HWC 10-Q Quarterly Report June 30, 2018

HANCOCK WHITNEY CORP

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10-Q 1 hwc-20180630x10q.htm 10-Q Form 10Q2_Taxonomy2017

Table of Contents

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 June 30, 2018


☐	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: 001-36827

HANCOCK WHITNEY CORPORATION

(Exact name of registrant as specified in its charter)


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

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

(228) 868-4000

(Registrant’s telephone number, including area code)

NOT APPLICABLE

(Former name, address and 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 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, smaller reporting company , or an emerging growth company . See the definition s of “large accelerated filer”, “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	☐ (Do not check if a smaller reporting company)	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.

8 5, 340,233 common shares were outstanding as of July 31 , 2018.

Table of Contents

Ha ncock Whitney Corporation

Index


Part I. Financial Information		Page Number
ITEM 1.	Financial Statements
	Consolidated Balance Sheets (unaudited) – June 30, 2018 and December 31, 2017		5
	Consolidated Statements of Income (unaudited) – Three and Six Months Ended June 30, 2018 and 2017		6
	Consolidated Statements of Comprehensive Income (unaudited) – Three and Six Months Ended June 30, 2018 and 2017		7
	Consolidated Statements of Ch anges in Stockholders’ Equity (unaudited) – Six Months Ended June 30, 2018 and 2017		8
	Consolidated Statements of Cash Flows (unaudited) – Six Months Ended June 30, 2018 and 201 7		9
	Notes to Consolidated Financial Statements (unaudited) – June 30, 2018 and 2017		10
ITEM 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations		36
ITEM 3.	Quantitative and Qualitative Disclosures about Market Risk		60
ITEM 4.	Controls and Procedures		60
Part II. Other Information
ITEM 1.	Legal Proceedings		61
ITEM 1A.	Risk Factors		62
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds		62
ITEM 3.	Default on Senior Securities		N/A
ITEM 4.	Mine Safety Disclosures		N/A
ITEM 5.	Other Information		N/A
ITEM 6.	Exhibits		62
Signatures

Table of Contents

Hancock Whitney Corporation

Glossary of Defined Terms

Entities:

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

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

Company – Hancock Whitney Corporation and its wholly-owned subsidiaries

Parent – Hancock Whitney Corporation, exclusive of its subsidiaries

Bank – Hancock Whitney Bank

*On May 25, 2018, Hancock Whitney Corporation changed its name from Hancock Holding Company, and Hancock Whitney Bank changed its name from Whitney Bank.

Other Terms:

AFS – available for sale securities

AOCI – accumulated other comprehensive income or loss

ALLL – allowance for loan and lease losses

ASC – Accounting Standards Codification

ASU – Accounting Standards Update

ATM - automated teller machine

Basel II - Basel Committee's 2004 Regulatory Capital Framework (Second Accord)

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

Basel Committee - Basel Committee on Banking Supervision

Beige Book - Federal Reserve’s Summary of Commentary on Current Economic Conditions

BOLI – Bank-owned life insurance

bp(s) – basis point(s)

C&I – commercial and industrial loans

Capital One – Capital One, National Association

CD – certificate of deposit

CDE – Community Development Entity

CMO – Collateralized Mortgage Obligation

CRE – commercial real estate

Dodd-Frank Act – The Dodd-Frank Wall Street Reform and Consumer Protection Act

FASB – Financial Accounting Standards Board

FDIC – Federal Deposit Insurance Corporation

Federal Reserve Bank – The 12 banks that are the operating arms of the U.S. central bank. They implement the

policies of the Federal Reserve Board and also conduct economic research.

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

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

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

Federal Reserve System – The 12 Federal Reserve Banks, with each one serving member banks in its own district.

This system, supervised by the Federal Reserve Board, has broad regulatory powers over the money supply and the

credit structure.

FHLB – Federal Home Loan Bank

FNBC – The former New Orleans, Louisiana based First NBC Bank that failed on April 28, 2017

FNBC I – acquired selected assets and liabilities from FNBC under agreement dated March 10, 2017

FNBC II – acquired selected assets and liabilities from the FDIC as receiver for FNBC under agreement dated April 28, 2017

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

HFC – Harrison Finance Company, a former consumer finance subsidiary

HTM – held to maturity securities

Table of Contents

LIBOR – London Interbank Offered Rate

LIHTC – Low Income Housing Tax Credit

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

NAICS – North American Industry Classification System

n/m – not meaningful

OCI – other comprehensive income

OFI – Louisiana Office of Financial Institutions

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

PCI – purchased credit impaired loans

Repos – securities sold under agreements to repurchase

SEC – U.S. Securities and Exchange Commission

Securities Act – Securities Act of 1933, as amended

Tax Act – Tax Cuts and Jobs Act of 2017

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

TDR – troubled debt restructuring (as defined in ASC 310-40)

TSR – total shareholder return

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

Table of Contents

Part I. Financial Information

Item 1 . Financial Statements

Hancock Whitney Corporation and Subsidiaries

Consolidated Balance Sheets

(Unaudited)



	June 30,		December 31,
(in thousands, except per share data)	2018		2017
ASSETS
Cash and due from banks	$	355,072	$	386,948
Interest-bearing bank deposits		103,763		92,157
Federal funds sold		447		227
Securities available for sale, at fair value (amortized cost of $3,091,620 and $2,949,057 )		2,981,673		2,910,869
Securities held to maturity (fair value of $3,054,469 and $2,962,010 )		3,132,200		2,977,511
Loans held for sale		36,047		39,865
Loans		19,370,917		19,004,163
Less: allowance for loan losses		(214,530)		(217,308)
Loans, net		19,156,387		18,786,855
Property and equipment, net of accumulated depreciation of $218,526 and $214,998		336,513		333,663
Prepaid expenses		31,232		28,015
Other real estate, net		9,675		14,862
Accrued interest receivable		80,982		82,191
Goodwill		745,523		745,523
Other intangible assets, net		79,700		90,640
Life insurance contracts		546,395		541,081
Deferred tax asset, net		53,510		53,979
Other assets		276,328		251,700
Total assets	$	27,925,447	$	27,336,086
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits
Noninterest-bearing	$	8,165,796	$	8,307,497
Interest-bearing		14,069,542		13,945,705
Total deposits		22,235,338		22,253,202
Short-term borrowings		2,314,190		1,703,890
Long-term debt		266,009		305,513
Accrued interest payable		14,145		8,680
Other liabilities		166,210		179,852
Total liabilities		24,995,892		24,451,137
Stockholders' equity:
Common stock		292,716		292,716
Capital surplus		1,729,542		1,718,117
Retained earnings		1,110,506		1,008,518
Accumulated other comprehensive loss, net		(203,209)		(134,402)
Total stockholders' equity		2,929,555		2,884,949
Total liabilities and stockholders' equity	$	27,925,447	$	27,336,086
Common shares authorized (par value of $3.33 per share)		350,000		350,000
Common shares issued		87,903		87,903
Common shares outstanding		85,335		85,200

See notes to unaudited consolidated financial statements.

Table of Contents

Hancock Whitney Corporation and Subsidiaries

Consolidated Statements of Income

(Unaudited)



	Three Months Ended				Six Months Ended
	June 30,				June 30,
(in thousands, except per share data)	2018		2017		2018		2017
Interest income:
Loans, including fees	$	215,161	$	194,180	$	421,008	$	366,961
Loans held for sale		295		236		516		453
Securities-taxable		30,783		24,402		60,084		47,769
Securities-tax exempt		5,490		5,628		11,027		11,035
Short-term investments		575		1,731		1,064		2,474
Total interest income		252,304		226,177		493,699		428,692
Interest expense:
Deposits		29,870		18,364		56,829		31,183
Short-term borrowings		7,416		4,232		12,767		7,173
Long-term debt		3,471		3,864		6,892		8,928
Total interest expense		40,757		26,460		76,488		47,284
Net interest income		211,547		199,717		417,211		381,408
Provision for loan losses		8,891		14,951		21,144		30,942
Net interest income after provision for loan losses		202,656		184,766		396,067		350,466
Noninterest income:
Service charges on deposit accounts		20,981		20,061		42,429		39,267
Trust fees		11,653		11,506		22,988		22,717
Bank card and ATM fees		15,464		13,687		29,922		26,155
Investment and annuity fees and insurance commissions		6,264		6,445		12,389		11,709
Secondary mortgage market operations		3,965		4,241		7,366		7,808
Other income		10,505		11,547		19,990		23,322
Total noninterest income		68,832		67,487		135,084		130,978
Noninterest expense:
Compensation expense		79,885		82,145		159,985		155,244
Employee benefits		17,358		18,888		37,232		37,968
Personnel expense		97,243		101,033		197,217		193,212
Net occupancy expense		12,316		13,080		23,326		23,837
Equipment expense		4,262		3,964		7,808		7,678
Data processing expense		18,273		16,798		34,722		32,195
Professional services expense		13,381		10,353		22,636		21,629
Amortization of intangible assets		5,322		5,757		10,940		10,462
Telecommunications and postage		3,615		3,738		7,465		7,205
Deposit insurance and regulatory fees		8,376		6,983		16,324		13,473
Other real estate income		(289)		(2,515)		(79)		(2,528)
Other expense		21,903		24,279		34,834		39,849
Total noninterest expense		184,402		183,470		355,193		347,012
Income before income taxes		87,086		68,783		175,958		134,432
Income taxes		15,909		16,516		32,306		33,151
Net income	$	71,177	$	52,267	$	143,652	$	101,281
Earnings per common share-basic	$	0.82	$	0.60	$	1.65	$	1.17
Earnings per common share-diluted	$	0.82	$	0.60	$	1.65	$	1.17
Dividends paid per share	$	0.24	$	0.24	$	0.48	$	0.48
Weighted average shares outstanding-basic		85,305		84,614		85,273		84,489
Weighted average shares outstanding-diluted		85,483		84,867		85,451		84,755

See notes to unaudited consolidated financial statements.

Table of Contents

Hancock Whitney Corporation and Subsidiaries

Consolidated Statements of Comprehensive Income

(Unaudited)



	Three Months Ended				Six Months Ended
	June 30,				June 30,
(in thousands)	2018		2017		2018		2017
Net income	$	71,177	$	52,267	$	143,652	$	101,281
Other comprehensive income/loss before income taxes:
Net change in unrealized gain/loss on securities available for sale and cash flow hedges		(23,409)		12,661		(85,653)		13,845
Reclassification of net losses realized and included in earnings		2,217		1,718		4,013		3,105
Valuation adjustment for pension plan amendment		—		17,315		—		17,315
Other valuation adjustments for employee benefit plan		(9,039)		(10,782)		(9,039)		(10,782)
Amortization of unrealized net loss on securities transferred to held to maturity		925		1,099		1,680		1,749
Other comprehensive income/loss before income taxes		(29,306)		22,011		(88,999)		25,232
Income tax expense (benefit)		(6,646)		7,938		(20,192)		9,139
Other comprehensive income/loss net of income taxes		(22,660)		14,073		(68,807)		16,093
Comprehensive income	$	48,517	$	66,340	$	74,845	$	117,374

See notes to unaudited consolidated financial statements.

Table of Contents

Hancock Whitney Corporation and Subsidiaries

Consolidated Statements of Changes in Stockholders’ Equity

(Unaudited)



								Accumulated
								Other
	Common Stock			Capital		Retained		Comprehensive
(in thousands, except per share data)	Shares Issued	Amount		Surplus		Earnings		Loss, Net			Total
Balance, December 31, 2016	87,495	$	291,358	$	1,698,253	$	850,689	$	(120,532)	$	2,719,768
Net income	—		—		—		101,281		—		101,281
Other comprehensive income	—		—		—		—		16,093		16,093
Comprehensive income	—		—		—		101,281		16,093		117,374
Cash dividends declared ( $0.48 per common share)	—		—		—		(41,594)		—		(41,594)
Common stock activity, long-term incentive plan	—		—		16,801		83		—		16,884
Issuance of stock from dividend reinvestment	—		—		1,530		—		—		1,530
Balance, June 30, 2017	87,495	$	291,358	$	1,716,584	$	910,459	$	(104,439)	$	2,813,962

Balance, December 31, 2017	87,903	$	292,716	$	1,718,117	$	1,008,518	$	(134,402)	$	2,884,949
Net income	—		—		—		143,652		—		143,652
Other comprehensive income	—		—		—		—		(68,807)		(68,807)
Comprehensive income	—		—		—		143,652		(68,807)		74,845
Cash dividends declared ( $0.48 per common share)	—		—		—		(41,775)		—		(41,775)
Common stock activity, long-term incentive plan	—		—		9,779		111		—		9,890
Issuance of stock from dividend reinvestment and stock purchase plan	—		—		1,646		—		—		1,646
Balance, June 30, 2018	87,903	$	292,716	$	1,729,542	$	1,110,506	$	(203,209)	$	2,929,555

See notes to unaudited consolidated financial statements.

Table of Contents

Hancock Whitney Corporation and Subsidiaries

Consolidated Statements of Cash Flows

(Unaudited)



	Six Months Ended
	June 30,
(in thousands)	2018		2017
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	143,652	$	101,281
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		13,019		13,960
Provision for loan losses		21,144		30,942
Gain on other real estate owned		(266)		(2,408)
Deferred tax expense		21,361		5,415
Increase in cash surrender value of life insurance contracts		(2,621)		(7,430)
Loss on disposal of other assets		1,501		1,455
Loss on sale of business		1,145		—
Net decrease in loans held for sale		4,299		8,177
Net amortization of securities premium/discount		16,913		14,944
Amortization of intangible assets		10,940		10,462
Amortization of FDIC indemnification asset		—		2,427
Stock-based compensation expense		9,821		8,360
Decrease in interest payable and other liabilities		(22,397)		(24,405)
Net payments to FDIC for loss share claims		—		(935)
Decrease in FDIC loss share receivable		—		8,613
Decrease in payable to FDIC for loan servicing		(11,113)		—
Decrease in other assets		13,074		8,259
Other, net		(307)		3,595
Net cash provided by operating activities		220,165		182,712
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of securities available for sale		—		213,877
Proceeds from maturities of securities available for sale		168,186		157,290
Purchases of securities available for sale		(318,786)		(425,096)
Proceeds from maturities of securities held to maturity		178,625		174,662
Purchases of securities held to maturity		(340,508)		(554,442)
Net (increase) decrease in short-term investments		(11,826)		317,042
Proceeds from sales of loans		32,003		33,279
Net increase in loans		(504,866)		(419,102)
Purchase of life insurance contracts		(1,601)		(50,000)
Purchases of property and equipment		(18,116)		(12,649)
Proceeds from sales of property and equipment		42		16
Proceeds from sales of other real estate		8,010		12,311
Cash received in excess of cash paid for acquisitions		—		475,659
Proceeds from the sale of business, net of cash sold		77,648		—
Other, net		(34,241)		(38,414)
Net cash used in investing activities		(765,430)		(115,567)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in deposits		(17,746)		90,040
Net increase (decrease) in short-term borrowings		610,300		(11,134)
Repayments of long-term debt		(39,817)		(121,837)
Net proceeds from issuance of long-term debt		83		83
Dividends paid		(41,775)		(41,594)
Payroll tax remitted on net share settlement of equity awards		(415)		(3,124)
Proceeds from exercise of stock options		1,113		11,427
Proceeds from dividend reinvestment and stock purchase plans		1,646		1,530
Net cash provided by (used in) financing activities		513,389		(74,609)
NET DECREASE IN CASH AND DUE FROM BANKS		(31,876)		(7,464)
CASH AND DUE FROM BANKS, BEGINNING		386,948		372,689
CASH AND DUE FROM BANKS, ENDING	$	355,072	$	365,225
SUPPLEMENTAL INFORMATION FOR NON-CASH
INVESTING AND FINANCING ACTIVITIES
Assets acquired in settlement of loans	$	2,911	$	2,855

See notes to unaudited consolidated financial statements.

Table of Contents

HANCOCK WHITNEY CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1. Basis of Presentation

The consolidated financial statements include the accounts of Hancock Whitney Corporation and all other entities in which it has a controlling interest (the “Company”). The financial statements include all adjustments that are, in the opinion of management, necessary to fairly state the Company’s financial condition, results of operations, changes in stockholders’ equity and cash flows for the interim periods presented. The Company has also evaluated all subsequent events for potential recognition and disclosure through the date of the filing of this Quarterly Report on Form 10-Q. Some financial information and disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the U.S. (“GAAP”) have been condensed or omitted in this Quarterly Report on Form 10-Q pursuant to Securities and Exchange Commission rules and regulations. These financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017. Financial information reported in these financial statements is not necessarily indicative of the Company’s financial condition, results of operations, or cash flows for any other interim or annual period.

Certain prior period amounts have been reclassified to conform to the current period presentation. These changes in presentation did not have a material impact on the Company’s financial condition or operating results.

On May 25, 2018, the Company changed its name from Hancock Holding Company to Hancock Whitney Corporation, and its wholly- owned banking subsidiary changed its name from Whitney Bank to Hancock Whitney Bank. In connection with the name change, the Company changed its stock ticker symbol from “HBHC” to “HWC” on the NASDAQ Global Select Market.

Use of Estimates

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

Critical Accounting Policies and Estimates

There were no material changes or developments during the reporting period with respect to methodologies that the Company uses when applying what management believes are critical accounting policies and developing critical accounting estimates as disclosed in its Annual Report on Form 10-K for the year ended December 31, 2017. Refer to Note 16 – Recent Accounting Pronouncements for a discussion of accounting standards adopted during the six months ended June 30, 2018.

2. Acquisitions and Divestiture

On March 10, 2017, the Company , through its banking subsidiary, Hancock Whitney Bank (“Hancock Whitney”), acquired certain assets and assumed certain liabilities, including nine branches, from First NBC Bank (“FNBC”), referred to as the FNBC I transaction. Hancock Whitney paid approximately $323 million in cash consideration ( $326 million cash paid net of $3 million in branch cash acquired), including a $41.6 million transaction premium for the earnings stream acquired.

On April 28, 2017, the Louisiana Office of Financial Institutions (“OFI”) closed FNBC and appointed the FDIC as receiver. Hancock Whitney entered into a purchase and assumption agreement with the FDIC , referred to as the FNBC II transaction . Pursuant to the agreement, Hancock Whitney acquired selected assets and assumed selected liabilities of the former FNBC , including substantially all of the transaction and savings deposits. Hancock Whitney paid a premium of $35 million to the FDIC for the earnings stream acquired and received approximately $ 800 million in cash ( $64 2 million from the FDIC for the net liabilities assumed and $158 million in branch cash acquired). The terms of the a greement require the FDIC to indemnify Hancock Whitney against certain liabilities of FNBC and its affiliates not assumed or otherwise purchased by Hancock Whitney. Neither the Company nor Hancock Whitney acquired any assets, common stock, preferred stock or debt, or assume d any other obligations, of First NBC Bank Holding Company.

Subsequent to the balance sheet date, on July 13, 2018, the Company acquired the bank-managed high net worth individual and institutional investment management and trust business of Capital One, National Association ( “ Capital One ” ). The transaction added assets under management of $4 billion and assets under management and administration of $10.4 billion to the Company’s existing trust and asset management business. In addition, the Company assumed approximately $217 million of customer deposit liabilities.

On March 9, 2018, the Company sold its consumer finance subsidiary, Harrison Finance Company (“HFC”). The Company received cash of approximately $78. 9 million and recorded a loss on the sale of $1.1 million.

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3 . Securities

The amortized cost , gross unrealized gains and losses, and estimated fair value of securities classified as available for sale and held to maturity follow.



Securities Available for Sale
(in thousands)	June 30, 2018								December 31, 2017
			Gross		Gross						Gross		Gross
	Amortized		Unrealized		Unrealized		Fair		Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value		Cost		Gains		Losses		Value
U.S. Treasury and government agency securities	$	95,469		—		4,484		90,985	$	99,535	$	—	$	2,263	$	97,272
Municipal obligations		244,365		165		8,520		236,010		245,997		1,135		3,346		243,786
Residential mortgage-backed securities		1,826,589		2,609		54,327		1,774,871		1,729,989		5,611		20,387		1,715,213
Commercial mortgage-backed securities		770,769		153		41,390		729,532		704,518		480		17,863		687,135
Collateralized mortgage obligations		150,928		—		4,153		146,775		165,518		4		1,559		163,963
Corporate debt securities		3,500		—		—		3,500		3,500		—		—		3,500
	$	3,091,620	$	2,927	$	112,874	$	2,981,673	$	2,949,057	$	7,230	$	45,418	$	2,910,869



Securities Held to Maturity
(in thousands)	June 30, 2018								December 31, 2017
			Gross		Gross						Gross		Gross
	Amortized		Unrealized		Unrealized		Fair		Amortized		Unrealized		Unrealized		Fair
	Cost		Gains		Losses		Value		Cost		Gains		Losses		Value
U.S. Treasury and government agency securities	$	50,000		—		668		49,332	$	50,000	$	—	$	289	$	49,711
Municipal obligations		704,082		953		14,166		690,869		723,094		8,323		4,245		727,172
Residential mortgage-backed securities		665,846		194		14,730		651,310		725,748		4,175		2,690		727,233
Commercial mortgage-backed securities		357,680		153		14,581		343,252		317,185		40		3,915		313,310
Collateralized mortgage obligations		1,354,592		18		34,904		1,319,706		1,161,484		572		17,472		1,144,584
	$	3,132,200	$	1,318	$	79,049	$	3,054,469	$	2,977,511	$	13,110	$	28,611	$	2,962,010

The following table presents the amortized cost and estimated fair value of debt securities available for sale and held to maturity at June 30, 2018 by contractual maturity. Actual maturities will differ from contractual maturities because of rights to call or repay obligations with or without penalties and scheduled and unscheduled principal payments on mortgage-backed securities and collateralized mortgage obligations.



Debt Securities Available for Sale	Amortized		Fair
(in thousands)	Cost		Value
Due in one year or less	$	5,073	$	5,088
Due after one year through five years		57,191		57,118
Due after five years through ten years		1,279,427		1,225,729
Due after ten years		1,749,929		1,693,738
Total available for sale debt securities	$	3,091,620	$	2,981,673

Debt Securities Held to Maturity	Amortized		Fair
(in thousands)	Cost		Value
Due in one year or less	$	17,258	$	17,413
Due after one year through five years		137,093		135,198
Due after five years through ten years		1,474,871		1,436,090
Due after ten years		1,502,978		1,465,768
Total held to maturity securities	$	3,132,200	$	3,054,469

The Company held no securities c lassified as trading at June 30, 2018 or December 31, 2017.

