Hancock Whitney Corporation (NASDAQ:HWC) Q3 2020 Results Earnings Conference Call October 20, 2020 5:00 PM ET Company Participants Trisha Carlson - EVP, Investor Relations Manager John Hairston - President, Chief Executive Officer Mike Achary - Chief Financial Officer Chris Ziluca - Chief Credit Officer Conference Call Participants Michael Rose - Raymond James Brett Rabatin - Hovde Group Kevin Fitzsimmons - D.A. Davidson Catherine Mealor - KBW Brad Milsaps - Piper Sandler Ebrahim Poonawala - Bank of America ...

Financial Performance - Net income was $794 million, compared to a loss of $1171 million in 2Q20[8] - Pre-provision net revenue (PPNR) increased by $78 million, a 7% linked-quarter increase, totaling $1263 million[8] - The provision for credit losses was $25 million, and net charge-offs totaled $24 million; the allowance for credit losses (ACL) remained strong at 240% excluding PPP loans[8] - Net interest margin (NIM) remained stable at 323%[9] Loan Portfolio - Total loans amounted to $222 billion, a decrease of $388 million linked-quarter, reflecting the current economic environment[8, 12] - The company originated over 13000 PPP loans totaling $24 billion in rounds 1 and 2 of the program, with 11874 loans, or $785 million, in loans less than $350K[6, 14] - Energy loans accounted for $338 million, representing 17% of total loans, a decrease of $14 million, or 4%, linked-quarter[16, 23] Deposits and Capital - Total deposits decreased by $292 million linked-quarter, mainly due to a reduction in brokered CD funding, reaching $270 billion[8, 6] - The CET1 ratio increased to 1029%, up 51 bps, and the TCE ratio increased to 753%, up 20 bps[9] Expenses and Revenue - Noninterest expense totaled $1958 million, down $08 million, or less than 1%, linked-quarter[49, 50] - Noninterest income totaled $837 million, up $98 million, or 13% linked-quarter[48] Other Key Points - The overactive hurricane season impacted several Gulf Coast markets, but no material provision expense is expected from the impact of the hurricanes[10] - Criticized commercial loans increased by $64 million, or 18%, linked-quarter, reflecting the economic impact of COVID-19 on many clients[8] - Deferrals peaked on 5/14/20 at $36 billion of outstandings; totaled $284 million at 9-30-20[25]

Part I [ITEM 1. Financial Statements](index=4&type=section&id=ITEM%201.%20Financial%20Statements) Presents unaudited consolidated financial statements for June 30, 2020, and December 31, 2019, with key accounting policy notes [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets%20%28unaudited%29%20%E2%80%93%20June%2030%2C%202020%20and%20December%2031%2C%202019) Provides a snapshot of the company's assets, liabilities, and equity at June 30, 2020, and December 31, 2019 | Metric | June 30, 2020 (in thousands) | December 31, 2019 (in thousands) | | :-------------------------------- | :----------------------------- | :------------------------------- | | Total Assets | $33,215,400 | $30,600,757 | | Total Liabilities | $29,899,243 | $27,133,072 | | Total Stockholders' Equity | $3,316,157 | $3,467,685 | | Total Deposits | $27,322,268 | $23,803,575 | | Loans, net | $22,185,739 | $21,021,504 | | Allowance for Loan Losses | $(442,638) | $(191,251) | - Total assets increased by **$2.6 billion (8.5%)** from December 31, 2019, to June 30, 2020, primarily driven by an increase in loans and deposits[11](index=11&type=chunk) - Total deposits saw a significant increase of **$3.5 billion (14.8%)** from December 31, 2019, to June 30, 2020, with noninterest-bearing deposits growing by **$2.98 billion**[11](index=11&type=chunk) [Consolidated Statements of Income](index=5&type=section&id=Consolidated%20Statements%20of%20Income%20%28unaudited%29%20%E2%80%93%20Three%20and%20Six%20Months%20Ended%20June%2030%2C%202020%20and%202019) Reports the company's financial performance, including net interest income and net income (loss) for Q2 2020 and 2019 | Metric (in thousands) | 3 Months Ended June 30, 2020 | 3 Months Ended June 30, 2019 | 6 Months Ended June 30, 2020 | 6 Months Ended June 30, 2019 | | :---------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Total Interest Income | $266,342 | $280,378 | $543,685 | $556,661 | | Total Interest Expense | $28,476 | $60,510 | $74,631 | $117,539 | | Net Interest Income | $237,866 | $219,868 | $469,054 | $439,122 | | Provision for Credit Losses | $306,898 | $8,088 | $553,691 | $26,131 | | Net Income (Loss) | $(117,072) | $88,277 | $(228,105) | $167,441 | | Basic EPS | $(1.36) | $1.01 | $(2.64) | $1.92 | | Diluted EPS | $(1.36) | $1.01 | $(2.64) | $1.92 | | Dividends Paid per Share| $0.27 | $0.27 | $0.54 | $0.54 | - The company reported a significant net loss of **$(117.072) million** for the three months ended June 30, 2020, compared to a net income of **$88.277 million** in the prior year, primarily due to a substantial increase in the provision for credit losses[14](index=14&type=chunk) - Provision for credit losses surged to **$306.898 million** for Q2 2020, a dramatic increase from **$8.088 million** in Q2 2019, reflecting economic deterioration[14](index=14&type=chunk) [Consolidated Statements of Comprehensive Income](index=6&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income%20%28unaudited%29%20%E2%80%93%20Three%20and%20Six%20Months%20Ended%20June%2030%2C%202020%20and%202019) Details net income (loss) and other comprehensive income components for Q2 2020 and 2019 | Metric (in thousands) | 3 Months Ended June 30, 2020 | 3 Months Ended June 30, 2019 | 6 Months Ended June 30, 2020 | 6 Months Ended June 30, 2019 | | :---------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Net Income (Loss) | $(117,072) | $88,277 | $(228,105) | $167,441 | | Other Comprehensive Income (OCI) before taxes | $38,302 | $74,099 | $203,772 | $136,152 | | Income Tax Expense on OCI | $8,842 | $16,793 | $46,322 | $30,646 | | OCI net of taxes | $29,460 | $57,306 | $157,450 | $105,506 | | Comprehensive Income (Loss) | $(87,612) | $145,583 | $(70,655) | $272,947 | - Despite a net loss, the company reported positive other comprehensive income (net of taxes) of **$29.460 million** for Q2 2020, primarily driven by net changes in unrealized gains on available-for-sale securities[17](index=17&type=chunk) [Consolidated Statements of Changes in Stockholders' Equity](index=7&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Stockholders%27%20Equity%20%28unaudited%29%20%E2%80%93%20Three%20and%20Six%20Months%20Ended%20June%2030%2C%202020%20and%202019) Outlines changes in stockholders' equity from December 31, 2019, to June 30, 2020, including net loss and CECL impact | Metric (in thousands) | Balance Dec 31, 2019 | Net Loss (6M 2020) | Other Comprehensive Income (6M 2020) | Cumulative Effect of CECL | Cash Dividends (6M 2020) | Balance June 30, 2020 | | :---------------------- | :------------------- | :----------------- | :----------------------------------- | :------------------------ | :----------------------- | :-------------------- | | Common Stock | $309,513 | — | — | — | — | $309,513 | | Capital Surplus | $1,736,664 | — | — | — | — | $1,747,640 | | Retained Earnings | $1,476,232 | $(228,105) | — | $(44,087) | $(47,817) | $1,156,278 | | Accumulated OCI (Loss) | $(54,724) | — | $157,450 | — | — | $102,726 | | Total Stockholders' Equity | $3,467,685 | $(228,105) | $157,450 | $(44,087) | $(47,817) | $3,316,157 | - Stockholders' equity decreased by **$151.528 million** from December 31, 2019, to June 30, 2020, primarily due to a net loss of **$228.105 million** and a cumulative effect of **$44.087 million** from the CECL accounting principle change, partially offset by other comprehensive income[20](index=20&type=chunk) [Consolidated Statements of Cash Flows](index=8&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows%20%28unaudited%29%20%E2%80%93%20Six%20Months%20Ended%20June%2030%2C%202020%20and%202019) Summarizes cash flows from operating, investing, and financing activities for H1 2020 and 2019 | Cash Flow Activity (in thousands) | 6 Months Ended June 30, 2020 | 6 Months Ended June 30, 2019 | | :-------------------------------- | :--------------------------- | :--------------------------- | | Net Cash Provided by Operating Activities | $66,880 | $128,806 | | Net Cash Used in Investing Activities | $(2,641,115) | $(251,003) | | Net Cash Provided by Financing Activities | $2,677,365 | $103,977 | | Net Increase (Decrease) in Cash and Due from Banks | $103,130 | $(18,220) | | Cash and Due from Banks, Ending | $535,234 | $365,152 | - Net cash provided by operating activities decreased by **48% YoY**, from **$128.806 million** in H1 2019 to **$66.880 million** in H1 2020[22](index=22&type=chunk) - Investing activities saw a significant increase in net cash used, from **$(251.003) million** in H1 2019 to **$(2,641.115) million** in H1 2020, primarily due to a large net increase in loans[22](index=22&type=chunk) - Financing activities generated substantial cash, increasing from **$103.977 million** in H1 2019 to **$2,677.365 million** in H1 2020, driven by a net increase in deposits[22](index=22&type=chunk) [Notes to Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements%20%28unaudited%29%20%E2%80%93%20June%2030%2C%202020%20and%202019) Provides detailed explanations for financial statements, covering accounting policies, business combinations, and specific financial instrument details [Note 1. Basis of Presentation](index=9&type=section&id=1.