—			74
Originated loans		—			—			132			—			132
Total charge-offs		440			—			141			—			581
Recoveries:
ACI loans		—			65			3			—			68
ANCI loans		27			—			164			65			256
Originated loans		44			11			29			—			84
Total recoveries		71			76			196			65			408
As of September 30, 2017	$	61,743		$	12,952		$	15,630		$	4,440		$	94,765

	For the Nine Months Ended September 30, 2017
(In thousands)	Commercial and Industrial		Commercial Real Estate			Consumer			Small Business			Total
As of December 31, 2016	$	54,688	$	10,103		$	13,265		$	4,212		$	82,268
Provision for loan losses:
ACI loans		95		(877	)		(1,416	)		—			(2,198	)
ANCI loans		639		(42	)		(146	)		(224	)		227
Originated loans		8,656		3,564			3,633			328			16,181
Total provision		9,390		2,645			2,071			104			14,210
Charge-offs:
ACI loans		414		—			—			—			414
ANCI loans		99		—			160			47			306
Originated loans		2,788		—			383			120			3,291
Total charge-offs		3,301		—			543			167			4,011
Recoveries:
ACI loans		246		186			484			—			916
ANCI loans		43		—			268			247			558
Originated loans		677		18			85			44			824
Total recoveries		966		204			837			291			2,298
As of September 30, 2017	$	61,743	$	12,952		$	15,630		$	4,440		$	94,765
ACL
ACI loans collectively evaluated for impairment	$	—	$	1,958		$	6,300		$	—		$	8,258
ACI loans individually evaluated for impairment		103		6			215			—			324
ANCI loans collectively evaluated for impairment		883		202			55			256			1,396
ANCI loans individually evaluated for impairment		—		—			38			24			62
Originated loans collectively evaluated for impairment		49,847		10,786			9,019			4,149			73,801
Originated loans individually evaluated for impairment		10,910		—			3			11			10,924
ACL as of September 30, 2017	$	61,743	$	12,952		$	15,630		$	4,440		$	94,765
Loans
ACI loan pools collectively evaluated for impairment	$	22,120	$	73,929		$	159,029		$	—		$	255,078
ACI loans individually evaluated for impairment		10,223		8,705			—			—			18,928
ANCI loans collectively evaluated for impairment		54,596		16,245			119,152			10,381			200,374
ANCI loans individually evaluated for impairment		—		—			1,597			321			1,918
Originated loans collectively evaluated for impairment		4,749,077		1,120,038			1,408,263			206,981			7,484,359
Originated loans individually evaluated for impairment		91,285		—			442			594			92,321
Loans as of September 30, 2017	$	4,927,301	$	1,218,917		$	1,688,483		$	218,277		$	8,052,978

	For the Three Months Ended September 30, 2016
(In thousands)	Commercial and Industrial			Commercial Real Estate			Consumer		Small Business			Total
As of June 30, 2016	$	60,135		$	9,804		$	13,323	$	3,885		$	87,147
Provision for loan losses:
ACI loans		(39	)		(763	)		992		—			190
ANCI loans		(33	)		(237	)		33		(47	)		(284	)
Originated loans		29,290			57			275		99			29,721
Total provision		29,218			(943	)		1,300		52			29,627
Charge-offs:
ACI loans		—			—			1,092		—			1,092
ANCI loans		—			—			144		—			144
Originated loans		25,455			—			177		—			25,632
Total charge-offs		25,455			—			1,413		—			26,868
Recoveries:
ACI loans		8			419			2		—			429
ANCI loans		11			100			31		2			144
Originated loans		656			—			34		—			690
Total recoveries		675			519			67		2			1,263
As of September 30, 2016	$	64,573		$	9,380		$	13,277	$	3,939		$	91,169

	For the Nine Months Ended September 30, 2016
(In thousands)	Commercial and Industrial			Commercial Real Estate			Consumer			Small Business			Total
As of December 31, 2015	$	55,824		$	8,136		$	13,450		$	2,373		$	79,783
Provision for loan losses:
ACI loans		(2,179	)		(876	)		(149	)		—			(3,204	)
ANCI loans		(196	)		(211	)		188			(60	)		(279	)
Originated loans		53,125			1,765			1,402			1,761			58,053
Total provision		50,750			678			1,441			1,701			54,570
Charge-offs:
ACI loans		—			—			1,092			—			1,092
ANCI loans		—			—			334			—			334
Originated loans		43,332			—			480			142			43,954
Total charge-offs		43,332			—			1,906			142			45,380
Recoveries:
ACI loans		20			466			7			—			493
ANCI loans		35			100			102			7			244
Originated loans		1,276			—			183			—			1,459
Total recoveries		1,331			566			292			7			2,196
As of September 30, 2016	$	64,573		$	9,380		$	13,277		$	3,939		$	91,169
ACL
ACI loans collectively evaluated for impairment	$	70		$	2,671		$	7,557		$	—		$	10,298
ACI loans individually evaluated for impairment		—			4			229			—			233
ANCI loans collectively evaluated for impairment		262			117			—			254			633
ANCI loans individually evaluated for impairment		—			—			61			—			61
Originated loans collectively evaluated for impairment		55,451			6,588			5,430			3,685			71,154
Originated loans individually evaluated for impairment		8,790			—			—			—			8,790
ACL as of September 30, 2016	$	64,573		$	9,380		$	13,277		$	3,939		$	91,169

Loans Held-for-sale

The Company had held-for-sale (“HFS”) loans totaling $21.8 million as of September 30, 2017 consisting of $16.0 million in commercial loans and $5.8 million in mortgage loans. During the third quarter of 2017 the Company transferred a $9.9 million nonperforming energy credit to the HFS category at the lower of cost or market value ("LOCOM"). The sale is expected to close in the fourth quarter of 2017.

Impaired Originated and ANCI Loans Including TDRs

The following includes certain key information about individually impaired originated and ANCI loans as of September 30, 2017 and December 31, 2016 and for the three and nine months ended September 30, 2017 and 2016.

Originated and ANCI Loans Identified as Impaired

	As of September 30, 2017
(In thousands)	Recorded Investment in Impaired Loans ⁽¹⁾		Unpaid Principal Balance		Related Specific Allowance		Nonaccrual Loans Included in Impaired Loans		Undisbursed Commitments
With no related allowance for credit losses
Commercial and Industrial
General C&I	$	193	$	197	$	—	$	193	$	—
Energy sector		67,584		77,441		—		60,452		4,432
Total commercial and industrial		67,777		77,638		—		60,645		4,432
Consumer
Residential real estate		1,105		1,108		—		36		—
Other		160		159		—		—		—
Total consumer		1,265		1,267		—		36		—
Small Business Lending		255		696		—		255		—
Total	$	69,297	$	79,601	$	—	$	60,936	$	4,432
With allowance for credit losses recorded
Commercial and Industrial
Energy sector	$	23,695	$	28,539	$	10,910	$	11,574	$	402
Consumer
Residential real estate		499		497		38		—		—
Other		285		283		3		—		—
Total consumer		784		780		41		—		—
Small Business Lending		662		930		35		65		—
Total	$	25,141	$	30,249	$	10,986	$	11,639	$	402

	As of December 31, 2016
(In thousands)	Recorded Investment in Impaired Loans ⁽¹⁾		Unpaid Principal Balance		Related Specific Allowance		Nonaccrual Loans Included in Impaired Loans		Undisbursed Commitments
With no related allowance for credit losses
Commercial and Industrial
General C&I	$	12,334	$	13,426	$	—	$	6,838	$	1,363
Energy sector		99,200		103,322		—		85,149		8,465
Total commercial and industrial		111,534		116,748		—		91,987		9,828
Consumer
Residential real estate		437		435		—		—		—
Other		429		427		—		—		1
Total consumer		866		862		—		—		1
Small Business Lending		299		703		—		299		—
Total	$	112,699	$	118,313	$	—	$	92,286	$	9,829
With allowance for credit losses recorded
Commercial and Industrial
Energy sector	$	39,319	$	45,243	$	1,598	$	28,228	$	4,788
Consumer
Residential real estate		736		741		37		39		—
Small Business Lending		641		897		40		90		—
Total	$	40,696	$	46,881	$	1,675	$	28,357	$	4,788

(1)

The recorded investment of a loan also includes any interest receivable, net unearned discount or fees, and unamortized premium or discount.

The related amount of interest income recognized for impaired loans was $301 thousand and $926 thousand for the three and nine months ended September 30, 2017, respectively, compared to $206 thousand and $897 thousand for the same periods in 2016.

Generally, cash receipts on nonperforming loans are used to reduce principal rather than recorded as interest income. Past due status is determined based upon contractual terms. A nonaccrual loan may be returned to accrual status when repayment is reasonably assured and there has been demonstrated performance under the terms of the loan or, if applicable, under the terms of the restructured loan. Approximately $0.4 million and $1.4 million of contractual interest paid was recognized on the cash basis for the three and nine months ended September 30, 2017, respectively, compared to $0.2 million and $1.2 million for same periods in 2016.

Average Recorded Investment in Impaired Originated and ANCI Loans

	Three Months Ended September 30,
	2017				2016
(In thousands)	Originated		ANCI		Originated		ANCI
Commercial and Industrial
General C&I	$	6,506	$	—	$	8,474	$	568
Energy sector		103,580		—		156,768		—
Total commercial and industrial		110,086		—		165,242		568
Consumer
Residential real estate		—		1,606		—		1,199
Other		369		—		439		—
Total consumer		369		1,606		439		1,199
Small Business Lending		649		334		—		405
Total	$	111,104	$	1,940	$	165,681	$	2,172

	Nine Months Ended September 30,
	2017				2016
(In thousands)	Originated		ANCI		Originated		ANCI
Commercial and Industrial
General C&I	$	9,480	$	—	$	11,856	$	432
Energy sector		122,269		—		133,150		—
Total commercial and industrial		131,749		—		145,006		432
Consumer
Residential real estate		—		1,385		—		1,273
Other		378		—		367		—
Total consumer		378		1,385		367		1,273
Small Business Lending		600		356		—		426
Total	$	132,727	$	1,741	$	145,373	$	2,131

Included in impaired loans are loans considered to be TDRs. The Company attempts to work with borrowers when necessary to extend or modify loan terms to better align with the borrower’s ability to repay. Extensions and modifications to loans are made in accordance with internal policies and guidelines which conform to regulatory guidance. Each occurrence is unique to the borrower and is evaluated separately. The Bank considers regulatory guidelines when restructuring loans to ensure that prudent lending practices are followed. Qualifying criteria and payment terms are structured by the borrower’s current and prospective ability to comply with the modified terms of the loan.

A modification is classified as a TDR if the borrower is experiencing financial difficulty and it is determined that the Company has granted a concession to the borrower. The Company may determine that a borrower is experiencing financial difficulty if the borrower is currently in default on any of its debt, or if it is probable that a borrower may default in the foreseeable future without the modification. Concessions could include reductions of interest rates, extension of the maturity date at a rate lower than current market rate for a new loan with similar risk, reduction of accrued interest, principal forgiveness, forbearance, or other concessions. The assessments of whether a borrower is experiencing or will likely experience financial difficulty and whether a concession has been granted is highly subjective in nature, and management’s judgment is required when determining whether a modification is classified as a TDR. Current amendments to the accounting guidance preclude a creditor from using the effective interest rate test in the debtor’s guidance on restructuring of payables (ASC 470-60-55-10) when evaluating whether a restructuring constitutes a TDR.

All TDRs are reported as impaired. Impaired classification may be removed if the borrower demonstrates compliance with the modified terms and the restructuring agreement specifies an interest rate equal to that which would be provided to a borrower with similar credit at the time of restructuring. The majority of TDRs are classified as impaired loans for the remaining life of the loan. Nonperforming loans and impaired loans are defined differently. Some loans may be included in both categories, whereas other loans may only be included in one category.

Originated and ANCI Loans that were modified into TDRs

	For the Three Months Ended September 30, 2017
	During the Period				Default ⁽¹⁾ during the Period
(In thousands)	Number of TDRs		Recorded Investment		Number of TDRs		Recorded Investment
Consumer
Other		1		285		—		—
Total		1	$	285		—	$	—

	For the Nine Months Ended September 30, 2017
	During the Period				Default ⁽¹⁾ during the Period
(In thousands)	Number of TDRs		Recorded Investment		Number of TDRs		Recorded Investment
Commercial and Industrial
General C&I		1	$	193		—	$	—
Consumer
Residential real estate		1		462		—		—
Other		1		285		—		—
Total consumer		2		747		—		—
Small Business Lending		1		145		—		—
Total		4	$	1,085		—	$	—

	For the Three Months Ended September 30, 2016
	During the Period				Default ⁽¹⁾ during the Period
(In thousands)	Number of TDRs		Recorded Investment		Number of TDRs		Recorded Investment
Commercial and Industrial
General C&I		1	$	7,896		—	$	—
Energy sector		3		29,107		—		—
Total commercial and industrial		4		37,003		—		—
Total		4	$	37,003		—	$	—

	For the Nine Months Ended September 30, 2016
	During the Period				Default ⁽¹⁾ during the Period
(In thousands)	Number of TDRs		Recorded Investment		Number of TDRs		Recorded Investment
Commercial and Industrial
General C&I		1	$	7,896		—	$	—
Energy sector		4		35,945		—		—
Total commercial and industrial		5		43,841		—		—
Consumer
Residential real estate		1		336		—		—
Other		1		184		—		—
Total consumer		2		520		—		—
Total		7	$	44,361		—	$	—

(1)	Default is defined as the earlier of the troubled debt restructuring being placed on non-accrual status or obtaining 90 day past due status with respect to principal and/or interest payments.

	For the Three Months Ended September 30,
	2017				2016
	Number of Loans Modified by:
	Rate Concession		Modified Terms and/ or Other Concessions		Forbearance Agreement		Modified Terms and/ or Other Concessions		Rate Concession
Commercial and Industrial
General C&I		—		—		—		1		—
Energy sector		—		—		1		1		1
Total commercial and industrial		—		—		1		2		1
Consumer
Other		—		1		—		—		—
Total		—		1		1		2		1

	For the Nine Months Ended September 30,
	2017				2016
	Number of Loans Modified by:
	Rate Concession		Modified Terms and/ or Other Concessions		Forbearance Agreement		Modified Terms and/ or Other Concessions		Rate Concession
Commercial and Industrial
General C&I		1		—		—		1		—
Energy sector		—		—		1		2		1
Total commercial and industrial		1		—		1		3		1
Consumer
Residential real estate		—		1		—		1		—
Other		—		1		—		1		—
Total consumer		—		2		—		2		—
Small Business Lending		1		—		—		—		—
Total		2		2		1		5		1

Residential Mortgage Loans in Process of Foreclosure

Included in loans are $3.4 million and $2.1 million of consumer loans secured by single family residential real estate that are in process of foreclosure at September 30, 2017 and December 31, 2016, respectively. Loans in process of foreclosure include those for which formal foreclosure proceedings are in process according to local requirements of the applicable jurisdiction. In addition to the single family residential real estate loans in process of foreclosure, the Company also held $4.8 million and $5.1 million of foreclosed single family residential properties in other real estate owned as of September 30, 2017 and December 31, 2016, respectively.

Credit Exposure in the Originated and ANCI Loan Portfolios

The following provides information regarding the credit exposure by portfolio segment and class of receivable as of September 30, 2017 and December 31, 2016:

Commercial and Industrial credit exposure, based on internal risk rating:

	As of September 30, 2017
(Recorded Investment in thousands)	General C&I		Energy ⁽¹⁾		Restaurant		Healthcare
Originated Loans
Pass	$	2,429,596	$	773,680	$	966,231	$	386,360
Special mention		84,846		—		4,647		45
Substandard ⁽¹⁾		34,580		150,929		10,907		—
Doubtful		—		10,503		—		—
Total originated loans ⁽¹⁾		2,549,022		935,112		981,785		386,405
ANCI Loans
Pass		45,780		—		—		2,731
Substandard		6,324		—		—		—
Total ANCI loans		52,104		—		—		2,731
Total	$	2,601,126	$	935,112	$	981,785	$	389,136

(1)

Does not include the $9.9 million nonperforming energy credit that was transferred to the HFS category.

	As of December 31, 2016
(Recorded Investment in thousands)	General C&I		Energy		Restaurant		Healthcare
Originated Loans
Pass	$	2,279,481	$	670,696	$	849,546	$	426,276
Special mention		36,419		30,433		16,169		9,479
Substandard		26,968		239,457		—		—
Doubtful		—		789		—		—
Total originated loans		2,342,868		941,375		865,715		435,755
ANCI Loans
Pass		47,269		—		—		4,114
Substandard		521		—		—		—
Total ANCI loans		47,790		—		—		4,114
Total	$	2,390,658	$	941,375	$	865,715	$	439,869

Commercial Real Estate credit exposure, based on internal risk rating:

	As of September 30, 2017				As of December 31, 2016
(Recorded Investment in thousands)	Income producing		Land and development		Income producing		Land and development
Originated Loans
Pass	$	1,049,645	$	71,814	$	888,608	$	67,742
Special mention		1,368		20		—		23
Total originated loans		1,051,013		71,834		888,608		67,765
ANCI Loans
Pass		14,767		1,232		18,410		1,618
Substandard		26		300		—		341
Total ANCI loans		14,793		1,532		18,410		1,959
Total	$	1,065,806	$	73,366	$	907,018	$	69,724

Consumer credit exposure, based on internal risk rating:

	As of September 30, 2017				As of December 31, 2016
(Recorded Investment in thousands)	Residential Real Estate		Other		Residential Real Estate		Other
Originated Loans
Pass	$	1,343,065	$	67,294	$	1,126,679	$	59,145
Special mention		328		621		422		455
Substandard		1,326		321		1,096		415
Total originated loans		1,344,719		68,236		1,128,197		60,015
ANCI Loans
Pass		113,731		2,915		141,349		7,151
Special mention		1,892		46		2,156		53
Substandard		2,632		2		2,775		4
Total ANCI loans		118,255		2,963		146,280		7,208
Total	$	1,462,974	$	71,199	$	1,274,477	$	67,223

Small Business credit exposure, based on internal risk rating:

	As of
(Recorded Investment in thousands)	September 30, 2017		December 31, 2016
Originated Loans
Pass	$	204,758	$	182,021
Special mention		2,624		1,807
Substandard		668		1,116
Doubtful		32		—
Total originated loans		208,082		184,944
ANCI Loans
Pass		10,136		8,407
Special mention		40		11
Substandard		561		764
Total ANCI loans		10,737		9,182
Total	$	218,819	$	194,126

The following provides an aging of past due originated and ANCI loans by portfolio segment and class of receivable as of September 30, 2017 and December 31, 2016:

Aging of Past due Originated and ANCI Loans

	As of September 30, 2017
	Accruing Loans						Non-Accruing Loans ⁽¹⁾
(Recorded Investment in thousands)	30-59 DPD		60-89 DPD		90+DPD		0-29 DPD		30-59 DPD		60-89 DPD		90+DPD
Originated Loans
Commercial and Industrial
General C&I	$	—	$	—	$	—	$	193	$	—	$	—	$	—
Energy sector ⁽¹⁾		—		—		—		59,801		5,883		—		6,342
Total commercial and industrial		—		—		—		59,994		5,883		—		6,342
Commercial Real Estate
Income producing		—		—		—		—		—		—		—
Land and development		347		—		—		—		—		—		—
Total commercial real estate		347		—		—		—		—		—		—
Consumer
Residential real estate		5,115		577		—		84		262		—		755
Other		817		30		—		—		—		—		—
Total consumer		5,932		607		—		84		262		—		755
Small Business Lending		98		—		41		39		119		30		124
Total ⁽¹⁾	$	6,377	$	607	$	41	$	60,117	$	6,264	$	30	$	7,221
ANCI Loans
Commercial Real Estate
Income producing	$	1,048	$	—	$	26	$	—	$	—	$	—	$	—
Land and development		—		—		—		300		—		—		—
Total commercial real estate		1,048		—		26		300		—		—		—
Consumer
Residential real estate		1,468		208		171		629		703		228		1,028
Other		5		—		—		—		—		—		—
Total consumer		1,473		208		171		629		703		228		1,028
Small Business Lending		721		—		—		117		49		255		93
Total	$	3,242	$	208	$	197	$	1,046	$	752	$	483	$	1,121

(1)

Does not include a $9.9 million nonperforming energy credit that was transferred to the HFS category.

	As of December 31, 2016
	Accruing Loans						Non-Accruing Loans
(Recorded Investment in thousands)	30-59 DPD		60-89 DPD		90+DPD		0-29 DPD		30-59 DPD		60-89 DPD		90+DPD
Originated Loans
Commercial and Industrial
General C&I	$	3,930	$	—	$	—	$	—	$	6,839	$	—	$	250
Energy sector		—		—		—		112,937		—		—		447
Total commercial and industrial		3,930		—		—		112,937		6,839		—		697
Commercial Real Estate
Income producing		4		—		—		—		—		—		—
Consumer
Residential real estate		1,388		239		244		344		—		—		454
Other		534		—		—		—		—		—		—
Total consumer		1,922		239		244		344		—		—		454
Small Business Lending		2,003		563		87		80		16		36		—
Total	$	7,859	$	802	$	331	$	113,361	$	6,855	$	36	$	1,151
ANCI Loans
Commercial and Industrial
General C&I	$	—	$	—	$	—	$	125	$	—	$	—	$	—
Commercial Real Estate
Land and development		259		—		—		—		—		341		—
Consumer
Residential real estate		1,522		839		252		1,083		30		—		1,619
Other		18		—		3		—		—		—		—
Total consumer		1,540		839		255		1,083		30		—		1,619
Small Business Lending		—		—		—		480		62		—		131
Total	$	1,799	$	839	$	255	$	1,688	$	92	$	341	$	1,750

Acquired Credit Impaired (“ACI”) Loans

The excess of cash flows expected to be collected over the carrying value of ACI loans is referred to as the accretable yield and is recognized in interest income using an effective yield method over the remaining life of the loan, or pools of loans. The accretable yield is affected by:

•

Changes in interest rate indices for variable rate ACI loans—Expected future cash flows are based on the variable rates in effect at the time of the regular evaluations of cash flows expected to be collected;

•

Changes in prepayment assumptions—Prepayments affect the estimated life of ACI loans which may change the amount of interest income, and possibly principal, expected to be collected; and

•

Changes in the expected principal and interest payments over the estimated life—Updates to expected cash flows are driven by the credit outlook and actions taken with borrowers.

Changes in the amount of accretable discount for ACI loans for the nine months ended September 30, 2017 and 2016 were as follows:

Changes in Accretable Yield on ACI Loans

	For the Nine Months Ended September 30,
(In thousands)	2017			2016
Balance at beginning of period	$	98,728		$	122,791
Maturities/payoff		(8,137	)		(8,861	)
Charge-offs		(98	)		(246	)
Foreclosure		(1,056	)		(857	)
Accretion		(17,955	)		(24,024	)
Reclass from nonaccretable difference due to increases in expected cash flow		10,617			12,567
Balance at end of period	$	82,099		$	101,370

Impaired ACI Loans and Pools Including TDRs

The following includes certain key information about individually impaired ACI loans and pooled ACI loans as of September 30, 2017 and December 31, 2016 and for the three and nine months ended September 30, 2017 and 2016.

ACI Loans / Pools Identified as Impaired

	As of September 30, 2017
	ACI Loans / Pools Identified as Impaired
(In thousands)	Recorded Investment in Impaired Loans ⁽¹⁾		Unpaid Principal Balance		Related Specific Allowance		Nonaccrual Loans Included in Impaired Loans		Undisbursed Commitments
Commercial and industrial	$	14,462	$	19,475	$	103	$	—	$	—
Commercial real estate		89,289		120,581		1,964		225		522
Consumer		18,302		21,232		6,515		—		14
Total	$	122,053	$	161,288	$	8,582	$	225	$	536

	As of December 31, 2016
	ACI Loans / Pools Identified as Impaired
(In thousands)	Recorded Investment in Impaired Loans ⁽¹⁾		Unpaid Principal Balance		Related Specific Allowance		Nonaccrual Loans Included in Impaired Loans		Undisbursed Commitments
Commercial and industrial	$	15,552	$	28,256	$	176	$	1,818	$	-
Commercial real estate		53,428		82,946		2,654		1,845		1,213
Consumer		44,295		50,175		7,447		—		15
Total	$	113,275	$	161,377	$	10,277	$	3,663	$	1,228

(1) The recorded investment of a loan also includes any interest receivable, net unearned discount or fees, and unamortized premium or discount.

ACI Loans that Were Modified into TDRs

There were no ACI loans modified into a TDR for the three and nine months ended September 30, 2017. In the nine months ended September 30, 2016, there was one ACI loan modified into a TDR with a recorded investment of $954 thousand. There were no ACI TDRs experiencing payment default during the three and nine months ended September 30, 2017 and 2016. Default is defined as the earlier of the troubled debt restructuring being placed on non-accrual status or obtaining 90 day past due status with respect to principal and interest payments.

Credit Exposure in the ACI Portfolio

The following provides information regarding the credit exposure by portfolio segment and class of receivable as of September 30, 2017 and December 31, 2016:

ACI Loans by Risk Rating / Delinquency Stratification

Commercial and Industrial credit exposure on ACI loans, based on internal risk rating:

	As of September 30, 2017				As of December 31, 2016
(Recorded Investment in thousands)	General C&I		Healthcare		General C&I		Healthcare
Pass	$	23,579	$	—	$	26,634	$	5,648
Special mention		885		—		939		—
Substandard		2,556		6,250		5,484		—
Doubtful		35		—		33		—
Total	$	27,055	$	6,250	$	33,090	$	5,648

Commercial Real Estate credit exposure on ACI loans, based on internal risk rating:

	As of September 30, 2017				As of December 31, 2016
(Recorded Investment in thousands)	Income producing		Land and development		Income producing		Land and development
Pass	$	77,523	$	7,310	$	80,463	$	7,254
Special mention		1,579		710		5,813		933
Substandard		6,139		2,057		13,591		3,240
Total	$	85,241	$	10,077	$	99,867	$	11,427

Consumer credit exposure on ACI loans, based on internal risk rating :

	As of September 30, 2017				As of December 31, 2016
(Recorded Investment in thousands)	Residential Real Estate		Other		Residential Real Estate		Other
Pass	$	136,430	$	1,563	$	157,762	$	1,821
Special mention		3,420		12		3,655		14
Substandard		20,266		220		27,586		287
Total	$	160,116	$	1,795	$	189,003	$	2,122

Consumer credit exposure on ACI loans, based on past due status:

	As of September 30, 2017				As of December 31, 2016
(Recorded Investment in thousands)	Residential Real Estate		Other		Residential Real Estate		Other
0 – 29 Days Past Due	$	144,292	$	1,649	$	171,457	$	1,871
30 – 59 Days Past Due		4,422		62		4,070		134
60 – 89 Days Past Due		2,001		32		1,939		25
90 – 119 Days Past Due		890		14		622		36
120 + Days Past Due		8,511		38		10,915		56
Total	$	160,116	$	1,795	$	189,003	$	2,122

Note 4—Goodwill and Other Intangible Assets

The following table summarizes the Company’s goodwill and other intangible assets at September 30, 2017 and December 31, 2016:

(In thousands)	September 30, 2017		December 31, 2016
Goodwill	$	317,817	$	317,817
Core deposit intangible, net of accumulated amortization of $37,520 and $35,495, respectively		2,166		4,191
Customer lists, net of accumulated amortization of $17,583 and $16,041, respectively		9,117		10,659
Trademarks		24		24
Total goodwill and intangible assets	$	329,124	$	332,691

Note 5—Derivatives

The Company primarily uses derivatives to manage exposure to market risk, including interest rate risk, credit risk and foreign currency risk, and to assist customers with their risk management objectives. Management will designate certain derivatives as hedging instruments in a qualifying hedge accounting relationship. The Company’s remaining derivatives consist of economic hedges that do not qualify for hedge accounting and derivatives held for customer accommodation, or other purposes.

