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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 other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)
﻿ |  |
Hancock Whitney Plaza, 2510 14th Street, Gulfport, Mississippi |  | 39501
(Address of principal executive offices) |  | (Zip Code)

(228) 868-4000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class | Trading symbol(s) | Name of each exchange on which registered
Common stock, par value $3.33 per share | HWC | Nasdaq

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No

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

Large accelerated filer | ☒ |  | Accelerated filer | ☐
Non-accelerated filer | ☐ |  | Smaller reporting company | ☐
Emerging growth company | ☐ |  |  |

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

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

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

86,412,669 common shares were outstanding at October 31, 2020.

Table of Contents

Hancock Whitney Corporation

Index

Part I. Financial Information | Page Number
ITEM 1. | Financial Statements | 4
| Consolidated Balance Sheets (unaudited) – September 30, 2020 and December 31, 2019 | 4
| Consolidated Statements of Income (unaudited) – Three and Nine Months Ended September 30, 2020 and 2019 | 5
| Consolidated Statements of Comprehensive Income (unaudited) – Three and Nine Months Ended September 30, 2020 and 2019 | 6
| Consolidated Statements of Changes in Stockholders’ Equity (unaudited) – Three and Nine Months Ended September 30, 2020 and 2019 | 7
| Consolidated Statements of Cash Flows (unaudited) – Nine Months Ended September 30, 2020 and 2019 | 8
| Notes to Consolidated Financial Statements (unaudited) – September 30, 2020 and 2019 | 9
ITEM 2. | Management's Discussion and Analysis of Financial Condition and Results of Operations | 43
ITEM 3. | Quantitative and Qualitative Disclosures about Market Risk | 71
ITEM 4. | Controls and Procedures | 72
Part II. Other Information |
ITEM 1. | Legal Proceedings | 74
ITEM 1A. | Risk Factors | 74
ITEM 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 77
ITEM 3. | Default on Senior Securities | N/A
ITEM 4. | Mine Safety Disclosures | N/A
ITEM 5. | Other Information | N/A
ITEM 6. | Exhibits | 77
Signatures | 78

2

Table of Contents

Hancock Whitney Corporation

Glossary of Defined Terms

Entities:

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

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

Company – Hancock Whitney Corporation and its consolidated subsidiaries

Parent – Hancock Whitney Corporation, exclusive of its subsidiaries

Bank – Hancock Whitney Bank

Other Terms:

ACL – allowance for credit losses

AFS – available for sale securities

AOCI – accumulated other comprehensive income or loss

ALLL – allowance for loan and lease losses

ARRC – Alternative Reference Rates Committee

ASC – Accounting Standards Codification

ASR – accelerated share repurchase

ASU – Accounting Standards Update

ATM – automated teller machine

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

Beta – amount by which deposit or loan costs change in response to movement in short-term interest rates

BOLI – bank-owned life insurance

bp(s) – basis point(s)

C&I – commercial and industrial loans

CARES Act – Coronavirus Aid, Relief, and Economic Security Act

CD – certificate of deposit

CDE – Community Development Entity

CECL – Current Expected Credit Losses, the term commonly used to refer to the methodology of estimating credit losses required by ASC 326, “Financial Instruments – Credit Losses.” ASC 326 was adopted by the Company on January 1, 2020, superseding the methodology prescribed by ASC 310.

CMO – collateralized mortgage obligation

Coronavirus – the novel coronavirus declared a pandemic during the first quarter of 2020, resulting in profound market disruptions

COVID-19 – disease caused by the novel coronavirus

FASB – Financial Accounting Standards Board

FDIC – Federal Deposit Insurance Corporation

FHLB – Federal Home Loan Bank

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

HTM – held to maturity securities

LIBOR – London Interbank Offered Rate

LIHTC – Low Income Housing Tax Credit

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

MidSouth – MidSouth Bancorp, Inc., an entity the Company acquired on September 21, 2019

NAICS – North American Industry Classification System

NII – net interest income

n/m – not meaningful

OCI – other comprehensive income or loss

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

PCD – purchased credit deteriorated loans, as defined by ASC 326

PCI – purchased credit impaired loans, as defined by ASC 310-30

PPP – Paycheck Protection Program, a loan program administered by the Small Business Administration designed to provide a direct incentive for small businesses to keep workers on payroll during interruptions caused by the COVID-19 pandemic

Reference rate reform – refers to the global transition away from LIBOR and other interbank offered rates toward new reference rates that are more reliable and robust

Repos – securities sold under agreements to repurchase

SBA – Small Business Administration

SEC – U.S. Securities and Exchange Commission

Securities Act – Securities Act of 1933, as amended

SOFR – secured overnight financing rate

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

TDR – troubled debt restructuring

TSR – total shareholder return

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

3

Table of Contents

Part I. Financial Information

Item 1. Financial Statements

Hancock Whitney Corporation and Subsidiaries

Consolidated Balance Sheets

(Unaudited)

|  | September 30, |  |  | December 31, |
(in thousands, except per share data) |  | 2020 |  |  | 2019 |
ASSETS |  |  |  |  |  |  |  |
Cash and due from banks |  | $ | 484,315 |  |  | $ | 432,104 |
Interest-bearing bank deposits |  |  | 778,363 |  |  |  | 109,961 |
Federal funds sold |  |  | 694 |  |  |  | 268 |
Securities available for sale, at fair value (amortized cost of $5,410,502 and $4,637,610) |  |  | 5,647,315 |  |  |  | 4,675,304 |
Securities held to maturity (fair value of $1,517,688 and $1,611,004) |  |  | 1,408,961 |  |  |  | 1,568,009 |
Loans held for sale |  |  | 103,566 |  |  |  | 55,864 |
Loans |  |  | 22,240,204 |  |  |  | 21,212,755 |
Less: allowance for loan losses |  |  | (448,674 | ) |  |  | (191,251 | )
Loans, net |  |  | 21,791,530 |  |  |  | 21,021,504 |
Property and equipment, net of accumulated depreciation of $266,241 and $249,527 |  |  | 384,329 |  |  |  | 380,209 |
Right of use assets, net of accumulated amortization of $20,309 and $12,194 |  |  | 114,420 |  |  |  | 110,023 |
Prepaid expenses |  |  | 40,003 |  |  |  | 40,178 |
Other real estate and foreclosed assets, net |  |  | 11,640 |  |  |  | 30,405 |
Accrued interest receivable |  |  | 112,686 |  |  |  | 92,037 |
Goodwill |  |  | 855,453 |  |  |  | 855,453 |
Other intangible assets, net |  |  | 91,505 |  |  |  | 106,807 |
Life insurance contracts |  |  | 611,713 |  |  |  | 608,063 |
Funded pension assets, net |  |  | 191,946 |  |  |  | 185,791 |
Other assets |  |  | 564,885 |  |  |  | 328,777 |
Total assets |  | $ | 33,193,324 |  |  | $ | 30,600,757 |
LIABILITIES AND STOCKHOLDERS' EQUITY |  |  |  |  |  |  |  |
Liabilities: |  |  |  |  |  |  |  |
Deposits |  |  |  |  |  |  |  |
Noninterest-bearing |  | $ | 11,881,548 |  |  | $ | 8,775,632 |
Interest-bearing |  |  | 15,149,111 |  |  |  | 15,027,943 |
Total deposits |  |  | 27,030,659 |  |  |  | 23,803,575 |
Short-term borrowings |  |  | 1,906,895 |  |  |  | 2,714,872 |
Long-term debt |  |  | 385,887 |  |  |  | 233,462 |
Accrued interest payable |  |  | 7,336 |  |  |  | 10,200 |
Lease liabilities |  |  | 134,007 |  |  |  | 127,703 |
Deferred tax liability, net |  |  | 46,665 |  |  |  | 37,721 |
Other liabilities |  |  | 306,231 |  |  |  | 205,539 |
Total liabilities |  |  | 29,817,680 |  |  |  | 27,133,072 |
Stockholders' equity: |  |  |  |  |  |  |  |
Common stock |  |  | 309,513 |  |  |  | 309,513 |
Capital surplus |  |  | 1,755,315 |  |  |  | 1,736,664 |
Retained earnings |  |  | 1,211,878 |  |  |  | 1,476,232 |
Accumulated other comprehensive income (loss), net |  |  | 98,938 |  |  |  | (54,724 | )
Total stockholders' equity |  |  | 3,375,644 |  |  |  | 3,467,685 |
Total liabilities and stockholders' equity |  | $ | 33,193,324 |  |  | $ | 30,600,757 |
Preferred shares authorized (par value of $20.00 per share) |  |  | 50,000 |  |  |  | 50,000 |
Preferred shares issued and outstanding |  |  | — |  |  |  | — |
Common shares authorized (par value of $3.33 per share) |  |  | 350,000 |  |  |  | 350,000 |
Common shares issued |  |  | 92,947 |  |  |  | 92,947 |
Common shares outstanding |  |  | 86,400 |  |  |  | 87,515 |

See notes to unaudited consolidated financial statements.

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Table of Contents

Hancock Whitney Corporation and Subsidiaries

Consolidated Statements of Income

(Unaudited)

|  | Three Months Ended |  |  | Nine Months Ended |
|  | September 30, |  |  | September 30, |
(in thousands, except per share data) |  | 2020 |  |  | 2019 |  |  | 2020 |  |  | 2019 |
Interest income: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Loans, including fees |  | $ | 220,392 |  |  | $ | 243,875 |  |  | $ | 688,032 |  |  | $ | 725,390 |
Loans held for sale |  |  | 833 |  |  |  | 592 |  |  |  | 2,104 |  |  |  | 1,189 |
Securities-taxable |  |  | 30,863 |  |  |  | 32,724 |  |  |  | 95,172 |  |  |  | 94,107 |
Securities-tax exempt |  |  | 4,831 |  |  |  | 5,058 |  |  |  | 14,629 |  |  |  | 15,715 |
Short-term investments |  |  | 124 |  |  |  | 915 |  |  |  | 791 |  |  |  | 3,424 |
Total interest income |  |  | 257,043 |  |  |  | 283,164 |  |  |  | 800,728 |  |  |  | 839,825 |
Interest expense: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Deposits |  |  | 14,783 |  |  |  | 49,220 |  |  |  | 76,349 |  |  |  | 145,201 |
Short-term borrowings |  |  | 1,673 |  |  |  | 7,729 |  |  |  | 8,388 |  |  |  | 23,658 |
Long-term debt |  |  | 5,404 |  |  |  | 3,276 |  |  |  | 11,754 |  |  |  | 8,905 |
Total interest expense |  |  | 21,860 |  |  |  | 60,225 |  |  |  | 96,491 |  |  |  | 177,764 |
Net interest income |  |  | 235,183 |  |  |  | 222,939 |  |  |  | 704,237 |  |  |  | 662,061 |
Provision for credit losses |  |  | 24,999 |  |  |  | 12,421 |  |  |  | 578,690 |  |  |  | 38,552 |
Net interest income (loss) after provision for credit losses |  |  | 210,184 |  |  |  | 210,518 |  |  |  | 125,547 |  |  |  | 623,509 |
Noninterest income: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Service charges on deposit accounts |  |  | 18,440 |  |  |  | 21,892 |  |  |  | 56,795 |  |  |  | 62,982 |
Trust fees |  |  | 14,424 |  |  |  | 15,098 |  |  |  | 43,390 |  |  |  | 46,126 |
Bank card and ATM fees |  |  | 17,222 |  |  |  | 17,154 |  |  |  | 50,541 |  |  |  | 49,063 |
Investment and annuity fees and insurance commissions |  |  | 5,988 |  |  |  | 7,048 |  |  |  | 18,504 |  |  |  | 20,167 |
Secondary mortgage market operations |  |  | 12,875 |  |  |  | 5,713 |  |  |  | 28,736 |  |  |  | 13,872 |
Other income |  |  | 14,799 |  |  |  | 16,325 |  |  |  | 44,112 |  |  |  | 40,773 |
Total noninterest income |  |  | 83,748 |  |  |  | 83,230 |  |  |  | 242,078 |  |  |  | 232,983 |
Noninterest expense: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Compensation expense |  |  | 97,095 |  |  |  | 93,858 |  |  |  | 286,922 |  |  |  | 265,573 |
Employee benefits |  |  | 20,761 |  |  |  | 18,622 |  |  |  | 64,892 |  |  |  | 57,240 |
Personnel expense |  |  | 117,856 |  |  |  | 112,480 |  |  |  | 351,814 |  |  |  | 322,813 |
Net occupancy expense |  |  | 13,191 |  |  |  | 13,156 |  |  |  | 39,272 |  |  |  | 38,101 |
Equipment expense |  |  | 5,355 |  |  |  | 4,685 |  |  |  | 14,724 |  |  |  | 13,706 |
Data processing expense |  |  | 21,888 |  |  |  | 21,532 |  |  |  | 65,185 |  |  |  | 60,951 |
Professional services expense |  |  | 14,372 |  |  |  | 17,704 |  |  |  | 35,098 |  |  |  | 35,537 |
Amortization of intangible assets |  |  | 4,788 |  |  |  | 4,889 |  |  |  | 15,302 |  |  |  | 15,074 |
Deposit insurance and regulatory fees |  |  | 4,108 |  |  |  | 3,995 |  |  |  | 15,039 |  |  |  | 14,156 |
Other real estate and foreclosed asset (income) expense |  |  | (482 | ) |  |  | 2,055 |  |  |  | 9,188 |  |  |  | 1,459 |
Other expense |  |  | 14,698 |  |  |  | 33,058 |  |  |  | 50,026 |  |  |  | 71,024 |
Total noninterest expense |  |  | 195,774 |  |  |  | 213,554 |  |  |  | 595,648 |  |  |  | 572,821 |
Income (loss) before income taxes |  |  | 98,158 |  |  |  | 80,194 |  |  |  | (228,023 | ) |  |  | 283,671 |
Income taxes expense (benefit) |  |  | 18,802 |  |  |  | 12,387 |  |  |  | (79,274 | ) |  |  | 48,423 |
Net income (loss) |  | $ | 79,356 |  |  | $ | 67,807 |  |  | $ | (148,749 | ) |  | $ | 235,248 |
Earnings (loss) per common share-basic |  | $ | 0.90 |  |  | $ | 0.77 |  |  | $ | (1.73 | ) |  | $ | 2.69 |
Earnings (loss) per common share-diluted |  | $ | 0.90 |  |  | $ | 0.77 |  |  | $ | (1.73 | ) |  | $ | 2.69 |
Dividends paid per share |  | $ | 0.27 |  |  | $ | 0.27 |  |  | $ | 0.81 |  |  | $ | 0.81 |
Weighted average shares outstanding-basic |  |  | 86,358 |  |  |  | 86,377 |  |  |  | 86,614 |  |  |  | 85,934 |
Weighted average shares outstanding-diluted |  |  | 86,400 |  |  |  | 86,462 |  |  |  | 86,614 |  |  |  | 86,010 |

See notes to unaudited consolidated financial statements.

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Table of Contents

Hancock Whitney Corporation and Subsidiaries

Consolidated Statements of Comprehensive Income

(Unaudited)

|  | Three Months Ended |  |  | Nine Months Ended |
|  | September 30, |  |  | September 30, |
(in thousands) |  | 2020 |  |  | 2019 |  |  | 2020 |  |  | 2019 |
Net income (loss) |  | $ | 79,356 |  |  | $ | 67,807 |  |  | $ | (148,749 | ) |  | $ | 235,248 |
Other comprehensive income (loss) before income taxes: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net change in unrealized gain or loss on securities available for sale and cash flow hedges |  |  | 425 |  |  |  | 34,159 |  |  |  | 217,254 |  |  |  | 160,627 |
Reclassification of net gain or loss realized and included in earnings |  |  | (4,076 | ) |  |  | 3,280 |  |  |  | (6,593 | ) |  |  | 11,483 |
Valuation adjustment to employee benefit plan |  |  | — |  |  |  | (7,015 | ) |  |  | (10,251 | ) |  |  | (7,015 | )
Amortization of unrealized net loss or gain on securities transferred to held to maturity |  |  | (89 | ) |  |  | 954 |  |  |  | (378 | ) |  |  | 2,435 |
Other comprehensive income (loss) before income taxes |  |  | (3,740 | ) |  |  | 31,378 |  |  |  | 200,032 |  |  |  | 167,530 |
Income tax expense |  |  | 48 |  |  |  | 7,331 |  |  |  | 46,370 |  |  |  | 37,977 |
Other comprehensive income (loss) net of income taxes |  |  | (3,788 | ) |  |  | 24,047 |  |  |  | 153,662 |  |  |  | 129,553 |
Comprehensive income |  | $ | 75,568 |  |  | $ | 91,854 |  |  | $ | 4,913 |  |  | $ | 364,801 |

See notes to unaudited consolidated financial statements.

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Table of Contents

Hancock Whitney Corporation and Subsidiaries

Consolidated Statements of Changes in Stockholders’ Equity

(Unaudited)

Three Months Ended September 30, 2020 and 2019 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Accumulated |  |  |  |  |
|  | Common Stock |  |  |  |  |  |  |  |  |  |  | Other |  |  |  |  |
(in thousands, except per share data) |  | Shares Issued |  |  | Amount |  |  | Capital Surplus |  |  | Retained Earnings |  |  | Comprehensive Income (Loss), Net |  |  | Total |
Balance, June 30, 2020 |  |  | 92,947 |  |  | $ | 309,513 |  |  | $ | 1,747,640 |  |  | $ | 1,156,278 |  |  | $ | 102,726 |  |  | $ | 3,316,157 |
Net income |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 79,356 |  |  |  | — |  |  |  | 79,356 |
Other comprehensive loss |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (3,788 | ) |  |  | (3,788 | )
Comprehensive income |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 79,356 |  |  |  | (3,788 | ) |  |  | 75,568 |
Cash dividends declared ($0.27 per common share) |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (23,803 | ) |  |  | — |  |  |  | (23,803 | )
Common stock activity, long-term incentive plans |  |  | — |  |  |  | — |  |  |  | 6,595 |  |  |  | 47 |  |  |  | — |  |  |  | 6,642 |
Issuance of stock from dividend reinvestment and stock purchase plans |  |  | — |  |  |  | — |  |  |  | 1,080 |  |  |  | — |  |  |  | — |  |  |  | 1,080 |
Balance, September 30, 2020 |  |  | 92,947 |  |  | $ | 309,513 |  |  | $ | 1,755,315 |  |  | $ | 1,211,878 |  |  | $ | 98,938 |  |  | $ | 3,375,644 |
Balance, June 30, 2019 |  |  | 87,903 |  |  | $ | 292,716 |  |  | $ | 1,737,492 |  |  | $ | 1,363,910 |  |  | $ | (75,203 | ) |  | $ | 3,318,915 |
Net income |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 67,807 |  |  |  | — |  |  |  | 67,807 |
Other comprehensive income |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 24,047 |  |  |  | 24,047 |
Comprehensive income |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 67,807 |  |  |  | 24,047 |  |  |  | 91,854 |
Cash dividends declared ($0.27 per common share) |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (23,597 | ) |  |  | — |  |  |  | (23,597 | )
Common stock issued in business combination |  |  | 5,044 |  |  |  | 16,797 |  |  |  | 177,052 |  |  |  | — |  |  |  | — |  |  |  | 193,849 |
Common stock activity, long-term incentive plan |  |  | — |  |  |  | — |  |  |  | 4,407 |  |  |  | 63 |  |  |  | — |  |  |  | 4,470 |
Issuance of stock from dividend reinvestment and stock purchase plans |  |  | — |  |  |  | — |  |  |  | 889 |  |  |  | — |  |  |  | — |  |  |  | 889 |
Balance, September 30, 2019 |  |  | 92,947 |  |  | $ | 309,513 |  |  | $ | 1,919,840 |  |  | $ | 1,408,183 |  |  | $ | (51,156 | ) |  | $ | 3,586,380 |
Nine Months Ended September 30, 2020 and 2019 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Accumulated |  |  |  |  |
|  | Common Stock |  |  |  |  |  |  |  |  |  |  | Other |  |  |  |  |
(in thousands, except per share data) |  | Shares Issued |  |  | Amount |  |  | Capital Surplus |  |  | Retained Earnings |  |  | Comprehensive Income (Loss), Net |  |  | Total |
Balance, December 31, 2019 |  |  | 92,947 |  |  | $ | 309,513 |  |  | $ | 1,736,664 |  |  | $ | 1,476,232 |  |  | $ | (54,724 | ) |  | $ | 3,467,685 |
Net loss |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (148,749 | ) |  |  | — |  |  |  | (148,749 | )
Other comprehensive income |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 153,662 |  |  |  | 153,662 |
Comprehensive income |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (148,749 | ) |  |  | 153,662 |  |  |  | 4,913 |
Cumulative effect of change in accounting principle |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (44,087 | ) |  |  | — |  |  |  | (44,087 | )
Cash dividends declared ($0.81 per common share) |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (71,620 | ) |  |  | — |  |  |  | (71,620 | )
Common stock activity, long-term incentive plans |  |  | — |  |  |  | — |  |  |  | 16,159 |  |  |  | 102 |  |  |  | — |  |  |  | 16,261 |
Net settlement of accelerated share repurchase agreement (1,001,472 shares) |  |  | — |  |  |  | — |  |  |  | 12,110 |  |  |  | — |  |  |  | — |  |  |  | 12,110 |
Repurchase of common stock |  |  | — |  |  |  | — |  |  |  | (12,716 | ) |  |  | — |  |  |  | — |  |  |  | (12,716 | )
Issuance of stock from dividend reinvestment and stock purchase plans |  |  | — |  |  |  | — |  |  |  | 3,098 |  |  |  | — |  |  |  | — |  |  |  | 3,098 |
Balance, September 30, 2020 |  |  | 92,947 |  |  | $ | 309,513 |  |  | $ | 1,755,315 |  |  | $ | 1,211,878 |  |  | $ | 98,938 |  |  | $ | 3,375,644 |
Balance, December 31, 2018 |  |  | 87,903 |  |  | $ | 292,716 |  |  | $ | 1,725,741 |  |  | $ | 1,243,592 |  |  | $ | (180,709 | ) |  | $ | 3,081,340 |
Net income |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 235,248 |  |  |  | — |  |  |  | 235,248 |
Other comprehensive income |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 129,553 |  |  |  | 129,553 |
Comprehensive income |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 235,248 |  |  |  | 129,553 |  |  |  | 364,801 |
Cash dividends declared ($0.81 per common share) |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (70,771 | ) |  |  | — |  |  |  | (70,771 | )
Common stock issued in business combination |  |  | 5,044 |  |  |  | 16,797 |  |  |  | 177,052 |  |  |  | — |  |  |  | — |  |  |  | 193,849 |
Common stock activity, long-term incentive plan |  |  | — |  |  |  | — |  |  |  | 14,355 |  |  |  | 114 |  |  |  | — |  |  |  | 14,469 |
Issuance of stock from dividend reinvestment and stock purchase plans |  |  | — |  |  |  | — |  |  |  | 2,692 |  |  |  | — |  |  |  | — |  |  |  | 2,692 |
Balance, September 30, 2019 |  |  | 92,947 |  |  | $ | 309,513 |  |  | $ | 1,919,840 |  |  | $ | 1,408,183 |  |  | $ | (51,156 | ) |  | $ | 3,586,380 |

See notes to unaudited consolidated financial statements.