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



Available for Sale
June 30, 2018	Losses < 12 months				Losses 12 months or >				Total
			Gross				Gross				Gross
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
(in thousands)	Value		Losses		Value		Losses		Value		Losses
U.S. Treasury and government agency securities	$	42,423	$	1,812	$	48,562	$	2,672	$	90,985	$	4,484
Municipal obligations		54,121		984		168,133		7,536		222,254		8,520
Residential mortgage-backed securities		559,924		8,483		1,066,016		45,844		1,625,940		54,327
Commercial mortgage-backed securities		291,635		10,839		396,809		30,551		688,444		41,390
Collateralized mortgage obligations		115,891		3,007		30,884		1,146		146,775		4,153
	$	1,063,994	$	25,125	$	1,710,404	$	87,749	$	2,774,398	$	112,874



Available for Sale
December 31, 2017	Losses < 12 months				Losses 12 months or >				Total
			Gross				Gross				Gross
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
(in thousands)	Value		Losses		Value		Losses		Value		Losses
U.S. Treasury and government agency securities	$	45,616	$	42	$	51,157	$	2,221	$	96,773	$	2,263
Municipal obligations		2,768		11		173,530		3,335		176,298		3,346
Residential mortgage-backed securities		461,835		4,195		898,099		16,192		1,359,934		20,387
Commercial mortgage-backed securities		203,618		995		411,046		16,868		614,664		17,863
Collateralized mortgage obligations		128,174		1,076		35,488		483		163,662		1,559
	$	842,011	$	6,319	$	1,569,320	$	39,099	$	2,411,331	$	45,418

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



Held to maturity
June 30, 2018	Losses < 12 months				Losses 12 months or >				Total
			Gross				Gross				Gross
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
(in thousands)	Value		Losses		Value		Losses		Value		Losses
U.S. Treasury and government agency securities	$	—	$	—	$	49,332	$	668	$	49,332	$	668
Municipal obligations		364,751		5,081		220,575		9,085		585,326		14,166
Residential mortgage-backed securities		383,695		7,189		211,897		7,541		595,592		14,730
Commercial mortgage-backed securities		232,031		9,079		70,133		5,502		302,164		14,581
Collateralized mortgage obligations		592,423		8,113		677,684		26,791		1,270,107		34,904
	$	1,572,900	$	29,462	$	1,229,621	$	49,587	$	2,802,521	$	79,049



Held to maturity
December 31, 2017	Losses < 12 months				Losses 12 months or >				Total
			Gross				Gross				Gross
	Fair		Unrealized		Fair		Unrealized		Fair		Unrealized
(in thousands)	Value		Losses		Value		Losses		Value		Losses
U.S. Treasury and government agency securities	$	—	$	—	$	49,711	$	289	$	49,711	$	289
Municipal obligations		14,603		19		230,960		4,226		245,563		4,245
Residential mortgage-backed securities		8,815		99		230,277		2,591		239,092		2,690
Commercial mortgage-backed securities		174,882		744		72,499		3,171		247,381		3,915
Collateralized mortgage obligations		570,289		5,653		472,536		11,819		1,042,825		17,472
	$	768,589	$	6,515	$	1,055,983	$	22,096	$	1,824,572		28,611

The unrealized losses primarily relate to c hanges in market rates on fixed rate debt securities since the respective purchase dates. In all cases, the indicated impairment on these debt securities would be recovered no later than the security’s maturity date or possibly earlier if the market price for the security increases with a reduction in the yield required by the market. None of the unrealized losses relate to the marketability o f the securities or the issuers’ abilities to meet contractual obligations. The Company believes it has adequate liquidity and, therefore, does not plan to 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.

There were no sales of securities during the six months ended June 30, 2018. Proceeds from the sales of securities were approximately $213.9 million with no gain or loss for the six months ended June 30, 2017.

Securities with carrying values totaling $ 3.1 billion and $3.3 billion at June 30 , 2018 and December 31, 2017, respectively, were pledged as collateral , primarily to secure public deposits or sec urities sold under agreements to repurchase.

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4. Loans and Allowance for Loan Losses

The Company generally makes loans in its market areas of south Mississippi, southern and central Alabama, south Louisi ana, the Houston, Texas area, the north ern, central and panhandle regions of Florida , and Nashville, Tennessee . Loans, net of unearned income, by portfolio are presented in the table below.



	June 30,		December 31,
(in thousands)	2018		2017
Commercial non-real estate	$	8,410,961	$	8,297,937
Commercial real estate - owner occupied		2,233,794		2,142,439
Total commercial and industrial		10,644,755		10,440,376
Commercial real estate - income producing		2,342,192		2,384,599
Construction and land development		1,515,233		1,373,421
Residential mortgages		2,780,359		2,690,472
Consumer		2,088,378		2,115,295
Total loans	$	19,370,917	$	19,004,163

The following briefly describes the composition of each loan category.

Commercial and industrial

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

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

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

Commercial real estate – income producing

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

Construction and land development

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

Residential m ortgages

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

Consumer

Consumer loans include second lien mortgage home loans, home equity lines of credit and nonresidential consumer purpose loans. Nonresidential consumer loans include both direct and indirect loans. Direct nonresidential consumer loans are made to finance the purchase of personal property, including automobiles, recreational vehicles and boats, and for other personal purposes (secured and unsecured), and deposit account secured loans. Indirect nonresidential consumer loans include automobile financing provided to the consumer through an agreement with automobile dealerships. Consumer loans also include a small portfolio of credit card receivables issued on the basis of applications received through referrals from the Bank’s branches, online and other marketing efforts.

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Allowance for Loan Losses

The following tables show activity in the allowance for loan losses by portfolio class for the six months ended June 30 , 2018 and 2017, as well as the corresponding recorded investment in loans at the end of each period. Charge-off, recovery and provision activity in the purchased credit impaired portfolio previously segregated has been collapsed into the remainder of the portfolio’s activity as it is no longer material, and the respective reclassifications have been made to the prior period to conform to the current presentation.



			Commercial				Commercial
	Commercial		real estate-		Total		real estate-		Construction
		non-real	owner		commercial		income		and land		Residential
(in thousands)	estate		occupied		and industrial		producing		development		mortgages		Consumer		Total
	Six Months Ended June 30, 2018
Allowance for loan losses:
Beginning balance	$	127,918	$	12,962	$	140,880	$	13,709	$	7,372	$	24,844	$	30,503	$	217,308
Charge-offs		(11,845)		(6,804)		(18,649)		(1,604)		(220)		(498)		(12,964)		(33,935)
Recoveries		12,476		275		12,751		65		38		712		3,095		16,661
Net provision for loan losses		(1,981)		7,727		5,746		1,975		3,121		(862)		11,164		21,144
Reduction as a result of sale of subsidiary		—		—		—		—		—		—		(6,648)		(6,648)
Ending balance	$	126,568	$	14,160	$	140,728	$	14,145	$	10,311	$	24,196	$	25,150	$	214,530
Ending balance:
Allowance:
Individually evaluated for impairment	$	19,369	$	824	$	20,193	$	407	$	1	$	99	$	130	$	20,830
Amounts related to purchased credit impaired loans		427		420		847		46		115		10,873		497		12,378
Collectively evaluated for impairment		106,772		12,916		119,688		13,692		10,195		13,224		24,523		181,322
Total allowance	$	126,568	$	14,160	$	140,728	$	14,145	$	10,311	$	24,196	$	25,150	$	214,530
Loans:
Individually evaluated for impairment	$	291,071	$	26,967	$	318,038	$	8,820	$	113	$	3,733	$	599	$	331,303
Purchased credit impaired loans		8,221		6,630		14,851		3,800		4,769		111,805		5,381		140,606
Collectively evaluated for impairment		8,111,669		2,200,197		10,311,866		2,329,572		1,510,351		2,664,821		2,082,398		18,899,008
Total loans	$	8,410,961	$	2,233,794	$	10,644,755	$	2,342,192	$	1,515,233	$	2,780,359	$	2,088,378	$	19,370,917



			Commercial				Commercial
	Commercial		real estate-		Total		real estate-		Construction
	non-real		owner		commercial		income		and land		Residential
(in thousands)	estate		occupied		and industrial		producing		development		mortgages		Consumer		Total
	Six Months Ended June 30, 2017
Allowance for loan losses:
Beginning balance	$	147,052	$	11,083	$	158,135	$	13,509	$	6,271	$	25,361	$	26,142	$	229,418
Charge-offs		(26,218)		(517)		(26,735)		(160)		(172)		(776)		(15,260)		(43,103)
Recoveries		1,818		336		2,154		398		755		281		3,546		7,134
Net provision for loan losses		14,758		1,196		15,954		(207)		195		858		14,142		30,942
Decrease in FDIC loss share receivable		(47)		—		(47)		—		—		(2,344)		(135)		(2,526)
Ending balance	$	137,363	$	12,098	$	149,461	$	13,540	$	7,049	$	23,380	$	28,435	$	221,865
Ending balance:
Allowance:
Individually evaluated for impairment	$	22,758	$	280	$	23,038	$	1,402	$	1	$	172	$	283	$	24,896
Amounts related to purchased credit impaired loans		395		742		1,137		192		239		12,622		942		15,132
Collectively evaluated for impairment		114,210		11,076		125,286		11,946		6,809		10,586		27,210		181,837
Total allowance	$	137,363	$	12,098	$	149,461	$	13,540	$	7,049	$	23,380	$	28,435	$	221,865
Loans:
Individually evaluated for impairment	$	250,256	$	7,480	$	257,736	$	14,913	$	847	$	3,466	$	1,053	$	278,015
Purchased credit impaired loans		5,422		9,848		15,270		6,247		4,160		129,198		8,280		163,155
Collectively evaluated for impairment		7,837,426		2,061,004		9,898,430		2,380,513		1,308,515		2,361,259		2,083,954		18,032,671
Total loans	$	8,093,104	$	2,078,332	$	10,171,436	$	2,401,673	$	1,313,522	$	2,493,923	$	2,093,287	$	18,473,841

Impaired Loans

The following table shows the composition of nonaccrual loans by portfolio class. Purchased credit impaired loans accounted for in pools with an accretable yield are considered to be performing and are excluded from the table.



	June 30,		December 31,
(in thousands)	2018		2017
Commercial non-real estate	$	155,051	$	152,863
Commercial real estate - owner occupied		26,216		25,989
Total commercial and industrial		181,267		178,852
Commercial real estate - income producing		10,500		14,574
Construction and land development		4,174		3,807
Residential mortgages		31,393		40,480
Consumer		14,347		15,087
Total loans	$	241,681	$	252,800

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Nonaccrual loans include nonaccruing loans modified in troubled debt restructurings (“TDRs”) of $ 98.8 million and $ 99.2 million at June 30 , 2018 and December 31, 2017, respectively. Total TDRs, both accruing and nonaccruing, were $ 251.3 million at June 30 , 2018 and $ 219.7 million at December 31, 2017. All TDRs are individually evaluated for impairment. At June 30 , 2018 and December 31, 2017, the Company had unfunded commitments of $9.7 million and $7. 3 million, respectively, to borrowers whose loan terms have been modified in a TDR.

The table s below detail by portfolio class TDRs that were modified during the three and six months ended June 30 , 2018 and 2017:



	Three Months Ended
($ in thousands)		June 30, 2018						June 30, 2017
			Pre-Modification		Post-Modification				Pre-Modification		Post-Modification
		Number	Outstanding		Outstanding			Number	Outstanding		Outstanding
		of	Recorded		Recorded			of	Recorded		Recorded
Troubled Debt Restructurings:		Contracts	Investment		Investment		Contracts		Investment		Investment
Commercial non-real estate		5	$	6,477	$	6,477		28		54,317		54,317
Commercial real estate - owner occupied		—		—		—		3		3,078		3,078
Total commercial and industrial		5		6,477		6,477		31		57,395		57,395
Commercial real estate - income producing		—		—		—		3		959		959
Construction and land development		—		—		—		—		—		—
Residential mortgages		2		75		75		5		848		848
Consumer		—		—		—		1		40		42
Total loans		7	$	6,552	$	6,552		40		59,242		59,244



	Six Months Ended
($ in thousands)		June 30, 2018						June 30, 2017
			Pre-Modification		Post-Modification				Pre-Modification		Post-Modification
		Number	Outstanding		Outstanding			Number	Outstanding		Outstanding
		of	Recorded		Recorded			of	Recorded		Recorded
Troubled Debt Restructurings:		Contracts	Investment		Investment		Contracts		Investment		Investment
Commercial non-real estate		18	$	61,959	$	61,959		37	$	92,976	$	92,976
Commercial real estate - owner occupied		1		5,909		5,909		4		3,734		3,734
Total commercial and industrial		19		67,868		67,868		41		96,710		96,710
Commercial real estate - income producing		1		1,564		1,564		5		6,486		6,486
Construction and land development		—		—		—		—		—		—
Residential mortgages		3		118		118		6		1,098		1,098
Consumer		1		222		222		1		40		42
Total loans		24	$	69,772	$	69,772		53	$	104,334	$	104,336

The TDRs modified during the six months ended June 30 , 2018 reflected in the table above include $ 49.6 million of loans with extended amortization terms or other payment concessions, $ 14.6 million with significant covenant waivers and $5 .6 million with other modifications. The TDRs modified during the six months ended June 30 , 2017 include $ 28.4 million of loans with extended amortization terms or other payment concessions, $4 0.2 million with significant covenant waivers and $35 .7 million with other modifications.

One residential mortgage totaling $0.2 million that defaulted during the three and six months ended June 30, 2018 was modified in a TDR during the twelve months prior to default. There were no defaults on loans during the three and six months ended June 30, 2017 that had been modified in a TDR during the prior twelve months.

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The tables below present loans that are individually evaluated for impairment disaggregated by portfolio class at June 30 , 2018 and December 31, 2017. Loans individually evaluated for impairment include TDRs and loans that are determined to be impaired and have aggregate relationship balances of $1 million or more.



	June 30, 2018
		Recorded investment		Recorded investment		Unpaid
(in thousands)		without an allowance		with an allowance		principal balance		Related allowance
Commercial non-real estate	$	125,440	$	165,631	$	302,314	$	19,369
Commercial real estate - owner occupied		8,742		18,225		28,214		824
Total commercial and industrial		134,182		183,856		330,528		20,193
Commercial real estate - income producing		1,765		7,055		9,840		407
Construction and land development		100		13		113		1
Residential mortgages		2,430		1,303		6,748		99
Consumer		—		599		599		130
Total loans	$	138,477	$	192,826	$	347,828	$	20,830


	December 31, 2017
		Recorded investment		Recorded investment		Unpaid
(in thousands)		without an allowance		with an allowance		principal balance		Related allowance
Commercial non-real estate	$	116,682	$	151,199	$	285,685	$	16,129
Commercial real estate - owner occupied		16,927		4,564		24,829		793
Total commercial and industrial		133,609		155,763		310,514		16,922
Commercial real estate - income producing		5,101		10,429		15,687		1,326
Construction and land development		100		263		363		11
Residential mortgages		8,245		2,395		13,855		189
Consumer		—		1,292		1,294		118
Total loans	$	147,055	$	170,142	$	341,713	$	18,566

The tables below present the average balances and interest income for total impaired loans for the three and six months ended June 30, 2018 and 2017. Interest income recognized represents interest on accruing loans modified in a TDR.



	Three Months Ended
	June 30, 2018				June 30, 2017
(in thousands)	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
Commercial non-real estate	$	307,492	$	2,002	$	241,122	$	597
Commercial real estate - owner occupied		28,643		102		5,687		18
Total commercial and industrial		336,135		2,104		246,809		615
Commercial real estate - income producing		11,446		24		14,257		34
Construction and land development		113		—		1,219		—
Residential mortgages		6,036		5		3,352		3
Consumer		608		9		1,601		3
Total loans	$	354,338	$	2,142	$	267,238	$	655



	Six Months Ended
	June 30, 2018				June 30, 2017
(in thousands)	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
Commercial non-real estate	$	301,695	$	3,588	$	246,374	$	934
Commercial real estate - owner occupied		27,274		168		5,384		22
Total commercial and industrial		328,969		3,756		251,758		956
Commercial real estate - income producing		13,123		49		14,372		77
Construction and land development		176		—		1,492		—
Residential mortgages		7,762		10		3,572		5
Consumer		781		18		1,876		5
Total loans	$	350,811	$	3,833	$	273,070	$	1,043

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Aging Analysis

The tables below present the age analysis of past due loans by portfolio class at June 30 , 2018 and December 31, 2017. Purchased credit impaired loans accounted for in pools with an accretable yield are considered to be current.



													Recorded
					Greater than								investment
	30-59 days		60-89 days		90 days		Total				Total		> 90 days and
June 30, 2018	past due		past due		past due		past due		Current		Loans		still accruing
(in thousands)
Commercial non-real estate	$	15,299	$	19,264	$	94,065	$	128,628	$	8,282,333	$	8,410,961	$	4,483
Commercial real estate - owner occupied		1,622		1,441		23,274		26,337		2,207,457		2,233,794		2,880
Total commercial and industrial		16,921		20,705		117,339		154,965		10,489,790		10,644,755		7,363
Commercial real estate - income producing		2,133		426		6,666		9,225		2,332,967		2,342,192		1,822
Construction and land development		7,044		723		2,870		10,637		1,504,596		1,515,233		49
Residential mortgages		26,947		10,244		16,549		53,740		2,726,619		2,780,359		118
Consumer		13,566		5,384		7,591		26,541		2,061,837		2,088,378		503
Total	$	66,611	$	37,482	$	151,015	$	255,108	$	19,115,809	$	19,370,917	$	9,855



													Recorded
					Greater than								investment
	30-59 days		60-89 days		90 days		Total				Total		> 90 days and
December 31, 2017	past due		past due		past due		past due		Current		Loans		still accruing
(in thousands)
Commercial non-real estate	$	62,766	$	10,761	$	92,982	$	166,509	$	8,131,428	$	8,297,937	$	21,989
Commercial real estate - owner occupied		8,493		648		15,517		24,658		2,117,781		2,142,439		2,032
Total commercial and industrial		71,259		11,409		108,499		191,167		10,249,209		10,440,376		24,021
Commercial real estate - income producing		5,315		2,165		6,081		13,561		2,371,038		2,384,599		489
Construction and land development		4,113		1,056		3,412		8,581		1,364,840		1,373,421		477
Residential mortgages		33,621		10,554		30,537		74,712		2,615,760		2,690,472		2,208
Consumer		22,959		7,816		8,553		39,328		2,075,967		2,115,295		571
Total	$	137,267	$	33,000	$	157,082	$	327,349	$	18,676,814	$	19,004,163	$	27,766

Credit Quality Indicators

The following tables present the credit quality indicators by segments and portfolio class of loans at June 30 , 2018 and December 31, 2017.



	June 30, 2018
(in thousands)	Commercial non-real estate		Commercial real estate - owner-occupied		Total commercial and industrial		Commercial real estate - income producing		Construction and land development		Total commercial
Grade:
Pass	$	7,492,452	$	2,040,720	$	9,533,172	$	2,242,250	$	1,441,146	$	13,216,568
Pass-Watch		249,892		43,185		293,077		38,906		56,240		388,223
Special Mention		70,464		26,511		96,975		8,982		7,434		113,391
Substandard		598,136		123,378		721,514		52,054		10,413		783,981
Doubtful		17		—		17		—		—		17
Total	$	8,410,961	$	2,233,794	$	10,644,755	$	2,342,192	$	1,515,233	$	14,502,180

	December 31, 2017
(in thousands)	Commercial non-real estate		Commercial real estate - owner-occupied		Total commercial and industrial		Commercial real estate - income producing		Construction and land development		Total commercial
Grade:
Pass	$	7,190,604	$	1,896,366	$	9,086,970	$	2,223,245	$	1,291,638	$	12,601,853
Pass-Watch		293,069		82,913		375,982		83,444		60,804		520,230
Special Mention		80,649		27,456		108,105		13,244		4,788		126,137
Substandard		733,558		135,704		869,262		64,658		16,191		950,111
Doubtful		57		—		57		8		—		65
Total	$	8,297,937	$	2,142,439	$	10,440,376	$	2,384,599	$	1,373,421	$	14,198,396

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	June 30, 2018						December 31, 2017
(in thousands)	Residential mortgage		Consumer		Total		Residential mortgage		Consumer		Total
Performing	$	2,748,848	$	2,073,528	$	4,822,376	$	2,647,784	$	2,099,637	$	4,747,421
Nonperforming		31,511		14,850		46,361		42,688		15,658		58,346
Total	$	2,780,359	$	2,088,378	$	4,868,737	$	2,690,472	$	2,115,295	$	4,805,767

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

Commercial :

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

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

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

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

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

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

Residential and Consumer:

Performing – loans on which payments of principal and interest are less than 90 days past due.

Nonperforming – a nonperforming loan is a loan that is in default or close to being in default and there are good reasons to doubt that payments will be made in full. All loans rated as nonaccrual loans are also classified as nonperforming.

Purchased Credit Impaired Loans

Changes in the carrying amount of purchased credit impaired loans and related accretable yield are presented in the following table for the six months ended June 30 , 2018 and the year ended December 31, 2017.



	June 30, 2018				December 31, 2017
	Carrying				Carrying
	Amount		Accretable		Amount		Accretable
(in thousands)	of Loans		Yield		of Loans		Yield
Balance at beginning of period	$	153,403	$	62,517	$	190,915	$	113,686
Addition of cost recovery loans - FNBC I		—		—		15,000		—
Payments received, net		(21,082)		(3,215)		(69,591)		(7,412)
Accretion		8,285		(8,285)		17,079		(17,079)
Decrease in expected cash flows based on actual cash flows and changes in cash flow assumptions		—		(1,889)		—		(30,379)
Net transfers from nonaccretable difference to accretable yield		—		—		—		3,701
Balance at end of period	$	140,606	$	49,128	$	153,403	$	62,517

During the six months ended June 30, 2017, certain of the Company’s purchased credit impaired loans were covered by a loss share agreement with the FDIC. The agreement was terminated by the Company during the third quarter of 2017. Prior to termination of the agreement , t he Company carried a receivable from the FDIC representing an indemnification a sset arising from the agreement . The receivable was accounted for separately from the covered loans as the agreement was not contractually part of the loans and were not transferrable should the Company have disposed of the loans.

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Residential Mortgage Loans in Process of Foreclosure

Included in loans are $ 6.2 million and $ 7.5 million of consumer loans secured by single family residential real estate that are in process of foreclosure as of June 30 , 2018 and December 31, 2017, 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 $ 2.5 million and $3. 4 million of foreclosed single family residential properties in other real estate owned as of June 30 , 2018 and December 31, 2017, respectively.