The fair value of derivative positions outstanding is included in other assets and other liabilities in the accompanying consolidated balance sheets and in the net change in each of these financial statement line items in the accompanying consolidated statements of cash flows. For derivatives not designated as hedging instruments, gains and losses due to changes in fair value are included in noninterest income and the operating section of the consolidated statement of cash flows. For derivatives designated as hedging instruments, the effective portion of the gain or loss related to the derivative instrument is recognized as a component of other comprehensive income and subsequently reclassified as interest income when the forecasted transaction affects income. The ineffective portion of the gain or loss is recognized immediately as noninterest income. The notional amounts and estimated fair values as of September 30, 2017 and December 31, 2016 were as follows:

	September 30, 2017						December 31, 2016
			Fair Value						Fair Value
(In thousands)	Notional Amount		Other Assets		Other Liabilities		Notional Amount		Other Assets		Other Liabilities
Derivatives designated as hedging instruments (cash flow hedges):
Commercial loan interest rate swaps	$	1,332,000	$	—	$	15,830	$	1,332,000	$	1,184	$	17,225
Derivatives not designated as hedging instruments:
Commercial loan interest rate swaps		718,686		2,481		2,481		474,923		2,877		2,877
Commercial loan interest rate caps		267,347		104		104		286,959		94		94
Commercial loan interest rate floors		265,515		48		48		51,878		118		118
Mortgage loan held for sale interest rate lock commitments		10,051		—		123		3,788		88		—
Mortgage loan forward sale commitments		5,384		—		6		7,724		—		46
Mortgage loan held for sale floating commitments		10,754		—		—		5,895		—		—
Foreign exchange contracts		45,659		713		696		—		—		—
Total derivatives not designated as hedging instruments		1,323,396		3,346		3,458		831,167		3,177		3,135
Total derivatives	$	2,655,396	$	3,346	$	19,288	$	2,163,167	$	4,361	$	20,360

The Company is party to collateral support agreements with certain derivative counterparties. Such agreements require that the Company maintain collateral based on the fair values of derivative transactions. In the event of default by the Company, the counterparty would be entitled to the collateral. At September 30, 2017 and December 31, 2016, the Company was required to post $16.4 million and $20.3 million, respectively, in cash or securities as collateral for its derivative transactions, which are included in “interest-bearing deposits in banks” on the Company’s consolidated balance sheets. The Company’s master 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 for the right to reclaim cash collateral or the obligation to return cash collateral against fair value amounts of derivatives executed with the same counterparty under the master agreement.

Gain (loss) included in the consolidated statements of income related to derivative instruments for the three and nine months ended September 30, 2017 and 2016 were as follows:

	For the Three Months Ended September 30,
	2017							2016
(In thousands)	OCI		Reclassified from AOCI to interest income		Noninterest income			OCI			Reclassified from AOCI to interest income		Noninterest income
Derivatives designated as hedging instruments (cash flow hedges):
Commercial loan interest rate swaps	$	546	$	409	$	—		$	(4,556	)	$	2,945	$	—
Derivatives not designated as hedging instruments:
Mortgage loan held for sale interest rate lock commitments	$	—	$	—	$	(44	)	$	—		$	—	$	(29	)
Foreign exchange contracts		—		—		631			—			—		328

	For the Nine Months Ended September 30,
	2017						2016
(In thousands)	OCI		Reclassified from AOCI to interest income		Noninterest income		OCI		Reclassified from AOCI to interest income		Noninterest income
Derivatives designated as hedging instruments (cash flow hedges):
Commercial loan interest rate swaps	$	3,872	$	3,442	$	—	$	27,661	$	8,328	$	329
Derivatives not designated as hedging instruments:
Mortgage loan held for sale interest rate lock commitments	$	—	$	—	$	35	$	—	$	—	$	93
Foreign exchange contracts		—		—		1,652		—		—		924

Interest Rate Swap and Cap Agreements not designated as hedging derivatives

The Company enters into certain interest rate swap, floor and cap agreements on commercial loans that are not designated as hedging instruments. These derivative contracts relate to transactions in which the Company enters into an interest rate swap, floor or cap with a loan customer while at the same time entering into an offsetting interest rate swap or cap with another financial institution. In connection with each swap transaction, the Company agrees to pay interest to the customer on a notional amount at a variable interest rate and receive interest from the customer on a similar notional amount at a fixed interest rate. At the same time, the Company agrees to pay another financial institution the same fixed interest rate on the same notional amount and receive the same variable interest rate on the same notional amount. The interest rate swap transaction allows the Company’s customer to effectively convert a variable rate loan to a fixed rate. The interest rate cap transaction allows the Company’s customer to minimize interest rate risk exposure to rising interest rates. Because the Company acts as an intermediary for its customer, changes in the fair value of the underlying derivative contracts for the most part offset each other and do not significantly impact the Company’s consolidated statements of income. The Company is exposed to credit loss in the event of nonperformance by the parties to the interest rate swap and cap agreements. However, the Company does not anticipate nonperformance by the counterparties. The estimated fair value has been recorded as an asset and a corresponding liability in the accompanying consolidated balance sheets as of September 30, 2017 and December 31, 2016.

Cash Flow Hedges

Cash flow hedge relationships mitigate exposure to the variability of future cash flows or other forecasted transactions. The Company uses interest rate swaps to manage overall cash flow changes related to interest rate risk exposure on benchmark interest rate loans. In June 2015 and March 2016, the Company entered into the following interest rate swap agreements to manage overall cash flow changes related to interest rate risk exposure on benchmark interest rate loans.

Effective Date

Maturity Date

Notional Amount

(In Thousands)

Fixed Rate

Variable Rate

June 15, 2015

December 17, 2018

382,000

1.3250

1 Month LIBOR

June 30, 2015

December 31, 2019

300,000

1.5120

1 Month LIBOR

June 30, 2015

December 29, 2017

300,000

0.9530

1 Month LIBOR

March 8, 2016

February 27, 2026

175,000

1.5995

1 Month LIBOR

March 8, 2016

February 27, 2026

175,000

1.5890

1 Month LIBOR

Based on our current interest rate forecast, $ 1.8 million of net payments on our cash flow hedges is estimated to be recorded in net interest income during the next twelve months. Future changes to interest rates may significantly change actual amounts reclassified to income. There were no reclassifications into income during 2017 or 2016 as a result of any discontinuance of cash flow hedges because the forecasted transaction was no longer probable. The maximum length of time over which the Company is hedging a portion of its exposure to the variability in future cash flows for forecasted transactions is approximately nine years as of September 30, 2017 .

Note 6—Deposits

Domestic time deposits $250,000 and over were $371.3 million and $318.8 million at September 30, 2017 and December 31, 2016, respectively. There were no foreign time deposits at either September 30, 2017 or December 31, 2016.

Note 7—Borrowed Funds

Repurchase Agreements

Securities sold under agreements to repurchase generally mature within one to seven days from the transaction date. Securities underlying the repurchase agreements remain under the control of the Company.

Information concerning the Company’s securities sold under agreements to repurchase as of September 30, 2017 and December 31, 2016 is summarized as follows:

(In thousands)	September 30, 2017			December 31, 2016
Balance at period end	$	3,146		$	3,494
Average balance during the period		3,881			5,948
Average interest rate during the period		0.19	%		0.19	%
Maximum month-end balance during the period	$	6,286		$	8,031

Repurchase agreements are treated as collateralized financing obligations and are reflected as a liability in the consolidated balance sheets.

Senior and Subordinated Debt

In June 2014, the Company and the Bank completed an unregistered $245 million multi-tranche debt transaction and in March 2015, the Company completed an unregistered $50 million debt transaction. These transactions enhanced our liquidity and the Bank’s capital levels to support balance sheet growth. Details of the debt transactions are as follows:

(In thousands)	September 30, 2017			December 31, 2016
Cadence Bancorporation:
4.875% senior notes, due June 28, 2019	$	145,000		$	145,000
5.375% senior notes, due June 28, 2021		50,000			50,000
7.250% subordinated notes, due June 28, 2029, callable in 2024		35,000			35,000
6.500% subordinated notes, due March 2025, callable in 2020		40,000			40,000
Total long-term debt—Cadence Bancorporation		270,000			270,000
Cadence Bank:
6.250% subordinated notes, due June 28, 2029, callable in 2024		25,000			25,000
Debt issuance cost and unamortized premium		(1,738	)		(2,693	)
Purchased 4.875% senior notes, due June 28, 2019		(10,078	)		(78	)
Total long-term debt	$	283,184		$	292,229

The senior transactions were structured with 4 and 7 year maturities to provide holding company liquidity and to stagger the Company’s debt maturity profile. The $35 million and $25 million subordinated debt transactions were structured with a 15 year maturity, 10 year call options, and fixed-to-floating interest rates in order to maximize regulatory capital treatment. These

subordinated debt structures were designed to achieve full Tier 2 capital treatment for 10 years. The $40 million subordinated debt transaction has a 5 year call option.

The Company’s senior notes are unsecured, unsubordinated obligations and are equal in right of payment to all of the Company’s other unsecured debt. The Company’s subordinated notes are unsecured obligations and will be subordinated in right of payment to all of the Company’s senior indebtedness and general creditors and to depositors at the Bank. The Company’s senior notes and subordinated notes are not guaranteed by any subsidiary of the Company, including the Bank.

The Bank’s subordinated notes are unsecured obligations and are subordinated in right of payment to all of the Bank’s senior indebtedness and general creditors and to depositors of the Bank. The Bank’s subordinated notes are not guaranteed by the Company or any subsidiary of the Bank.

Payment of principal on the Company’s and Bank’s subordinated notes may be accelerated by holders of such subordinated notes only in the case of certain insolvency events. There is no right of acceleration under the subordinated notes in the case of default. The Company and/or the Bank may be required to obtain the prior written approval of the Federal Reserve, and, in the case of the Bank, the OCC, before it may repay the subordinated notes issued thereby upon acceleration or otherwise.

Junior Subordinated Debentures

In conjunction with the Company’s acquisition of Cadence Financial Corporation and Encore Bank, N.A., the junior subordinated debentures were marked to their fair value as of their respective acquisition dates. The related mark is being amortized over the remaining term of the junior subordinated debentures. The following is a list of junior subordinated debt:

(In thousands)	September 30, 2017			December 31, 2016
Junior subordinated debentures, 3 month LIBOR plus 2.85%, due 2033	$	30,000		$	30,000
Junior subordinated debentures, 3 month LIBOR plus 2.95%, due 2033		5,155			5,155
Junior subordinated debentures, 3 month LIBOR plus 1.75%, due 2037		15,464			15,464
Total par value	$	50,619		$	50,619
Purchase accounting adjustment, net of amortization		(14,266	)		(14,630	)
Total junior subordinated debentures	$	36,353		$	35,989

Advances from FHLB and Borrowings from FRB

FHLB advances are collateralized by deposits with the FHLB, FHLB stock and loans. FHLB advances were $250 million as of September 30, 2017. $100 million of these advances are fixed rate and will mature in October 2017 while $150 million are short-term daily rate credit advances. There were no outstanding FHLB advances as of December 31, 2016. Any advances are collateralized by $1.6 billion of commercial and residential real estate loans pledged under a blanket lien arrangement as of September 30, 2017.

As of September 30, 2017 and December 31, 2016, the FHLB has issued for the benefit of the Bank irrevocable letters of credit totaling $435 million. The Bank has a $35 million irrevocable letter of credit in favor of the State of Alabama SAFE Program to secure certain deposits of the State of Alabama. This letter of credit expires September 27, 2018 upon 45 days’ prior notice of non-renewal; otherwise it automatically extends for a successive one-year term. The Bank also has a $400 million irrevocable letter of credit to secure a large treasury management deposit. This letter of credit expires May 26, 2018 upon 45 days’ prior notice of non-renewal; otherwise it automatically extends for a successive one-year term.

There were no borrowings from the FRB discount window as of September 30, 2017 and December 31, 2016. Any borrowings from the FRB will be collateralized by $810.8 million in commercial loans pledged under a borrower-in-custody arrangement.

Note 8—Other Noninterest Income and Other Noninterest Expense

The detail of the other noninterest income and other noninterest expense captions presented in the consolidated statements of income is as follows:

	Three Months Ended September 30,					Nine Months Ended September 30,
(In thousands)	2017		2016			2017		2016
Other Noninterest Income
Insurance revenue	$	1,950	$	1,863		$	5,908	$	6,140
Bankcard fees		1,803		1,823			5,477		5,330
Income from bank owned life insurance policies		724		736			2,550		2,200
Gain on sale of loans		70		—			70		516
Other		3,315		(210	)		4,113		(558	)
Total other noninterest income	$	7,862	$	4,212		$	18,118	$	13,628

	Three Months Ended September 30,				Nine Months Ended September 30,
(In thousands)	2017		2016		2017		2016
Other Noninterest Expense
Net cost of operation of other real estate owned	$	453	$	1,126	$	1,175	$	1,916
Data processing expense		1,688		1,530		5,086		4,513
Special asset expenses		215		391		824		742
Consulting and professional fees		2,069		2,040		4,710		4,441
Loan related expenses		532		1,071		1,569		2,252
FDIC Insurance		889		1,912		3,336		5,711
Communications		650		535		1,980		1,915
Advertising and public relations		521		303		1,365		1,025
Legal expenses		612		337		1,552		2,059
Branch closure expenses		50		52		143		191
Other		5,289		5,756		16,430		17,608
Total other noninterest expense	$	12,968	$	15,053	$	38,170	$	42,373

Note 9—Income Taxes

Income tax expense for the three and nine months ended September 30, 2017 was $17.5 million and $43.7 million, respectively, compared to $2.1 million and $16.8 million for the same periods in 2016. The effective tax rate was 34.9% and 33.3% for the three and nine months ended September 30, 2017, respectively, compared to 24.2% and 31.4% for the same periods in 2016. The increase in the effective tax rate for the three and nine months ended September 30, 2017 compared to the three and nine months ended September 30, 2016 was primarily driven by an increase in income before income taxes.

The effective tax rate is primarily affected by the amount of pre-tax income, tax-exempt interest income, and the increase in cash surrender value of bank-owned life insurance. The effective tax rate is also affected by discrete items that may occur in any given period, but are not consistent from period-to-period, which may impact the comparability of the effective tax rate between periods.

Note 10—Earnings Per Common Share

The following table displays a reconciliation of the information used in calculating basic and diluted net income per common share for the three and nine months ended September 30, 2017 and 2016.

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
(In thousands, except per share data)	2017		2016		2017		2016
Net income	$	32,577	$	6,607	$	87,662	$	36,789
Weighted average common shares outstanding (Basic)		83,625,000		75,000,000		80,212,912		75,000,000
Weighted average restricted stock units		330,685		258,375		345,425		258,375
Weighted average common shares outstanding (Diluted)		83,955,685		75,258,375		80,558,337		75,258,375
Earnings per common share (Basic)	$	0.39	$	0.09	$	1.09	$	0.49
Earnings per common share (Diluted)	$	0.39	$	0.09	$	1.09	$	0.49

In March 2017, the Board of Directors approved a 75-for-one stock split of the Company’s common stock. The stock split occurred on April 7, 2017. The effect of the stock split on outstanding shares and earnings per share has been retroactively applied to all periods presented.

Note 11—Related Party Transactions

In the normal course of business, loans are made to directors and executive officers and to companies in which they have a significant ownership interest. In the opinion of management, these loans are made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other parties, are consistent with sound banking practices, and are within applicable regulatory and lending limitations. The aggregate balances of related party loans and deposits as of September 30, 2017 and December 31, 2016 were insignificant.

Note 12—Regulatory Matters

The Bank is subject to the capital adequacy requirements of the OCC. The Company, as a bank holding company, is subject to the capital adequacy requirements of the Federal Reserve. 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 guidelines and the regulatory framework for prompt corrective action, the Company and the Bank must meet specific capital guidelines that involve quantitative measures of assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgment by regulators about components, risk weightings, and other related factors.

The risk-based capital requirements of the Federal Reserve and the OCC define capital and establish minimum capital requirements in relation to assets and off-balance sheet exposure, adjusted for credit risk. The risk-based capital standards currently in effect are designed to make regulatory capital requirements sensitive to differences in risk profiles among bank holding companies and banks, to account for off-balance sheet exposure and to minimize disincentives for holding liquid assets. Assets and off-balance sheet items are assigned to broad risk categories, each with appropriate relative risk weights. The resulting capital ratios represent capital as a percentage of total risk-weighted assets and off-balance sheet items.

The Federal Reserve, the FDIC and the OCC have issued guidelines governing the levels of capital that banks must maintain. The bank guidelines for the period as of September 30, 2017 specify capital tiers, which include the following classifications:

Capital Tiers	Tier 1 Capital to Average Assets (Leverage)	Common Equity Tier 1 to Risk - Weighted Assets (CET1)	Tier 1 Capital to Risk – Weighted Assets	Total Capital to Risk – Weighted Assets
Well capitalized	5% or above	6.5% or above	8% or above	10% or above
Adequately capitalized	4% or above	4.5% or above	6% or above	8% or above
Undercapitalized	Less than 4%	Less than 4.5%	Less than 6%	Less than 8%
Significantly undercapitalized	Less than 3%	Less than 3%	Less than 4%	Less than 6%
Critically undercapitalized		Tangible Equity / Total Assets less than 2%

The most recent notification from the OCC categorized the Bank as well-capitalized under the regulatory framework for prompt corrective action (the prompt corrective action requirements are not applicable to the Company). The actual capital amounts and rat ios for the Company and the bank as of September 30, 2017 and December 31, 2016 are presented in the following table and as shown, are above the thresholds necessary to be considered “well-capitalized”. Management believes there are no conditions or events that would change that classification in the foreseeable future.

	Consolidated Company					Bank
(In thousands)	Amount		Ratio			Amount		Ratio
September 30, 2017
Tier 1 leverage	$	1,079,726		11.1	%	$	1,181,066		12.2	%
Common equity tier 1 capital (transitional)		1,042,920		10.8			1,132,506		11.7
Tier 1 risk-based capital		1,079,726		11.2			1,181,066		12.2
Total risk-based capital		1,273,724		13.2			1,301,129		13.5
The minimum amounts of capital and ratios established by banking regulators are as follows:
Tier 1 leverage	$	388,553		4.0	%	$	388,516		4.0	%
Common equity tier 1 capital (transitional)		434,801		4.5			434,726		4.5
Tier 1 risk-based capital		579,734		6.0			579,635		6.0
Total risk-based capital		772,979		8.0			772,846		8.0
Well capitalized requirement:
Tier 1 leverage	N/A		N/A			$	485,645		5.0	%
Common equity tier 1 capital (transitional)	N/A		N/A				627,938		6.5
Tier 1 risk-based capital	N/A		N/A				772,846		8.0
Total risk-based capital	N/A		N/A				966,058		10.0

	Consolidated Company					Bank
(In thousands)	Amount		Amount			Amount		Ratio
December 31, 2016
Tier 1 leverage	$	824,676		8.9	%	$	1,035,972		11.2	%
Common equity tier 1 (CET1)		793,268		8.8			989,990		11.0
Tier 1 risk-based capital		824,676		9.2			1,035,972		11.5
Total risk-based capital		1,007,011		11.2			1,144,519		12.8
The minimum amounts of capital and ratios established by banking regulators are as follows:
Tier 1 leverage	$	371,052		4.0	%	$	370,836		4.0	%
Common equity tier 1 (CET1)		403,718		4.5			403,578		4.5
Tier 1 risk-based capital		538,290		6.0			538,105		6.0
Total risk-based capital		717,720		8.0			717,473		8.0
Well capitalized requirement:
Tier 1 leverage	N/A		N/A			$	463,546		5.0	%
Common equity tier 1 (CET1)	N/A		N/A				583,248		6.5
Tier 1 risk-based capital	N/A		N/A				717,844		8.0
Total risk-based capital	N/A		N/A				897,305		10.0

Under regulations controlling national banks, the payment of any dividends by a bank without prior approval of the OCC is limited to the current year’s net profits (as defined by the OCC) and retained net profits of the two preceding years. The Federal Reserve, as primary regulator for bank holding companies, has also stated that all common stock dividends should be paid out of current income. As the Company does not generate income on a stand-alone basis, it does not have the capability to pay common stock dividends without receiving dividends from the Bank.

The Bank is required to maintain average reserve balances in the form of cash or deposits with the Federal Reserve Bank. The reserve balance varies depending upon the types and amounts of deposits. At September 30, 2017 and December 31, 2016, the required reserve balance with the Federal Reserve Bank was approximately $59.6 million and $38.3 million, respectively.

Note 13—Commitments and Contingent Liabilities

The consolidated financial statements do not reflect various commitments and contingent liabilities which arise in the normal course of banking business and which involve elements of credit risk, interest rate risk, and liquidity risk. The commitments and contingent liabilities are commitments to extend credit, home equity lines, overdraft protection lines, and standby letters of credit. Such financial instruments are recorded when they are funded. A summary of commitments and contingent liabilities at September 30, 2017 is as follows:

(In thousands)
Commitments to extend credit	$	3,035,455
Standby letters of credit		102,145
Performance letters of credit		22,635
Commercial letters of credit		1,797

Commitments to extend credit and letters of credit include some exposure to credit loss in the event of nonperformance of the customer. 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. In addition, the Company has entered certain commitments to grant loans totaling $402.2 million as of September 30, 2017. Standby letters of credit are conditional commitments issued to guarantee the performance of a customer to a third party. The credit policies and procedures for such commitments are the same as those used for lending activities. Because these instruments have fixed maturity dates and because a number expire without being drawn upon, they generally do not present any significant liquidity risk. No significant losses on commitments were incurred during the three and nine months ended September 30, 2017 and 2016. The Company does not anticipate any significant future losses as a result of these transactions.

The Company makes investments in limited partnerships, including certain low income housing partnerships for which tax credits are received. As of September 30, 2017 and December 31, 2016, unfunded capital commitments totaled $23.2 million and $15.1 million, respectively.

The Company and the Bank are defendants in various pending and threatened legal actions arising in the normal course of business. In the opinion of management, based upon the advice of legal counsel, the ultimate disposition of all pending and threatened legal action will not have a material effect on the Company’s consolidated financial statements.

Note 14—Concentrations of Credit

Most of the loans, commitments and letters of credit involve customers or sponsors in the Company’s market areas. Investments in state and municipal securities also involve governmental entities within the Company’s market areas. General concentrations of credit by type of loan are set forth in Note 3 of these consolidated financial statements. The distribution of commitments to extend credit approximates the distribution of loans outstanding. Letters of credit were granted primarily to commercial borrowers.

Note 15—Supplemental Cash Flow Information

	For the Nine Months Ended September 30,
(In thousands)	2017		2016
Cash paid during the year for:
Interest	$	47,048	$	37,267
Income taxes, net of refunds		29,105		22,516
Non-cash investing activities (at fair value):
Transfers of loans to other real estate	$	6,922	$	12,243
Transfers of commercial loans to loans held for sale		9,397		309,415

Note 16—Disclosure About Fair Values of Financial Instruments

The Company groups its assets and liabilities measured at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value. This hierarchy requires the Company to maximize the use of observable market data, when available, and to minimize the use of unobservable inputs when determining fair value. Each fair value measurement is placed into the proper level based on the lowest level of significant input. These levels are:

•

Level 1 —Valuation is based upon quoted prices for identical instruments traded in active markets.

•

Level 2 —Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market.

•

Level 3 —Valuation is generated from model-based techniques that use significant assumptions not observable in the market. These unobservable assumptions reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability. Valuation techniques include use of option pricing models, discounted cash flow models, and similar techniques.

Transfers between fair value levels are recognized at the end of the fiscal quarter in which the associated change in inputs occurs.

Assets and Liabilities Recorded at Fair Value on a Recurring Basis

The table below presents the Company’s assets and liabilities measured at fair value on a recurring basis categorized by the level of inputs used in the valuation of each asset at September 30, 2017 and December 31, 2016:

(In thousands)	Carrying Value		(Level 1)		(Level 2)		(Level 3)
September 30, 2017
Investment securities available-for-sale:
U.S. Treasury securities	$	97,688	$	—	$	97,688	$	—
Obligations of U.S. government agencies		84,165		—		84,165		—
Mortgage-backed securities issued or guaranteed by U.S. agencies (MBS)
Residential pass-through:
Guaranteed by GNMA		112,535		—		112,535		—
Issued by FNMA and FHLMC		384,042		—		384,042		—
Other residential mortgage-backed securities		40,568		—		40,568		—
Commercial mortgage-backed securities		60,990		—		60,990		—
Total MBS		598,135		—		598,135		—
Obligations of states and municipal subdivisions		412,216		—		412,216
Other securities		5,828		5,828		—		—
Total investment securities available-for-sale		1,198,032		5,828		1,192,204		—
Derivative assets		3,346		—		3,346		—
Other assets (Net profits interests)		16,193		—		—		16,193
Total recurring basis measured assets	$	1,217,571	$	5,828	$	1,195,550	$	16,193
Derivative liabilities	$	19,288	$	—	$	19,288	$	—
Total recurring basis measured liabilities	$	19,288	$	—	$	19,288	$	—

(In thousands)	Carrying Value		(Level 1)		(Level 2)		(Level 3)
December 31, 2016
Investment securities available-for-sale:
U.S. Treasury securities	$	96,785	$	—	$	96,785	$	—
Obligations of U.S. government agencies		97,528		—		97,528		—
Mortgage-backed securities issued or guaranteed by U.S. agencies (MBS)
Residential pass-through:
Guaranteed by GNMA		153,153		—		153,153		—
Issued by FNMA and FHLMC		265,328		—		265,328		—
Other residential mortgage-backed securities		47,561		—		47,561		—
Commercial mortgage-backed securities		62,613		—		62,613		—
Total MBS		528,655		—		528,655		—
Obligations of states and municipal subdivisions		410,812		—		410,812		—
Other securities		5,567		5,567		—		—
Total investment securities available-for-sale		1,139,347		5,567		1,133,780		—
Derivative assets		4,361		—		4,361		—
Other assets (Net profits interest)		19,425		—		—		19,425
Total recurring basis measured assets	$	1,163,133	$	5,567	$	1,138,141	$	19,425
Derivative liabilities	$	20,360	$	—	$	20,360	$	—
Total recurring basis measured liabilities	$	20,360	$	—	$	20,360	$	—

There were no transfers between the Level 1 and Level 2 fair value categories during the three and nine months ended September 30, 2017 and 2016.