%20Basis%20of%20Presentation) Explains accounting principles and policies, including the adoption of CECL and goodwill impairment testing - The Company adopted ASC 326, 'Financial Instruments – Credit Losses' (CECL), on January 1, 2020, on a modified retrospective basis, materially changing how credit losses are estimated and reported[28](index=28&type=chunk) - The Allowance for Credit Losses (ACL) now includes both Allowance for Loan and Lease Losses (ALLL) and Reserve for Unfunded Lending Commitments, estimated quarterly based on past experience, portfolio risks, collateral values, and current/forecasted economic conditions[29](index=29&type=chunk) - An interim goodwill impairment test was performed as of June 30, 2020, due to economic disruption, operating losses, and a sustained decrease in share price caused by the COVID-19 pandemic; however, goodwill was not impaired[41](index=41&type=chunk) [Note 2. Business Combination](index=12&type=section&id=2.%20Business%20Combination) Details the acquisition of MidSouth Bancorp, Inc. in September 2019, including consideration and resulting goodwill - On September 21, 2019, Hancock Whitney Corporation acquired MidSouth Bancorp, Inc., issuing approximately **5.0 million shares** for a transaction value of **$193.8 million**, resulting in **$63.4 million** in goodwill[44](index=44&type=chunk) | (in thousands) | Acquisition Date Fair Value | | :--------------- | :-------------------------- | | Total identifiable assets | $1,514,332 | | Total liabilities | $1,383,852 | | Net assets acquired | $130,480 | | Value of stock-based consideration | $193,849 | | Goodwill | $63,369 | - Goodwill balance at June 30, 2020, remained at **$855.453 million**, with no measurement period adjustments recorded during the six months ended June 30, 2020[47](index=47&type=chunk) [Note 3. Securities](index=13&type=section&id=3.%20Securities) Details the company's investment securities portfolio, including available-for-sale and held-to-maturity categories | Securities (in thousands) | Amortized Cost (June 30, 2020) | Fair Value (June 30, 2020) | Amortized Cost (Dec 31, 2019) | Fair Value (Dec 31, 2019) | | :------------------------ | :----------------------------- | :------------------------- | :---------------------------- | :-------------------------- | | Available for Sale | $4,698,304 | $4,932,142 | $4,637,610 | $4,675,304 | | Held to Maturity | $1,449,661 | $1,553,593 | $1,568,009 | $1,611,004 | | Total Securities | $6,147,965 | $6,485,735 | $6,205,619 | $6,286,308 | - The Company's securities portfolio consists primarily of investment-grade U.S. agency and municipal securities, with no credit losses expected on U.S. government-backed held-to-maturity securities[53](index=53&type=chunk) - Proceeds from sales of securities totaled **$124.1 million** during the six months ended June 30, 2020, with gross gains of **$1.1 million** and gross losses of **$1.0 million**[51](index=51&type=chunk) [Note 4. Loans and Allowance for Credit Losses](index=16&type=section&id=4.%20Loans%20and%20Allowance%20for%20Credit%20Losses) Presents a breakdown of the loan portfolio by category and details the allowance for credit losses, including CECL impact | Loan Category (in thousands) | June 30, 2020 | December 31, 2019 | | :--------------------------- | :------------ | :---------------- | | Commercial non-real estate | $10,465,280 | $9,166,947 | | Commercial real estate - owner occupied | $2,762,259 | $2,738,460 | | Commercial real estate - income producing | $3,350,299 | $2,994,448 | | Construction and land development | $1,128,959 | $1,157,451 | | Residential mortgages | $2,877,316 | $2,990,631 | | Consumer | $2,044,264 | $2,164,818 | | Total Loans | $22,628,377 | $21,212,755 | - Total loans increased by **$1.4 billion (6.7%)** from December 31, 2019, to June 30, 2020, with significant growth in commercial non-real estate loans, partly due to Paycheck Protection Program (PPP) loans[61](index=61&type=chunk)[64](index=64&type=chunk) | Allowance for Credit Losses (in thousands) | June 30, 2020 | December 31, 2019 | | :--------------------------------------- | :------------ | :---------------- | | Allowance for Loan Losses | $442,638 | $191,251 | | Reserve for Unfunded Lending Commitments | $36,571 | $3,974 | | Total Allowance for Credit Losses | $479,209 | $195,225 | - The allowance for credit losses significantly increased from **$195.225 million** at December 31, 2019, to **$479.209 million** at June 30, 2020, reflecting the adoption of CECL and the impact of the COVID-19 pandemic and energy loan sale[71](index=71&type=chunk)[73](index=73&type=chunk) - Nonaccrual loans decreased from **$245.833 million** at December 31, 2019, to **$183.979 million** at June 30, 2020, with troubled debt restructurings (TDRs) also declining[75](index=75&type=chunk)[77](index=77&type=chunk) [Note 5. Securities Sold under Agreements to Repurchase](index=25&type=section&id=5.%20Securities%20Sold%20under%20Agreements%20to%20Repurchase) Reports on customer securities sold under repurchase agreements, detailing changes in balances and collateral - Customer securities sold under agreements to repurchase, maturing daily and secured by U.S. agency securities, increased from **$484.4 million** at December 31, 2019, to **$654.3 million** at June 30, 2020[99](index=99&type=chunk) [Note 6. Long Term Debt](index=26&type=section&id=6.%20Long%20Term%20Debt) Outlines the company's long-term debt obligations, including subordinated notes and other long-term debt instruments | Long-Term Debt (in thousands) | June 30, 2020 | December 31, 2019 | | :---------------------------- | :------------ | :---------------- | | Subordinated notes payable, maturing June 2045 | $150,000 | $150,000 | | Subordinated notes payable, maturing June 2060 | $172,500 | — | | Other long-term debt | $73,786 | $87,890 | | Less: unamortized debt issuance costs | $(10,017) | $(4,428) | | Total long-term debt | $386,269 | $233,462 | - Total long-term debt increased by **$152.8 million (65.5%)** from December 31, 2019, to June 30, 2020, primarily due to the issuance of **$172.5 million** in subordinated notes in June 2020[101](index=101&type=chunk)[102](index=102&type=chunk) - The newly issued subordinated notes (maturing June 2060) accrue interest at a fixed rate of **6.25%** per annum and qualify as Tier 2 capital[102](index=102&type=chunk) [Note 7. Derivatives](index=26&type=section&id=7.%20Derivatives) Describes the company's use of derivative instruments for interest rate risk management and customer programs | Derivative Type (in thousands) | Notional Amount (June 30, 2020) | Derivative Assets (June 30, 2020) | Derivative Liabilities (June 30, 2020) | | :----------------------------- | :------------------------------ | :-------------------------------- | :----------------------------------- | | Designated as hedging instruments | $1,724,900 | $64,003 | $25,293 | | Not designated as hedging instruments | $5,520,605 | $181,111 | $191,171 | | Total Derivatives | $7,245,505 | $245,114 | $216,464 | - The Company uses derivatives to manage interest rate risk (cash flow and fair value hedges) and offers customer interest rate derivative programs, offsetting risk with financial institutions[104](index=104&type=chunk)[109](index=109&type=chunk)[111](index=111&type=chunk)[114](index=114&type=chunk) - Total notional or contractual amounts of derivatives increased from **$6.01 billion** at December 31, 2019, to **$7.24 billion** at June 30, 2020[107](index=107&type=chunk) | Effect on Income Statement (in thousands) | 6 Months Ended June 30, 2020 | 6 Months Ended June 30, 2019 | | :---------------------------------------- | :--------------------------- | :--------------------------- | | Cash flow hedges - variable rate loans | $5,461 | $(3,676) | | Fair value hedges - securities | $40 | — | | Fair value hedges - brokered deposits | $46 | $(1,449) | | All other instruments | $7,979 | $4,409 | | Total gain (loss) | $13,526 | $(716) | [Note 8. Stockholders' Equity](index=30&type=section&id=8.%20Stockholders%27%20Equity) Details changes in stockholders' equity, including common shares, share repurchases, and accumulated other comprehensive income - Common shares outstanding were **86,342 thousand** at June 30, 2020, compared to **87,515 thousand** at December 31, 2019[11](index=11&type=chunk) - The Company completed an Accelerated Share Repurchase (ASR) agreement in March 2020, repurchasing **4.9 million shares** at an average price of **$37.65 per share** under a program authorized for up to **5.5 million shares**, but has since suspended further repurchases[131](index=131&type=chunk)[132](index=132&type=chunk)[133](index=133&type=chunk) | Accumulated Other Comprehensive Income (Loss) (in thousands) | Balance Dec 31, 2019 | Balance June 30, 2020 | | :--------------------------------------------------------- | :------------------- | :-------------------- | | Available for Sale Securities | $28,950 | $161,524 | | HTM Securities Transferred from AFS | $639 | $415 | | Employee Benefit Plans | $(101,278) | $(106,932) | | Cash Flow Hedges | $17,399 | $49,137 | | Equity Method Investment | $(434) | $(1,418) | | Total | $(54,724) | $102,726 | - Accumulated Other Comprehensive Income (Loss) shifted from a loss of **$(54.724) million** at December 31, 2019, to a gain of **$102.726 million** at June 30, 2020, primarily due to a significant net change in unrealized gains on available-for-sale securities[136](index=136&type=chunk) [Note 9. Other Noninterest Income](index=32&type=section&id=9.