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Table of Contents

Hancock Whitney Corporation and Subsidiaries

Consolidated Statements of Cash Flows

(Unaudited)

|  | Nine Months Ended |
|  | September 30, |
(in thousands) |  | 2020 |  |  | 2019 |
CASH FLOWS FROM OPERATING ACTIVITIES: |  |  |  |  |  |  |  |
Net income (loss) |  | $ | (148,749 | ) |  | $ | 235,248 |
Adjustments to reconcile net income to net cash provided by operating activities: |  |  |  |  |  |  |  |
Depreciation and amortization |  |  | 22,869 |  |  |  | 22,867 |
Provision for credit losses |  |  | 578,690 |  |  |  | 38,552 |
Loss on other real estate and foreclosed assets |  |  | 9,252 |  |  |  | 852 |
Gain on sale of securities |  |  | (488 | ) |  |  | — |
Deferred tax expense (benefit) |  |  | (28,949 | ) |  |  | 30,136 |
Increase in cash surrender value of life insurance contracts |  |  | (14,443 | ) |  |  | (10,792 | )
(Gain) loss on disposal of other assets |  |  | (556 | ) |  |  | 70 |
Net increase in loans held for sale |  |  | (46,691 | ) |  |  | (46,727 | )
Net amortization of securities premium/discount |  |  | 30,576 |  |  |  | 23,133 |
Amortization of intangible assets |  |  | 15,302 |  |  |  | 15,074 |
Stock-based compensation expense |  |  | 16,661 |  |  |  | 15,497 |
Net change in liability from variation margin collateral |  |  | (102,501 | ) |  |  | (42,500 | )
Contribution to pension plan |  |  | — |  |  |  | (100,000 | )
Increase (decrease) in interest payable and other liabilities |  |  | 11,369 |  |  |  | (1,632 | )
Increase in other assets |  |  | (97,265 | ) |  |  | (10,631 | )
Other, net |  |  | (17,607 | ) |  |  | (2,854 | )
Net cash provided by operating activities |  |  | 227,470 |  |  |  | 166,293 |
CASH FLOWS FROM INVESTING ACTIVITIES: |  |  |  |  |  |  |  |
Proceeds from the sale of available for sale securities |  |  | 211,919 |  |  |  | 143,334 |
Proceeds from maturities of securities available for sale |  |  | 662,269 |  |  |  | 204,391 |
Purchases of securities available for sale |  |  | (1,667,476 | ) |  |  | (810,198 | )
Proceeds from maturities of securities held to maturity |  |  | 169,863 |  |  |  | 297,150 |
Purchases of securities held to maturity |  |  | (20,884 | ) |  |  | (183,626 | )
Net (increase) decrease in short-term investments |  |  | (668,828 | ) |  |  | 383,970 |
Proceeds from sales of loans and leases |  |  | 301,609 |  |  |  | 111,141 |
Net increase in loans |  |  | (1,657,939 | ) |  |  | (353,971 | )
Purchase of life insurance contracts |  |  | — |  |  |  | (32,788 | )
Purchases of property and equipment |  |  | (31,214 | ) |  |  | (33,746 | )
Proceeds from sales of other real estate |  |  | 15,299 |  |  |  | 20,764 |
Cash acquired in stock-based business combination |  |  | — |  |  |  | 28,060 |
Final cash settlement for acquisition of business |  |  | — |  |  |  | (1,112 | )
Other, net |  |  | (4,412 | ) |  |  | (19,815 | )
Net cash used in investing activities |  |  | (2,689,794 | ) |  |  | (246,446 | )
CASH FLOWS FROM FINANCING ACTIVITIES: |  |  |  |  |  |  |  |
Net increase (decrease) in deposits |  |  | 3,227,084 |  |  |  | (229,964 | )
Net increase (decrease) in short-term borrowings |  |  | (807,977 | ) |  |  | 452,691 |
Proceeds from the issuance of long-term debt, net of issuance costs |  |  | 166,425 |  |  |  | 11,649 |
Repayments of long-term debt |  |  | (230 | ) |  |  | (226 | )
Dividends paid |  |  | (71,620 | ) |  |  | (70,771 | )
Payroll tax remitted on net share settlement of equity awards |  |  | (1,639 | ) |  |  | (1,594 | )
Proceeds from exercise of stock options |  |  | — |  |  |  | 367 |
Proceeds from dividend reinvestment and stock purchase plans |  |  | 3,098 |  |  |  | 2,692 |
Settlement of forward contract portion of accelerated share repurchase |  |  | 12,110 |  |  |  | — |
Repurchase of shares |  |  | (12,716 | ) |  |  | — |
Net cash provided by financing activities |  |  | 2,514,535 |  |  |  | 164,844 |
NET INCREASE IN CASH AND DUE FROM BANKS |  |  | 52,211 |  |  |  | 84,691 |
CASH AND DUE FROM BANKS, BEGINNING |  |  | 432,104 |  |  |  | 383,372 |
CASH AND DUE FROM BANKS, ENDING |  | $ | 484,315 |  |  | $ | 468,063 |
SUPPLEMENTAL INFORMATION FOR NON-CASH |  |  |  |  |  |  |  |
INVESTING AND FINANCING ACTIVITIES |  |  |  |  |  |  |  |
Value of stock-based consideration in business combination |  | $ | — |  |  | $ | 193,849 |
Assets acquired in settlement of loans |  |  | 5,459 |  |  |  | 14,170 |

See notes to unaudited consolidated financial statements.

8

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HANCOCK WHITNEY CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1. Basis of Presentation

The consolidated financial statements include the accounts of Hancock Whitney Corporation and all other entities in which it has a controlling interest (the “Company”). The financial statements include all adjustments that are, in the opinion of management, necessary to fairly state the Company’s financial condition, results of operations, changes in stockholders’ equity and cash flows for the interim periods presented. The Company has also evaluated all subsequent events for potential recognition and disclosure through the date of the filing of this Quarterly Report on Form 10-Q. Some financial information and disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the U.S. (“GAAP”) have been condensed or omitted in this Quarterly Report on Form 10-Q pursuant to Securities and Exchange Commission rules and regulations. These financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019. Financial information reported in these financial statements is not necessarily indicative of the Company’s financial condition, results of operations, or cash flows for any other interim or annual period.

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

Use of Estimates

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

Critical Accounting Policies and Estimates

On January 1, 2020, the Company adopted Accounting Standards Codification (“ASC”) 326, “Financial Instruments – Credit Losses,” more commonly referred to as CECL, on a modified retrospective basis. The provisions of this guidance require a material change to the manner in which the Company estimates and reports losses on financial instruments, including loans and unfunded lending commitments, select securities and other assets carried at amortized cost. Results for reporting periods beginning after January 1, 2020 are presented under ASC 326, while prior period amounts continue to be reported in accordance with previously applicable GAAP. Changes to the Company’s accounting policies related to CECL are described below. Further, the Company performed an interim test of goodwill impairment using a quantitative assessment, as described below. There were no other material changes or developments during the reporting period with respect to methodologies that the Company uses when applying what management believes are critical accounting policies and developing critical accounting estimates as disclosed in its Annual Report on Form 10-K for the year ended December 31, 2019. Refer to Note 16 – Recent Accounting Pronouncements for a discussion of accounting standards adopted during the nine months ended September 30, 2020 and the impact to the Company’s financial statements.

Accounting Policy Updates

Allowance for Credit Losses on Loans, Leases Held for Investment and Unfunded Exposures

For reporting periods beginning on or after January 1, 2020, the Allowance for Credit Losses (ACL) is comprised of the Allowance for Loan and Lease Losses (ALLL), a valuation account available to absorb losses on loans and leases held for investment, and the Reserve for Unfunded Lending Commitments, a liability established to absorb credit losses for the expected life of the contractual term of on and off-balance sheet exposures as of the date of the determination. Quarterly, management estimates losses in the portfolio and unfunded exposures based on a number of factors, including the Company’s past loan loss experience, known and potential risks in the portfolio, adverse situations that may affect the borrowers’ ability to repay, the estimated value of any underlying collateral, and current and forecasted economic conditions.

The analysis and methodology for estimating the ACL includes two primary elements: a collective approach for pools of loans that have similar risk characteristics using a loss rate analysis, and a specific reserve analysis for credits individually evaluated for credit loss. For the collective approach, the Company segments loans into commercial non-real estate, commercial real estate – owner occupied, commercial real estate – income producing, construction and land development, residential mortgage and consumer, with further segmentation by region and sub-portfolio, as deemed appropriate. Both quantitative and qualitative factors are applied at the portfolio segment levels. The Company applies the practical expedient that permits the exclusion of the accrued interest receivable balance from amortized cost basis of financing receivables.

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For the collectively evaluated portfolios, the Company utilizes internally developed credit models and third party economic forecasts for the calculation of expected credit loss over the reasonable and supportable forecast period for the majority of the portfolio and other methods, generally historical loss based, for select portfolios. The Company calculates collective allowance for a two-year reasonable and supportable forecast period utilizing probability weighted multiple macroeconomic scenarios, and then reverts on a linear basis over four quarters to an average historical loss rate for the remaining term. The credit models consist primarily of multivariate regression and autoregressive models that correlate our historical net charge-off rates to select macroeconomic variables at a collective level. Forward-looking macroeconomic forecasts are applied as inputs to the regression equations to estimate quarterly collective net charge-off rates over the reasonable and supportable period. The net charge-off rates from the credit models for the reasonable and supportable period, the linear reversion rates, and the average loss rates for the post reasonable and supportable periods are applied to forecasted balance runoff for the estimated remaining term. The balance runoff incorporates prepayment assumptions developed from historical experience that are applied to the multiple macroeconomic forecasts. Forecasted net charge-off rates are also applied to forecasted draws and subsequent runoff of unfunded commitments in the calculation of the reserve for unfunded lending commitments. Qualitative adjustments to the output of quantitative calculations are made when management deems it necessary to reflect differences in current and forecasted conditions as compared to those during the historical loss period used in model development. Conditions to be considered include, but are not limited to, problem loan trends, current business and economic conditions, credit concentrations, lending policies and procedures, lending staff, collateral values, loan profiles and volumes, loan review quality, changes in competition and regulations, and other adjustments for model limitations or other variables not specifically captured.

The Company establishes specific reserves using an individually evaluated approach for nonaccrual loans, loans modified in troubled debt restructures, loans for which a troubled debt restructure is reasonably expected, and other financial instruments that are deemed to not share risk characteristics with other collectively evaluated financial assets. For loans individually evaluated, a specific allowance is recognized for any shortfall between the loan’s value and its recorded investment. The loan’s value is measured by either the loan’s observable market price, the fair value of the collateral of the loan (less liquidation costs) if it is collateral dependent, or by the present value of expected future cash flows discounted at the loan’s effective interest rate. The Company applies the practical expedient and defines collateral dependent loans as those where the borrower is experiencing financial difficulty and on which repayment is expected to be provided substantially through the operation or sale of the collateral. Loans individually analyzed are not incorporated into the pool analysis to avoid double counting. The Company limits the individually evaluated specific reserve analysis to include commercial and residential mortgage loans with relationship balances of $1 million or greater and all loans classified as troubled debt restructurings.

Acquired Loans and Other Financial Assets

Acquired loans and other financial assets within the scope of CECL are segregated between those purchased with credit deterioration (“PCD”) and those that are not (“non PCD”). Assets considered PCD include those individual financial assets (or groups of financial assets with similar risk characteristics) that as of the date of acquisition are assessed as having experienced a more-than-insignificant deterioration in credit quality since origination. The assessment of what is more-than-insignificant credit deterioration since origination considers information including, but not limited to, financial assets that are delinquent, on nonaccrual and/or otherwise adversely risk rated as of the acquisition date, those that have been downgraded since origination, and those for which, after origination, credit spreads have widened beyond the threshold specified in policy. The Company bifurcates the fair value discount between the credit and noncredit components and records an allowance for credit losses for PCD assets by adding the credit portion of the fair value discount to the initial amortized cost basis and increasing the allowance for credit losses at the date of acquisition. Any noncredit discount or premium resulting from acquiring assets with credit deterioration is allocated to each individual asset. All non PCD financial assets acquired are recorded at the estimated fair value of the asset at acquisition, with the estimated allowance for credit loss recorded as a provision for credit losses through earnings in the period in which the acquisition has occurred. The noncredit discount or premium for PCD assets and full discount for non PCD assets will be accreted to interest income using the interest method based on the effective interest rate at the acquisition date.

Under the transition provisions for application of CECL, the Company has classified all purchased credit impaired loans (“PCI”) previously accounted for under Financial Accounting Standard Subtopic 310-30 to be classified as PCD, without reassessing whether the financial assets meet the criteria of PCD as of the date of adoption. The application of these provisions resulted in an adjustment to the amortized cost basis of the financial asset to reflect the addition of the allowance for credit losses at the date of adoption. The Company elected not to maintain pools of loans accounted for under Subtopic 310-30 at adoption. The Company was also not required to reassess whether modifications to individual acquired financial assets accounted for in pools were troubled debt restructurings as of the date of adoption. The noncredit discount, after the adjustment for the allowance for credit losses, will be accreted to interest income using the interest method based on the effective interest rate determined after the adjustment for credit losses at the adoption date.

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Allowance for Credit Losses on Securities

The CECL standard also requires an assessment of the Company’s held to maturity debt securities for expected credit losses and the available for sale debt securities for credit-related impairment. The Company applies the practical expedient to exclude the accrued interest receivable balance from amortized cost basis of financing receivables. The allowance for credit losses on held to maturity debt securities is estimated at the individual security level when there is a more than inconsequential risk of default. The assessment uses probability of default and loss given default models based on public ratings, where available, or mapped internally developed risk grades to public ratings and forecasted cash flows using the same economic forecasts and probability weighting as used for the Company’s evaluation of the loan portfolio. Qualitative adjustments to the output of the quantitative calculation are made when management deems it necessary to reflect differences in current and forecasted conditions as compared to those during the historical loss period used in model development. The Company evaluates credit impairment on available for sale debt securities at an individual security level. This evaluation is done for securities whose fair value is below amortized cost with a more than inconsequential risk of default and where the Company has assessed the decline in fair value is significant enough to suggest a credit event occurred. Credit events are generally assessed based on adverse conditions specifically related to the security, an industry, or geographic area, changes in the financial condition of the issuer of the security, or in the case of an asset-backed debt security, changes in the financial condition of the underlying loan obligors. The allowance for credit losses for such securities is measured using a discounted cash flow methodology, through which management compares the present value of expected cash flows with the amortized cost basis of the security. The allowance for credit loss is limited to the amount by which the fair value is less than the amortized cost basis.

The Company reassesses the potential for credit losses at each reporting period and records subsequent changes in the allowance for credit losses on securities with a corresponding adjustment recorded in the provision for credit loss expense. If the Company intends to sell the debt security, or more likely than not will be required to sell the security before recovery of its amortized cost basis, the security is charged down to fair value against the allowance for credit losses, with any incremental impairment reported in earnings.

Critical Accounting Estimates

Goodwill Impairment Testing

Goodwill, which represents the excess of cost over the fair value of the net assets of an acquired business, is not amortized but is assessed for impairment on an annual basis, or more often if events or circumstances indicate that it is more likely than not that a goodwill impairment exists. The impairment test compares the estimated fair value of a reporting unit with its net book value. If the unit’s fair value is less than its carrying value, an impairment is recognized.

The Company completed its annual impairment test of goodwill as of September 30, 2019 by performing a qualitative (“Step Zero”) assessment. The qualitative assessment involved the examination of changes in macroeconomic conditions, industry and market conditions, overall financial performance, cost factors and other relevant entity-specific events, including changes in management and other key personnel and changes in the share price of the Company’s common stock. As a result of the assessment, the Company concluded that its goodwill was not impaired.

During the third quarter of 2020, the Company assessed the indicators of goodwill impairment and noted certain events that indicated that it is “more likely than not” that a goodwill impairment exists, necessitating an interim test of impairment. Triggering events stemming from and in response to the COVID-19 pandemic include continued economic disruption, operating losses driven by a higher provision for credit losses and a lower interest rate environment, and a sustained decrease in the Company’s share price. As such, the Company performed a quantitative assessment of goodwill impairment as of September 30, 2020, which included determining the estimated fair value of the reporting unit and comparing that fair value to the reporting unit's carrying amount. The results of the test indicated that the estimated fair value of the reporting unit exceeded its carrying amount at September 30, 2020; therefore, goodwill was not impaired as of the testing date.

The Company used multiple approaches to measure its fair value at September 30, 2020. The primary approaches included an income approach using the discounted net present value of estimated future cash flows and a market approach using transaction or price-to-forward earnings multiples methodology using the actual price paid in recent acquisition transactions for similar entities, discounted for the current recessionary environment, neither of which resulted in impairment. The results from each of the primary approaches were weighted equally, with the valuation of the reporting unit approximately 14% in excess of net book value at September 30, 2020.

Both valuation techniques employed by the Company require significant assumptions. Depending upon the specific approach, assumptions are made regarding the economic environment, expected net interest margins, growth rates, discount rate used to present value future cash flows, asset quality metrics, control premiums, and price-to-forward earnings multiples. Changes to any one of these assumptions could result in significantly different results. Changes in the amount and/or timing of the Company’s expected future cash flows or estimated growth rates, lack of improvement and/or further decline in the price of the Company’s common stock relative to our book value per share, and/or further deterioration in the economic environment beyond current estimates could result in an impairment charge to goodwill in future reporting periods. Annual impairment testing will be performed in the fourth quarter of 2020 in coordination with our annual strategic planning process, and interim testing is expected to continue until indicators of goodwill impairment no longer exist.

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2. Business Combination

On September 21, 2019, the Company completed the acquisition of MidSouth Bancorp, Inc. (“MidSouth”) (NYSE: MSL), parent company of MidSouth Bank, N.A. The transaction provides the Company opportunity for both enhanced growth in several of its current markets, such as MidSouth’s home market of Lafayette, Louisiana, as well as opportunities for expansion into new markets in Louisiana and Texas. The transaction was accounted for as a business combination whereby the Company acquired net assets with an estimated fair value of $130.5 million and recorded goodwill of $63.4 million. In consideration for the net assets acquired, the Company issued approximately 5.0 million shares of our common stock, resulting in a transaction value of $193.8 million. The following table sets forth the acquisition date fair value of the assets acquired and liabilities assumed, and the resulting goodwill. The goodwill is not deductible for federal income tax purposes.

(in thousands) |  |  |
ASSETS |  |  |
Cash and due from banks |  | $ | 28,059
Interest bearing bank deposits |  |  | 276,911
Federal funds sold |  |  | 3,475
Securities available for sale |  |  | 272,240
Loans |  |  | 787,628
Property and equipment |  |  | 34,288
Other real estate |  |  | 343
Identifiable intangible assets |  |  | 31,500
Other assets |  |  | 79,888
Total identifiable assets |  |  | 1,514,332
LIABILITIES |  |  |
Deposit liabilities |  |  | 1,280,947
Short term borrowings |  |  | 66,996
Long term debt |  |  | 13,919
Other liabilities |  |  | 21,990
Total liabilities |  |  | 1,383,852
Net assets acquired |  |  | 130,480
Value of stock-based consideration |  |  | 193,849
Goodwill |  | $ | 63,369

The results of the acquired business were included in the Company’s consolidated results of operations from the date of acquisition. The results of the acquired business are not material to the Company’s consolidated results of operations and, as such, neither supplemental pro forma information of the combined entity nor revenue and earnings contributed by the acquired business since the date of acquisition are presented.

Goodwill Resulting from Business Combinations

Goodwill represents the excess of the consideration transferred over the fair value of the net assets acquired. It is comprised of estimated future economic benefits arising from the transaction that cannot be individually identified or do not qualify for separate recognition. These benefits include expanded presence in existing markets and entry into new markets, and expected earnings streams and operational efficiencies that the Company believes will result from this business combination. The following table presents the change in the Company’s goodwill during the year ended December 31, 2019. No measurement period adjustments were recorded during the nine months ended September 30, 2020.

(in thousands) |  |  |  |
Goodwill balance at December 31, 2018 |  | $ | 790,972 |
Final settlement of cash consideration - acquisition of trust and asset management business |  |  | 1,112 |
Initial goodwill recorded in the acquisition of MidSouth Bancorp, Inc. |  |  | 69,207 |
Measurement period adjustments - acquisition of MidSouth Bancorp, Inc. |  |  | (5,838 | )
Goodwill balance at December 31, 2019 |  | $ | 855,453 |
Goodwill balance at September 30, 2020 |  | $ | 855,453 |

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3. Securities

The following tables set forth the amortized cost, gross unrealized gains and losses, and estimated fair value of debt securities classified as available for sale and held to maturity at September 30, 2020 and December 31, 2019. Amortized cost of securities does not include accrued interest which is reflected in the accrued interest line item on the consolidated balance sheets totaling $23.2 million and $23.9 million at September 30, 2020 and December 31, 2019, respectively.

|  | September 30, 2020 |  |  | December 31, 2019 |
|  |  |  |  |  | Gross |  |  | Gross |  |  |  |  |  |  | Gross |  |  | Gross |  |  |  |  |  |  |  |  |
Securities Available for Sale |  | Amortized |  |  | Unrealized |  |  | Unrealized |  |  | Fair |  |  | Amortized |  |  | Unrealized |  |  | Unrealized |  |  | Fair |
(in thousands) |  | Cost |  |  | Gains |  |  | Losses |  |  | Value |  |  | Cost |  |  | Gains |  |  | Losses |  |  | Value |
U.S. Treasury and government agency securities |  | $ | 192,077 |  |  | $ | 6,664 |  |  | $ | 125 |  |  | $ | 198,616 |  |  | $ | 98,320 |  |  | $ | 652 |  |  | $ | 300 |  |  | $ | 98,672 |
Municipal obligations |  |  | 297,712 |  |  |  | 16,291 |  |  |  | 347 |  |  |  | 313,656 |  |  |  | 242,016 |  |  |  | 7,789 |  |  |  | — |  |  |  | 249,805 |
Residential mortgage-backed securities |  |  | 2,536,999 |  |  |  | 70,222 |  |  |  | 531 |  |  |  | 2,606,690 |  |  |  | 1,910,909 |  |  |  | 20,268 |  |  |  | 7,020 |  |  |  | 1,924,157 |
Commercial mortgage-backed securities |  |  | 1,965,664 |  |  |  | 136,056 |  |  |  | 720 |  |  |  | 2,101,000 |  |  |  | 1,570,765 |  |  |  | 19,880 |  |  |  | 4,178 |  |  |  | 1,586,467 |
Collateralized mortgage obligations |  |  | 410,050 |  |  |  | 9,141 |  |  |  | 21 |  |  |  | 419,170 |  |  |  | 807,600 |  |  |  | 3,757 |  |  |  | 3,142 |  |  |  | 808,215 |
Corporate debt securities |  |  | 8,000 |  |  |  | 185 |  |  |  | 2 |  |  |  | 8,183 |  |  |  | 8,000 |  |  |  | 21 |  |  |  | 33 |  |  |  | 7,988 |
﻿ |  | $ | 5,410,502 |  |  | $ | 238,559 |  |  | $ | 1,746 |  |  | $ | 5,647,315 |  |  | $ | 4,637,610 |  |  | $ | 52,367 |  |  | $ | 14,673 |  |  | $ | 4,675,304 |

|  | September 30, 2020 |  |  | December 31, 2019 |
|  |  |  |  |  | Gross |  |  | Gross |  |  |  |  |  |  | Gross |  |  | Gross |  |  |  |  |  |  |  |  |
Securities Held to Maturity |  | Amortized |  |  | Unrealized |  |  | Unrealized |  |  | Fair |  |  | Amortized |  |  | Unrealized |  |  | Unrealized |  |  | Fair |
(in thousands) |  | Cost |  |  | Gains |  |  | Losses |  |  | Value |  |  | Cost |  |  | Gains |  |  | Losses |  |  | Value |
U.S. Treasury and government agency securities |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 50,000 |  |  | $ | 3 |  |  | $ | — |  |  | $ | 50,003 |
Municipal obligations |  |  | 630,894 |  |  |  | 49,348 |  |  |  | 17 |  |  |  | 680,225 |  |  |  | 641,019 |  |  |  | 27,146 |  |  |  | 69 |  |  |  | 668,096 |
Residential mortgage-backed securities |  |  | 24,041 |  |  |  | 1,641 |  |  |  | — |  |  |  | 25,682 |  |  |  | 29,687 |  |  |  | 883 |  |  |  | — |  |  |  | 30,570 |
Commercial mortgage-backed securities |  |  | 550,201 |  |  |  | 53,253 |  |  |  | — |  |  |  | 603,454 |  |  |  | 539,371 |  |  |  | 12,474 |  |  |  | 581 |  |  |  | 551,264 |
Collateralized mortgage obligations |  |  | 203,825 |  |  |  | 4,502 |  |  |  | — |  |  |  | 208,327 |  |  |  | 307,932 |  |  |  | 3,597 |  |  |  | 458 |  |  |  | 311,071 |
﻿ |  | $ | 1,408,961 |  |  | $ | 108,744 |  |  | $ | 17 |  |  | $ | 1,517,688 |  |  | $ | 1,568,009 |  |  | $ | 44,103 |  |  | $ | 1,108 |  |  | $ | 1,611,004 |

The following tables present the amortized cost and estimated fair value of debt securities available for sale and held to maturity at September 30, 2020 by contractual maturity. Actual maturities will differ from contractual maturities because of rights to call or repay obligations with or without penalties and scheduled and unscheduled principal payments on mortgage-backed securities and collateralized mortgage obligations.

Debt Securities Available for Sale |  | Amortized |  |  | Fair |
(in thousands) |  | Cost |  |  | Value |
Due in one year or less |  | $ | 14,492 |  |  | $ | 14,540 |
Due after one year through five years |  |  | 239,148 |  |  |  | 258,655 |
Due after five years through ten years |  |  | 2,066,697 |  |  |  | 2,196,332 |
Due after ten years |  |  | 3,090,165 |  |  |  | 3,177,788 |
Total available for sale debt securities |  | $ | 5,410,502 |  |  | $ | 5,647,315 |

Debt Securities Held to Maturity |  | Amortized |  |  | Fair |
(in thousands) |  | Cost |  |  | Value |
Due in one year or less |  | $ | 2,196 |  |  | $ | 2,191 |
Due after one year through five years |  |  | 189,141 |  |  |  | 201,869 |
Due after five years through ten years |  |  | 636,976 |  |  |  | 701,345 |
Due after ten years |  |  | 580,648 |  |  |  | 612,283 |
Total held to maturity securities |  | $ | 1,408,961 |  |  | $ | 1,517,688 |

The Company held no securities classified as trading at September 30, 2020 and December 31, 2019.

The following table presents the proceeds from, gross gain on, and gross losses on sales of securities during the nine months ended September 30, 2020 and 2019.

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|  | Nine Months Ended September 30, |
(in thousands) |  | 2020 |  |  | 2019 |
Proceeds |  | $ | 211,919 |  |  | $ | 143,304 |
Gross gains |  |  | 1,984 |  |  |  | — |
Gross losses |  |  | 1,496 |  |  |  | — |

Securities with carrying values totaling $3.2 billion and $3.3 billion were pledged as collateral at September 30, 2020 and December 31, 2019 respectively, primarily to secure public deposits or securities sold under agreements to repurchase.

