First Quarter 2021 Earnings Conference Call 4/20/2021 Important cautionary statement about forward-looking statements This presentation contains forward-looking statements within the meaning of section 27A of the Securities Act of 1933, as amended, and section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements that we may make include statements regarding our expectations regarding our performance and financial condition, balance sheet and revenue growth, the provision for cr ...

Financial Data and Key Metrics Changes - Earnings for Q1 2021 were $107 million or $1.21 per share, an increase of almost $4 million or $0.04 from the previous quarter [7] - The provision for credit losses was a negative $4.9 million, indicating a release of loan loss reserves due to improved asset quality [8] - The common Tier 1 capital ratio increased by 41 basis points to an estimated 11.02% [10] Business Line Data and Key Metrics Changes - Core loans declined by $465 million linked quarter, primarily due to a runoff in indirect loans and increased residential mortgage payoffs [9] - The bank originated over $800 million in new PPP loans during the first quarter, with a lower-than-expected pace of forgiveness [9] Market Data and Key Metrics Changes - The bank reported declines in criticized and nonperforming loans of 11% and 20%, respectively [8] - The Eastern franchise showed loan growth, while the Central area, particularly New Orleans, remained under pressure but showed signs of improvement [9] Company Strategy and Development Direction - The company is focused on expense and efficiency initiatives, including an early retirement program expected to reduce expenses by approximately $19 million annually [15][16] - The management is cautiously optimistic about 2021 and beyond, depending on the success of vaccination programs and economic recovery [10] Management's Comments on Operating Environment and Future Outlook - Management noted a more positive operating environment compared to the end of the previous year, with signs of cautious optimism as markets reopen [7] - The company expects loan growth to pick up in the second half of the year, driven by an improved pipeline and economic conditions [22] Other Important Information - The bank's net interest margin (NIM) for the quarter was 3.09%, down 13 basis points, with expectations of further compression in the second quarter [13] - The early retirement program had a 40% acceptance rate, which was higher than expected, contributing to future expense reductions [48] Q&A Session Summary Question: Margin outlook and loan growth dependency - Management indicated that NIM stabilization is dependent on loan growth picking up in the second half of the year, with expectations of further compression in Q2 [20][21] Question: Capital returns and buyback plans - Management confirmed that they are evaluating options for capital returns, including potential buybacks, as capital builds from PPP loan forgiveness [25][26] Question: Expense guidance and operating leverage - Management acknowledged that while there will be natural growth in expenses, they aim for a significant reduction in overall expenses, targeting a more efficient operating model [31][32] Question: Loan growth appetite and mortgage paydowns - Management noted that while there is a strong appetite for home purchases, they do not plan to refill the mortgage bucket until the rate environment improves [59] Question: Green shoots in tourism and hospitality - Management reported positive changes in the hospitality outlook, particularly in New Orleans, with expectations for leisure tourism to rebound significantly [50][53]

PART I [ITEM 1. BUSINESS](index=7&type=section&id=ITEM%201.%20BUSINESS) Hancock Whitney Corporation is a regulated financial services company in the U.S. Gulf South, offering banking, trust, and investment services, with **$33.6 billion in assets** - **Key Financial Metrics (as of Dec 31, 2020)** | Metric | Amount (Billion USD) | | :--- | :--- | | Total Assets | $33.6 | | Total Loans | $21.8 | | Total Deposits | $27.7 | - The company's strategic focus in 2020 was on navigating the COVID-19 pandemic and a highly active hurricane season by de-risking its balance sheet, which included divesting a significant portion of its energy loan portfolio and issuing **$172.5 million of subordinated debt**[22](index=22&type=chunk) - The company operates primarily in the Gulf South region, including Mississippi, Alabama, Louisiana, Florida, and Texas, with a loan production office in Nashville, Tennessee[20](index=20&type=chunk) - As of December 31, 2020, the company had **3,986 full-time equivalent employees**, with headcount reduced by approximately **5%** in the latter half of 2020 through attrition and other efficiency initiatives[54](index=54&type=chunk) [Loan Portfolio and Underwriting](index=7&type=section&id=Loan%20Portfolio%20and%20Underwriting) The Bank's lending focuses on commercial, consumer, and real estate loans, with underwriting standards designed for consistency and risk management - The Bank's lending focuses on commercial, consumer, and real estate loans. Underwriting standards are designed for consistency and risk management, with specific policies for loan concentrations, collateral, and approval hierarchies[24](index=24&type=chunk)[25](index=25&type=chunk) - **Portfolio Segment Concentrations (as of Dec 31, 2020)** | Portfolio Segment | Concentration (% of risk-based capital) | | :--- | :--- | | Commercial non-real estate | 527% | | Commercial real estate - owner occupied | 103% | | Commercial real estate-income producing | 121% | | Construction and land development | 78% | | Residential mortgage | 92% | | Consumer | 121% | - The loan portfolio includes loans made under the SBA's Paycheck Protection Program (PPP), which are guaranteed by the SBA, bear **1% interest**, and have two or five-year terms[34](index=34&type=chunk) [Securities Portfolio](index=12&type=section&id=Securities%20Portfolio) The investment portfolio primarily consists of U.S. agency debt, mortgage-related securities, and municipal obligations, managed with a target effective duration of two to five and a half years - The investment portfolio primarily consists of U.S. agency debt, mortgage-related securities, and municipal obligations. It is managed with a target effective duration of **two to five and a half years**[47](index=47&type=chunk) - A significant portion of the securities portfolio is used to secure certain deposits and other liabilities, with limits on the percentage pledged to maintain liquidity[48](index=48&type=chunk) [Deposits and Trust Services](index=12&type=section&id=Deposits%20and%20Trust%20Services) Deposits are the most significant funding source, with levels in 2020 influenced by pandemic-driven factors, and the trust department managing approximately **$27.0 billion of assets** - Deposits are the most significant funding source. Deposit levels in 2020 were influenced by pandemic-driven factors, including government stimulus payments and PPP loan proceeds[50](index=50&type=chunk) - Brokered deposits decreased to **$14 million** at year-end 2020, as the company did not renew maturing brokered deposits due to strong growth in transaction and savings deposits[52](index=52&type=chunk) - The Bank's trust department had approximately **$27.0 billion of assets under administration** at December 31, 2020[53](index=53&type=chunk) [Supervision and Regulation](index=14&type=section&id=Supervision%20and%20Regulation) The company is a financial holding company subject to extensive supervision by federal and state authorities, with regulations primarily protecting consumers, depositors, and the Deposit Insurance Fund - The Company is a financial holding company subject to extensive supervision by the Federal Reserve, FDIC, and other state and federal agencies. Regulations are intended primarily for the protection of consumers, depositors, and the Deposit Insurance Fund (DIF)[64](index=64&type=chunk)[66](index=66&type=chunk)[67](index=67&type=chunk) - The Company and the Bank are subject to minimum capital requirements under Basel III rules. Both entities must maintain a capital conservation buffer of **2.5%** above minimums to avoid restrictions on dividends and share buybacks[79](index=79&type=chunk)[82](index=82&type=chunk) - **Company and Bank Capital Ratios (as of Dec 31, 2020)** | Ratio | Minimum + Buffer | Company | Bank | | :--- | :--- | :--- | :--- | | Tier 1 leverage capital | N/A | 7.88% | 8.11% | | Common Equity Tier 1 capital | 7.00% | 10.61% | 10.94% | | Tier 1 capital | 8.50% | 10.61% | 10.94% | | Total risk-based capital | 10.50% | 13.22% | 12.19% | - The Company adopted the CECL accounting standard on January 1, 2020, and elected the optional five-year transition period to delay the estimated impact on regulatory capital[87](index=87&type=chunk)[88](index=88&type=chunk) [ITEM 1A. RISK FACTORS](index=23&type=section&id=ITEM%201A.