%20Other%20Noninterest%20Income) Reports on various sources of noninterest income, including bank-owned life insurance, credit fees, and derivatives | Other Noninterest Income (in thousands) | 3 Months Ended June 30, 2020 | 3 Months Ended June 30, 2019 | 6 Months Ended June 30, 2020 | 6 Months Ended June 30, 2019 | | :-------------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Income from bank-owned life insurance | $3,317 | $4,083 | $7,583 | $7,348 | | Credit related fees | $2,609 | $2,937 | $5,674 | $5,532 | | Income from derivatives | $4,108 | $3,600 | $7,979 | $4,409 | | Other miscellaneous | $3,100 | $4,360 | $8,077 | $7,159 | | Total other noninterest income | $13,134 | $14,980 | $29,313 | $24,448 | - Total other noninterest income decreased by **$1.846 million (12.3%)** for Q2 2020 compared to Q2 2019, primarily due to lower income from bank-owned life insurance and other miscellaneous income[142](index=142&type=chunk) - For the six months ended June 30, 2020, total other noninterest income increased by **$4.865 million (19.9%)** compared to the prior year, largely driven by higher income from derivatives[142](index=142&type=chunk) [Note 10. Other Noninterest Expense](index=33&type=section&id=10.%20Other%20Noninterest%20Expense) Details various noninterest expenses, including advertising, corporate taxes, and retirement expenses | Other Noninterest Expense (in thousands) | 3 Months Ended June 30, 2020 | 3 Months Ended June 30, 2019 | 6 Months Ended June 30, 2020 | 6 Months Ended June 30, 2019 | | :--------------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Advertising | $2,696 | $3,253 | $6,930 | $6,333 | | Corporate value and franchise taxes | $4,481 | $4,215 | $8,777 | $8,257 | | Telecommunications and postage | $3,374 | $3,363 | $7,440 | $6,829 | | Travel expense | $396 | $1,344 | $1,507 | $2,442 | | Entertainment and contributions | $3,384 | $2,742 | $5,831 | $5,450 | | Net other retirement expense (income) | $(6,337) | $(4,152) | $(12,459) | $(8,257) | | Other miscellaneous | $5,177 | $6,588 | $12,646 | $12,279 | | Total other noninterest expense | $15,759 | $19,679 | $35,328 | $37,966 | - Total other noninterest expense decreased by **$3.920 million (19.9%)** for Q2 2020 compared to Q2 2019, largely due to a decrease in net other retirement expense and travel expense[144](index=144&type=chunk) - For the six months ended June 30, 2020, total other noninterest expense decreased by **$2.638 million (7.0%)** compared to the prior year, primarily driven by a larger reduction in net other retirement expense[144](index=144&type=chunk) [Note 11. Earnings (Loss) Per Common Share](index=33&type=section&id=11.%20Earnings%20%28Loss%29%20Per%20Common%20Share) Presents basic and diluted earnings (loss) per common share for Q2 2020 and 2019, reflecting net loss impact | EPS Metric | 3 Months Ended June 30, 2020 | 3 Months Ended June 30, 2019 | 6 Months Ended June 30, 2020 | 6 Months Ended June 30, 2019 | | :----------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Basic EPS | $(1.36) | $1.01 | $(2.64) | $1.92 | | Diluted EPS | $(1.36) | $1.01 | $(2.64) | $1.92 | - The Company reported a basic and diluted loss per common share of **$(1.36)** for Q2 2020, a significant decline from **$1.01** earnings per share in Q2 2019, reflecting the net loss incurred[147](index=147&type=chunk) - For periods with a net loss, potential common shares are excluded from diluted EPS calculation as their impact would be antidilutive[147](index=147&type=chunk) [Note 12. Retirement Plans](index=34&type=section&id=12.%20Retirement%20Plans) Describes the company's defined benefit pension plan and 401(k) savings plan, detailing net periodic benefit costs - The Company sponsors a qualified defined benefit pension plan (Pension Plan) and a defined contribution 401(k) Savings Plan, with varying eligibility and contribution structures[149](index=149&type=chunk)[150](index=150&type=chunk) | Net Periodic Benefit Cost (in thousands) | 3 Months Ended June 30, 2020 | 3 Months Ended June 30, 2019 | 6 Months Ended June 30, 2020 | 6 Months Ended June 30, 2019 | | :--------------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Pension Benefits | $(3,095) | $(1,352) | $(5,877) | $(2,584) | | Other Post-Retirement Benefits | $(6) | $(42) | $(49) | $(112) | | Total Net Periodic Benefit Cost (Reduction) | $(3,101) | $(1,394) | $(5,926) | $(2,696) | - Net periodic benefit cost for pension benefits showed a larger reduction (income) of **$(3.095) million** in Q2 2020 compared to **$(1.352) million** in Q2 2019, primarily due to expected return on plan assets[154](index=154&type=chunk) [Note 13. Share-Based Payment Arrangements](index=34&type=section&id=13.%20Share-Based%20Payment%20Arrangements) Outlines stock option activity, unrecognized compensation expense, and performance share awards granted | Stock Option Activity | Number of Shares (Jan 1, 2020) | Exercise Price (Jan 1, 2020) | Number of Shares (June 30, 2020) | Exercise Price (June 30, 2020) | | :-------------------- | :----------------------------- | :--------------------------- | :------------------------------- | :------------------------------- | | Outstanding | 28,725 | $34.11 | 28,725 | $34.11 | | Exercisable | N/A | N/A | 28,725 | $34.11 | - As of June 30, 2020, there was **$50.3 million** of total unrecognized compensation expense related to nonvested restricted and performance shares, expected to be recognized over a weighted average period of **3.2 years**[159](index=159&type=chunk) - During the six months ended June 30, 2020, the Company granted **75,607 performance share awards**, with vesting tied to TSR and operating EPS performance metrics over three-year and two-year periods, respectively[159](index=159&type=chunk)[160](index=160&type=chunk) [Note 14. Commitments and Contingencies](index=36&type=section&id=14.%20Commitments%20and%20Contingencies) Reports on off-balance sheet commitments, including credit extensions and letters of credit, and legal proceedings | Off-Balance Sheet Instruments (in thousands) | June 30, 2020 | December 31, 2019 | | :------------------------------------------- | :------------ | :---------------- | | Commitments to extend credit | $7,995,491 | $7,530,143 | | Letters of credit | $369,848 | $393,284 | - Commitments to extend credit increased by **$465.3 million (6.2%)** from December 31, 2019, to June 30, 2020, while letters of credit decreased by **$23.4 million (6.0%)**[165](index=165&type=chunk) - The Company is party to various legal proceedings in the ordinary course of business, but management does not believe loss contingencies will have a material adverse effect on its financial position or liquidity[166](index=166&type=chunk) [Note 15. Fair Value Measurements](index=36&type=section&id=15.%20Fair%20Value%20Measurements) Details assets and liabilities measured at fair value, categorizing them by valuation input levels (Level 2 and Level 3) | Recurring Fair Value Measurements (in thousands) | June 30, 2020 (Level 2) | December 31, 2019 (Level 2) | | :----------------------------------------------- | :---------------------- | :-------------------------- | | Available for sale debt securities | $4,932,142 | $4,675,304 | | Derivative assets | $181,111 | $54,446 | | Derivative liabilities | $53,952 | $15,385 | - The majority of the Company's assets and liabilities measured at fair value on a recurring basis are classified as Level 2, relying on observable market inputs[170](index=170&type=chunk) - A Level 3 derivative liability, related to a Visa Class B common stock contract, was valued at **$4.982 million** at June 30, 2020, using a discounted cash flow methodology with unobservable inputs like Visa Class A appreciation and conversion rate[175](index=175&type=chunk)[179](index=179&type=chunk) | Nonrecurring Fair Value Measurements (in thousands) | June 30, 2020 | December 31, 2019 | | :-------------------------------------------------- | :------------ | :---------------- | | Collateral-dependent impaired loans | $116,205 | $182,377 | | Other real estate owned and foreclosed assets, net | $18,724 | $24,422 | [Note 16. Recent Accounting Pronouncements](index=41&type=section&id=16.%20Recent%20Accounting%20Pronouncements) Discusses the adoption of new accounting standards, including CECL and ASU 2020-04 'Reference Rate Reform' - The Company adopted ASC 326 (CECL) on January 1, 2020, resulting in a cumulative-effect adjustment that decreased retained earnings by **$44.086 million**[198](index=198&type=chunk)[200](index=200&type=chunk) - The adoption of CECL increased the allowance for loan losses by **$49.411 million** and established a reserve for unfunded lending commitments of **$27.330 million**[200](index=200&type=chunk) - The Company adopted ASU 2020-04, 'Reference Rate Reform,' upon issuance, electing to amend hedge documentation for outstanding hedging relationships referencing LIBOR without de-designating and re-designating[201](index=201&type=chunk) [Note 17. Subsequent Event](index=42&type=section&id=17.