Credit Quality

The Company’s policy is to invest only in securities of investment grade quality. These investments are largely limited to U.S. agency securities and municipal securities. Management has concluded, based on the long history of no credit losses, that the expectation of nonpayment of the held to maturity securities carried at amortized cost is zero for securities that are backed by the full faith and credit of and/or guaranteed by the U.S. government. As such, no allowance for credit losses has been recorded for these securities. The municipal portfolio is analyzed separately for allowance for credit loss in accordance with the applicable guidance for each portfolio as noted below.

Effective January 1, 2020, in conjunction with the adoption of CECL, and again at September 30, 2020, the Company evaluated credit impairment for individual securities available for sale whose fair value was below amortized cost with a more than inconsequential risk of default and where the Company had assessed the decline in fair value significant enough to suggest a credit event occurred. There were no securities that met the criteria of a credit loss event and therefore, no allowance for credit loss was recorded for either period. The fair value and gross unrealized losses for securities classified as available for sale with unrealized losses for the periods indicated follow.

Available for Sale |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
September 30, 2020 |  | Losses < 12 months |  |  | Losses 12 months or > |  |  | Total |
(in thousands) |  | Fair Value |  |  | Gross Unrealized Losses |  |  | Fair Value |  |  | Gross Unrealized Losses |  |  | Fair Value |  |  | Gross Unrealized Losses |
U.S. Treasury and government agency securities |  | $ | 44,039 |  |  | $ | 125 |  |  | $ | — |  |  | $ | — |  |  | $ | 44,039 |  |  | $ | 125 |
Municipal obligations |  |  | 26,010 |  |  |  | 347 |  |  |  | — |  |  |  | — |  |  |  | 26,010 |  |  |  | 347 |
Residential mortgage-backed securities |  |  | 229,662 |  |  |  | 529 |  |  |  | 367 |  |  |  | 2 |  |  |  | 230,029 |  |  |  | 531 |
Commercial mortgage-backed securities |  |  | 252,858 |  |  |  | 720 |  |  |  | — |  |  |  | — |  |  |  | 252,858 |  |  |  | 720 |
Collateralized mortgage obligations |  |  | 3,300 |  |  |  | 21 |  |  |  | — |  |  |  | — |  |  |  | 3,300 |  |  |  | 21 |
Corporate debt securities |  |  | 3,498 |  |  |  | 2 |  |  |  | — |  |  |  | — |  |  |  | 3,498 |  |  |  | 2 |
﻿ |  | $ | 559,367 |  |  | $ | 1,744 |  |  | $ | 367 |  |  | $ | 2 |  |  | $ | 559,734 |  |  | $ | 1,746 |

Available for Sale |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
December 31, 2019 |  | Losses < 12 months |  |  | Losses 12 months or > |  |  | Total |
|  |  |  |  |  | Gross |  |  |  |  |  |  | Gross |  |  |  |  |  |  | Gross |
|  | Fair |  |  | Unrealized |  |  | Fair |  |  | Unrealized |  |  | Fair |  |  | Unrealized |
(in thousands) |  | Value |  |  | Losses |  |  | Value |  |  | Losses |  |  | Value |  |  | Losses |
U.S. Treasury and government agency securities |  | $ | 28,235 |  |  |  | 300 |  |  | $ | — |  |  | $ | — |  |  | $ | 28,235 |  |  | $ | 300 |
Municipal obligations |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Residential mortgage-backed securities |  |  | 420,066 |  |  |  | 5,042 |  |  |  | 399,787 |  |  |  | 1,978 |  |  |  | 819,853 |  |  |  | 7,020 |
Commercial mortgage-backed securities |  |  | 458,855 |  |  |  | 3,971 |  |  |  | 14,896 |  |  |  | 207 |  |  |  | 473,751 |  |  |  | 4,178 |
Collateralized mortgage obligations |  |  | 89,689 |  |  |  | 1,315 |  |  |  | 184,389 |  |  |  | 1,827 |  |  |  | 274,078 |  |  |  | 3,142 |
Corporate debt securities |  |  | 1,467 |  |  |  | 33 |  |  |  | — |  |  |  | — |  |  |  | 1,467 |  |  |  | 33 |
﻿ |  | $ | 998,312 |  |  | $ | 10,661 |  |  | $ | 599,072 |  |  | $ | 4,012 |  |  | $ | 1,597,384 |  |  | $ | 14,673 |

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Effective January 1, 2020 and in conjunction with the adoption of CECL, and again as of September 30, 2020, the Company evaluated its held to maturity municipal obligation portfolio for credit loss using probability of default and loss given default models. The models were run using a long-term average probability of default migration and with a probability weighting of Moody’s economic forecasts. The economic forecasts were largely weighted to a baseline scenario with some weight given to other scenarios. The September 30, 2020 forecast was further stressed by running a more severe probability of default migration. The resulting credit loss was negligible for both periods and no allowance for credit loss was recorded. The fair value and gross unrealized losses for securities classified as held to maturity with unrealized losses for the periods indicated follow.

Held to Maturity |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
September 30, 2020 |  | Losses < 12 months |  |  | Losses 12 months or > |  |  | Total |
﻿ |  |  |  |  |  | Gross |  |  |  |  |  |  | Gross |  |  |  |  |  |  | Gross |
﻿ |  | Fair |  |  | Unrealized |  |  | Fair |  |  | Unrealized |  |  | Fair |  |  | Unrealized |
(in thousands) |  | Value |  |  | Losses |  |  | Value |  |  | Losses |  |  | Value |  |  | Losses |
U.S. Treasury and government agency securities |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |
Municipal obligations |  |  | 523 |  |  |  | 2 |  |  |  | 2,890 |  |  |  | 15 |  |  |  | 3,413 |  |  |  | 17 |
Residential mortgage-backed securities |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Commercial mortgage-backed securities |  |  | 222 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 222 |  |  |  | — |
Collateralized mortgage obligations |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
﻿ |  | $ | 745 |  |  | $ | 2 |  |  | $ | 2,890 |  |  | $ | 15 |  |  | $ | 3,635 |  |  | $ | 17 |

Held to Maturity |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
December 31, 2019 |  | Losses < 12 months |  |  | Losses 12 months or > |  |  | Total |
﻿ |  |  |  |  |  | Gross |  |  | Gross |  |  |  |  |  |  |  |  |  |  | Gross |
﻿ |  | Fair |  |  | Unrealized |  |  | Fair |  |  | Unrealized |  |  | Fair |  |  | Unrealized |
(in thousands) |  | Value |  |  | Losses |  |  | Value |  |  | Losses |  |  | Value |  |  | Losses |
U.S. Treasury and government agency securities |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |
Municipal obligations |  |  | 4,735 |  |  |  | 38 |  |  |  | 3,143 |  |  |  | 31 |  |  |  | 7,878 |  |  |  | 69 |
Residential mortgage-backed securities |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Commercial mortgage-backed securities |  |  | 28,426 |  |  |  | 581 |  |  |  | — |  |  |  | — |  |  |  | 28,426 |  |  |  | 581 |
Collateralized mortgage obligations |  |  | — |  |  |  | — |  |  |  | 49,110 |  |  |  | 458 |  |  |  | 49,110 |  |  |  | 458 |
﻿ |  | $ | 33,161 |  |  | $ | 619 |  |  | $ | 52,253 |  |  | $ | 489 |  |  | $ | 85,414 |  |  | $ | 1,108 |

As of September 30, 2020 the Company had 40 securities with market values below their cost basis. Unrealized losses in both portfolios relate primarily to changes in interest rates on fixed rate debt securities since the respective purchase dates. In all cases, the indicated impairment on these debt securities would be recovered no later than the security’s maturity date or possibly earlier if the market price for the security increases with a reduction in the yield required by the market. None of the unrealized losses relate to the marketability of the securities or the issuers’ abilities to meet contractual obligations. The Company had adequate liquidity as of September 30, 2020 and December 31, 2019 and did not intend to nor believe that it would be required to sell these securities before recovery of the indicated impairment. The unrealized losses on these securities were determined to be non-credit related as of December 31, 2019 and as noted above, no allowance for credit losses was recorded as of January 1, 2020 or September 30, 2020.

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4. Loans and Allowance for Credit Losses

The Company generally makes loans in its market areas of south and central Mississippi; southern and central Alabama; northwest, central and south Louisiana; the northern, central, and panhandle regions of Florida; certain areas of east and northeast Texas, including Houston, Beaumont and Dallas; and Nashville, Tennessee. Loans, net of unearned income, by portfolio are presented at amortized cost basis in the table below. Amortized cost does not include accrued interest, which is reflected in the accrued interest line item in the Consolidated Balance Sheets, totaling $86.0 million and $67.7 million at September 30, 2020 and December 31, 2019, respectively.

|  | September 30, |  |  | December 31, |
(in thousands) |  | 2020 |  |  | 2019 |
Commercial non-real estate |  | $ | 10,257,788 |  |  | $ | 9,166,947 |
Commercial real estate - owner occupied |  |  | 2,779,407 |  |  |  | 2,738,460 |
Total commercial and industrial |  |  | 13,037,195 |  |  |  | 11,905,407 |
Commercial real estate - income producing |  |  | 3,406,554 |  |  |  | 2,994,448 |
Construction and land development |  |  | 1,096,149 |  |  |  | 1,157,451 |
Residential mortgages |  |  | 2,754,388 |  |  |  | 2,990,631 |
Consumer |  |  | 1,945,918 |  |  |  | 2,164,818 |
Total loans |  | $ | 22,240,204 |  |  | $ | 21,212,755 |

The following briefly describes the composition of each loan category.

Commercial and industrial

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

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

Commercial non-real estate loans also include loans made under the Small Business Administration’s (SBA) Paycheck Protection Program (PPP). PPP loans are guaranteed by the SBA and are forgivable to the debtor upon satisfaction of certain criteria. The loans bear interest at 1% per annum and have two or five year terms, depending on the date of origination. These loans also earn an origination fee of 1% to 5%, depending on the loan size, that is deferred and amortized over the estimated life of the loan using the effective yield method.

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

Commercial real estate – income producing

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

Construction and land development

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

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Residential mortgages

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

Consumer

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

Allowance for Credit Losses

The following tables show activity in the allowance for credit losses by portfolio class for the nine months ended September 30, 2020 and 2019, as well as the corresponding recorded investment in loans at the end of each period. Effective January 1, 2020, the Company adopted the provisions of ASC 326 (CECL) using a modified retrospective basis. The difference between the December 31, 2019 incurred allowance and the CECL allowance is reflected as a cumulative effect of change in accounting principle in the table below. For further discussion of the day one impact of the CECL adoption, refer to Note 16 – Recent Accounting Pronouncements.

|  |  |  |  |  | Commercial |  |  | Total |  |  | Commercial |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | Commercial |  |  | real estate- |  |  | commercial |  |  | real estate- |  |  | Construction |  |  |  |  |  |  |  |  |  |  |  |  |
|  | non-real |  |  | owner |  |  | and |  |  | income |  |  | and land |  |  | Residential |  |  |  |  |  |  |  |  |
(in thousands) |  | estate |  |  | occupied |  |  | industrial |  |  | producing |  |  | development |  |  | mortgages |  |  | Consumer |  |  | Total |
|  | Nine Months Ended September 30, 2020 |
Allowance for credit losses |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Allowance for loan losses: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Beginning balance |  | $ | 106,432 |  |  | $ | 10,977 |  |  | $ | 117,409 |  |  | $ | 20,869 |  |  | $ | 9,350 |  |  | $ | 20,331 |  |  | $ | 23,292 |  |  | $ | 191,251 |
Cumulative effect of change in accounting principle |  |  | (244 | ) |  |  | 14,877 |  |  |  | 14,633 |  |  |  | 7,287 |  |  |  | 7,478 |  |  |  | 12,921 |  |  |  | 7,092 |  |  |  | 49,411 |
Charge-offs |  |  | (364,123 | ) |  |  | (1,828 | ) |  | $ | (365,951 | ) |  |  | (2,211 | ) |  |  | (7 | ) |  |  | (170 | ) |  |  | (13,640 | ) |  |  | (381,979 | )
Recoveries |  |  | 4,831 |  |  |  | 659 |  |  | $ | 5,490 |  |  |  | 46 |  |  |  | 549 |  |  |  | 1,078 |  |  |  | 4,360 |  |  |  | 11,523 |
Net provision for loan losses |  |  | 401,155 |  |  |  | 41,336 |  |  | $ | 442,491 |  |  |  | 78,661 |  |  |  | 12,325 |  |  |  | 17,613 |  |  |  | 27,378 |  |  |  | 578,468 |
Ending balance - allowance for loan losses |  | $ | 148,051 |  |  | $ | 66,021 |  |  | $ | 214,072 |  |  | $ | 104,652 |  |  | $ | 29,695 |  |  | $ | 51,773 |  |  | $ | 48,482 |  |  | $ | 448,674 |
Reserve for unfunded lending commitments: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Beginning balance |  | $ | 3,974 |  |  | $ | — |  |  | $ | 3,974 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 3,974 |
Cumulative effect of change in accounting principle |  |  | 5,772 |  |  |  | 288 |  |  |  | 6,060 |  |  |  | 449 |  |  |  | 15,658 |  |  |  | 17 |  |  |  | 5,146 |  |  |  | 27,330 |
Provision for losses on unfunded commitments |  |  | (3,786 | ) |  |  | 187 |  |  |  | (3,599 | ) |  |  | 1,599 |  |  |  | 6,046 |  |  |  | (11 | ) |  |  | (3,813 | ) |  |  | 222 |
Ending balance - reserve for unfunded lending commitments |  |  | 5,960 |  |  |  | 475 |  |  |  | 6,435 |  |  |  | 2,048 |  |  |  | 21,704 |  |  |  | 6 |  |  |  | 1,333 |  |  |  | 31,526 |
Total allowance for credit losses |  | $ | 154,011 |  |  | $ | 66,496 |  |  | $ | 220,507 |  |  | $ | 106,700 |  |  | $ | 51,399 |  |  | $ | 51,779 |  |  | $ | 49,815 |  |  | $ | 480,200 |
Allowance for loan losses: |  |  |
Individually evaluated |  | $ | 27,304 |  |  | $ | 1,344 |  |  | $ | 28,648 |  |  | $ | 24 |  |  | $ | 169 |  |  | $ | 416 |  |  | $ | 456 |  |  | $ | 29,713 |
Collectively evaluated |  |  | 120,747 |  |  |  | 64,677 |  |  |  | 185,424 |  |  |  | 104,628 |  |  |  | 29,526 |  |  |  | 51,357 |  |  |  | 48,026 |  |  |  | 418,961 |
Allowance for loan losses |  | $ | 148,051 |  |  | $ | 66,021 |  |  | $ | 214,072 |  |  | $ | 104,652 |  |  | $ | 29,695 |  |  | $ | 51,773 |  |  | $ | 48,482 |  |  | $ | 448,674 |
Reserve for unfunded lending commitments: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Individually evaluated |  | $ | 992 |  |  | $ | — |  |  | $ | 992 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 5 |  |  | $ | 997 |
Collectively evaluated |  |  | 4,968 |  |  |  | 475 |  |  |  | 5,443 |  |  |  | 2,048 |  |  |  | 21,704 |  |  |  | 6 |  |  |  | 1,328 |  |  |  | 30,529 |
Reserve for unfunded lending commitments: |  | $ | 5,960 |  |  | $ | 475 |  |  | $ | 6,435 |  |  | $ | 2,048 |  |  | $ | 21,704 |  |  | $ | 6 |  |  | $ | 1,333 |  |  | $ | 31,526 |
Total allowance for credit losses |  | $ | 154,011 |  |  | $ | 66,496 |  |  | $ | 220,507 |  |  | $ | 106,700 |  |  | $ | 51,399 |  |  | $ | 51,779 |  |  | $ | 49,815 |  |  | $ | 480,200 |
Loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Individually evaluated |  | $ | 73,139 |  |  | $ | 11,124 |  |  | $ | 84,263 |  |  | $ | 5,549 |  |  | $ | 1,837 |  |  | $ | 6,064 |  |  | $ | 3,924 |  |  | $ | 101,637 |
Collectively evaluated |  |  | 10,184,649 |  |  |  | 2,768,283 |  |  |  | 12,952,932 |  |  |  | 3,401,005 |  |  |  | 1,094,312 |  |  |  | 2,748,324 |  |  |  | 1,941,994 |  |  |  | 22,138,567 |
Total loans |  | $ | 10,257,788 |  |  | $ | 2,779,407 |  |  | $ | 13,037,195 |  |  | $ | 3,406,554 |  |  | $ | 1,096,149 |  |  | $ | 2,754,388 |  |  | $ | 1,945,918 |  |  | $ | 22,240,204 |

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|  |  |  |  |  | Commercial |  |  | Total |  |  | Commercial |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | Commercial |  |  | real estate- |  |  | commercial |  |  | real estate- |  |  | Construction |  |  |  |  |  |  |  |  |  |  |  |  |
|  | non-real |  |  | owner |  |  | and |  |  | income |  |  | and land |  |  | Residential |  |  |  |  |  |  |  |  |
(in thousands) |  | estate |  |  | occupied |  |  | industrial |  |  | producing |  |  | development |  |  | mortgages |  |  | Consumer |  |  | Total |
|  | Nine Months Ended September 30, 2019 |
Allowance for loan losses: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Beginning balance |  | $ | 97,752 |  |  | $ | 13,757 |  |  | $ | 111,509 |  |  | $ | 17,638 |  |  | $ | 15,647 |  |  | $ | 23,782 |  |  | $ | 25,938 |  |  | $ | 194,514 |
Charge-offs |  |  | (33,382 | ) |  |  | (137 | ) |  |  | (33,519 | ) |  |  | (10 | ) |  |  | (7 | ) |  |  | (660 | ) |  |  | (13,169 | ) |  |  | (47,365 | )
Recoveries |  |  | 5,662 |  |  |  | 284 |  |  |  | 5,946 |  |  |  | 518 |  |  |  | 108 |  |  |  | 433 |  |  |  | 2,866 |  |  |  | 9,871 |
Net provision for loan losses |  |  | 29,267 |  |  |  | 545 |  |  |  | 29,812 |  |  |  | 7,604 |  |  |  | (5,982 | ) |  |  | (2,076 | ) |  |  | 9,194 |  |  |  | 38,552 |
Ending balance |  | $ | 99,299 |  |  | $ | 14,449 |  |  | $ | 113,748 |  |  | $ | 25,750 |  |  | $ | 9,766 |  |  | $ | 21,479 |  |  | $ | 24,829 |  |  | $ | 195,572 |
Ending balance: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Allowance: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Individually evaluated for impairment |  | $ | 11,535 |  |  | $ | 57 |  |  | $ | 11,592 |  |  | $ | 49 |  |  | $ | 29 |  |  | $ | 183 |  |  | $ | 365 |  |  | $ | 12,218 |
Amounts related to purchased credit impaired loans |  |  | 135 |  |  |  | 172 |  |  |  | 307 |  |  |  | 40 |  |  |  | 144 |  |  |  | 8,032 |  |  |  | 300 |  |  |  | 8,823 |
Collectively evaluated for impairment |  |  | 87,629 |  |  |  | 14,220 |  |  |  | 101,849 |  |  |  | 25,661 |  |  |  | 9,593 |  |  |  | 13,264 |  |  |  | 24,164 |  |  |  | 174,531 |
Total allowance |  | $ | 99,299 |  |  | $ | 14,449 |  |  | $ | 113,748 |  |  | $ | 25,750 |  |  | $ | 9,766 |  |  | $ | 21,479 |  |  | $ | 24,829 |  |  | $ | 195,572 |
Loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Individually evaluated for impairment |  | $ | 201,979 |  |  | $ | 11,109 |  |  | $ | 213,088 |  |  | $ | 2,781 |  |  | $ | 3,385 |  |  | $ | 4,301 |  |  | $ | 1,583 |  |  | $ | 225,138 |
Purchased credit impaired loans |  |  | 33,040 |  |  |  | 45,124 |  |  |  | 78,164 |  |  |  | 27,281 |  |  |  | 23,431 |  |  |  | 93,450 |  |  |  | 6,294 |  |  |  | 228,620 |
Collectively evaluated for impairment |  |  | 8,657,985 |  |  |  | 2,678,146 |  |  |  | 11,336,131 |  |  |  | 3,030,506 |  |  |  | 1,163,902 |  |  |  | 2,907,207 |  |  |  | 2,144,448 |  |  |  | 20,582,194 |
Total loans |  | $ | 8,893,004 |  |  | $ | 2,734,379 |  |  | $ | 11,627,383 |  |  | $ | 3,060,568 |  |  | $ | 1,190,718 |  |  | $ | 3,004,958 |  |  | $ | 2,152,325 |  |  | $ | 21,035,952 |

The calculation of the allowance for credit losses under CECL is performed using two primary approaches: a collective approach for pools of loans that have similar risk characteristics using a loss rate analysis, and a specific reserve analysis for credits individually evaluated. The increase in the allowance for credit losses for the nine months ended September 30, 2020 reflects the impact of the economic shutdown in response to the pandemic and the significant drop in oil prices. The allowance for credit losses was developed using multiple Moody’s macroeconomic forecasts applied to internally developed credit models for a two year reasonable and supportable period. The Company weighted the baseline economic forecast, which Moody’s defines as the “most likely outcome” based on current conditions and its view of where the economy is headed, at 50%. Following the sharp recession in the first half of 2020, the baseline scenario assumes a gradual recovery beginning in the second half of 2020, with the most meaningful growth occurring after a vaccine for the coronavirus becomes widely available in the second quarter of 2021. The upside scenario S-1 and the downside scenario S-2 were each weighted 25% to incorporate reasonably possible alternative outcomes. The S-1 scenario reflects reasonably possible improving conditions and a quicker recovery in 2020 and in 2021 compared to the baseline. The S-2 scenario reflects reasonably possible slower economic recovery, with higher instances of infection and death, and restrictions on travel and business winding down somewhat more slowly as compared to the baseline. The degradation in economic conditions during the nine months ended September 30, 2020 created the need for an increased allowance across all portfolios. The allowance for credit loss activity for the nine months ended September 30, 2020 also reflects the impact the sale of $497 million of energy-related loans. The write-down to loans’ observable market value plus cost to sell resulted in charge-offs of $242.6 million and a reserve release of $82.5 million, for a net provision for credit losses impact of $160.1 million, which is mostly reflected in the commercial non-real estate portfolio. Detail of the individually evaluated allowance is provided in the impaired loans section that follows.

Impaired Loans

The following table shows the composition of nonaccrual loans by portfolio class. Prior to the adoption of CECL, purchased credit impaired loans accounted for in pools with an accretable yield were considered to be performing. Such loans totaled $17.5 million at December 31, 2019.

|  | September 30, |  |  | December 31, |
(in thousands) |  | 2020 |  |  | 2019 |
Commercial non-real estate |  | $ | 78,184 |  |  | $ | 178,678 |
Commercial real estate - owner occupied |  |  | 14,683 |  |  |  | 7,708 |
Total commercial and industrial |  |  | 92,867 |  |  |  | 186,386 |
Commercial real estate - income producing |  |  | 7,028 |  |  |  | 2,594 |
Construction and land development |  |  | 3,234 |  |  |  | 1,217 |
Residential mortgages |  |  | 43,596 |  |  |  | 39,262 |
Consumer |  |  | 24,737 |  |  |  | 16,374 |
Total loans |  | $ | 171,462 |  |  | $ | 245,833 |

For the nine months ended September 30, 2020 and 2019, the estimated amount of interest income that would have been recorded had the loans not been assigned nonaccrual status was $10.6 million and $9.9 million, respectively.

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Nonaccrual loans include nonaccruing loans modified in troubled debt restructurings (“TDRs”) of $39.9 million and $132.5 million at September 30, 2020 and December 31, 2019, respectively. Total TDRs, both accruing and nonaccruing, were $49.1 million at September 30, 2020 and $193.7 million at December 31, 2019. All TDRs are individually evaluated for credit loss. At September 30, 2020 and December 31, 2019, the Company had unfunded commitments of $1.0 million and $2.4 million, respectively, to borrowers whose loan terms have been modified in a TDR.