%20RISK%20FACTORS) The company faces material risks across economic, financial industry, operational, strategic, legal, and regulatory categories, including COVID-19 impacts and LIBOR transition challenges [Risks Related to Economic and Market Conditions](index=23&type=section&id=Risks%20Related%20to%20Economic%20and%20Market%20Conditions) The COVID-19 pandemic has created extensive disruptions, adversely impacting credit risk, collateral values, customer demand, and operational stability, with the ultimate impact remaining highly uncertain - The COVID-19 pandemic has created extensive disruptions, adversely impacting credit risk, collateral values, customer demand, and operational stability. The ultimate impact remains highly uncertain[122](index=122&type=chunk)[123](index=123&type=chunk) - The company has significant lending concentrations in commercial real estate, healthcare, hospitality, and energy, making it vulnerable to downturns in these sectors, which have been exacerbated by COVID-19[138](index=138&type=chunk) - The transition away from LIBOR after 2021 presents a significant risk, as it could adversely affect interest rates on a substantial portion of the company's variable-rate loans, derivatives, and other financial instruments[152](index=152&type=chunk)[154](index=154&type=chunk) [Risks Related to the Financial Services Industry](index=30&type=section&id=Risks%20Related%20to%20the%20Financial%20Services%20Industry) Effective liquidity management is essential, and access to funding could be impaired by factors affecting the financial services industry or the broader economy, while the CECL accounting standard adds potential volatility to credit loss allowances - Effective liquidity management is essential, and access to funding could be impaired by factors affecting the financial services industry or the broader economy[161](index=161&type=chunk) - The adoption of the CECL accounting standard on January 1, 2020, accelerates the recognition of expected credit losses and adds potential volatility to the allowance for credit losses due to its forward-looking nature[165](index=165&type=chunk) [Risks Related to Our Operations](index=31&type=section&id=Risks%20Related%20to%20Our%20Operations) The company is dependent on operational systems and infrastructure, and a failure or breach, including those of third-party vendors, could disrupt business, result in financial loss, and damage its reputation, with cybersecurity risks heightened by remote work - The company is dependent on operational systems and infrastructure, and a failure or breach, including those of third-party vendors, could disrupt business, result in financial loss, and damage its reputation[168](index=168&type=chunk)[169](index=169&type=chunk) - Cybersecurity risks have dramatically increased due to new technologies and sophisticated attackers. The transition to remote work during the COVID-19 pandemic has heightened these risks[173](index=173&type=chunk)[174](index=174&type=chunk) [Risks Related to Our Business Strategy](index=33&type=section&id=Risks%20Related%20to%20Our%20Business%20Strategy) The financial services industry is highly competitive, requiring adaptation to new technology-driven products and services, while future growth through acquisitions carries risks such as integration challenges and potential overpayment - The financial services industry is highly competitive, with pressure from larger institutions and non-bank competitors not subject to the same regulatory oversight. Success depends on the ability to adapt to new technology-driven products and services[181](index=181&type=chunk)[182](index=182&type=chunk) - Future growth may depend on acquisitions, which carry risks such as failing to obtain regulatory approval, integration challenges, and potentially overpaying for targets in a competitive M&A environment[188](index=188&type=chunk)[190](index=190&type=chunk)[191](index=191&type=chunk) [ITEM 1B. UNRESOLVED STAFF COMMENTS](index=40&type=section&id=ITEM%201B.%20UNRESOLVED%20STAFF%20COMMENTS) The company reports no unresolved staff comments from the SEC - None[220](index=220&type=chunk) [ITEM 2. PROPERTIES](index=40&type=section&id=ITEM%202.%20PROPERTIES) The company operates **208 full-service banking offices** and **275 ATMs** across the Gulf South, with its main office in Gulfport, Mississippi - The Company operates **208 full-service banking offices** and **275 automated teller machines** across its primary markets in the Gulf South[222](index=222&type=chunk) - Approximately **48%** of the company's banking facilities are owned, with the remaining facilities being leased[222](index=222&type=chunk) [ITEM 3. LEGAL PROCEEDINGS](index=40&type=section&id=ITEM%203.%20LEGAL%20PROCEEDINGS) The company is party to various legal proceedings arising in the ordinary course of business but does not believe any pending matters will have a material adverse effect on its financial position or liquidity - The company does not expect any pending legal proceedings to have a material adverse effect on its consolidated financial position or liquidity[223](index=223&type=chunk) [ITEM 4. MINE SAFETY DISCLOSURES](index=40&type=section&id=ITEM%204.