%20Subsequent%20Event) Reports on the sale of energy-related loans in July 2020 and its financial impact, including credit loss provision - On July 21, 2020, the Company closed the sale of **$497 million** of energy-related loans for **$254.4 million**, net of selling costs[205](index=205&type=chunk) - This sale resulted in a **$160.1 million** provision for credit losses recorded on June 30, 2020, to write down the loans to their expected net sales proceeds, consisting of a **$242.6 million** charge-off and an **$82.5 million** reserve release[205](index=205&type=chunk) [ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=43&type=section&id=ITEM%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management's analysis of financial condition and results, including forward-looking statements, COVID-19 impact, and operational performance [FORWARD-LOOKING STATEMENTS](index=43&type=section&id=FORWARD-LOOKING%20STATEMENTS) Highlights that the report contains forward-looking statements subject to risks and uncertainties, including COVID-19 impacts - The report contains forward-looking statements subject to significant risks and uncertainties, including impacts from COVID-19, credit risk, loan growth, interest rate changes, and regulatory responses[207](index=207&type=chunk)[208](index=208&type=chunk)[211](index=211&type=chunk) - The Company does not assume any obligation to update these statements or the reasons why actual results could differ from those contained in such statements, except as required by law[210](index=210&type=chunk)[212](index=212&type=chunk) [OVERVIEW](index=44&type=section&id=OVERVIEW) Provides an overview of performance, non-GAAP measures, and the significant impact of the COVID-19 pandemic - The Company uses non-GAAP financial measures like taxable equivalent (te) net interest income, operating pre-provision net revenue, and operating earnings to provide a better understanding of performance and strategic execution[213](index=213&type=chunk)[215](index=215&type=chunk)[216](index=216&type=chunk)[217](index=217&type=chunk)[218](index=218&type=chunk) - The COVID-19 pandemic has caused significant economic harm, leading to delays in economic reopenings and uncertainty, which has been reflected in increased allowance for credit losses and losses from an energy portfolio sale[219](index=219&type=chunk)[220](index=220&type=chunk) - The Company reported a net loss of **$117.1 million**, or **$(1.36) diluted EPS**, for Q2 2020, primarily due to a **$306.9 million** provision for credit losses, including **$160.1 million** related to an energy loan sale[228](index=228&type=chunk) | Key Metric (Q2 2020 vs Q1 2020) | Change | | :------------------------------- | :----- | | Net Loss | $(117.1) million (Q2) vs $(111.0) million (Q1) | | Diluted EPS | $(1.36) (Q2) vs $(1.28) (Q1) | | Provision for Credit Loss | $306.9 million (Q2) vs $246.8 million (Q1) | | Net Interest Margin | 3.23% (down 18 bps) | | Pre-provision Net Revenue | $118.5 million (up 2.4%) | | Net Loan Growth | $1.1 billion (includes $2.3 billion PPP loans) | | Criticized Commercial Loans | Down $182 million (34%) | | Nonperforming Loans | Down $94 million (33%) | | Total Deposits | Up $2.3 billion | | CET1 Ratio | 9.77% | | TCE Ratio | 7.33% | | Available Liquidity | Over $17 billion | [Non-GAAP Financial Measures](index=44&type=section&id=Non-GAAP%20Financial%20Measures) Explains the company's use of non-GAAP financial measures for performance assessment and capital generation - The Company presents net interest income, net interest margin, and efficiency ratios on a fully taxable equivalent (te) basis, adjusting for the tax-favored status of certain income using a **21% federal tax rate**[215](index=215&type=chunk) - Operating Pre-Provision Net Revenue is defined as total revenue (te) less noninterest expense, excluding nonoperating items, to assess capital generation for credit losses[217](index=217&type=chunk) - Operating Earnings and Operating Earnings per Share exclude nonoperating items net of income tax to provide a measure more indicative of forward-looking business trends[218](index=218&type=chunk) [Impact of COVID-19](index=44&type=section&id=Impact%20of%20COVID-19) Discusses the significant economic impact of COVID-19 on the company, including credit loss allowance and liquidity management - The Company utilizes Moody's Analytics economic forecasts, weighting a baseline scenario (**50%**) and alternative S-1 (upside) and S-2 (downside) scenarios (**25% each**) for allowance for credit losses calculation, reflecting a sharp recession and gradual recovery[221](index=221&type=chunk)[222](index=222&type=chunk) - The Company increased net liquidity to **$17.4 billion** at June 30, 2020, and originated **12,662 PPP loans** totaling **$2.3 billion**, which contributed **$17.4 million** in fees and interest in Q2 2020[223](index=223&type=chunk)[224](index=224&type=chunk) - Loan payment deferral modifications peaked at **$3.6 billion** in mid-May, decreasing to **$2.7 billion** by June 30, 2020, and **$1.4 billion** by July 15, 2020[223](index=223&type=chunk) [Overview of Second Quarter 2020](index=46&type=section&id=Overview%20of%20Second%20Quarter%202020) Summarizes key financial results for Q2 2020, including net loss, credit loss provision, and asset quality improvements - The Company reported a net loss of **$117.1 million**, or **$(1.36) diluted EPS**, for Q2 2020, primarily due to a **$306.9 million** provision for credit losses, including **$160.1 million** (pre-tax) related to the energy loan sale[228](index=228&type=chunk) - The sale of **$497 million** in energy-related loans, closed on July 21, 2020, resulted in **$242.6 million** in charge-offs and an **$82.5 million** reserve release, reducing energy portfolio concentration from **4.4% to 1.7%** of total loans (excluding PPP)[229](index=229&type=chunk) - Allowance for credit losses strengthened to **$479.2 million (2.12% of total loans, or 2.36% excluding PPP loans)**, and nonperforming assets decreased by **$94 million (33%)** linked-quarter[230](index=230&type=chunk) [RESULTS OF OPERATIONS](index=47&type=section&id=RESULTS%20OF%20OPERATIONS) Analyzes the company's financial performance, focusing on net interest income, credit loss provision, noninterest income, and expenses [Net Interest Income](index=47&type=section&id=Net%20Interest%20Income) Examines trends in net interest income and net interest margin, highlighting factors influencing changes | Metric (te, in millions) | Q2 2020 | Q1 2020 | Q2 2019 | | :----------------------- | :------ | :------ | :------ | | Net Interest Income | $241.1 | $234.6 | $223.6 | | Net Interest Margin | 3.23% | 3.41% | 3.45% | - Net interest income (te) increased by **$6.5 million (3%)** linked-quarter to **$241.1 million** in Q2 2020, primarily due to a **$2.4 billion** increase in average earning assets, including **$1.7 billion** from PPP loan originations[232](index=232&type=chunk) - Net interest margin narrowed by **18 bps** to **3.23%** in Q2 2020, driven by a lower rate environment (**11 bps**), excess liquidity (**6 bps**), and reduced purchase accounting accretion (**4 bps**), partially offset by PPP loans (**5 bps**)[233](index=233&type=chunk) - The Company expects net interest margin to remain relatively stable in H2 2020, with PPP loan forgiveness and lower purchase accounting accretion offset by continued decreased funding costs[237](index=237&type=chunk) [Provision for Credit Losses](index=49&type=section&id=Provision%20for%20Credit%20Losses) Details the provision for credit losses and net charge-offs, emphasizing macroeconomic deterioration and loan sales | Metric (in millions) | Q2 2020 | Q1 2020 | Q2 2019 | | :------------------- | :------ | :------ | :------ | | Provision for Credit Losses | $306.9 | $246.8 | $8.1 | | Net Charge-offs | $302.7 | $43.8 | $7.2 | - Provision for credit losses totaled **$306.9 million** in Q2 2020, including **$146.8 million** for macroeconomic deterioration and **$160.1 million** related to the energy loan sale[245](index=245&type=chunk) - Net charge-offs for Q2 2020 were **$302.7 million (5.30% annualized)**, significantly higher than Q1 2020 (**$43.8 million**) and Q2 2019 (**$7.2 million**), primarily due to **$242.6 million** from the energy loan sale[246](index=246&type=chunk) [Noninterest Income](index=50&type=section&id=Noninterest%20Income) Analyzes trends in noninterest income, including service charges, trust fees, and secondary mortgage market operations | Noninterest Income (in thousands) | Q2 2020 | Q1 2020 | Q2 2019 | | :-------------------------------- | :------ | :------ | :------ | | Service charges on deposit accounts | $15,518 | $22,837 | $20,723 | | Trust fees | $14,160 | $14,806 | $15,904 | | Bank card and ATM fees | $15,957 | $17,362 | $16,619 | | Secondary