5. Securities Sold under Agreements to Repurchase

Included in short-term borrowings are customer securities sold under agreements to repurchase (“repurchase agreements”) that mature daily and are secured by U.S. agency securities totaling $ 453.0 million and $430.6 million at June 30, 2018 and December 31, 2017, respectively . The Company borrows funds on a secured basis by selling securities under agreements to repurchase, mainly in connection with treasury management services offered to its deposit customers. As the Company maintains effective control over assets sold under agreements to repurchase, the securities continue to be carried on the consolidated statements of financial condition. Because the Company acts as borrower transferring assets to the counterparty, and the agreements mature daily, the Company’s risk is limited.

6. Derivatives

On January 1, 2018, the Company adopted the provisions of Accounting Standards Update (ASU) 2017-12, “Derivatives and Hedging,” using the modified retrospective transition approach . As a result of adoption of the u pdate, the Company has made certain adjustments to its existing designation documentation for active hedging relationships to take advantage of sp ecific provisions of the update. Adoption of this guidance did not have a material impact on the Company’s financial condition or results of operations. Following is a discussion of the provisions of the guidance relevant to the Company:

Ineffectiveness measurement and presentation

The provisions of the update eliminate the concept of ineffectiveness from an accounting perspective. The guidance provides that, as long as a hedging instrument is designated and the results of the effectiveness testing support that the instrument qualifies for hedge accounting treatment, there will be no periodic measurement or recognition of ineffectiveness. Rather, the full impact of hedge gains and losses will be recognized in the period in which the hedged transactions impact the entity’s earnings.

Presentation of r eclassifications from Accumulated Other Comprehensive Income

Amounts in Accumulated Other Comprehensive Income that are included in the assessment of effectiveness should be reclassified into earnings in the same period in which the hedged forecasted transactions impact earnings. As such, the Company will recognize all reclassifications out of Other Comprehensive Income in the same statement of income line item in which the earnings effect of the hedged item is presented.

Changes to hedged risk

The update also states that if the designated hedged risk changes during the life of the hedging relationship, an entity may continue to apply hedge accounting as long as the hedging instrument is highly effective at achieving offsetting cash flows attributable to the revised hedged risk. Regardless of the description of the hedged transactions contained in the initial designation documentation, the Company intends to utilize this provision in the updated guidance to the extent possible.

Risk component hedging in fair value hedges

The update allows an entity to make a one-time transition election regarding the fair value measurement methodology applied to fair value hedges in place at adoption. The Company did not elect either of the one-time transition options; rather, it will continue to measure the hedged items as documented in the initial hedge documentation.

Risk Management Objective of Using Derivatives

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

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Fair Values of Derivative Instruments on the Balance Sheet

The table below presents the notional or contractual amounts and fair values of the Company’s derivative financial instruments as well as their classification on the consolidated balance sheets as of June 30, 2018 and December 31, 2017.





			June 30, 2018					December 31, 2017
				Derivative (1)						Derivative (1)
(in thousands)	Type of Hedge		Notional or Contractual Amount	Assets		Liabilities		Notional or Contractual Amount		Assets		Liabilities
Derivatives designated as hedging instruments:
Interest rate swaps	Cash Flow	$	875,000	$	—	$	18,321	$	875,000	$	—	$	14,020
Interest rate swaps	Fair Value		483,110		—		4,003		483,110		—		2,475
			1,358,110		—		22,324		1,358,110		—		16,495
Derivatives not designated as hedging instruments:
Interest rate swaps (2)	N/A		1,227,663		25,797		25,700		1,144,789		15,408		15,857
Risk participation agreements	N/A		141,907		8		56		119,951		23		109
Forward commitments to sell residential mortgage loans	N/A		106,970		44		950		80,462		1,000		290
Interest rate-lock commitments on residential mortgage loans	N/A		69,935		555		16		53,724		186		782
Foreign exchange forward contracts	N/A		44,740		1,768		1,732		42,260		2,453		2,419
			1,591,215		28,172		28,454		1,441,186		19,070		19,457
Total derivatives		$	2,949,325	$	28,172	$	50,778	$	2,799,296	$	19,070	$	35,952
Less: netting adjustment (3)					(16,744)		(24,825)				(4,913)		(21,563)
Total derivative assets/liabilities				$	11,428	$	25,953			$	14,157	$	14,389

(1)

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

(2)

The notional amount represents both the customer accommodation agreements and offsetting agreements with unrelated financial institutions.

(3)

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

Cash Flow Hedges of Interest Rate Risk

The Company is party to various interest rate swap agreements designated and qualify ing as cash flow hedges of the Company’s forec asted variable cash flows for pools of variable rate loans. For each agreement, the Company receives interest at a fixed rate and pays at a variable rate . During the six months ended June 30, 2018, the Company terminated five of its shorter-term swap agreements with notional amounts totaling $450 million and entered into five longer-term agreements with notional amounts totaling $450 million. The Company paid termination fees of approximately $10.6 million to settle the interest rate swap liabilities, and the resulting accumulated other comprehensive loss is being amortized over the remaining maturities of the designated instruments. Amortization of other comprehensive loss on terminated cash flow hedges totaled $1.5 million and $2.5 million for the three and six months ended June 30, 2018 , respectively . The notional amounts of the swap agreements in place at June 30 , 2018 expire as follows: $ 425 million in 20 22 ; $ 350 million in 202 3 ; and $ 100 million in 202 4 .

Fair Value Hedges of Interest Rate Risk

The Company enters into interest rate swap agreements that modify the Company’s exposure to interest rate risk by effectively converting a portion of the Company’s brokered certificates of deposit from fixed rates to variable rates. The maturities and call features of these interest rate swaps match the features of the hedged deposits. As interest rates fall, the decline in the value of the certificates of deposit is offset by the increase in the value of the interest rate swaps. Conversely, as interest rates rise, the value of the underlying hedged deposits increases, but the value of the interest rate swaps decrease s , resu lting in no impact on earnings. Interest expense is adjusted by the difference between the fixed and floating rates for the period the swaps are in effect.

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Derivatives Not Designated as Hedges

Customer interest rate derivative program

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

Risk participation agreements

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

Mortgage banking derivatives

The Bank also enters into certain deri vative agreements as part of its mortgage banking activities. These agreements include interest rate lock commitments on prospective residential mortgage loans and forward commitments to sell these loans to investors on a best efforts delivery basis.

Customer foreign exchange forward contract derivatives

The Bank enters into foreign exchange forward derivative agreements, primarily forward foreign currency contracts, with commercial ban king customers to facilitate their risk management strategies. The Bank manages its risk exposure from such transactions by entering into offsetting agreements with unrelated financial institutions. Because the foreign exchange forward contract derivatives associated with this program do not meet hedge accounting requirements, changes in the fair value of both the customer derivatives and the offsetting derivatives are recognized directly in earnings.

Effect of Derivative Instruments on the Statement of Income

The effects of derivative instruments on the consolidated statements of income are presented in the table below. For the three and six months ended June 30, 2018 , the reduction of interest income attributable to cash flow hedges includes amortization of accumulated other comprehensive loss that resulted from termination of five interest rate swap contracts.


			Three Months Ended				Six Months Ended
			June 30,				June 30,
Derivative Instruments:	Location of Gain (Loss) Recognized in the Statement of Income:		2018		2017		2018		2017
Interest rate swaps - cash flow hedges	Interest income	$	(946)	$	(210)	$	(1,565)	$	(96)
Interest rate swaps - fair value hedges	Interest expense		(519)		303		(646)		444
All other instruments	Other noninterest income		1,588		2,680		3,111		3,145
Total		$	123	$	2,773	$	900	$	3,493

Credit Risk-R elated Contingent Features

Certain of the Bank’s derivative instruments contain provisions allowing the financial institution counterparty to terminate the contracts in ce rtain circumstances, such as a downgrade of the Bank’s credit ratings below specified levels, a default by the Bank on its indebtedness, or the failure of the Bank to maintain specified minimum regulatory capital ratios or its regulatory status as a well-capitalized institution. These derivative agreements also contain provisions regarding the posting of collateral by each party. As of June 30, 2018, the Company was not in violation of any such provisions.

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Offsetting Assets and Liabilities

The Bank’s derivative instruments with certain counterparties contain legally enforceable netting provisions that allow for net settlement of multiple transactions to a single amount, which may be positive, negative, or zero. Agreements with certain bilateral counterparties require both parties to maintain collateral in the event that the fair values of derivative instruments exceed established exposure thresholds. For centrally cleared derivatives, the Company is subject to initial margin posting and daily variation margin exchange with the central clearinghouses. Offsetting information in regards to all derivative assets and liabilities , including accrued interest, subject to these master netting agreements at June 30, 2018 and December 31, 2017 is presented in the following tables.



(in thousands)			Gross Amounts		Net Amounts		Gross Amounts Not Offset in the Statement of Income
Description	Gross Amounts Recognized		Offset in the Statement of Income		Presented in the Statement of Income		Financial Instruments		Cash Collateral		Net Amount
As of June 30, 2018
Derivative Assets	$	22,669	$	(16,909)	$	5,760	$	1,118	$	—	$	4,642

Derivative Liabilities	$	24,128	$	(23,010)	$	1,118	$	1,118	$	3,033	$	(3,033)



(in thousands)			Gross Amounts		Net Amounts		Gross Amounts Not Offset in the Statement of Income
Description	Gross Amounts Recognized		Offset in the Statement of Income		Presented in the Statement of Income		Financial Instruments		Cash Collateral		Net Amount
As of December 31, 2017
Derivative Assets	$	7,155	$	(5,007)	$	2,148	$	2,148	$	—	$	—

Derivative Liabilities	$	24,015	$	(20,077)	$	3,938	$	2,148	$	4,099	$	(2,309)

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

7 . Stockholders’ Equity

Common Shares Outstanding

Common shares outstanding excludes treasury shares totaling 1.1 million and 1.2 million at June 30, 2018 and December 31, 2017 , respectively, with a first-in-first-out cost basi s of $24.1 million and $25.5 m illion at June 30, 2018 and December 31, 2017 , respectively. Shares outstanding also exclude s unvested restricted share awards totaling 1. 5 million at June 30, 2018 and December 31, 2017.

Stock Buyback Program

On May 24, 2018, the Company’s board of directors approved a stock buyback program that authorized the repurchase of up to 5% , or approximately 4.3 million shares, of its outstanding common stock. The approved program allows the Company to repurchase its common shares either in the open market in compliance with Rule 10b-18 promulgated under the Securities Exchange Act of 1934, as amended, or in privately negotiated transactions with non-affiliated sellers or as otherwise determined by the Company in one or more transactions, from time to time until December 31, 2019. The Company is not obligated to purchase any shares under this program, and the board of directors may terminate or amend the program at any time prior to the expiration date. As of June 30, 2018, no shares of the Company’s common stock had been purchased under this program .

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A ccumulated Other Comprehensive Loss

T he components of Accumulated Other Comprehensive Loss and changes in those components are presented in the following table.



	Available		HTM Securities
	for Sale		Transferred		Employee		Cash
(in thousands)	Securities		from AFS		Benefit Plans		Flow Hedges		Total
Balance, December 31, 2016	$	(28,679)	$	(14,392)	$	(72,501)	$	(4,960)	$	(120,532)
Other comprehensive income (loss) before income taxes:
Net change in unrealized gain (loss)		14,687		—		—		(842)		13,845
Reclassification of net loss realized and included in earnings		—		—		3,105		—		3,105
Valuation adjustment for pension plan amendment		—		—		17,315		—		17,315
Other valuation adjustments for employee benefit plan		—		—		(10,782)		—		(10,782)
Amortization of unrealized net loss on securities transferred to HTM		—		1,749		—		—		1,749
Income tax expense (benefit)		5,333		657		3,458		(309)		9,139
Balance, June 30, 2017	$	(19,325)	$	(13,300)	$	(66,321)	$	(5,493)	$	(104,439)
Balance, December 31, 2017	$	(29,512)	$	(14,585)	$	(79,078)	$	(11,227)	$	(134,402)
Other comprehensive income (loss) before income taxes:
Net change in unrealized losses		(71,759)		—		—		(13,894)		(85,653)
Reclassification of net losses realized and included in earnings		—		—		2,448		1,565		4,013
Other valuation adjustments for employee benefit plan		—		—		(9,039)		—		(9,039)
Amortization of unrealized net loss on securities transferred to HTM		—		1,680		—		—		1,680
Income tax expense (benefit)		(16,284)		380		(1,494)		(2,794)		(20,192)
Balance, June 30, 2018	$	(84,987)	$	(13,285)	$	(84,175)	$	(20,762)	$	(203,209)

Accumulated Other Comprehensive Income or Loss (“ AOCI ”) is reported as a component of stockholders’ equity. AOCI can include, among other items, unrealized holding gains and losses on securities available for sale (“AFS”), gains and losses associa ted with pension or other post- retirement benefits that are not recognized immediately as a component of net periodic benefit cost, and gains and losses on derivative instruments that are designated as, and qualify as, cash flo w hedges. Net unrealized gains and losses on AFS securities reclassified as securities held to maturity (“HTM”) also continue to be reported as a component of AOCI and will be amortized over the estimated remaining life of the securities as an adjustment to interest income. Subject to certain thresholds, unrealized losses on employee benefit plans will be reclassified into income as pension and post-retirement costs are recognized over the remaining service period of plan participants. Accumulated gains or losses on the cash flow hedge of the variable rate loans described in Note 6 will be reclassified into inco me over the life of the hedge. Accumulated other comprehensive loss resulting from the terminated interest rate swaps will be amortized over the remaining maturities of the designated instruments. Gains and losses within AOCI are net of deferred income taxes.

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



	Six Months Ended
Amount reclassified from AOCI (a)	June 30,				Affected line item on
(in thousands)		2018		2017	the statement of income
Amortization of unrealized net loss on securities transferred to HTM	$	(1,680)	$	(1,749)	Interest income
Tax effect		380		657	Income taxes
Net of tax		(1,300)		(1,092)	Net income
Amortization of defined benefit pension and post-retirement items		(2,448)		(3,105)	Other noninterest expense (b)
Tax effect		555		1,114	Income taxes
Net of tax		(1,893)		(1,991)	Net income
Reclassification of unrealized gain on cash flow hedges		979		—	Interest income
Tax effect		(222)		—	Income taxes
Net of tax		757		—	Net income
Amortization of loss on terminated cash flow hedges		(2,544)		—	Interest income
Tax effect		577		—	Income taxes
Net of tax		(1,967)		—	Net income
Total reclassifications, net of tax	$	(4,403)	$	(3,083)	Net income

(a)

Amounts in parenthese s indicate reduction in net income.

(b)

These AOCI components are included in the computation of net periodic pension and post-retirement cost that is reported with employee benefits expense (see Note 1 2 – Retirement Plans for additional details).

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8. Revenue Recognition

Effective January 1, 2018, the Company adopted the amended provisions of the Financial Accounting Standards Codification Topic 606, “Revenue from Contracts with Customers,” using the modified retrospective approach. The standard applies to most of the Company’s noninterest income, with a significant portion of the Company’s revenue excluded from the scope of the standard, including interest and loan origination fees associated with financial instruments, gains and losses on investment securities, derivatives and sales of financial instruments.

The Company’s evaluation of contracts for compliance with the standard did not identify any material changes to the timing of revenue recognition as the standard was largely consistent with the existing guidance and current practices . Therefore, the adoption of this guidance did not have a material impact on the Company’s financial condition or results of operations and there was no cumulative effect adjustment to opening retained earnings. However, upon adoption the Company has begun presenting certain underwriting costs (previously offset against Investment and Annuity Fees), as well as certain subadvisor costs (previously offset against Trust Fees) gross as noninterest expense, neither of which are material to operating results.

Due to the nature of the Company’s primary sources of revenue , there are no significant receivables, contract assets or contract liabilities not otherwise disclosed. The Company has assessed that its current disclosures are consistent with the requirements of the standard to p resent revenue disaggregated in to categories that depict how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors. The following provides additional qualitative disclosures about the Company’s noninterest income and revenue recognition policies.

Service Charges on Deposit Accounts

Service charges on deposit accounts include transaction based fees for non-sufficient funds , account analysis fees, and other service charges on deposits, including monthly account service fees. Non-sufficient funds fees are recognized at the time when the account overdraft occurs in accordance with regulatory guidelines. Account analysis fees consist of fees charged on certain business deposit accounts based upon account activity as well as other monthly account fees, are recorded under the accrual method of accounting as services are performed.

Other service charges are earned by providing depositors safeguard and remittance of funds as well as by providing other elective services for depositors that are performed upon the depositor’s request. Charges for deposit services for the safeguard and remittance of funds are recognized at the end of the statement cycle, after services are provided , as the customer retains funds in the account. Revenue for other elective services is earned at the point in time the customer uses the service.

Trust Fees

Trust fee income represents revenue generated from asset management services provided to individuals, businesses, and institutions. The Company has a fiduciary responsibility to the beneficiary of the trust to perform agreed upon services which can include investing assets, periodic reporting, and providing tax information regarding the trust. In exchange for these trust and custodial services, the Company collects fee income from beneficiaries as contractually determined via fee schedules. The Company’s performance obligation is primarily satisfied over time as the services are performed and provided to the customer. These fees are recorded under the accrual method of accounting as the services are performed. The Company generally acts as the principal in these transactions and records revenue and expenses on a gross basis.

Bank Card and Automated Teller Machine (“ATM”) Fees

Bank card and ATM fees include credit card, debit card and ATM transaction revenue. The majority of this revenue is card interchange fees earned through a third party network. Performance obligations are satisfied for each transaction when the card is used and the funds are remitted. The network establishes interchange fees that the merchant remits for each transaction, and costs are incurred from the network for facilitating the interchange with the merchant. Card fees also include merchant services fees earned for providing merchants with card processing capabilities.

ATM income is generated from allowing customers to withdraw funds from other banks’ machines and from allowing a non-customer cardholder to withdraw funds from the Company’s machines. The Company satisfies its performance obligations for each transaction at the point in time that the withdrawal is processed.

Bank card and ATM fee income is recorded on accrual basis as services are provided with the related expense reflected in data processing expense.

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Investment and Annuity Fees and Insurance Commissions

Investment and annuity services fee income represents income earned from investment and advisory services. The Company provides its customers with access to investment products through the use of third party carriers to meet their financial needs and investment objectives. Upon selection of an investment product, the customer enters into a policy with the carrier. The performance obligation is satisfied by fulfilling its responsibility to acquire the investment for which a commission fee is earned from the carrier based on agreed-upon fee percentages on a trade date basis. The Company has a contractual relationship with a third party broker dealer to provide full service brokerage and investment advisory activities. As the agent in the arrangement, the Company recognizes the investment services commissions on a net basis. Investment revenue also includes portfolio management fees, which represent monthly fees charged on a contractual basis to customers for the management of their investment portfolios and are recorded under the accrual method of accounting on a gross basis, with expenses recorded in the appropriate expense line item.

This revenue line item includes investment banking income, which includes fees for services arising from securities offerings or placements in which the Company acts as a principal. Revenue is recognized at the time the underwriting is completed and the revenue is reasonably determinable.

Insurance commission revenue is recognized, net of cost, as of the effective date of the insurance policy as the Company’s performance obligation is connecting the customer to the insurance products. The Company also receives contingent commissions from insurance companies as additional incentive for achieving specified premium volume goals and/or the loss experience of the insurance placed. Contingent commissions from insurance companies are recognized when determinable, which is generally when such commissions are received or when we receive data from the insurance companies that allows the reasonable estimation of these amounts.

Secondary Mortgage Market Operations

Secondary mortgage market operations revenue is primarily comprised of service release premiums earned on the sale of closed-end mortgage loans to other financial institutions or government agencies that are recognized in revenue as each sales transaction occurs.

Income from Bank-Owned Life Insurance

Bank-owned life insurance income primarily represents income earned from the appreciation of cash surrender value of insurance contracts held and the proceeds of insurance benefits. Revenue from the proceeds of insurance benefits is recognized at the time a claim is confirmed.

Credit Related Fee Income

Credit-related fee income includes letters of credit fees and unused commercial commitment fees. Revenue for letters of credit fees is recognized over time. Revenue for unused commercial commitment fees are recognized based on contractual terms, generally when collected.

Income from Derivatives

Income from derivatives consists primarily of interest rate swap fees, net of fair value adjustments for customer derivatives and the related offsetting agreements with unrelated financial institutions for which the derivative instruments are not designated as hedges. This line item also includes the resulting gain or loss from ineffectiveness on derivatives that are designated as hedged items.

Gain (Loss) on Sales of Assets

Gain (loss) on sales of assets reflects the excess (deficiency) of proceeds received over the carrying amount assets sold plus cost to sell for various assets other than foreclosed real estate. Gain or loss on the sale of assets are recognized as each transaction occurs.

Other Miscellaneous Income

Other miscellaneous income represents a variety of revenue streams, including safe deposit box income, wire transfer fees, syndication fees and any other income not reflected above. Income is recorded once the performance obligation is satisfied, generally on the accrual basis or on a cash basis if not material and/or considered constrained.