%20MINE%20SAFETY%20DISCLOSURES) This item is not applicable to the company's operations - Not applicable[224](index=224&type=chunk) PART II [ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES](index=41&type=section&id=ITEM%205.%20MARKET%20FOR%20THE%20REGISTRANT%27S%20COMMON%20EQUITY%2C%20RELATED%20STOCKHOLDER%20MATTERS%20AND%20ISSUER%20PURCHASES%20OF%20EQUITY%20SECURITIES) The company's common stock trades on NASDAQ under 'HWC', and it repurchased approximately **4.9 million shares** at an average of **$37.65 per share** under a program that expired in 2020 - The Company's common stock is traded on the NASDAQ Global Select Market under the ticker symbol "**HWC**"[226](index=226&type=chunk) - A stock buyback program authorized in September 2019 for up to **5.5 million shares** expired on December 31, 2020. The company repurchased approximately **4.9 million shares** at an average price of **$37.65 per share** under this program[233](index=233&type=chunk)[235](index=235&type=chunk) - Final settlement of a **$185 million** Accelerated Share Repurchase (ASR) agreement occurred on March 18, 2020, resulting in a final delivery of **1,001,472 shares** and a cash receipt of approximately **$12.1 million**[234](index=234&type=chunk) [ITEM 6. SELECTED FINANCIAL DATA](index=43&type=section&id=ITEM%206.%20SELECTED%20FINANCIAL%20DATA) The company reported a **net loss of $45.2 million** in 2020, driven by a **$602.9 million provision for credit losses**, despite growth in total assets to **$33.6 billion** and deposits to **$27.7 billion** - **Selected Financial Data (2020 vs. 2019)** | Metric (in thousands, except per share) | 2020 | 2019 | | :--- | :--- | :--- | | Net income (loss) | $(45,174) | $327,380 | | Diluted earnings (loss) per share | $(0.54) | $3.72 | | Provision for credit losses | $602,904 | $47,708 | | Total assets (period-end) | $33,638,602 | $30,600,757 | | Total loans (period-end) | $21,789,931 | $21,212,755 | | Total deposits (period-end) | $27,697,877 | $23,803,575 | | Return on average assets | (0.14%) | 1.12% | | Net charge-offs to average loans | 1.78% | 0.23% | [ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=47&type=section&id=ITEM%207.%20MANAGEMENT%27S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) The company recorded a **$45.2 million net loss** in 2020, primarily due to a **$602.9 million provision for credit losses**, while assets grew to **$33.6 billion** and deposits to **$27.7 billion** [Executive Overview](index=47&type=section&id=Executive%20Overview) The company reported a **$45.2 million net loss** for 2020, heavily impacted by a **$602.9 million provision for credit losses**, despite stable operating pre-provision net revenue and significant growth in assets and deposits - The company reported a **net loss of $45.2 million** for 2020, heavily impacted by a **$602.9 million provision for credit losses**. This provision included **$160.1 million** related to the sale of a substantial portion of the energy loan portfolio[265](index=265&type=chunk) - Operating pre-provision net revenue (PPNR) was stable at **$491.2 million**, up slightly from 2019. Total assets grew **10%** to **$33.6 billion**, and deposits grew **16%** to **$27.7 billion**[252](index=252&type=chunk)[265](index=265&type=chunk) - The company participated in the Paycheck Protection Program (PPP), originating over **13,000 loans** totaling **$2.4 billion** in 2020, which contributed to loan growth and net interest income[257](index=257&type=chunk)[258](index=258&type=chunk) - Net interest margin (NIM) decreased by **17 basis points** to **3.27%** due to sharp interest rate contractions and a changing asset/liability mix from excess liquidity[265](index=265&type=chunk) [Results of Operations](index=50&type=section&id=Results%20of%20Operations) Net interest income increased by **5%** to **$955.5 million** in 2020, driven by growth in earning assets, while the provision for credit losses surged to **$602.9 million** due to the pandemic and an energy loan sale - Net interest income (tax-equivalent) increased by **5%** to **$955.5 million** in 2020, driven by a **$2.8 billion increase** in average earning assets, primarily from PPP loans and the MidSouth acquisition[271](index=271&type=chunk) - The provision for credit losses surged to **$602.9 million** in 2020 from **$47.7 million** in 2019, reflecting the economic impact of the pandemic and a **$160.1 million provision** for the energy loan sale[283](index=283&type=chunk) - Noninterest income increased by **3%** to **$324.4 million**, largely due to a **103% increase** in income from secondary mortgage market operations (**$40.2 million**) amid a favorable