mortgage market operations | $9,808 | $6,053 | $4,433 | | Total Noninterest Income | $73,943 | $84,387 | $79,250 | - Total noninterest income decreased by **$10.4 million (12%)** linked-quarter and **$5.3 million (7%) YoY** in Q2 2020, mainly due to lower service charges on deposits and trust fees[248](index=248&type=chunk) - Income from secondary mortgage market operations increased significantly by **$3.8 million (62%)** linked-quarter and **$5.4 million (121%) YoY** in Q2 2020, driven by increased origination volume due to the lower rate environment[254](index=254&type=chunk) - Service charges on deposit accounts decreased by **$7.3 million (32%)** linked-quarter and **$5.2 million (25%) YoY**, primarily due to higher customer account balances from economic stimulus and lower consumer spending[250](index=250&type=chunk) [Noninterest Expense](index=51&type=section&id=Noninterest%20Expense) Examines changes in noninterest expenses, including personnel, occupancy, and data processing costs | Noninterest Expense (in thousands) | Q2 2020 | Q1 2020 | Q2 2019 | | :--------------------------------- | :------ | :------ | :------ | | Personnel expense | $120,409| $113,549| $106,635| | Net occupancy expense | $13,559 | $12,522 | $12,961 | | Equipment expense | $4,752 | $4,617 | $4,342 | | Data processing expense | $21,250 | $22,047 | $20,088 | | Professional services expense | $10,985 | $9,741 | $9,665 | | Amortization of intangible assets | $5,169 | $5,345 | $5,047 | | Other real estate and foreclosed asset (income) expense | $(460) | $10,130 | $395 | | Total Noninterest Expense | $196,539| $203,335| $183,567| - Total noninterest expense decreased by **$6.8 million (3%)** linked-quarter to **$196.5 million** in Q2 2020, largely due to the absence of **$9.8 million** equity interest write-downs recorded in Q1 2020[261](index=261&type=chunk) - Personnel expense increased by **$6.9 million (6%)** linked-quarter and **$13.8 million (13%) YoY**, driven by annual merit raises, mortgage origination overtime, PPP support costs, and the MidSouth acquisition[264](index=264&type=chunk) - Other real estate and foreclosed asset income of **$0.5 million** in Q2 2020 contrasts with an expense of **$10.1 million** in Q1 2020, which included a **$9.8 million** non-cash write-down of equity interests in energy-related companies[272](index=272&type=chunk) [Income Taxes](index=53&type=section&id=Income%20Taxes) Analyzes income tax expense (benefit) and the effective income tax rate, noting impacts from pre-tax loss and tax benefits | Income Tax Metric (in thousands) | Q2 2020 | Q1 2020 | Q2 2019 | | :------------------------------- | :------ | :------ | :------ | | Income Taxes Expense (Benefit) | $(74,556)| $(23,520)| $19,186 | | Effective Income Tax Rate | 38.9% | 17.5% | 17.9% | - The effective income tax rate for Q2 2020 was approximately **38.9%**, significantly higher than **17.5%** in Q1 2020 and **17.9%** in Q2 2019, primarily due to the sizable pre-tax loss incurred year-to-date[275](index=275&type=chunk) - A discrete tax benefit of **$7.1 million** was recognized in Q1 2020 related to the intent to carryback a net operating loss attribute to a **35% statutory tax rate** year under the CARES Act[276](index=276&type=chunk) - The Company expects to realize **$7.8 million, $8.6 million, and $8.5 million** in federal and state tax credits for 2021, 2022, and 2023, respectively, from existing tax credit investments[280](index=280&type=chunk) [Selected Financial Data](index=54&type=section&id=Selected%20Financial%20Data) Presents key financial metrics and ratios, including common share data, performance ratios, and asset quality information | Common Share Data | June 30, 2020 | March 31, 2020 | June 30, 2019 | | :------------------ | :------------ | :------------- | :------------ | | Basic EPS | $(1.36) | $(1.28) | $1.01 |\ | Diluted EPS | $(1.36) | $(1.28) | $1.01 |\ | Cash dividends paid | $0.27 | $0.27 | $0.27 |\ | Book value per share| $38.41 | $39.65 | $38.70 |\ | Tangible book value per share | $27.38 | $28.56 | $28.46 | | Performance Ratios | June 30, 2020 | March 31, 2020 | June 30, 2019 | | :----------------- | :------------ | :------------- | :------------ | | Return on average assets | (1.42)% | (1.46)% | 1.24% |\ | Return on average common equity | (13.59)% | (12.72)% | 10.96% |\ | Net Interest Margin (te) | 3.23% | 3.41% | 3.45% |\ | Efficiency ratio (b) | 60.74% | 62.06% | 58.95% | | Asset Quality Information | June 30, 2020 | March 31, 2020 | June 30, 2019 | | :------------------------ | :------------ | :------------- | :------------ | | Nonperforming loans | $193,827 | $288,309 | $311,081 |\ | Total nonperforming assets| $212,551 | $306,769 | $338,601 |\ | Net charge-offs | $302,684 | $43,764 | $7,151 |\ | Allowance for credit losses | $479,209 | $474,995 | $195,625 |\ | Nonperforming assets to loans, ORE and foreclosed assets | 0.94% | 1.42% | 1.68% | [Reconciliation of Non-GAAP Measures](index=57&type=section&id=Reconciliation%20of%20Non-GAAP%20Measures) Reconciles non-GAAP financial measures to their most directly comparable GAAP financial measures | Metric (in thousands) | Q2 2020 | Q1 2020 | Q2 2019 | | :-------------------- | :------ | :------ | :------ | | Total revenue (te) | $315,057| $319,023| $302,836|\ | Operating pre-provision net revenue (te) | $118,518| $115,688| $119,269| - Operating pre-provision net revenue (te) increased by **$2.83 million (2.4%)** linked-quarter to **$118.518 million** in Q2 2020[290](index=290&type=chunk) - Operating earnings per share (diluted) was **$(1.36)** in Q2 2020, consistent with reported diluted EPS, as there were no nonoperating items impacting earnings[291](index=291&type=chunk) [LIQUIDITY](index=57&type=section&id=LIQUIDITY) Discusses the company's liquidity position, including available funding sources and key liquidity ratios | Liquidity Sources (in millions) | Total Available | Amount Used | Net Availability | | :------------------------------ | :-------------- | :---------- | :--------------- | | Internal Sources | $3,931 | — | $3,931 | | External Sources | $16,516 | $3,085 | $13,431 | | Total Liquidity | $20,447 | $3,085 | $17,362 | - The Company had over **$17 billion** in net available sources of funds at June 30, 2020, with a significant portion from Federal Home Loan Bank and Federal Reserve Bank lines of credit[292](index=292&type=chunk) - The ratio of free securities to total securities was **48.83%** at June 30, 2020, exceeding the internal target of **20%**, and up from **25.42%** at March 31, 2020, due to the release of pledged securities and replacement with PPP loans as collateral[293](index=293&type=chunk) - Core deposits to total deposits ratio was **94.53%** at June 30, 2020, up from **90.48%** at March 31, 2020, reflecting strong deposit growth from PPP loan proceeds and other stimulus funds[294](index=294&type=chunk) [CAPITAL RESOURCES](index=59&type=section&id=CAPITAL%20RESOURCES) Reviews the company's capital position, including regulatory capital ratios and stockholders' equity | Capital Ratios | June 30, 2020 | March 31, 2020 | December 31, 2019 | | :--------------- | :------------ | :------------- | :---------------- | | Total capital | 12.36% | 11.87% | 11.90% | | Tier 1 common equity capital | 9.78% | 10.02% | 10.50% | | Tier 1 capital | 9.78% | 10.02% | 10.50% | | Tier 1 leverage capital | 7.37% | 8.40% | 8.76% | - Stockholders' equity totaled **$3.3 billion** at June 30, 2020, down **3%** from March 31, 2020. The tangible common equity ratio was **7.33%**, below management's **8.00%** target, but expected to recover by year-end[303](index=303&type=chunk) - All regulatory capital ratios for the Company and the Bank remained well in excess of minimum requirements at June 30, 2020, benefiting from the five-year CECL transition rule[304](index=304&type=chunk)[305](index=305&type=chunk) - The Company suspended its stock buyback program after repurchasing **4.9 million shares** and declared a regular quarterly cash dividend of **$0.27 per share**[309](index=309&type=chunk)[310](index=310&type=chunk) [BALANCE SHEET ANALYSIS](index=60&type=section&id=BALANCE%20SHEET%20ANALYSIS) Analyzes key balance sheet components, including securities, loans, allowance for credit losses, and deposits [Securities](index=60&type=section&id=Securities) Examines the investment securities portfolio, including composition, maturity, and credit loss assessment - Investment in securities totaled **$6.4 billion** at June 30, 2020, up less than **1%** from March 31, 2020, and **11%** from June 30, 2019[313](index=313&type=chunk) - The securities portfolio, primarily U.S. government agency and municipal mortgage-backed securities, had an average expected maturity of **5.51 years** and an effective duration of **3.79 years** at June 30, 2020[314](index=314&type=chunk) - No allowance for credit loss was recorded for the securities portfolio as of June 30, 2020, following the CECL adoption, as expected credit loss was negligible[315](index=315&type=chunk) [Loans](index=60&type=section&id=Loans) Provides a detailed breakdown of the loan portfolio by category, including growth drivers and sector concentrations | Loan Category (in