Changes in Level 3 Fair Value Measurements

The tables below include a roll-forward of the condensed consolidated balance sheet amounts for the three and nine months ended September 30, 2017 and 2016 , including changes in fair value for financial instruments within Level 3 of the valuation hierarchy. Level 3 financial instruments typically include unobservable components, but may also include some observable components that may be validated to external sources. The gains or (losses) in the following table may include changes to fair value due in part to observable factors that may be part of the valuation methodology:

Level 3 Assets Measured at Fair Value on a Recurring Basis

	Other Assets - Net Profits Interests
	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
(In thousands)	2017			2016			2017			2016
Beginning Balance	$	16,405		$	8,489		$	19,425		$	—
Addition of net profits interest to other assets		—			—			—			8,489
Total net gains (losses) included in earnings		104			(161	)		(2,427	)		(161	)
Distributions received		(316	)		(86	)		(805	)		(86	)
Balance at September 30	$	16,193		$	8,242		$	16,193		$	8,242
Net unrealized gains (losses) included in earnings relating to assets held at the end of the period	$	104		$	(161	)	$	(2,427	)	$	(161	)

Assets Recorded at Fair Value on a Nonrecurring Basis

From time to time, the Company may be required to measure certain other financial assets at fair value on a nonrecurring basis in accordance with GAAP. These adjustments to fair value usually result from the application of lower of cost or fair value accounting or write-downs of individual assets. For assets measured at fair value on a nonrecurring basis which were still held on the balance sheets at September 30, 2017 and December 31, 2016, the following tables provide the level of valuation assumptions used to determine each adjustment and the related carrying value:

(In thousands)	Carrying Value		(Level 1)		(Level 2)		(Level 3)
September 30, 2017
Loans held for sale	$	21,835	$	—	$	21,835	$	—
Impaired loans, net of specific allowance		83,453		—		—		83,453
Other real estate		18,836		—		—		18,836
Total assets measured on a nonrecurring basis	$	124,124	$	—	$	21,835	$	102,289

(In thousands)	Carrying Value		(Level 1)		(Level 2)		(Level 3)
December 31, 2016
Loans held for sale	$	17,822	$	—	$	17,822	$	—
Impaired loans, net of specific allowance		151,720		—		—		151,720
Other real estate		18,875		—		—		18,875
Total assets measured on a nonrecurring basis	$	188,417	$	—	$	17,822	$	170,595

Significant unobservable inputs used in Level 3 fair value measurements for financial assets measured at fair value on a nonrecurring basis at September 30, 2017 and December 31, 2016 are summarized below:

(In thousands)

Carrying

Value

Valuation

Methods

Unobservable Inputs

Range

September 30, 2017

Impaired loans, net of specific allowance

83,453

Internal appraisals of accounts receivable and inventory

Discount of book value

50% - 75%

Third-Party Appraisals

Discount of fair value

0% - 20%

Estimated closing costs

10%

Other real estate

18,836

Third-Party Appraisals

Discount of fair value

0% - 20%

Estimated closing costs

10%

Quantitative Information about Level 3 Fair Value Measurements

(In thousands)

Carrying

Value

Valuation

Methods

Unobservable

Inputs

Range

December 31, 2016

Impaired loans, net of specific

allowance

151,720

Internal

appraisals of

accounts

receivable

and inventory

Discount of

book value

50%-75%

Third-Party

Appraisals

Discount of

fair value

0%-20%

Estimated

closing costs

10%

Other real estate

18,875

Third-Party

Appraisals

Discount of

fair value

0%-20%

Estimated

closing costs

10%

Determ ination of Fair Values

In accordance with ASC 820-10-35, fair values are based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The following describes the assumptions and methodologies used to estimate the fair value of financial instruments recorded at fair value in the consolidated balance sheets and for estimating the fair value of financial instruments for which fair value is disclosed under ASC 825-10-50.

Investment Securities . When quoted prices are available in an active market, securities are classified as Level 1. For securities reported at fair value utilizing Level 2 inputs, the Company obtains fair value measurements from an independent pricing service. These fair value measurements consider observable market data that may include benchmark yield curves, reported trades, broker/dealer quotes, issuer spreads and credit information, among other inputs.

Loans Held for Sale . Loans held for sale are recorded at the lower of aggregate cost or fair value. Fair value is generally based on quoted market prices of similar loans and is considered to be Level 2.

Net Loans . Fair values of loans are estimated using discounted cash flow analyses using various discount spreads to Treasury yields that approximate interest rates currently being offered for loans with similar terms to borrowers of similar credit quality.

Derivative Financial Instruments . Derivative financial instruments are measured at fair value based on modeling that utilizes observable market inputs for various interest rates published by leading third-party financial news and data providers. This is observable data that represents the rates used by market participants for instruments entered into at that date; however, they are not based on actual transactions so they are classified as Level 2.

Other Assets - Net profits interests. The fair value of the net profit interests in oil and gas reserves was estimated using discounted cash flow analyses applied to the expected cash flows from producing developed wells. Expected cash flows are derived from reports prepared by consulting engineers under established professional standards for the industry.

Deposits . The fair values disclosed for demand deposits are, by definition, equal to the amount payable on demand at the reporting date (that is, their carrying amounts). Fair values for CDs are estimated using a discounted cash flow calculation that applies interest rate spreads to current Treasury yields.

FHLB Advances . The fair value of the FHLB advance approximates its book value considering their short-term maturities.

Security Sold Under Agreements to Repurchase . The carrying amount of security repurchase agreements approximates their fair values.

Senior Debt . The fair value of senior debt was estimated by obtaining broker indications that compared the Company’s senior debt to other comparable financial institutions.

Subordinated Debt. The fair value of subordinated debentures was estimated by obtaining broker indications that compared the Company’s subordinated debentures to other comparable financial institutions.

Junior Subordinated Debentures. The fair value of junior subordinated debentures was estimated by obtaining broker indications that compared the Company’s junior subordinated debentures to other comparable financial institutions.

Limitations . The following fair value estimates are determined as of a specific point in time utilizing various assumptions and estimates. The use of assumptions and various valuation techniques, as well as the absence of secondary markets for certain financial instruments, will likely reduce the comparability of fair value disclosures between financial institutions. The fair values for loans involve the use of significant internally-developed pricing assumptions due to market-illiquidity for loans net of unearned income and loans held for sale as of September 30, 2017 and December 31, 2016. These assumptions are considered to reflect inputs that market participants would use in transactions involving these instruments as of the measurement date. This table only includes financial instruments of the Company, and, accordingly, the total of the fair value amounts does not represent, and should not be construed to represent, the underlying value of the Company.

The estimated fair values of the Company’s financial instruments are as follows:

	As of September 30, 2017
	Carrying
(In thousands)	Amount		Fair Value		Level 1		Level 2		Level 3
Financial Assets:
Cash and due from banks	$	68,248	$	68,248	$	68,248	$	—	$	—
Interest-bearing deposits in other banks		515,556		515,556		515,556		—		—
Federal funds sold		5,578		5,578		5,578		—		—
Securities available-for-sale		1,198,032		1,198,032		5,828		1,192,204		—
Securities held-to-maturity		425		451		—		451		—
Loans held for sale		21,835		21,835		—		21,835		—
Net loans		7,934,173		7,832,079		—		—		7,832,079
Derivative assets		3,346		3,346		—		3,346		—
Other assets-net profits interests		16,193		16,193		—		—		16,193
Financial Liabilities:
Deposits		8,501,102		8,365,930		—		8,365,930		—
Advances from FHLB		250,000		250,000		—		250,000		—
Securities sold under agreements to repurchase		3,146		3,146		—		3,146		—
Senior debt		184,557		201,178		—		201,178		—
Subordinated debt		98,627		100,984		—		100,984		—
Junior subordinated debentures		36,353		49,163		—		49,163		—
Derivative liabilities		19,288		19,288		—		19,288		—

	As of December 31, 2016
(In thousands)	Carrying Amount		Fair Value		Level 1		Level 2		Level 3
Financial Assets:
Cash and due from banks	$	48,017	$	48,017	$	48,017	$	—	$	—
Interest-bearing deposits in other banks		199,747		199,747		199,747		—		—
Federal funds sold		1,161		1,161		1,161		—		—
Securities available-for-sale		1,139,347		1,139,347		5,567		1,133,780		—
Securities held-to-maturity		425		463		—		463		—
Loans held for sale		17,822		17,822		—		17,822		—
Net loans		7,350,443		7,395,003		—		—		7,395,003
Derivative assets		4,361		4,361		—		4,361		—
Other assets-net profits interests		19,425		19,818		—		—		19,818
Financial Liabilities:
Deposits		8,016,749		7,904,926		—		7,904,926		—
Securities sold under agreements to repurchase		4,361		4,361		—		4,361		—
Senior debt		193,788		191,076		—		191,076		—
Subordinated debt		98,441		97,938		—		97,938		—
Junior subordinated debentures		35,989		47,409		—		47,409		—
Derivative liabilities		20,360		20,360		—		20,360		—

Note 17—Segment Reporting

The Company determines reportable segments based on the services offered, the significance of the services offered, the significance of those services to the Company’s financial condition and operating results and management’s regular review of the operating results of those services. The Company operates through three operating segments: Banking, Financial Services and Corporate.

The Banking Segment includes the Commercial Banking, Retail Banking and Private Banking lines of business. The Commercial Banking line of business includes a general business services component primarily focusing on commercial & industrial (C&I), community banking, business banking and commercial real estate lending to clients in the geographic footprint in Texas and the southeast United States. In addition, the Commercial Banking line of business includes within C&I a separate component that focuses on select industries (which is referred to as the “specialized industries”) in which the Company believes it has specialized experience and service capabilities, including energy, healthcare, restaurant industry, and technology. The

Company serves clients in these special ized industries both within the geographic footprint and throughout the United States as a result of the national orientation of many of these businesses. The Retail Banking line of business offers a broad range of retail banking services including mortgag e services through the branch network to serve the needs of consumer and small businesses in the geographic footprint. The Private Banking line of business offers banking services and loan products tailored to the needs of the high-net worth clients in the geographic footprint.

The Financial Services Segment includes the Trust, Retail Brokerage, Investment Services and Insurance businesses. These businesses offer products independently to their own customers as well as to Banking Segment clients. Investment Services operates through the “Linscomb & Williams” name and Insurance operates though the “Cadence Insurance” name. The products offered by the businesses in the Financial Services Segment primarily generate non-banking service fee income. The Corporate Segment reflects parent-only activities and intercompany eliminations.

Business segment results are determined based upon the management reporting system, which assigns balance sheet and income statement items to each of the business segments. The process is designed around the organizational and management structure and, accordingly, the results derived are not necessarily comparable with similar information published by other financial institutions or in accordance with generally accepted accounting principles.

The Company evaluates performance and allocates resources based on profit or loss from operations. There are no material inter-segment sales or transfers. The accounting policies used by each reportable segment are the same as those discussed in Note 1. All costs, except corporate administration and income taxes, have been allocated to the reportable segments. Therefore, combined amounts agree to the consolidated totals.

The following tables present the operating results of the segments as of and for the three and nine months ended September 30, 2017 and 2016:

	As of and for the Three Months Ended September 30, 2017
(In thousands)	Banking		Financial Services			Corporate			Consolidated
Net interest income	$	87,123	$	(2,340	)	$	(3,620	)	$	81,163
Provision for credit losses		1,723		—			—			1,723
Noninterest income		13,967		12,798			359			27,124
Noninterest expense		46,785		9,087			658			56,530
Income tax expense (benefit)		18,404		480			(1,427	)		17,457
Net income (loss)	$	34,178	$	891		$	(2,492	)	$	32,577

	As of and for the Three Months Ended September 30, 2016
(In thousands)	Banking		Financial Services			Corporate			Consolidated
Net interest income	$	74,970	$	(58	)	$	(4,486	)	$	70,426
Provision for credit losses		29,627		—			—			29,627
Noninterest income		12,078		10,613			100			22,791
Noninterest expense		46,890		7,943			43			54,876
Income tax expense (benefit)		3,685		914			(2,492	)		2,107
Net income (loss)	$	6,846	$	1,698		$	(1,937	)	$	6,607

	As of and for the Nine Months Ended September 30, 2017
(In thousands)	Banking		Financial Services			Corporate			Consolidated
Net interest income	$	252,240	$	(873	)	$	(13,062	)	$	238,305
Provision for credit losses		14,210		—			—			14,210
Noninterest income		37,178		36,517			523			74,218
Noninterest expense		139,239		26,361			1,385			166,985
Income tax expense (benefit)		47,589		3,249			(7,172	)		43,666
Net income (loss)	$	88,380	$	6,034		$	(6,752	)	$	87,662
Total assets	$	10,407,827	$	89,735		$	4,699		$	10,502,261

	As of and for the Nine Months Ended September 30, 2016
(In thousands)	Banking		Financial Services			Corporate			Consolidated
Net interest income	$	220,577	$	(88	)	$	(13,548	)	$	206,941
Provision for credit losses		54,570		—			—			54,570
Noninterest income		33,664		32,232			147			66,043
Noninterest expense		140,276		24,349			161			164,786
Income tax expense (benefit)		20,788		2,728			(6,677	)		16,839
Net income (loss)	$	38,607	$	5,067		$	(6,885	)	$	36,789
Total assets	$	9,355,328	$	82,327		$	6,355		$	9,444,010

Note 18—Equity-based Compensation

The Company administers a long-term incentive compensation plan that permits the granting of incentive awards in the form of stock options, restricted stock, restricted stock units, performance units, stock appreciation rights, or other stock-based awards. The terms of all awards issued under these plans are determined by the Compensation Committee of the Board of Directors

The Amended and Restated 2015 Omnibus Incentive Plan (the “Plan”), permits the Company to grant to employees and directors various forms of incentive compensation. The principal purposes of this plan are to focus directors, officers and other employees and consultants on business performance that creates shareholder value, to encourage innovative approaches to the business of the Company, and to encourage ownership of the Company’s stock. The Plan authorizes 7,500,000 common share equivalents available for grant, where grants of full value awards (e.g., shares of restricted stock, restricted stock units and performance stock units) count as one share equivalent. The number of remaining share equivalents available for future issuance under the Plan was 6,827,250 at September 30, 2017.

The Company recorded $0.4 million and $1.2 million equity-based compensation expense for the outstanding restricted stock units for the three and nine months ended September 30, 2017, respectively, compared to $0.3 million and $0.9 million for the same periods in 2016. The remaining expense related to unvested restricted stock units is $2.2 million as of September 30, 2017 and will be recognized over the next 17 months.

There were 672,750 outstanding non-vested restricted stock units with a grant date fair value of $5.14. There were no grants or forfeitures for the three and nine months ended September 30, 2017.

Note 19—Accumulated Other Comprehensive Income (Loss)

Activity within the balances in accumulated other comprehensive income (loss) is shown in the following tables for the nine months ended September 30, 2017.

`	Unrealized gains (losses) on securities available for sale			Unrealized gains (losses) on defined benefit pension plans			Unrealized gains (losses) on derivative instruments designated as cash flow hedges			Accumulated other comprehensive gain (loss)
Balance, December 31, 2016	$	(21,819	)	$	(500	)	$	(10,212	)	$	(32,531	)
Net change		15,410			—			272			15,682
Balance, September 30, 2017	$	(6,409	)	$	(500	)	$	(9,940	)	$	(16,849	)

Note 20—Variable Interest Entities and Other Investments

Under ASC 810-10-65, the Company is deemed to be the primary beneficiary and required to consolidate a variable interest entity (“VIE”) if it has a variable interest in the VIE that provides it with a controlling financial interest. For such purposes, the determination of whether a controlling financial interest exists is based on whether a single party has both the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and the obligation to absorb the losses of the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE. ASC 810-10-65, as amended, requires continual reconsideration of conclusions reached regarding which interest holder is a VIE’s primary beneficiary.

The Bank has invested in several affordable housing projects as a limited partner. The partnerships ha ve qualified to receive annual affordable housing federal tax credits that are recognized as a reduction of current tax expense. The Company has determined that these structures meet the definition of VIE’s under Topic ASC 810 but that consolidation is not required, as the Bank is not the primary beneficiary. At September 30, 2017 and December 31, 2016, the Bank’s maximum exposure to loss associated with these limited partnerships was limited to the Bank’s investment. The Company accounts for these investme nts and the related tax credits using either the effective yield method or the proportional amortization method, depending upon the date of the investment. Under the effective yield method, the Bank recognizes the tax credits as they are allocated and amor tizes the initial costs of the investments to provide a constant effective yield over the period that the tax credits are allocated. Under the proportional amortization method, the Bank amortizes the cost of the investment in proportion to the tax credits and other tax benefits received and recognizes the net investment performance in the income statement as a component of income tax expense. At September 30, 2017 and December 31, 2016, the Company had recorded investments in other assets on its consolidate d balance sheets of approximately $8.3 million and $4.2 million, respectively related to these investments. Additionally, the Company invests in other certain limited partnerships accounted for under the cost method totaling $11.6 million and $6.1 million as of September 30, 2017 and December 31, 2016, respectively and the equity method totaling $8.1 million and $3.9 million as of September 30, 2017 and December 31, 2016, respectively.

During 2016, the Bank received net profits interests in oil and gas reserves, in connection with the reorganization under bankruptcy of two loan customers. The Company has determined that these contracts meet the definition of VIE’s under Topic ASC 810, but that consolidation is not required as the Bank is not the primary beneficiary. The net profits interests are financial instruments and recorded at estimated fair value, which was $16.2 million and $19.4 million at September 30, 2017 and December 31, 2016, respectively, representing the maximum exposure to loss as of that date.

The Company has established a rabbi trust related to the deferred compensation plan offered to certain of its employees. The Company contributes employee cash compensation deferrals to the trust. The assets of the trust are available to creditors of the Company only in the event the Company becomes insolvent. This trust is considered a VIE because either there is no equity at risk in the trust or because the Company provided the equity interest to its employees in exchange for services rendered. The Company is considered the primary beneficiary of the rabbi trust as it has the ability to select the underlying investments made by the trust, the activities that most significantly impact the economic performance of the rabbi trust. The Company includes the assets of the rabbi trust as a component of other assets and a corresponding liability for the associated benefit obligation in other liabilities in its consolidated balance sheets. At September 30, 2017 and December 31, 2016, the amount of rabbi trust assets and benefit obligation was $3.5 million and $3.0 million, respectively.

Note 21—Subsequent Events

On November 8, 2017, the Company, priced its previously announced secondary public offering of 9,500,000 shares of the Company’s Class A common stock, par value $0.01 per share (the “Class A Common Stock”), by Cadence Bancorp, LLC, the controlling stockholder of the Company (the “Selling Stockholder”). The underwriters will have a 30-day option to purchase an additional 1,425,000 shares of the Class A Common Stock from the Selling Stockholder. The Company itself did not sell any shares of Class A Common Stock and did not receive any proceeds from the offering, and the offering did not change the number of shares of the Company’s Class A Common Stock that are currently outstanding.

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

General

The following discussion and analysis presents our results of operations and financial condition on a consolidated basis for three and nine months ended September 30, 2017. 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 September 30, 2017 compared to December 31, 2016 for the balance sheets and the three and nine months ended September 30, 2017 compared to September 30, 2016 for the statements of income.

Because we conduct our material business operations through our bank subsidiary, Cadence Bank, N.A., the discussion and analysis relates to activities primarily conducted by the Bank. We generate most of our revenue from interest on loans and investments and fee-based revenues. Our primary source of funding for our loans is deposits. Our largest expenses are interest on these deposits and salaries and related employee benefits. We measure our performance primarily through our net income, pre-tax and pre-loan provision earnings, net interest margin, efficiency ratio, ratio of allowance for credit losses to total loans, return on average assets and return on average equity, among other metrics, while maintaining appropriate regulatory leverage and risk-based capital ratios.

This Report on Form 10-Q contains forward-looking statements. These forward-looking statements reflect our current views with respect to, among other things, future events and our results of operations, financial condition and financial performance. These statements are often, but not always, made through the use of words or phrases such as “may,” “should,” “could,” “predict,” “potential,” “believe,” “will likely result,” “expect,” “continue,” “will,” “anticipate,” “seek,” “estimate,” “intend,” “plan,” “projection,” “would” and “outlook,” or the negative version of those words or other comparable words of a future or forward-looking nature. These forward-looking statements are not historical facts, and are based on current expectations, estimates and projections about our industry, management’s beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond our control. Accordingly, we caution you that any such forward-looking statements are not guarantees of future performance and are subject to risks, assumptions and uncertainties that are difficult to predict. Although we believe that the expectations reflected in these forward-looking statements are reasonable as of the date made, actual results may prove to be materially different from the results expressed or implied by the forward-looking statements.

There are or will be important factors that could cause our actual results to differ materially from those indicated in these forward-looking statements, including, but not limited to, the following:

•

business and economic conditions generally and in the financial services industry, nationally and within our current and future geographic market areas;

•

economic, market, operational, liquidity, credit and interest rate risks associated with our business;

•

lack of seasoning in our loan portfolio;

•

deteriorating asset quality and higher loan charge-offs;

•

the laws and regulations applicable to our business;

•

our ability to achieve organic loan and deposit growth and the composition of such growth;

•

increased competition in the financial services industry, nationally, regionally or locally;

•

our ability to maintain our historical earnings trends;

•

our ability to raise additional capital to implement our business plan;

•

material weaknesses in our internal control over financial reporting;

•

systems failures or interruptions involving our information technology and telecommunications systems or third-party servicers;

•

the composition of our management team and our ability to attract and retain key personnel;

•

the fiscal position of the U.S. federal government and the soundness of other financial institutions;

•

our ability to monitor our lending relationships;

•

the composition of our loan portfolio, including the identity of our borrowers and the concentration of loans in energy-related industri es and in our specialized industries;

•

the portion of our loan portfolio that is comprised of participations and shared national credits;

•

the amount of nonperforming and classified assets we hold;

•

time and effort necessary to resolve nonperforming assets;

•

our ability to identify potential candidates for, consummate, and achieve synergies resulting from, potential future acquisitions;

•

our limited operating history as an integrated company and our recent acquisitions;

•

environmental liability associated with our lending activities;

•

the geographic concentration of our markets in Texas and the southeast United States;

•

the commencement and outcome of litigation and other legal proceedings against us or to which we may become subject;

•

the impact of recent and future legislative and regulatory changes, including changes in banking, securities and tax laws and regulations, such as the Dodd-Frank Act, and their application by our regulators, and the impact if potential expected changes do not occur;

•

requirements to remediate adverse examination findings;

•

changes in the scope and cost of FDIC deposit insurance premiums;

•

implementation of regulatory initiatives regarding bank capital requirements that may require heightened capital;

•

the obligations associated with being a public company;

•

our success at managing the risks involved in the foregoing items;

•

our modeling estimates related to an increased interest rate environment;

•

our ability to achieve the cost savings and efficiencies in connection with branch closures; and

•

our estimates as to our expected operational leverage and the expected additional loan capacity of our relationship managers.

The foregoing factors should not be construed as exhaustive and should be read together with the other cautionary statements included in this Report. If one or more events related to these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, actual results may differ materially from what we anticipate. Accordingly, you should not place undue reliance on any such forward-looking statements. Any forward-looking statement speaks only as of the date on which it is made, and we do not undertake any obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise. New factors emerge from time to time, and it is not possible for us to predict which will arise. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

Overview

Cadence Bancorporation is a bank holding company and a Delaware corporation headquartered in Houston, Texas, and is the parent company of Cadence Bank, National Association (N.A.). With $10.5 billion in assets, $8.0 billion in total loans (net of unearned discounts and fees), $8.5 billion in deposits and $1.3 billion in shareholders’ equity as of September 30, 2017, we currently operate a network of 65 branch locations across Texas, Alabama, Florida, Mississippi and Tennessee. We focus on middle-market commercial lending, complemented by retail banking and wealth management services, and provide a broad range of banking services to businesses, high net worth individuals and business owners.

We operate Cadence Bancorporation through three operating segments: Banking, Financial Services and Corporate. Our Banking Segment, which represented approximately 92% of our total revenues for the nine months ended September 30, 2017, consists of our Commercial Banking, Retail Banking and Private Banking lines of business. Our Commercial Ba nking activities focus on commercial and industrial (“C&I”), community banking, business banking and commercial real estate lending and treasury management services to clients in our geographic footprint in Texas and the southeast United States. Within our Commercial Banking line of business, we focus on select industries, which we refer to as our “specialized industries,” in which we believe we have specialized experience and service capabilities. These industries include franchise restaurant, healthcare a nd technology. Energy lending is also an important part of our business as energy production and energy related industries are meaningful contributors to the economy in our primary markets. In our Retail Banking business line, we offer a broad range of ban king services through our branch network to serve the needs of consumers and small businesses. In our Private Banking business line, we offer banking services, such as deposit services and residential mortgage lending, to affluent clients and business owne rs.

We are focused on organic growth and expanding our position in our markets. We believe that our franchise is positioned for continued growth as a result of prudent lending in our markets through experienced relationship managers and a client-centered, relationship-driven banking model, with particular emphasis on Texas-based expansion and our focus and capabilities in serving specialized industries. We believe our continued growth is supported by (i) our attractive geographic footprint, (ii) the stable and cost efficient deposit funding provided by our acquired franchises (each of which was a long-standing institution with an established customer network), (iii) our veteran board of directors and management team, (iv) our capital position and (v) our credit quality and risk management processes.