rate environment for refinancing[287](index=287&type=chunk)[293](index=293&type=chunk) - Noninterest expense rose **2%** to **$788.8 million**. Excluding prior-year merger costs, operating expenses increased by **7%**, driven by higher personnel costs and OREO write-downs[297](index=297&type=chunk) - The company recorded an income tax benefit at an effective rate of **63.8%** due to a pre-tax loss and benefits from the CARES Act, which allowed for a net operating loss (NOL) carryback to a higher tax rate year[310](index=310&type=chunk) [Balance Sheet Analysis](index=60&type=section&id=Balance%20Sheet%20Analysis) Total loans grew by **$0.6 billion** (3%) to **$21.8 billion**, primarily due to PPP loan originations, while total deposits increased by **$3.9 billion** (16%) to **$27.7 billion**, with noninterest-bearing deposits comprising **44%** - Total loans grew by **$0.6 billion (3%)** to **$21.8 billion**, primarily due to **$2.4 billion** in PPP loan originations, which was partially offset by the sale of a portion of the energy loan portfolio[326](index=326&type=chunk)[329](index=329&type=chunk) - The energy loan portfolio was significantly reduced to **$308 million** from **$1.0 billion** at year-end 2019, mainly due to a **$497 million loan sale** in July 2020[331](index=331&type=chunk) - Total deposits increased by **$3.9 billion (16%)** to **$27.7 billion**, with noninterest-bearing deposits growing **39%** to **$12.2 billion**, comprising **44%** of total deposits[368](index=368&type=chunk)[369](index=369&type=chunk) - The Allowance for Credit Losses (ACL) increased to **$480.1 million (2.20% of total loans)** from **$195.2 million**, reflecting the adoption of CECL and a significant reserve build due to the pandemic's economic impact[356](index=356&type=chunk) [Enterprise Risk Management](index=75&type=section&id=Enterprise%20Risk%20Management) The company manages risk through a framework overseen by the Board of Directors and senior management, focusing on seven primary risk categories, while actively managing interest rate risk and the transition from LIBOR - The company manages risk through a framework overseen by the Board of Directors and senior management, focusing on seven primary risk categories: credit, market, liquidity, operational, legal, reputational, and strategic[386](index=386&type=chunk)[387](index=387&type=chunk) - Asset/Liability management is a key function, utilizing models to quantify and control interest rate risk (IRR) with the objective of maintaining a stable net interest income[396](index=396&type=chunk)[399](index=399&type=chunk) - The company has a LIBOR Transition Working Group to manage the risks associated with the discontinuation of LIBOR. As of year-end 2020, approximately **30%** of the loan portfolio was tied to LIBOR[408](index=408&type=chunk)[409](index=409&type=chunk) - At December 31, 2020, the company had **$17.5 billion** in net available sources of liquidity from internal and external sources, demonstrating a strong liquidity position[410](index=410&type=chunk)[411](index=411&type=chunk) [Capital Resources](index=81&type=section&id=Capital%20Resources) Stockholders' equity totaled **$3.4 billion** at year-end 2020, with all regulatory capital ratios remaining well in excess of minimum requirements, including a Common Equity Tier 1 (CET1) ratio of **10.61%** - Stockholders' equity totaled **$3.4 billion** at year-end 2020, a slight decrease from **$3.5 billion** in 2019, attributable to the net loss and dividends, partially offset by gains in other comprehensive income[428](index=428&type=chunk) - All regulatory capital ratios remained well in excess of minimum requirements, including the capital conservation buffer. The Common Equity Tier 1 (CET1) ratio was **10.61%** at December 31, 2020[431](index=431&type=chunk)[432](index=432&type=chunk) - The company maintained its quarterly dividend of **$0.27 per share** throughout 2020, continuing an uninterrupted quarterly dividend payment history since 1967[437](index=437&type=chunk) [ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=87&type=section&id=ITEM%207A.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) The company's primary market risk is interest rate risk, with an asset-sensitive balance sheet projecting a **3.95% increase in net interest income** for a **+100 basis point rate shock** in year one - **Net Interest Income (NII) at Risk (as of Dec 31, 2020)** | Change in Interest Rates (bps) | Estimated Increase in NII (Year 1) | Estimated Increase in NII (Year 2) | | :--- | :--- | :--- | | +100 | 3.95% | 6.47% | | +200 | 8.62% | 14.13% | | +300 | 13.19% | 21.55% | - The company's balance sheet is generally asset-sensitive, driven by variable-rate loans and a high volume of non-interest bearing and low-rate sensitive deposits[402](index=402&type=chunk) [ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA](index=88&type=section&id=ITEM%208.