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9 . Other Noninterest Income

Components of other no ninterest income are as follows:



	Three Months Ended				Six Months Ended
	June 30,				June 30,
(in thousands)	2018		2017		2018		2017
Income from bank-owned life insurance	$	3,113	$	2,883	$	6,183	$	5,535
Credit related fees		2,416		2,898		5,138		5,776
Income from derivatives		1,588		2,680		3,111		3,145
Gain (loss) on sales of assets		41		(60)		(1,166)		4,065
Amortization of FDIC loss share receivable		—		(1,327)		—		(2,427)
Other miscellaneous		3,347		4,473		6,724		7,228
Total other noninterest income	$	10,505	$	11,547	$	19,990	$	23,322

10 . Other Noninterest Expense

Components of other non interest expense are as follows:



	Three Months Ended				Six Months Ended
	June 30,				June 30,
(in thousands)	2018		2017		2018		2017
Advertising	$	3,517	$	4,984	$	6,043	$	8,061
Corporate value and franchise taxes		3,577		3,519		7,017		6,555
Printing and supplies		1,688		1,330		2,974		2,508
Travel expense		1,441		1,350		2,507		2,409
Entertainment and contributions		3,193		1,982		5,711		3,765
Tax credit investment amortization		875		1,213		1,749		2,425
FDIC l oss share agreement termination		—		6,603		—		6,603
Other retirement expense		(4,458)		(3,388)		(8,921)		(6,448)
Loss on restructuring of bank-owned life insurance contracts		3,240		—		3,240		—
Other miscellaneous		8,830		6,686		14,514		13,971
Total other noninterest expense	$	21,903	$	24,279	$	34,834	$	39,849

11 . Earnings Per Share

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

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



	Three Months Ended				Six Months Ended
	June 30,				June 30,
(in thousands, except per share data)	2018		2017		2018		2017
Numerator:
Net income to common shareholders	$	71,177	$	52,267	$	143,652	$	101,281
Net income allocated to participating securities - basic and diluted		1,328		1,166		2,694		2,322
Net income allocated to common shareholders - basic and diluted	$	69,849	$	51,101	$	140,958	$	98,959
Denominator:
Weighted-average common shares - basic	$	85,305	$	84,614	$	85,273	$	84,489
Dilutive potential common shares		178		253		178		266
Weighted-average common shares - diluted	$	85,483	$	84,867	$	85,451	$	84,755
Earnings per common share:
Basic	$	0.82	$	0.60	$	1.65	$	1.17
Diluted	$	0.82	$	0.60	$	1.65	$	1.17

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Potential common shares consist of stock options, nonvested performance - based awards, and nonvested restricted share awards deferred under the Company’s nonqualified deferred compensation plan. These potential co mmon shares do not enter into the calculation of diluted earnings per sh are if the impact would be anti dilutive, i.e., increase earnings per share or redu ce a loss per share. Weighted average anti dilutive potential common shares totaled 1,816 and 913 , respectively, for the three and six months ended June 30, 2018. Weighted average anti dilutive potential common shares totaled 19,397 and 17,701 , respectively, for the three and six months ended June 30, 2017.

12. Retirement Plans

The Company sponsors a qualified defined benefit pension plan, the Hancock Whitney Corporation Pension Plan (“Pension Plan”), covering certain eligible associates. Eligibility is based on minimum age and service-related requirements. During the second quarter of 2017, the Pension Plan was amended to exclude any individual hired or rehired by the Company after June 30, 2017 from eligibility to participate. The Pension Plan amendment further provided that the accrued benefits of each participant in the Pension Plan whose combined age plus years of service as of January 1, 2018 totals less than 55 were to be frozen as of January 1, 2018 and thereafter not increase. The Company makes contributions to the Pension Plan in amounts sufficient to meet funding requirements set forth in federal employee benefit and tax laws, plus such additional amounts as the Company may determine to be appropriate. The Company is not required to and does not anticipate making a contribution t o the Pension Plan in 2018.

The Company also offers a defined contribution retirement benefit plan (401(k) plan), the Hancock Whitney Corporation 401(k) Savings Plan (“401(k) Plan”), that covers substantially all associates who have been employed 60 days and meet a minimum age requirement and employment classification criteria. The Company matches 100% of the first 1% of compensation saved by a participant, and 50% of the next 5% of compensation saved. Newly eligible associates are automatically enrolled at an initial 3% savings rate unless the associate actively opts out of participation in the plan. The 401(k) Plan was also amended during the second quarter of 2017 for participants whose benefits are frozen under the Pension Plan to add an enhanced Company contribution beginning January 1, 2018, in the amount of 2% , 4% or 6% of such participant’s eligible compensation, based on the participant’s age and years of service with the Company. The 401(k) Plan’s amendment further provide d that the Company will contribute to the benefit of those associates of the Company hired or rehired after June 30, 2017 and those associates of the Company never enrolled in the Pension Plan an additional basic contribution in an amount equal to 2% of the associate’s eligible compensation beginning January 1, 2018. Participants will vest in the new basic and enhanced Company contributions upon completion of three years of service.

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

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

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



					Other Post-
(in thousands)	Pension Benefits				Retirement Benefits
Three Months Ended June 30, 2018	2018		2017		2018		2017
Service cost	$	3,163	$	4,093	$	28	$	47
Interest cost		4,279		4,291		161		179
Expected return on plan assets		(10,169)		(9,576)		—		—
Amortization of net loss and prior service costs		1,365		1,766		(94)		(48)
Net periodic benefit cost (reduction of cost)	$	(1,362)	$	574	$	95	$	178

					Other Post-
(in thousands)	Pension Benefits				Retirement Benefits
Six Months Ended June 30, 2018	2018		2017		2018		2017
Service cost	$	6,088	$	7,843	$	63	$	95
Interest cost		8,202		8,414		298		359
Expected return on plan assets		(19,869)		(18,326)		—		—
Amortization of net loss and prior service costs		2,691		3,201		(243)		(96)
Net periodic benefit cost (reduction of cost)	$	(2,888)	$	1,132	$	118	$	358

Effective January 1, 2018, the Company adopted ASU 2017-07, “Compensation – Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Costs.” In accordance with the Update, only the service component of net periodic benefit cost is included in the Employee Benefits line item on the Company’s Consolidated Statement s of Income. All other components have been included in Other Noninterest Expense. Prior period amounts have been reclassified to conform to current presentation.

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13. Share-Based Payment Arrangements

The Company maintains incentive compensation plans that provide for awards of share-based compensation to employees and directors. These plans have been approved by the Company’s shareholders. Detailed descriptions of these plans were included in Note 17 to the consolidated financial statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017.

A summary of stock option activity for the six months ended June 30, 2018 is presented below:



				Weighted
				Average
		Weighted		Remaining
		Average		Contractual	Aggregate
	Number of	Exercise		Term	Intrinsic
Options	Shares	Price		(Years)	Value ($000)
Outstanding at January 1, 2018	88,301	$	34.84	2.8	$	1,294
Exercised/Released	(32,458)		37.02			564
Cancelled/Forfeited	—		—			—
Expired	(2,298)		44.91			10
Outstanding at June 30, 2018	53,545	$	33.09	2.8	$	726
Exercisable at June 30, 2018	53,545	$	33.09	2.8	$	726

The total intrinsic value of options exercised for the six months ended June 30, 2018 and 2017 was $ 0.6 million and $4.1 million, respectively.

The Company’s restricted and performance-based share awards to certain employees and directors are subject to service requirements. A summary of the status of the Company’s nonvested restricted and performance-based share awards as of June 30, 2018 and changes during the six months ended June 30, 2018, is presented in the following table.



			Weighted
			Average
	Number of		Grant Date
	Shares		Fair Value
Nonvested at January 1, 2018	1,708,942	$	37.05
Granted	82,876		48.81
Vested	(28,835)		32.65
Forfeited	(49,687)		36.49
Nonvested at June 30, 2018	1,713,296	$	37.60

As of June 30, 2018, there was $ 43.5 million of total unrecognized compensation expense related to nonvested restricted and performance shares expected to vest. This compensation is expected to be recognized in expense over a weighted average period of 3.2 years. The total fair value of shares which vested during the six months ended June 30, 2018 and 2017 was $0. 9 million and $10.0 million, respectively.

During the six months ended June 30, 2018, the Company granted 2 6,147 performance share awards subject to a total shareholder return (“TSR”) performance metric with a grant date fair value of $ 51.13 per share and 2 6,147 performance shares subject to an operating earnings per share performance metric with a grant date fair value of $ 44.84 per share to key members of executive management. The number of performance shares subject to TSR that ultimately vest at the end of the three -year performance period, if any, will be based on the relative rank of the Company’s three-year TSR among the TSRs of a peer group of 4 3 regional banks. The fair value of the performance shares subject to TSR at the grant date was determined using a Monte Carlo simulation method. The number of performance shares subject to core earnings per share that ultimately vest will be based on the Company’s attainment of certain core earnings per share goals over the two -year performance period. The maximum number of performance shares that could vest is 200% of the target award. Compensation expense for these performance shares is recognized on a straight line basis over the three -year service period.

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14. Commitments and Contingencies

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

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

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

The contract amounts of these instruments reflect the Company’ s exposure to credit risk. The Company undertakes the same credit evaluation in making loan commitments and assuming conditional obligations as it does for on-balance sheet instruments and may require collateral or other credit support. These off-balance sheet financial instruments are summarized below:


		June 30,		December 31,
(in thousands)		2018		2017
Commitments to extend credit	$	7,096,587	$	6,689,033
Letters of credit		362,198		348,377

Legal Proceedings

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

15 . Fair Value Measurements

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

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Fair Value of Assets and Liabilities Measured on a Recurring Basis

The following tables present for each of the fair value hierarchy levels the Company’s assets and liabilities that are measured at fair value on a recurring basis in the consolidated balance sheets.



	June 30, 2018
(in thousands)	Level 1		Level 2		Level 3		Total
Assets
Available for sale debt securities:
U.S. Treasury and government agency securities	$	—	$	90,985	$	—	$	90,985
Municipal obligations		—		236,010		—		236,010
Corporate debt securities		—		3,500		—		3,500
Residential mortgage-backed securities		—		1,774,871		—		1,774,871
Commercial mortgage-backed securities		—		729,532		—		729,532
Collateralized mortgage obligations		—		146,775		—		146,775
Total available for sale securities		—		2,981,673		—		2,981,673
Derivative assets (1)		—		11,428		—		11,428
Total recurring fair value measurements - assets	$	—	$	2,993,101	$	—	$	2,993,101
Liabilities
Derivative liabilities (1)	$	—	$	25,953	$	—	$	25,953
Total recurring fair value measurements - liabilities	$	—	$	25,953	$	—	$	25,953



	December 31, 2017
(in thousands)	Level 1		Level 2		Level 3		Total
Assets
Available for sale debt securities:
U.S. Treasury and government agency securities	$	—	$	97,272	$	—	$	97,272
Municipal obligations		—		243,786		—		243,786
Corporate debt securities		—		3,500		—		3,500
Residential mortgage-backed securities		—		1,715,213		—		1,715,213
Commercial mortgage-backed securities		—		687,135		—		687,135
Collateralized mortgage obligations		—		163,963		—		163,963
Total available for sale securities		—		2,910,869		—		2,910,869
Derivative assets (1)		—		14,157		—		14,157
Total recurring fair value measurements - assets	$	—	$	2,925,026	$	—	$	2,925,026
Liabilities
Derivative liabilities (1)	$	—	$	14,389	$	—	$	14,389
Total recurring fair value measurements - liabilities	$	—	$	14,389	$	—	$	14,389

(1)

For further disaggregation of derivative assets and liabilities, see Note 6 - Derivatives.

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

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

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

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

The Company’s policy is to recognize transfers between valuation hierarchy levels as of the end of a reporting period. There were no transfers between levels during the periods presented .

Fair Value of Assets Measured on a Nonrecurring Basis

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

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

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

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



	June 30, 2018
(in thousands)	Level 1		Level 2		Level 3		Total
Collateral-dependent impaired loans	$	—	$	206,110	$	—	$	206,110
Other real estate owned		—		—		5,926		5,926
Total nonrecurring fair value measurements	$	—	$	206,110	$	5,926	$	212,036



	December 31, 2017
(in thousands)	Level 1		Level 2		Level 3		Total
Collateral-dependent impaired loans	$	—	$	184,205	$	—	$	184,205
Other real estate owned		—		—		6,928		6,928
Total nonrecurring fair value measurements	$	—	$	184,205	$	6,928	$	191,133

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

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

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

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

Loans Held for Sale – These loans are recorded at fair value and carried at the lower of cost or market. The carrying amount is considered a reasonable estimate of fair value.

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

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

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

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

The following tables present the estimated fair values of the Company’s financial instruments by fair value hierarchy levels and the corresponding carrying amount at June 30, 2018 and December 31, 2017 .



	June 30, 2018
							Total Fair		Carrying
(in thousands)	Level 1		Level 2		Level 3		Value		Amount
Financial assets:
Cash, interest-bearing bank deposits, and federal funds sold	$	459,282	$	—	$	—	$	459,282	$	459,282
Available for sale securities		—		2,981,673		—		2,981,673		2,981,673
Held to maturity securities		—		3,054,469		—		3,054,469		3,132,200
Loans, net		—		206,110		18,633,620		18,839,730		19,156,387
Loans held for sale		—		36,047		—		36,047		36,047
Derivative financial instruments		—		11,428		—		11,428		11,428

Financial liabilities:
Deposits	$	—	$	—	$	22,187,823	$	22,187,823	$	22,235,338
Federal funds purchased		525		—		—		525		525
Securities sold under agreements to repurchase		452,994		—		—		452,994		452,994
FHLB short-term borrowings		1,860,671		—		—		1,860,671		1,860,671
Long-term debt		—		263,134		—		263,134		266,009
Derivative financial instruments		—		25,953		—		25,953		25,953



	December 31, 2017
							Total Fair		Carrying
(in thousands)	Level 1		Level 2		Level 3		Value		Amount
Financial assets:
Cash, interest-bearing bank deposits, and federal funds sold	$	479,332	$	—	$	—	$	479,332	$	479,332
Available for sale securities		—		2,910,869		—		2,910,869		2,910,869
Held to maturity securities		—		2,962,010		—		2,962,010		2,977,511
Loans, net		—		184,205		18,403,303		18,587,508		18,786,855
Loans held for sale		—		39,865		—		39,865		39,865
Derivative financial instruments		—		14,157		—		14,157		14,157

Financial liabilities:
Deposits	$	—	$	—	$	22,238,847	$	22,238,847	$	22,253,202
Federal funds purchased		140,754		—		—		140,754		140,754
Securities sold under agreements to repurchase		430,569		—		—		430,569		430,569
FHLB short-term borrowings		1,132,567		—		—		1,132,567		1,132,567
Long-term debt		—		303,631		—		303,631		305,513
Derivative financial instruments		—		14,389		—		14,389		14,389

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1 6 . Recent Accounting Pronouncements

Accounting Standards Adopted in 2018

In March 2018, the FASB issued ASU 2018-05, “Income Taxes (Topic 740): Amendments to SEC Paragraphs Pursuant to SEC Staff Account ing Bulletin No. 118.” The ASU amends Topic 740 to incorporate SEC guidance issued in its Staff Bulletin No. 118 (SAB 118). SAB 118 addressed the application of generally accepted accounting principles in situations when a registrant does not have the necessary information available, prepared or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the Tax Cuts and Jobs Act. The amendments in this update were effective upon issuance, at which time the Company adopted the standard. Adoption of this standard did not 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,” with the objective of improving financial reporting of hedging relationships to better portray the economic results of an entity’s risk management activities in its financial statements. The update provides changes to both the designation and measurement guidance for qualifying hedging relationships and the presentation of hedge results. The amendments in this update are effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early application is permitted in any interim period after issuance of the update. All transition requirements and elections are to be applied to hedging relationships existing on the date of adoption, and the effect of the adoption should be reflected as of the beginning of the fiscal year of adoption. The Company early adopted this standard effective January 1, 2018 and has made certain adjustments to its existing designation documentation for active hedging relationships in order to take advantage of specific provisions in the new guidance and to fully align its documentation with the ASU. The adoption of this standard did not have a material impact on its financial condition or results of operations. See further discussion in Note 6 – Derivatives.

In March 2017, the FASB issued ASU 2017-07, “Compensation – Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Costs,” to improve the presentation of net periodic pension cost and net periodic postretirement benefit cost. The amendments require that an employer report the service cost component in the same line item or items as other compensation costs arising from services rendered by the pertinent employees during the period. The other components of net benefit cost are required to be presented in the income statement separately from the service cost component and outside a subtotal of income from operations, if one is presented. The amendments also allow only the service cost component to be eligible for capitalization when applicable. These amendments are effective for public business entities for annual periods beginning after December 15, 2017, including interim periods within those annual periods. Disclosures of the nature of and reason for the change in accounting principle are required in the first interim and annual periods of adoption. The Company adopted the standard effective January 1, 2018 and the amendments were applied retrospectively for the presentation of the service cost component and the other components of net periodic pension and postretirement benefit costs in the statement of income. Refer to Note 12 – Retirement Plans – for detail on the components of net periodic pension and post-retirement benefit costs that were reclassified for each reporting period. The provisions of this update apply only to presentation and therefore did not have a material impact on the Company’s financial condition or results of operations.

In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers (Topic 606),” affecting any entity that enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets unless those contracts are within the scope of other standards. The core principle of this standard is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Most revenue associated with financial instruments, including interest and loan origination fees, is outside the scope of the guidance. Gains and losses on investment securities, derivatives, and sales of financial instruments are also excluded from the scope. Subsequent to issuance of the revenue recognition guidance, the FASB has issued several updates that deferred by one year the effective date for revenue recognition guidance; clarified its guidance for performing the principal-versus-agent analysis; clarified guidance for identifying performance obligations allowing entities to ignore immaterial promised goods and services in the context of a contract with a customer and other clarifying guidance and technical corrections. Entities could elect to adopt the guidance either on a full or modified retrospective basis. The standard was effective and the Company adopted this guidance on January 1, 2018, using the modified retrospective approach. The Company inventoried and evaluated its contracts with customers for compliance with the standard. The Company did not identify material changes to the timing of revenue recognition and the adoption of this guidance did not have a material impact on its financial condition or results of operations. See Note 8 - Revenue Recognition for additional information regarding the implementation of this standard.

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Additionally, the following ASUs were adopted by the Company on January 1, 2018, but did not have a significant impact on the Company’s consolidated financial statements:

ASU 2018-03,Technical Corrections and Improvements to Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities;

ASU 2017-09, Compensation – Stock Compensation (Topic 718): Scope of Modification Accounting;

ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business;

ASU 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other than Inventory;

ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments; and

ASU 2016-01, Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities

Issued but Not Yet Adopted Accounting Standards

In July 2018, the FASB issued ASU 2018-09, “Codification Improvements,” that clarifies certain topics within the Accounting Standards Codification (“ASC”) in an effort to correct unintended application of guidance. The amendments in this Update affect a wide variety of Topics in the Codification, some topics of which are applicable to the Company. The amendments apply to all reporting entities within the scope of the affected accounting guidance. The transition and effective date guidance is based on the facts and circumstances of each amendment, with some of the amendments effective upon issuance of this Update and with other transition guidance effective for annual periods beginning after December 15, 2018 for public business entities. The Company is currently assessing the impact of adoption of this guidance, but does not expect it to have a material impact upon its financial condition or results of operations.

In June 2018, the FASB issued ASU 2018-07, “Compensation – Stock Compensation – (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting,” to expand the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. The amendments specify that Topic 718 applies to all share-based payment transactions in which a grantor acquires good and services to be used or consumed in a grantor’s own operations by issuing share-based payment awards. The amendments also clarify that Topic 718 does not apply to share-based payments used to effectively provide financing to the issuer or awards granted in conjunction with the selling of goods or services to customers as part of a contract accounted for under Topic 606, “Revenue from Contracts with Customers.” The amendments in this Update are effective for public business entities for fiscal years beginning after December 15, 2018, including interim periods within that fiscal year. Early adoption is permitted, but no earlier than an entity’s adoption date of Topic 606. The Company does not expect the adoption of this guidance to have a material impact upon its financial condition or results of operations.

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments – Credits Losses (Topic 326): Measurement of Credit Losses on Financial Instruments,” to improve financial reporting by requiring timelier recording of credit losses on loans and other financial instruments held by financial institutions and other organizations. The ASU, more commonly referred to as Current Expected Credit Losses, or CECL, 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. Financial institutions and other organizations will now use forward-looking information to better inform their credit loss estimates. Many of the loss estimation techniques currently applied will still be permitted, although the inputs to those techniques will change to reflect the full amount of expected credit losses. Organizations will continue to use judgment to determine which loss estimation method is appropriate for their circumstances. In addition, the ASU amends the accounting for credit losses on debt securities and purchased financial assets with credit deterioration. The ASU is effective for SEC filers for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019, with a cumulative-effect adjustment to retained earnings as of the beginning of the year of adoption. Early application is permitted for all organizations for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The Company is not planning to early adopt this guidance. The Company has engaged third party consultant s and formed cross-functional working group s comprised of individuals from various areas including credit, finance, risk management and information technology. Five work streams have been created to develop the expected credit loss models; execute system implementation; c omplete balance sheet scoping; ensure the design of effective internal controls surrounding new processes ; and provide executive oversight of the project . Balance sheet scoping is largely complete. While the Company has not yet quantified the financial impact of adoption, the expectation is that application of this guidance will result in an increase in the allowance for loan losses given the change in methodology from covering losses inherent in the portfolio to covering losses over the remaining expected life of the portfolio, and the reclassification of nonaccretable difference on purchased credit impaired loans to allowance (offset by an increase in the carrying value of the related loans). Application of the guidance is also expected to result in the establishment of an allowance for credit loss on held to maturity debt securities. The amount of the increase in these allowances will be impacted by the portfolio composition and quality at the adoption date as well as economic conditions and forecasts at that time.

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842),” to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. With the exception of short-term leases, lessees will be required to recognize a lease liability representing the lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis, and a right-of-use asset representing the lessee’s

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right to use, or control the use of, a specified asset for the lease term. Consequently, lessees will no longer be able to utilize leases as a source of off-balance sheet financing. Lessor accounting is largely unchanged under the new guidance, except for clarification of the definition of initial direct costs which may impact the timing of recognition of those costs. Subsequent to the issuance of this Update, the FASB issued three additional ASUs that provide c odification improvements and certain transition elections , including ASU 2018-11 , which permits an additional transition method whereby an entity may elect to record a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. Consequently, the entity’s reporting for the comparative periods presented in the financial statements in which the entity adopts the new lease requirements would continue to be in accordance with current GAAP (Topic 840), including disclosures. The Company plans to elect this transition method. Public business entities are required to apply the amendments for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company has preliminarily determined the practical expedients expected to be applied and continues its review of existing service contracts that may include embedded leases. The Company has upgraded its existing third-party leasing software and has begun implementation of the Update , with a targeted completion date in the fourth quarter of 2018. The Company expects a gross-up of its Consolidated Balance Sheets as a result of recognizing lease liabilities and right of use assets; the extent of such is under evaluation. The Company does not expect material changes to its consolidated results of operations as a result of the application of this guidance.

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

FORWARD-LOOKING STATEMENTS

This report contains forward-looking statements within the meaning and protections of section 27A of the Securities Act of 1933, as amended, and section 21E of the Securities Exchange Act of 1934, as amended. I mportant factors that could cause actual results to differ materially from the forward-looking statements we make in this Quarterly Report on Form 10-Q and in other reports or documents that we file from time to time with the SEC and include, but are not limited to, the following:

balance sheet and revenue growth expectations;

the provision for loans losses, management’s predictions about charge-offs of loans, including energy related credits, the impact of changes in oil and gas prices on our energy portfolio, and the downstream impact on businesses that support the energy sector, especially in the Gulf Coast region;

the impact of the sale of Harrison Finance Company upon our performance and financial condition;

the impact of the FNBC and the Capital One transactions or future business combinations upon our performance and financial condition, including our ability to successfully integrate the businesses;

deposit trends;

credit quality trends;

changes in interest rates and net interest margin trends;

future expense levels;

success of revenue-generating initiatives;

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

projected tax rates;

future profitability;

improvements in expense to revenue (efficiency) ratio;

purchase accounting impacts such as accretion levels;

potential cyber-security incidents;

possible repurchases of shares under stock buyback programs;

impact of tax reform legislation; and

financial impact of regulatory requirements.