Recent Development

On November 8, 2017 we priced our previously announced secondary public offering of 9,500,000 shares of our Class A common stock, par value $0.01 per share (the “Class A Common Stock”), by Cadence Bancorp, LLC, our controlling stockholder (the “Selling Stockholder”). The underwriters will have a 30-day option to purchase an additional 1,425,000 shares of our Class A Common Stock from the Selling Stockholder. We did not sell any shares of Class A Common Stock and did not receive any proceeds from the offering, and the offering did not change the number of shares of our Class A Common Stock that are currently outstanding.

Selected Financial Data

The following table summarizes certain selected consolidated financial data for the periods presented. The historical consolidated financial information presented below contains financial measures that are not presented in accordance with U.S. GAAP and which have not been audited. See “Table 33 - Non-GAAP Financial Measures.”

Table 1 – Selected Financial Data

	As of and for the three months ended						As of and for the nine months ended						As of and for the year ended
	September 30,						September 30,						December 31,
(In thousands)	2017			2016			2017			2016			2016
Statement of Income Data:
Net income	$	32,577		$	6,607		$	87,662		$	36,789		$	65,774
Net interest income		81,163			70,426			238,305			206,941			279,439
Noninterest income - service fees and revenue		23,014			20,879			67,647			61,416			81,976
Noninterest expense		56,530			54,876			166,985			164,786			220,180
Provision for credit losses		1,723			29,627			14,210			54,570			49,348
Efficiency ratio ⁽¹⁾		52.20	%		58.87	%		53.43	%		60.36	%		59.86	%
Period-End Balance Sheet Data:
Investment securities, available-for-sale	$	1,198,032		$	1,031,319		$	1,198,032		$	1,031,319		$	1,139,347
Total loans, net of unearned income		8,028,938			7,207,313			8,028,938			7,207,313			7,432,711
Allowance for credit losses ("ACL")		94,765			91,169			94,765			91,169			82,268
Total assets		10,502,261			9,444,010			10,502,261			9,444,010			9,530,888
Total deposits		8,501,102			7,917,289			8,501,102			7,917,289			8,016,749
Total shareholders’ equity		1,340,848			1,111,783			1,340,848			1,111,783			1,080,498
Asset Quality Ratios:
Total nonperforming assets ('NPAs") to total loans plus OREO and NPI ⁽³⁾		1.51	%		2.52	%		1.51	%		2.52	%		2.22	%
Total ACL to total loans		1.18			1.26			1.18			1.26			1.11
ACL to total nonperforming loans ("NPLs") ⁽³⁾		122.66			59.34			122.66			59.34			63.80
Net charge-offs to average loans ⁽²⁾		0.01			1.41			0.03			0.81			0.65
Capital Ratios:
Total shareholders’ equity to assets		12.77	%		11.77	%		12.77	%		11.77	%		11.34	%
Tangible common equity to tangible assets ⁽¹⁾		9.95			8.54			9.95			8.54			8.13
Common equity tier 1 (CET1) (transitional)		10.79			8.82			10.79			8.82			8.84
Tier 1 leverage capital		11.12			8.73			11.12			8.73			8.89
Tier 1 risk-based capital		11.17			9.17			11.17			9.17			9.19
Total risk-based capital		13.18			11.38			13.18			11.38			11.22

(1)	Considered a non-GAAP financial measure. See “Table 33 - Non-GAAP Financial Measures” for a reconciliation of our non-GAAP measures to the most directly comparable GAAP financial measure.

(2)	Annualized for the three and nine months ended September 30, 2017 and 2016.

(3)

Included in our NPAs as of September 30, 2017 is a $9.9 million nonperforming energy credit that was reclassified as held-for-sale (“HFS”) and is being carried at lower of cost or market value ("LOCOM"). Because this credit was reclassified to HFS it has not been included in our investment loan portfolio ratios in order for these ratios to be comparable to prior periods (see- Table 18).

Summary of Results of Operations - Three and Nine Months ended September 30, 2017

Net income for the three months ended September 30, 2017 totaled $32.6 million, a $26.0 million, or 393.1%, increase compared to $6.6 million for the same period in 2016. The primary drivers of the net $26.0 million increase included a $10.7 million increase in net interest income, a $2.1 million increase in service fees and revenue, and a $27.9 million decrease in provision for credit losses, offset by a $15.4 million increase in income taxes. Net income for the nine months ended September 30, 2017 totaled $87.7 million, a $50.9 million, or 138%, increase compared to $36.8 million for the same period in 2016. The primary drivers of the net $50.9 million increase included a $31.4 million increase in net interest income, a $6.2 million increase in service fees and revenue, and a $40.4 million decrease in provision for credit losses, offset by a $26.8 million increase in income taxes. The resulting earnings per diluted common share for the three and nine months ended September 30, 2017 were $0.39 and $1.09, compared to $0.09 and $0.49 for the same periods of 2016.

Net interest income was $81.2 million for the three months ended September 30, 2017, a $10.7 million, or 15.2%, increase compared to the same period of 2016. Our net interest spread increased to 3.20% for the three months ended September 30, 2017 compared to 3.04% for the same period in 2016, and the net interest margin on an annualized basis increased 25 basis points to 3.52% from 3.27%. Net interest income was $238.3 million for the nine months ended September 30, 2017, a $31.4 million, or 15%, increase compared to the same period of 2016. Our net interest spread increased to 3.28% for the nine months ended September 30, 2017 compared to 3.08% for the same period in 2016, and the net interest margin on an annualized basis increased 26 basis points to 3.56% from 3.30%. The increase in net interest margin year-over-year resulted from increases in earning asset yields due largely to the impact of short-term rate increases on our floating rate loans during the periods, lagging deposit cost increases, and the impact of decreased interest-sensitive brokered deposits and increased noninterest bearing deposits during the periods

Service fees and revenue was $23.0 million in the three months ended September 30, 2017, an increase of $2.1 million, or 10.2%, over the same period in 2016. Service fees and revenue was $67.6 million in the nine months ended September 30, 2017, an increase of $6.2 million, or 10.1%, over the same period in 2016. The period-over-period increase reflects broad based business line growth during the year.

Noninterest expense for the three months ended September 30, 2017 increased $1.7 million, or 3.0%, to $56.5 million compared to $54.9 million during the same period of 2016. Noninterest expense for the nine months ended September 30, 2017 increased $2.2 million, or 1.3%, to $167.0 million compared to $164.8 million during the same period of 2016. The three and nine months ended September 30, 2017 included higher salary and benefits expenses offset by lower intangible amortization, FDIC insurance expense and professional fees.

Our efficiency ratio was 52.2% for the three months ended September 30, 2017, an improvement over the 58.9% efficiency ratio for the three months ended September 30, 2016. Our efficiency ratio was 53.4% for the nine months ended September 30, 2017, an improvement over the 60.4% efficiency ratio for the nine months ended September 30, 2016. A reconciliation of our non-GAAP measures is included in Table 33.

Provision for credit losses decreased $27.9 million, or 94.2%, to $1.7 million in the three months ended September 30, 2017, compared to $29.6 million in the three months ended September 30, 2016. Provision for credit losses decreased $40.4 million, or 74%, to $14.2 million in the nine months ended September 30, 2017, compared to $54.6 million in the nine months ended September 30, 2016. (See “—Provision for Credit Losses” and “—Asset Quality”). The higher provision for credit losses in 2016 was primarily related to our energy portfolio and a single healthcare loan that was charged-off during the second quarter of 2016. Annualized net charge-offs were 0.01% and 0.03% of average loans during the three and nine months ended September 30, 2017, respectively, compared to 1.41% and 0.81% of average loans during the three and nine months ended September 30, 2016, respectively.

Two “Category 4” hurricanes moved through our geographic footprint during the quarter. Hurricane Harvey made landfall in Texas in late August and Hurricane Irma hit Florida in early September. Our technology and operations in the affected areas continued to function throughout the storms, and we were able to re-open all but one of our 25 branches in the impacted footprint for regular business hours within days of the storm and with negligible repairs and costs, and all branches are now open. Based on our outreach to and analysis of our commercial customers, most with robust business continuity and disaster recovery plans, we have not identified any expected losses in the commercial portfolio to date. Based on our outreach to and analysis of our mortgage customers in the impacted areas, and in consideration of factors that increase the risks associated with these mortgages, we concluded that increasing reserves by approximately $2.0 million was appropriate as of September 30, 2017. We will continue to closely monitor all of our impacted customers as recovery efforts continue in the area.

Summary of Financial Condition as of September 30, 2017

Our total loans, net of unearned income increased $596.2 million, or 8.0%, from December 31, 2016 to $8.03 billion at September 30, 2017, which was driven by originated loan growth of $677.5 million, partially offset by a decrease of $81.3 million in the acquired loan portfolio. Our organic loan growth reflects increases in general C&I, commercial real estate and residential portfolios.

From an asset quality perspective, total nonperforming assets (“NPAs”) decreased $44.4 million, or 26.7%, compared to December 31, 2016. The decrease in NPAs from December 31, 2016 is primarily related to pay downs and resolutions within the energy portfolio. The bank does continue to see some stress due to low oil and gas prices, evidenced in elevated criticized loan levels within the energy portfolio. (See “—Asset Quality). Our total allowance for credit losses increased $12.5 million, or 15.2%, from $82.3 million at December 31, 2016 to $94.8 million at September 30, 2017, and represented approximately 1.2% of total loans at September 30, 2017 and 1.1% at December 31, 2016.

Total deposits increased $484.4 million, or 6.0%, to $8.5 billion at September 30, 2017, from $8.0 billion at December 31, 2016. Over the same period, noninterest-bearing deposits increased $230.6 million, or 12.5%, and comprised 24.4% and 23.0% of total deposits at September 30, 2017 and December 31, 2016, respectively. Interest-bearing deposits increased $253.7 million, or 4.1%, and comprised 75.6% and 77.0% of total deposits at September 30, 2017 and December 31, 2016, respectively. There was an offsetting a decline in brokered deposits of $217.7 million.

Overall, our Tier 1 leverage ratio increased 223 basis points, total risk-based capital ratio increased 196 basis points and Tier 1 risk-based capital ratio increased 198 basis points from December 31, 2016. The increases are primarily due to our initial public offering which occurred in April 2017. We met all capital adequacy requirements and the Bank continued to meet the minimum requirements to be considered well-capitalized under regulatory guidelines as of September 30, 2017.

Results of Operations

Earnings

We reported net income for the three and nine months ended September 30, 2017 of $32.6 million and $87.7 million, respectively, compared to $6.6 million and $36.8 million for the three and nine months ended September 30, 2016, respectively. The following table presents key earnings data for the periods indicated:

Table 2 – Key Earnings Data

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
(In thousands, except per share data)	2017			2016			2017			2016
Net income	$	32,577		$	6,607		$	87,662		$	36,789
Net income per common share
- basic ⁽¹⁾		0.39			0.09			1.09			0.49
- diluted ⁽⁴⁾		0.39			0.09			1.09			0.49
Net interest margin		3.52	%		3.27	%		3.56	%		3.30	%
Net interest spread		3.20			3.04			3.28			3.08
Return on average assets ⁽²⁾		1.29			0.28			1.19			0.54
Return on average equity ⁽²⁾		9.78			2.35			9.59			4.49
Return on average tangible common equity ⁽²⁾⁽³⁾		13.04			3.36			13.16			6.50

(1)	75 million of our outstanding shares are owned by our parent holding company Cadence Bancorp, LLC.

(2)	Annualized for the three and nine months ended September 30, 2017 and 2016.

(3)	Considered a non-GAAP financial measure. See “Table 33 - Non-GAAP Financial Measures” for a reconciliation of our non-GAAP measures to the most directly comparable GAAP financial measure.

(4)	Includes common stock equivalents (“CSE”) of 330,685 and 258,375 for the three months ended September 30, 2017 and 2016, and 345,425 and 258,375 for the nine months ended September 30, 2017 and 2016, respectively.

Net Interest Income

The largest component of our net income is net interest income, which is the difference between the income earned on interest-earning assets and interest paid on deposits and borrowings. We manage our interest-earning assets and funding sources to maximize our net interest margin. (See “—Quantitative and Qualitative Disclosures about Market Risk” for a discussion regarding

our interest rate risk). Net interest income is determined by the rates earned on our interest-earning assets, rates paid on our interest-bearing liabilities, the relative amounts of interest-earning assets and interest-bearing liabilities, the degree of mismatch and the maturity and re-pricing characteristics of our interest-earning assets and interest-bearing liabilities. Net interest income divided by average interest-earning assets represents our net interest margin. The yield on our net earning assets less the yield on our interest bearing liabilities represents our net interest spread.

Interest earned on our loan portfolio is the largest component of our interest income. Our originated and acquired noncredit impaired loan (“ANCI”) portfolios are presented at the principal amount outstanding net of deferred origination fees and unamortized discounts and premiums. Interest income is recognized based on the principal balance outstanding and the stated rate of the loan. Loan origination fees and certain direct origination costs are capitalized and recognized as an adjustment of the yield on the related loan. ANCI loans acquired through our acquisitions were initially recorded at fair value. Discounts or premiums created when the loans were recorded at their estimated fair values at acquisition are being accreted over the remaining term of the loan as an adjustment to the related loan’s yield.

The performance of loans within our acquired credit impaired (“ACI”) portfolio impacts interest income as the remaining discounts and proceeds received in excess of expected cash flow are realized in interest income when these loans are closed through payoff, charge off, workout, sale or foreclosure. At acquisition, the expected shortfall in future cash flows on our ACI portfolio, as compared to the contractual amount due, was recognized as a non-accretable discount. Any excess of expected cash flows over the acquisition date fair value is known as the accretable discount, and is recognized as accretion income over the life of each pool or individual ACI loan. Expected cash flows over the acquisition date fair value are re-estimated quarterly utilizing the same cash flow methodology used at the time of acquisition. Any subsequent decreases to the expected cash flows will generally result in a provision for credit losses charge in the consolidated statements of income. Conversely, subsequent increases in expected cash flows result in a transfer from the non-accretable discount to the accretable discount, which has a positive impact on accretion income prospectively. The following table summarizes the amount of interest income related to our ACI portfolio for the periods presented:

Table 3 – ACI Interest Income

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
(In thousands)	2017			2016			2017			2016
Scheduled accretion for the period	$	5,550		$	7,296		$	17,955		$	24,024
Recovery income for the period		290			1,360			5,350			4,732
Total interest realized on the ACI portfolio	$	5,840		$	8,656		$	23,305		$	28,756
Yield on ACI Portfolio
Scheduled accretion for the period		7.86	%		8.15	%		8.02	%		8.29	%
Recovery income for the period		0.41			1.52			2.39			1.63
Total yield on the ACI portfolio		8.27	%		9.67	%		10.41	%		9.92	%

As of September 30, 2017 the weighted average contractual interest rate on the remaining active ACI portfolio loans was approximately 4.65%.

The following table is a rollforward of the accretable difference on our ACI portfolio for the periods indicated:

Table 4 - Accretable Difference Rollforward

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
(In thousands)	2017			2016			2017			2016
Balance at beginning of period	$	85,788		$	107,973		$	98,728		$	122,791
Decreases from accretion, maturities/payoffs, foreclosures and charge-offs		(7,937	)		(10,851	)		(27,246	)		(33,988	)
Reclass from nonaccretable difference		4,248			4,248			10,617			12,567
Balance at end of period	$	82,099		$	101,370		$	82,099		$	101,370

Three Months Ended September 30, 2017 and 2016

Our net interest income, fully-tax equivalent (FTE), for the three months ended September 30, 2017 and 2016 was $82.9 million and $71.7 million, respectively, an increase of $11.2 million. Our net interest margin for the three months ended September 30, 2017 and 2016 was 3.52% and 3.27%, respectively, an increase of 25 basis points. The yield on our total loan portfolio increased 31 basis points to 4.55% for the three months ended September 30, 2017 compared to 4.24% for the three months ended September 30, 2016 due to an increase in the rate and volume of our originated portfolio. The following table sets forth, on a tax equivalent basis, the components of our net interest income with the effect that the varying levels of interest-earning assets and interest-bearing liabilities and the applicable rates have had on changes in net interest income for the three months ended September 30, 2017:

Table 5- Rate/Volume Analysis

	Three Months Ended September 30,
	2017 vs. 2016
	Net Interest Income				Increase			Changes Due To ⁽¹⁾
(In thousands)	2017		2016		(Decrease)			Rate			Volume
Increase (decrease) in:
Income from interest-earning assets:
Interest and fees on loans:
Originated and ANCI loans	$	84,321	$	68,411	$	15,910		$	8,286		$	7,624
ACI portfolio		5,840		8,656		(2,816	)		(1,140	)		(1,676	)
Interest on securities:
Taxable		4,610		3,866		744			928			(184	)
Tax-exempt ⁽²⁾		5,046		3,671		1,375			208			1,168
Interest on fed funds and short-term investments		1,072		662		410			605			(195	)
Interest on other investments		380		673		(293	)		(388	)		94
Total interest income		101,269		85,939		15,330			8,499			6,831
Expense from interest-bearing liabilities:
Interest on demand deposits		7,300		4,494		2,806			2,583			223
Interest on savings deposits		113		110		3			3			—
Interest on time deposits		5,665		4,676		989			1,501			(512	)
Interest on other borrowings		2,926		2,670		256			(843	)		1,099
Interest on subordinated debentures		2,336		2,278		58			43			15
Total interest expense		18,340		14,228		4,112			3,287			825
Net interest income	$	82,929	$	71,711	$	11,218		$	5,212		$	6,006

(1)	The change in interest income due to both rate and volume has been allocated to rate and volume changes in proportion to the relationship of the absolute dollar amounts of the changes in each.

(2)	Interest income and yields are presented on a tax equivalent basis using a Federal tax rate of 35% on our state, county and municipal investment portfolios.

Our total interest income (FTE) for the three months ended September 30, 2017 totaled $101.3 million compared to $85.9 million in the three months ended September 30, 2016. This increase is primarily the result of an increase in the volume and yield of our originated loans and an increase in the volume of our investment portfolio. The yield on our originated loan portfolio reflects an increase in LIBOR rates in our loan portfolio. We also increased the level of our investments in tax-exempt securities which increased the interest income volume on our investment securities portfolio.

The following table presents a comparison of loan portfolio yield for the thr ee months ended September 30, 2017 and 2016:

Table 6 - Loan Portfolio Yield

	Three Months Ended
	September 30, 2017							September 30, 2016
	Average		Interest					Average		Interest
(In thousands)	Balance		Income		Yield			Balance		Income		Yield
Loans, net of unearned income
Originated loans	$	7,389,566	$	81,585		4.38	%	$	6,619,157	$	64,999		3.91	%
ANCI loans		197,990		2,736		5.48			250,164		3,412		5.43
ACI Loans		280,238		5,840		8.27			356,044		8,656		9.67
Total loans	$	7,867,794	$	90,161		4.55	%	$	7,225,365	$	77,067		4.24	%

The yield on our ACI portfolio fluctuates due to the volume and timing of cash flows received or expected to be received. The yield on our ACI portfolio for the three months ended September 30, 2017 was 8.27% compared to 9.67% for the three months ended September 30, 2016. During the three months ended September 30, 2017, interest income on the ACI portfolio included $0.3 million in recovery income, compared to $1.4 million in the three months ended September 30, 2016. These amounts were realized on certain individual loans that were settled before expected, or where we received amounts above our estimates. Excluding these amounts, the yield on our ACI loans would have been 7.86% for the three months ended September 30, 2017 compared to 8.15% for the three months ended September 30, 2016. Our total loan yield, excluding these amounts, would have been 4.53 % and 4.17 % for the three months ended September 30, 2017 and 2016, respectively.

Our interest expense for the three months ended September 30, 2017 and 2016 was $18.3 million and $14.2 million, respectively, an increase of $4.1 million. This increase is primarily related to the impact of higher market rates on our interest bearing demand accounts and time deposits. Our cost of interest bearing deposits increased to 0.84% for the three months ended September 30, 2017 compared to 0.60% for the three months ended September 30, 2016. Our cost of borrowings for the three months ended September 30, 2017 and 2016 was 4.31% and 5.35%, respectively, and is primarily related to an increase in lower costs FHLB advances offset by an increase in LIBOR rates from the prior period.

The following table presents, on a tax equivalent basis, for the three months ended September 30, 2017 and 2016, our average balance sheet and our average yields on assets and average costs of liabilities. Average yields are calculated by dividing income or expense by the average balance of the corresponding assets or liabilities. Average balances have been calculated on a daily basis, except for ACI loans, which is a monthly average.

Table 7 – Average Balances, Net Interest Income and Interest Yields/Rates

	Three Months Ended September 30,
	2017									2016
	Average			Income/			Yield/			Average			Income/			Yield/
(In thousands)	Balance			Expense			Rate			Balance			Expense			Rate
ASSETS
Interest-earning assets:
Loans, net of unearned income ⁽¹⁾
Originated and ANCI loans	$	7,587,556		$	84,321			4.41	%	$	6,869,321		$	68,411			3.96	%
ACI portfolio		280,238			5,840			8.27			356,044			8,656			9.67
Total loans		7,867,794			90,161			4.55			7,225,365			77,067			4.24
Investment securities
Taxable		760,269			4,610			2.41			796,625			3,866			1.93
Tax-exempt ⁽²⁾		408,913			5,046			4.90			314,211			3,671			4.65
Total investment securities		1,169,182			9,656			3.28			1,110,836			7,537			2.70
Federal funds sold and short-term investments		267,684			1,072			1.59			354,720			662			0.74
Other investments		49,661			380			3.04			42,896			673			6.24
Total interest-earning assets		9,354,321			101,269			4.30			8,733,817			85,939			3.91
Noninterest-earning assets:
Cash and due from banks		60,760									45,873
Premises and equipment		65,308									69,247
Accrued interest and other assets		639,188									644,340
Allowance for credit losses		(94,706	)								(93,132	)
Total assets	$	10,024,871								$	9,400,145

LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Demand deposits	$	4,329,086		$	7,300			0.67	%	$	4,130,126		$	4,494			0.43	%
Savings deposits		180,099			113			0.25			180,452			110			0.24
Time deposits		1,648,000			5,665			1.36			1,835,371			4,676			1.01
Total interest-bearing deposits		6,157,185			13,078			0.84			6,145,949			9,280			0.60
Other borrowings		349,925			2,926			3.32			234,072			2,670			4.54
Subordinated debentures		134,873			2,336			6.87			134,120			2,278			6.76
Total interest-bearing liabilities		6,641,983			18,340			1.10			6,514,141			14,228			0.87
Noninterest-bearing liabilities:
Demand deposits		1,982,784									1,697,633
Accrued interest and other liabilities		79,220									69,768
Total liabilities		8,703,987									8,281,542
Shareholders' equity		1,320,884									1,118,603
Total liabilities and shareholders' equity	$	10,024,871								$	9,400,145
Net interest income/net interest spread					82,929			3.20	%					71,711			3.04	%
Net yield on earning assets/net interest margin								3.52	%								3.27	%
Taxable equivalent adjustment:
Investment securities					(1,766	)								(1,285	)
Net interest income				$	81,163								$	70,426

(1)	Nonaccrual loans are included in loans, net of unearned income. No adjustment has been made for these loans in the calculation of yields.

(2)	Interest income and yields are presented on a taxable equivalent basis using a tax rate of 35%.

Nine months ended September 30, 2017 and 2016

Our net interest income, fully-tax equivalent (FTE), for the nine months ended September 30, 2017 and 2016 was $243.7 million and $210.0 million, respectively, an increase of $33.8 million. Our net interest margin for the nine months ended September 30, 2017 and 2016 was 3.56% and 3.30%, respectively, an increase of 26 basis points. The yield on our total loan portfolio increased 29 basis points to 4.54% for the nine months ended September 30, 2017 compared to 4.25% for the nine months ended September 30, 2016 due to an increase in the rate and volume of our originated portfolio offset by a decline in the volume of our higher yielding ACI portfolio. The following table sets forth, on a tax equivalent basis, the components of our net

interest income with the effect that the varying levels of interest-earning assets and interest-bearing liabilities and the applicable rates have had on changes in net interest income for the nine months ended September 30, 2017:

	Nine Months Ended September 30,
	2017 vs. 2016
	Net Interest Income				Increase			Changes Due To ⁽¹⁾
(In thousands)	2017		2016		(Decrease)			Rate			Volume
Increase (decrease) in:
Income from interest-earning assets:
Interest and fees on loans:
Originated and ANCI loans	$	238,095	$	197,747	$	40,348		$	20,395		$	19,953
ACI portfolio		23,305		28,756		(5,451	)		1,359			(6,810	)
Interest on securities:
Taxable		13,089		12,420		669			973			(304	)
Tax-exempt ⁽²⁾		15,506		8,651		6,855			508			6,347
Interest on fed funds and short-term investments		2,184		1,636		548			898			(350	)
Interest on other investments		1,745		2,000		(255	)		(406	)		151
Total interest income		293,924		251,210		42,714			23,727			18,987
Expense from interest-bearing liabilities:
Interest on demand deposits		19,186		12,858		6,328			5,241			1,087
Interest on savings deposits		344		312		32			25			7
Interest on time deposits		15,084		12,867		2,217			2,887			(670	)
Interest on other borrowings		8,623		8,361		262			(1,089	)		1,351
Interest on subordinated debentures		6,955		6,843		112			72			40
Total interest expense		50,192		41,241		8,951			7,136			1,815
Net interest income	$	243,732	$	209,969	$	33,763		$	16,591		$	17,172

Our total interest income (FTE) for the nine months ended September 30, 2017 totaled $293.9 million compared to $251.2 million in the nine months ended September 30, 2016. This increase is primarily the result of an increase in the volume and yield of our originated loans offset by declines in the volume and yield of our ACI portfolio and an increase in the volume of our investment portfolio. The yield on our originated loan portfolio reflects the increase in LIBOR rates in our loan portfolio. We also increased the level of our investments in tax-exempt securities which increased the interest income volume on our investment securities portfolio.