%20FINANCIAL%20STATEMENTS%20AND%20SUPPLEMENTARY%20DATA) This section presents the company's audited consolidated financial statements and the independent auditor's unqualified report, highlighting the adoption of the CECL accounting standard [Note 1. Summary of Significant Accounting Policies and Recent Accounting Pronouncements](index=100&type=section&id=Note%201.%20Summary%20of%20Significant%20Accounting%20Policies%20and%20Recent%20Accounting%20Pronouncements) The company adopted the CECL accounting standard on January 1, 2020, requiring the measurement of expected credit losses over the life of financial assets - The company adopted ASC Topic 326, "Financial Instruments – Credit Losses" (CECL), on January 1, 2020. This new standard requires the measurement of expected credit losses over the life of financial assets based on historical experience, current conditions, and reasonable forecasts[508](index=508&type=chunk)[588](index=588&type=chunk) - **Impact of CECL Adoption (Jan 1, 2020)** | Item | Impact (in thousands) | | :--- | :--- | | Increase in Allowance for Loan Losses | $49,411 | | Increase in Reserve for Unfunded Commitments | $27,330 | | **Total Increase in Allowance for Credit Losses** | **$76,741** | | **Decrease to Retained Earnings (after-tax)** | **$44,087** | [Note 2. Business Combination](index=112&type=section&id=Note%202.%20Business%20Combination) On September 21, 2019, the company acquired MidSouth Bancorp, Inc. for **$193.8 million**, recording **$63.4 million in goodwill** - On September 21, 2019, the Company completed the acquisition of MidSouth Bancorp, Inc. The transaction was valued at **$193.8 million**, resulting in the acquisition of **$130.5 million** in net assets and the recording of **$63.4 million in goodwill**[597](index=597&type=chunk)[599](index=599&type=chunk) - The company incurred approximately **$32.7 million** in acquisition-related costs in 2019, including severance, professional services, and contract termination fees[600](index=600&type=chunk) [Note 4. Loans and Allowance for Credit Losses](index=118&type=section&id=Note%204.%20Loans%20and%20Allowance%20for%20Credit%20Losses) In 2020, the company sold **$497 million** of its energy loan portfolio to reduce risk, increasing the allowance for credit losses to **$450.2 million** - In 2020, the Company sold **$497 million** of its energy loan portfolio for net proceeds of approximately **$254.4 million** to reduce risk in the loan portfolio[619](index=619&type=chunk) - The allowance for credit losses increased from **$191.3 million** at year-end 2019 to **$450.2 million** at year-end 2020. This includes a **$49.4 million** adjustment upon adopting CECL and a **$604.3 million provision** for loan losses during the year, offset by net charge-offs[624](index=624&type=chunk) - At December 31, 2020, there were **176 loans** totaling **$630.6 million** with active short-term payment deferrals or other modifications under the CARES Act[635](index=635&type=chunk) [ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE](index=158&type=section&id=ITEM%209.%20CHANGES%20IN%20AND%20DISAGREEMENTS%20WITH%20ACCOUNTANTS%20ON%20ACCOUNTING%20AND%20FINANCIAL%20DISCLOSURE) The company reports no changes in or disagreements with its accountants on accounting and financial disclosure - None[797](index=797&type=chunk) [ITEM 9A. CONTROLS AND PROCEDURES](index=158&type=section&id=ITEM%209A.%20CONTROLS%20AND%20PROCEDURES) Management concluded that the company's disclosure controls and procedures and internal control over financial reporting were effective as of December 31, 2020, with no material changes during the fourth quarter - Management concluded that the company's disclosure controls and procedures were effective as of December 31, 2020[799](index=799&type=chunk) - Based on an evaluation using the COSO framework, management concluded that the company's internal control over financial reporting was effective as of December 31, 2020[801](index=801&type=chunk) [ITEM 9B. OTHER INFORMATION](index=158&type=section&id=ITEM%209B.%20OTHER%20INFORMATION) The company announced its Annual Meeting of Shareholders will be held virtually on Wednesday, April 21, 2021 - The Annual Meeting of Shareholders is scheduled for April 21, 2021, to be held virtually[803](index=803&type=chunk) PART III [ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE](index=158&type=section&id=ITEM%2010.