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

Forward-looking statements are subject to significant risks and uncertainties. Investors are cautioned against placing undue reliance on such statements. Actual results may differ materially from those set forth in the forward looking statements. Additional factors that could cause actual results to differ materially from those described in the forward-looking statements can be found in Part I, Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2017 and in other periodic reports that we file with the SEC.

OVERVIEW

Non-GAAP Financial Measures

Management’s Discussion and Analysis of Financial Condition and Results of Operations include non-GAAP measures used to describe our performance. A reconciliation of those measures to GA AP measures are provided within the Selected Financial Data section on page 46 of this report . The following is a summary of these non-GAAP measures and an explanation as to why they are deemed useful.

C onsistent with Securities and Exchange Co mmission Industry Guide 3, we present net interest income, net interest margin and efficiency ratios on a fully taxable equiva lent (“te”) basis . The te basis adjusts for the tax-favored status of net interest income from certain loans and investmen ts using statutory federal tax rates of 21% and 35 % for 2018 and 2017, respectively, to increase tax-exem pt interest income to a taxable equivalent basis. We believe this measure to be the preferred industry measurement o f net interest income , and that it enhances comparability of net interest income arising from taxable and tax-exempt sources.

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

We define Core Net Interest Income as net interest income ( te ) excluding net purchase accounting accretion and amortization. We define Core Net Interest Margin as core net interest income expressed as a percentage of average earning assets. M anagement believes that core net interest income and core net interest margin provide investors with meaningful financial measures of the Company’s performance over time.

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

We define Operating Earnings as reported net income excluding nonoperating items net of income tax. We define Operating Earnings per Share as operating earnings expressed as an amount available to each common shareholder on a diluted basis.

Rebranding

On May 24 , our shareholders approved the Company’s proposal to change the name of the organization from “Hancock Holding Company” to “Hancock Whitney Corporation.” Related to the name change, the Company also changed its common stock ticker from “HBHC” to “HWC.” Both changes were effective May 25, 2018.

Additional corporate changes resulting from rebranding are as follows:

“ Whitney Bank” became “Hancock Whitney Bank.”

“Hancock Investment Services, Inc.” became “Hancock Whitney Investment Services, Inc.”

The Company’s ticker for its exchange-traded debt (subordinated notes) changed from “HBHCL” to “HWCPL.”

Acquisition s

On March 10, 2017, our wholly-owned subsidiary, Hancock Whitney Bank (“Hancock Whitney”), completed a transaction with First NBC Bank (“ FNBC ”) , whereby Hancock Whitney acquired approximately $1.2 billion in loans (net of fair value discount or “loan mark”), nine branch locations with $398 million in deposits, and assumed $604 million in FHLB borrowings. The operational conversion of the branch locations occurred in the second quarter of 2017, along with the simultaneous closure of 10 overlapping branches. This transaction is referred to as the FNBC I transaction throughout this document.

On April 28, 2017, Hancock Whitney entered into a purchase and assumption agreement with the FDIC (“Agreement”), which acted as the receiver for the Louisiana Office of Financial Institutions (OFI) following the OFI’s closure of FNBC. This transaction is referred to as the FNBC II transaction throughout this document. Pursuant to the Agreement, Hancock Whitney acquired selected assets and liabilities of FNBC from the FDIC and continued to operate the 29 former FNBC branch locations until systems conversion, which occurred in July 2017. In the third quarter of 2017, Hancock Whitney exercised its option to acquire seven former FNBC locations and closed and consolidated 25 overlapping branch locations.

Under the Agreement, Hancock Whitney assumed approximately $1.6 billion in deposits and customer repurchase agreements and acquired $165 million in performing loans, and $791 million in other assets. Hancock Whitney paid a premium of $35 million to the FDIC for the earnings stream acquired and received approximately $ 800 million in cash ($64 2 million from the FDIC for the net liabilities assumed and $158 million in branch cash acquired).

The terms of the Agreement require the FDIC to indemnify Hancock Whitney against certain liabilities of FNBC and its affiliates not assumed or otherwise purchased by Hancock Whitney. Neither the Company nor Hancock Whitney acquired any assets, common stock, preferred stock or debt, or assume d any other obligations, of First NBC Bank Holding Company.

Subsequent to quarter end, o n July 13, 2018, we completed the acqui sition of the bank-managed high net worth individual and institutional investment management and trust business of Capital One, National Association ( “ Capital One ”) . In addition, we assumed approximately $217 million of customer deposit liabilities. The combination bring s assets under administration and assets under management to approximately $26 billion and $10 billion, respectively, and is expected to provide opportunity to develop relationships for other private, wholesale and retail services.

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Divestiture

On March 9, 2018, we sold our consumer finance subsidiary, Harrison Finance Company (“HFC”), due to a change in corporate strategy. The subsidiary operated in 35 branches with 137 employees and had $95 million in loans as of December 31, 2017. The transaction resulted in a loss on sale totaling $1.1 million.

Current Economic Environment

Most of our market area experienced a solid to modest expansion in economic activity during the second quarter of 2018, according to the Federal Reserve’s Summary of Commentary on Current Economic Conditions (“Beige Book”). Overall, the economic outlook remains positive, with some uncertainty on the impact of tariffs on trade. Energy related businesses operating mainly in our south Louisiana and Houston, Texas markets continued to expand. Demand for oilfield services rose further, with increased drilling activity and equipment utilization. However, there continues to be concern over steel tariffs, pipeline capacity constraints and worker shortages in this sector .

The commercial real estate market maintained strong demand in most of our footprint, with the pace of nonresidential construction activity at least matched with the year-ago level except for multifamily construction , which was down . In the Houston market, apartment rent growth continued to accelerate with a slowing pace of deliveries and a pickup in economic growth . The outlook for commercial real estate construction is anticipated to match or exceed the current level.

The residential real estate market has a varied outlook with new home sales up slightly and existing home sales flat to slightly down compared to a year earlier. Overall the housing market experienced modest price appreciation. Builders reported higher construction activity and home sales activity for the next quarter is expected to hold steady.

Retail sales activity and consumer spending outlook was positive. Auto sales were up in all of our markets. The labor market remained tight , citing low availability of quality labor as a growing challenge.

Economic reports indicate that loan growth slowed as higher interest rates impacted some loan demand, especially for real estate products. Our loan production in the second quarter 2018 was strong, and in line with our 2018 annual loan growth guidance at 6% linked quarter annualized.

Highlights of Second Quarter 2018

Net income for the second quarter of 2018 was $71.2 million, or $.82 per diluted common share (EPS), compared to $72.5 million, or $.83 EPS in the first quarter of 2018 and $52 . 3 million, or $ 0 . 60 EPS, in the second quarter of 2017 . The second quarter of 2018 includes $15.8 million ($.14 per share after-tax impact) of nonoperating items related to the brand consolidation project, the Capital One trust and asset management purchase, the restructuring of a portion of our bank-owned life insurance (BOLI) contracts, and other miscellaneous items. T he first quarter of 2018 included $7.0 million ($.07 per share after-tax impact) of nonoperating items related to the sale of the consumer finance subsidiary, the pending Capital One trust and management transaction, the brand consolidation project and a one-time all hands bonus. The second quarter of 2017 included $10.6 million ($0.08 per share after-tax impact) related to the FNBC transactions and expense related to the termination of the loss share agreement with the FDIC.

Highlights of Our Second Quarter 2018 Results (Compared to First Quarter 2018 ):

Effective May 25, our name changed to Hancock Whitney Corporation and Hancock Whitney Bank; new ticker “HWC”

Net income decreased $1.3 million, or 2%; excluding nonoperating items noted above , earnings increased $5.4 million or 7%

Efficiency ratio improved 11 bps to 57.4% ; operating revenue up $7.4 million versus operating expenses up $3.7 million

Return on average assets (ROA) declined 4 bps to 1.04%; excluding nonoperating items, ROA increased 5 bps to 1.22%

N et interest margin increased 3 bps to 3.40%

Criticized commercial loans declined $187 million or 17% ; $115 million in energy related loans , $72 million in nonenergy

Results for second quarter of 2018 were solid, reflecting continued improvement in operating EPS, ROA, efficiency ratio and ROTCE. We are proud of the notable improvement in credit metrics, as criticized and nonaccrual loans trended positively for both energy and nonenergy. We publicly debuted our new Hancock Whitney brand on our website, on new signs, on the mobile app and online banking, and at special events throughout the footp rint. On May 25, 2018, as the C ompany celebrated the 100 th anniversary of the first transaction between Hancock and Whitney, the name change of the organization’s legal entities became official.

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RESULTS OF OPERATIONS

Net Interest Income

Net interest income (te) for the second quarter of 2018 was $215.6 million, a $6.0 million, or 3%, increase from the first quarter of 201 8 . Over the same period , core net interest income increased $6.7 million . Net interest income (te) for the second quarter of 2018 increased $7.3 million, or 4%, compared to the second quarter of 2017, while core net interest income was up $9.6 million, or 5%. The linked quarter increase is primarily attributable to the March 2018 interest rate hike, one additional accrual day, and interest activity on nonaccrual loans , partially offset by a reduction following the sale of HFC on March 9, 2018.

The net interest margin was 3.40% for the second quarter of 2018 , up 3 bps from the first quarter of 2018 . The increase in the margin from prior quarter includes 2 bps of positive impact from interest recoveries on nonaccrual loans this quarter versus 3 bps negative impact of interest reversals last quarter, a 5 bp negative impact from the sale of HFC and a 3 bp positive impact from the March 2018 rate hike. The core net interest margin for the second quarter of 2018 was 3.31%, up 5 bps from the first quarter of 2018 . Our deposit beta, which represents the amount by which deposit costs changed given the movement in short-term interest rates, improved to 17% from 29% in the first quarter of 2018, whereas our loan beta held relatively steady at 44% compared to 47%, resulting in the net improvement experienced from the rate hike.

Compared to the second quarter of 2017, the net interest margin decreased 3 bps and the core margin was up 2 bps. The net interest margin was negatively impacted by 7 bps from lower taxable equivalent adjustment as a result of a lower statutory income tax rate. Excluding the tax rate change, the margin was up 4 bps, primarily due to interest rate hikes.

Net interest income (te) for the first six months of 2018 totaled $425.3 million, up $27.0 million, or 7%, from the first half of 2017. Core net interest income was also up $27.0 million. Interest earned on loans, excluding purchase accounting accretion, increased $48.6 million as average total loans grew $1.3 billion, or 7%, due to the FNBC transactions and organic loan growth. The securities yield of 2.48 was down 4 bps compared to the first half of 2017, which reflects a negative impact of 10 bps from tax reform. The cost of funds was up 21 bps to .61%, due in part to both recent rate hikes and promotional pricing campaigns aimed at attracting and retaining deposits.

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The net interest margin was down 3 bps compared to the second quarter of 2017, and the core net interest margin was up 2 bps, with comparability also affected by the 7 bps impact of tax reform, and rising interest rates.

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



	Three Months Ended

	June 30, 2018						March 31, 2018						June 30, 2017

(dollars in millions)	Volume		Interest		Rate		Volume		Interest		Rate		Volume		Interest		Rate
Average earning assets
Commercial & real estate loans (te) (a)	$	14,380.9	$	162.3	4.53	%	$	14,224.4	$	150.9	4.30	%	$	13,890.1	$	148.4		4.29	%
Residential mortgage loans		2,754.3		28.1	4.08			2,718.4		27.9	4.10			2,399.4		22.3		3.71
Consumer loans		2,058.0		27.2	5.30			2,085.7		29.0	5.64			2,080.0		29.3		5.64
Loan fees & late charges		—		0.2	—			—		0.5	—			—		(0.2)		—
Total loans (te) (b)		19,193.2		217.8	4.55			19,028.5		208.3	4.43			18,369.5		199.8		4.36
Loans held for sale		22.6		0.3	5.22			32.2		0.2	2.75			22.4		0.2		4.22
U.S. Treasury and government agency securities		145.6		0.8	2.22			148.4		0.8	2.21			125.9		0.7		2.08
Mortgage-backed securities and collateralized mortgage obligations		4,932.0		29.3	2.38			4,785.3		27.9	2.33			4,068.4		22.8		2.23
Municipals (te)		951.0		7.6	3.18			960.1		7.6	3.18			983.0		9.3		3.81
Other securities		3.5		—	2.84			3.5		—	2.06			64.4		0.3		1.91
Total securities (te) (c)		6,032.1		37.7	2.50			5,897.3		36.3	2.46			5,241.7		33.1		2.52
Total short-term investments		143.1		0.6	1.61			148.3		0.5	1.34			704.5		1.7		0.99
Total earning assets (te)	$	25,391.0	$	256.4	4.05	%	$	25,106.3	$	245.3	3.95	%	$	24,338.1	$	234.8		3.87	%
Average interest-bearing liabilities
Interest-bearing transaction and savings deposits	$	7,860.0	$	9.3	0.47	%	$	8,043.2	$	9.1	0.46	%	$	8,047.4	$	8.1		0.40	%
Time deposits		3,121.8		11.5	1.48			2,979.0		9.7	1.32			2,575.7		6.5		1.01
Public funds		2,970.1		9.1	1.22			3,070.1		8.1	1.07			2,539.5		3.8		0.59
Total interest-bearing deposits		13,951.9		29.9	0.86			14,092.3		26.9	0.78			13,162.6		18.4		0.56
Short-term borrowings		1,989.4		7.4	1.49			1,823.1		5.4	1.17			2,232.8		4.2		0.77
Long-term debt		299.7		3.5	4.63			305.1		3.4	4.48			428.3		3.9		3.61
Total borrowings		2,289.1		10.9	1.91			2,128.2		8.8	1.66			2,661.1		8.1		1.22
Total interest-bearing liabilities		16,241.0		40.8	1.01	%		16,220.5		35.7	0.89	%		15,823.7		26.5		0.67	%
Net interest-free funding sources		9,150.0						8,885.8						8,514.4
Total cost of funds	$	25,391.0	$	40.8	0.64	%	$	25,106.3	$	35.7	0.58	%	$	24,338.1	$	26.5		0.44	%
Net interest spread (te)			$	215.6	3.04	%			$	209.6	3.05	%			$	208.3		3.19	%
Net interest margin	$	25,391.0	$	215.6	3.40	%	$	25,106.3	$	209.6	3.37	%	$	24,338.1	$	208.3		3.43	%

(a)

T axable equivalent (te) amounts were calculated using a federal income tax rate of 21% for the three months ended June 30, 2018 and March 31, 2018, and 35% for the three months ended June 30, 2017.

(b)

Includes nonaccrual loans.

(c)

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

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	Six Months Ended
		June 30, 2018						June 30, 2017
(dollars in millions)		Volume		Interest	Rate			Volume		Interest	Rate
Average earning assets
Commercial & real estate loans (te) (a)	$	14,303.1	$	313.3	4.41	%	$	13,476.6	$	278.8	4.17	%
Residential mortgage loans		2,736.4		56.0	4.09			2,293.3		43.6	3.80
Consumer loans		2,071.8		56.2	5.47			2,069.3		55.8	5.44
Loan fees & late charges		—		0.6	—			—		(0.3)	—
Total loans (te) (b)		19,111.3		426.1	4.49			17,839.2		377.9	4.26
Loans held for sale		27.4		0.5	3.77			21.9		0.5	4.15
US Treasury and government agency securities		147.0		1.6	2.22			121.1		1.2	2.06
Mortgage-backed securities and collateralized mortgage obligations		4,859.0		57.2	2.35			4,022.0		44.8	2.23
Municipals (te)		955.5		15.2	3.18			962.7		18.4	3.83
Other securities		3.5		—	2.45			34.2		0.3	1.90
Total securities (te) (c)		5,965.0		74.0	2.48			5,140.0		64.7	2.52
Total short-term investments		145.7		1.1	1.47			557.3		2.5	0.90
Total earning assets (te)	$	25,249.4	$	501.7	4.00	%	$	23,558.4	$	445.6	3.80	%
Average interest-bearing liabilities
Interest-bearing transaction and savings deposits	$	7,951.1	$	18.4	0.47	%	$	7,475.7	$	12.6	0.34	%
Time deposits		3,050.8		21.2	1.40			2,458.6		11.6	0.96
Public funds		3,019.8		17.2	1.15			2,543.6		6.9	0.55
Total interest-bearing deposits		14,021.7		56.8	0.82			12,477.9		31.1	0.50
Short-term borrowings		1,906.7		12.8	1.35			2,180.3		7.3	0.67
Long-term debt		302.4		6.9	4.56			443.1		8.9	4.03
Total borrowings		2,209.1		19.7	1.79			2,623.4		16.2	1.23
Total interest-bearing liabilities		16,230.8		76.5	0.95	%		15,101.3		47.3	0.63	%
Net interest-free funding sources		9,018.6						8,457.1
Total cost of funds	$	25,249.4	$	76.5	0.61	%	$	23,558.4	$	47.3	0.40	%
Net interest spread (te)			$	425.2	3.05	%			$	398.3	3.17	%
Net interest margin	$	25,249.4	$	425.2	3.39	%	$	23,558.4	$	398.3	3.40	%

(a)

Taxable equivalent (te) amounts were calculated using a federal income tax rate of 21% for the six months ended June 30, 2018 and 35% for the six months ended June 30, 2017.

(b)

Includes nonaccrual loans.

(c)

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

Provision for Loan Losses

During the second quarter of 201 8 , we recorded a provision for loan losses of $8.9 million, down $3.4 million from the first quarter of 2018 and down $6.1 million from the second quarter of 2017. For the six months ended June 30, 2018, we recorded a total provision for loan losses of $21.1 million, compared to $30.9 million for the six months ended June 30, 2017.

The provision includes net charge-offs totaling $5.1 million, which represents 0.11% of average total loans on an annualized basis in the second quarter of 2018, compared to $ 1 2. 2 million, or 0. 26 % of average total loans in the f irst quarter of 201 8. The energy portfolio reflected a n et recovery in the second quarter of 2018 of $1.9 million with gross charge -offs of $5.0 million, and recoveries totaling $6.9 million. There were $4 . 3 million in net charges-offs related to energy credits in the f irst quarter of 201 8 . The provision for the six months ended June 30, 2018 included net charge-offs totaling $17.3 million compared to $36.0 million in the first half of 2017, with energy related net charge-offs down $21 million.

The provision for loan losses reflects a continued decline in energy allowance, with reduced exposure and an overall improvement in portfolio performance and an increase in nonenergy allowance as the portfolio continues to grow. The discussion of Allowance for Loan Losses and Asset Quality later in this Item provides additional information on changes in the allowance for loan losses and general credit quality.

Noninterest Income

Noninterest income totaled $68.8 million for the second quarter of 2018, up $2.6 million, or 4%, from the first quarter of 201 8 and up $1.3 million, or 2%, compared to the second quarter of 201 7 . The first quarter of 2018 included a loss on the sale of the finance company of $1.1 million which was considered a nonoperating item. Excluding the first quarter of 2018 nonoperating item, noninterest income for the second quarter of 2018 was up $1.4 million, or 2%, linked quarter. The increase over the prior quarter was largely driven by an increase in bank card and ATM fees . The increase compared to the second quarter of 2017 was largely driven by

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higher bank card and ATM fees, and service charges on deposit accounts. Also included in the second quarter of 2017 is $1.3 million in amortization of FDIC loss share receivable related to loss share agreements that were terminated in the second quarter of 2017.

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



	Three Months Ended						Six Months Ended
	June 30,		March 31,		June 30,		June 30,
(in thousands)	2018		2018		2017		2018		2017
Service charges on deposit accounts	$	20,981	$	21,448	$	20,061	$	42,429	$	39,267
Trust fees		11,653		11,335		11,506		22,988		22,717
Bank card and ATM fees		15,464		14,458		13,687		29,922		26,155
Investment and annuity fees and insurance commissions		6,264		6,125		6,445		12,389		11,709
Secondary mortgage market operations		3,965		3,401		4,241		7,366		7,808
Amortization of FDIC loss share receivable		—		—		(1,327)		—		(2,427)
Income from bank-owned life insurance		3,113		3,070		2,883		6,183		5,535
Credit related fees		2,416		2,722		2,898		5,138		5,776
Income from derivatives		1,588		1,523		2,680		3,111		3,145
Gain (loss) on sales of assets		41		(62)		(60)		(21)		(287)
Other miscellaneous		3,347		3,377		4,473		6,724		7,228
Total noninterest operating income		68,832		67,397		67,487		136,229		126,626
Nonoperating income items		—		(1,145)		—		(1,145)		4,352
Total noninterest income	$	68,832	$	66,252	$	67,487	$	135,084	$	130,978

Service charges on deposits totaled $21.0 million for the second quarter of 2018, down $0.5 million, or 2%, from the first quarter of 2018 and up $0.9 million, or 5%, from the second quarter of 2017. The decrease from the prior quart er was due to seasonality as second quarter overdraft fees are generally lower than the first quarter. The increase over the second quarter of 2017 was primarily due to increased check printing fees and an increase in overdraft fees driven by sustained overdraft fees introduced in the second half of 2017.

Trust fees increased $0.3 million, or 3%, linked quarter, due largely to income from annual tax preparation fees . Compared to the second quarter of 2017 , trust fee s increased $0.1 million, or 1%.

Bank card and ATM fees totaled $15.5 million for the second quarter of 2018, up $1.0 million, or 7%, from the first quarter of 2018, due to additional processing days and increased spending and activity across most products . Compared to the second quarter of 2017, bank card and ATM fees were up $1.8 million, or 13%, also due to increased activity.

Investment and ann uity fees and insurance commissions increased $0.1 million, or 2%, compared to first quarter 2018 due to higher annuity sales volume, and decreased $0.2 million, or 3%, compared to second quarter 2017.

Fee income from se condary mortgage market operations was up $0.6 million, or 17%, from first quarter of 2018 with seasonally higher sales activity, and down $0.3 million, or 7%, from the second quarter of 2017.