The following table presents a comparison of loan portfolio yield for the nine months ended September 30, 2017 and 2016:

	Nine Months Ended
	September 30, 2017							September 30, 2016
	Average		Interest					Average		Interest
(In thousands)	Balance		Income		Yield			Balance		Income		Yield
Loans, net of unearned income
Originated loans	$	7,185,554	$	229,705		4.27	%	$	6,468,699	$	186,874		3.86	%
ANCI loans		206,072		8,390		5.44			267,278		10,873		5.43
ACI Loans		299,172		23,305		10.41			387,234		28,756		9.92
Total loans	$	7,690,798	$	261,400		4.54	%	$	7,123,211	$	226,503		4.25	%

The yield on our ACI portfolio fluctuates due to the volume and timing of cash flows received or expected to be received. The yield on our ACI portfolio for the nine months ended September 30, 2017 was 10.41% compared to 9.92% for the nine months ended September 30, 2016. During the nine months ended September 30, 2017, interest income on the ACI portfolio included $5.4 million in recovery income, compared to $4.7 million in the nine months ended September 30, 2016. These amounts were realized on certain individual loans that were settled before expected, or where we received amounts above our estimates. Excluding these amounts, the yield on our ACI loans would have been 8.02% for the nine months ended September 30, 2017 compared to 8.29% for the nine months ended September 30, 2016. Our total loan yield, excluding these amounts, would have been 4.45 % and 4.16 % for the nine months ended September 30, 2017 and 2016, respectively.

Our interest expense for the nine months ended September 30, 2017 and 2016 was $50.2 million and $41.2 million, respectively, an increase of $9.0 million. This increase is primarily related to the impact of higher market rates on our interest bearing demand accounts and time deposits. Our cost of interest bearing deposits increased to 0.75% for the nine months ended September 30, 2017 compared to 0.59% for the nine months ended September 30, 2016. Our cost of borrowings was 4.25% and

4.65% for the nine months ended September 30, 2017 and 2016, respectively. The decline reflects our purchase of senior debt and increases in lower cost FHLB advances.

The following table presents, on a tax equivalent basis, for the nine months ended September 30, 2017 and 2016, our average balance sheet and our average yields on assets and average costs of liabilities. Average yields are calculated by dividing income or expense by the average balance of the corresponding assets or liabilities. Average balances have been calculated on a daily basis, except for ACI loans, which is a monthly average.

	Nine Months Ended September 30,
	2017									2016
	Average			Income/			Yield/			Average			Income/			Yield/
(In thousands)	Balance			Expense			Rate			Balance			Expense			Rate
ASSETS
Interest-earning assets:
Loans, net of unearned income ⁽¹⁾
Originated and ANCI loans	$	7,391,626		$	238,095			4.31	%	$	6,735,977		$	197,747			3.92	%
ACI portfolio		299,172			23,305			10.41			387,234			28,756			9.92
Total loans		7,690,798			261,400			4.54			7,123,211			226,503			4.25
Investment securities
Taxable		723,871			13,089			2.42			741,536			12,420			2.24
Tax-exempt ⁽²⁾		407,511			15,506			5.09			239,801			8,651			4.82
Total investment securities		1,131,382			28,595			3.38			981,337			21,071			2.87
Federal funds sold and short-term investments		281,454			2,184			1.04			345,838			1,636			0.63
Other investments		49,263			1,745			4.74			45,599			2,000			5.86
Total interest-earning assets		9,152,897			293,924			4.29			8,495,985			251,210			3.95
Noninterest-earning assets:
Cash and due from banks		57,837									48,481
Premises and equipment		65,663									69,855
Accrued interest and other assets		641,331									636,862
Allowance for credit losses		(89,156	)								(88,660	)
Total assets	$	9,828,572								$	9,162,523

LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Demand deposits	$	4,338,645		$	19,186			0.59	%	$	4,027,944		$	12,858			0.43	%
Savings deposits		182,877			344			0.25			178,163			312			0.23
Time deposits		1,618,298			15,084			1.25			1,702,380			12,867			1.01
Total interest-bearing deposits		6,139,820			34,614			0.75			5,908,487			26,037			0.59
Other borrowings		355,393			8,623			3.24			302,867			8,361			3.69
Subordinated debentures		134,692			6,955			6.90			133,916			6,843			6.83
Total interest-bearing liabilities		6,629,905			50,192			1.01			6,345,270			41,241			0.87
Noninterest-bearing liabilities:
Demand deposits		1,895,754									1,656,166
Accrued interest and other liabilities		81,068									67,678
Total liabilities		1,976,822									8,069,114
Shareholders' equity		1,221,845									1,093,409
Total liabilities and shareholders' equity	$	9,828,572								$	9,162,523
Net interest income/net interest spread					243,732			3.28	%					209,969			3.08	%
Net yield on earning assets/net interest margin								3.56	%								3.30	%
Taxable equivalent adjustment:
Investment securities					(5,427	)								(3,028	)
Net interest income				$	238,305								$	206,941

(1)	Nonaccrual loans are included in loans, net of unearned income. No adjustment has been made for these loans in the calculation of yields.

(2)	Interest income and yields are presented on a taxable equivalent basis using a tax rate of 35%.

Provision for Credit Losses

The provision for credit losses is based on management’s quarterly assessment of the adequacy of our ACL which, in turn, is based on such factors as the composition of our loan portfolio and its inherent risk characteristics, the level of nonperforming loans and net charge-offs, both current and historic, local economic and credit conditions, the direction of collateral values, and regulatory guidelines. The provision for credit losses is charged against earnings in order to maintain our allowance for credit losses, which reflects management’s best estimate of probable losses inherent in our loan portfolio at the balance sheet date. (See “—Allowance for Credit Losses”).

Under accounting standards for business combinations, acquired loans are re corded at fair value with no credit loss allowance on the date of acquisition. A provision for credit losses is recorded in periods after the date of acquisition for the emergence of new probable and estimable losses on ANCI loans. A provision for credit l osses is recognized on our ACI loans after the date of acquisition based on the re-estimation of expected cash flows. See “—Asset Quality”.

The provision for credit losses totaled $1.7 million and $14.2 million for the three and nine months ended September 30, 2017, compared to $29.6 million and $54.6 million for the three and nine months ended September 30, 2016. The following is a summary of our provision for credit losses for the periods indicated presented by originated, ANCI and ACI portfolios:

Table 8 – Provision for Credit Losses

	Three Months Ended September 30,						Nine Months Ended September 30,
(In thousands)	2017			2016			2017			2016
Originated Loans
Commercial and industrial	$	(432	)	$	29,290		$	8,656		$	53,125
Commercial real estate		811			57			3,564			1,765
Consumer		2,689			275			3,633			1,402
Small business		109			99			328			1,761
Total originated loans		3,177			29,721			16,181			58,053
ANCI Loans
Commercial and industrial		31			(33	)		639			(196	)
Commercial real estate		—			(237	)		(42	)		(211	)
Consumer		(154	)		33			(146	)		188
Small business		(69	)		(47	)		(224	)		(60	)
Total ANCI		(192	)		(284	)		227			(279	)
ACI Loans
Commercial and industrial		278			(39	)		95			(2,179	)
Commercial real estate		(1,195	)		(763	)		(877	)		(876	)
Consumer		(345	)		992			(1,416	)		(149	)
Small business		—			—			—			—
Total ACI		(1,262	)		190			(2,198	)		(3,204	)
Total Loans
Commercial and industrial		(123	)		29,218			9,390			50,750
Commercial real estate		(384	)		(943	)		2,645			678
Consumer		2,190			1,300			2,071			1,441
Small business		40			52			104			1,701
Total provision for credit losses	$	1,723		$	29,627		$	14,210		$	54,570

Our originated loan portfolio is categorized into specific risk segments that are subject to estimated loss rates according to their respective segment and risk rating. The primary driver of the originated ACL is the underlying credit quality of the loans, which have seen credit risk migration trends as the portfolio has become more seasoned and as our energy segments have experienced stress from lower oil and gas prices. We recognized $1.7 million and $14.2 million in provision during the three and nine months ended September 30, 2017, respectively, which included $3.2 million and $16.2 million provision related to the originated portfolio. The $3.2 million and $16.2 million in originated loan provision for the three and nine months ended September 30, 2017 is primarily attributable to loan growth within the originated General C&I and CRE portfolios, an approximately $2.0 million addition to the Consumer provision in the third quarter of 2017 associated with heightened risks surrounding certain of our mortgage loan customers impacted by the hurricanes in the quarter and a $2.6 million charge-off in the Exploration and Production portfolio during the second quarter of 2017.

concluded that increasing reserves by approximately $2.0 million was appropriate as of September 30, 2017. We will continue to closely monitor all of our impacted customers as recovery efforts continue in the area.

We recognized $29.6 million and $54.6 million in provision during the three and nine month periods ended September 30, 2016, respectively. This included $29.7 million and $58.1 million provision, respectively, related to the originated portfolio. Of the $58.1 million in originated loan provision for the nine month period ended September 30, 2016, approximately $34.0 million is attributable to our energy credits which includes an increase in the December 31, 2015 energy credit ACL balance of $4.8 million to $31.9 million and charge-offs of two energy credits totaling $29.2 million. An additional $12.2 million in provision is attributable to a single credit in the healthcare sector. The remaining provision of approximately $11.2 million during the nine month period ended September 30, 2016 is related to loan growth and normal credit migration.

Noninterest Income

Noninterest income is a component of our revenue and is comprised primarily of income generated from the services we provide our customers.

Noninterest income totaled $27.1 million and $74.2 million for the three and nine months ended September 30, 2017, compared to $22.8 million and $66.0 million for the three and nine months ended September 30, 2016. The increase in our service fees and revenue is primarily attributable to investment advisory revenue, trust services income, service charges on deposits, credit-related fees and other service fee revenue.

The following table compares noninterest income for the three and nine months ended September 30, 2017 and 2016:

Table 9 – Noninterest Income

	Three Months Ended September 30,							Nine Months Ended September 30,
(In thousands)	2017		2016		% Change			2017			2016		% Change
Investment advisory revenue	$	5,283	$	4,733		11.6	%	$	15,260		$	13,990		9.1	%
Trust services revenue		4,613		3,959		16.5			14,428			12,000		20.2
Service charges on deposit accounts		3,920		3,555		10.3			11,519			10,179		13.2
Credit-related fees		3,306		2,690		22.9			8,794			7,870		11.7
Insurance revenue		1,950		1,863		4.7			5,908			6,140		(3.8	)
Bankcard fees		1,803		1,823		(1.1	)		5,477			5,330		2.8
Mortgage banking revenue		965		1,459		(33.9	)		3,044			3,644		(16.5	)
Other service fees earned		1,174		797		47.3			3,217			2,263		42.2
Total service fees and revenue		23,014		20,879		10.2			67,647			61,416		10.1
Securities gains (losses), net		1		1,386	NM				(162	)		2,469	NM
Other		4,109		526	NM				6,733			2,158	NM
Total other noninterest income		4,110		1,912		115.0			6,571			4,627		42.0
Total noninterest income	$	27,124	$	22,791		19.0	%	$	74,218		$	66,043		12.4	%

NM – Not meaningful.

Investment Advisory Revenue. Our investment advisory revenue is comprised largely of investment management and financial planning revenues generated through our subsidiary Linscomb & Williams, Inc. (“L&W”). The 11.6% and 9.1% increase in investment advisory revenue for the three and nine months ended September 30, 2017, respectively, to $5.3 million and $15.3 million, respectively, was mostly due to growth in assets under management due to both new customer origination and market improvements.

Trust Services Revenue. We earn fees from our customers for trust services. For the three months ended September 30, 2017 and 2016, trust fees totaled $4.6 million and $4.0 million, respectively, an increase of $0.7 million, or 16.5%. For the nine months ended September 30, 2017 and 2016, trust fees totaled $14.4 million and $12.0 million, respectively, an increase of $2.4 million, or 20.2%. The increase was primarily due to growth in trust assets under management and through customer expansion.

Service Charges on Deposit Accounts. We earn fees from our customers for deposit-related services. For the three months ended September 30, 2017 and 2016, service charges and fees totaled $3.9 million and $3.6 million, which is an increase of 10.3%. For the nine months ended September 30, 2017 and 2016, service charges and fees totaled $11.5 million and $10.2 million, which is an increase of 13.2%. The increase was largely due to an increase in account analysis fees.

Credit-Related Fees. Our credit-related fees include fees related to credit advisory services, unfunded commitment fees and letter of credit fees. For the three and nine months ended September 30, 2017, credit-related fees increased 22.9% and 11.7%, respectively, to $3.3 million a nd $8.8 million, respectively, compared to $2.7 million and $7.9 million for the three and nine months ended September 30, 2016, primarily as a result of an increase in unfunded commitment, capital market and letter of credit fees.

Insurance Revenue. Our insurance revenue is comprised of insurance commissions generated through our wholly-owned subsidiary, Cadence Insurance. Our insurance revenue was $2.0 million and $5.9 million for the three and nine months ended September 30, 2017 compared to $1.9 million and $6.1 million for the same periods in 2016. The decrease of 3.8%, for the nine months ended September 30, 2017 is the result of lower contingent commissions from insurance carriers and lower commercial premiums.

Bankcard Fees. Our bankcard fees are comprised of automated teller machine (“ATM”) network fees and debit card revenue. Our bankcard fees were $1.8 million and $5.5 million for the three and nine months ended September 30, 2017, respectively. The increase of 2.8% for the nine months ended September 30, 2017 was primarily due to increased volume and customer expansion.

Mortgage Banking Revenue. Our mortgage banking revenue is comprised of mortgage loan sales and servicing income. The decreases of $0.5 million and $0.6 million or 33.9% and 16.5%, for the three and nine months ended September 30, 2017, respectively, were mostly due to lower gains related to decreased volumes.

Other Service Fees. Our other service fees include retail services fees. For the three and nine months ended September 30, 2017, other service fees totaled $1.2 million and $3.2 million, respectively. The increase over the three and nine months ended September 30, 2016 was largely due to an increase in foreign exchange income.

Other Income. The increase in other income for the three and nine months ended September 30, 2017 compared to 2016 is primarily related to the increase in equity investments in certain limited partnership investments, a one-time $1.1 million gain on the sale of a specialty insurance unit, partially offset by a decline in the estimated fair value of a net profits interests in oil and gas reserves due to lower forecasted production.

Noninterest Expenses

The following table compares noninterest expense for the three and nine months ended September 30, 2017 and 2016:

Table 10 – Noninterest Expense

	Three Months Ended September 30,							Nine Months Ended September 30,
(In thousands)	2017		2016		% Change			2017		2016		% Change
Noninterest Expenses
Salaries and employee benefits	$	35,007	$	31,086		12.6	%	$	103,956	$	96,929		7.2	%
Premises and equipment		7,419		7,130		4.1			21,292		20,507		3.8
Intangible asset amortization		1,136		1,607		(29.3	)		3,567		4,977		(28.3	)
Net cost of operation of other real estate owned		453		1,126		(59.8	)		1,175		1,916		(38.7	)
Data processing		1,688		1,530		10.3			5,086		4,513		12.7
Special asset expenses		215		391		(45.0	)		824		742		11.1
Consulting and professional fees		2,069		2,040		1.4			4,710		4,441		6.1
Loan related expenses		532		1,071		(50.3	)		1,569		2,252		(30.3	)
FDIC insurance		889		1,912		(53.5	)		3,336		5,711		(41.6	)
Communications		650		535		21.5			1,980		1,915		3.4
Advertising and public relations		521		303		71.9			1,365		1,025		33.2
Legal expenses		612		337		81.6			1,552		2,059		(24.6	)
Branch closure expenses		50		52		(3.8	)		143		191		(25.1	)
Other		5,289		5,756		(8.1	)		16,430		17,608		(6.7	)
Total	$	56,530	$	54,876		3.0	%	$	166,985	$	164,786		1.3	%

NM – Not meaningful.

Noninterest expense was $56.5 million and $167.0 million for the three and nine months ended September 30, 2017, respectively, compared to $54.9 million and $164.8 million for the three and nine months ended September 30, 2016, respectively. The slight inc rease of $1.7 million and $2.2 million, or 3.0% and 1.3%, respectively, for the three and nine months ended September 30, 2017, compared to the same periods in 2016 reflects our broad efforts to manage expenses.

Salaries and Employee Benefits. Salaries and employee benefit costs are the largest component of noninterest expense and include employee payroll expense, incentive compensation, health insurance, benefit plans and payroll taxes. Salaries and employee benefits increased $3.9 million and $7.0 million, or 12.6% and 7.2%, for the three and nine months ended September 30, 2017, respectively, compared to 2016, largely due to short and long-term incentive costs as salary expense remained relatively level. The increase in long-term incentive costs is related to achieving higher levels of performance targets and higher corporate valuation; the short-term incentive is related to business growth. The following table provides additional detail of our salaries and employee benefits expense for the periods presented:

	Three Months Ended September 30,				Nine Months Ended September 30,
(In thousands)	2017		2016		2017		2016
Salaries and employee benefits
Regular compensation	$	20,495	$	19,672	$	61,754	$	60,422
Incentive compensation		10,354		7,630		27,623		22,529
Taxes and employee benefits		4,158		3,784		14,579		13,978
Total salaries and employee benefits	$	35,007	$	31,086	$	103,956	$	96,929

Premises and Equipment. Rent, depreciation and maintenance costs comprise the majority of premises and equipment expenses, which increased $289 thousand and $785 thousand, or 4.1% and 3.8%, for the three and nine months ended September 30, 2017, respectively, compared to the three and nine months ended September 30, 2016. This increase includes the increase in certain maintenance costs and the effect of a one-time lease termination credit recognized in 2016.

Intangible Asset Amortization. In conjunction with our previous acquisitions, we recorded core deposit and other customer intangible assets of approximately $66.0 million, which are being amortized on an accelerated basis over a seven- to ten-year period.

Net Cost of Operation of Other Real Estate Owned. Net cost of operation of other real estate owned primarily represents our gains (losses) on other real estate owned resulting from the sale or write-down of foreclosed property. During the three and nine months ended September 30, 2017, we had net losses from the sale/write-down of foreclosed properties totaling $0.1 million and $0.4 million, respectively, compared to $0.8 million thousand and $1.3 million for the three and nine months ended September 30, 2016, respectively. Our other costs of operations continue to decline as the volume and complexity of these properties diminishes. See “—Nonperforming Assets” for detail of foreclosed properties as of September 30, 2017.

Data Processing. Data processing expense for our operating systems totaled $1.7 million and $5.1 million for the three and nine months ended September 30, 2017, respectively, compared to $1.5 million and $4.5 million for the three and nine months ended September 30, 2016, an increase of 10.3% and 12.7%, respectively. The increases reflect growth in our business as well as implementations and enhancement of various technologies.

Special Asset Expenses. Special asset expenses include costs related to the management and resolution of our loan portfolio. For the three and nine months ended September 30, 2017, special asset expenses were $215 thousand and $824 thousand, respectively. Our special asset expenses have been steadily declining and while these costs can fluctuate between periods, we expect these expenses to remain low in the foreseeable future.

Consulting and Professional Services. Consulting and professional services expenses include consulting, audit and professional fees paid to external parties. For the three and nine months ended September 30, 2017, our consulting and professional services increased $29 thousand and $269 thousand, respectively, or 1.4% and 6.1%, respectively, compared to the three and nine months ended September 30, 2016 as a result of the engagement of outside consultants related to regulatory compliance and additional costs of being a public company.

Loan-Related Expenses. Loan-related expenses include costs related to maintaining our various loan portfolios. For the three and nine months ended September 30, 2017, our loan-related expenses totaled $0.5 million and $1.6 million, respectively, compared to $1.1 million and $2.3 million for the three and nine months ended September 30, 2016, respectively. The decrease is related to insurance costs on serviced loans and may fluctuate between periods.

FDIC Insurance. We are subject to risk-based assessment fees by the FDIC for de posit insurance. For the three and nine months ended September 30, 2017 and 2016, FDIC insurance expense declined $1.0 million and $2.4 million, respectively, due to the increase in our levels of capital, and the reduction in our nonperformimg loans and br okered deposits.

Communications. Communications expenses include expenses related to both voice and data communications. During the three and nine months ended September 30, 2017, our communications expenses increased slightly to $0.7 million and $2.0 million from $0.5 million and $1.9 million for the three and nine months ended September 30, 2016, due to an increase in data communications services.

Advertising and Public Relations. Advertising and public relations expenses for the three and nine months ended September 30, 2017 increased $218 thousand and $340 thousand, respectively, or 71.9% and 33.2%, respectively. The increases were driven by overall business growth as well as our initial public offering in April 2017. Our advertising and public relations expenses are seasonal and can fluctuate between quarters.

Legal Expenses. Our legal expenses include fees paid to outside counsel related to general legal matters as well as loan resolutions. For the three months ended September 30, 2017, our legal fees increased $275 thousand, or 81.6% compared to the same period in the prior year. For the nine months ended September 30, 2017, legal fees decreased $507 thousand, or 24.6%, compared to the same period in the prior year, primarily due to reduced general litigation expenses.

Branch Closure Expenses. During 2017 and 2016, we incurred certain trailing costs related to branch closures.

Other. These expenses include costs for insurance, supplies, education and training, and other operational expenses. For the three and nine months ended September 30, 2017, other noninterest expenses declined 8.1% and 6.7% compared to the three and nine months ended September 30, 2016, respectively.

Income Tax Expense

Income tax expense for the three and nine months ended September 30, 2017 was $17.5 million and $43.7 million, respectively, compared to $2.1 million and $16.8 million for the three and nine months ended September 30, 2016. The effective tax rate was 34.9% and 33.3% for the three and nine months ended September 30, 2017, respectively, compared to 24.2% and 31.4% for the three and nine months ended September 30, 2016. The increase in the effective tax rate for the three and nine months ended September 30, 2017 compared to the three and nine months ended September 30, 2016 was primarily driven by an increase in income before income taxes.

Our effective tax rate is impacted by pre-tax income, tax-exempt income, and the increase in the cash surrender value of bank-owned life insurance. The effective tax rate is also affected by discrete items that may occur in any given period, but are not consistent from period-to-period, which may impact the comparability of the effective tax rate between periods.

Financial Condition

The following table summarizes selected components of our balance sheet as of the periods indicated.

Table 11 – Selected Balance Sheet Data

	As of				Average Balance
(In thousands)	September 30, 2017		December 31, 2016		Three Months Ended September 30, 2017		Nine Months Ended September 30, 2017		Year Ended December 31, 2016
Total assets	$	10,502,261	$	9,530,888	$	10,024,871	$	9,828,572	$	9,271,629
Total interest-earning assets		9,824,610		8,832,706		9,354,321		9,152,897		8,602,985
Total interest-bearing liabilities		7,002,191		6,507,506		6,641,983		6,629,905		6,419,582
Short-term and other investments		575,380		242,401		317,345		330,717		415,033
Securities available for sale		1,198,032		1,139,347		1,169,182		1,131,382		1,001,317
Loans, net of unearned income		8,028,938		7,432,711		7,867,794		7,690,798		7,186,635
Goodwill		317,817		317,817		317,817		317,817		317,817
Noninterest bearing deposits		2,071,594		1,840,955		1,982,784		1,895,754		1,688,405
Interest bearing deposits		6,429,508		6,175,794		6,157,185		6,139,820		5,966,897
Borrowings and subordinated debentures		572,683		331,712		484,798		490,085		452,685
Shareholders' equity		1,340,848		1,080,498		1,320,884		1,221,845		1,093,604

Investment Portfolio

Our available-for-sale securities portfolio increased $58.7 million, or 5.2%, to $1.20 billion at September 30, 2017, from $1.14 billion at December 31, 2016. At September 30, 2017, our investment security portfolio was 12.2% of our total interest-earning assets and produced an average taxable equivalent yield of 3.28% and 3.38% for the three and nine months ended September 30, 2017.

The following table sets forth the fair value of the available-for-sale securities at the dates indicated:

Table 12 –Investment Portfolio

	September 30,		December 31,		Percent Change
(In thousands)	2017		2016		2017 vs 2016
Investment securities available for sale:
U.S. Treasury securities	$	97,688	$	96,785		0.9	%
U.S. Agency securities		84,165		97,528		(13.7	)
Mortgage-backed securities issued or guaranteed by U.S. agencies (MBS):
Residential pass-through:
Guaranteed by GNMA		112,535		153,153		(26.5	)
Issued by FNMA and FHLMC		384,042		265,328		44.7
Other residential mortgage-backed securities		40,568		47,561		(14.7	)
Commercial mortgage-backed securities		60,990		62,613		(2.6	)
Total MBS		598,135		528,655		13.1
State, county and municipal securities		412,216		410,812		0.3
Other securities		5,828		5,567		4.7
Total investment securities available for sale	$	1,198,032	$	1,139,347		5.2	%

The following table summarizes the investment securities with unrealized losses at September 30, 2017 by aggregated major security type and length of time in a continuous unrealized loss position:

Table 13 –Unrealized Losses in the Investment Portfolio

	September 30, 2017
	Less than 12 Months				More than 12 Months				Total
(In thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Temporarily Impaired
U.S. Treasury securities	$	—	$	—	$	97,688	$	2,927	$	97,688	$	2,927
U.S. Agency securities		138		—		25,784		103		25,922		103
Mortgage-backed securities:
Residential pass-through		173,854		1,922		23,190		407		197,044		2,329
Other residential mortgage-backed securities		2,896		22		15,643		739		18,539		761
Commercial mortgage-backed securities		41,476		2,164		19,514		1,622		60,990		3,786
Total MBS		218,226		4,108		58,347		2,768		276,573		6,876
State, county and municipal securities		140,067		4,134		93,325		7,351		233,392		11,485
Equity securities		—		—		4,313		134		4,313		134
Total temporarily impaired securities	$	358,431	$	8,242	$	279,457	$	13,283	$	637,888	$	21,525

None of the unrealized losses relate to the marketability of the securities or the issuer’s ability to honor redemption of the obligations. We have adequate liquidity, no plans to sell securities and the ability and intent to hold securities to maturity resulting in full recovery of the indicated impairment. Accordingly, the unrealized losses on these securities have been determined to be temporary.

Loan Portfolio

We originate commercial and industrial loans, commercial real estate loans (including construction loans), residential mortgages and other consumer loans. A strong emphasis is placed on the commercial portfolio, consisting of commercial and industrial and commercial real estate loan types, with over 76% of the portfolio residing in these loan types as of September 30, 2017. Our commercial portfolio is further diversified by industry concentration and includes loans to clients in specialized industries, including restaurant, healthcare and technology. Additional commercial lending activities include energy, construction, general corporate loans, business banking and community banking loans. Mortgage, wealth management and retail make up the majority of the consumer portfolio.

The following tables present total loans outstanding by portfolio component and class of financing receivable as of September 30, 2017 and December 31, 2016. The tables below are presented using a risk-based perspective of the loan portfo lio. Total loan balances include ANCI loans, originated loans and ACI loans combined. Subsequent tables present the ANCI, ACI and originated loans separately.