thousands) | June 30, 2020 | March 31, 2020 | June 30, 2019 | | :--------------------------- | :------------ | :------------- | :------------ | | Commercial non-real estate | $10,465,280 | $9,321,340 | $8,559,118 | | Commercial real estate - owner occupied | $2,762,259 | $2,731,320 | $2,519,970 | | Commercial real estate - income producing | $3,350,299 | $3,232,783 | $2,895,468 | | Total Loans | $22,628,377 | $21,515,681 | $20,175,812 | - Total loans increased by **$1.1 billion (5%)** linked-quarter to **$22.6 billion** at June 30, 2020, primarily due to **$2.3 billion** in PPP loan originations, partially offset by the energy loan sale and lower demand[316](index=316&type=chunk) - Loans to the energy sector decreased by **$587.7 million (63%)** linked-quarter to **$351.9 million** at June 30, 2020, mainly due to the sale of **$497 million** in energy loans[320](index=320&type=chunk) | Commercial Loan Exposure to Focus Sectors (June 30, 2020, in thousands) | Tier 1 (Concerned) | Tier 2 (Limited Concern) | Tier 3 (No Concern) | Total | | :-------------------------------------------------------------------- | :----------------- | :----------------------- | :------------------ | :---- | | Healthcare and social assistance | $289,880 | $1,056,900 | $247,080 | $1,593,860 | | Hospitality | $1,045,530 | $115,221 | — | $1,160,751 | | Retail trade | $1,009,309 | $378,382 | $370,527 | $1,758,218 | | Energy | $351,896 | — | — | $351,896 | | Total Sectors under focus | $2,696,615 | $1,550,503 | $617,607 | $4,864,725 | [Allowance for Credit Losses and Asset Quality](index=63&type=section&id=Allowance%20for%20Credit%20Losses%20and%20Asset%20Quality) Analyzes the allowance for credit losses and asset quality metrics, including nonperforming assets and criticized loans - The allowance for credit losses increased to **$479.2 million** at June 30, 2020, from **$195.2 million** at December 31, 2019, reflecting the CECL adoption and a **$86.7 million** build due to worsening economic forecasts, partially offset by an **$82.5 million** release from the energy loan sale[329](index=329&type=chunk)[330](index=330&type=chunk) - The Company's allowance for credit loss coverage to total loans was **2.12%** at June 30, 2020, or **2.36%** excluding SBA guaranteed PPP loans[335](index=335&type=chunk) - Criticized commercial loans decreased to **$348 million** at June 30, 2020, from **$530 million** at March 31, 2020, largely due to the energy loan sale[337](index=337&type=chunk) | Nonperforming Assets (in thousands) | June 30, 2020 | December 31, 2019 | | :---------------------------------- | :------------ | :---------------- | | Total nonaccrual loans | $183,979 | $245,833 | | Restructured loans - still accruing | $9,848 | $61,265 | | ORE and foreclosed assets | $18,724 | $30,405 | | Total nonperforming assets | $212,551 | $337,503 | | Nonperforming assets to loans plus ORE and foreclosed assets | 0.94% | 1.59% | [Short-Term Investments](index=67&type=section&id=Short-Term%20Investments) Reports on short-term liquidity investments, detailing changes and their role in providing additional liquidity - Short-term liquidity investments totaled **$760.2 million** at June 30, 2020, down **$116.1 million** from March 31, 2020, but up **$609.1 million** from June 30, 2019, to provide additional liquidity during the pandemic[346](index=346&type=chunk) [Deposits](index=67&type=section&id=Deposits) Analyzes deposit trends, including total deposits, noninterest-bearing demand deposits, and time deposits - Total deposits increased by **$2.3 billion (9%)** linked-quarter to **$27.3 billion** at June 30, 2020, primarily due to strong growth in noninterest-bearing deposits from PPP loan proceeds and other economic stimulus[348](index=348&type=chunk) - Noninterest-bearing demand deposits comprised **43%** of total deposits at June 30, 2020, up from **37%** at March 31, 2020[349](index=349&type=chunk) - Time deposits decreased by **$989.3 million (27%)** linked-quarter, driven by a **$581 million** decrease in brokered certificates of deposit and a **$405.7 million** decrease in retail certificates of deposits[351](index=351&type=chunk) [Short-Term Borrowings](index=67&type=section&id=Short-Term%20Borrowings) Reports on short-term borrowing levels and changes, including FHLB borrowings and federal funds purchased - Short-term borrowings totaled **$1.8 billion** at June 30, 2020, down **$918 million (34%)** linked-quarter, primarily due to decreases in FHLB borrowings and federal funds purchased[352](index=352&type=chunk) - Average short-term borrowings for Q2 2020 were **$2.3 billion**, up **5%** linked-quarter and **39% YoY**[353](index=353&type=chunk) [Long-Term Debt](index=68&type=section&id=Long-Term%20Debt) Details changes in long-term debt, primarily driven by the issuance of new subordinated notes in June 2020 - Long-term debt increased to **$386 million** at June 30, 2020, from **$226 million** at March 31, 2020, due to the issuance of **$172.5 million** in subordinated notes in June 2020[356](index=356&type=chunk) [OFF-BALANCE SHEET ARRANGEMENTS](index=68&type=section&id=OFF-BALANCE%20SHEET%20ARRANGEMENTS) Describes the company's off-balance sheet arrangements, including loan commitments and letters of credit [Loan Commitments and Letters of Credit](index=68&type=section&id=Loan%20Commitments%20and%20Letters%20of%20Credit) Details off-balance sheet commitments to extend credit and letters of credit, and associated risks | Off-Balance Sheet Instruments (in thousands) | Total | Less than 1 year | 1-3 years | 3-5 years | More than 5 years | | :------------------------------------------- | :---------- | :--------------- | :---------- | :---------- | :---------------- | | Commitments to extend credit | $7,995,491 | $3,765,697 | $1,806,895 | $1,551,355 | $871,544 | | Letters of credit | $369,848 | $272,344 | $52,761 | $44,743 | — | | Total | $8,365,339 | $4,038,041 | $1,859,656 | $1,596,098 | $871,544 | - The Company had **$7.995 billion** in commitments to extend credit and **$369.8 million** in letters of credit at June 30, 2020, exposing it to credit and interest rate risk[362](index=362&type=chunk) - A reserve for unfunded lending commitments totaling **$36.6 million** was held at June 30, 2020[360](index=360&type=chunk) [CRITICAL ACCOUNTING POLICIES AND ESTIMATES](index=68&type=section&id=CRITICAL%20ACCOUNTING%20POLICIES%20AND%20ESTIMATES) Highlights key accounting policies and estimates, particularly those involving significant judgment and uncertainty - The Company adopted CECL on January 1, 2020, which introduced additional subjective inputs to the allowance estimation process, including economic forecasts for a two-year reasonable and supportable period[363](index=363&type=chunk)[366](index=366&type=chunk) - The economic forecasts used for CECL are inherently uncertain due to the volatile environment from the pandemic, leading to enhanced estimation uncertainty[366](index=366&type=chunk) - A quantitative interim test of goodwill impairment was performed as of June 30, 2020, due to COVID-19 related economic disruption and operating losses, but goodwill was not impaired[371](index=371&type=chunk)[372](index=372&type=chunk) [Allowance for Credit Loss](index=69&type=section&id=Allowance%20for%20Credit%20Loss) Explains the methodology for estimating the allowance for credit losses under CECL, including economic forecasts and qualitative factors - The CECL standard requires incorporating an economic forecast for a reasonable and supportable period (two years), utilizing probability-weighted multiple economic scenarios from third-party forecasts[366](index=366&type=chunk) - The quantitative loss rate analysis is supplemented by qualitative factors, such as problem loan trends, changes in loan profiles, and current economic conditions, which involve a high level of judgment[367](index=367&type=chunk) - For individually evaluated credits, specific allowance is calculated based on observable market price, fair value of collateral, or present value of expected future cash flows, with values being highly subjective due to pandemic-related market conditions[368](index=368&type=chunk) [Goodwill Impairment Testing](index=69&type=section&id=Goodwill%20Impairment%20Testing) Details the interim goodwill impairment test performed in Q2 2020 due to COVID-19 impacts, confirming no impairment - An interim goodwill impairment test was necessitated in Q2 2020 due to triggering events from the COVID-19 pandemic, including economic disruption, operating losses, and a sustained decrease in the Company's share price[371](index=371&type=chunk) - The quantitative assessment as of June 30, 2020, indicated that the estimated fair value of the reporting unit exceeded its carrying amount, thus goodwill was not impaired[372](index=372&type=chunk) - The Company used income and market approaches for valuation, with the income approach showing fair market value approximately **6%** higher and the market approach **17%** higher than net book value[373](index=373&type=chunk) [NEW ACCOUNTING PRONOUNCEMENTS](index=70&type=section&id=NEW%20ACCOUNTING%20PRONOUNCEMENTS) Refers to Note 16 for details on recent accounting pronouncements and their impact on