Income from bank-owned life insurance was relatively unchanged from the first quarter of 2018, and increased $0.2 million, or 8%, compared to the second quarter of 2017. The increase over the second quarter of 2017 is mostly due to increased mortality gains during the second quarter of 2018 .

Income on our customer interest rate derivative program resulted in a $1.6 million net gain for the second quarter of 2018 compared to net gains of $1.5 million in the first quarter of 2018 and $2.7 million for the second quarter of 2017. This income can be volatile and is dependent upon both customer sales activity as well as market value adjustments due to interest rate movement.

Noninterest income was $135.1 million in the first six months of 2018, up $4.1 million, or 3%, from the first six months of 2017. Excluding nonoperating items, noninterest income was $136.2, up $9.6 million, or 8%, from the first six months of 2017. Service charges were up $3.2 million, or 8% at $42.4 million, primarily due to an increase in check printing fees and overdraft fees driven by the sustained overdraft fee introduced in the third quarter of 2017. Bank card and ATM fees were up $3.8 million, or 14%, at $29.9 million due to increased activity. The loss share agreements with the FDIC were terminated in June of 2017, resulting in an increase in income from the prior year of $2.4 million due to the elimination of amortization of the FDIC loss share receivable.

Noninterest Expense

Noninterest expense for the second quarter of 2018 was $184.4 million, up $13.6 million, or 8%, from the first quarter of 2018, and up $0.9 million, or 1%, from the second quarter of 2017. Excluding nonoperating expense items, total operating expense for the second

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quarter of 2018 totaled $168.6 million, an increase of $3.7 million, or 2%, linked quarter and down $4.3 million, or 2%, from the second quarter of 2017. For the first six months of 2018, total noninterest expense was $355.2 million, an $8.2 million, or 2%, increase over 2017. Excluding nonoperating expense items, noninterest expense for the first half of 2018 totaled $333.5 million, up $3.6 million, or 1%, over the same period in 2017.

Nonoperating expense s in the second quarter of 2018 were $15.8 million and included costs associated with the brand consolidation project ($9.8 million), the acquisition of Capital One’s trust and asset management business ($1.5 million), a charge related to the restructuring of a portion of our bank-owned life insurance contracts ($3.2 million), and other miscellaneous small items. Nonoperating expense s in the first quarter of 2018 were $5.9 million and also included costs associated with the brand consolidation project and the Capital One transaction, as well as a one-time all hands bonus and the sale of the consumer finance company . The nonoperating expenses in the second quarter of 2017 and the six months ended June 30, 2017 of $10.6 million and $17.1 million, respectively, included costs associated with the FNBC transactions and the termination of the FDIC loss share agreem ents . The components of noninterest expense and nonoperating expense are presented in the following tables for the indicated periods.



	Three Months Ended						Six Months Ended
	June 30,		March 31,		June 30,		June 30,
(in thousands)	2018		2018		2017		2018		2017
Operating expense
Compensation expense	$	79,670	$	76,743	$	80,876	$	156,413	$	153,881
Employee benefits		17,165		19,623		18,722		36,788		37,789
Personnel expense		96,835		96,366		99,598		193,201		191,670
Net occupancy expense		11,698		10,943		12,969		22,641		23,731
Equipment expense		3,641		3,493		3,799		7,134		7,507
Data processing expense		17,279		16,368		16,755		33,647		32,150
Professional services expense		8,189		7,847		8,153		16,036		14,802
Amortization of intangible assets		5,322		5,618		5,757		10,940		10,462
Telecommunications and postage		3,250		3,850		3,698		7,100		7,165
Deposit insurance and regulatory fees		8,376		7,948		6,983		16,324		13,473
Other real estate income		(289)		210		(1,004)		(79)		(1,017)
Advertising		2,390		2,341		4,083		4,731		7,030
Corporate value and franchise taxes		3,577		3,440		3,519		7,017		6,555
Printing and supplies		842		1,031		1,324		1,873		2,498
Travel expense		1,436		1,064		1,206		2,500		2,250
Entertainment and contributions		2,950		2,509		1,974		5,459		3,741
Tax credit investment amortization		875		874		1,213		1,749		2,425
Other retirement expense		(4,458)		(4,463)		(3,388)		(8,921)		(6,448)
Other miscellaneous		6,684		5,499		6,214		12,183		11,938
Total operating expense		168,597		164,938		172,853		333,535		329,932
Nonoperating expense items		15,805		5,853		10,617		21,658		17,080
Total noninterest expense	$	184,402	$	170,791	$	183,470	$	355,193	$	347,012


	Three Months Ended						Six Months Ended
	June 30,		March 31,		June 30,		June 30,
(in thousands)	2018		2018		2017			2018		2017
Nonoperating expense
Personnel expense	$	408	$	3,608	$	1,435	$	4,016	$	1,542
Net occupancy and equipment expense		1,239		120		276		1,359		277
Data processing expense		994		81		43		1,075		45
Professional services expense		5,192		1,408		2,200		6,600		6,827
Other real estate income		—		—		(1,511)		—		(1,511)
Advertising		1,127		185		901		1,312		1,031
Printing and supplies		846		255		6		1,101		10
Write-down related to FDIC loss share termination		—		—		6,603		—		6,603
Loss on restructure of bank-owned life insurance contracts		3,240		—		—		3,240		—
Other expense		2,759		196		664		2,955		2,256
Total nonoperating expenses	$	15,805	$	5,853	$	10,617	$	21,658	$	17,080

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The following discussion of the components of operating expense excludes nonoperating items for each period.

Personnel expense totaled $96.8 million for the second quarter of 2018, up $0.5 million, or less than 1%, compared to the prior quarter; however, the prior quarter included approximately $1.3 million of costs attributable to the finance company that was sold on March 9, 2018. Adjusting for the impact of the sale of the finance company, personnel costs are up $1.8 million, due mainly to annual merit increases and incentives. Personnel costs are down $2.8 million, or 3%, compared to the second quarter of 2017 due to reductions in personnel costs with the consolidation of FNBC operations, partially offset by merit increases and higher incentives. Year to date June 30, 2018 personnel expense was up $ 1.5 million, or 1%, compared to the prior period .

Occupancy and equipment expenses totaled $15.3 million in the second quarter of 2018, up $0.9 million, or 6%, from the first quarter of 201 8 and down $1.4 million from the second quarter of 2017. The increase compared to prior quarter is primarily due to an increase in property taxes and insurance. The reduction compared to the prior year is due largely to costs related to FNBC branches that had not yet been consolidated. Occupancy and equipment expenses totaled $29.8 million for the first six months of 2018, $1.5 million, or 5%, less than the first six months of 2017.

Data processing expense was $17.3 million for the second quarter of 2018, up $0.9 million, or 6%, from the first quarter of 2018, and up $0.5 million, or 3%, from the second quarter of 2017. Data processing expense was $33.6 million for the first six months of 2018, $1.5 million, or 5%, over the first six months of 2017. The increase in expense is attributable to revenue-generating initiatives related to new digital offerings and higher card transaction processing costs resulting from increased card activity.

Professional service expense totaled $8.2 million in the second quarter of 2018, up $0.3 million, or 4%, compared to the previous quarter and was virtually flat compared to the same quarter last year. Professional service expense totaled $16.0 million for the first six months of 2018, up $1.2 million, or 8%, compared to the first six months of 2017. Professional service expense includes legal, audit, accounting and other consulting services.

Deposit insurance and regulatory fees and corporate value and franchise taxes were $12.0 million, an increase of $0.6 million, or 5%, from the first quarter of 2018 and up $1.5 million, or 14%, from the second quarter of 2017. Deposit insurance and regulatory fees and corporate value and franchise taxes totaled $23.3 million for the first six months of 2018, up $3.3 million, or 17%, from the first six months of 2017. Deposit insurance and regulatory fees and corporate value and franchise taxes were up both quarter over quarter and year over year primarily due to asset growth.

Business development-related expenses (including advertising, travel and entertainment and contributions) were $6.8 million for the second quarter of 2018, up $0.9 million, or 15%, from the first quarter of 2018 and down $0.5 million, or 7%, from the second quarter of 2017. Business development expense totaled $12.7 million for the first six months of 2018, $0.3 million, or 3%, less than the first six months of 2017.

Net gains on ORE dispositions exceeded ORE costs by $0.3 million during the second quarter of 2018 compared to net ORE expense of $0.2 million in the first quarter of 2018 and net gains on ORE dispositions of $1.0 million in the second quarter of 2017. Net gains on ORE dispositions exceeded ORE costs by $0.1 million for the first six months of 2018 and $ 1.0 million for the first six months of 2017. Management believes the first quarter of 2018 reflects a more typical level of net ORE expense.

All other expenses, excluding amortization of intangibles and nonoperating expense items , totaled $ 7.2 million for the second quarter of 2018, up $0. 4 million, or 6 %, from the first quarter of 2018, and down $1. 9 million, or 21 %, from the second quarter of 2017 . All other expenses, excluding amortization of intangibles and nonoperating expense items , totaled $ 14.0 million for the first six months of 2018, down $ 3.6 million, or 20 %, from the first six months of 201 7. T he de creases compared to prior year are primarily due to lower other retirement expense and the elimination of FNBC related costs through branch consolidation.

Income Taxes

The effective income tax rate for the second quarter of 2018 was approximately 18.3%, compared to 18.5% in the first quarter of 2018 and 24.0% in the second quarter of 2017. The decrease in the effective tax rate from the second quarter of 2017 was primarily due to the enactment of the Tax Cuts and Jobs Act (“Tax Act”) on December 22, 2017. The Tax Act significantly revised U.S. corporate income tax laws by, among other things, lowering the statutory corporate federal income tax rate from 35% to 21%, eliminating or reducing the deductibility of certain meals and entertainment expenses, limiting the deduction of FDIC insurance premiums, as well as modifying the deductibility of executive compensation through the elimination of the performance-based compensation exception and changes to the definition of a covered employee.

Our deferred tax assets and liabilities were re-measured to reflect the lower income tax rate during the fourth quarter of 2017. The resulting re-measurement charge of $19.5 million included a provisional income tax benefit of $5.8 million related to items included in continuing operations. Pursuant to ASU 2018-05 , entities have a measurement period not to exceed one year from the enactment date of the Tax Act to record provisional amounts related to the impact of the Tax Act. As of June 30, 2018, no adjustment had been made to the provisional benefit recorded. Management does not expect to adjust the provisional benefit recorded unless new guidance is issued by federal and/or state tax authorities that would require us to reevaluate our original estimate of provisional impact. If so,

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any such adjustments could materially impact income tax expense in the period in which the adjustments are made.

Our effective tax rate has historically varied from the federal statutory rate primarily because of tax-exempt income and tax credits. Interest income on bonds issued by or loans to state and municipal governments and authorities, and earnings from the bank-owned life insurance program are the major components of tax-exempt income. The $3.2 million charge recorded during the second quarter of 2018 related to restructuring a portion of our bank-owned life insurance contracts negatively impacted the tax benefit attributable to life insurance contracts, as reflected in the below table.

The main source of tax credits has been investments in tax-advantaged securities and tax credit projects. These investments are made primarily in the markets the Company serves and are directed at tax credits issued under the Qualified Zone Academy Bonds (“QZAB”), Qualified School Construction Bonds (“QSCB”) and Federal and State New Market Tax Credit (“NMTC”) programs. The investments generate tax credits, which reduce current and future taxes and are recognized when earned as a benefit in the provision for income taxes. The Tax Act repealed the provision related to tax credit bonds effective for bonds issued after December 31, 2017. As such, these bonds are no longer viable alternatives for lowering our effective tax rate.

We have invested in NMTC projects through investments in our Community Development Entity (“CDE”), as well as other unrelated CDEs. These investments are expected to generate approximately $104 million in federal and state tax credits. Federal tax credits from NMTC investments are recognized over a seven-year period, while recognition of the benefits from state tax credits varies from three to five years. In February 2018, the U.S. Department of Treasury announced the 2017 New Market Tax Credit allocation. We were awarded a New Market Tax Credit allocation that will allow us to invest $50 million in tax credit projects and receive a total of $19.5 million in tax credits to be recognized over a seven-year period.

We intend to continue making investments in tax credit projects. However, our ability to access new credits will depend upon, among other factors, federal and state tax policies and the level of competition for such credits. Based on tax credit investments that have been made to date and those we expect to make from our new allocation award, we expect to realize benefits from federal and state tax credits totaling $7.1 million, $6.1 million and $4.1 million for 2019, 2020 and 2021, respectively.

Additionally, the effective tax rate is affected by other items that may impact comparability from quarter to quarter, such as the excess benefit of vested employee share-based compensation. As of the second quarter of 2018, the excess benefit of vested share-based compensation decreased income tax expense by $0.3 million.

The following table reconciles reported income tax expense to that computed at the statutory federal tax rate for the indicated periods.



	Three Months Ended						Six Months Ended
	June 30,		March 31,		June 30,		June 30,
(in thousands)	2018		2018		2017		2018		2017
Taxes computed at statutory rate	$	18,288	$	18,663	$	24,074	$	36,951	$	47,051
Tax credits:
QZAB/QSCB		(760)		(759)		(643)		(1,519)		(1,285)
NMTC - Federal and State		(1,378)		(1,379)		(1,679)		(2,757)		(3,358)
Total tax credits		(2,138)		(2,138)		(2,322)		(4,276)		(4,643)
State income taxes, net of federal income tax benefit		1,924		2,044		1,133		3,968		1,976
Tax-exempt interest		(2,761)		(2,786)		(4,719)		(5,547)		(9,392)
Life insurance contracts		306		(930)		(1,046)		(624)		(1,993)
Employee share-based compensation		(176)		(140)		(1,367)		(316)		(1,801)
Impact from interim estimated effective tax rate		(844)		356		821		(488)		2,701
FDIC Assessment Disallowance		758		747		—		1,505		—
Other, net		552		581		(58)		1,133		(748)
Income tax expense	$	15,909	$	16,397	$	16,516	$	32,306	$	33,151

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Selected Financial Data

The following tables contain selected financial data as of the dates and for the periods indicated.



	Three Months Ended						Six Months Ended
	June 30,		March 31,		June 30,		June 30,
	2018		2018		2017		2018		2017
Common Share Data
Earnings per share:
Basic	$	0.82	$	0.83	$	0.60	$	1.65	$	1.17
Diluted	$	0.82	$	0.83	$	0.60	$	1.65	$	1.17
Cash dividends paid	$	0.24	$	0.24	$	0.24	$	0.48	$	0.48
Book value per share (period-end)	$	34.33	$	33.96	$	33.21	$	34.33	$	33.21
Tangible book value per share (period-end)	$	24.66	$	24.22	$	23.27	$	24.66	$	23.27
Weighted average number of shares (000s):
Basic		85,305		85,241		84,614		85,273		84,489
Diluted		85,483		85,423		84,867		85,451		84,755
Period-end number of shares (000s)		85,335		85,285		84,738		85,335		84,738
Market data:
High sales price	$	53.60	$	56.40	$	52.94	$	56.40	$	52.94
Low sales price	$	45.76	$	49.48	$	42.70	$	45.76	$	41.71
Period-end closing price	$	46.65	$	51.70	$	49.00	$	46.65	$	49.00
Trading volume (000s) (a)		35,727		35,459		39,035		71,186		84,154

(a)

Trading volume is based on the total volume as determined by NASDAQ on the last day of the quarter.

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	Three Months Ended						Six Months Ended
	June 30,		March 31,		June 30,		June 30,
(in thousands)	2018		2018		2017		2018		2017
Income Statement:
Interest income	$	252,304	$	241,395	$	226,177	$	493,699	$	428,692
Interest income (te) (a)		256,385		245,358		234,741		501,743		445,554
Interest expense		40,757		35,731		26,460		76,488		47,284
Net interest income (te)		215,628		209,627		208,281		425,255		398,270
Provision for loan losses		8,891		12,253		14,951		21,144		30,942
Noninterest income		68,832		66,252		67,487		135,084		130,978
Noninterest expense (excluding amortization of intangibles)		179,080		165,173		177,713		344,253		336,550
Amortization of intangibles		5,322		5,618		5,757		10,940		10,462
Income before income taxes		87,086		88,872		68,783		175,958		134,432
Income tax expense		15,909		16,397		16,516		32,306		33,151
Net income	$	71,177	$	72,475	$	52,267	$	143,652	$	101,281

Earnings excluding nonoperating items
Net income	$	71,177	$	72,475	$	52,267	$	143,652	$	101,281
Nonoperating income		—		1,145		—		1,145		(4,352)
Nonoperating expense		15,805		5,853		10,617		21,658		17,080
Income tax benefit		(3,319)		(1,216)		(3,715)		(4,535)		(4,454)
Nonoperating items, net of applicable income tax benefit		12,486		5,782		6,902		18,268		8,274
Operating earnings	$	83,663	$	78,257	$	59,169	$	161,920	$	109,555



	Three Months ended										Six Months ended
		June 30,			March 31,			June 30,			June 30,
	2018			2018			2017			2018			2017
Performance Ratios
Return on average assets		1.04	%		1.08	%		0.79	%		1.06	%		0.80	%
Return on average common equity		9.81	%		10.23	%		7.52	%		10.02	%		7.40	%
Return on average tangible common equity		13.72	%		14.41	%		10.69	%		14.06	%		10.31	%
Earning asset yield (te) (a)		4.05	%		3.95	%		3.87	%		4.00	%		3.80	%
Total cost of funds		0.64	%		0.58	%		0.44	%		0.61	%		0.40	%
Net interest margin (te)		3.40	%		3.37	%		3.43	%		3.39	%		3.40	%
Noninterest income to total revenue (te)		24.20	%		24.01	%		24.47	%		24.11	%		24.75	%
Average loan/deposit ratio		86.84	%		86.32	%		87.76	%		86.58	%		88.77	%
FTE employees (period-end)		3,780			3,775			4,162			3,780			4,162
Capital Ratios
Common stockholders' equity to total assets		10.49	%		10.61	%		10.57	%		10.49	%		10.57	%
Tangible common equity ratio (b)		7.76	%		7.80	%		7.65	%		7.76	%		7.65	%

Select performance measures excluding nonoperating items
Operating earnings per share - diluted (d)	$	0.96		$	0.90		$	0.68		$	1.86		$	1.26
Return on average assets - operating		1.22	%		1.17	%		0.89	%		1.19	%		0.86	%
Return on average common equity - operating		11.54	%		11.05	%		8.52	%		11.29	%		8.00	%
Return on average tangible common equity - operating		16.12	%		15.56	%		12.11	%		15.85	%		11.15	%
Efficiency ratio (c)		57.40	%		57.51	%		60.59	%		57.45	%		60.86	%
Noninterest income as a percent of total revenue (te) - operating		24.20	%		24.33	%		24.47	%		24.26	%		24.12	%

(a)

Taxable equivalent (te) amounts were calculated using a federal income tax rate of 21% for the three and six months ended June 30, 2018 and the three months ended March 31, 2018, and 35% for the three and six months ended June 30, 2017.

(b)

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

(c)

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

(d)

See Reconciliation of Non-GAAP Measures “Operating earnings per share – diluted” for the reconciliation of this non-GAAP mea sure.

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	Three Months Ended									Six Months Ended
	June 30,			March 31,			June 30,			June 30,			June 30,
($ in thousands)	2018			2018			2017			2018			2017
Asset Quality Information
Nonaccrual loans (a)	$	241,681		$	275,179		$	238,219		$	241,681		$	238,219
Restructured loans - still accruing		152,507			166,520			90,502			152,507			90,502
Total nonperforming loans		394,188			441,699			328,721			394,188			328,721
Other real estate (ORE) and foreclosed assets		22,342			26,630			18,049			22,342			18,049
Total nonperforming assets	$	416,530		$	468,329		$	346,770		$	416,530		$	346,770
Accruing loans 90 days past due (a)	$	7,941		$	12,724		$	18,390		$	7,941		$	18,390
Net charge-offs		5,074			12,200			5,940			17,274			35,969
Allowance for loan losses		214,530			210,713			221,865			214,530			221,865
Provision for loan losses		8,891			12,253			14,951			21,144			30,942
Ratios:
Nonperforming assets to loans, ORE and foreclosed assets		2.15	%		2.45	%		1.88	%		2.15	%		1.88	%
Accruing loans 90 days past due to loans		0.04	%		0.07	%		0.10	%		0.04	%		0.10	%
Nonperforming assets + accruing loans 90 days past due to loans, ORE and foreclosed assets		2.19	%		2.52	%		1.97	%		2.19	%		1.97	%
Net charge-offs to average loans		0.11	%		0.26	%		0.13	%		0.18	%		0.41	%
Allowance for loan losses to period-end loans		1.11	%		1.10	%		1.20	%		1.11	%		1.20	%
Allowance for loan losses to nonperforming loans + accruing loans 90 days past due		53.35	%		46.37	%		63.92	%		53.35	%		63.92	%

(a)

Nonaccrual loans and accruing loans past due 90 days or more do not include purchased credit impaired loans with an accretable yield. Included in nonaccrual loans are $98.8 million, $118. 0 million, and $96.3 million in nonaccruing restructured loans at June 30, 2018, March 31, 2018, and June 30, 2017, respectively.