Table 14 –Loan Portfolio

	Total Loans						Change
(In thousands)	September 30, 2017			December 31, 2016			Q3 2017 vs YE 2016			Percent
Commercial and Industrial
General C&I	$	2,620,240		$	2,416,665		$	203,575			8.42		%
Energy sector		932,981			939,369			(6,388	)		(0.68	)
Restaurant industry		979,735			864,085			115,650			13.38
Healthcare		394,345			445,103			(50,758	)		(11.40	)
Total commercial and industrial		4,927,301			4,665,222			262,079			5.62
Commercial Real Estate
Income producing		1,145,810			1,001,703			144,107			14.39
Land and development		73,107			71,004			2,103			2.96
Total commercial real estate		1,218,917			1,072,707			146,210			13.63
Consumer
Residential real estate		1,616,157			1,457,170			158,987			10.91
Other		72,326			68,689			3,637			5.29
Total consumer		1,688,483			1,525,859			162,624			10.66
Small Business Lending		218,277			193,641			24,636			12.72
Total (Gross of Unearned Discount and Fees)		8,052,978			7,457,429			595,549			7.99
Unearned Discount and Fees		(24,040	)		(24,718	)		678			(2.74	)
Total (Net of Unearned Discount and Fees)	$	8,028,938		$	7,432,711		$	596,227			8.02		%

	Total Originated loans						Change
(In thousands)	September 30, 2017			December 31, 2016			Q3 2017 vs YE 2016			Percent
Commercial and Industrial
General C&I	$	2,542,261		$	2,337,364		$	204,897			8.77		%
Energy sector		932,981			939,369			(6,388	)		(0.68	)
Restaurant industry		979,735			864,085			115,650			13.38
Healthcare		385,385			434,663			(49,278	)		(11.34	)
Total commercial and industrial		4,840,362			4,575,481			264,881			5.79
Commercial Real Estate
Income producing		1,048,441			886,676			161,765			18.24
Land and development		71,597			67,555			4,042			5.98
Total commercial real estate		1,120,038			954,231			165,807			17.38
Consumer
Residential real estate		1,340,724			1,125,048			215,676			19.17
Other		67,981			59,819			8,162			13.64
Total consumer		1,408,705			1,184,867			223,838			18.89
Small Business Lending		207,575			184,483			23,092			12.52
Total (Gross of Unearned Discount and Fees)		7,576,680			6,899,062			677,618			9.82
Unearned Discount and Fees		(20,545	)		(20,417	)		(128	)		0.63
Total (Net of Unearned Discount and Fees)	$	7,556,135		$	6,878,645		$	677,490			9.85		%
Percent to total loans		94.11	%		92.55	%

	Total ANCI loans						Change
(In thousands)	September 30, 2017			December 31, 2016			Q3 2017 vs YE 2016			Percent
Commercial and Industrial
General C&I	$	51,876		$	47,592		$	4,284			9.00		%
Energy sector		—			—			—			—
Restaurant industry		—			—			—			—
Healthcare		2,720			4,102			(1,382	)		(33.69	)
Total commercial and industrial		54,596			51,694			2,902			5.61
Commercial Real Estate
Income producing		14,735			18,354			(3,619	)		(19.72	)
Land and development		1,510			1,952			(442	)		(22.64	)
Total commercial real estate		16,245			20,306			(4,061	)		(20.00	)
Consumer
Residential real estate		117,801			145,747			(27,946	)		(19.17	)
Other		2,948			7,180			(4,232	)		(58.94	)
Total consumer		120,749			152,927			(32,178	)		(21.04	)
Small Business Lending		10,702			9,158			1,544			16.86
Total (Gross of Unearned Discount and Fees)		202,292			234,085			(31,793	)		(13.58	)
Unearned Discount and Fees		(3,495	)		(4,301	)		806			(18.74	)
Total (Net of Unearned Discount and Fees)	$	198,797		$	229,784		$	(30,987	)		(13.49	)	%
Percent to total loans		2.48	%		3.09	%

	Total ACI loans						Change
(In thousands)	September 30, 2017			December 31, 2016			Q3 2017 vs YE 2016			Percent
Commercial and Industrial
General C&I	$	26,103		$	31,709		$	(5,606	)		(17.68	)	%
Energy sector		—			—			—			—
Restaurant industry		—			—			—			—
Healthcare		6,240			6,338			(98	)		(1.55	)
Total commercial and industrial		32,343			38,047			(5,704	)		(14.99	)
Commercial Real Estate
Income producing		82,634			96,673			(14,039	)		(14.52	)
Land and development		—			1,497			(1,497	)		(100.00	)
Total commercial real estate		82,634			98,170			(15,536	)		(15.83	)
Consumer
Residential real estate		157,632			186,375			(28,743	)		(15.42	)
Other		1,397			1,690			(293	)		(17.34	)
Total consumer		159,029			188,065			(29,036	)		(15.44	)
Small Business Lending		—			—			—			—
Total (Gross of Unearned Discount and Fees)		274,006			324,282			(50,276	)		(15.50	)
Unearned Discount and Fees		—			—			—			—
Total (Net of Unearned Discount and Fees)	$	274,006		$	324,282		$	(50,276	)		(15.50	)	%
Percent to total loans		3.41	%		4.36	%

Commercial and Industrial. Commercial and Industrial (“C&I”) loans increased by $262.1 million, or 5.6%, since December 31, 2016 and represented 61.2% of our total loan portfolio at September 30, 2017, compared to 62.6% of total loans at December 31, 2016. Approximately half of the originated commercial loan portfolio (combining C&I and CRE) consists of shared national credits, which vary by industry and geography. These transactions are generally relationship-based and have the potential for ancillary business. As of September 30, 2017, 91% of the shared national credit portfolio, or $2.8 billion, resides in the commercial and industrial segment of the loan portfolio, on a loan balance basis. As of September 30, 2017, the largest category of shared national credits is the Energy sector, representing 25% of the shared national credits portfolio, or $757 million as of September 30, 2017 compared to 29% of the shared national credits portfolio, or $782 million as of December 31, 2016. The next largest category of shared national credits is the Restaurant industry at 24% of all shared national credits, or $744 million, compared to 24% and $663 million as of December 31, 2016. The remaining amount of the shared national credit portfolio can be

found in the servi ces, healthcare and other categories and, to a lesser amount, the CRE segment of the loan portfolio. Additionally, all shared national credits are part of the originated loan portfolio.

Our C&I loan growth reflects our strategic focus on this broad loan category. We seek further diversification within C&I loans by industry to mitigate concentration risk in any one industry and/or risk type. Our specialized industries are significant drivers of the growth and diversification of this portion of our loan portfolio. Energy and specialized industries lending have experienced teams with extensive knowledge on their particular industry, allowing for quality underwriting and relationship-based lending.

General C&I . As of September 30, 2017 our general C&I category included the following types of loans: finance and insurance, professional services, commodities excluding energy, manufacturing, real estate activities, transportation, media and telecom and other. Generally C&I loans typically provide working capital, equipment financing and financing for expansion and are generally secured by assignments of corporate assets including accounts receivable, inventory and/or equipment.

Energy . Energy lending is an important part of our business and our energy team is comprised of experienced lenders with significant product expertise and long-standing relationships. Additionally, energy production and energy related industries are substantial contributors to the economies in the Houston metropolitan area and the state of Texas. As of September 30, 2017, energy loans outstanding totaled $933.0 million, or 11.6% of total loans compared to $939 million, or 12.6% as of December 31, 2016. We strive for a rigorous and thorough approach to energy underwriting and credit monitoring. As a result of the stress on oil and gas prices during the periods reported we have experienced downgrades, increased loan provisions and certain losses in the energy sector loans. As of September 30, 2017 we had an allowance for credit losses of $23.2 million for our energy loans, or 2.49% of the energy portfolio compared to $24.6 million, or 2.61% as of December 31, 2016. (See “—Provision for Credit Losses” and “—Allowance for Credit Losses”). As of September 30, 2017, we had $82.0 million of nonperforming energy credits, of which more than 85% were current with their contractual terms compared to $113.4 million of nonperforming energy credits as of December 31, 2016. In addition, 17.3% of the energy portfolio was criticized or classified as of September 30, 2017 compared to 28.8% at December 31, 2016. We recorded recoveries of $519 thousand and charge-offs of $2.6 million on our energy portfolio during the nine months ended September 30, 2017. As presented in the following table our energy lending business is comprised of three areas: Exploration and Production (“E&P”), Midstream and Energy Services:

Table 15 –Energy Loan Portfolio

	Energy Sector						September 30, 2017
(In thousands)	September 30, 2017			December 31, 2016			Unfunded Commitments		Criticized/ Classified
Outstanding Balance
E&P	$	294,953		$	371,870		$	166,977	$	116,760
Midstream		558,187			472,053			467,023		7,886
Energy Services		79,841			95,446			57,607		36,786
Total energy sector	$	932,981		$	939,369		$	691,607	$	161,432
Percent to total loans		11.59	%		12.60	%
Allocated ACL
E&P	$	19,040		$	13,018
Midstream		1,476			5,878
Energy Services		2,695			5,657
Total allocated ACL	$	23,211		$	24,553
ACL as a Percentage of Outstanding Balances
E&P		6.46	%		3.50	%
Midstream		0.26			1.25
Energy Services		3.38			5.93
Total percentage		2.49	%		2.61	%

E&P loans outstanding totaled $295.0 million and comprised approximately 31.6% of outstanding energy loans as of September 30, 2017 compared to $371.9 million, or 40% of outstanding energy loans as of December 31, 2016. E&P customers are primarily businesses that derive a majority of their revenues from the sale of oil and gas and whose credit needs require technical evaluation of oil and gas reserves. Emphasis for E&P is on high quality, independent producers with proven track records. Our E&P credit underwriting includes a combination of well-by-well analyses, frequent updates to our pricing decks and engaging energy engineers to actively monitor the portfolio and provide credit redeterminations, at a minimum, every six months. At least quarterly, and more frequently during periods of higher commodity price volatility, we adjust the base and sensitivity price decks

on which we value our clients’ oil and gas reserves. Generally, we seek to follow the shape of the NYMEX strips for oil and natural gas, but at a discount to the strip. In periods of higher commodity prices, our discount f rom the strip is higher whereas in lower price periods our discount is lower. The price decks utilized in our engineering analysis are approved by our senior credit risk management committee. Borrowing base redeterminations occur every spring and fall, wit h the spring redeterminations completed prior to the end of the second quarter and fall determinations completed prior to the end of the fourth quarter.

Midstream loans outstanding totaled $558.2 million and comprised approximately 59.8% of outstanding energy loans as of September 30, 2017 compared to $472.1 million, or approximately 50% of outstanding energy loans as of December 31, 2016. Midstream lending is generally to customers who handle the gathering, treating and processing, storage or transportation of oil and gas. These customers’ businesses are generally less price sensitive than other energy segments given the nature of their fee-based revenue streams. Underwriting guidelines for the Midstream portfolio generally require a first lien on all assets as collateral.

Energy Services loans outstanding totaled $79.8 million and comprised approximately 8.6% of outstanding energy as of September 30, 2017 compared to $95.4 million, or approximately 10% of outstanding energy loans, as of December 31, 2016. Energy Services lending targets oilfield service companies that provide equipment and services used in the exploration for and extraction of oil and natural gas. Customers consist of a wide variety of businesses, including production equipment manufacturers, chemical sales, water transfer, rig equipment and other early and late stage services companies. The Company expects that additions to the Energy Services portfolio in the current environment would be on a limited basis, with any new loans primarily issued for short-term working capital facilities.

Specialized lending . The following table includes our specialized lending portfolio as of the dates presented:

Table 16 –Specialized Lending Portfolio

	Originated C&I Loans - Specialized Lending
(In thousands)	September 30, 2017		December 31, 2016		Unfunded Commitments as of September 30, 2017		Q3 2017 vs YE 2016
Specialized Industries
Restaurant industry	$	979,735	$	864,085	$	255,558	$	115,650
Healthcare		385,385		434,663		164,365		(49,278	)
Technology		332,614		218,162		71,905		114,452
Total specialized industries	$	1,697,734	$	1,516,910	$	491,828	$	180,824

Restaurant industry and healthcare are the largest components of our specialized industries. For these industries we focus on larger corporate clients, who are typically well-known within the industry. The client coverage for both of these components is national in scope, given the size and capital needs of the majority of the clients. Additionally, in the restaurant sector we focus on major franchisees and the operating companies of “branded” restaurant concepts. Our healthcare portfolio focuses on middle market healthcare providers with diversified payer mix, while our technology portfolio focuses on the technology sub-segments of software and services, network and communications infrastructure, and internet and mobility applications. Given these customer profiles, we frequently participate in such credits with two or more banks through syndication.

Commercial Real Estate. Commercial real estate (“CRE”) loans increased by $146.2 million, or 13.6%, since December 31, 2016. CRE loans represented 15.1% of our total loan portfolio as of September 30, 2017, compared to 14.4% of total loans as of December 31, 2016. Income Producing CRE includes non-owner occupied loans secured by commercial real estate, regardless of the phase of the loan (construction versus completed). Commercial construction loans are primarily included in Income Producing CRE. Additionally, all real estate investment trust and income producing loans are included in the Income Producing CRE segment. Land, lots and homebuilder loans are included in the land and development segment. All owner occupied CRE loans reside in the various C&I segments in which the underlying risk exists. Our CRE lending team is a group of experienced relationship managers focusing on construction and income producing property lending which generally have property or sponsors located in our geographic footprint. CRE loans are secured by a variety of property types, including multi-family dwellings, office buildings, industrial properties and retail facilities.

Consumer . Consumer loans increased by $162.6 million, or 10.7%, from December 31, 2016 to September 30, 2017. Consumer loans represented 21.0% of total loans at September 30, 2017, compared to 20.5% of total loans at December 31, 2016. We originate residential real estate mortgages that are held for investment as well as held for sale in the secondary market. Approximately 16.6% of the consumer portfolio relates to acquired portfolios compared to 22% as of December 31, 2016. Our

originated consumer loan portfolio totaled $1.4 billion as of September 30, 2017, an increase of $223.8 million, or 18.9% from December 31, 2016.

Small Business. Small Business loans increased by $24.6 million, or 12.7% from December 31, 2016 to September 30, 2017. Small business loans represented 2.7% of the total loan portfolio at September 30, 2017, compared to 2.6% of total loans at December 31, 2016. The small business category is defined as all commercial loans with a transactional exposure of $1.5 million or less and relationship exposure of $2.0 million or less.

Concentrations of Credit. Our concentrations of credit are closely and consistently monitored by the Company. Individual concentration limits are assessed and established, as needed, on a quarterly basis and measured as a percentage of risk-based capital. All concentrations greater than 25% of risk-based capital require a concentration limit, which is monitored and reported to the board of directors on at least a quarterly basis. In addition to the loans categorized in the loan portfolio section, we manage concentration limits for leveraged loans, technology loans, specialty chemical, and non-specialized enterprise value loans.

We evaluate the appropriateness of our underwriting standards in response to changes in national and regional economic conditions, including energy prices, interest rates, real estate values, and employment levels. Underwriting standards and credit monitoring activities are assessed and enhanced in response to changes in these conditions.

Asset Quality

We focus on asset quality strength through robust underwriting, proactive monitoring and reporting of the loan portfolio and collaboration between the lines of business, credit administration and risk management.

Credit risk is governed and reported up to the board of directors primarily through our senior credit risk management committee. The senior credit risk management committee reviews credit portfolio management information such as problem loans, delinquencies, concentrations of credit, asset quality trends, portfolio analysis, policy updates and changes, and other relevant information. Further, both senior loan committee and credit transition committee, the primary channels for credit approvals, report up through senior credit risk management committee. The senior loan committee generally approves all loans with relationship exposure greater than $5 million. Dual signature authority is utilized for loan approvals below the $5 million threshold. Additionally, the credit transition committee manages all material credit actions for classified credits greater than $5 million. Our board of directors receives information concerning asset quality measurements and trends on at least a quarterly basis if not more frequently. While we continue to proactively monitor the loan portfolio, external factors, such as an economic downturn, can lead to negative consequences such as lowered earnings and unemployment leading to the inability to make loan payments.

Credit policies have been established for each type of lending activity in which we engage, with a particular focus given to the commercial side of the Bank. Polices are evaluated and updated as needed based on changes in guidance and regulations as well as business needs of the Bank.

Each loan’s creditworthiness is assessed and assigned a risk rating, based on both the borrower strength as well as the collateral protection of the loan. Each risk rating takes into account the probability of default as well as loss given default. Risk rating accuracy and reporting are critical tools for monitoring the portfolio as well as determining the allowance for credit losses. Assigned risk ratings are periodically reviewed for accuracy and adjusted as appropriate for all relationships greater than $2.5 million.

Select asset quality metrics presented below distinguish between the originated, ANCI and ACI portfolios.

Nonperforming Assets. Nonperforming assets (“NPAs”) primarily consist of nonperforming loans and property acquired through foreclosures or repossession (which we refer to as other real estate owned or “OREO”). The following tables present nonperforming assets and additional asset quality data for the dates indicated:

Table 17 –Nonperforming Assets

	As of September 30, 2017
(Recorded Investment in thousands)	Originated			ANCI			ACI			Total
Nonperforming loans ("NPLs"):
Commercial and industrial	$	72,219		$	—		$	—		$	72,219
Commercial real estate		—			300			225			525
Consumer		1,101			2,588			—			3,689
Small business		312			514			—			826
Total NPLs		73,632			3,402			225			77,259
Foreclosed OREO and other NPAs		26,270			408			17,815			44,493
Total nonperforming assets ("NPAs")	$	99,902		$	3,810		$	18,040		$	121,752
NPLs as a percentage of total loans		0.92	%		0.04	%		0.00	%		0.96	%
NPLs as a percentage of portfolio		0.97	%		1.71	%		0.08	%
NPAs as a percentage of loans plus OREO/other NPAs		1.24	%		0.05	%		0.22	%		1.51	%
NPAs as a percentage of portfolio plus OREO/other NPAs		1.32	%		1.91	%		6.18	%
NPAs as a percentage of total assets		0.95	%		0.04	%		0.17	%		1.16	%
Accruing 90 days or more past due	$	41		$	197		$	18,856		$	19,094

	As of December 31, 2016
(Recorded Investment in thousands)	Originated			ANCI			ACI			Total
Nonperforming loans ("NPLs"):
Commercial and industrial	$	120,473		$	125		$	1,818		$	122,416
Commercial real estate		—			341			1,845			2,186
Consumer		798			2,732			—			3,530
Small business		132			673			—			805
Total NPLs		121,403			3,871			3,663			128,937
Foreclosed OREO and other NPAs		19,425			127			17,679			37,231
Total nonperforming assets ("NPAs")	$	140,828		$	3,998		$	21,342		$	166,168
NPLs as a percentage of total loans		1.63	%		0.05	%		0.05	%		1.73	%
NPLs as a percentage of portfolio		1.76	%		1.68	%		1.13	%
NPAs as a percentage of loans plus OREO/other NPAs		1.89	%		0.05	%		0.29	%		2.22	%
NPAs as a percentage of portfolio plus OREO/other NPAs		2.04	%		1.74	%		6.24	%
NPAs as a percentage of total assets		1.48	%		0.04	%		0.22	%		1.74	%
Accruing 90 days or more past due	$	331		$	255		$	18,364		$	18,950

Nonperforming Loans. Commercial loans, including small business loans, are generally placed on nonaccrual status when principal or interest is past due 90 days or more unless the loan is well secured and in the process of collection, or when the loan is specifically determined to be impaired. When a commercial loan is placed on nonaccrual status, interest accrued but not received is generally reversed against interest income.

Consumer loans, including residential first and second lien loans secured by real estate, are generally placed on nonaccrual status when they are 120 or more days past due. When a consumer loan is placed on nonaccrual status, interest accrued but not received is generally reversed against interest income.

Generally, cash receipts on nonperforming loans are used to reduce principal rather than recorded as interest income. Past due status is determined based upon contractual terms. A nonaccrual loan may be returned to accrual status when repayment is reasonably assured and there has been demonstrated performance under the terms of the loan or, if applicable, under the terms of the restructured loan. For the three and nine months ended September 30, 2017, approximately $2.1 million and $6.9 million,

respectively, of contractual interest accrued on nonperforming loans was not recognized in earnings; however, approximately $0.4 million and $1.4 million, respectively, of contractual interest paid was recognized on the cash basis.

Our nonperforming loans have decreased to 0.96% of our loan portfolio as of September 30, 2017 compared to 1.73% of our loan portfolio as of December 31, 2016, with the decrease primarily due to energy credits within our originated portfolio. As of September 30, 2017, we had $82.0 million in energy credits considered nonperforming, of which more than 85% were current under their contractual terms. Included in the $82 million as of September 30, 2017 is a $9.9 million nonperforming energy credit that was reclassified as held-for-sale (“HFS”) during the third quarter of 2017 and is being carried at lower of cost or market value ("LOCOM"). Because this credit was reclassified to HFS it has not been included in our loan portfolio held-for-investment ratios in order for these ratios to be comparable to prior periods. However, this HFS nonaccrual E&P was included in table 17 above as part of our other NPAs (see – Table 18 below).

During early 2016, banking regulators revised their definition of nonaccrual for E&P loans as it relates to leverage, including second-lien debt, in which we do not participate. As a result it has affected the nonaccrual status of certain loans in that portfolio. The following table includes our originated nonperforming loans and assets for the periods presented.

Table 18 – Originated Nonperforming Assets

	As of
(Recorded Investment in thousands)	September 30, 2017			December 31, 2016
Nonperforming loans ("NPLs"):
Commercial and industrial
Energy -E&P	$	57,739		$	95,453
- Midstream		7,886			10,689
- Service		6,402			7,242
Other commercial		193			7,089
Consumer		1,101			798
Small business		311			132
Total NPLs - originated portfolio		73,632			121,403
E&P - net profits interests		16,193			19,425
Foreclosed OREO		140			—
Originated E&P loan transferred to held-for-sale		9,937			—
Total net profits interest and other nonperforming assets ("NPAs") - originated portfolio		26,270			19,425
Total nonperforming assets ("NPAs") - originated portfolio	$	99,902		$	140,828
NPLs as a percentage of total loans		0.91	%		1.63	%

Other Real Estate Owned. Other real estate owned (“OREO”) consists of properties acquired through foreclosure and unutilized bank-owned properties. These properties, as held for sale properties, are initially recorded at fair value, less estimated costs to sell, on the date of foreclosure (establishing a new cost basis for the property). Subsequent to the foreclosure date the OREO is maintained at the lower of cost or fair value. Any write-down to fair value required at the time of foreclosure is charged to the allowance for credit losses. Subsequent gains or losses on other real estate owned resulting from either the sale of the property or additional valuation allowances, are reported in other noninterest expense.

The balance of foreclosed OREO was $18.8 million as of September 30, 2017 compared to $18.9 million as of December 31, 2016, with 94.6% related to foreclosures resulting from our ACI loan portfolio. Approximately 24.0% of our foreclosed OREO, or $4.5 million , is comprised of single-family residential properties located in Alabama and Florida. OREO also included a $6.7 million tract of undeveloped timber land in Florida and $1.2 million commercial office complex in Florida we foreclosed in the second quarter of 2017. As of September 30, 2017 and December 31, 2016, there had been no additions to OREO resulting from foreclosure or repossession from a shared national credit. However, we did receive during the second and fourth quarters of 2016, $19.1 million in net profits interests (“NPIs”) in certain oil and gas reserves related to energy credit bankruptcies related to two energy portfolio shared national credits that were charged-off in 2016. We recorded the NPIs at estimated fair value using a discounted cash flow analysis applied to the expected cash flows from the producing developed wells. These NPIs are considered financial instruments and recorded at fair value and are subject to the volatility of oil and gas prices and other operational factors outside of our control. The balance of the NPIs was $16.2 million as of September 30, 2017 compared to $19.4 million as of

December 31, 2016. The decrease was primarily attributable to a decline in the estimated fair value due to lower production forecasts for one of the NPIs. The following tables present the balances of our OREO and NPIs/HFS loan as of the dates indicated:

Table 19 – OREO and Other Assets

	September 30, 2017
(In thousands)	Originated		ANCI		ACI		Other		Total
Acquired through foreclosure
Land	$	—	$	140	$	8,288	$	—	$	8,428
Residential property		140		245		4,250		—		4,635
Commercial property		—		23		5,277		—		5,300
Total foreclosed OREO		140		408		17,815		—		18,363
Unutilized bank-owned properties
Land		—		—		—		473		473
Total unutilized bank owned property		—		—		—		473		473
Total OREO		140		408		17,815		473		18,836
Other assets - net profits interests and held-for-sale loan		26,130		—		—		—		26,130
Total OREO and other assets	$	26,270	$	408	$	17,815	$	473	$	44,966

	As of December 31, 2016
(In thousands)	Originated		ANCI		ACI		Other		Total
Acquired through foreclosure
Land	$	—	$	—	$	10,183	$	—	$	10,183
Residential property		97		104		4,937		—		5,138
Commercial property		—		23		2,559		—		2,582
Total foreclosed OREO		97		127		17,679		—		17,903
Unutilized bank-owned properties
Land		—		—		—		756		756
Commercial property		—		—		—		216		216
Total unutilized bank owned property		—		—		—		972		972
Total OREO		97		127		17,679		972		18,875
Other assets - net profits interests		19,425		—		—		—		19,425
Total OREO and other assets	$	19,522	$	127	$	17,679	$	972	$	38,300

Past Due 90 Days and Accruing. We classify certain loans with principal or interest past due 90 days or more as accruing loans if those loans are well secured and in the process of collection, or are specifically determined to be impaired as accruing loans. The bulk of the accruing 90 days or more past due loans reside in the ACI portfolio which approximately half consists of single family residential loans, the bulk of which are located in Florida and Alabama, with the remainder consisting of a healthcare loan and commercial real estate loans. These loans are monitored on a bi-weekly basis by both the lines of business and credit administration. As of September 30, 2017, there were no shared national credits that were 90 days or more past due and accruing.

Troubled Debt Restructuring. We attempt to work with borrowers when necessary to extend or modify loan terms to better align with the borrower’s ability to repay. Extensions and modifications to loans are made in accordance with internal policies and guidelines which conform to regulatory guidance. Each occurrence is unique to the borrower and is evaluated separately. The Bank considers regulatory guidelines when restructuring loans to ensure that prudent lending practices are followed. Qualifying criteria and payment terms are structured by the borrower’s current and prospective ability to comply with the modified terms of the loan.