The tables below detail by portfolio class TDRs that were modified during the three and nine months ended September 30, 2020 and 2019:

|  | Three Months Ended |
($ in thousands) |  | September 30, 2020 |  |  | September 30, 2019 |
|  |  |  |  |  | Pre- Modification |  |  | Post- Modification |  |  |  |  |  |  | Pre- Modification |  |  | Post- Modification |
|  | Number |  |  | Outstanding |  |  | Outstanding |  |  | Number |  |  | Outstanding |  |  | Outstanding |
|  | of |  |  | Recorded |  |  | Recorded |  |  | of |  |  | Recorded |  |  | Recorded |
Troubled Debt Restructurings: |  | Contracts |  |  | Investment |  |  | Investment |  |  | Contracts |  |  | Investment |  |  | Investment |
Commercial non-real estate |  |  | — |  |  | $ | — |  |  | $ | — |  |  |  | 2 |  |  | $ | 13,083 |  |  | $ | 6,271 |
Commercial real estate - owner occupied |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Total commercial and industrial |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 2 |  |  |  | 13,083 |  |  |  | 6,271 |
Commercial real estate - income producing |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 1 |  |  |  | 123 |  |  |  | 123 |
Construction and land development |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 3 |  |  |  | 323 |  |  |  | 323 |
Residential mortgages |  |  | 5 |  |  |  | 1,358 |  |  |  | 1,358 |  |  |  | 3 |  |  |  | 297 |  |  |  | 297 |
Consumer |  |  | 2 |  |  |  | 25 |  |  |  | 25 |  |  |  | 4 |  |  |  | 70 |  |  |  | 70 |
Total loans |  |  | 7 |  |  | $ | 1,383 |  |  | $ | 1,383 |  |  |  | 13 |  |  | $ | 13,896 |  |  | $ | 7,084 |

|  | Nine Months Ended |
($ in thousands) |  | September 30, 2020 |  |  | September 30, 2019 |
Troubled Debt Restructurings: |  | Number of Contracts |  |  | Pre- Modification Outstanding Recorded Investment |  |  | Post- Modification Outstanding Recorded Investment |  |  | Number of Contracts |  |  | Pre- Modification Outstanding Recorded Investment |  |  | Post- Modification Outstanding Recorded Investment |
Commercial non-real estate |  |  | 3 |  |  | $ | 745 |  |  | $ | 745 |  |  |  | 10 |  |  | $ | 27,220 |  |  | $ | 20,408 |
Commercial real estate - owner occupied |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 1 |  |  |  | 167 |  |  |  | 167 |
Total commercial and industrial |  |  | 3 |  |  |  | 745 |  |  |  | 745 |  |  |  | 11 |  |  |  | 27,387 |  |  |  | 20,575 |
Commercial real estate - income producing |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 1 |  |  |  | 123 |  |  |  | 123 |
Construction and land development |  |  | 1 |  |  |  | 15 |  |  |  | 15 |  |  |  | 3 |  |  |  | 323 |  |  |  | 323 |
Residential mortgages |  |  | 14 |  |  |  | 3,424 |  |  |  | 3,424 |  |  |  | 10 |  |  |  | 2,199 |  |  |  | 2,199 |
Consumer |  |  | 7 |  |  |  | 89 |  |  |  | 89 |  |  |  | 6 |  |  |  | 116 |  |  |  | 116 |
Total loans |  |  | 25 |  |  |  | 4,273 |  |  |  | 4,273 |  |  |  | 31 |  |  | $ | 30,148 |  |  | $ | 23,336 |

The TDRs modified during the nine months ended September 30, 2020 reflected in the table above include $0.7 million of loans with extended amortization terms or other payment concessions, $1.1 million with reduced interest rates, $0.4 million with significant covenant waivers and $2.1 million with other modifications. The TDRs modified during the nine months ended September 30, 2019 include $0.6 million of loans with extended amortization terms or other payment concessions, $22.1 million with significant covenant waivers and $7.4 million with other modifications.

One commercial non-real estate loan totaling $0.4 million, one residential mortgage loan totaling $0.6 million, and two consumer loans totaling $0.2 million that defaulted during the nine months ended September 30, 2020 had been modified in a TDR during the twelve months prior to default. No loans that defaulted during the nine months ended September 30, 2019 had been modified in a TDR during the twelve months prior to default.

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The tables below present loans that are individually evaluated by portfolio class at September 30, 2020 and December 31, 2019. Loans individually evaluated include nonaccrual loans, TDRs and other loans that do not share common characteristics with loans evaluated on a collective basis that have aggregate relationship balances of $1 million or more.

|  | September 30, 2020 |
(in thousands) |  | Recorded investment without an allowance |  |  | Recorded investment with an allowance |  |  | Unpaid principal balance |  |  | Related allowance for loan loss |
Commercial non-real estate |  | $ | 20,689 |  |  | $ | 52,450 |  |  | $ | 125,893 |  |  | $ | 27,304 |
Commercial real estate - owner occupied |  |  | 6,900 |  |  |  | 4,224 |  |  |  | 14,029 |  |  |  | 1,344 |
Total commercial and industrial |  |  | 27,589 |  |  |  | 56,674 |  |  |  | 139,922 |  |  |  | 28,648 |
Commercial real estate - income producing |  |  | 5,453 |  |  |  | 96 |  |  |  | 7,016 |  |  |  | 24 |
Construction and land development |  |  | 667 |  |  |  | 1,170 |  |  |  | 1,838 |  |  |  | 169 |
Residential mortgages |  |  | 2,890 |  |  |  | 3,174 |  |  |  | 6,869 |  |  |  | 416 |
Consumer |  |  | 1,592 |  |  |  | 2,332 |  |  |  | 3,924 |  |  |  | 456 |
Total loans |  | $ | 38,191 |  |  | $ | 63,446 |  |  | $ | 159,569 |  |  | $ | 29,713 |

|  | December 31, 2019 |
(in thousands) |  | Recorded investment without an allowance |  |  | Recorded investment with an allowance |  |  | Unpaid principal balance |  |  | Related allowance for loan loss |
Commercial non-real estate |  | $ | 134,191 |  |  | $ | 98,247 |  |  | $ | 270,078 |  |  | $ | 21,733 |
Commercial real estate - owner occupied |  |  | 2,665 |  |  |  | 1,716 |  |  |  | 7,793 |  |  |  | 104 |
Total commercial and industrial |  |  | 136,856 |  |  |  | 99,963 |  |  |  | 277,871 |  |  |  | 21,837 |
Commercial real estate - income producing |  |  | 373 |  |  |  | 1,525 |  |  |  | 1,959 |  |  |  | 18 |
Construction and land development |  |  | — |  |  |  | 277 |  |  |  | 322 |  |  |  | 21 |
Residential mortgages |  |  | 3,383 |  |  |  | 1,791 |  |  |  | 5,709 |  |  |  | 217 |
Consumer |  |  | 479 |  |  |  | 1,004 |  |  |  | 1,906 |  |  |  | 292 |
Total loans |  | $ | 141,091 |  |  | $ | 104,560 |  |  | $ | 287,767 |  |  | $ | 22,385 |

The tables below present the average balances and interest income for individually evaluated loans for the three and nine months ended September 30, 2020 and 2019. Interest income recognized represents interest on accruing loans modified in a TDR.

|  | Three Months Ended |
|  | September 30, 2020 |  |  | September 30, 2019 |
(in thousands) |  | Average Recorded Investment |  |  | Interest Income Recognized |  |  | Average Recorded Investment |  |  | Interest Income Recognized |
Commercial non-real estate |  | $ | 81,227 |  |  | $ | 37 |  |  | $ | 213,291 |  |  | $ | 1,062 |
Commercial real estate - owner occupied |  |  | 10,553 |  |  |  | — |  |  |  | 14,439 |  |  |  | 45 |
Total commercial and industrial |  |  | 91,780 |  |  |  | 37 |  |  |  | 227,730 |  |  |  | 1,107 |
Commercial real estate - income producing |  |  | 5,886 |  |  |  | 6 |  |  |  | 2,331 |  |  |  | 7 |
Construction and land development |  |  | 1,422 |  |  |  | 3 |  |  |  | 1,702 |  |  |  | 2 |
Residential mortgages |  |  | 5,887 |  |  |  | 22 |  |  |  | 4,195 |  |  |  | 2 |
Consumer |  |  | 3,947 |  |  |  | 21 |  |  |  | 1,552 |  |  |  | 21 |
Total loans |  | $ | 108,922 |  |  | $ | 89 |  |  | $ | 237,510 |  |  | $ | 1,139 |

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|  | Nine Months Ended |
|  | September 30, 2020 |  |  | September 30, 2019 |
(in thousands) |  | Average Recorded Investment |  |  | Interest Income Recognized |  |  | Average Recorded Investment |  |  | Interest Income Recognized |
Commercial non-real estate |  | $ | 190,622 |  |  | $ | 776 |  |  | $ | 225,597 |  |  | $ | 4,202 |
Commercial real estate - owner occupied |  |  | 7,306 |  |  |  | — |  |  |  | 17,044 |  |  |  | 196 |
Total commercial and industrial |  |  | 197,928 |  |  |  | 776 |  |  |  | 242,641 |  |  |  | 4,398 |
Commercial real estate - income producing |  |  | 5,749 |  |  |  | 18 |  |  |  | 2,430 |  |  |  | 21 |
Construction and land development |  |  | 1,805 |  |  |  | 7 |  |  |  | 597 |  |  |  | 2 |
Residential mortgages |  |  | 5,318 |  |  |  | 43 |  |  |  | 4,525 |  |  |  | 9 |
Consumer |  |  | 2,651 |  |  |  | 67 |  |  |  | 1,442 |  |  |  | 55 |
Total loans |  | $ | 213,451 |  |  | $ | 911 |  |  | $ | 251,635 |  |  | $ | 4,485 |

The TDR disclosure above does not include loans modified under Section 4013 of the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) signed into law on March 27, 2020, which allows financial institutions to exclude eligible modifications from TDR assessment. Eligible modification must be (1) related to COVID-19, (2) executed on a loan that was not more than 30 days past due as of December 31, 2019 and (3) executed between March 1, 2020 and the earlier of 60 days after the date of the termination of the national emergency or December 31, 2020. At September 30, 2020, there were 817 loans totaling $564.8 million with active short-term payment deferrals of principal, interest or both, or other qualifying CARES Act modifications. These loans are reported in the aging analysis that follows based on the modified terms.

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Aging Analysis

The tables below present the aging analysis of past due loans by portfolio class at September 30, 2020 and December 31, 2019. Prior to the adoption of CECL, purchased credit impaired loans accounted for in pools under ASC 310-30 with an accretable yield were considered to be current in the table below as of December 31, 2019. These loans totaled $6.1 million for 30-59 days past due, $2.0 million for 60-89 days past due and $8.3 million for both greater than 90 days past due and greater than 90 days past due and still accruing at December 31, 2019.

September 30, 2020 |  | 30-59 days past due |  |  | 60-89 days past due |  |  | Greater than 90 days past due |  |  | Total past due |  |  | Current |  |  | Total Loans |  |  | Recorded investment > 90 days and still accruing |
(in thousands) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial non-real estate |  | $ | 6,026 |  |  | $ | 14,277 |  |  | $ | 65,705 |  |  | $ | 86,008 |  |  | $ | 10,171,780 |  |  | $ | 10,257,788 |  |  | $ | 5,110 |
Commercial real estate - owner occupied |  |  | 535 |  |  |  | 2,276 |  |  |  | 11,708 |  |  |  | 14,519 |  |  |  | 2,764,888 |  |  |  | 2,779,407 |  |  |  | 113 |
Total commercial and industrial |  |  | 6,561 |  |  |  | 16,553 |  |  |  | 77,413 |  |  |  | 100,527 |  |  |  | 12,936,668 |  |  |  | 13,037,195 |  |  |  | 5,223 |
Commercial real estate - income producing |  |  | 165 |  |  |  | 30,238 |  |  |  | 8,701 |  |  |  | 39,104 |  |  |  | 3,367,450 |  |  |  | 3,406,554 |  |  |  | 2,490 |
Construction and land development |  |  | 1,076 |  |  |  | 237 |  |  |  | 3,178 |  |  |  | 4,491 |  |  |  | 1,091,658 |  |  |  | 1,096,149 |  |  |  | 393 |
Residential mortgages |  |  | 3,164 |  |  |  | 11,779 |  |  |  | 32,908 |  |  |  | 47,851 |  |  |  | 2,706,537 |  |  |  | 2,754,388 |  |  |  | 1,818 |
Consumer |  |  | 9,451 |  |  |  | 4,621 |  |  |  | 12,920 |  |  |  | 26,992 |  |  |  | 1,918,926 |  |  |  | 1,945,918 |  |  |  | 515 |
Total |  | $ | 20,417 |  |  | $ | 63,428 |  |  | $ | 135,120 |  |  | $ | 218,965 |  |  | $ | 22,021,239 |  |  | $ | 22,240,204 |  |  | $ | 10,439 |

December 31, 2019 |  | 30-59 days past due |  |  | 60-89 days past due |  |  | Greater than 90 days past due |  |  | Total past due |  |  | Current |  |  | Total Loans |  |  | Recorded investment > 90 days and still accruing |
(in thousands) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial non-real estate |  | $ | 20,893 |  |  | $ | 13,445 |  |  | $ | 100,806 |  |  | $ | 135,144 |  |  | $ | 9,031,803 |  |  |  | 9,166,947 |  |  | $ | 1,537 |
Commercial real estate - owner occupied |  |  | 4,862 |  |  |  | 556 |  |  |  | 7,268 |  |  |  | 12,686 |  |  |  | 2,725,774 |  |  |  | 2,738,460 |  |  |  | 830 |
Total commercial and industrial |  |  | 25,755 |  |  |  | 14,001 |  |  |  | 108,074 |  |  |  | 147,830 |  |  |  | 11,757,577 |  |  |  | 11,905,407 |  |  |  | 2,367 |
Commercial real estate - income producing |  |  | 738 |  |  |  | 703 |  |  |  | 2,910 |  |  |  | 4,351 |  |  |  | 2,990,097 |  |  |  | 2,994,448 |  |  |  | 450 |
Construction and land development |  |  | 5,747 |  |  |  | 680 |  |  |  | 2,480 |  |  |  | 8,907 |  |  |  | 1,148,544 |  |  |  | 1,157,451 |  |  |  | 2,042 |
Residential mortgages |  |  | 32,867 |  |  |  | 8,584 |  |  |  | 23,577 |  |  |  | 65,028 |  |  |  | 2,925,603 |  |  |  | 2,990,631 |  |  |  | 85 |
Consumer |  |  | 18,586 |  |  |  | 6,215 |  |  |  | 9,901 |  |  |  | 34,702 |  |  |  | 2,130,116 |  |  |  | 2,164,818 |  |  |  | 1,638 |
Total |  | $ | 83,693 |  |  | $ | 30,183 |  |  | $ | 146,942 |  |  | $ | 260,818 |  |  | $ | 20,951,937 |  |  | $ | 21,212,755 |  |  | $ | 6,582 |

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Credit Quality Indicators

The following tables present the credit quality indicators by segments and portfolio class of loans held for investment at September 30, 2020 and December 31, 2019. The Company routinely assesses the ratings of loans in its portfolio through an established and comprehensive portfolio management process. In addition, the Company often examines portfolios of loans to determine if there are areas of risk not specifically identified in its loan by loan approach. As a result, several loans were downgraded to pass-watch in 2020 in reaction to the economic downturn caused by the pandemic and other environmental factors. In alignment with regulatory guidance, the Company has been working with its customers to manage through this period of severe uncertainty and economic stress, including providing various types of loan deferrals. While a significant number of these deferrals have expired, our ability to predict future cash flow is limited due to the economic uncertainty, and we expect that further risk rating adjustments may be required.

|  | September 30, 2020 |
(in thousands) |  | Commercial non-real estate |  |  | Commercial real estate - owner- occupied |  |  | Total commercial and industrial |  |  | Commercial real estate - income producing |  |  | Construction and land development |  |  | Total commercial |
Grade: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  | $ | 9,617,743 |  |  | $ | 2,562,635 |  |  | $ | 12,180,378 |  |  | $ | 3,278,116 |  |  | $ | 1,062,252 |  |  | $ | 16,520,746 |
Pass-Watch |  |  | 368,292 |  |  |  | 127,688 |  |  |  | 495,980 |  |  |  | 83,736 |  |  |  | 27,851 |  |  |  | 607,567 |
Special Mention |  |  | 85,096 |  |  |  | 37,299 |  |  |  | 122,395 |  |  |  | 2,021 |  |  |  | 210 |  |  |  | 124,626 |
Substandard |  |  | 186,657 |  |  |  | 51,785 |  |  |  | 238,442 |  |  |  | 42,681 |  |  |  | 5,836 |  |  |  | 286,959 |
Doubtful |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Total |  | $ | 10,257,788 |  |  | $ | 2,779,407 |  |  | $ | 13,037,195 |  |  | $ | 3,406,554 |  |  | $ | 1,096,149 |  |  | $ | 17,539,898 |

|  | December 31, 2019 |
(in thousands) |  | Commercial non-real estate |  |  | Commercial real estate - owner- occupied |  |  | Total commercial and industrial |  |  | Commercial real estate - income producing |  |  | Construction and land development |  |  | Total commercial |
Grade: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  | $ | 8,492,113 |  |  | $ | 2,517,448 |  |  | $ | 11,009,561 |  |  |  | 2,883,553 |  |  | $ | 1,120,997 |  |  | $ | 15,014,111 |
Pass-Watch |  |  | 220,850 |  |  |  | 146,266 |  |  |  | 367,116 |  |  |  | 69,765 |  |  |  | 25,621 |  |  |  | 462,502 |
Special Mention |  |  | 71,654 |  |  |  | 14,651 |  |  |  | 86,305 |  |  |  | 14,995 |  |  |  | 283 |  |  |  | 101,583 |
Substandard |  |  | 382,330 |  |  |  | 60,095 |  |  |  | 442,425 |  |  |  | 26,135 |  |  |  | 10,550 |  |  |  | 479,110 |
Doubtful |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Total |  | $ | 9,166,947 |  |  | $ | 2,738,460 |  |  | $ | 11,905,407 |  |  | $ | 2,994,448 |  |  | $ | 1,157,451 |  |  | $ | 16,057,306 |

|  | September 30, 2020 |  |  | December 31, 2019 |
(in thousands) |  | Residential mortgage |  |  | Consumer |  |  | Total |  |  | Residential mortgage |  |  | Consumer |  |  | Total |
Performing |  | $ | 2,708,484 |  |  | $ | 1,920,049 |  |  | $ | 4,628,533 |  |  | $ | 2,950,854 |  |  | $ | 2,147,312 |  |  | $ | 5,098,166 |
Nonperforming |  |  | 45,904 |  |  |  | 25,869 |  |  |  | 71,773 |  |  |  | 39,777 |  |  |  | 17,506 |  |  |  | 57,283 |
Total |  | $ | 2,754,388 |  |  | $ | 1,945,918 |  |  | $ | 4,700,306 |  |  | $ | 2,990,631 |  |  | $ | 2,164,818 |  |  | $ | 5,155,449 |

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

Commercial:

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

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

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

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

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

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

Residential and Consumer:

| • | Performing – accruing loans that have not been modified in a troubled debt restructuring.

| • | Nonperforming – loans for which there are good reasons to doubt that payments will be made in full. All loans with nonaccrual status and all loans that have been modified in a troubled debt restructuring are classified as nonperforming.

Vintage Analysis

The following table presents credit quality disclosures of amortized cost by class and vintage for term loans and by revolving and revolving converted to amortizing at September 30, 2020. The Company defines vintage as the later of origination, renewal or restructure date.

| Term Loans |  |  |  |  |  |  |  |  |  |  |
| Amortized Cost Basis by Origination Year |  |  |  |  |  |  |  |  |  |  |
|  | 2020 |  |  | 2019 |  |  | 2018 |  |  | 2017 |  |  | 2016 |  |  | Prior |  |  | Revolving Loans |  |  | Revolving Loans Converted to Term Loans |  |  | Total |
Commercial Loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  | $ | 4,980,953 |  |  | $ | 3,098,996 |  |  | $ | 1,979,152 |  |  | $ | 1,508,213 |  |  | $ | 1,067,144 |  |  | $ | 1,417,583 |  |  | $ | 2,385,763 |  |  | $ | 82,942 |  |  | $ | 16,520,746 |
Pass-Watch |  |  | 70,389 |  |  |  | 101,741 |  |  |  | 56,681 |  |  |  | 78,598 |  |  |  | 53,259 |  |  |  | 116,413 |  |  |  | 125,134 |  |  |  | 5,352 |  |  |  | 607,567 |
Special Mention |  |  | 5,687 |  |  |  | 13,763 |  |  |  | 24,805 |  |  |  | 17,888 |  |  |  | 31,355 |  |  |  | 2,268 |  |  |  | 25,960 |  |  |  | 2,900 |  |  |  | 124,626 |
Substandard |  |  | 76,243 |  |  |  | 21,552 |  |  |  | 24,505 |  |  |  | 37,104 |  |  |  | 18,231 |  |  |  | 50,571 |  |  |  | 48,004 |  |  |  | 10,749 |  |  |  | 286,959 |
Doubtful |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Total Commercial Loans |  | $ | 5,133,272 |  |  | $ | 3,236,052 |  |  | $ | 2,085,143 |  |  | $ | 1,641,803 |  |  | $ | 1,169,989 |  |  | $ | 1,586,835 |  |  | $ | 2,584,861 |  |  | $ | 101,943 |  |  | $ | 17,539,898 |
Residential Mortgage and Consumer Loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Performing |  | $ | 351,828 |  |  | $ | 501,172 |  |  | $ | 489,007 |  |  | $ | 629,621 |  |  | $ | 536,380 |  |  | $ | 901,979 |  |  | $ | 1,212,937 |  |  | $ | 5,609 |  |  |  | 4,628,533 |
Nonperforming |  |  | 1,244 |  |  |  | 4,540 |  |  |  | 6,181 |  |  |  | 10,422 |  |  |  | 5,178 |  |  |  | 35,169 |  |  |  | 3,039 |  |  |  | 6,000 |  |  |  | 71,773 |
Total Consumer Loans |  | $ | 353,072 |  |  | $ | 505,712 |  |  | $ | 495,188 |  |  | $ | 640,043 |  |  | $ | 541,558 |  |  | $ | 937,148 |  |  | $ | 1,215,976 |  |  | $ | 11,609 |  |  | $ | 4,700,306 |

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Purchased Credit Impaired Loans

Under the transition provisions for the application of CECL, the Company has classified all loans previously accounted for as purchased credit impaired under ASC 310-30 to be classified as purchased credit deteriorated. The application of these provisions resulted in an increase of $19.8 million to the amortized cost basis of the financial asset and the allowance for credit losses at the date of adoption, representing the remaining credit portion of the purchased discount. The Company elected not to maintain pools of loans accounted for under Subtopic 310-30 with the adoption of CECL. The remaining noncredit discount was allocated to the individual loans and will be accreted to interest income using the interest method based on the effective interest rate. Changes in the carrying amount of purchased credit impaired loans and related accretable yield are presented in the following table for the year ended December 31, 2019.

|  | December 31, 2019 |
(in thousands) |  | Carrying Amount of Loans |  |  | Accretable Yield |
Balance at beginning of period |  | $ | 129,596 |  |  | $ | 37,294 |
Additions |  |  | 120,562 |  |  |  | 6,246 |
Payments received, net |  |  | (48,076 | ) |  |  | (4,601 | )
Accretion |  |  | 13,163 |  |  |  | (13,163 | )
Decrease in expected cash flows based on actual cash flows and changes in cash flow assumptions |  |  | — |  |  |  | 4,170 |
Balance at end of period |  | $ | 215,245 |  |  | $ | 29,946 |

Residential Mortgage Loans in Process of Foreclosure

Loans in process of foreclosure include those for which formal foreclosure proceedings are in process according to local requirements of the applicable jurisdiction. Included in loans at September 30, 2020 and December 31, 2019 was $11.2 million and $8.6 million of consumer loans secured by single family residential real estate that were in process of foreclosure. In March 2020, in light of the economic deterioration stemming from the COVID-19 pandemic, the Company placed all active residential mortgage foreclosures on hold and suspended the filing of new foreclosures. On September 1, 2020 the Company resumed foreclosure activity in all states except Florida, where the moratorium expired on September 30 and foreclosure activity resumed October 1, 2020. In addition to the single family residential real estate loans in process of foreclosure, the Company also held $3.6 million and $6.3 million of foreclosed single family residential properties in other real estate owned at September 30, 2020 and December 31, 2019, respectively.

Loans Held for Sale

At September 30, 2020 and December 31, 2019, loans held for sale was comprised only of mortgage loans originated for sale in the secondary market.

5. Securities Sold under Agreements to Repurchase

Included in short-term borrowings are customer securities sold under agreements to repurchase that mature daily and are secured by U.S. agency securities totaling $806.6 million and $484.4 million at September 30, 2020 and December 31, 2019, respectively. The Company borrows funds on a secured basis by selling securities under agreements to repurchase, mainly in connection with treasury management services offered to its deposit customers. As the Company maintains effective control over assets sold under agreements to repurchase, the securities continue to be carried on the consolidated statements of financial condition. Because the Company acts as borrower transferring assets to the counterparty, and the agreements mature daily, the Company’s risk is limited.

6. Long Term Debt

At September 30, 2020 and December 31, 2019, long-term debt was comprised of the following:

|  | September 30, |  |  | December 31, |
(in thousands) |  | 2020 |  |  | 2019 |
Subordinated notes payable, maturing June 2045 |  | $ |  | 150,000 |  |  | $ |  | 150,000 |
Subordinated notes payable, maturing June 2060 |  |  |  | 172,500 |  |  |  |  | — |
Other long-term debt |  |  |  | 73,709 |  |  |  |  | 87,890 |
Less: unamortized debt issuance costs |  |  |  | (10,322 | ) |  |  |  | (4,428 | )
Total long-term debt |  | $ |  | 385,887 |  |  | $ |  | 233,462 |

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The following table sets forth unamortized debt issuance costs associated with the respective debt instruments at September 30, 2020:

|  |  |  |  |  |  |  | Unamortized |
|  |  |  |  |  |  |  | Debt |
|  |  |  |  |  |  |  | Issuance |
(in thousands) |  |  | Principal |  |  |  | Costs |
Subordinated notes payable, maturing June 2045 |  | $ |  | 150,000 |  |  | $ |  | 4,296 |
Subordinated notes payable, maturing June 2060 |  |  |  | 172,500 |  |  |  |  | 6,026 |
Other long-term debt |  |  |  | 73,709 |  |  |  |  | — |
Total |  | $ |  | 396,209 |  |  | $ |  | 10,322 |

On June 9, 2020, the Company completed the issuance of subordinated notes payable with an aggregate principal amount of $172.5 million with a stated maturity of June 15, 2060. The notes accrue interest at a fixed rate of 6.25% per annum, with quarterly interest payments that began September 15, 2020. Subject to prior approval by the Federal Reserve, the Company may redeem the notes in whole or in part on any interest payment date on or after June 15, 2025. This debt qualifies as tier 2 capital in the calculation of certain regulatory capital ratios. The proceeds from the issuance are intended for general corporate purposes, including providing capital to Hancock Whitney Bank if and when deemed appropriate.