financial statements - Refer to Note 16 to the Consolidated Financial Statements for details on recent accounting pronouncements[374](index=374&type=chunk) [ITEM 3. Quantitative and Qualitative Disclosures about Market Risk](index=70&type=section&id=ITEM%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) Discusses the company's exposure to market risk, primarily interest rate risk, and its management strategies - The Company's primary market risk is interest rate risk, managed by measuring net interest income sensitivity and implementing asset/liability management strategies for stability[375](index=375&type=chunk) | Change in Interest Rates (basis points) | Estimated Increase (Decrease) in NII (Year 1) | Estimated Increase (Decrease) in NII (Year 2) | | :-------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | +100 | 3.02% | 5.77% | | +200 | 7.19% | 12.93% | | +300 | 11.20% | 19.61% | - The Company exhibits general asset sensitivity, driven by variable rate loans and a funding mix with non-interest bearing and lower rate-sensitive deposits[377](index=377&type=chunk) - Approximately **32%** of the loan portfolio consisted of variable rate loans tied to LIBOR at June 30, 2020, and the Company is actively transitioning away from LIBOR by modifying documents to include fallback trigger language[380](index=380&type=chunk) [ITEM 4. Controls and Procedures](index=71&type=section&id=ITEM%204.%20Controls%20and%20Procedures) Confirms the effectiveness of disclosure controls and procedures and reports no material changes in internal control over financial reporting - The Company's disclosure controls and procedures were effective as of June 30, 2020[381](index=381&type=chunk) - No material changes in internal control over financial reporting occurred during the three months ended June 30, 2020, despite operational changes in response to the COVID-19 pandemic[382](index=382&type=chunk) Part II. Other Information [ITEM 1. Legal Proceedings](index=72&type=section&id=ITEM%201.%20Legal%20Proceedings) States that the company is involved in ordinary course legal proceedings but anticipates no material adverse financial effects - The Company is party to various legal proceedings arising in the ordinary course of business[385](index=385&type=chunk) - Management does not believe that loss contingencies from pending litigation and regulatory matters will have a material adverse effect on the consolidated financial position or liquidity[385](index=385&type=chunk) [ITEM 1A. Risk Factors](index=72&type=section&id=ITEM%201A.%20Risk%20Factors) Updates risk factors, emphasizing adverse impacts and uncertainties from the COVID-19 pandemic across various business areas - The COVID-19 pandemic has adv

Hancock Whitney Corporation (NASDAQ:HWC) Q2 2020 Earnings Conference Call July 21, 2020 5:00 PM ET Company Participants Trisha Voltz Carlson - Executive Vice President and Investor Relations Manager John Hairston - President and Chief Executive Officer Michael Achary - Chief Financial Officer Christopher Ziluca - Chief Credit Officer Conference Call Participants Michael Rose - Raymond James & Associates, Inc. Kevin Fitzsimmons - D.A. Davidson & Co. Casey Haire - Jefferies LLC Brad Milsaps - Piper Sandler Eb ...

Part I. Financial Information [Financial Statements](index=5&type=section&id=Item%201.%20Financial%20Statements) Q1 2020 resulted in a **$111.0 million net loss**, primarily due to increased credit loss provisions and CECL adoption, reversing prior year's net income [Consolidated Balance Sheets](index=5&type=section&id=Consolidated%20Balance%20Sheets) Total assets grew to **$31.76 billion** by March 31, 2020, driven by loans and deposits, while stockholders' equity slightly decreased due to net loss and accounting changes Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2020 | December 31, 2019 | | :--- | :--- | :--- | | **Total Assets** | **$31,761,693** | **$30,600,757** | | Loans, net | $21,089,678 | $21,021,504 | | Allowance for loan losses | ($426,003) | ($191,251) | | Goodwill | $855,453 | $855,453 | | **Total Liabilities** | **$28,340,629** | **$27,133,072** | | Total Deposits | $25,008,496 | $23,803,575 | | **Total Stockholders' Equity** | **$3,421,064** | **$3,467,685** | | Retained Earnings | $1,297,129 | $1,476,232 | [Consolidated Statements of Income](index=6&type=section&id=Consolidated%20Statements%20of%20Income) The company reported a **$111.0 million net loss** for Q1 2020, a significant reversal from prior year's net income, primarily due to a substantial increase in provision for credit losses Consolidated Income Statement Summary (in thousands, except per share data) | Metric | Three Months Ended March 31, 2020 | Three Months Ended March 31, 2019 | | :--- | :--- | :--- | | Net Interest Income | $231,188 | $219,254 | | Provision for credit losses | $246,793 | $18,043 | | Noninterest income | $84,387 | $70,503 | | Noninterest expense | $203,335 | $175,700 | | **Net income (loss)** | **($111,033)** | **$79,164** | | **Earnings (loss) per share-diluted** | **($1.28)** | **$0.91** | [Notes to Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes detail significant accounting policies, including CECL adoption, which increased credit loss allowance and reduced retained earnings, and the impact of COVID-19 on loan modifications - The company adopted ASC 326 (CECL) on January 1, 2020, on a modified retrospective basis, materially changing how it estimates credit losses on financial instruments[29](index=29&type=chunk) Impact of CECL Adoption on Jan 1, 2020 (in thousands) | Account | CECL Adoption Impact | | :--- | :--- | | Allowance for loan and lease losses | $49,411 | | Reserve for unfunded lending commitments | $27,330 | | **Total Allowance for credit losses** | **$76,741** | | **Decrease to retained earnings (after tax)** | **$44,086** | - As of March 31, 2020, **1,618 customers** with loans totaling **$839.4 million** had received payment deferral modifications under the CARES Act, which are excluded from TDR reporting[78](index=78&type=chunk) - The company suspended its share repurchase program after repurchasing **4.9 million shares** out of **5.5 million authorized**, including settling an Accelerated Share Repurchase (ASR) agreement in March 2020[117](index=117&type=chunk)[118](index=118&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=39&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management attributes the **Q1 2020 net loss of $111.0 million** to the COVID-19 pandemic and declining oil prices, necessitating a large credit loss provision, while maintaining strong capital and liquidity - The Q1 2020 net loss of **$111.0 million** was driven by a **$246.8 million provision for credit loss** related to the COVID-19 pandemic and declining oil prices[196](index=196&type=chunk) - The company adopted the CECL accounting standard on January 1, 2020, and further increased its allowance for credit losses to **$475 million**, or **2.21% of total loans**[200](index=200&type=chunk) - Capital remains solid with a Common Equity Tier 1 (CET1) ratio of **10.03%**, and liquidity is strong with approximately **$14 billion** in available funding sources[200](index=200&type=chunk)[248](index=248&type=chunk) - The company is actively participating in the Paycheck Protection Program (PPP), originating **4,893 loans** totaling **$1.7 billion** in the initial phase and processing an additional **7,000 applications** for about **$800 million** in the second phase[194](index=194&type=chunk) [Results of Operations](index=42&type=section&id=Results%20of%20Operations) Q1 2020 net interest income (te) was **$234.6 million**, with net interest margin declining, and a **$246.8 million provision for credit losses** driven by economic downturn and a significant write-down Key Operating Metrics Comparison | Metric | Q1 2020 | Q4 2019 | Q1 2019 | | :--- | :--- | :--- | :--- | | Net Interest Income (te) | $234.6M | $236.7M | $223.1M | | Net Interest Margin (te) | 3.41% | 3.43% | 3.46% | | Provision for Credit Losses | $246.8M | $9.2M | $18.0M | | Noninterest Income | $84.4M | $82.9M | $70.5M | | Noninterest Expense | $203.3M | $197.9M | $175.7M | - Net charge-offs in Q1 2020 were **$43.8 million** (**0.83% of average loans**), up significantly from **$9.5 million** (**0.18%**) in Q4 2019, primarily due to **$35.9 million** in energy-related charge-offs[205](index=205&type=chunk)[206](index=206&type=chunk) - Other real estate and foreclosed asset expense was **$10.1 million**, which included a **$9.8 million non-cash write-down** of equity interests in two energy-related companies received in bankruptcy restructurings[230](index=230&type=chunk) [Liquidity and Capital Resources](index=51&type=section&id=Liquidity%20and%20Capital%20Resources) The company strengthened liquidity in Q1 2020, ending with nearly **$14 billion in available funding**, maintained strong regulatory capital ratios with CECL transition benefits, and sustained its quarterly dividend - At March 31, 2020, the company had nearly **$14 billion** in net available sources of funds, including **$2.9 billion** from the FHLB and **$4.4 billion** from the Federal Reserve Bank[248](index=248&type=chunk)[252](index=252&type=chunk) - The