A modification is classified as a troubled debt restructuring (a “TDR”) if the borrower is experiencing financial difficulty and it is determined that we have granted a concession to the borrower. We may determine that a borrower is experiencing financial difficulty if the borrower is currently in default on any of its debt, or if it is probable that a borrower may default in the foreseeable future without the modification. Concessions could include reductions of interest rates, extension of the maturity date at a rate lower than current market rate for a new loan with similar risk, reduction of accrued interest, principal forgiveness, forbearance, or other concessions. The assessments of whether a borrower is experiencing or will likely experience financial difficulty and whether a concession has been granted is highly subjective in nature, and management’s judgment is required when determining whether a modification is classified as a TDR.

All TDRs are reported as impaired. An impaired classification may be removed if the borrower demonstrates compliance with the modified terms and the restructuring agreement specifies an interest rate equal to that which w ould be provided to a borrower with similar credit at the time of restructuring. Nonperforming loans and impaired loans have unique definitions. Some loans may be included in both categories, whereas other loans may only be included in one category. As of September 30, 2017 there were 5 shared national credit borrowers that were considered TDRs, totaling $32.3 million. The following table summarizes our TDR activity for the three and nine months ended September 30, 2017 and 2016:

Table 20 -ANCI and Originated Loans that were modified into TDRs

	For the Three Months Ended September 30, 2017								For the Three Months Ended September 30, 2016
	Loans Modified into TDRs During the Period				TDRs Experiencing Payment Default (1) during the Period				Loans Modified into TDRs During the Period				TDRs Experiencing Payment Default (1) during the Period
(In thousands)	Number of TDRs		Recorded Investment		Number of TDRs		Recorded Investment		Number of TDRs		Recorded Investment		Number of TDRs		Recorded Investment
Commercial and Industrial
General C&I		—	$	—		—	$	—		1	$	7,896		—	$	—
Energy sector		—		—		—		—		3		29,107		—		—
Total commercial and industrial		—		—		—		—		4		37,003		—		—
Consumer
Other		1	$	285		—		—		—		—		—		—
Total		1	$	285		—	$	—		4	$	37,003		—	$	—
	For the Nine Months Ended September 30, 2017								For the Nine Months Ended September 30, 2016
	Loans Modified into TDRs During the Period				TDRs Experiencing Payment Default (1) during the Period				Loans Modified into TDRs During the Period				TDRs Experiencing Payment Default (1) during the Period
(In thousands)	Number of TDRs		Recorded Investment		Number of TDRs		Recorded Investment		Number of TDRs		Recorded Investment		Number of TDRs		Recorded Investment
Commercial and Industrial
General C&I		1	$	193		—	$	—		1	$	7,896		—	$	—
Energy sector		—		—		—		—		4		35,945		—		—
Total commercial and industrial		1		193		—		—		5		43,841		—		—
Consumer
Residential real estate		1		462		—		—		1		336		—		—
Other		1		285		—		—		1		184		—		—
Total Consumer		2		747		—		—		2		520		—		—
Small Business Lending		1		145		—		—		—		—		—		—
Total		4	$	1,085		—	$	—		7	$	44,361		—	$	—

(1)	Default is defined as the earlier of the troubled debt restructuring being placed on non-accrual status or obtaining 90 day past due status with respect to principal and/or interest payments.

ACI Loans that were modified into TDRs . There were no ACI loans modified in a TDR for the three and nine months ended September 30, 2017. In the nine months ended September 30, 2016, there was one ACI loan modified in a TDR with a recorded investment of $954 thousand in income producing commercial real estate. There were no TDRs experiencing payment default during the three and nine months ended September 30, 2017 and 2016. Default is defined as the earlier of the troubled debt restructuring being placed on non-accrual status or obtaining 90 day past due status with respect to principal and interest payments.

Potential Problem Loans. Potential problem loans represent loans that are currently performing, but for which known information about possible credit problems of the related borrowers causes management to have doubts as to the ability of such borrowers to comply with the present loan repayment terms and which may result in disclosure of such loans as nonperforming at some time in the future. These loans are not included in the amounts of nonaccrual or restructured loans presented above. We cannot predict the extent to which economic conditions or other factors may impact borrowers and the potential problem loans.Accordingly, there can be no assurance that other loans will not become 90 days or more past due, be placed on nonaccrual status, become restructured, or require increased allowance coverage and provision for credit losses. We have identified three credits as a potential problem loan at September 30, 2017 totaling approximately $27.1 million. These credits are classified in the general C&I and Restaurant segments of our portfolio. Any potential problem loans are assessed for loss exposure consistent with the methods described in Notes 1 and 3 to our Consolidated Financial Statements.

We expect the levels of nonperforming assets and potential problem loans to fluctuate in response to changing economic and market conditions, and the relative sizes of the respective loan portfolios, along with our degree of success in resolving problem assets. We seek to take a proactive approach with respect to the identification and resolution of problem loans.

Allowance for Credit Losses

The allowance for credit losses is maintained at a level that management believes is adequate to absorb all probable losses inherent in the loan portfolio as of the reporting date. Events that are not within the Company’s control, such as changes in economic factors, could change subsequent to the reporting date and could cause increases or decreases to the ACL. The amount of the allowance is affected by loan charge-offs, which decrease the allowance; recoveries on loans previously charged off, which increase the allowance; and the provision for credit losses charged to earnings, which increases the allowance. In determining the provision for credit losses, management monitors fluctuations in the ACL resulting from actual charge-offs and recoveries and reviews the size and composition of the loan portfolio in light of current and anticipated economic conditions (see Notes 1 and 3 to the Consolidated Financial Statements). This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available or as events change.

Total ACL for the period ending September 30, 2017 was $94.8 million, or 1.18% of total loans (net of unearned discounts and fees) of $8.03 billion. This compares with $82.3 million on loans of $7.43 billion, or 1.11% at December 31, 2016. The following tables present the allocation of the allowance for credit losses and the percentage of these loans to total loans. The allocation below is neither indicative of the specific amounts or the loan categories in which future charge-offs may occur, nor is it an indicator of any future loss trends. The allocation of the allowance to each category does not restrict the use of the allowance to absorb any losses in any category.

Table 21 –Allocation of the ACL

	Allowance for Credit Losses				Percent of ACL to Each Category of Loans						Percent of Loans in Each Category to Total Loans
(In thousands)	September 30, 2017		December 31, 2016		September 30, 2017			December 31, 2016			September 30, 2017			December 31, 2016
Originated Loans
Commercial and industrial	$	60,757	$	54,213		1.26	%		1.19	%		60.11	%		61.36	%
Commercial real estate		10,786		7,205		0.96			0.76			13.91			12.80
Consumer		9,022		5,687		0.64			0.48			17.49			15.89
Small business		4,160		3,907		2.00			2.12			2.58			2.47
Total originated loans		84,725		71,012		1.12	%		1.03	%		94.09	%		92.52	%
ANCI Loans
Commercial and industrial		883		299		1.62	%		0.58	%		0.68	%		0.69	%
Commercial real estate		202		243		1.24			1.20			0.20			0.27
Consumer		93		131		0.08			0.09			1.50			2.05
Small business		280		305		2.62			3.33			0.13			0.12
Total ANCI		1,458		978		0.73	%		0.43	%		2.51	%		3.13	%
ACI Loans
Commercial and industrial		103		176		0.32	%		0.46	%		0.40	%		0.51	%
Commercial real estate		1,964		2,655		2.38			2.70			1.03			1.32
Consumer		6,515		7,447		4.10			3.96			1.97			2.52
Small business		—		—		—			—			—			—
Total ACI		8,582		10,278		3.13	%		3.17	%		3.40	%		4.35	%
Total Loans
Commercial and industrial		61,743		54,688		1.26	%		1.18	%		61.19	%		62.56	%
Commercial real estate		12,952		10,103		1.06			0.94			15.14			14.39
Consumer		15,630		13,265		0.93			0.87			20.96			20.46
Small business		4,440		4,212		2.03			2.18			2.71			2.59
Total allowance for credit losses	$	94,765	$	82,268		1.18	%		1.11	%		100.00	%		100.00	%

Originated ACL. The ACL on our originated loan portfolio totaled $84.7 million, or 1.12%% on loans of $7.6 billion as of September 30, 2017 compared to $71.0 million, or 1.03% on loans of $6.9 billion as of December 31, 2016. The primary driver of the originated ACL is the net new loan growth as well as the underlying credit quality of the loans. The underlying credit quality changes were driven by stress in our energy portfolio and general migration related to the seasoning of the General C&I portfolio. Our loans are categorized into specific risk segments and are subject to loss rates according to their segment and risk rating. As September 30, 2017, $60.8 million, or 71.7% of our originated ACL is attributable to our C&I loan segment compared to $54.2 million, or 76.3%, as December 31, 2016. The ACL as a percentage of the C&I portfolio has increased to 1.26% as of September 30, 2017 from 1.19% as of December 31, 2016. The increase in the level of ACL as a percentage of C&I loans as of

September 30, 2017 from December 31, 2016 is primarily the result of gener al loan growth, the migration of a few credits within the criticized status in the General C&I portfolio, and specific impairment on two energy credits where collateral values have declined, primarily as a result of related commodity prices.

The level of criticized and classified loans in the C&I portfolio is presented in the following tables.

Table 22 –Criticized and Classified C&I Loans

	As of September 30, 2017
(Recorded Investment in thousands)	General C&I		Energy Sector		Restaurant Industry		Healthcare		Total
Originated Loans
Special mention	$	84,846	$	—	$	4,647	$	45	$	89,538
Substandard		34,580		150,929		10,907		—		196,416
Doubtful		—		10,503		—		—		10,503
Total	$	119,426	$	161,432	$	15,554	$	45	$	296,457

	As of December 31, 2016
(Recorded Investment in thousands)	General C&I		Energy Sector		Restaurant Industry		Healthcare		Total
Originated Loans
Special mention	$	36,419	$	30,433	$	16,169	$	9,479	$	92,500
Substandard		26,968		239,457		—		—		266,425
Doubtful		—		789		—		—		789
Total	$	63,387	$	270,679	$	16,169	$	9,479	$	359,714

As of September 30, 2017, $10.8 million, or 13% of our originated ACL is attributable to the CRE loan segment compared to $7.2 million, or 10.1%, as of December 31, 2016. The ACL as a percentage of the CRE portfolio has increased to 0.96% as of September 30, 2017 from 0.76% as of December 31, 2016, primarily as a result of qualitative considerations and some grade migration in the CRE portfolio.

In addition to quantitative elements, certain qualitative and environmental factors are also considered at management’s discretion, which are generally based on a combination of internal and external factors and trends. At September 30, 2017, these totaled $13.6 million and accounted for approximately 16.0% of the originated ACL compared to $16.7 million, or 23.5%, as of December 31, 2016, with the most significant consideration being the stress on the energy industry from the volatility of oil and gas prices, and the amount of losses realized in the energy portfolio in 2016 and 2015. Approximately $7.6 million and $16.0 million as of September 30, 2017 and December 31, 2016, respectively, of these qualitative reserves were allocated to the energy portfolio.

Two “Category 4” hurricanes moved through our geographic footprint during the quarter. Hurricane Harvey made landfall in Texas in late August and Hurricane Irma hit Florida in early September. Based on our outreach to and analysis of our commercial customers, most with robust business continuity and disaster recovery plans, we have not identified any expected losses in the commercial portfolio to date. Based on our outreach to and analysis of our mortgage customers in the impacted areas, and in consideration of factors that increase the risks associated with these mortgages, we concluded that increasing reserves by approximately $2.0 million was appropriate as of September 30, 2017. We will continue to closely monitor all of our impacted customers as recovery efforts continue in the area.

As of September 30, 2017 and December 31, 2016, $39.3 million, or 46.4% and $31.7 million, or 45.7%, respectively of the total originated ACL, was attributable to shared national credits. During the second quarter of 2017, we recorded a $2.6 million charge-off to a single E&P credit that was a shared national credit. During 2016 we recorded gross charge-offs of two energy portfolio credits totaling $32.9 million that were shared national credits. The ACL is estimated based on the underlying credit quality of the loan, primarily based on its risk segment and risk rating. This methodology is consistent whether or not a loan is a shared national credit.

ANCI ACL. The ACL on our ANCI loans totaled $1.5 million on $198.8 million in loans, or 0.73% and $1.0 million on $229.8 million in loans, or 0.43%, at September 30, 2017 and December 31, 2016, respectively. The increase in the ANCI reserve is related to a single credit amounting to $0.3 million that migrated to criticized status during the second quarter of 2017. ANCI loans were recorded at fair value at the date of each acquisition and are pooled for ACL assessment based on risk segment, with the

majority of the ANCI loans within the consumer residential categ ory. Any net shortage of credit mark indicates the need for an allowance on that segment of loans with certain loans individually reviewed for specific impairment.

ACI ACL. The ACL on our ACI loans totaled $8.6 million on $274.0 million in loans, or 3.13%%, at September 30, 2017, compared to $10.3 million on $324.3 million in loans, or 3.17% at December 31, 2016. At the time of our acquisitions, we estimated the fair value of the total ACI loan portfolio by segregating the portfolio into loan pools with similar characteristics and certain specifically-reviewed non-homogeneous loans.

Since the acquisition dates, the expected cash flows have been re-estimated quarterly utilizing the same cash flow methodology used at the time of each acquisition. Any subsequent decreases to the expected cash flows generally result in a provision for credit losses. Conversely, subsequent increases in expected cash flows result first in the reversal of any impairment, then in a transfer from the non-accretable discount to the accretable discount, which would have a positive impact on accretion income prospectively. These cash flow evaluations are inherently subjective, as they require material estimates, all of which may be susceptible to significant change.

The largest component of our ACI ACL is attributable to our consumer category, primarily first and second-lien residential loans, that represents 76% of the ACI ACL at September 30, 2017 compared to 72.5% of the ACI ACL at December 31, 2016. This component of the ACL has declined $0.9 million to $6.5 million since December 31, 2016 due to impairment reversals on the residential pools, largely driven by loan pay-offs.

The commercial real estate component comprises 23% of the ACI ACL at September 30, 2017 and has decreased $0.7 million to $2.0 million since December 31, 2016.

The following table summarizes certain information with respect to our ACL on the total loan portfolio and the composition of charge-offs and recoveries for the periods indicated. Subse quent tables present this information separately for the originated, ANCI and ACI portfolios:

Table 23 –Total ACL Rollforward

	Total Loans
	Three Months Ended September 30,						Nine Months Ended September 30,						Year Ended December 31,
(In thousands)	2017			2016			2017			2016			2016
Allowance for credit losses at beginning of period	$	93,215		$	87,147		$	82,268		$	79,783		$	79,783
Charge-offs:
Commercial and industrial		440			25,455			3,301			43,332			46,368
Commercial real estate		—			—			—			—			—
Consumer		141			1,413			543			1,906			2,093
Small business		—			—			167			142			841
Total charge-offs		581			26,868			4,011			45,380			49,302
Recoveries:
Commercial and industrial		71			675			966			1,331			1,450
Commercial real estate		76			519			204			566			578
Consumer		196			67			837			292			403
Small business		65			2			291			7			9
Total recoveries		408			1,263			2,298			2,196			2,440
Net charge-offs		173			25,605			1,713			43,184			46,862
Provision for credit losses:
Commercial and industrial		(123	)		29,218			9,390			50,750			43,782
Commercial real estate		(384	)		(943	)		2,645			678			1,389
Consumer		2,190			1,300			2,071			1,441			1,506
Small business		40			52			104			1,701			2,671
Total provision for credit losses		1,723			29,627			14,210			54,570			49,348
Allowance for credit losses at end of period	$	94,765		$	91,169		$	94,765		$	91,169		$	82,269
Loans at end of period, net of unearned income	$	8,028,938		$	7,207,313		$	8,028,938		$	7,207,313		$	7,432,711
Average loans, net of unearned income		7,867,794			7,225,365			7,690,798			7,123,211			7,186,635
Ratio of ending allowance to ending loans		1.18	%		1.26	%		1.18	%		1.26	%		1.11	%
Ratio of net charge-offs to average loans ⁽¹⁾		0.01			1.41			0.03			0.81			0.65
Net charge-offs as a percentage of:
Provision for credit losses		10.04			86.42			12.05			79.14			94.96
Allowance for credit losses ⁽¹⁾		0.72			111.42			2.42			63.10			56.96
Allowance for credit losses as a percentage of nonperforming loans		122.66			59.34			122.66			59.34			63.80

(1)	Annualized for the three and nine months ended September 30, 2017 and 2016.

Table 24 –Total Originated ACL Rollforward

	Originated Loans
	Three Months Ended September 30,						Nine Months Ended September 30,						Year Ended December 31,
(In thousands)	2017			2016			2017			2016			2016
Allowance for credit losses at beginning of period	$	81,596		$	75,165		$	71,011		$	64,386		$	64,386
Charge-offs:
Commercial and industrial		—			25,455			2,788			43,332			46,368
Commercial real estate		—			—			—			—			—
Consumer		132			177			383			480			634
Small business		—			—			120			142			841
Total charge-offs		132			25,632			3,291			43,954			47,843
Recoveries:
Commercial and industrial		44			656			677			1,276			1,386
Commercial real estate		11			—			18			—			3
Consumer		29			34			85			183			225
Small business		—			—			44			—			—
Total recoveries		84			690			824			1,459			1,614
Net charge-offs		48			24,942			2,467			42,495			46,229
Provision for credit losses:
Commercial and industrial		(432	)		29,290			8,656			53,125			46,024
Commercial real estate		811			57			3,564			1,765			2,378
Consumer		2,689			275			3,633			1,402			1,772
Small business		109			99			328			1,761			2,681
Total provision for credit losses		3,177			29,721			16,181			58,053			52,855
Allowance for credit losses at end of period	$	84,725		$	79,944		$	84,725		$	79,944		$	71,012
Loans at end of period, net of unearned income	$	7,556,135		$	6,618,324		$	7,556,135		$	6,618,324		$	6,878,645
Ratio of ending allowance to ending loans		1.12	%		1.21	%		1.12	%		1.21	%		1.03	%
Net charge-offs as a percentage of:
Provision for credit losses		1.51			83.92			15.25			73.20			87.47
Allowance for credit losses ⁽¹⁾		0.22			124.12			3.89			71.00			65.28
Allowance for credit losses as a percentage of nonperforming loans		115.07			54.50			115.07			54.50			58.49

(1)	Annualized for the three and nine months ended September 30, 2017 and 2016.

Table 25 –Total ANCI ACL Rollforward

	ANCI Loans
	Three Months Ended September 30,						Nine Months Ended September 30,						Year Ended December 31,
(In thousands)	2017			2016			2017			2016			2016
Allowance for credit losses at beginning of period	$	1,468		$	978		$	979		$	1,063		$	1,063
Charge-offs:
Commercial and industrial		65			—			99			—			—
Commercial real estate		—			—			—			—			—
Consumer		9			144			160			334			367
Small business		—			—			47			—			—
Total charge-offs		74			144			306			334			367
Recoveries:
Commercial and industrial		27			11			43			35			44
Commercial real estate		—			100			—			100			101
Consumer		164			31			268			102			168
Small business		65			2			247			7			9
Total recoveries		256			144			558			244			322
Net (recoveries) charge-offs		(182	)		—			(252	)		90			45
Provision for credit losses:
Commercial and industrial		31			(33	)		639			(196	)		(169	)
Commercial real estate		—			(237	)		(42	)		(211	)		(85	)
Consumer		(154	)		33			(146	)		188			225
Small business		(69	)		(47	)		(224	)		(60	)		(10	)
Total provision for credit losses		(192	)		(284	)		227			(279	)		(39	)
Allowance for credit losses at end of period	$	1,458		$	694		$	1,458		$	694		$	979
Loans at end of period, net of unearned income	$	198,797		$	242,026		$	198,797		$	242,026		$	229,784
Ratio of ending allowance to ending loans		0.73	%		0.29	%		0.73	%		0.29	%		0.43	%
Net charge-offs (recoveries) as a percentage of:
Provision for credit losses		94.79			—			(111.01	)		(32.26	)		(115.38	)
Allowance for credit losses ⁽¹⁾		(49.52	)		—			(23.11	)		17.32			4.61
Allowance for credit losses as a percentage of nonperforming loans		42.86			21.21			42.86			21.21			25.29

(1)	Annualized for the three and nine months ended September 30, 2017 and 2016.

Table 26 –Total ACI ACL Rollforward

	ACI Loans
	Three Months Ended September 30,						Nine Months Ended September 30,						Year Ended December 31,
(In thousands)	2017			2016			2017			2016			2016
Allowance for credit losses at beginning of period	$	10,151		$	11,004		$	10,278		$	14,334		$	14,334
Charge-offs:
Commercial and industrial		375			—			414			—			—
Commercial real estate		—			—			—			—			—
Consumer		—			1,092			—			1,092			1,092
Small business		—			—			—			—			—
Total charge-offs		375			1,092			414			1,092			1,092
Recoveries:
Commercial and industrial		—			8			246			20			20
Commercial real estate		65			419			186			466			474
Consumer		3			2			484			7			10
Small business		—			—			—			—			—
Total recoveries		68			429			916			493			504
Net charge-offs (recoveries)		307			663			(502	)		599			588
Provision for credit losses:
Commercial and industrial		278			(39	)		95			(2,179	)		(2,073	)
Commercial real estate		(1,195	)		(763	)		(877	)		(876	)		(904	)
Consumer		(345	)		992			(1,416	)		(149	)		(491	)
Small business		—			—			—			—			—
Total provision for credit losses		(1,262	)		190			(2,198	)		(3,204	)		(3,468	)
Allowance for credit losses at end of period	$	8,582		$	10,531		$	8,582		$	10,531		$	10,278
Loans at end of period, net of unearned income	$	274,006		$	346,963		$	274,006		$	346,963		$	324,282
Ratio of ending allowance to ending loans		3.13	%		3.04	%		3.13	%		3.04	%		3.17	%
Net charge-offs (recoveries) as a percentage of:
Provision for credit losses		(24.33	)		348.95			22.84			(18.70	)		(16.96	)
Allowance for credit losses ⁽¹⁾		14.19			25.08			(7.82	)		7.60			5.74
Allowance for credit losses as a percentage of nonperforming loans	NM				284.24		NM				284.24			280.59

(1)	Annualized for the three and nine months ended September 30, 2017 and 2016.

NM – Not Meaningful

Deposits. Our strategy is to fund asset growth primarily with customer deposits in order to maintain a stable liquidity profile and a more competitive cost of funds. We categorize deposits as brokered and non-brokered consistent with the banking industry. All customer deposits are non-brokered. The following table illustrates the growth in our deposits during the periods indicated:

Table 27 –Deposits

					Percent to Total						Percentage Change
	September 30,		December 31,		September 30,			December 31,			3Q 2017
(In thousands)	2017		2016		2017			2016			vs YE 2016
Noninterest-bearing demand	$	2,071,594	$	1,840,955		24.4	%		23.0	%		12.5		%
Interest-bearing demand		4,505,370		4,541,412		53.0			56.6			(0.8	)
Savings		177,935		180,687		2.1			2.3			(1.5	)
Time deposits less than $100,000		749,265		605,579		8.8			7.6			23.7
Time deposits greater than $100,000		996,938		848,116		11.7			10.5			17.6
Total deposits (including brokered)	$	8,501,102	$	8,016,749		100.0	%		100.0	%		6.0		%

Total brokered deposits	$	824,147	$	1,041,858		9.7	%		13.0	%		(20.9	)	%

The following tables set forth our average deposits and the average rates expensed for the periods indicated:

Table 28 –Average Deposits/Rates

	Three Months Ended September 30,
	2017					2016
	Average		Average			Average		Average
	Amount		Rate			Amount		Rate
(In thousands)	Outstanding		Paid			Outstanding		Paid
Noninterest-bearing demand	$	1,982,784		—	%	$	1,697,633		—	%
Interest-bearing deposits
Interest-bearing demand		4,329,086		0.67			4,130,126		0.43
Savings		180,099		0.25			180,452		0.24
Time deposits		1,648,000		1.36			1,835,371		1.01
Total interest bearing deposits		6,157,185		0.84			6,145,949		0.60
Total average deposits	$	8,139,969		0.64	%	$	7,843,582		0.47	%

	Nine Months Ended September 30,
	2017					2016
	Average		Average			Average		Average
	Amount		Rate			Amount		Rate
(In thousands)	Outstanding		Paid			Outstanding		Paid
Noninterest-bearing demand	$	1,895,754		—	%	$	1,656,166		—	%
Interest-bearing deposits
Interest-bearing demand		4,338,645		0.59			4,027,944		0.43
Savings		182,877		0.25			178,163		0.23
Time deposits		1,618,298		1.25			1,702,380		1.01
Total interest bearing deposits		6,139,820		0.75			5,908,487		0.59
Total average deposits	$	8,035,574		0.58	%	$	7,564,653		0.46	%

Borrowings

The following is a summary of our borrowings for the periods indicated:

Table 29 –Borrowings

	September 30,		December 31,
(In thousands)	2017		2016
Summary of Borrowings
Securities sold under repurchase agreements	$	3,146	$	3,494
Advances from FHLB		250,000		—
Senior debt		184,557		193,788
Subordinated debt		98,627		98,441
Junior subordinated debentures		36,353		35,989
Total borrowings	$	572,683	$	331,712
Average total borrowings - YTD	$	490,085	$	452,685

The increase in advances from the FHLB are short-term fixed and daily rate credits..