On March 9, 2015, the Company completed the issuance of subordinated notes payable with an aggregate principal amount of $150 million with a stated maturity of June 15, 2045. These notes accrue interest at a fixed rate of 5.95% per annum, with quarterly interest payments that began in June 2015. Subject to prior approval by the Federal Reserve, the Company may redeem the notes in whole or in part on any interest payment date on or after June 15, 2020. This debt qualifies as tier 2 capital in the calculation of certain regulatory capital ratios.

Substantially all of the Company’s other long-term debt consists of borrowings associated with tax credit fund activities. Although these borrowings have indicated maturities through 2053, each is expected to be satisfied at the end of the seven-year compliance period for the related tax credit investments.

7. Derivatives

Risk Management Objective of Using Derivatives

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

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Fair Values of Derivative Instruments on the Balance Sheet

The table below presents the notional or contractual amounts and fair values of the Company’s derivative financial instruments as well as their classification on the consolidated balance sheets at September 30, 2020 and December 31, 2019.

|  |  |  | September 30, 2020 |  |  | December 31, 2019 |
|  |  |  |  |  |  |  | Derivative (1) |  |  |  |  |  |  | Derivative (1) |
(in thousands) |  | Type of Hedge |  | Notional or Contractual Amount |  |  | Assets |  |  | Liabilities |  |  | Notional or Contractual Amount |  |  | Assets |  |  | Liabilities |
Derivatives designated as hedging instruments: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest rate swaps - variable rate loans |  | Cash Flow |  | $ | 1,175,000 |  |  | $ | 57,412 |  |  | — |  |  | $ | 1,175,000 |  |  | $ | 24,172 |  |  | $ | 337 |
Interest rate swaps - securities |  | Fair Value |  |  | 762,650 |  |  |  | 842 |  |  |  | 24,203 |  |  |  | 441,400 |  |  |  | 1,474 |  |  |  | 1,759 |
Interest rate swaps - brokered deposits |  | Fair Value |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 43,000 |  |  |  | — |  |  |  | 9 |
|  |  |  |  | 1,937,650 |  |  |  | 58,254 |  |  |  | 24,203 |  |  |  | 1,659,400 |  |  |  | 25,646 |  |  |  | 2,105 |
Derivatives not designated as hedging instruments: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest rate swaps (2) |  | N/A |  |  | 4,560,306 |  |  |  | 164,273 |  |  |  | 168,207 |  |  |  | 3,759,232 |  |  |  | 54,512 |  |  |  | 55,664 |
Risk participation agreements |  | N/A |  |  | 205,787 |  |  |  | 78 |  |  |  | 136 |  |  |  | 254,825 |  |  |  | 21 |  |  |  | 45 |
Forward commitments to sell residential mortgage loans |  | N/A |  |  | 345,871 |  |  |  | 82 |  |  |  | 3,584 |  |  |  | 145,623 |  |  |  | 651 |  |  |  | 744 |
Interest rate-lock commitments on residential mortgage loans |  | N/A |  |  | 265,957 |  |  |  | 2,452 |  |  |  | 59 |  |  |  | 83,224 |  |  |  | 369 |  |  |  | 375 |
Foreign exchange forward contracts |  | N/A |  |  | 81,492 |  |  |  | 1,937 |  |  |  | 1,888 |  |  |  | 64,632 |  |  |  | 303 |  |  |  | 366 |
Visa Class B derivative contract |  | N/A |  |  | 43,565 |  |  | — |  |  |  | 4,616 |  |  |  | 43,753 |  |  |  | — |  |  |  | 5,704 |
|  |  |  |  | 5,502,978 |  |  |  | 168,822 |  |  |  | 178,490 |  |  |  | 4,351,289 |  |  |  | 55,856 |  |  |  | 62,898 |
Total derivatives |  |  |  | $ | 7,440,628 |  |  | $ | 227,076 |  |  | $ | 202,693 |  |  | $ | 6,010,689 |  |  | $ | 81,502 |  |  | $ | 65,003 |
Less: netting adjustment (3) |  |  |  |  |  |  |  |  | (58,254 | ) |  |  | (146,415 | ) |  |  |  |  |  |  | (27,056 | ) |  |  | (43,914 | )
Total derivative assets/liabilities |  |  |  |  |  |  |  | $ | 168,822 |  |  | $ | 56,278 |  |  |  |  |  |  | $ | 54,446 |  |  | $ | 21,089 |

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

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

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

Cash Flow Hedges of Interest Rate Risk

The Company is party to various interest rate swap agreements designated and qualifying as cash flow hedges of the Company’s forecasted variable cash flows for pools of variable rate loans. For each agreement, the Company receives interest at a fixed rate and pays at a variable rate. Amortization of other comprehensive loss on terminated cash flow hedges totaled $1.4 million and 3.4 million for the nine months ended September 30, 2020 and 2019. The notional amounts of the swap agreements in place at September 30, 2020 expire as follows: $50 million in 2021; $475 million in 2022; $550 million in 2023; and $100 million in 2024.

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Fair Value Hedges of Interest Rate Risk

Interest rate swaps on securities available for sale

The Company is party to forward-starting fixed payer swaps that convert the latter portion of the term of certain available for sale securities to a floating rate. These derivative instruments are designated as fair value hedges of interest rate risk. This strategy provides the Company with a fixed rate coupon during the front-end unhedged tenor of the bonds and results in a floating rate security during the back-end hedged tenor with hedged start dates between August 2023 through September 2025, and maturity dates from January 2028 through March 2031. The fair value of the hedged item attributable to interest rate risk will be presented in interest income along with the change in the fair value of the hedging instrument.

The majority of the hedged available for sale securities is a closed portfolio of pre-payable commercial mortgage backed securities. In accordance with ASC 815, prepayment risk may be excluded when measuring the change in fair value of such hedged items attributable to interest rate risk under the last-of-layer approach. At September 30, 2020, the amortized cost basis of the closed portfolio of pre-payable commercial mortgage backed securities totaled $823.6 million. The amount that represents the hedged items was $752.5 million and the basis adjustment associated with the hedged items totaled $23.8 million.

Interest rate swaps on brokered deposits

Prior to January 2020, the Company was party to certain interest rate swap agreements that modified the Company’s exposure to interest rate risk by effectively converting a portion of the Company’s brokered certificates of deposit from fixed rates to variable rates. The maturities and call features of these interest rate swaps matched the features of the hedged deposits. As interest rates declined or increased, the corresponding movement in the value of the certificates of deposit were offset by the change in the value of the interest rate swaps, resulting in no impact to earnings. Interest expense was adjusted by the difference between the fixed and floating rates for the period the swaps are in effect.

Derivatives Not Designated as Hedges

Customer interest rate derivative program

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

The Company has offered customers a deferral of the monthly derivative payment/settlement if the associated loan was on deferral. At September 30, 2020, the Company had a receivable totaling $0.1 million related to these deferrals.

Risk participation agreements

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

Mortgage banking derivatives

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

Customer foreign exchange forward contract derivatives

The Company enters into foreign exchange forward derivative agreements, primarily forward foreign currency contracts, with commercial banking customers to facilitate their risk management strategies. The Bank manages its risk exposure from such transactions by entering into offsetting agreements with unrelated financial institutions. Because the foreign exchange forward

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contract derivatives associated with this program do not meet hedge accounting requirements, changes in the fair value of both the customer derivatives and the offsetting derivatives are recognized directly in earnings.

Visa Class B derivative contract

The Company is a member of Visa USA. During the fourth quarter of 2018, the Company sold the majority of its Visa Class B holdings, at which time it entered into a derivative agreement with the purchaser whereby the Company will make or receive cash payments whenever the conversion ratio of the Visa Class B shares into Visa Class A shares is adjusted. The conversion ratio changes when Visa deposits funds to a litigation escrow account established by Visa to pay settlements for certain litigation, for which Visa is indemnified by Visa USA members. The Company is also required to make periodic financing payments to the purchaser until all of Visa’s covered litigation matters are resolved. Thus, the derivative contract extends until the end of Visa’s covered litigation matters, the timing of which is uncertain.

The contract includes a contingent accelerated termination clause based on the credit ratings of the Company. At September 30, 2020 and December 31, 2019 the fair value of the liability associated with this contract was $4.6 million and $5.7 million, respectively.

Effect of Derivative Instruments on the Statement of Income

The effects of derivative instruments on the consolidated statements of income for the nine months ended September 30, 2020 and 2019 are presented in the table below. Interest income or the reduction of interest income attributable to cash flow hedges includes amortization of accumulated other comprehensive loss that resulted from termination of interest rate swap contracts.

|  |  |  | Three Months Ended |  |  | Nine Months Ended |
|  |  |  | September 30, |  |  | September 30, |
Derivative Instruments: |  | Location of Gain (Loss) Recognized in the Statement of Income: |  | 2020 |  |  | 2019 |  |  | 2020 |  |  | 2019 |
Cash flow hedges - variable rate loans |  | Interest income |  | $ | 5,788 |  |  | $ | (956 | ) |  | $ | 11,249 |  |  | $ | (4,632 | )
Fair value hedges - securities |  | Interest income |  |  | (7 | ) |  |  | 15 |  |  |  | 33 |  |  |  | 15 |
Fair value hedges - brokered deposits |  | Interest expense |  | — |  |  |  | (243 | ) |  |  | 46 |  |  |  | (1,692 | )
All other instruments |  | Other noninterest income |  |  | 1,739 |  |  |  | 4,324 |  |  |  | 9,718 |  |  |  | 8,733 |
Total gain |  |  |  | $ | 7,520 |  |  | $ | 3,140 |  |  | $ | 21,046 |  |  | $ | 2,424 |

Credit Risk-Related Contingent Features

Certain of the Company’s derivative instruments contain provisions allowing the financial institution counterparty to terminate the contracts in certain circumstances, such as a downgrade of the Bank’s credit ratings below specified levels, a default by the Bank on its indebtedness, or the failure of the Bank to maintain specified minimum regulatory capital ratios or its regulatory status as a well-capitalized institution. These derivative agreements also contain provisions regarding the posting of collateral by each party. At September 30, 2020, the Company was not in violation of any such provisions. The aggregate fair value of derivative instruments with credit risk-related contingent features that were in a net liability position at September 30, 2020 and December 31, 2019 was $47.1 million and $12.9 million, respectively, for which the Company had posted collateral of $47.8 million and $12.4 million, respectively.

Offsetting Assets and Liabilities

The Company’s derivative instruments with certain counterparties contain legally enforceable netting provisions that allow for net settlement of multiple transactions to a single amount, which may be positive, negative, or zero. Agreements with certain bilateral counterparties require both parties to maintain collateral in the event that the fair values of derivative instruments exceed established exposure thresholds. For centrally cleared derivatives, the Company is subject to initial margin posting and daily variation margin exchange with the central clearinghouses. Offsetting information in regards to all derivative assets and liabilities, including accrued interest, subject to these master netting agreements at September 30, 2020 and December 31, 2019 is presented in the following tables.

(in thousands) |  |  |  |  |  | Gross Amounts |  |  | Net Amounts |  |  | Gross Amounts Not Offset in the Statement of Financial Condition |
Description |  | Gross Amounts Recognized |  |  | Offset in the Statement of Financial Condition |  |  | Presented in the Statement of Financial Condition |  |  | Financial Instruments |  |  | Cash Collateral |  |  | Net Amount |
As of September 30, 2020 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Derivative Assets |  | $ | 60,231 |  |  | $ | (60,231 | ) |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |
Derivative Liabilities |  | $ | 195,780 |  |  | $ | (148,738 | ) |  | $ | 47,042 |  |  | $ | — |  |  | $ | 87,926 |  |  | $ | (40,884 | )

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(in thousands) |  |  |  |  |  | Gross Amounts |  |  | Net Amounts |  |  | Gross Amounts Not Offset in the Statement of Financial Condition |
Description |  | Gross Amounts Recognized |  |  | Offset in the Statement of Financial Condition |  |  | Presented in the Statement of Financial Condition |  |  | Financial Instruments |  |  | Cash Collateral |  |  | Net Amount |
As of December 31, 2019 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Derivative Assets |  | $ | 27,938 |  |  | $ | (27,915 | ) |  | $ | 23 |  |  | $ | 23 |  |  | $ | — |  |  | $ | — |
Derivative Liabilities |  | $ | 56,523 |  |  | $ | (44,570 | ) |  | $ | 11,953 |  |  | $ | 23 |  |  | $ | 35,113 |  |  | $ | (23,183 | )

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

8. Stockholders’ Equity

Common Shares Outstanding

Common shares outstanding excludes treasury shares totaling 5.2 million at September 30, 2020 and 4.0 million at December 31, 2019, with a first-in-first-out cost basis of $176.1 million and $135.8 million at September 30, 2020 and December 31, 2019, respectively. Shares outstanding also excludes unvested restricted share awards totaling 1.4 million at both September 30, 2020 and December 31, 2019.

Shares Issued as Consideration in Business Combination

On September 21, 2019, the Company issued approximately 5.0 million shares of common stock at a market value of $38.42 per share as consideration for its acquisition of MidSouth. Refer to Note 2 – Business Combination for further information.

Stock Buyback Program

On September 23, 2019, the Company’s board of directors approved a stock buyback program that authorized the Company to repurchase up to 5.5 million shares of its common stock through the expiration date of December 31, 2020. The program allows the Company to repurchase its common shares in the open market, by block purchase, through accelerated share repurchase programs, in privately negotiated transactions, or as otherwise determined by the Company in one or more transactions. The Company is not obligated to purchase any shares under this program, and the board of directors may terminate or amend the program at any time prior to the expiration date.

On October 18, 2019, the Company entered into an accelerated share repurchase agreement (“ASR”) with Morgan Stanley & Co. LLC (“Morgan Stanley”) to repurchase $185 million of the Company’s common stock. Pursuant to the ASR, the Company made a $185 million payment to Morgan Stanley on October 21, 2019, and received from Morgan Stanley an initial delivery of 3,611,870 shares of the Company’s common stock, which represented 75% of the estimated total number of shares to be repurchased based on the October 18, 2019 closing price of the Company’s common stock. The value of the remaining shares to be exchanged upon final settlement was accounted for as a forward contract until settlement. Final settlement of the ASR agreement occurred on March 18, 2020. Pursuant to the terms of the settlement, the Company received cash of approximately $12.1 million and a final delivery of 1.0 million shares.

In January 2020, the Company repurchased 315,851 shares of its common stock at a price of $40.26 in a privately negotiated transaction. In total, the Company repurchased 4.9 million of the 5.5 million authorized shares under the buyback program at an average price of $37.65 per share.

The Company has suspended the repurchase of shares under its stock buyback program.

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Accumulated Other Comprehensive Income (Loss)

The components of Accumulated Other Comprehensive Income (Loss) and changes in those components are presented in the following table.

﻿ |  | Available for Sale Securities |  |  | HTM Securities Transferred from AFS |  |  | Employee Benefit Plans |  |  | Cash Flow Hedges |  |  | Equity Method Investment |  |  | Total |
(in thousands) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Balance, December 31, 2018 |  | $ | (50,125 | ) |  | $ | (12,044 | ) |  | $ | (110,247 | ) |  | $ | (8,293 | ) |  | $ | — |  |  | $ | (180,709 | )
Net change in unrealized loss |  |  | 125,589 |  |  |  | — |  |  |  | — |  |  |  | 35,472 |  |  |  | (434 | ) |  |  | 160,627 |
Reclassification of net loss realized and included in earnings |  |  | — |  |  |  | — |  |  |  | 6,851 |  |  |  | 4,632 |  |  |  | — |  |  |  | 11,483 |
Valuation adjustment to employee benefit plans |  |  | — |  |  |  | — |  |  |  | (7,015 | ) |  |  | — |  |  |  | — |  |  |  | (7,015 | )
Amortization of unrealized net loss on securities transferred to HTM |  |  | — |  |  |  | 2,435 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 2,435 |
Income tax expense (benefit) |  |  | 28,395 |  |  |  | 551 |  |  |  | (37 | ) |  |  | 9,068 |  |  |  | — |  |  |  | 37,977 |
Balance, September 30, 2019 |  | $ | 47,069 |  |  | $ | (10,160 | ) |  | $ | (110,374 | ) |  | $ | 22,743 |  |  | $ | (434 | ) |  | $ | (51,156 | )
Balance, December 31, 2019 |  | $ | 28,950 |  |  | $ | 639 |  |  | $ | (101,278 | ) |  | $ | 17,399 |  |  | $ | (434 | ) |  | $ | (54,724 | )
Net change in unrealized gain or loss |  |  | 176,009 |  |  |  | — |  |  |  | — |  |  |  | 46,180 |  |  |  | (4,935 | ) |  |  | 217,254 |
Reclassification of net income or loss realized and included in earnings |  |  | — |  |  |  | — |  |  |  | 4,656 |  |  |  | (11,249 | ) |  |  | — |  |  |  | (6,593 | )
Valuation adjustment to employee benefit plans |  |  | — |  |  |  | — |  |  |  | (10,251 | ) |  |  | — |  |  |  | — |  |  |  | (10,251 | )
Amortization of unrealized net gain on securities transferred to HTM |  |  | — |  |  |  | (378 | ) |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (378 | )
Income tax expense (benefit) |  |  | 39,817 |  |  |  | (85 | ) |  |  | (1,265 | ) |  |  | 7,903 |  |  |  | — |  |  |  | 46,370 |
Balance, September 30, 2020 |  | $ | 165,142 |  |  | $ | 346 |  |  | $ | (105,608 | ) |  | $ | 44,427 |  |  | $ | (5,369 | ) |  | $ | 98,938 |

Accumulated Other Comprehensive Income or Loss (“AOCI”) is reported as a component of stockholders’ equity. AOCI can include, among other items, unrealized holding gains and losses on securities available for sale (“AFS”), including the Company’s share of unrealized gains and losses reported by a partnership accounted for under the equity method, gains and losses associated with pension or other post-retirement benefits that are not recognized immediately as a component of net periodic benefit cost, and gains and losses on derivative instruments that are designated as, and qualify as, cash flow hedges. Net unrealized gains and losses on AFS securities reclassified as securities held to maturity (“HTM”) also continue to be reported as a component of AOCI and will be amortized over the estimated remaining life of the securities as an adjustment to interest income. Subject to certain thresholds, unrealized losses on employee benefit plans will be reclassified into income as pension and post-retirement costs are recognized over the remaining service period of plan participants. Accumulated gains or losses on the cash flow hedge of the variable rate loans described in Note 7 will be reclassified into income over the life of the hedge. Accumulated other comprehensive loss resulting from the terminated interest rate swaps will be amortized over the remaining maturities of the designated instruments. Gains and losses within AOCI are net of deferred income taxes, where applicable.

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

﻿ |  | Nine Months Ended |  |  |
Amount reclassified from AOCI (a) |  | September 30, |  |  | Affected line item on
(in thousands) |  | 2020 |  |  | 2019 |  |  | the statement of income
Amortization of unrealized net gain or loss or gain on securities transferred to HTM |  | $ | 378 |  |  | $ | (2,435 | ) |  | Interest income
Tax effect |  |  | (85 | ) |  |  | 551 |  |  | Income taxes
Net of tax |  |  | 293 |  |  |  | (1,884 | ) |  | Net income
Amortization of defined benefit pension and post-retirement items |  |  | (4,656 | ) |  |  | (6,851 | ) |  | Other noninterest expense (b)
Tax effect |  |  | 1,053 |  |  |  | 1,546 |  |  | Income taxes
Net of tax |  |  | (3,603 | ) |  |  | (5,305 | ) |  | Net income
Reclassification of unrealized gain (loss) on cash flow hedges |  |  | 12,602 |  |  |  | (1,200 | ) |  | Interest income
Tax effect |  |  | (2,851 | ) |  |  | 271 |  |  | Income taxes
Net of tax |  |  | 9,751 |  |  |  | (929 | ) |  | Net income
Amortization of loss on terminated cash flow hedges |  |  | (1,353 | ) |  |  | (3,432 | ) |  | Interest income
Tax effect |  |  | 306 |  |  |  | 776 |  |  | Income taxes
Net of tax |  |  | (1,047 | ) |  |  | (2,656 | ) |  | Net income
Total reclassifications, net of tax |  | $ | 5,394 |  |  | $ | (10,774 | ) |  | Net income

(a) | Amounts in parentheses indicate reduction in net income.

(b) | These AOCI components are included in the computation of net periodic pension and post-retirement cost that is reported with other noninterest expense (see Note 12 – Retirement Plans for additional details).

On March 27, 2020, the Office of the Comptroller of the Currency (OCC), the Board of Governors of the Federal Reserve System, and the Federal Deposit Insurance Corporation issued an interim final rule that provides an option to delay the estimated impact on regulatory capital stemming from the implementation CECL for a transition period of five years. The five-year rule provides a full delay of the estimated impact of CECL on regulatory capital transition (0%) for the first two years, followed by a three-year transition (25% of the impact included in 2022, 50% in 2023, 75% in 2024 and 100% thereafter). The two-year delay includes the full impact of day one CECL plus the estimated impact of current CECL activity calculated quarterly as 25% of the current ACL over the day one balance (“modified transition amount”). The modified transition amount will be recalculated each quarter in 2020 and 2021, with the December 31, 2021 impact carrying through the remaining three years of the transition. The Company elected the five-year transition period option upon issuance of the interim final rule.

9. Other Noninterest Income

Components of other noninterest income are as follows:

|  | Three Months Ended |  |  | Nine Months Ended |
|  | September 30, |  |  | September 30, |
(in thousands) |  | 2020 |  |  | 2019 |  |  | 2020 |  |  | 2019 |
Income from bank-owned life insurance |  | $ | 6,628 |  |  | $ | 4,147 |  |  | $ | 14,211 |  |  | $ | 11,495 |
Credit related fees |  |  | 2,911 |  |  |  | 2,988 |  |  |  | 8,585 |  |  |  | 8,520 |
Income from derivatives |  |  | 1,739 |  |  |  | 4,324 |  |  |  | 9,718 |  |  |  | 8,733 |
Other miscellaneous |  |  | 3,521 |  |  |  | 4,866 |  |  |  | 11,598 |  |  |  | 12,025 |
Total other noninterest income |  | $ | 14,799 |  |  | $ | 16,325 |  |  | $ | 44,112 |  |  | $ | 40,773 |

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10. Other Noninterest Expense

Components of other noninterest expense are as follows:

|  | Three Months Ended |  |  | Nine Months Ended |
|  | September 30, |  |  | September 30, |
(in thousands) |  | 2020 |  |  | 2019 |  |  | 2020 |  |  | 2019 |
Advertising |  | $ | 3,159 |  |  | $ | 5,435 |  |  | $ | 10,089 |  |  | $ | 11,768 |
Corporate value and franchise taxes |  |  | 4,872 |  |  |  | 4,109 |  |  |  | 13,649 |  |  |  | 12,366 |
Telecommunications and postage |  |  | 4,043 |  |  |  | 3,610 |  |  |  | 11,483 |  |  |  | 10,439 |
Entertainment and contributions |  |  | 1,315 |  |  |  | 2,765 |  |  |  | 7,146 |  |  |  | 8,215 |
Travel expense |  |  | 309 |  |  |  | 1,172 |  |  |  | 1,816 |  |  |  | 3,614 |
Printing and supplies |  |  | 1,271 |  |  |  | 1,459 |  |  |  | 4,006 |  |  |  | 3,720 |
Tax credit investment amortization |  |  | 961 |  |  |  | 1,286 |  |  |  | 2,882 |  |  |  | 3,658 |
Net other retirement expense (income) |  |  | (6,337 | ) |  |  | (4,152 | ) |  |  | (18,796 | ) |  |  | (12,409 | )
Other miscellaneous |  |  | 5,105 |  |  |  | 17,374 |  |  |  | 17,751 |  |  |  | 29,653 |
Total other noninterest expense |  | $ | 14,698 |  |  | $ | 33,058 |  |  | $ | 50,026 |  |  | $ | 71,024 |

11. Earnings (Loss) Per Common Share

The Company calculates earnings (loss) per share using the two-class method. The two-class method allocates net income or loss to each class of common stock and participating security according to common dividends declared and participation rights in undistributed earnings. For reporting periods in which a net loss is recorded, net loss is not allocated to participating securities because the holders of such securities bear no contractual obligation to fund or otherwise share in the losses. Participating securities consist of nonvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents.