%20DIRECTORS%2C%20EXECUTIVE%20OFFICERS%20AND%20CORPORATE%20GOVERNANCE) Information regarding directors, corporate governance, and compliance with Section 16(a) is incorporated by reference from the company's definitive proxy statement for its 2021 annual meeting, with executive officer information provided in Part I - Information required by this item concerning directors and corporate governance is incorporated by reference from the company's definitive proxy statement for the 2021 annual meeting of shareholders[804](index=804&type=chunk) - Information regarding executive officers is presented in Part I of this Form 10-K[805](index=805&type=chunk) [ITEM 11. EXECUTIVE COMPENSATION](index=159&type=section&id=ITEM%2011.%20EXECUTIVE%20COMPENSATION) Information concerning executive and director compensation, including the Compensation Discussion and Analysis, is incorporated by reference from the company's definitive proxy statement for its 2021 annual meeting - Information required by this item is incorporated by reference from the company's definitive proxy statement for the 2021 annual meeting of shareholders[806](index=806&type=chunk) [ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS](index=159&type=section&id=ITEM%2012.%20SECURITY%20OWNERSHIP%20OF%20CERTAIN%20BENEFICIAL%20OWNERS%20AND%20MANAGEMENT%20AND%20RELATED%20STOCKHOLDER%20MATTERS) Information regarding security ownership of certain beneficial owners and management is incorporated by reference from the company's definitive proxy statement for its 2021 annual meeting - Information required by this item is incorporated by reference from the company's definitive proxy statement for the 2021 annual meeting of shareholders[807](index=807&type=chunk) [ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE](index=159&type=section&id=ITEM%2013.%20CERTAIN%20RELATIONSHIPS%20AND%20RELATED%20TRANSACTIONS%2C%20AND%20DIRECTOR%20INDEPENDENCE) Information concerning related party transactions and director independence is incorporated by reference from the company's definitive proxy statement for its 2021 annual meeting - Information required by this item is incorporated by reference from the company's definitive proxy statement for the 2021 annual meeting of shareholders[808](index=808&type=chunk) [ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES](index=159&type=section&id=ITEM%2014.%20PRINCIPAL%20ACCOUNTANT%20FEES%20AND%20SERVICES) Information regarding principal accountant fees and services is incorporated by reference from the company's definitive proxy statement for its 2021 annual meeting - Information required by this item is incorporated by reference from the company's definitive proxy statement for the 2021 annual meeting of shareholders[809](index=809&type=chunk) PART IV [ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES](index=160&type=section&id=ITEM%2015.%20EXHIBITS%2C%20FINANCIAL%20STATEMENT%20SCHEDULES) This section lists the financial statements, financial statement schedules, and exhibits filed as part of the Form 10-K report, including consolidated financial statements and various agreements and certifications - This section lists all documents filed as part of the report, including the consolidated financial statements, consents of the independent registered public accounting firm, and certifications by the CEO and CFO[811](index=811&type=chunk)[812](index=812&type=chunk) [ITEM 16. FORM 10-K SUMMARY](index=163&type=section&id=ITEM%2016.%20FORM%2010-K%20SUMMARY) This item is not applicable to the company's filing - Not applicable[816](index=816&type=chunk)

Fourth Quarter 2020 Earnings Conference Call 1/20/2021 Important cautionary statement about forward-looking statements This presentation contains forward-looking statements within the meaning of section 27A of the Securities Act of 1933, as amended, and section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements that we may make include statements regarding our expectations regarding our performance and financial condition, balance sheet and revenue growth, the provision for c ...

Hancock Whitney Corporation (NASDAQ:HWC) Q4 2020 Earnings Conference Call January 20, 2021 5:00 PM ET Company Participants Trisha Carlson - EVP, IR Manager John Hairston - President and CEO Mike Achary - CFO Chris Ziluca - Chief Credit Officer Conference Call Participants Michael Rose - Raymond James Jennifer Demba - Truist Security Brett Rabatin - Hovde Group Kevin Fitzsimmons - D. A. Davidson Ebrahim Poonawala - Bank of America Merrill Lynch Catherine Mealor - KBW Brad Milsaps - Piper Sandler Matt Olney - ...

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, 2020 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 64-0693170 (State or o ...

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 ...