Shareholders’ Equity

Tangible Common Equity

As of September 30, 2017 and December 31, 2016, our ratio of shareholders’ equity to total assets was 12.77% and 11.34%, respectively, and we had tangible common equity ratios of 9.95% and 8.13%, respectively. Tangible common equity ratio is a non-GAAP financial measure. We believe that this non-GAAP financial measure provides investors with information useful in understanding our financial performance and, specifically, our capital position. The tangible common equity ratio is calculated as tangible common shareholders’ equity divided by tangible assets. Tangible common equity is calculated as total shareholders’ equity less goodwill and other intangible assets, net, and tangible assets are total assets less goodwill and other intangible assets,

net. The following table provides a reconciliation of tangible common equity to GAAP total common shareholders’ equity and tangible assets to GAAP total assets:

Table 30 –Tangible Common Equity

	September 30,			December 31,
(In thousands)	2017			2016
Shareholders’ equity	$	1,340,848		$	1,080,498
Less: Goodwill and other intangible assets, net		(329,124	)		(332,691	)
Tangible common shareholders’ equity		1,011,724			747,807
Total assets		10,502,261			9,530,888
Less: Goodwill and other intangible assets, net		(329,124	)		(332,691	)
Tangible assets	$	10,173,137		$	9,198,197
Tangible common equity ratio		9.95	%		8.13	%

Regulatory Capital

We are subject to regulatory capital requirements that require us to maintain certain minimum common equity Tier 1 capital, Tier 1 leverage, Tier 1 risk-based, and total risk-based ratios. At September 30, 2017, our capital ratios exceeded these requirements. Our actual regulatory capital amounts and ratios at September 30, 2017 are presented in the following table:

Table 31 –Regulatory Capital Amounts/Ratios

	Consolidated Company					Bank
(In thousands)	Amount		Ratio			Amount		Ratio
September 30, 2017
Tier 1 leverage	$	1,079,726		11.1	%	$	1,181,066		12.2	%
Common equity tier 1 capital (transitional)		1,042,920		10.8			1,132,506		11.7
Tier 1 risk-based capital		1,079,726		11.2			1,181,066		12.2
Total risk-based capital		1,273,724		13.2			1,301,129		13.5
The minimum amounts of capital and ratios established by banking regulators are as follows:
Tier 1 leverage	$	388,553		4.0	%	$	388,516		4.0	%
Common equity tier 1 capital (transitional)		434,801		4.5			434,726		4.5
Tier 1 risk-based capital		579,734		6.0			579,635		6.0
Total risk-based capital		772,979		8.0			772,846		8.0
Well capitalized requirement:
Tier 1 leverage	N/A		N/A			$	485,645		5.0	%
Common equity tier 1 capital (transitional)	N/A		N/A				627,938		6.5
Tier 1 risk-based capital	N/A		N/A				772,846		8.0
Total risk-based capital	N/A		N/A				966,058		10.0

Liquidity and Capital Resources

Overview

We measure and seek to manage liquidity risk by a variety of processes, including monitoring the composition of our funding mix; monitoring financial ratios specifically designed to measure liquidity risk; maintaining a minimum liquidity cushion; and performing forward cash flow gap forecasts in various liquidity stress testing scenarios designed to simulate possible stressed liquidity environments. We attempt to limit our liquidity risk by setting board-approved concentration limits on sources of funds and limits on liquidity ratios used to measure liquidity risk, and maintaining adequate levels of on-hand liquidity. We use the following ratios to monitor and analyze our liquidity:

•

Total Loans to Total Deposits—the ratio of our outstanding loans to total deposits.

•

Non-Brokered Deposits to Total Deposits—the ratio of our deposits that are organically originated through commercial and branch activity to total deposits.

•

Brokered Deposits to Total Deposits—the ratio of our deposits generated through wholesale sources to total deposits.

•

Highly Liquid Assets to Uninsured Large Depositors—the ratio of cash and highly liquid assets to uninsured deposits with a current depository relationship greater than $10,000,000.

•

Wholesale Funds Usage—the ratio of our current borrowings to all available wholesale sources with potential maturities greater than one day.

•

Wholesale Funds to Total Assets—the ratio of current outstanding wholesale funding to assets.

As of September 30, 2017, all of our liquidity measures were within our established guidelines.

The goal of liquidity management is to ensure that we maintain adequate funds to meet changes in loan demand or any deposit withdrawals. Additionally, we strive to maximize our earnings by investing our excess funds in securities and other assets. To meet our short-term liquidity needs, we seek to maintain a targeted cash position and have borrowing capacity through many wholesale sources including correspondent banks, the Federal Home Loan Bank (“FHLB”) and the Federal Reserve Bank. To meet long-term liquidity needs, we additionally depend on the repayment of loans, sales of loans, term wholesale borrowings, brokered deposits and the maturity or sale of investment securities.

Maturities of Time Deposits

The aggregate amount of time deposits in denominations of $100,000 or more as of September 30, 2017 and December 31, 2016, was $996.9 million and $848.1 million, respectively.

At September 30, 2017, the scheduled maturities of time deposits greater than $100,000 were as follows:

Table 32 – Time Deposit Maturity Schedule

	September 30, 2017
(In thousands)	Amount		Average Interest Rate
Under 3 months	$	43,963		0.84	%
3 to 6 months		111,533		1.14
6 to 12 months		383,238		1.35
12 to 24 months		393,950		1.60
24 to 36 months		45,351		1.61
36 to 48 months		8,676		1.57
Over 48 months		10,227		1.39
Total	$	996,938		1.42	%

Cash Flow Analysis

Cash and cash equivalents

At September 30, 2017, we had $589.4 million cash and cash equivalents on hand, an increase of $340.5 million or 136.8% over our cash and cash equivalents of $248.9 million at December 31, 2016. At September 30, 2017 our cash and cash equivalents comprised 5.61% of total assets compared to 2.61% at December 31, 2016. We monitor our liquidity position and increase or decrease our short-term liquid assets as necessary. The higher balance in cash and cash equivalents at September 30, 2017 is due to timing of net loan fundings and customer deposits at the end of the quarter.

2017 vs. 2016

As shown in the Condensed Consolidated Statements of Cash Flows, operating activities provided $149.8 million in the nine months ended September 30, 2017 compared to $71.7 million in the nine months ended September 30, 2016. The increase in operating funds during the nine months ended September 30, 2017 was due primarily to an increase in net income and an increase in proceeds from the sale of held for sale loans, offset by an increase in originations of loans held for sale and a decrease in other assets related to the refund of a bid deposit made in the fourth quarter of 2016 to acquire a large treasury management deposit account.

Investing activities during the nine months ended September 30, 2017 used $689.4 million of net funds, primarily due to net loan fundings of $614.0 million and purchases of securities of $278.3 million, partially offset by sales and other cash flows from available for sale securities. This compares to investing activities during the nine months ended September 30, 2016 using $670.0 million of net funds, primarily due to net loan fundings of $654.5 million and the purchase of available for sale securities of $743.2 million, partially offset by sales of certain commercial loans of $328.8 million.

Financing activities during the nine months ended September 30, 2017 provided net funds of $880.0 million, due to $250.0 million in advances from FHLB, net proceeds of $155.6 million from the issuance of common stock and an increase in deposits of $484.4 million. This compares to financing activities during the nine months ended September 30, 2016 providing net funds of $559.0 million, resulting from an increase in deposits of $930.0 million and a decrease in short-term FHLB borrowings of $370.0 million.

NON-GAAP FINANCIAL MEASURES

We identify “efficiency ratio,” “adjusted noninterest expense,” “adjusted operating revenue,” “tangible common equity,” “tangible common equity ratio,” “return on average tangible common equity,” “tangible book value per share” and “pre-tax pre-provision net earnings” as “non-GAAP financial measures.” In accordance with the SEC’s rules, we identify certain financial measures as non-GAAP financial measures if such financial measures exclude or include amounts in the most directly comparable measures calculated and presented in accordance with generally accepted accounting principles (“GAAP”) in effect in the United States in our statements of income, balance sheet or statements of cash flows. Non-GAAP financial measures do not include operating and other statistical measures, ratios or statistical measures calculated using exclusively financial measures calculated in accordance with GAAP.

The non-GAAP financial measures that we discuss herein should not be considered in isolation or as a substitute for the most directly comparable or other financial measures calculated in accordance with GAAP. Moreover, the manner in which we calculate these non-GAAP financial measures may differ from that of other companies reporting measures with similar names, and, therefore, may not be comparable to our non-GAAP financial measures.

Efficiency ratio is defined as noninterest expenses divided by operating revenue, which is equal to net interest income plus noninterest income. We believe that this measure is important to many investors in the marketplace who wish to assess our performance versus that of our peers.

Our adjusted noninterest expenses represents total noninterest expenses net of any merger, restructuring or branch closing costs. Our adjusted operating revenue is equal to net interest income plus noninterest income excluding gains and losses on sales of securities and branches. In our judgment, the adjustments made to noninterest expense and operating revenue allow management and investors to better assess our performance by removing the volatility that is associated with certain other discrete items that are unrelated to our core business.

Tangible common equity is defined as total shareholders’ equity, excluding preferred stock, less goodwill and other intangible assets. We believe that this measure is important to many investors in the marketplace who are interested in changes from period to period in common shareholders’ equity exclusive of changes in intangible assets. Goodwill, an intangible asset that

is recorded in a purchase business combination, has the effect of increasing both common equity and assets while not increasing our tangible common equity or tangible assets.

The tangible common equity ratio is defined as the ratio of tangible common equity divided by total assets less goodwill and other intangible assets. We believe that this measure is important to many investors in the marketplace who are interested in relative changes from period to period in common equity and total assets, each exclusive of changes in intangible assets. We believe that the most directly comparable GAAP financial measure is total shareholders’ equity to total assets.

Return on average tangible common equity is defined as net income divided by average tangible common equity. We believe the most directly comparable GAAP financial measure is the return on average common equity.

Tangible book value per share is defined as book value, excluding the impact of goodwill and other intangible assets, if any, divided by shares of our common stock outstanding.

Pre-tax, pre-provision net earnings is defined as income before taxes and provision for credit losses. We believe the most directly comparable GAAP financial measure is income before taxes.

Table 33 – Non-GAAP Financial Measures

	As of and for the three months ended						As of and for the nine months ended						As of and for the year ended
	September 30,						September 30,						December 31,
(In thousands)	2017			2016			2017			2016			2016
Efficiency ratio
Noninterest expenses (numerator)	$	56,530		$	54,876		$	166,985		$	164,786		$	220,180
Net interest income	$	81,163		$	70,426		$	238,305		$	206,941		$	279,439
Noninterest income		27,124			22,791			74,218			66,043			88,403
Operating revenue (denominator)	$	108,287		$	93,217		$	312,523		$	272,984		$	367,842
Efficiency ratio		52.20	%		58.87	%		53.43	%		60.36	%		59.86	%
Adjusted noninterest expenses and operating revenue
Noninterest expense	$	56,530		$	54,876		$	166,985		$	164,786		$	220,180
Less: Branch closure expenses		50			52			143			191			238
Adjusted noninterest expenses	$	56,480		$	54,824		$	166,842		$	164,595		$	219,942
Net interest income	$	81,163		$	70,426		$	238,305		$	206,941		$	279,439
Noninterest income		27,124			22,791			74,218			66,043			88,403
Less: Securities gains (losses), net		1			1,386			(162	)		2,469			3,736
Adjusted operating revenue	$	108,286		$	91,831		$	312,685		$	270,515		$	364,106
Tangible common equity ratio
Shareholders’ equity	$	1,340,848		$	1,111,783		$	1,340,848		$	1,111,783		$	1,080,498
Less: Goodwill and other intangible assets, net		(329,124	)		(334,246	)		(329,124	)		(334,246	)		(332,691	)
Tangible common shareholders’ equity		1,011,724			777,537			1,011,724			777,537			747,807
Total assets		10,502,261			9,444,010			10,502,261			9,444,010			9,530,888
Less: Goodwill and other intangible assets, net		(329,124	)		(334,246	)		(329,124	)		(334,246	)		(332,691	)
Tangible assets	$	10,173,137		$	9,109,764		$	10,173,137		$	9,109,764		$	9,198,197
Tangible common equity ratio		9.95	%		8.54	%		9.95	%		8.54	%		8.13	%
Tangible book value per share
Shareholders’ equity	$	1,340,848		$	1,111,783		$	1,340,848		$	1,111,783		$	1,080,498
Less: Goodwill and other intangible assets, net		(329,124	)		(334,246	)		(329,124	)		(334,246	)		(332,691	)
Tangible common shareholders’ equity	$	1,011,724		$	777,537		$	1,011,724		$	777,537		$	747,807
Common shares issued		83,625,000			75,000,000			83,625,000			75,000,000			75,000,000
Tangible book value per share	$	12.10		$	10.37		$	12.10		$	10.37		$	9.97
Return on average tangible common equity
Average common equity	$	1,320,884		$	1,118,603		$	1,221,845		$	1,118,603		$	1,093,604
Less: Average intangible assets		(329,816	)		(335,215	)		(330,989	)		(335,215	)		(336,054	)
Average tangible common equity	$	991,068		$	783,388		$	890,856		$	783,388		$	757,550
Net income	$	32,577		$	6,607		$	87,662		$	36,789		$	65,774
Return on average tangible common equity ⁽¹⁾		13.04	%		3.35	%		13.16	%		6.23	%		8.68	%
Pre-tax, pre-provision net earnings
Income before taxes	$	50,034		$	8,714		$	131,328		$	53,628		$	98,314
Plus: Provision for credit losses		1,723			29,627			14,210			54,570			49,348
Pre-tax, pre-provision net earnings	$	51,757		$	38,341		$	145,538		$	108,198		$	147,662

___________________

(1)	Annualized for the three and nine months ended September 30, 2017 and 2016.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risk is the exposure to unanticipated changes in net interest earnings or changes in the fair value of financial instruments due to fluctuations in interest rates, exchange rates and equity prices. Our primary market risk is interest rate risk.

Interest Rate Risk (“IRR”) is the risk that changing market interest rates may lead to an unexpected decline in the Bank’s earnings or capital. The main causes of interest rate risk are the differing structural characteristics of the balance sheet’s assets, liabilities and off balance sheet obligations and their cumulative net reaction to changing interest rates. These structural characteristics include timing differences in maturity or repricing and the effect of embedded options such as loan prepayments, securities prepayments and calls, interest rate caps and floors, and deposit withdrawal options. In addition to these sources of interest rate risk, basis risk results from differences in the spreads between various market interest rates and changes in the slope of the yield curve which can contribute to additional interest rate risk.

We evaluate interest rate risk and develop guidelines regarding balance sheet composition and re-pricing, funding sources and pricing, and off-balance sheet commitments that aim to moderate interest rate risk. We use computer simulations that reflect various interest rate scenarios and the related impact on net interest income over specified periods of time. We refer to this process as asset/liability management, or “ALM”.

The primary objective of ALM is to seek to manage interest rate risk and desired risk tolerance for potential fluctuations in net interest income (“NII”) throughout interest rate cycles, which we aim to achieve by maintaining a balance of interest rate sensitive earning assets and liabilities. In general, we seek to maintain a desired risk tolerance with asset and liability balances within maturity and repricing categories to limit our exposure to earnings volatility and changes in the value of assets and liabilities as interest rates fluctuate over time. Adjustments to maturity categories can be accomplished either by lengthening or shortening the duration of either an individual asset or liability category, or externally with interest rate contracts, such as interest rate swaps, caps and floors. See “—Interest Rate Exposures” for a more detailed discussion of our various derivative positions.

Our asset and liability management strategy is formulated and monitored by our Asset/Liability Management Committee (“ALCO”) in accordance with policies approved by the board of directors. The ALCO meets regularly to review, among other things, the sensitivity of our assets and liabilities to interest rate changes, the book and market values of assets and liabilities, unrealized gains and losses, recent purchase and sale activity, maturities of investments and borrowings, and projected future transactions. The ALCO also establishes and approves pricing and funding decisions with respect to overall asset and liability composition. The ALCO reports regularly to our board of directors.

Financial simulation models are the primary tools we use to measure interest rate risk exposures. By examining a range of hypothetical deterministic interest rate scenarios, these models provide management with information regarding the potential impact on NII and Economic Value of Equity (“EVE”) caused by changes in interest rates.

The models simulate the cash flows and accounting accruals generated by the financial instruments on our balance sheet at a given month-end, as well as the cash flows generated by the new business we anticipate over a 36-month forecast horizon. Numerous assumptions are made in the modeling process, including balance sheet composition, the pricing, re-pricing and maturity characteristics of existing business and new business. Additionally, loan and investment prepayment, administered rate account elasticity and other option risks are considered as well as the uncertainty surrounding future customer behavior. Because of the limitations inherent in any approach used to measure interest rate risk and because the Bank’s loan portfolio will be actively managed in the event of a change in interest rates, simulation results, including those discussed in “—Interest Rate Exposures” immediately below, are not intended as a forecast of the actual effect of a change in market interest rates on our net interest income or results of operations or indicative of management’s expectations of actual results in the event of a fluctuation in market interest rates.

Interest Rate Exposures

The Bank’s net interest income simulation model projects that net interest income over a 12-month horizon will increase on an annual basis by 3.51%, or approximately $12.4 million, assuming an instant increase in interest rates of 100 basis points, by 6.93%, or approximately $24.5 million, assuming an instant increase in interest rates of 200 basis points and decrease by 3.81% or approximately $13.5 million, assuming an instant decrease in interest rates of 100 basis points. Based upon the current interest rate environment as of September 30, 2017, our sensitivity to interest rate risk was as follows:

Table 34- Interest Rate Sensitivity

	Increase(Decrease)
(in millions)	Net Interest Income							Economic Value of Equity
Change (in Basis Points) in Interest Rates (12-Month Projection)	Amount			Percent				Amount			Percent
+ 200 BP	$	24.5			6.93		%	$	365.8			18.07		%
+ 100 BP		12.4			3.51				205.7			10.16
- 100 BP		(13.5	)		(3.81	)			(281.1	)		(13.88	)

Based upon the current interest rate environment as of September 30, 2017, the following table reflects our sensitivity to a gradual increase or decrease in interest rates over a twelve-month period:

	Increase(Decrease)
(in millions)	Net Interest Income
Change (in Basis Points) in Interest Rates (12-Month Projection)	Amount			Percent
+ 200 BP	$	24.6			6.97		%
+ 100 BP		12.4			3.52
- 100 BP		(13.2	)		(3.73	)
- 200 BP		(28.9	)		(8.16	)

Both the NII and EVE simulations include assumptions regarding balances, asset prepayment speeds, deposit repricing and runoff and interest rate relationships among balances that management believes to be reasonable for the various interest rate environments. Differences in actual occurrences from these assumptions, as well as non-parallel changes in the yield curve, may change our market risk exposure.

Derivative Positions

Overview. Our board of directors has authorized the ALCO to utilize financial futures, forward sales, options, interest rate swaps, caps and floors, and other instruments to the extent appropriate, in accordance with regulations and our internal policy. We expect to use interest rate swaps, caps and floors as macro hedges against inherent rate sensitivity in our securities portfolio, our loan portfolio and our liabilities.

Positions for hedging purposes are undertaken primarily as a mitigation of three main areas of risk exposure: (1) mismatches between assets and liabilities; (2) prepayment and other option-type risks embedded in our assets, liabilities and off-balance sheet instruments; and (3) the mismatched commitments for mortgages and funding sources.

We currently intend to engage in only the following types of hedges: (1) those which synthetically alter the maturities or re-pricing characteristics of assets or liabilities to reduce imbalances; (2) those which enable us to transfer the interest rate risk exposure involved in our daily business activities; and (3) those which serve to alter the market risk inherent in our investment portfolio, mortgage pipeline, or liabilities and thus help us to match the effective maturities of the assets and liabilities. Our current interest rate hedges will begin to roll off at the end of 2017 and we do not currently expect to enter into interest rate swaps or like arrangements in the near-term.

Cash Flow Hedges. Cash flow hedge relationships mitigate exposure to the variabili ty of future cash flows or other forecasted transactions. We use interest rate swaps to manage overall cash flow changes related to interest rate risk exposure on benchmark interest rate loans (1-Month LIBOR). In June 2015 and March 2016, we entered into i nterest rate swap agreements with notional values totaling $982 million and $350 million, respectively, to manage overall cash flow changes related to interest rate risk exposure on the 1-Month LIBOR rate indexed loans. The following is a detail of our cas h flow hedges as of September 30, 2017:

Table 35 –Summary of Cash Flow Hedges

Effective Date

Maturity Date

Notional

Amount

(In Thousands)

Fixed Rate

Variable Rate

June 15, 2015

December 17, 2018

382,000

1.33

1 Month LIBOR

June 30, 2015

December 31, 2019

300,000

1.51

1 Month LIBOR

June 30, 2015

December 29, 2017

300,000

0.95

1 Month LIBOR

March 8, 2016

February 27, 2026

175,000

1.60

1 Month LIBOR

March 8, 2016

February 27, 2026

175,000

1.59

1 Month LIBOR

The following summarizes all derivative positions as of September 30, 2017:

Table 36 –Derivative Positions

	September 30, 2017
			Fair Value
(In thousands)	Notional Amount		Other Assets		Other Liabilities
Derivatives designated as hedging instruments (cash flow hedges):
Commercial loan interest rate swaps	$	1,332,000	$	—	$	15,830
Derivatives not designated as hedging instruments:
Commercial loan interest rate swaps		718,686		2,481		2,481
Commercial loan interest rate caps		267,347		104		104
Commercial loan interest rate floors		265,515		48		48
Mortgage loan held for sale interest rate lock commitments		10,051		—		123
Mortgage loan forward sale commitments		5,384		—		6
Mortgage loan held for sale floating commitments		10,754		—		—
Foreign exchange contracts		45,659		713		696
Total derivatives not designated as hedging instruments		1,323,396		3,346		3,458
Total derivatives	$	2,655,396	$	3,346	$	19,288

Counterparty Credit Risk

Derivative contracts involve the risk of dealing with both bank customers and institutional derivative counterparties and their ability to meet contractual terms. Our policies require that institutional counterparties must be approved by our ALCO and all positions over and above the minimum transfer amounts are secured by marketable securities or cash.

ITEM 4. CONTROLS AND PROCEDURES

(a)	Evaluation of Disclosure Controls and Procedures

The Company’s management, including the Chief Executive Officer and Chief Financial Officer have evaluated the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures are effective in ensuring that information required to be disclosed is recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms and are also designed to ensure that the information required to be disclosed in the reports filed or submitted under the Exchange Act is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosures.

(b)	Internal Control Over Financial Reporting

Changes in internal control over financial reporting

There have been no changes in the Company’s internal control over financial reporting during the period ended September 30, 2017 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II OTHER INFORM ATION

ITEM 1. LEGAL PROCEEDINGS.

The Company and its subsidiaries are from time to time subject to claims and litigation arising in the ordinary course of business. At this time, in the opinion of management, the likelihood is remote that the impact of such proceedings, either individually or in the aggregate, would have a material adverse effect on our consolidated results of operations, financial condition or cash flows. However, one or more unfavorable outcomes in any claim or litigation against us could have a material adverse effect for the period in which they are resolved. In addition, regardless of their merits or their ultimate outcomes, such matters are costly, divert management’s attention and may materially adversely affect our reputation, even if resolved in our favor.

ITEM 1A. RISK FACTORS.

There have been no material changes to our risk factors previously disclosed in the Company’s Prospectus filed with the Securities and Exchange Commission on November 9, 2017 pursuant to Rule 424(b) of the Securities Act of 1933, as amended.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITES AND USE OF PROCEEDS.

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

None.

ITEM 4. MINE SAFETY DISCLOSURES.

Not applicable.

ITEM 5. OTHER INFORMATION.

None.

ITEM 6. EXHIBITS.

Exhibit Number		Description of Exhibit

3.1		Second Amended and Restated Certificate of Incorporation of Cadence Bancorporation (incorporated by reference to Exhibit 3.1 to the Registration Statement on Form S-1 of Cadence Bancorporation (Registration No. 333-216809), filed with the Securities and Exchange Commission on March 17, 2017).

3.2		Amended and Restated By-Laws of Cadence Bancorporation (incorporated by reference to Exhibit 3.2 to the Registration Statement on Form S-1 of Cadence Bancorporation (Registration No. 333-216809), filed with the Securities and Exchange Commission on March 17, 2017).

4.1		Registration Rights Agreement, dated as of April 19, 2017, by and between Cadence Bancorporation and Cadence Bancorp, LLC (incorporated by reference to Exhibit 4.1 to the Current Report on From 8-K of Cadence Bancorporation, filed with the Securities and Exchange Commission on April 19, 2017).

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

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

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

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

101		Interactive Financial Data

SIGNAT URES

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.

		Cadence Bancorporation (Registrant)

Date: November 14, 2017		/s/ Paul B. Murphy
		Paul B. Murphy
		Chairman and Chief Executive Officer

Date: November 14, 2017		/s/ Valerie C. Toalson
		Valerie C. Toalson
		Executive Vice President and Chief Financial Officer

TABLE OF CONTENTS

Part I: Financi Item 1. Financial Statements Note 1 Summary Of Accounting Policies Note 2 Securities Note 3 Loans and Allowance For Credit Losses Note 4 Goodwill and Other Intangible Assets Note 5 Derivatives Note 6 Deposits Note 7 Borrowed Funds Note 8 Other Noninterest Income and Other Noninterest Expense Note 9 Income Taxes Note 10 Earnings Per Common Share Note 11 Related Party Transactions Note 12 Regulatory Matters Note 13 Commitments and Contingent Liabilities Note 14 Concentrations Of Credit Note 15 Supplemental Cash Flow Information Note 16 Disclosure About Fair Values Of Financial Instruments Note 16 Disclosure About Note 17 Segment Reporting Note 18 Equity-based Compensation Note 19 Accumulated Other Comprehensive Income (loss)Note 20 Variable Interest Entities and Other Investments Note 21 Subsequent Events Item 2. Management S Discussion and Analysis Of Financial Condition and Results Of Operations Item 3. Quantitative and Qualitative Disclosures About Market Risk Item 4. Controls and Procedures Part II Other Information Part II Other Item 1. Legal Proceedings Item 1A. Risk Factors Item 2. Unregistered Sales Of Equity Securites and Use Of Proceeds Item 3. Defaults Upon Senior Securities Item 4. Mine Safety Disclosures Item 5. Other Information Item 6. Exhibits

Exhibits

3.1 Second Amended and Restated Certificate of Incorporation of Cadence Bancorporation (incorporated by reference to Exhibit 3.1 to the Registration Statement on Form S-1 of Cadence Bancorporation (Registration No. 333-216809), filed with the Securities and Exchange Commission on March 17, 2017). 3.2 Amended and Restated By-Laws of Cadence Bancorporation (incorporated by reference to Exhibit 3.2 to the Registration Statement on Form S-1 of Cadence Bancorporation (Registration No. 333-216809), filed with the Securities and Exchange Commission on March 17, 2017). 4.1 Registration Rights Agreement, dated as of April 19, 2017, by and between Cadence Bancorporation and Cadence Bancorp, LLC (incorporated by reference to Exhibit 4.1 to the Current Report on From 8-K of Cadence Bancorporation, filed with the Securities and Exchange Commission on April 19, 2017). 31.1 Certification of the Chief Executive Officer pursuant to Section 302 of Sarbanes-Oxley Act of 2002 31.2 Certification of the Chief Financial Officer pursuant to Section 302 of Sarbanes-Oxley Act of 2002 32.1 Certification of the Chief Executive Officer pursuant to pursuant to Section 906 of Sarbanes-Oxley Act of 2002 32.2 Certification of the Chief Financial Officer pursuant to pursuant to Section 906 of Sarbanes-Oxley Act of 2002

CADE 10-Q Quarter ended Sept. 30, 2017

Exhibits