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

|  | Three Months Ended |  |  | Nine Months Ended |
|  | September 30, |  |  | September 30, |
(in thousands, except per share data) |  | 2020 |  |  | 2019 |  |  | 2020 |  |  | 2019 |
Numerator: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Net income (loss) to common shareholders |  | $ | 79,356 |  |  | $ | 67,807 |  |  | $ | (148,749 | ) |  | $ | 235,248 |
Net dividends or income allocated to participating securities - basic and diluted |  |  | 1,435 |  |  |  | 1,141 |  |  |  | 1,278 |  |  |  | 3,980 |
Net income (loss) allocated to common shareholders - basic and diluted |  | $ | 77,921 |  |  | $ | 66,666 |  |  | $ | (150,027 | ) |  | $ | 231,268 |
Denominator: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Weighted-average common shares - basic |  |  | 86,358 |  |  |  | 86,377 |  |  | $ | 86,614 |  |  | $ | 85,934 |
Dilutive potential common shares |  |  | 42 |  |  |  | 85 |  |  |  | — |  |  |  | 76 |
Weighted-average common shares - diluted |  |  | 86,400 |  |  |  | 86,462 |  |  | $ | 86,614 |  |  | $ | 86,010 |
Earnings (loss) per common share: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Basic |  | $ | 0.90 |  |  | $ | 0.77 |  |  | $ | (1.73 | ) |  | $ | 2.69 |
Diluted |  | $ | 0.90 |  |  | $ | 0.77 |  |  | $ | (1.73 | ) |  | $ | 2.69 |

Potential common shares consist of stock options, nonvested performance-based awards, and nonvested restricted share awards deferred under the Company’s nonqualified deferred compensation plan. These potential common shares do not enter into the calculation of diluted earnings per share if the impact would be antidilutive, i.e., increase earnings per share or reduce a loss per share. For reporting periods in which a net loss is reported, no effect is given to potentially dilutive common shares in the computation of loss per common share as any impact from such shares would be antidilutive. Potentially dilutive common shares with weighted averages of 78,867 for the three months ended September 30, 2020 and 43,794 and 37,680 for the three and nine months ended September 30, 2019, respectively, were excluded from the calculation of earnings per common share, as the effect would have been antidilutive.

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12. Retirement Plans

The Company sponsors a qualified defined benefit pension plan, the Hancock Whitney Corporation Pension Plan (“Pension Plan”), covering certain eligible associates. Those hired or rehired by the Company prior to June 30, 2017 are eligible to participate; however, the accrued benefits of each participant in the Pension Plan whose combined age plus years of service as of January 1, 2018 totaled less than 55 were frozen as of January 1, 2018 and will not thereafter increase. The Company makes contributions to the Pension Plan in amounts sufficient to meet funding requirements set forth in federal employee benefit and tax laws, plus such additional amounts as the Company may determine to be appropriate. During the first quarter of 2019, the Company made a discretionary contribution of $100 million to the Pension Plan.

The Company also offers a defined contribution retirement benefit plan, the Hancock Whitney Corporation 401(k) Savings Plan (“401(k) Plan”), that covers substantially all associates who have been employed 60 days and meet a minimum age requirement and employment classification criteria. The Company matches 100% of the first 1% of compensation saved by a participant, and 50% of the next 5% of compensation saved. Newly eligible associates are automatically enrolled at an initial 3% savings rate unless the associate actively opts out of participation in the plan. Beginning January 1, 2018, the Company makes an additional basic contribution to associates hired or rehired after June 30, 2017 in an amount equal to 2% of the associate’s eligible compensation. For Pension Plan participants whose benefits were frozen as of January 1, 2018, the 401(k) Plan provides an enhanced Company contribution in the amount of 2%, 4% or 6% of such participant’s eligible compensation, based on the participant’s age and years of service with the Company. Participants vest in basic and enhanced Company contributions upon completion of three years of service.

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

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

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

﻿ |  |  |  |  |  |  |  |  |  | Other Post- |
(in thousands) |  | Pension Benefits |  |  | Retirement Benefits |
For The Three Months Ended September 30, |  | 2020 |  |  | 2019 |  |  | 2020 |  |  | 2019 |
Service cost |  | $ | 3,207 |  |  | $ | 2,735 |  |  | $ | 28 |  |  | $ | 22 |
Interest cost |  |  | 3,892 |  |  |  | 4,659 |  |  |  | 106 |  |  |  | 165 |
Expected return on plan assets |  |  | (12,047 | ) |  |  | (11,299 | ) |  |  | — |  |  |  | — |
Amortization of net loss and prior service costs |  |  | 1,854 |  |  |  | 2,553 |  |  |  | (142 | ) |  |  | (229 | )
Net reduction of periodic benefit cost |  | $ | (3,094 | ) |  | $ | (1,352 | ) |  | $ | (8 | ) |  | $ | (42 | )

﻿ |  |  |  |  |  |  |  |  |  | Other Post- |
(in thousands) |  | Pension Benefits |  |  | Retirement Benefits |
For the Nine Months Ended September 30, |  | 2020 |  |  | 2019 |  |  | 2020 |  |  | 2019 |
Service cost |  | $ | 9,690 |  |  | $ | 8,245 |  |  | $ | 78 |  |  | $ | 73 |
Interest cost |  |  | 12,315 |  |  |  | 14,183 |  |  |  | 377 |  |  |  | 457 |
Expected return on plan assets |  |  | (36,144 | ) |  |  | (33,899 | ) |  |  | — |  |  |  | — |
Amortization of net loss and prior service costs |  |  | 5,168 |  |  |  | 7,535 |  |  |  | (512 | ) |  |  | (684 | )
Net reduction of periodic benefit cost |  | $ | (8,971 | ) |  | $ | (3,936 | ) |  | $ | (57 | ) |  | $ | (154 | )

13. Share-Based Payment Arrangements

The Company maintains incentive compensation plans that provide for awards of share-based compensation to employees and directors. These plans have been approved by the Company’s shareholders. Detailed descriptions of these plans were included in Note 18 to the consolidated financial statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.

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At September 30, 2020, the Company had 28,725 outstanding and exercisable stock options, with a weighted average exercise price of $34.11 and a weighted average remaining contractual term of 1.4 years. The options had no aggregate intrinsic value.

There were no exercises of stock options during the nine months ended September 30, 2020. The total intrinsic value of options exercised during the nine months ended September 30, 2019 was $0.2 million.

The Company’s restricted and performance-based share awards to certain employees and directors are subject to service requirements. A summary of the status of the Company’s nonvested restricted and performance-based share awards at September 30, 2020 are presented in the following table.

|  |  |  |  |  | Weighted |
|  |  |  |  |  | Average |
|  | Number of |  |  | Grant Date |
|  | Shares |  |  | Fair Value |
Nonvested at January 1, 2020 |  |  | 1,596,258 |  |  | $ | 40.43 |
Granted |  |  | 131,025 |  |  |  | 31.81 |
Vested |  |  | (32,706 | ) |  |  | 41.39 |
Forfeited |  |  | (55,814 | ) |  |  | 41.21 |
Nonvested at September 30, 2020 |  |  | 1,638,763 |  |  | $ | 39.70 |

At September 30, 2020, there was $44.8 million of total unrecognized compensation expense related to nonvested restricted and performance shares expected to vest in the future. This compensation is expected to be recognized in expense over a weighted average period of 3 years. The total fair value of shares which vested during the nine months ended September 30, 2020 and 2019 was $1.4 million and $1.3 million, respectively.

During the nine months ended September 30, 2020, the Company granted 35,754 performance share awards subject to a total shareholder return (“TSR”) performance metric with a grant date fair value of $46.61 per share and 35,754 performance shares subject to an operating earnings per share performance metric with a grant date fair value of $39.39 per share to key members of executive management. The number of performance shares subject to TSR that ultimately vest at the end of the three-year performance period, if any, will be based on the relative rank of the Company’s three-year TSR among the TSRs of a peer group of 47 regional banks. The fair value of the performance shares subject to TSR at the grant date was determined using a Monte Carlo simulation method. The number of performance shares subject to operating earnings per share that ultimately vest will be based on the Company’s attainment of certain operating earnings per share goals over the two-year performance period. The maximum number of performance shares that could vest is 200% of the target award. Compensation expense for these performance shares is recognized on a straight line basis over the three-year service period.

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14. Commitments and Contingencies

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

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

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

The contract amounts of these instruments reflect the Company’s exposure to credit risk. The Company undertakes the same credit evaluation in making loan commitments and assuming conditional obligations as it does for on-balance sheet instruments and may require collateral or other credit support. At September 30, 2020, the Company had a reserve for unfunded lending commitments of $31.5 million.

The following table presents a summary of the Company’s off-balance sheet financial instruments as of September 30, 2020 and December 31, 2019:

﻿ |  | September 30, |  |  | December 31, |
(in thousands) |  | 2020 |  |  | 2019 |
Commitments to extend credit |  | $ | 7,803,139 |  |  | $ | 7,530,143 |
Letters of credit |  |  | 369,538 |  |  |  | 393,284 |

Legal Proceedings

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

15. Fair Value Measurements

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

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Fair Value of Assets and Liabilities Measured on a Recurring Basis

The following tables present for each of the fair value hierarchy levels the Company’s assets and liabilities that are measured at fair value on a recurring basis in the consolidated balance sheets at September 30, 2020 and December 31, 2019:

﻿ |  | September 30, 2020 |
(in thousands) |  | Level 1 |  |  | Level 2 |  |  | Level 3 |  |  | Total |
Assets |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Available for sale debt securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
U.S. Treasury and government agency securities |  | $ | — |  |  | $ | 198,616 |  |  | $ | — |  |  | $ | 198,616 |
Municipal obligations |  |  | — |  |  |  | 313,656 |  |  |  | — |  |  |  | 313,656 |
Corporate debt securities |  |  | — |  |  |  | 8,183 |  |  |  | — |  |  |  | 8,183 |
Residential mortgage-backed securities |  |  | — |  |  |  | 2,606,690 |  |  |  | — |  |  |  | 2,606,690 |
Commercial mortgage-backed securities |  |  | — |  |  |  | 2,101,000 |  |  |  | — |  |  |  | 2,101,000 |
Collateralized mortgage obligations |  |  | — |  |  |  | 419,170 |  |  |  | — |  |  |  | 419,170 |
Total available for sale securities |  |  | — |  |  |  | 5,647,315 |  |  |  | — |  |  |  | 5,647,315 |
Derivative assets (1) |  |  | — |  |  |  | 168,822 |  |  |  | — |  |  |  | 168,822 |
Total recurring fair value measurements - assets |  | $ | — |  |  | $ | 5,816,137 |  |  | $ | — |  |  | $ | 5,816,137 |
Liabilities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Derivative liabilities (1) |  | $ | — |  |  | $ | 51,662 |  |  | $ | 4,616 |  |  | $ | 56,278 |
Total recurring fair value measurements - liabilities |  | $ | — |  |  | $ | 51,662 |  |  | $ | 4,616 |  |  | $ | 56,278 |

﻿ |  | December 31, 2019 |
(in thousands) |  | Level 1 |  |  | Level 2 |  |  | Level 3 |  |  | Total |
Assets |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Available for sale debt securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
U.S. Treasury and government agency securities |  | $ | — |  |  | $ | 98,672 |  |  | $ | — |  |  | $ | 98,672 |
Municipal obligations |  |  | — |  |  |  | 249,805 |  |  |  | — |  |  |  | 249,805 |
Corporate debt securities |  |  | — |  |  |  | 7,988 |  |  |  | — |  |  |  | 7,988 |
Residential mortgage-backed securities |  |  | — |  |  |  | 1,924,157 |  |  |  | — |  |  |  | 1,924,157 |
Commercial mortgage-backed securities |  |  | — |  |  |  | 1,586,467 |  |  |  | — |  |  |  | 1,586,467 |
Collateralized mortgage obligations |  |  | — |  |  |  | 808,215 |  |  |  | — |  |  |  | 808,215 |
Total available for sale securities |  |  | — |  |  |  | 4,675,304 |  |  |  | — |  |  |  | 4,675,304 |
Derivative assets (1) |  |  | — |  |  |  | 54,446 |  |  |  | — |  |  |  | 54,446 |
Total recurring fair value measurements - assets |  | $ | — |  |  | $ | 4,729,750 |  |  | $ | — |  |  | $ | 4,729,750 |
Liabilities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Derivative liabilities (1) |  | $ | — |  |  | $ | 15,385 |  |  | $ | 5,704 |  |  | $ | 21,089 |
Total recurring fair value measurements - liabilities |  | $ | — |  |  | $ | 15,385 |  |  | $ | 5,704 |  |  | $ | 21,089 |

(1) | For further disaggregation of derivative assets and liabilities, see Note 7 - Derivatives.

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

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

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

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

The Company’s Level 3 liability consists of a derivative contract with the purchaser of 192,163 shares of Visa Class B common stock. Pursuant to the agreement, the Company retains the risks associated with the ultimate conversion of the Visa Class B common shares into shares of Visa Class A common stock, such that the counterparty will be compensated for any dilutive adjustments to the conversion ratio and the Company will be compensated for any anti-dilutive adjustments to the ratio. The agreement also requires periodic payments by the Company to the counterparty calculated by reference to the market price of Visa Class A common shares at the time of sale and a fixed rate of interest that steps up once after the eighth scheduled quarterly payment. The fair value of the liability is determined using a discounted cash flow methodology. The significant unobservable inputs used in the fair value measurement are the Company’s own assumptions about estimated changes in the conversion rate of the Visa Class B common shares into Visa Class A common shares, the date on which such conversion is expected to occur and the estimated growth rate of the Visa Class A common share price. Refer to Note 7 – Derivatives for information about the derivative contract with the counterparty.

The Company believes its valuation methods for its assets and liabilities carried at fair value are appropriate; however, the use of different methodologies or assumptions, particularly as applied to Level 3 assets and liabilities, could have a material effect on the computation of their estimated fair values.

Changes in Level 3 Fair Value Measurements and Quantitative Information about Level 3 Fair Value Measurements

The table below presents a rollforward of the amounts on the consolidated balance sheets for the nine months ended September 30, 2020 and the year ended December 31, 2019 for financial instruments of a material nature that are classified within Level 3 of the fair value hierarchy and are measured at fair value on a recurring basis:

(in thousands) |  |  |  |
Balance at December 31, 2018 |  | $ | 7,304 |
Cash settlement |  |  | (1,900 | )
Losses included in earnings |  |  | 300 |
Balance at December 31, 2019 |  |  | 5,704 |
Cash settlement |  |  | (1,243 | )
Losses included in earnings |  |  | 155 |
Balance at September 30, 2020 |  | $ | 4,616 |

The table below provides an overview of the valuation techniques and significant unobservable inputs used in those techniques to measure the financial instrument measured on a recurring basis and classified within Level 3 of the valuation. The range of sensitivities that management utilized in its fair value calculations is deemed acceptable in the industry with respect to the identified financial instrument.

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($ in thousands) |  |  |  |  |  |  |  |
﻿ |  | Fair Value |
Level 3 Class |  | September 30, 2020 |  |  | December 31, 2019 |
Derivative liability |  | $ | 4,616 |  |  | $ | 5,704 |
Valuation technique |  | Discounted cash flow |  |  | Discounted cash flow |
Unobservable inputs: |  |  |  |  |  |  |  |
Visa Class A appreciation - range |  | 6% - 18% |  |  | 6% - 18% |
Visa Class A appreciation - weighted average |  | 12% |  |  | 12% |
Conversion rate - range |  | 1.63x - 1.59x |  |  | 1.63x - 1.59x |
Conversion rate -weighted average |  | 1.6109x |  |  | 1.616x |
Time until resolution |  | 3-27 months |  |  | 12 - 36 months |

Fair Value of Assets Measured on a Nonrecurring Basis

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

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

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

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

﻿ |  | September 30, 2020 |
(in thousands) |  | Level 1 |  |  | Level 2 |  |  | Level 3 |  |  | Total |
Collateral-dependent impaired loans |  | $ | — |  |  | $ | 91,819 |  |  | $ | — |  |  | $ | 91,819 |
Other real estate owned and foreclosed assets, net |  |  | — |  |  |  | — |  |  |  | 11,219 |  |  |  | 11,219 |
Total nonrecurring fair value measurements |  | $ | — |  |  | $ | 91,819 |  |  | $ | 11,219 |  |  | $ | 103,038 |

﻿ |  | December 31, 2019 |
(in thousands) |  | Level 1 |  |  | Level 2 |  |  | Level 3 |  |  | Total |
Collateral-dependent impaired loans |  | $ | — |  |  | $ | 182,377 |  |  | $ | — |  |  | $ | 182,377 |
Other real estate owned and foreclosed assets, net |  |  | — |  |  |  | — |  |  |  | 24,422 |  |  |  | 24,422 |
Total nonrecurring fair value measurements |  | $ | — |  |  | $ | 182,377 |  |  | $ | 24,422 |  |  | $ | 206,799 |

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

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

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

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

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

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

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

Short-Term FHLB Borrowings – The fair value at September 30, 2020 is estimated by discounting the future contractual cash flows using current market rates at which borrowings with similar terms and options could be obtained. The fair value at December 31, 2019 assumed that the carrying amount was a reasonable estimate of fair value given the relatively stable interest rate environment.

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

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

The following tables present the estimated fair values of the Company’s financial instruments by fair value hierarchy levels and the corresponding carrying amounts:

﻿ |  | September 30, 2020 |
﻿ |  |  |  |  |  |  |  |  |  |  |  |  |  | Total Fair |  |  | Carrying |
(in thousands) |  | Level 1 |  |  | Level 2 |  |  | Level 3 |  |  | Value |  |  | Amount |
Financial assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash, interest-bearing bank deposits, and federal funds sold |  | $ | 1,263,372 |  |  | $ | — |  |  | $ | — |  |  | $ | 1,263,372 |  |  | $ | 1,263,372 |
Available for sale securities |  |  | — |  |  |  | 5,647,315 |  |  |  | — |  |  |  | 5,647,315 |  |  |  | 5,647,315 |
Held to maturity securities |  |  | — |  |  |  | 1,517,688 |  |  |  | — |  |  |  | 1,517,688 |  |  |  | 1,408,961 |
Loans, net |  |  | — |  |  |  | 91,819 |  |  |  | 21,970,946 |  |  |  | 22,062,765 |  |  |  | 21,791,530 |
Loans held for sale |  |  | — |  |  |  | 103,566 |  |  |  | — |  |  |  | 103,566 |  |  |  | 103,566 |
Derivative financial instruments |  |  | — |  |  |  | 168,822 |  |  |  | — |  |  |  | 168,822 |  |  |  | 168,822 |
Financial liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Deposits |  |  | — |  |  |  | — |  |  |  | 27,017,416 |  |  |  | 27,017,416 |  |  |  | 27,030,659 |
Federal funds purchased |  |  | 250 |  |  |  | — |  |  |  | — |  |  |  | 250 |  |  |  | 250 |
Securities sold under agreements to repurchase |  |  | 806,645 |  |  |  | — |  |  |  | — |  |  |  | 806,645 |  |  |  | 806,645 |
FHLB short-term borrowings |  |  | — |  |  |  | 1,161,666 |  |  |  | — |  |  |  | 1,161,666 |  |  |  | 1,100,000 |
Long-term debt |  |  | — |  |  |  | 434,597 |  |  |  | — |  |  |  | 434,597 |  |  |  | 385,887 |
Derivative financial instruments |  |  | — |  |  |  | 51,662 |  |  |  | 4,616 |  |  |  | 56,278 |  |  |  | 56,278 |

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﻿ |  | December 31, 2019 |
(in thousands) |  | Level 1 |  |  | Level 2 |  |  | Level 3 |  |  | Total Fair Value |  |  | Carrying Amount |
Financial assets: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash, interest-bearing bank deposits, and federal funds sold |  | $ | 542,333 |  |  | $ | — |  |  | $ | — |  |  | $ | 542,333 |  |  | $ | 542,333 |
Available for sale securities |  |  | — |  |  |  | 4,675,304 |  |  |  | — |  |  |  | 4,675,304 |  |  |  | 4,675,304 |
Held to maturity securities |  |  | — |  |  |  | 1,611,004 |  |  |  | — |  |  |  | 1,611,004 |  |  |  | 1,568,009 |
Loans, net |  |  | — |  |  |  | 182,377 |  |  |  | 20,861,702 |  |  |  | 21,044,079 |  |  |  | 21,021,504 |
Loans held for sale |  |  | — |  |  |  | 55,864 |  |  |  | — |  |  |  | 55,864 |  |  |  | 55,864 |
Derivative financial instruments |  |  | — |  |  |  | 54,446 |  |  |  | — |  |  |  | 54,446 |  |  |  | 54,446 |
Financial liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Deposits |  | $ | — |  |  | $ | — |  |  | $ | 23,786,775 |  |  | $ | 23,786,775 |  |  | $ | 23,803,575 |
Federal funds purchased |  |  | 195,450 |  |  |  | — |  |  |  | — |  |  |  | 195,450 |  |  |  | 195,450 |
Securities sold under agreements to repurchase |  |  | 484,422 |  |  |  | — |  |  |  | — |  |  |  | 484,422 |  |  |  | 484,422 |
FHLB short-term borrowings |  |  | 2,035,000 |  |  |  | — |  |  |  | — |  |  |  | 2,035,000 |  |  |  | 2,035,000 |
Long-term debt |  |  | — |  |  |  | 226,098 |  |  |  | — |  |  |  | 226,098 |  |  |  | 233,462 |
Derivative financial instruments |  |  | — |  |  |  | 15,385 |  |  |  | 5,704 |  |  |  | 21,089 |  |  |  | 21,089 |

16. Recent Accounting Pronouncements

Accounting Standards Adopted in 2020

In June 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” The ASU, more commonly referred to as Current Expected Credit Losses, or CECL, along with several subsequently issued related amendments, were codified as ASC 326. The provisions of ASC 326, which supersede the incurred loss methodology, require the measurement of expected credit losses over the life of financial assets based on historical experience, current conditions, and reasonable and supportable forecasts. As such, financial institutions and other organizations are required to use forward-looking information to inform their credit loss estimates. Many of the loss estimation techniques prescribed by previous guidance will still be permitted, although the inputs to those techniques will change to reflect the full amount of expected credit losses for the estimated remaining life of the instrument. An entity will continue to use judgment to determine which loss estimation methods are appropriate for its circumstances. In addition, ASC 326 amends the accounting for credit losses on both held to maturity and available for sale debt securities and purchased financial assets with credit deterioration.

The Company adopted the provisions of ASC 326 on January 1, 2020, with a cumulative-effect adjustment to retained earnings for non-purchased credit impaired loans. For purchased credit impaired loans (as defined by ASC 310-30), there was no impact to retained earnings upon adoption; rather, a portion of the purchase accounting fair value mark was reclassified to allowance for credit losses. A more detailed discussion of the Company’s policy for accounting for credit losses under the provisions of ASC 326 is presented in Note 1 – Basis of Presentation.

The following table reflects the impact of adoption reflected in the Company’s consolidated balance sheets. The increase in the allowance for loan losses represents a reduction in total assets, while the reserve for unfunded lending commitments represents an increase in total liabilities.

(in thousands) |  | December 31, 2019 |  |  | January 1, 2020 |  |  | CECL adoption impact |
Assets and Liabilities |  |  |  |  |  |  |  |  |  |  |  |
Allowance for loan and lease losses |  | $ | 191,251 |  |  | $ | 240,662 |  |  | $ | 49,411 |
Reserve for unfunded lending commitments |  |  | 3,974 |  |  |  | 31,304 |  |  |  | 27,330 |
Allowance for credit losses |  | $ | 195,225 |  |  | $ | 271,966 |  |  | $ | 76,741 |
Retained Earnings |  |  |  |  |  |  |  |  |  |  |  |
Allowance for credit loss increase |  |  |  |  |  |  |  |  |  | $ | 76,741 |
Balance sheet reclassification |  |  |  |  |  |  |  |  |  |  | (19,767 | )
Total pretax impact |  |  |  |  |  |  |  |  |  |  | 56,974 |
Income tax impact |  |  |  |  |  |  |  |  |  |  | (12,888 | )
Decrease to retained earnings |  |  |  |  |  |  |  |  |  | $ | 44,086 |

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In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” The amendments in this Update provide optional guidance for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. The amendments in this Update are elective and apply to all entities, subject to meeting certain criteria, that have contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. The amendments in this Update provide optional expedients and exceptions for applying generally accepted accounting principles (GAAP) to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments in this Update apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. The expedients and exceptions provided by the amendments do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022, except for hedging relationships existing as of December 31, 2022, that an entity has elected certain optional expedients for and that are retained through the end of the hedging relationship. The Company adopted this guidance upon its issuance; at adoption, the Company elected to amend the hedge documentation, without de-designating and re-designating, for all outstanding hedging relationships using the available expedient to assert probability of the hedged interest, regardless of any expected modification in terms related to reference rate reform.

In August 2018, the FASB issued ASU 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement.” The amendments in this Update modify certain disclosure requirements on fair value measurements set forth in Topic 820, Fair Value Measurements. In addition, the amendments in this Update eliminate the phrase “an entity shall disclose at a minimum” to promote the appropriate exercise of discretion by entities when considering fair value measurement disclosures to clarify that materiality is an appropriate consideration of entities and their auditors when evaluating disclosure requirements. The amendments in this Update are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 31, 2019, and the Company adopted the guidance effective January 1, 2020. Refer to Note 15 - Fair Value Measurements for the modified disclosures. Adoption of this guidance had no impact upon the Company’s results of operations or financial condition.