company elected to use the five-year CECL transition rule, which delays the estimated impact on regulatory capital, favorably impacting the leverage ratio by **19 bps** and risk-based capital ratios by **22 bps**[260](index=260&type=chunk) Key Capital Ratios | Ratio | March 31, 2020 | December 31, 2019 | | :--- | :--- | :--- | | Common equity tier 1 (CET1) | 10.02% | 10.50% | | Tier 1 leverage capital | 8.40% | 8.76% | | Tangible common equity ratio | 8.00% | 8.45% | - The company maintained its quarterly cash dividend of **$0.27 per share**, expressing confidence in its capital strength to sustain it[265](index=265&type=chunk) [Balance Sheet Analysis](index=54&type=section&id=Balance%20Sheet%20Analysis) Total loans grew to **$21.5 billion** at March 31, 2020, while the allowance for credit losses surged to **$475.0 million** (2.21% of loans) due to CECL and pandemic-related risks, with deposits also increasing - Total loans increased by **$302.9 million** (**1%**) QoQ to **$21.5 billion**, driven by increased originations and funding of credit lines[270](index=270&type=chunk) - The allowance for credit losses increased significantly to **$475.0 million**, or **2.21% of total loans**, at March 31, 2020, up from **0.92%** at December 31, 2019[280](index=280&type=chunk)[281](index=281&type=chunk) - The energy loan portfolio decreased to **$939.5 million** (**4.4% of total loans**), with an allowance coverage of **9.4%** of that portfolio[274](index=274&type=chunk)[282](index=282&type=chunk) - Total deposits grew by **$1.2 billion** (**5%**) QoQ to **$25.0 billion**, with noninterest-bearing deposits up **$429.0 million**[293](index=293&type=chunk)[294](index=294&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=62&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company's balance sheet is asset-sensitive, projecting increased net interest income in a rising rate environment, and is actively managing the transition away from LIBOR for its variable rate loans Net Interest Income (NII) Sensitivity to Interest Rate Changes | Change in Interest Rates (bps) | Estimated Increase in NII (Year 1) | Estimated Increase in NII (Year 2) | | :--- | :--- | :--- | | +100 | 2.70% | 5.22% | | +200 | 5.70% | 10.37% | | +300 | 8.42% | 14.91% | - The company's interest rate risk profile is generally asset-sensitive, driven by variable rate loans and a significant volume of non-interest bearing deposits[320](index=320&type=chunk) - As of March 31, 2020, approximately **32%** of the loan portfolio consisted of variable rate loans tied to LIBOR, and the company is actively managing the transition away from this benchmark[322](index=322&type=chunk) [Controls and Procedures](index=63&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of March 31, 2020, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by this report (March 31, 2020)[323](index=323&type=chunk) - There were no material changes to the company's internal control over financial reporting during the first quarter of 2020[324](index=324&type=chunk) Part II. Other Information [Legal Proceedings](index=64&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in various ordinary course legal proceedings, which management does not expect to have a material adverse effect on its financial position or liquidity - The company is party to various legal proceedings arising in the ordinary course of business, but management does not believe they will have a material adverse effect on its financial position or liquidity[327](index=327&type=chunk) [Risk Factors](index=64&type=section&id=Item%201A.%20Risk%20Factors) The COVID-19 pandemic is a significant new risk, potentially impacting credit, operations, and interest rates, exacerbating existing concentration risks in real estate, energy, healthcare, and hospitality sectors - The COVID-19 pandemic is a primary risk factor, with potential adverse impacts on credit, collateral values, customer demand, funding, operations, and interest rate risk[329](index=329&type=chunk) - Credit risk is heightened as business shutdowns and economic instability may cause customers to be unable to make scheduled loan payments, potentially leading to significant delinquencies and credit losses[330](index=330&type=chunk) - Operational risks have increased due to remote work arrangements, including greater cybersecurity threats and reliance on third-party vendors who may also be experiencing disruptions[333](index=333&type=chunk)[334](index=334&type=chunk) - The company is subject to lending concentration risk, with substantial portions of its loan portfolio in real estate, energy, healthcare, and hospitality, which are particularly vulnerable to the current economic downturn[337](index=337&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=66&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) During Q1 2020, the company repurchased **1,317,323 shares** at an average price of **$35.56 per share**, including shares from an ASR settlement, with **570,807 shares** remaining in the program Share Repurchase Activity for Q1 2020 | Period | Total Shares Purchased | Average Price Paid | Shares Remaining in Program | | :--- | :--- | :--- | :--- | | Jan 2020 | 315,851 | $40.26 | 1,572,279 | | Feb 2020 | 0 | N/A | 1,572,279 | | Mar 2020 | 1,001,472 | $34.07 | 570,807 | | **Total Q1** | **1,317,323** | **$35.56** | **570,807** |

Financial Data and Key Metrics Changes - The company reported a loss of $111 million or $1.28 per share for Q1 2020, which included a provision for credit losses of $247 million or $2.24 per share [21] - Pre-provision net revenue (PPNR) was flat from Q4 2019 but up nearly 6.5% from the same quarter a year ago [22] - The allowance for credit losses (ACL) ended the quarter at $475 million or 2.21% of period-end loans, reflecting a significant increase of $280 million or 144% from the previous year-end under the old incurred loss model [26][27] Business Line Data and Key Metrics Changes - Net interest margin (NIM) reported a decline of 2 basis points from the previous quarter, primarily due to expected accretion runoff related to the merger with MidSouth and the impact of Fed rate cuts [23] - Fee income increased by $1.5 million from the previous quarter, driven mainly by tax credit sales and BOLI income, although service charges and card fees were negatively impacted by COVID-19 [24][25] Market Data and Key Metrics Changes - The company has seen pandemic-related pressure on its energy portfolio and potential impacts on markets most affected by economic restrictions [13] - The company is proactively managing its reserves in anticipation of challenges in the energy sector and the New Orleans hospitality market [39] Company Strategy and Development Direction - The company is focused on maintaining solid capital and liquidity levels, with a common Tier 1 equity ratio just over 10% and a target tangible common equity (TCE) ratio of 8% [17][31] - The company has suspended all previous guidance for 2020 due to the uncertainty surrounding COVID-19 but intends to maintain the common dividend at the current level [32] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the rapidly changing economic environment and the inherent limitations in projecting future results [4] - The company is prepared for potential additional reserving in future quarters, emphasizing a proactive approach to managing credit risk [40] Other Important Information - The company has participated in the SBA's Paycheck Protection Program, originating nearly 4,900 loans totaling $1.7 billion [9] - The company has made $2.5 million in direct contributions to communities and associates during the pandemic [10] Q&A Session Summary Question: Is the current reserve build sufficient? - Management indicated that the reserve build was a combination of historical lessons and current economic modeling, emphasizing a proactive approach to credit risk management [38][39] Question: What is the outlook for the TCE ratio? - Management expressed confidence in maintaining the TCE ratio at 8% or above, depending on future reserve needs and profitability [42]

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 FORM 10-K ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2019 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number 001-36872 Hancock Whitney Corporation (Exact name of registrant as specified in its charter) | Mississippi | | 64-0693170 | | | --- | --- | --- | --- | | (State or ...

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 September 30, 2019 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number: 001-36872 HANCOCK WHITNEY CORPORATION (Exact name of registrant as specified in its charter) Mississippi 64-0 ...

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, 2019 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Commission file number: 001-36872 HANCOCK WHITNEY CORPORATION (Exact name of registrant as specified in its charter) Mississippi 64-069317 ...

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 March 31, 2019 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number: 001-36872 HANCOCK WHITNEY CORPORATION (Exact name of registrant as specified in its charter) Mississippi 64-06931 ...