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	June 30,		March 31,		December 31,		September 30,		June 30,
(in thousands)	2018		2018		2017		2017		2017
Period-End Balance Sheet
Total loans, net of unearned income (a)	$	19,370,917	$	19,092,504	$	19,004,163	$	18,786,285	$	18,473,841
Loans held for sale		36,047		21,827		39,865		23,236		26,787
Securities		6,113,873		5,930,076		5,888,380		5,624,552		5,668,836
Short-term investments		104,210		61,541		92,384		111,725		126,428
Earning assets		25,625,047		25,105,948		25,024,792		24,545,798		24,295,892
Allowance for loan losses		(214,530)		(210,713)		(217,308)		(223,122)		(221,865)
Goodwill		745,523		745,523		745,523		739,403		740,265
Other intangible assets, net		79,700		85,021		90,640		96,525		101,694
Other assets		1,689,707		1,571,558		1,692,439		1,658,151		1,714,583
Total assets	$	27,925,447	$	27,297,337	$	27,336,086	$	26,816,755	$	26,630,569
Noninterest-bearing deposits	$	8,165,796	$	8,230,060	$	8,307,497	$	7,896,384	$	7,887,867
Interest-bearing transaction and savings deposits		7,711,542		8,058,793		8,181,554		7,893,546		8,402,133
Interest-bearing public funds deposits		2,854,839		3,108,008		3,040,318		2,762,048		2,537,030
Time deposits		3,503,161		3,088,861		2,723,833		2,981,881		2,615,785
Total interest-bearing deposits		14,069,542		14,255,662		13,945,705		13,637,475		13,554,948
Total deposits		22,235,338		22,485,722		22,253,202		21,553,859		21,442,815
Short-term borrowings		2,314,190		1,452,097		1,703,890		1,737,151		1,810,907
Long-term debt		266,009		300,443		305,513		331,179		407,876
Other liabilities		180,355		163,037		188,532		351,291		155,009
Stockholders' equity		2,929,555		2,896,038		2,884,949		2,863,275		2,813,962
Total liabilities & stockholders' equity	$	27,925,447	$	27,297,337	$	27,336,086	$	26,816,755	$	26,630,569



	Three Months Ended						Six Months Ended
	June 30,		March 31,		June 30,		June 30,		June 30,
(in thousands)	2018		2018		2017		2018		2017
Average Balance Sheet
Total loans, net of unearned income (a)	$	19,193,234	$	19,028,490	$	18,369,446	$	19,111,318	$	17,839,191
Loans held for sale		22,575		32,194		22,389		27,358		21,862
Securities (b)		6,032,058		5,897,290		5,241,735		5,965,046		5,140,075
Short-term investments		143,158		148,309		704,560		145,719		557,270
Earning assets		25,391,025		25,106,283		24,338,130		25,249,441		23,558,398
Allowance for loan losses		(212,766)		(216,796)		(216,851)		(214,770)		(221,650)
Goodwill and other intangible assets		827,760		833,269		826,097		830,499		778,198
Other assets		1,479,033		1,514,321		1,578,877		1,496,580		1,531,322
Total assets	$	27,485,052	$	27,237,077	$	26,526,253	$	27,361,750	$	25,646,268
Noninterest-bearing deposits	$	8,149,521	$	7,951,121	$	7,769,932	$	8,050,870	$	7,616,945
Interest-bearing transaction and savings deposits		7,860,019		8,043,176		8,047,426		7,951,092		7,475,719
Interest-bearing public fund deposits		2,970,117		3,070,079		2,539,424		3,019,821		2,543,626
Time deposits		3,121,817		2,979,043		2,575,779		3,050,825		2,458,574
Total interest-bearing deposits		13,951,953		14,092,298		13,162,629		14,021,738		12,477,919
Total deposits		22,101,474		22,043,419		20,932,561		22,072,608		20,094,864
Short-term borrowings		1,989,416		1,823,033		2,232,845		1,906,684		2,180,342
Long-term debt		299,695		305,117		428,292		302,391		443,089
Other liabilities		185,470		192,695		145,989		189,062		167,998
Stockholders' equity		2,908,997		2,872,813		2,786,566		2,891,005		2,759,975
Total liabilities & stockholders' equity	$	27,485,052	$	27,237,077	$	26,526,253	$	27,361,750	$	25,646,268

(a)

Includes nonaccrual loans.

(b)

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

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Reconciliation of Non-GAAP Measures

Reported to core net interest income (te) and core net interest margin


	Three Months Ended									Six Months Ended
	June 30,			March 31,			June 30,				June 30,			June 30,
($ in thousands)		2018			2018			2017			2018			2017
Net interest income	$	211,547		$	205,664		$	199,717		$	417,211		$	381,408
Tax-equivalent adjustment (te)(a)		4,081			3,963			8,564			8,044			16,862
Net interest income (te)		215,628			209,627			208,281			425,255			398,270
Purchase accounting adjustments
Loan discount accretion (b)		6,376			7,108			8,801			13,484			13,818
Bond premium amortization (c)		(259)			(315)			(398)			(574)			(852)
Total net purchase accounting adjustments (d)		6,117			6,793			8,403			12,910			12,966
Net interest income (te) - core	$	209,511		$	202,834		$	199,878		$	412,345		$	385,304
Average earning assets	$	25,391,025		$	25,106,283		$	24,338,130		$	25,249,441		$	23,558,398
Net interest margin - reported		3.40	%		3.37	%		3.43	%		3.39	%		3.40	%
Net purchase accounting adjustments		0.09	%		0.11	%		0.14	%		0.11	%		0.11	%
Net interest margin - core		3.31	%		3.26	%		3.29	%		3.28	%		3.29	%

Operating revenue (te) and operating pre-provision net revenue (te)


	Three Months Ended						Six Months Ended
	June 30,		March 31,		June 30,				June 30,		June 30,
(in thousands)	2018		2018		2017				2018		2017
Net interest income	$	211,547	$	205,664	$	199,717		$	417,211	$	381,408
Noninterest income		68,832		66,252		67,487			135,084		130,978
Total revenue		280,379		271,916		267,204			552,295		512,386
Tax-equivalent adjustment (a)		4,081		3,963		8,564			8,044		16,862
Nonoperating revenue		—		1,145		—			1,145		(4,352)
Operating revenue (te)	$	284,460	$	277,024	$	275,768		$	561,484	$	524,896
Noninterest expense		(184,402)		(170,791)		(183,470)			(355,193)		(347,012)
Nonoperating expense		15,805		5,853		10,617			21,658		17,080
Operating pre-prevision net revenue (te)	$	115,863	$	112,086	$	102,915		$	227,949	$	194,964

Operating earnings per share - diluted


	Three Months Ended						Six Months Ended
	June 30,		March 31,		June 30,				June 30,		June 30,
(amounts in thousands, except per share data)	2018		2018		2017				2018		2017
Net income	$	71,177	$	72,475	$	52,267		$	143,652	$	101,281
Net income allocated to participating securities		(1,328)		(1,366)		(1,166)			(2,694)		(2,322)
Net income available to common shareholders		69,849		71,109	$	51,101		$	140,958	$	98,959
Nonoperating items, net of applicable income tax		12,486		5,782		6,902			18,268		8,274
Nonoperating items allocated to participating securities		(233)		(109)		(154)			(342)		(186)
Operating earnings available to common shareholders	$	82,102	$	76,782		57,849			158,884		107,047
Weighted average common shares - diluted		85,483		85,423		84,867			85,451		84,755
Earnings per share -diluted	$	0.82	$	0.83	$	0.60		$	1.65	$	1.17
Operating earnings per share - diluted	$	0.96	$	0.90	$	0.68		$	1.86	$	1.26

(a)

(b)

Includes net investment premium amortization arising from business combinations.

(c)

Includes net loan discount accretion and net investment premium amortization as defined in (b) and (c) and amortization of the FDIC loss share receivable related to an FDIC assisted transaction.

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LIQUIDITY

Liquidity management is focused on ensuring that funds are available to meet the cash flow requirements of our depositors and borrowers, while also meeting the operating, capital and strategic cash flow needs of the Company, the Bank and other subsidiaries. We develop liq uidity ma nagement strategies, and measure and regularly monitor liquidity risk as part of our overall asset/liability management process.

The asset portion of the balance sheet provides liquidity primarily through loan principal repayments, as well as maturities and repayments of investment securities. Short-term investments such as federal funds sold, securities purchased under agreements to resell and interest-bearing deposits with the Federal Reserve Bank or with other commercial banks are additional sources of liquidity to meet cash flow requirements. Free securities represent unpledged securities that can be sold or used as collateral for borrowings, a nd include unpledged securities assigned to short-term dealer repurchase agreements or to the Federal Reserve Bank discount window. As shown in the table below, our ratio of free securities to total securiti es was 49.31% at June 30, 2018, compare d to 4 3.3 5% at March 31 , 2018 and 33 . 57 % at June 30, 2017 . The total of pledged securities at June 30 , 201 8 was $3.1 billion, down $243 million from March 31, 2018 a s collateral related to seasonal public fund tax deposits was released. To tal securities at June 30, 2018 were $0.5 billion higher than at June 30, 2017.



	June 30,		March 31,		December 31,		September 30,		June 30,
Liquidity Metrics	2018		2018		2017		2017		2017
Free securities / total securities	49.31	%	43.35	%	44.15	%	36.61	%	33.57	%
Core deposits / total deposits	89.65	%	90.84	%	93.03	%	91.70	%	93.05	%
Wholesale funds / core deposits	19.93	%	14.44	%	13.76	%	15.94	%	14.92	%
Quarter-to-date average loans /quarter-to-date average deposits	86.84	%	86.32	%	86.57	%	87.08	%	87.76	%

The liability portion of the balance sheet provides liquidity mainly through the ability to use cash sourced from various customers’ in terest-bearing and noninterest-bearing deposit and sweep accounts. Core deposits consist of total deposits excluding certificates of deposit (“CDs”) of $250,000 or more and brokered deposits. The ratio of core deposits to total deposits was 89.65% at June 30, 2018, com pared to 90.84% at March 31, 2018 and 93.05% at June 30, 2017. Core deposits totaled $19.9 billion at June 30, 2018, a decrease of $0.5 billion from March 31, 2018, and down $19 million from June 30, 2017. Brokered deposits totaled $1.4 bil lion as of June 30, 2018, a $208 m illion increase co m pared to March 31, 2018 and up $644 million compared to June 30, 2017. The use of brokered deposits as a funding source is subject to strict parameters regarding the amount , term and interest rate.

Purchases of federal funds, securities sold under agreements to repurchase and other short-term borrowings from customers provide additional sources of liquidity to meet short-term funding requirements. Besides funding from customer sources, the Bank has a line of credit with the FHLB that is secured by blanket pledg es of certain mortgage loans . At June 30, 2018, the Bank had borrowings of approximately $1.9 billion and had approximately $2.7 billion available under this line. The Bank also has unused borrowing capacity at the Federal Reserve’s discount window of approximately $2.2 billion; there were no outstanding borrowings with the Federal Reserve at any date during the twelve months ended June 30, 2018.

Whol esale funds, which are compri sed of short-term borrowings, long-term debt and brokered deposits were 19.93 % of core deposits at June 30, 2 018, compared to 14.44 % at March 31, 2 018 and 14.92 % at June 30, 2017. The linked quarter and year over year increases in wholesale fu nds were primarily related to increase s in FHLB borrowings and brokered deposits . Management has established an internal target for wholesale funds to be less than 25% of core deposits.

Another key measure used to monitor our liquidity position is the lo an-to- deposit ratio (average loans outstanding for the reporting period divided by average d eposits outst anding). The loan-to-deposit ratio measures the amount of funds the Company lends for each dollar of deposits on hand. Our loan-to-deposit ratio for the second quarter of 2018 was 86.84%, compared to 86.32% for the first quarter of 2018 and 87.76% for the second quarter of 2017. Management h as established a target range for its loan-to - deposit ratio of 83% to 87 %.

Cash generated from operations is another important source of funds to meet liquidity needs. The consolidated statements of cash flows present operating cash flows and summarize all significant sources and uses of funds for the six months ended June 30, 2018 and 2017 .

Dividends received from the Bank have been the primary source of funds available to the Parent for the payment of dividends to our stockholders and for servicing its debt . The liquidity management process takes into account the various regulatory provisions that can limit the amount of dividends the Bank can distribute to the Parent . The Parent maintains cash and other liquid assets to provide liquidity in an amount sufficient to fund a minimum of at least six quarters of anticipated common stockholder dividends.

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CAPITAL RESOURCES

Stockholders’ equity totaled $2.9 billion at June 30 , 2018, up $34 million, or 1% from March 31, 2018 and up $116 million, or 4%, from June 30 , 2017. The tangible common equity ratio was 7.76% at June 30, 2018 , compared to 7.80% at March 31 , 201 8 a nd 7.65% at June 30, 2017 . The decrease in the ratio from prior quarter is due to growth in tangible assets and the change in other comprehensive loss , partially offset by net tangible retained earnings . The increase from June 30, 2017 was primarily related to net tangible retained earnings, partially offset by increase s in tangible assets and intangible assets related to the FNBC transactions, and the change in accumulated other comprehensive loss. Management has established an internal target for the tangible common equity ratio of at least 8.00%. However, management will allow the tangible common equity ratio to drop below 8.00% on a temporary basis if it believes that the shortfall can be replenished through normal operations.

The regulatory capital ratios of the Company and the Bank as of June 30, 2018 remain strong and are well in excess of current regulatory minimum requirements. The Company and the Bank have been categorized as “well-capitalized” in the most recent notices received from our regulators. Both entities currently exceed all capital requirements of the Basel III requirements, including the fully phased-in conservation buffer. See the Supervision and Regulation section in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017 for further discussion of our capital requirements.

The following table shows the regulatory capital ratios for the Company and the Bank as calculated under current rules for the indicated periods. The Company’s and Bank’s regulatory filings for quarters ending March 31, 2018 and prior were filed in the names of Hancock Holding Company and Whitney Bank, respectively.



	Well-		June 30,		March 31,		December 31,		September 30,		June 30,
	Capitalized		2018		2018		2017		2017		2017
Total capital (to risk weighted assets)
Hancock Whitney Corporation	10.00	%	12.12	%	12.00	%	11.90	%	11.84	%	11.76	%
Hancock Whitney Bank	10.00	%	11.57	%	11.60	%	11.55	%	11.35	%	11.33	%
Tier 1 common equity capital (to risk weighted assets)
Hancock Whitney Corporation	6.50	%	10.48	%	10.35	%	10.21	%	10.10	%	10.01	%
Hancock Whitney Bank	6.50	%	10.60	%	10.63	%	10.54	%	10.31	%	10.28	%
Tier 1 capital (to risk weighted assets)
Hancock Whitney Corporation	8.00	%	10.48	%	10.35	%	10.21	%	10.10	%	10.01	%
Hancock Whitney Bank	8.00	%	10.60	%	10.63	%	10.54	%	10.31	%	10.28	%
Tier 1 leverage capital
Hancock Whitney Corporation	5.00	%	8.66	%	8.51	%	8.43	%	8.34	%	8.21	%
Hancock Whitney Bank	5.00	%	8.77	%	8.75	%	8.72	%	8.53	%	8.44	%

Regulatory definitions:

(1)

Tier 1 common equity capital generally includes common equity and retained earnings, reduced by goodwill and other disallowed intangibles, disallowed deferred tax assets and certain other assets.

(2)

Tier 1 capital consists of Tier 1 common equity capital plus non-controlling interest in equity of consolidated subsidiaries and a limited amount of qualifying perpetual preferred stock.

(3)

Total capital consists of Tier 1 capital plus perpetual preferred stock not qualifying as Tier 1 capital, mandatory convertible securities, certain types of subordinated debt and a limited amount of allowances for credit losses.

(4)

The risk-weighted asset base is equal to the sum of the aggregate value of assets and credit-converted off-balance sheet items in each risk category as specified in regulatory guidelines, multiplied by the weight assigned by the guidelines to that category.

(5)

The Tier 1 leverage capital ratio is Tier 1 capital divided by average total assets reduced by the deductions for Tier 1 capital noted above.

On May 24, 2018, our board of directors approved a stock buyback program that authorized the repurchase of up to 5%, or approximately 4.3 million shares of its outstanding common stock. The approved program allows us to repurchase shares of our common stock either in the open market in compliance with Rule 10b-18 promulgated under the Securities Exchange Act of 1934, as amended, or in privately negotiated transactions with non-affiliated sellers or as otherwise determined by the Company in one or more transactions, from time to time until December 31, 2019. The Company is not obligated to purchase any shares under this program and the board of directors may terminate or amend the program at any time prior to the expiration. As of June 30, 2018, we have not purchased a ny shares of our common stock under this program .

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BALANCE SHEET ANALYSIS

Securities

Investments in securities total ed $6.1 bi llion at June 30, 2018, up $184 million, or 3%, from March 31, 2018, and up $445 million from June 30, 2017. At June 30, 2018, securities available for sale totaled $3.0 billion and securities held to maturity totaled $3.1 billion.

The securities portfolio consists mainly of residential and commercial mortgage-backed securities and collateralized mortgage obligations issued or guaranteed by U.S. government agencies. The portfolio is designed to enhance liquidity while providing an acceptable rate of return. The Company invests only in high quality investment grade securities with a targeted effective duration for the overall portfolio of between two and five years. The effective duration calculates the price sensitivity to changes in interest rates. At June 30, 2018, the average maturity of the portfolio was 6.09 years with an effective duration of 4.89 years and a nominal weighted-average yield of 2.53%. Management simulations indicate that the effective duration would decrease to 4.87 years with a 100 bps increase in the yield curve and increase to 4.96 years with a 200 bps increase. At March 31, 2018, the average maturity of the portfolio was 6.15 years with an effective duration of 4.87 years and a nominal weighted-average yield of 2.47%. The average maturity of the portfolio at June 30, 2017 was 5.53 years, while the duration was 4.84 years, and the nominal weighted average yield was 2.35%.

Loans

Total loans at June 30, 2018 were $19.4 billion, up approximately $278 million , or 1% , from March 31, 2 018, and up $897 million, or 5%, from June 30, 2017. Net loan growth continues to be diversified both regionally and in areas identified as a part of the Company’s revenue generating initiatives, including healthcare and equipment finance. Loans to energy related companies decreased $69 million d uring second quarter of 2018 and are down $246 million compared to June 30, 2017, as we continue to reduce our exposure to that sector.

The following table shows the composition of our loan portfolio:



	June 30,		March 31,		December 31,			September 30,		June 30,
(in thousands)	2018		2018		2017		2017		2017
Total loans:
Commercial non-real estate	$	8,410,961	$	8,336,222	$	8,297,937	$	8,129,429	$	8,093,104
Commercial real estate - owner occupied		2,233,794		2,185,543		2,142,439		2,076,014		2,078,332
Total commercial and industrial		10,644,755		10,521,765		10,440,376		10,205,443		10,171,436
Commercial real estate - income producing		2,342,192		2,394,862		2,384,599		2,511,808		2,401,673
Construction and land development		1,515,233		1,413,878		1,373,421		1,373,048		1,313,522
Residential mortgages		2,780,359		2,732,821		2,690,472		2,596,692		2,493,923
Consumer		2,088,378		2,029,178		2,115,295		2,099,294		2,093,287
Total loans	$	19,370,917	$	19,092,504	$	19,004,163	$	18,786,285	$	18,473,841

Our commercial customer base is diversified over a range of industries, including energy, healthcare, wholesale and retail trade in various durable and nondurable products and the manufacture of such products, marine transportation and maritime construction, financial and professional services, and agricultural production.

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The following tables provide detail of the more significant industry concentrations for our commercial and industrial loan portfolio, which is based on NAICS codes, and property type concentrations of our commercial real estate – income producing portfolio.



	June 30,				March 31,				December 31,				September 30,				June 30,
	2018				2018				2017				2017				2017
			Pct of				Pct of				Pct of				Pct of				Pct of
( $ in thousands )	Balance		Total		Balance		Total		Balance		Total		Balance		Total		Balance		Total
Commercial & industrial loans:
Real Estate and Rental and Leasing	$	1,195,278	11	%	$	1,154,304	11	%	$	1,122,389	11	%	$	1,134,451	12	%	$	1,116,117	11	%
Health Care and Social Assistance		1,152,593	11			1,159,214	11			1,118,288	11			1,023,939	10			1,084,644	11
Mining, Quarrying, and Oil and Gas Extraction (a)		932,113	9			972,580	9			992,179	10			1,074,822	11			1,131,279	11
Retail Trade (a)		901,020	8			869,662	8			757,998	7			761,418	7			774,414	8
Public Administration		866,052	8			857,736	8			840,773	8			832,638	8			848,543	8
Manufacturing (a)		820,135	8			795,014	8			745,744	7			726,339	7			769,161	8
Transportation and Warehousing (a)		702,615	7			651,869	6			609,011	6			563,263	6			569,923	6
Construction		632,592	6			626,013	6			619,956	6			564,444	6			521,926	5
Wholesale Trade (a)		523,839	5			536,791	5			578,037	6			513,086	5			492,910	5
Finance and Insurance		460,803	4			437,547	4			501,157	5			559,092	5			503,551	5
Professional, Scientific, and Technical Services (a)		440,727	4			433,169	4			429,637	4			356,560	3			371,055	4
Educational Services		437,484	4			440,272	4			462,595	4			438,247	4			434,955	4
Other Services (except Public Administration)		382,737	4			371,913	4			356,787	3			349,711	3			348,080	3
Accommodation and Food Services		366,240	3			357,693	3			324,619	3			340,551	3			305,421	3
Other (a)		830,527	8			857,988	9			981,206	9			966,882	10			899,457	8
Total commercial & industrial loans	$	10,644,755	100	%	$	10,521,765	100	%	$	10,440,376	100	%	$	10,205,443	100	%	$	10,171,436	100	%

(a) The Company's energy related lending portfolio includes certain balances within each of these selected industry categories as the definition is based on the borrower’s source of revenue. The energy related lending portfolio totaled approximately $ 1.0 billion at June 30, 2018, $1.1 billion at March 31, 2018, December 31, 2017, and September 30, 2017, and $1.2 billion at June 30, 2017.

At June 30, 2018, commercial and industrial (“C&I”) loans, including both non-real estate and owner occupied real estate secured loans, totaled approximately $ 10.6 billion, an increase of $123 million, or 1%, from March 31, 2018. Included in C&I a re $985 m illion in energy related loans, which are comprised of credits to both the exploration and production segment and the support services segment. Energy related loans comprised 5.1% of total loans at June 30, 2018, down from 12.4% in first quarter of 2014, the beginning of the downturn in the energy cycle and meeting our strategic target to reduce concentration of energy loans to 5%. Second quarter 2018 activity in the energy portfolio included p ayoffs and paydowns of approximately $137 million and charge-offs of approximately $5 million partially offset by approximately $73 million in draws on existing lines of credit. Energy charge-offs during the second quarter of 2018 were offset by app roximately $7 million in energy related recoveries.

The Bank lends mainly to middle market and smaller commercial entities, although it participates in larger shared credit loan facilities. Shared national credits funded at June 30, 2018 totaling approximately $1.8 billion, or 9%, of total loans were up $42.6 million from March 31, 2018. Approximately $439 million of our shared national credits were with energy related customers at June 30, 2018.

Commercial real estate – income producing loans totaled approximately $2.3 billion at June 30, 2018, a d ecrease of $52.7 million, or 2 %, from March 31, 2018. The decrease was related primarily to multifamily and retail properties. The following table details for the preceding five quarters the end-of-period commercial real estate – income producing loan balances by property type.