Accounting Standards Issued But Not Yet Adopted

In December 2019, the FASB issued ASU 2019-12, “Simplifying the Accounting for Income Taxes (Topic 740).” The amendments in this update are meant to simplify the accounting for income taxes by removing certain exceptions to GAAP. The amendments also improve consistent application of and simplify GAAP by modifying and/or revising the accounting for certain income tax transactions and by clarifying certain existing codification. The amendments in the update are effective for public business entities for fiscal years and interim periods within those fiscal years beginning after December 15, 2020. The Company is currently assessing the impact of adoption of this guidance, but does not expect the update to have a material impact upon its financial position and results of operations.

In August 2018, the FASB issued ASU 2018-14, “Compensation – Retirement Benefits – Defined Benefit Plans – General (Subtopic 715-20): Disclosure Framework – Changes to the Disclosure Requirements for Defined Benefit Plans.” The amendments in this Update modify certain disclosure requirements by removing disclosures that are no longer considered cost beneficial, clarifying specific requirements of disclosures, and adding disclosure requirements identified as relevant. The amendments in this Update are effective for fiscal years ending after December 15, 2020 for public business entities. Adoption of this guidance will have no impact upon the Company’s results of operations or financial condition.

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

FORWARD-LOOKING STATEMENTS

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

| • | the negative impacts and disruptions resulting from the outbreak of the novel coronavirus, or COVID-19, on the economies and communities we serve, which has had and may continue to have an adverse impact on our business operations and performance, and has and may continue to have a negative impact on our credit portfolio, stock price, borrowers and the economy as a whole both globally and domestically;

| • | government or regulatory responses to the COVID-19 pandemic;

| • | balance sheet and revenue growth expectations may differ from actual results;

| • | the risk that our provision for loan losses may be inadequate or may be negatively affected by credit risk exposure;

| • | loan growth expectations;

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

| • | the risk that our enterprise risk management framework may not identify or address risks adequately, which may result in unexpected losses;

| • | the impact of the transaction with MidSouth or future business combinations upon our performance and financial condition including our ability to successfully integrate the businesses;

| • | deposit trends;

| • | credit quality trends;

| • | changes in interest rates;

| • | the impact of reference rate reform;

| • | net interest margin trends;

| • | future expense levels;

| • | improvements in expense to revenue (efficiency ratio);

| • | success of revenue-generating initiatives;

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

| • | risks related to our reliance on third parties to provide key components of our business infrastructure, including the risks related to disruptions in services or financial difficulties of a third-party vendor;

| • | risks related to the ability of our operational framework to manage risks associated with our business such as credit risk and operation risk, including third-party vendors and other service providers, which could among other things, result in a breach of operating or security systems as a result of a cyber-attack or similar act;

| • | projected tax rates;

| • | future profitability;

| • | purchase accounting impacts, such as accretion levels;

| • | our ability to identify and address potential cybersecurity risks, heightened by the increased use of our virtual private network platform, including data security breaches, credential stuffing, malware, “denial-of-service” attacks, “hacking” and identity theft, a failure of which could disrupt our business and result in the disclosure of and/or misuse or misappropriation of confidential or proprietary information, disruption or damage to our systems, increased costs, losses, or adverse effects to our reputation;

| • | our ability to receive dividends from Hancock Whitney Bank could affect our liquidity, including our ability to pay dividends or take other capital actions;

| • | a material decrease in net income or a net loss over several quarters could result in a decrease in, or the elimination of, our quarterly cash dividend;

| • | the impact on our financial results, reputation, and business if we are unable to comply with all applicable federal and state regulations or other supervisory actions or directives and any necessary capital initiatives;

| • | our ability to effectively compete with other traditional and non-traditional financial services companies, some of whom possess greater financial resources than we do or are subject to different regulatory standards than we are;

| • | our ability to maintain adequate internal controls over financial reporting;

| • | potential claims, damages, penalties, fines and reputational damage resulting from pending or future litigation, regulatory proceedings and enforcement actions, including costs and effects of litigation related to our participation in stimulus programs associated with the government’s response to the COVID-19 pandemic;

| • | the financial impact of future tax legislation; and

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| • | changes in laws and regulations affecting our businesses, including governmental monetary and fiscal policies, legislation and regulations relating to bank products and services, as well as changes in the enforcement and interpretation of such laws and regulations by applicable governmental and self-regulatory agencies, which could require us to change certain business practices, increase compliance risk, reduce our revenue, impose additional costs on us, or otherwise negatively affect our businesses.

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

Forward-looking statements are subject to significant risks and uncertainties. Investors are cautioned against placing undue reliance on such statements. Actual results may differ materially from those set forth in the forward looking statements. Additional factors that could cause actual results to differ materially from those described in the forward-looking statements can be found in Part I, Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2019, Part II, Item 1A. “Risk Factors” in our Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2020, Part II, Item 1A. “Risk Factors” in this Quarterly Report on Form 10-Q, and in other periodic reports that we file with the SEC.

You are cautioned not to place undue reliance on these forward-looking statements. We do not intend, and undertake no obligation, to update or revise any forward-looking statements, whether as a result of differences in actual results, changes in assumptions or changes in other factors affecting such statements, except as required by law.

OVERVIEW

Non-GAAP Financial Measures

Management’s Discussion and Analysis of Financial Condition and Results of Operations include non-GAAP measures used to describe our performance. These non-GAAP financial measures have inherent limitations as analytical tools and should not be considered on a standalone basis or as a substitute for analyses of financial condition and results as reported under GAAP. Non-GAAP financial measures are not standardized and therefore, it may not be possible to compare these measures with other companies that present measures having the same or similar names. These disclosures should not be considered an alternative to GAAP.

A reconciliation of those measures to GAAP measures are provided within the Selected Financial Data section that appears later in this item. The following is a summary of these non-GAAP measures and an explanation as to why they are deemed useful.

Consistent with Securities and Exchange Commission Industry Guide 3, we present net interest income, net interest margin and efficiency ratios on a fully taxable equivalent (“te”) basis. The te basis adjusts for the tax-favored status of net interest income from certain loans and investments using a statutory federal tax rate of 21% to increase tax-exempt interest income to a taxable equivalent basis. We believe this measure to be the preferred industry measurement of net interest income, and that it enhances comparability of net interest income arising from taxable and tax-exempt sources.

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

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

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

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Economic Outlook and Ongoing Impact of COVID-19

The COVID-19 pandemic continues to profoundly impact economic conditions throughout the United States and globally. Early and ongoing efforts to contain the spread of the novel coronavirus in the form of stay at home orders and restrictions on travel, trade and retail operations triggered a sharp decline in commercial and consumer activity, resulting in a recessionary economic environment. Gross domestic product (“GDP”) declined 31% on an annualized basis and unemployment averaged 13% during the second quarter of 2020. The federal government’s CARES Act and other stimulus programs in addition to the Federal Reserve’s actions to reduce interest rates to near zero provided businesses and individuals temporary relief from these conditions. Consumer spending increased meaningfully in the third quarter of 2020, resulting in GDP growth and increased hiring and employment. According to an October 2, 2020 release by the Bureau of Labor Statistics, the unemployment rate fell to approximately 8% during the month of September, reflecting the partial resumption of economic activities as many jurisdictions began or continued phased reopening programs.

Economic Outlook

The Company utilizes economic forecasts produced by Moody’s Analytics (Moody’s) that provide various scenarios to assist with the development of our economic outlook. These forecasts are anchored on a baseline forecast scenario, which by definition reflects a 50% probability that the economy will perform better or worse than the forecasted baseline parameters. Several upside and downside scenarios are produced that are derived from the baseline scenario. In the September 2020 Baseline forecast, the economic recovery in the near-term is expected to be somewhat faster than the June forecast, but growth is muted until a vaccine is widely available. Key underlying assumptions in the Baseline forecast are that (1) there is not a second wave of economic shutdown, (2) a vaccine will be made available by April 2021 with infections abating by June 2021, (3) unemployment rates average 9.1% in the fourth quarter of 2020, 8.4% in 2021, and 6.4% in 2022, (4) lawmakers will pass an additional stimulus bill in 2020 that is split between aid for state and local governments and unemployment benefits, and (5) the Federal Reserve will continue to respond to the economic damage by maintaining rates at or near zero until late 2023.

The alternative Moody’s forecast scenarios have varying degrees of positive and negative severity of the outcome of the economic downturn, as well as varying shapes and length of recovery. Management determined that assumptions provided for in the stronger and slower near-term growth scenarios (S-1 and S-2, respectively) were reasonably possible, and as such, the S-1 and S-2 scenarios were given consideration through probability weighting in our allowance for credit losses calculation at September 30, 2020. We believe these alternative scenarios are less likely to occur than the Baseline and have weighted them accordingly in developing our economic forecast. The extent to which observed and forecasted economic conditions deteriorate or recover beyond that currently forecasted may result in additional volatility and allowance for credit loss builds or releases in the future. Changes in the depth and duration of these economic conditions may also require revisions to our currently forecasted cash flows that could result in impairment of certain intangible or other assets in future periods.

Ongoing Impact of COVID-19

Our response at the outset of the COVID-19 crisis was proactive and continues to be adaptive to ongoing changing conditions. We have taken deliberate measures to maintain a strong liquidity position and enhance capital levels, control both interest and noninterest expense, and build an allowance for credit losses that we believe to be appropriate in light of current and forecasted economic conditions. We have participated in various economic relief strategies, including the origination of $2.4 billion of Small Business Administration Paycheck Protection Program (PPP) loans, and offering temporary waivers of certain service fees, short-term deferrals of principal and/or interest on loan payments as well as other modifications to loan repayment terms for customers affected by COVID-19. The PPP loans provided loan growth and contributed favorably to our net interest income and margin during the second and third quarters, while providing much needed assistance in the communities we serve.

We have been able to return most of our financial centers to full service operation and substantially all of our back office associates to onsite work in compliance with guidelines from the Centers for Disease Control and Prevention. Recent easing of certain restrictions on movement and the impacts of government stimulus programs and the low interest rate environment have positively impacted business activity for both commercial and consumer customers. We experienced an increase in most categories of noninterest income, including sizable increases in secondary mortgage origination and sales activity, bank card usage fees and deposit account service charges, albeit not to pre-pandemic levels. We initiated cost reduction measures in the third quarter, including closing two trust locations in New York and New Jersey in mid-September 2020, closing 12 branch locations in Louisiana and Mississippi scheduled for late October 2020 and reducing headcount through higher vacancy levels and attrition, as well as other initiatives. Increased business activity, cost control measures, and balance sheet de-risking strategies undertaken in the first half of the year, including the sale of a large portion of the energy portfolio, resulted in a return to profitability in the third quarter of 2020.

Despite recent improvements in certain economic indicators, significant constraints to commerce remain in place, and considerable uncertainty remains over the timing of an effective and widely available coronavirus vaccine, the timing and scope of additional government stimulus packages, and the economic impact resulting from the outcome of the November 2020 elections. The duration

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and extent of the downturn and speed of the related recovery on our business, customers, and the economy as a whole remains uncertain.

Highlights of the Third Quarter 2020

We reported net income for the third quarter of 2020 of $79.4 million, or $.90 per diluted common share (EPS), compared to a net loss for the second quarter 2020 of $117.1 million, or $(1.36) EPS and net income for the third quarter of 2019 of $67.8 million, or $.77 EPS. The second quarter net loss reflected a provision for credit losses of $306.9 million that included both a $160 million, or $1.47 per share, provision for credit losses related to the sale of $497 million of energy loans and an additional reserve build for credit losses related to COVID-19. The third quarter of 2019 included $28.8 million, or $.26 per share, of merger costs associated with the September 2019 acquisition of MidSouth Bancorp, Inc. (“Midsouth”).

As noted above, second quarter 2020 results included a $160 million provision for credit loss associated with the sale of $497 million of energy loans that included reserve-based (RBL), midstream and nondrilling service credits, significantly reducing our exposure in this portfolio. The transaction closed on July 21, 2020 and the company received proceeds of $257.5 million from the sale.

Third quarter 2020 results compared to second quarter 2020:

| • | Return to profitability with net income of $79.4 million, or $.90 per diluted share

| • | Pre-provision net revenue (PPNR) totaled $126.3 million, up $7.8 million, or 7%, linked-quarter

| • | Provision of $25 million and allowance for credit losses strong at 2.16% of total loans, up from 2.12%

| • | Net interest margin remained stable at 3.23%

| • | Capital levels improved with common equity Tier 1 (CET1) ratio of 10.30%, up 52 bps and tangible common equity (TCE) ratio of 7.53%, up 20 bps

| • | Loans declined $388 million, or 2%, reflecting limited demand throughout our footprint

| • | Nonperforming loans declined $13 million, or 7%, from June 30, 2020

| • | Criticized commercial loans increased $64 million, or 18%, from June 30, 2020, reflecting pandemic-related downgrades

| • | Core deposits remained resilient, with the decline in total deposits primarily due to a decrease in brokered deposit funding

We were able to return to profitability in the third quarter, despite continued challenges of the current economy. Our de-risking strategies implemented during the first half of 2020, which included building a strong reserve for credit losses, issuing subordinated debt, and divesting a large portion of the energy portfolio, positioned us to report solid results and strengthen our capital. Pre-provision net revenue increased, our provision for credit loss returned to a more normalized level and our capital ratios improved compared to the second quarter of 2020.

The overactive hurricane season has impacted several of our Gulf Coast markets, including Southwest and Southeast Louisiana, Coastal Mississippi, Alabama and Florida, with three significant hurricanes making landfall in the third quarter and another in October. After each event, we quickly mobilized portable banking units and ATMs to affected areas, and most locations reopened under generator power the following day. We will continue to support our clients, communities and our colleagues in these areas. While we had some damage to facilities, we do not expect significant financial impact from any of the storms, including no material provision for credit losses.

RESULTS OF OPERATIONS

Net Interest Income

Net interest income (te) for the third quarter of 2020 was $238.4 million, a $2.7 million, or 1%, decrease from the second quarter of 2020, but up $11.8 million, or 5%, compared to the third quarter of 2019. The linked quarter decrease was primarily attributable to declining earning asset volumes, partially from the energy loan sale, in excess of interest-bearing deposit and lower net yields. Factors impacting the lower yields included $1.5 million increase in securities premium amortization, $0.5 million decrease in purchase accounting accretion and $0.7 million increase in net nonaccrual interest reversals. Net interest income was also negatively impacted by higher long-term debt expense of $1.8 million resulting from a full quarter impact of the June 2020 issuance of subordinated debt. This decline in income was partially offset by an approximate $1.8 million impact of the additional accrual day in the quarter. The increase compared to the third quarter of 2019 is primarily attributable to an increase in earning asset balances, partially offset by the impact of a lower rate environment. The year-over-year increase in earning asset balances is due to PPP loans originated in the second

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and third quarters of 2020, the MidSouth acquisition that occurred late in the third quarter of 2019, and an increase in securities and short-term investments resulting from the influx of deposits from PPP loans and stimulus funds.

The net interest margin for the third quarter of 2020 was 3.23%, flat compared to the second quarter of 2020. The impact from lower earning asset yields and a full quarter of interest expense on the subordinated notes issued in June of 2020 offset a reduction in excess liquidity and lower cost of deposits. Compared to the third quarter of 2019, the net interest margin decreased 18 bps, primarily driven by the lower rate environment that resulted in a 78 bp decline in the earning asset yield, partially offset by a 60 bp decline in the cost of funds.

Net interest income (te) for the nine months ended September 30, 2020 was $714.1 million, up $40.9 million, or 6%, from the same period in 2019. The increase was largely driven by a $2.9 billion increase in average earning assets, primarily due to the MidSouth acquisition at the end of the third quarter of 2019, as well as the funding of PPP loans. The lower rate environment and aggressive deposit pricing drove down total cost of funds, which was partially offset by the impact of lower yields on earning assets. The net interest margin was 3.29% for the nine months ended September 30, 2020, down 15 bps from the same period in 2019.

We expect the net interest margin to remain relatively stable for the remainder of 2020. We anticipate margin headwinds in 2021 with the substantial reduction in PPP loans expected to begin in the fourth quarter of 2020 and continue through early 2021.

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

|  | Three Months Ended |
|  | September 30, 2020 |  |  | June 30, 2020 |  |  | September 30, 2019 |
(dollars in millions) |  | Volume |  |  | Interest (d) |  |  | Rate |  |  | Volume |  |  | Interest (d) |  |  | Rate |  |  | Volume |  |  | Interest (d) |  |  | Rate |
Average earning assets |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial & real estate loans (te) (a) |  | $ | 17,607.2 |  |  | $ | 155.6 |  |  |  | 3.52 | % |  | $ | 17,931.8 |  |  | $ | 165.3 |  |  |  | 3.71 | % |  | $ | 15,126.1 |  |  | $ | 185.5 |  |  |  | 4.87 | %
Residential mortgage loans |  |  | 2,807.5 |  |  |  | 27.5 |  |  |  | 3.92 | % |  |  | 2,923.2 |  |  |  | 28.4 |  |  |  | 3.89 | % |  |  | 2,978.7 |  |  |  | 30.1 |  |  |  | 4.05 | %
Consumer loans |  |  | 1,993.1 |  |  |  | 24.0 |  |  |  | 4.79 | % |  |  | 2,102.0 |  |  |  | 25.3 |  |  |  | 4.85 | % |  |  | 2,092.3 |  |  |  | 30.4 |  |  |  | 5.76 | %
Loan fees & late charges |  |  | — |  |  |  | 15.2 |  |  |  | 0.00 | % |  |  | — |  |  |  | 11.8 |  |  |  | 0.00 | % |  |  | — |  |  |  | 0.1 |  |  |  | 0.00 | %
Total loans (te) (b) |  |  | 22,407.8 |  |  |  | 222.3 |  |  |  | 3.95 | % |  |  | 22,957.0 |  |  |  | 230.8 |  |  |  | 4.04 | % |  |  | 20,197.1 |  |  |  | 246.1 |  |  |  | 4.84 | %
Loans held for sale |  |  | 112.2 |  |  |  | 0.8 |  |  |  | 2.96 | % |  |  | 90.0 |  |  |  | 0.6 |  |  |  | 2.89 | % |  |  | 55.3 |  |  |  | 0.6 |  |  |  | 4.26 | %
US Treasury and government agency securities |  |  | 165.6 |  |  |  | 0.8 |  |  |  | 1.99 | % |  |  | 127.1 |  |  |  | 0.8 |  |  |  | 2.31 | % |  |  | 141.6 |  |  |  | 0.8 |  |  |  | 2.33 | %
Mortgage-backed securities and collateralized mortgage obligations |  |  | 5,326.2 |  |  |  | 29.4 |  |  |  | 2.21 | % |  |  | 5,128.2 |  |  |  | 30.4 |  |  |  | 2.37 | % |  |  | 4,966.5 |  |  |  | 31.4 |  |  |  | 2.53 | %
Municipals (te) |  |  | 889.5 |  |  |  | 6.7 |  |  |  | 3.01 | % |  |  | 866.3 |  |  |  | 6.6 |  |  |  | 3.06 | % |  |  | 893.1 |  |  |  | 6.9 |  |  |  | 3.08 | %
Other securities |  |  | 8.0 |  |  |  | 0.1 |  |  |  | 4.33 | % |  |  | 8.0 |  |  |  | 0.1 |  |  |  | 4.31 | % |  |  | 3.5 |  |  | 0.0 |  |  |  | 3.61 | %
Total securities (te) (c) |  |  | 6,389.3 |  |  |  | 37.0 |  |  |  | 2.31 | % |  |  | 6,129.6 |  |  |  | 37.9 |  |  |  | 2.47 | % |  |  | 6,004.7 |  |  |  | 39.1 |  |  |  | 2.61 | %
Total short-term investments |  |  | 503.0 |  |  |  | 0.1 |  |  |  | 0.10 | % |  |  | 837.2 |  |  |  | 0.3 |  |  |  | 0.11 | % |  |  | 180.5 |  |  |  | 1.0 |  |  |  | 2.01 | %
Total earning assets (te) |  | $ | 29,412.3 |  |  | $ | 260.2 |  |  |  | 3.53 | % |  | $ | 30,013.8 |  |  | $ | 269.6 |  |  |  | 3.61 | % |  | $ | 26,437.6 |  |  | $ | 286.8 |  |  |  | 4.31 | %
Average interest-bearing liabilities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest-bearing transaction and savings deposits |  | $ | 9,806.8 |  |  | $ | 4.2 |  |  |  | 0.17 | % |  | $ | 9,387.3 |  |  | $ | 4.4 |  |  |  | 0.19 | % |  | $ | 8,179.3 |  |  | $ | 15.7 |  |  |  | 0.76 | %
Time deposits |  |  | 2,174.6 |  |  |  | 6.0 |  |  |  | 1.09 | % |  |  | 3,005.1 |  |  |  | 11.9 |  |  |  | 1.60 | % |  |  | 3,840.1 |  |  |  | 20.0 |  |  |  | 2.07 | %
Public funds |  |  | 3,196.8 |  |  |  | 4.6 |  |  |  | 0.57 | % |  |  | 3,320.3 |  |  |  | 6.3 |  |  |  | 0.76 | % |  |  | 2,979.5 |  |  |  | 13.5 |  |  |  | 1.80 | %
Total interest-bearing deposits |  |  | 15,178.2 |  |  |  | 14.8 |  |  |  | 0.39 | % |  |  | 15,712.7 |  |  |  | 22.6 |  |  |  | 0.58 | % |  |  | 14,998.9 |  |  |  | 49.2 |  |  |  | 1.30 | %
Short-term borrowings |  |  | 1,733.3 |  |  |  | 1.6 |  |  |  | 0.39 | % |  |  | 2,254.7 |  |  |  | 2.3 |  |  |  | 0.40 | % |  |  | 2,063.3 |  |  |  | 8.1 |  |  |  | 1.57 | %
Long-term debt |  |  | 386.0 |  |  |  | 5.4 |  |  |  | 5.60 | % |  |  | 276.9 |  |  |  | 3.6 |  |  |  | 5.19 | % |  |  | 234.3 |  |  |  | 2.9 |  |  |  | 4.82 | %
Total borrowings |  |  | 2,119.3 |  |  |  | 7.0 |  |  |  | 1.33 | % |  |  | 2,531.6 |  |  |  | 5.9 |  |  |  | 0.93 | % |  |  | 2,297.6 |  |  |  | 11.0 |  |  |  | 1.90 | %
Total interest-bearing liabilities |  |  | 17,297.5 |  |  |  | 21.8 |  |  |  | 0.50 | % |  |  | 18,244.3 |  |  |  | 28.5 |  |  |  | 0.63 | % |  |  | 17,296.5 |  |  |  | 60.2 |  |  |  | 1.38 | %
Net interest-free funding sources |  |  | 12,114.8 |  |  |  | — |  |  |  | 0.00 | % |  |  | 11,769.5 |  |  |  | — |  |  |  | 0.00 | % |  |  | 9,141.1 |  |  |  | — |  |  |  | 0.00 | %
Total cost of funds |  | $ | 29,412.3 |  |  | $ | 21.8 |  |  |  | 0.30 | % |  | $ | 30,013.8 |  |  | $ | 28.5 |  |  |  | 0.38 | % |  | $ | 26,437.6 |  |  | $ | 60.2 |  |  |  | 0.90 | %
Net interest spread (te) |  |  |  |  |  | $ | 238.4 |  |  |  | 3.02 | % |  |  |  |  |  | $ | 241.1 |  |  |  | 2.98 | % |  |  |  |  |  | $ | 226.6 |  |  |  | 2.93 | %
Net interest margin |  | $ | 29,412.3 |  |  | $ | 238.4 |  |  |  | 3.23 | % |  | $ | 30,013.8 |  |  | $ | 241.1 |  |  |  | 3.23 | % |  | $ | 26,437.6 |  |  | $ | 226.6 |  |  |  | 3.41 | %

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(a) | Taxable equivalent (te) amounts were calculated using a federal income tax rate of 21%.

(b) | Includes nonaccrual loans.

(c) | Average securities do not include unrealized holding gains/losses on available for sale securities.