	June 30,				March 31,				December 31,				September 30,				June 30,
	2018				2018				2017				2017				2017
			Pct of				Pct of				Pct of				Pct of				Pct of
( $ in thousands )	Balance		Total		Balance		Total		Balance		Total		Balance		Total		Balance		Total
Commercial real estate - income producing loans:
Retail	$	502,809	22	%	$	521,607	22	%	$	526,929	22	%	$	550,720	22	%	$	511,708	22	%
Office		430,319	18			436,789	18			441,539	19			472,169	19			481,626	20
Multifamily		347,732	15			379,932	16			341,783	14			339,656	13			347,583	15
Hotel/Motel		332,411	14			336,724	14			328,238	14			299,796	12			296,996	12
Industrial		279,041	12			270,812	11			272,133	11			327,048	13			269,985	11
Other		449,880	19			448,998	19			473,977	20			522,419	21			493,775	21
Total commercial real estate - income producing loans	$	2,342,192	100	%	$	2,394,862	100	%	$	2,384,599	100	%	$	2,511,808	100	%	$	2,401,673	100	%

Construction and land development loans, totaling approximately $1.5 billion at June 30, 2018, increased $101.4 million from March 31, 2018. Residential mortgages increased $47 .5 million and consumer loans increased $59.2 million during the second quarter of 2018.

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We currently expect end of period loan growth for third quarter 2018 of approximately $250 to $300 million and the full year 2018 end of period loan growth in the range of 5% to 6%.

Allowance for Loan Losses and Asset Quality

The Company's total allowance for loan losses was $214.5 million at June 30, 2018, compared to $210.7 million at March 31, 2018 and $217.3 million at December 31, 2017 . The ratio of the allowance for loan losses to period-end loans increased slightly to 1.11%, compared to 1.10% at March 31, 2018 but is down from 1.14% at year end . The increase in allowance as well as coverage compared to first quarter 2018 is driven by a $7.4 million increase in allowance for loan losses on the nonenergy portfolio, partially offset by a decrease of $3.6 million in energy reserves . The increase in the nonenergy allowance reflects increased growth and diversification of this portfolio and criticized and nonperforming levels that, while down compared to the prior period-end, remain elevated compared to the last several years. The decline in energy reserves reflects the continued improvement in crude oil prices, a sizable decline in energy exposure and a significant reduction in criticized loan balances. Management believes the allowance level for the energy portfolio, as built in previous quarters, remains adequate and we are continuing to allow it to decline as we work through problem credits.

The Company’s balance of criticized commercial lo ans totaled $0.9 billion at June 30, 2018, down $187 million, or 17% compared to March 31, 2018, with a decrease in nonenergy criticized loans of $72 million and a decrease in energy of $115 million. Commercia l criticized loans are down $179 million compared to December 31, 2017, with the energy portfolio down $141 million and non energy down $38 million. Criticized loans are defined as those having potential weaknesses that deserve management’s close attention (risk-rated special mention, substandard and doubtful), including both accruing and nonaccruing loans. Our nonenergy criticized portfolio, totaling $489 million at June 30, 2018, is comprised of loans that are diversified as to both industry and geography and the level as a percent age of total loans is not outside of historical norms. As of June 30, 2018, criticized loans in the energy portfolio were $ 408 million, or approximately 46 % of that portfolio. Energy related loans delinquent for more than 30 days, including accrual and nonaccrual loans, totaled $62 million, or 6%, of the energy portfolio at June 30, 2018 , down from 10% at March 31, 2018 .

Management continues to closely monitor the ability of our energy related customers to service their debt, including reviews of customers’ balance sheets, leverage ratios, collateral values and other critical lending metrics. We note that even with the rise in commodity prices, we expect a lag in the recovery of energy service and support credits, and we believe the key to resolution of many of these credits is stabilized prices over the longer-term. While we are seeing general improvement in risk profiles for upstream and onshore segments, there is lingering pressure for the offshore support segment. Based upon information currently available, management is maintaining the estimate that net charge-offs from energy related credits could be as high as $95 million over the duration of the downturn , which started in the first quarter of 2014. To date, we have recorded approximately $79 million in energy rel ated net charge-offs since the downturn of the cycle began . See Item 7 in our Annual Report on Form 10-K for the year ended December 31, 2017 for further discussion of our energy portfolio and its potential impact on the allowance for loan losses.

The following table provides a breakout of the allowance for loan loss for the energy portfolio, allocated by sector, as of June 30, 2018 and December 31, 2017.



	June 30, 2018					December 31, 2017
( in millions )	Outstanding Balance		Allocated Allowance for Loan and Lease Losses		Allowance for Loan and Lease Losses as a % of Loans	Outstanding Balance		Allocated Allowance for Loan and Lease Losses		Allowance for Loan and Lease Losses as a % of Loans
Upstream (reserve-based lending)	$	313	$	8.3	2.7%	$	353	$	11.4	3.2%
Midstream		60		0.8	1.3%		52		0.4	0.7%
Support - drilling		122		6.2	5.1%		121		10.5	8.6%
Support - nondrilling		489		43.6	8.9%		529		47.9	9.1%
Total	$	984	$	58.9	6.0%	$	1,055	$	70.2	6.7%

Net charge-offs were $5.1 million, or 0.11%, of average total loans on an annualized basis in the second quarter of 2018, down from $12.2 million, or 0.26%, of average total loans in the first quarter of 2018. The energy portfolio reflected a net recovery in th e second quarter of 2018 of $1.9 million, consisting of gross charge-offs of $5.0 million, net of recoveries of $6.9 million. There were approximately $4.3 million of net charge-offs related to energy credits in the first quarter of 2018, with gross charge-offs of $7.6 million and recoveries of $3.3 million. Commercial nonenergy net charge-offs were up $2.1 million to $3.6 million in second quarter of 2018. Consumer loan charge-offs of $3.6 million were down $2.6 million for the quarter, or $1.1 million, excluding the impact of charge -offs from the consumer finance company sold March 9, 2018 . Mortgage continued to perform well during second quarter of 2018 with a net recovery of $0.3 million compared to minimal losses in first quarter of 2018 .

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



	Three Months Ended									Six Months Ended
	June 30,			March 31,			June 30,			June 30,
(in thousands)	2018			2018			2017			2018			2017
Allowance for loan losses at beginning of period	$	210,713		$	217,308		$	213,550		$	217,308		$	229,418
Loans charged-off:
Commercial non real estate		2,510			9,335			1,427			11,845			26,218
Commercial real estate - owner-occupied		5,953			851			488			6,804			517
Total commercial & industrial		8,463			10,186			1,915			18,649			26,735
Commercial real estate - income producing		1,604			—			153			1,604			160
Construction and land development		210			10			81			220			172
Total commercial		10,277			10,196			2,149			20,473			27,067
Residential mortgages		306			192			428			498			776
Consumer		4,916			8,048			6,582			12,964			15,260
Total charge-offs		15,499			18,436			9,159			33,935			43,103
Commercial non real estate		8,330			4,146			880			12,476			1,818
Commercial real estate - owner-occupied		187			88			61			275			336
Total commercial & industrial		8,517			4,234			941			12,751			2,154
Commercial real estate - income producing		2			63			23			65			398
Construction and land development		9			29			284			38			755
Total commercial		8,528			4,326			1,248			12,854			3,307
Residential mortgages		596			116			168			712			281
Consumer		1,301			1,794			1,803			3,095			3,546
Total recoveries		10,425			6,236			3,219			16,661			7,134
Total net charge-offs		5,074			12,200			5,940			17,274			35,969
Decrease in allowance as a result of sale of subsidiary		—			(6,648)			—			(6,648)			—
Provision for loan losses before FDIC benefit		8,891			12,253			14,255			21,144			28,416
Benefit attributable to FDIC loss share agreement		—			—			696			—			2,526
Provision for loan losses, net		8,891			12,253			14,951			21,144			30,942
Increase (decrease) in FDIC loss share receivable		—			—			(696)			—			(2,526)
Allowance for loan losses at end of period	$	214,530		$	210,713		$	221,865		$	214,530		$	221,865
Ratios:
Gross charge-offs to average loans		0.32	%		0.39	%		0.20	%		0.36	%		0.48	%
Recoveries to average loans		0.22	%		0.13	%		0.07	%		0.18	%		0.08	%
Net charge-offs to average loans		0.11	%		0.26	%		0.13	%		0.18	%		0.41	%
Allowance for loan losses to period-end loans		1.11	%		1.10	%		1.20	%		1.11	%		1.20	%

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



	June 30,			December 31,
(in thousands)	2018			2017
Loans accounted for on a nonaccrual basis: (a)
Commercial non-real estate	$	63,253		$	63,387
Commercial non-real estate - restructured		91,798			89,476
Total commercial non-real estate		155,051			152,863
Commercial real estate - owner occupied		24,584			23,549
Commercial real estate - owner-occupied - restructured		1,632			2,440
Total commercial real estate - owner-occupied		26,216			25,989
Commercial real estate - income producing		5,955			9,054
Commercial real estate - income producing - restructured		4,545			5,520
Total commercial real estate - income producing		10,500			14,574
Construction and land development		4,161			3,791
Construction and land development - restructured		13			16
Total construction and land development		4,174			3,807
Residential mortgage		30,609			38,703
Residential mortgage - restructured		784			1,777
Total residential mortgage		31,393			40,480
Consumer		14,347			15,087
Consumer - restructured		—			—
Total consumer		14,347			15,087
Total nonaccrual loans	$	241,681		$	252,800
Restructured loans - still accruing:
Commercial non-real estate	$	142,190		$	114,224
Commercial real estate - owner occupied		7,661			1,578
Commercial real estate - income producing		1,539			3,827
Construction and land development		—			—
Residential mortgage		518			480
Consumer		599			384
Total restructured loans - still accruing		152,507			120,493
Total nonperforming loans		394,188			373,293
ORE and foreclosed assets		22,342			27,542
Total nonperforming assets (b)	$	416,530		$	400,835
Loans 90 days past due still accruing to loans (c)	$	7,941		$	27,766
Total restructured loans	$	251,279		$	219,722
Ratios:
Nonperforming assets to loans plus ORE and foreclosed assets		2.15	%		2.11	%
Allowance for loan losses to nonperforming loans and accruing loans 90 days past due		53.35	%		54.18	%
Loans 90 days past due still accruing to loans		0.04	%		0.15	%

(a)

Nonaccrual loans and accruing loans past due 90 days or more do not include purchased credit impaired loans which were written down to fair value upon acquisition and accrete interest income the remaining life of the loan.

(b)

Includes total nonaccrual loans, total restructured loans - still accruing and ORE and foreclosed assets.

(c)

Excludes accruing TDR already reflected as a restructured accruing loan.

Nonperforming assets totaled $416.5 million at June 30 , 2018, down $51.8 million from March 31, 2018, but up $15.7 million from December 31, 2017 and $69.8 million from June 30, 2017. N onperforming loans decreased approximately $47.5 million compared to March 31, 2018, with the energy portfolio down $41.4 million and nonenergy down $6.1 million . The reduction in energy nonperforming loans includes paydowns, note sales, charge-offs and return to performing status as we continue to work to resolve problem credits. Nonperforming assets as a percent of total loans, ORE and other foreclosed assets was 2.15% at June 30, 2018, down 30 bps from March 31, 2018 and up 4 bps from December 31, 2017 and 27 bps from June 30, 2017.

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Short-Term Investments

Short-term liquidity assets are held to ensure funds are available to meet the cash flow needs of both borrowers and depositors. Short-term liquidity investments, including interest-bearing bank deposits and federal funds sold, were $104.2 million at June 30, 2018. This represents an increase of $42.7 million from March 31, 2018 and a decrease of $22.2 million compared to June 30, 2017. These assets are highly volatile on a daily basis depending upon movement in customer loan and deposit accounts. Average short-term investments of $143.2 million for the secon d quarter of 2018 were down $5.1 million compared to the first quarter of 2018, and down $561.4 million compared to the second quarter of 2017. See the Liquidity section above for further discussion regarding the management of our short-term investment portfolio and the impact upon our liquidity in general.

Deposits

Total deposits were $22.2 billion at June 30, 2018, down $250.4 million, or 1%, from March 31, 2018, and up $792 m illion, or 4%, from June 30, 2017. Average deposits for the second quarter of 2018 were $22.1 billion, up $58.1 million, or less than 1%, from the first quarter of 2018 and up $1.2 billion, or 6%, from the second quarter of 2017.

Noninterest-bearing demand deposits were $8.2 billion at June 30, 2018, down $64.3 million, or less than 1%, linked quarter, and up $277.9 million, or 4%, year over year. Noninterest-bearing demand deposits comprised 37% of tot al deposits at June 30, 2018, March 31, 2018, and June 30, 2017.

Interest-bearing transaction and savings accounts of $7.7 billion at June 30, 2018 decreased $347.3 million, or 4%, compared to March 31, 2018 , with some shift into higher rate certificates of deposit, and decreased $690.6 billion, or 8%, compared to June 30, 2017.

Interest-bearing public fund deposits totaled $2. 9 billion at June 30, 2018, down $253.2 million, or 8% from March 31, 2018 , with normal seasonal trends, and up $317.8 million, or 13%, compared to June 30, 2017. Time deposits other than public funds totaled $3.5 billion at June 30, 2018 up $414.3 million from March 31, 2018, which includes an increase in brokered CDs of $207.8 million.

Short-Term Borrowings

At June 30, 2018, short-term borrowings totaled $2.3 billion, up $862.1 million from March 31, 2018, as FHLB borrowings increased $877.7 million, securities sold under repurchase agreements increased $9.8 million, and federal funds purchased decreased $25.4 million. Short-term borrowings increased $503.3 million from June 30, 2017.

Avera ge short-term borrowings of $2.0 billion in the seco nd quarter of 2018 were up $166.4 million, or 9 %, compared to the first quarter of 2018, and down $243.4 million, or 11 %, compared to the second quarter of 2017. Customer repurchase agreements and FHLB borrowings are the major sources of short-term borrowings. Customer repurchase agreements are offered mainly to commercial customers to assist them with their cash management strategies or to provide a temporary investment vehicle for their excess liquidity pending redeployment for corporate or investment purposes. While customer repurchase agreements provide a recurring source of funds to the Bank, the amounts available over time can be volatile. FHLB borrowings are funds from the Federal Home Loan Bank that are collateralized by single family and commercial real estate loans included in the Bank’s loan portfolio, subject to specific criteria.

Long-Term Debt

At June 30, 2018, long-term debt totaled $266.0 million, down $34.4 million from March 31, 2018. The decrease in long-term debt for the second quarter 2018 reflects a $30 million payment in addition to the regularly scheduled payment on the Parent’s term note maturing in December 2018. The Company was in compliance with all contractual covenants, as amended, related to long-term debt as of June 30, 2018.

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OFF-BALANCE SHEET ARRANGEMENTS

Loan Commitments and Letters of Credit

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

The following table shows the commitments to extend credit and letters of credit at June 30, 2018 according to expiration date.



			Expiration Date

			Less than		1-3		3-5		More than
(in thousands)	Total		1 year		years		years		5 years
Commitments to extend credit	$	7,096,587	$	3,033,828	$	1,331,374	$	1,418,518	$	1,312,867
Letters of credit		362,198		280,336		31,264		12,217		38,381
Total	$	7,458,785	$	3,314,164	$	1,362,638	$	1,430,735	$	1,351,248

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

There were no material changes or developments with respect to methodologies that the Company uses when applying what management believes are critical accounting policies and developing critical accounting estimates as disclosed in our Annual Report on Form 10-K for the year ended December 31, 2017 .

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

NEW ACCOUNTING PRONOUNCEMENTS

Refer to Note 16 to our Consolidated Financial Statements included elsewhere in this report.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

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

The Company measures its interest rate sensitivity primarily by running various net interest income simulations. The Company’s balance sheet is asset sensitive over a two-year period due to a larger volume of rate sensitive assets than rate sensitive liabilities . The model measures annual net interest income sensitivity relative to a base case scenario and incorporates assumptions regarding balance sheet growth and the mix of earning assets and funding sources as well as pricing, repricing and maturity characteristics of the existing and projected balance sheet.

The table below presents the results of simulations run as of June 30, 2018 for year 1 and year 2, assuming the indicated instantaneous and sustained parallel shift in the yield curve at the measurement date. The results demonstrate an increase in net interest income as rates rise and a decline should rates fall as compared to the stable rate environment assumed for the base case.



	Estimated Increase
	(Decrease) in NII
Change in Interest Rates	Year 1		Year 2
(basis points)
- 100	(1.24)	%	(1.69)	%
+100	1.98	%	2.49	%
+200	3.49	%	4.21	%
+300	4.66	%	5.28	%

No te: Decrease in interest rates limited to 100 basis points in the current rate environment

The foregoing disclosures related to our market risk should be read in conjunction with our audited consolidated financial statements, related notes and management’s discussion and analysis included in our Annual Report on Form 10-K for the year ended December 31, 2017 .

Item 4. Controls and Procedures

In connection with the preparation of this Quarterly Report on Form 10-Q, an evaluation was carried out by the Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Disclosure controls and procedures are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and that such information is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosures. Based on that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that, as of June 30, 2018, the Company’s disclosure controls and procedures were effective.

Our management, including the Chief Executive Officer and Chief Financial Officer, identified no change in our internal control over financial reporting that occurred during the three month period ended June 30, 2018 , that has materially affected, or is reasonably l ikely to materially affect, our internal controls over financial reporting.

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PART II . OTHER INFORMATION

Item 1. Legal Proceedings

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

Item 1A. Risk Factors

The Company disclosed risk factors in its Annual Report on Form 10-K for the year ended December 31, 2017 . The risks described may not be the only risks facing us. Additional risks and uncertainties not currently known to us or that are currently considered to not be material also may materially adversely affect our business, financial condition, and/or operating results. The following risk factor regarding cybersecurity matters has been included in this Quarterly Report on Form 10-Q in response to the SEC’s Statement and Guidance on Public Company Cybersecurity Disclosures published on February 26, 2018.

Our operational and communications systems and infrastructure may fail or may be the subject of a breach or cyber-attack that, if successful, could adversely affect our business and disrupt business continuity.

We depend on our ability to process, record and monitor a large number of client transactions and to communicate with clients and other institutions on a continuous basis. As client, industry, public and regulatory expectations regarding operational and information security have increased, our operational systems and infrastructure continue to be safeguarded and monitored for potential failures, disruptions and breakdowns, whether as a result of events beyond our control or otherwise.

Our business, financial, accounting, data processing, or other operating systems and facilities may stop operating properly or become disabled or damaged as a result of a number of factors, including events that are wholly or partially beyond our control. For example, there could be sudden increases in client transaction volume; electrical or telecommunications outages; natural disasters such as earthquakes, tornadoes, floods, and hurricanes; disease pandemics; events arising from local or larger scale political or social matters, including terrorist acts; occurrences of employee error, fraud, or malfeasance; and, as described below, cyber-attacks.

Although we have business continuity plans and other safeguards in place, our operations and communications may be adversely affected by significant and widespread disruption to our systems and infrastructure that support our businesses and clients. While we continue to evolve and modify our business continuity plans, there can be no assurance in an escalating threat environment that they will be effective in avoiding disruption and business impacts. Our insurance may not be adequate to compensate us for all resulting losses, and the cost to obtain adequate coverage may increase for us or the industry.

Security risks for financial institutions such as ours have dramatically increased in recent years, in part because of the proliferation of new technologies, the use of the internet and telecommunications technologies to conduct financial transactions, and the increased sophistication, resources and activities of hackers, terrorists, activists, organized crime, and other external parties, including nation state actors. In addition, clients may use devices or software to access our products and services that are beyond our control environment, which may provide additional avenues for attackers to gain access to confidential information. Although we have information security procedures and controls in place, our technologies, systems, networks, and clients’ devices and software may become the target of cyber-attacks or information security breaches that could result in the unauthorized release, gathering, monitoring, misuse, loss, change or destruction of our or our clients’ confidential, proprietary and other information (including personal identifying information of individuals), or otherwise disrupt our or our clients’ or other third parties’ business operations. Other U.S. financial institutions and financial service companies have reported breaches in the security of their websites or other systems, including attempts to shut down access to their networks and systems in an attempt to extract compensation from them to regain control. Financial institutions have experienced distributed denial-of-service attacks, a sophisticated and targeted attack intended to disable or degrade internet service or to sabotage systems.

We and others in our industry are regularly the subject of attempts by attackers to gain unauthorized access to our networks, systems, and data, or to obtain, change, or destroy confidential data (including personal identifying information of individuals) through a variety of means, including computer viruses, malware, and phishing. In the future, these attacks may result in unauthorized individuals obtaining access to our confidential information or that of our clients, or otherwise accessing, damaging, or disrupting our systems or infrastructure.

We are continuously enhancing our controls, processes and practices designed to protect our systems, computers, software, data and networks from attack, damage or unauthorized access. This continued enhancement will require us to expend additional resources, including to investigate and remediate any information security vulnerabilities that may be detected. Despite our ongoing investments in security resources, talent, and business practices, we are unable to assure that security measures will be effective.

If our systems and infrastructure were to be breached, damaged, or disrupted, or if we were to experience a loss of our confidential information or that of our clients, we could be subject to serious negative consequences, including disruption of our operations,

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damage to our reputation, a loss of trust in us on the part of our clients, vendors or other counterparties, client attrition, reimbursement or other costs, increased compliance costs, significant litigation exposure and legal liability, or regulatory fines, penalties or intervention. Any of these could materially and adversely affect our results of operations, our financial condition, and/or our share price.

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

None.

Item 6. Exhibits

(a) Exhibits :




Exhibit		Filed	Incorporated by Reference
Number	Description	Herewith	Form	Exhibit	Filing Date
3.1	Composite Articles of the Company		8 -K	3.1	5/24 /2018
3.2	Amended and Restated Bylaws		8 -K	3.2	5 /2 4 /2018
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	X
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	X
32.1	Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	X
32.2	Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	X
101	XBRL Interactive Data	X

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SIG NATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	Hancock Whitney Corporation

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

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

		/s/ Stephen E. Barker
		Stephen E. Barker
		Executive Vice President & Chief Accounting Officer August 7, 2018

TABLE OF CONTENTS

Part I Item 1. Financial Statements 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 Item 1. Legal Proceedings Item 1A. Risk Factors Item 2. Unregistered Sales Of Equity Securities and Use Of Proceeds Item 6. Exhibits

Exhibits

3.1 Composite Articles of the Company 8-K 3.1 5/24/2018 3.2 Amended and Restated Bylaws 8-K 3.2 5/24/2018 31.1 Certification of Chief Executive Officer pursuant to Section302 of the Sarbanes-Oxley Act of 2002 31.2 Certification of Chief Financial Officer pursuant to Section302 of the Sarbanes-Oxley Act of 2002 32.1 Certification of Chief Executive Officer pursuant to Section906 of the Sarbanes-Oxley Act of 2002 32.2 Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

HWC 10-Q Quarter ended June 30, 2018

Exhibits