(d) | Included in interest income is net purchase accounting accretion of $3.2 million, $3.7 million and $4.6 million for the three months ended September 30, 2020, June 30, 2020, and September 30, 2019, respectively.

|  | Nine Months Ended |  |
|  | September 30, 2020 |  |  | September 30, 2019 |  |
(dollars in millions) |  | Volume |  |  | Interest (d) |  |  | Rate |  |  | Volume |  |  | Interest (d) |  |  | Rate |
Average earning assets |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial & real estate loans (te) (a) |  | $ | 17,217.5 |  |  | $ | 503.5 |  |  |  | 3.91 | % |  | $ | 15,090.3 |  |  | $ | 551.3 |  |  |  | 4.88 | %
Residential mortgage loans |  |  | 2,899.6 |  |  |  | 85.4 |  |  |  | 3.93 | % |  |  | 2,963.7 |  |  |  | 91.4 |  |  |  | 4.11 | %
Consumer loans |  |  | 2,083.3 |  |  |  | 78.7 |  |  |  | 5.05 | % |  |  | 2,104.3 |  |  |  | 90.6 |  |  |  | 5.76 | %
Loan fees & late charges |  |  | — |  |  |  | 26.4 |  |  |  | 0.00 | % |  |  | — |  |  |  | (0.9 | ) |  |  | 0.00 | %
Total loans (te) (b) |  |  | 22,200.4 |  |  |  | 694.0 |  |  |  | 4.17 | % |  |  | 20,158.3 |  |  |  | 732.4 |  |  |  | 4.86 | %
Loans held for sale |  |  | 80.9 |  |  |  | 2.1 |  |  |  | 3.47 | % |  |  | 34.7 |  |  |  | 1.2 |  |  |  | 4.57 | %
US Treasury and government agency securities |  |  | 139.2 |  |  |  | 2.3 |  |  |  | 2.20 | % |  |  | 130.5 |  |  |  | 2.2 |  |  |  | 2.30 | %
Mortgage-backed securities and collateralized mortgage obligations |  |  | 5,198.4 |  |  |  | 91.1 |  |  |  | 2.34 | % |  |  | 4,706.7 |  |  |  | 90.3 |  |  |  | 2.56 | %
Municipals (te) |  |  | 877.7 |  |  |  | 20.0 |  |  |  | 3.05 | % |  |  | 909.8 |  |  |  | 21.4 |  |  |  | 3.13 | %
Other securities |  |  | 8.0 |  |  |  | 0.3 |  |  |  | 4.31 | % |  |  | 3.5 |  |  |  | 0.1 |  |  |  | 3.33 | %
Total securities (te) (c) |  |  | 6,223.3 |  |  |  | 113.7 |  |  |  | 2.44 | % |  |  | 5,750.5 |  |  |  | 114.0 |  |  |  | 2.64 | %
Total short-term investments |  |  | 515.7 |  |  |  | 0.8 |  |  |  | 0.21 | % |  |  | 208.3 |  |  |  | 3.4 |  |  |  | 2.20 | %
Total earning assets (te) |  | $ | 29,020.3 |  |  | $ | 810.6 |  |  |  | 3.73 | % |  | $ | 26,151.8 |  |  | $ | 851.0 |  |  |  | 4.35 | %
Average interest-bearing liabilities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest-bearing transaction and savings deposits |  | $ | 9,332.6 |  |  | $ | 21.4 |  |  |  | 0.31 | % |  | $ | 8,096.3 |  |  | $ | 45.6 |  |  |  | 0.75 | %
Time deposits |  |  | 2,895.0 |  |  |  | 33.3 |  |  |  | 1.54 | % |  |  | 3,800.8 |  |  |  | 57.4 |  |  |  | 2.02 | %
Public funds |  |  | 3,256.2 |  |  |  | 21.6 |  |  |  | 0.89 | % |  |  | 3,077.7 |  |  |  | 42.1 |  |  |  | 1.83 | %
Total interest-bearing deposits |  |  | 15,483.8 |  |  |  | 76.3 |  |  |  | 0.66 | % |  |  | 14,974.8 |  |  |  | 145.1 |  |  |  | 1.30 | %
Short-term borrowings |  |  | 2,044.9 |  |  |  | 8.4 |  |  |  | 0.55 | % |  |  | 1,790.1 |  |  |  | 24.1 |  |  |  | 1.93 | %
Long-term debt |  |  | 298.5 |  |  |  | 11.8 |  |  |  | 5.25 | % |  |  | 230.5 |  |  |  | 8.5 |  |  |  | 3.22 | %
Total borrowings |  |  | 2,343.4 |  |  |  | 20.2 |  |  |  | 1.15 | % |  |  | 2,020.6 |  |  |  | 32.6 |  |  |  | 2.15 | %
Total interest-bearing liabilities |  |  | 17,827.2 |  |  |  | 96.5 |  |  |  | 0.72 | % |  |  | 16,995.4 |  |  |  | 177.7 |  |  |  | 1.40 | %
Net interest-free funding sources |  |  | 11,193.1 |  |  |  | — |  |  |  | 0.00 | % |  |  | 9,156.4 |  |  |  | — |  |  |  | 0.00 | %
Total cost of funds |  | $ | 29,020.3 |  |  | $ | 96.5 |  |  |  | 0.44 | % |  | $ | 26,151.8 |  |  | $ | 177.7 |  |  |  | 0.91 | %
Net interest spread (te) |  |  |  |  |  | $ | 714.1 |  |  |  | 3.01 | % |  |  |  |  |  | $ | 673.3 |  |  |  | 2.95 | %
Net interest margin |  | $ | 29,020.3 |  |  | $ | 714.1 |  |  |  | 3.29 | % |  | $ | 26,151.8 |  |  | $ | 673.3 |  |  |  | 3.44 | %

(a) | Taxable equivalent (te) amounts were calculated using a federal income tax rate of 21%.

(b) | Includes nonaccrual loans.

(c) | Average securities do not include unrealized holding gains/losses on available for sale securities.

(d) | Included in interest income is net purchase accounting accretion of $13.1 million and $14.4 million for the nine months ended September 30, 2020 and 2019, respectively.

Provision for Credit Losses

For the third quarter of 2020, we recorded a provision for credit losses totaling $25.0 million, compared to $306.9 million in the second quarter of 2020 and $12.4 million in the third quarter of 2019. The third quarter of 2020 provision included net charge-offs of $24.0 million and a reserve build of $1.0 million. The second quarter of 2020 provision for credit losses included approximately $146.8 million related to the COVID-19 recessionary environment, with an additional $160.1 million related to the energy loan sale, comprised of charge-offs of $242.6 million and a reserve release of $82.5 million. Economic conditions related to the pandemic, coupled with the write-down of the divested energy loans to their net realizable value, led to the elevated provisions for credit losses recorded in the first and second quarters of the year. As economic forecasts were relatively stable quarter over quarter and loan volumes declined, we returned to a more normalized provision level during the third quarter of 2020. For the nine months ended September 30, 2020, we recorded a total provision for credit losses of $578.7 million, compared to $38.6 million for the nine months ended September 30, 2019. The year-over-year increase is attributable to the impact of widespread economic disruption and the additional provision related to the energy loan sale.

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Net charge-offs in the third quarter of 2020 were $24.0 million, or 0.43% of average total loans on an annualized basis, compared to $302.7 million or 5.30% in the second quarter of 2020, and $12.5 million, or 0.25% in the third quarter of 2019. The third quarter of 2020 included net charge-offs of $17.3 million of healthcare-dependent credits and no energy related charge-offs. Substantially all of the commercial credits charged off during the third quarter were existing problem credits that were further impacted by the pandemic. The second quarter of 2020 included $242.6 million of charge-offs on the energy loans sold as a part of our strategy to reduce our concentration in that portfolio. The remaining $60.1 million of second quarter 2020 net charge-offs included $20.7 million of credits in the healthcare sector and $25.9 million of credits in the energy portfolio. Third quarter of 2019 reflects a more normalized level of net charge-offs in a benign credit environment.

The discussion of Allowance for Credit Losses and Asset Quality later in this Item provides additional information on these changes and on general credit quality.

Noninterest Income

Noninterest income totaled $83.7 million for the third quarter of 2020, up $9.8 million, or 13%, from the second quarter of 2020 and up $0.5 million, or 1%, compared to the third quarter of 2019. The linked-quarter increase in noninterest income was attributable to improvements in most fee categories as the economy began to reopen and consumer activity rebounded. The modest increase in noninterest income compared to the prior year was largely due to higher secondary mortgage market fees driven by the low rate environment and benefit proceeds from bank-owned life insurance contracts, partially offset by declines in most other fee categories due to the economic slowdown stemming from the pandemic.

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

|  | Three Months Ended |  |  | Nine Months Ended |
|  | September 30, |  |  | June 30, |  |  | September 30, |  |  | September 30, |
(in thousands) |  | 2020 |  |  | 2020 |  |  | 2019 |  |  | 2020 |  |  | 2019 |
Service charges on deposit accounts |  | $ | 18,440 |  |  | $ | 15,518 |  |  | $ | 21,892 |  |  | $ | 56,795 |  |  | $ | 62,982 |
Trust fees |  |  | 14,424 |  |  |  | 14,160 |  |  |  | 15,098 |  |  |  | 43,390 |  |  |  | 46,126 |
Bank card and ATM fees |  |  | 17,222 |  |  |  | 15,957 |  |  |  | 17,154 |  |  |  | 50,541 |  |  |  | 49,063 |
Investment and annuity fees and insurance commissions |  |  | 5,988 |  |  |  | 5,366 |  |  |  | 7,048 |  |  |  | 18,504 |  |  |  | 20,167 |
Secondary mortgage market operations |  |  | 12,875 |  |  |  | 9,808 |  |  |  | 5,713 |  |  |  | 28,736 |  |  |  | 13,872 |
Income from bank-owned life insurance |  |  | 6,628 |  |  |  | 3,317 |  |  |  | 4,147 |  |  |  | 14,211 |  |  |  | 11,495 |
Credit related fees |  |  | 2,911 |  |  |  | 2,609 |  |  |  | 2,988 |  |  |  | 8,585 |  |  |  | 8,520 |
Income from derivatives |  |  | 1,739 |  |  |  | 4,108 |  |  |  | 4,324 |  |  |  | 9,718 |  |  |  | 8,733 |
Other miscellaneous |  |  | 3,521 |  |  |  | 3,100 |  |  |  | 4,866 |  |  |  | 11,598 |  |  |  | 12,025 |
Total noninterest income |  | $ | 83,748 |  |  | $ | 73,943 |  |  | $ | 83,230 |  |  | $ | 242,078 |  |  | $ | 232,983 |

Service charges are composed of overdraft and insufficient funds fees, consumer, business and corporate analysis service charges, overdraft protection fees and other customer transaction-related charges. Service charges on deposits totaled $18.4 million for the third quarter of 2020, up $2.9 million, or 19%, from the second quarter of 2020 and down $3.5 million, or 16%, from the third quarter of 2019. The increase from the second quarter was largely due to higher overdraft activity and service charge fees resulting from an increase in customer spending activity and the resumption of select fees that had been temporarily waived during the first and second quarters. The decrease from the third quarter of 2019 was due to higher customer account balances that resulted from PPP loan proceeds and stimulus payments, and decreased consumer spending due to the economic environment.

Trust fees increased $0.3 million, or 2%, linked quarter and decreased $0.7 million, or 4%, from the same quarter a year ago. The modest increase compared to the prior quarter is primarily due to the rebound of the market. The decrease compared the prior year was largely due to the downturn in the market beginning at the end of the first quarter of 2020 and continuing through much of the second quarter of 2020, impacting assets under management and related trust fees. The estimated fair value of trust assets under management as of September 30, 2020 was $9.0 billion, compared to $8.8 billion at June 30, 2020, and $9.3 billion at September 30, 2019.

Bank card and ATM fees include interchange and other income from credit and debit card transactions, fees earned from processing card transactions for merchants, and fees earned from ATM transactions. Bank card and ATM fees totaled $17.2 million for the third quarter of 2020, up $1.3 million, or 8%, from the second quarter of 2020 and up less than $0.1 million from the same quarter last year. The increase from the prior quarter is due to higher levels of card activity as consumer spending activity increased.

Investment and annuity fees and insurance commissions increased $0.6 million, or 12%, compared to second quarter 2020 and were down $1.1 million, or 15%, compared to the same quarter a year ago. Investment and annuity fees and insurance commissions were up from the prior quarter primarily due to an increase in investment and annuity transaction-based fees as a result of the phased

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re-opening of the financial centers during the third quarter of 2020 and an increase in insurance commissions, partially offset by a $0.2 million decrease in corporate underwriting fees. The decrease from the same quarter last year was due to decreases in transaction-based fees due to the continued economic impact of the pandemic, lower insurance commissions, and a $0.3 million decrease in corporate underwriting fees.

Income from secondary mortgage market operations is comprised of income produced from the origination and sales of residential mortgage loans in the secondary market. Income from secondary mortgage market operations was $12.9 million in the third quarter of 2020, up $3.1 million, or 31%, from the second quarter of 2020 and up $7.2 million, or 125%, from the third quarter of 2019. Origination volume during the third quarter of 2020, particularly when compared to the third quarter of 2019, was positively impacted by the low rate environment, resulting in a surge in both refinancing and purchase production. Mortgage production for the third quarter of 2020 was up 31% compared to the second quarter of 2020 and up 57% compared to the third quarter of 2019. Secondary mortgage market operations income will vary based on origination volume and the timing of subsequent sales. To the extent low interest rate trends persist, mortgage loan production may remain elevated in the near term, but is not expected to be at the level experienced in third quarter of 2020.

Income from bank-owned life insurance is generated through insurance benefit proceeds as well as the growth of the cash surrender value of insurance contracts held. Income from bank-owned life insurance was $6.6 million in the third quarter of 2020, up $3.3 million, or 100%, from the second quarter of 2020 and up $2.5 million, or 60%, from the third quarter of 2019. The linked-quarter increase is attributable to benefit proceeds of $3.4 million recorded in the third quarter of 2020, compared to none in the second quarter of 2020, and $0.5 million in the third quarter of 2019. A similar level of benefits proceeds is not expected in the fourth quarter of 2020.

Credit related fees include unused commitment fees and letter of credit fees. Credit related fees were $2.9 million for the third quarter of 2020, up $0.3 million, or 12%, from the second quarter of 2020 and down $0.1 million, or 3%, from the third quarter of 2019. The linked quarter increase was due to higher unused commitment fees and letter of credit fees. The decrease over the same quarter last year is primarily due to lower unused commitment fees, partially offset by higher letter of credit fees. During the second quarter of 2020, customers drew on their lines as a source of liquidity as a cautionary measure in response to the pandemic. They began to pay down the lines during the third quarter of 2020, resulting in higher unused commitment fees compared to the prior quarter, but lower compared to the same quarter a year ago.

Income from our customer interest rate derivative program totaled $1.7 million for the third quarter of 2020 compared to $4.1 million in the second quarter of 2020 and $4.3 million for the third quarter of 2019. The decrease compared to both the previous quarter and the third quarter of 2019 reflects a decline in customer demand for interest rate swap arrangements, resulting in a lower transaction volume, due in part to the sustained low rate environment. Derivative income can be volatile and is dependent upon the composition of the portfolio, volume and mix of sales activity and market value adjustments due to market interest rate movement.

Other miscellaneous income was $3.5 million in the third quarter of 2020, up $0.4 million compared to the second quarter of 2020 and down $1.3 million compared to the third quarter of 2019. The increase compared to the prior quarter was largely due to $0.4 million of net gain on sales of securities, $0.4 million in gains on sales of assets, primarily leases, and an increase of $0.3 million in income from investments in small business investment companies, partially offset by a $0.2 million decrease in syndication fees and a $0.2 million decrease in FHLB stock dividends. The decrease compared to the third quarter of 2019 includes a decrease of $1.0 million in income from investments in small business investment companies, a $0.6 million decrease in syndication fees, and a $0.2 million decrease in FHLB stock dividends, partially offset by the $0.4 million net gain on the sales of securities and the $0.3 million gain on sales of assets, primarily leases.

Noninterest income for the first nine months of 2020 totaled $242.1 million, up $9.1 million, or 4% from the first nine months of 2019. The impact of the lower rate environment drove a surge in activity in our secondary mortgage market operations with fees up $14.9 million, or 107%, compared to the same period in 2019. Income on bank-owned life insurance was up $2.7 million, or 24%, as mortality benefits received in the first nine months of 2020 exceeded the first nine months of 2019 by $2.9 million. Card fees were up $1.5 million, or 3%, due largely to increased activity as a result of the acquisition of MidSouth in the third quarter of 2019, partially offset by lower levels of activity during 2020 as a result of the pandemic. Derivative fees were up $1.0 million, or 11%, with higher activity during the first half of 2020. The first nine months of 2020 also includes a $1.5 million gain on the sale of historic tax credits. These increases were partially offset by lower service charges, down $6.2 million, and trust fees, down $2.7 million, related to the impact of COVID-19 on economic conditions.

Noninterest Expense

Noninterest expense for the third quarter of 2020 was $195.8 million, down $0.8 million, or less than 1%, from the second quarter of 2020, and down $17.8 million, or 8%, from the third quarter of 2019. The linked quarter decrease is largely due to a focus on expense control with offsetting nonrecurring items leading to a slightly lower level of expense, discussed in more detail below. The decrease over the same quarter last year is primarily due to merger costs of $28.8 million associated with the acquisition and operational

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integration of MidSouth incurred in the third quarter of 2019. Excluding the nonoperating merger costs, noninterest expense was up $11.0 million, or 6%, reflecting an increase in personnel costs related to annual merit raises as well as increased cost s from MidSouth operations, additional costs incurred in response to the pandemic, and an increase in professional services expense largely related to PPP consulting.

The components of noninterest expense for the periods indicated are presented in the following tables.

|  | Three Months Ended |  |  | Nine Months Ended |
|  | September 30, |  |  | June 30, |  |  | September 30, |  |  | September 30, |
(in thousands) |  | 2020 |  |  | 2020 |  |  | 2019 |  |  | 2020 |  |  | 2019 |
Compensation expense |  | $ | 97,095 |  |  | $ | 98,756 |  |  | $ | 93,858 |  |  | $ | 286,922 |  |  | $ | 265,573 |
Employee benefits |  |  | 20,761 |  |  |  | 21,653 |  |  |  | 18,622 |  |  |  | 64,892 |  |  |  | 57,240 |
Personnel expense |  |  | 117,856 |  |  |  | 120,409 |  |  |  | 112,480 |  |  |  | 351,814 |  |  |  | 322,813 |
Net occupancy expense |  |  | 13,191 |  |  |  | 13,559 |  |  |  | 13,156 |  |  |  | 39,272 |  |  |  | 38,101 |
Equipment expense |  |  | 5,355 |  |  |  | 4,752 |  |  |  | 4,685 |  |  |  | 14,724 |  |  |  | 13,706 |
Data processing expense |  |  | 21,888 |  |  |  | 21,250 |  |  |  | 21,532 |  |  |  | 65,185 |  |  |  | 60,951 |
Professional services expense |  |  | 14,372 |  |  |  | 10,985 |  |  |  | 17,704 |  |  |  | 35,098 |  |  |  | 35,537 |
Amortization of intangible assets |  |  | 4,788 |  |  |  | 5,169 |  |  |  | 4,889 |  |  |  | 15,302 |  |  |  | 15,074 |
Deposit insurance and regulatory fees |  |  | 4,108 |  |  |  | 5,116 |  |  |  | 3,995 |  |  |  | 15,039 |  |  |  | 14,156 |
Other real estate and foreclosed asset (income) expense |  |  | (482 | ) |  |  | (460 | ) |  |  | 2,055 |  |  |  | 9,188 |  |  |  | 1,459 |
Advertising |  |  | 3,159 |  |  |  | 2,696 |  |  |  | 5,435 |  |  |  | 10,089 |  |  |  | 11,768 |
Corporate value and franchise taxes |  |  | 4,872 |  |  |  | 4,481 |  |  |  | 4,109 |  |  |  | 13,649 |  |  |  | 12,366 |
Telecommunications and postage |  |  | 4,043 |  |  |  | 3,374 |  |  |  | 3,610 |  |  |  | 11,483 |  |  |  | 10,439 |
Entertainment and contributions |  |  | 1,315 |  |  |  | 3,384 |  |  |  | 2,765 |  |  |  | 7,146 |  |  |  | 8,215 |
Travel expense |  |  | 309 |  |  |  | 396 |  |  |  | 1,172 |  |  |  | 1,816 |  |  |  | 3,614 |
Printing and supplies |  |  | 1,271 |  |  |  | 1,627 |  |  |  | 1,459 |  |  |  | 4,006 |  |  |  | 3,720 |
Tax credit investment amortization |  |  | 961 |  |  |  | 961 |  |  |  | 1,286 |  |  |  | 2,882 |  |  |  | 3,658 |
Other retirement expense |  |  | (6,337 | ) |  |  | (6,337 | ) |  |  | (4,152 | ) |  |  | (18,796 | ) |  |  | (12,409 | )
Other miscellaneous |  |  | 5,105 |  |  |  | 5,177 |  |  |  | 17,374 |  |  |  | 17,751 |  |  |  | 29,653 |
Total noninterest expense |  | $ | 195,774 |  |  | $ | 196,539 |  |  | $ | 213,554 |  |  | $ | 595,648 |  |  | $ | 572,821 |

|  | Three Months Ended |  |  | Nine Months Ended |
|  | September 30, |  |  | June 30, |  |  | September 30, |  |  | September |
(in thousands) |  | 2020 |  |  | 2020 |  |  | 2019 |  |  | 2020 |  |  | 2019 |
Nonoperating expense |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Personnel expense |  | $ | — |  |  | $ | — |  |  | $ | 5,002 |  |  | $ | — |  |  | $ | 5,002 |
Net occupancy expense |  |  | — |  |  |  | — |  |  |  | 735 |  |  |  | — |  |  |  | 735 |
Equipment expense |  |  | — |  |  |  | — |  |  |  | 188 |  |  |  | — |  |  |  | 188 |
Data processing expense |  |  | — |  |  |  | — |  |  |  | 437 |  |  |  | — |  |  |  | 437 |
Professional services expense |  |  | — |  |  |  | — |  |  |  | 7,491 |  |  |  | — |  |  |  | 7,491 |
Advertisng |  |  | — |  |  |  | — |  |  |  | 2,624 |  |  |  | — |  |  |  | 2,624 |
Printing and supplies |  |  | — |  |  |  | — |  |  |  | 433 |  |  |  | — |  |  |  | 433 |
other expenses |  |  | — |  |  |  | — |  |  |  | 11,900 |  |  |  | — |  |  |  | 11,900 |
Total nonoperating expenses |  | $ | — |  |  | $ | — |  |  | $ | 28,810 |  |  | $ | — |  |  | $ | 28,810 |

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Personnel expense consists of salaries, incentive compensation, long-term incentives, payroll taxes, and other employee benefits such as 401(k), pension, and medical, life and disability insurance. Personnel expense totaled $117.9 million for the third quarter of 2020, down $2.6 million, or 2%, compared to the prior quarter and up $5.4 million, or 5%, compared to the same quarter last year. The decrease from prior quarter was primarily due to lower bonus, incentive, and payroll tax expense; partially offset by severance accruals related to the closure of two trust offices in New York and New Jersey, twelve branches in Louisiana and Mississippi scheduled for closure in late October 2020, and other associate reductions. The increase over the same quarter last year is primarily due to compensation expense related to annual merit increases, overtime related to an increase in the volume of mortgage origination and implementation of the PPP, other support costs in response to the pandemic, the impact of adding MidSouth operations, and the severance accruals mentioned above. These increases are partially offset by merger-related expenses of $5.0 million in the third quarter of 2019.

Occupancy and equipment expenses are primarily composed of lease expenses, depreciation, maintenance and repairs, rent, taxes, and other equipment expenses. Occupancy and equipment expenses totaled $18.5 million in the third quarter of 2020, up $0.2 million, or 1%, from the second quarter of 2020 and up $0.7 million, or 4%, from the third quarter of 2019. The linked-quarter increase was largely due to an increase in equipment expense, partially offset by a decrease in occupancy expense related to insurance payments in the second quarter of 2020. The increase from the same quarter last year is primarily related increased equipment expense and additional cost from the MidSouth operations. The third quarter of 2019 included $0.9 million in merger-related expenses.

Data processing expense includes expenses related to third party technology processing and servicing costs, technology project costs and fees associated with bank card and ATM transactions. Data processing expense was $21.9 million for the third quarter of 2020, up $0.6 million, or 3%, compared to the second quarter of 2020, and up $0.4 million, or 2%, compared to the third quarter of 2019. The increase over the second quarter of 2020 is due to a higher level of ATM and card activity, reflecting the partial resumption of economic activities as many areas in our market began or continued phased reopening programs. The increase from the third quarter of 2019 is primarily due to a higher level of ATM and card activity as a result of the acquisition of MidSouth. The third quarter of 2019 included $0.4 million of merger-related expenses.

Professional services expense for the third quarter of 2020 totaled $14.4 million, up $3.4 million, or 31%, compared to the previous quarter and down $3.3 million, or 19%, from the third quarter of 2019. The increase over the second quarter of 2020 is primarily attributable to higher consulting fees related to PPP support and legal fees. The third quarter of 2019 included $7.5 million of merger-related expenses. Excluding merger-related cost, professional fees increased $4.2 million compared to the same quarter last year, also largely due to the increase in consulting fees related to PPP support and legal fees.

Deposit insurance and regulatory fees totaled $4.1 million, down $1.0 million, or 20%, from the second quarter of 2020 and up $0.1 million, or 3%, from the third quarter of 2019. The decrease from the prior quarter is largely due to a lower risk-based assessment rate resulting from an improved liquidity position and the sale of energy loans. The increase compared to 2019 is primarily due to higher assessment base and rates, largely driven by the MidSouth acquisition.

Corporate value and franchise tax expense for the third quarter of 2020 totaled $4.9 million, up modestly by $0.4 million, or 9%, compared to the prior quarter and up $0.8 million, or 19%, compared to the same quarter last year. The increase from the third quarter of 2019 is primarily attributable to the impact the acquisition of MidSouth.

Business development-related expenses (including advertising, travel, entertainment and contributions) were $4.8 million for the third quarter of 2020, down $1.7 million, or 26%, from the second quarter of 2020 and $4.6 million, or 49%, from the third quarter of 2019. The linked-quarter decrease was largely due to a $2.5 million contribution made in the second quarter of 2020 as an investment in Gulf South communities to assist with the effects of the pandemic. The year over year decrease was largely due to a decrease in advertising as the third quarter of 2019 included $2.6 million of merger-related expenses for the acquisition of MidSouth, and a decrease in business travel in response to the pandemic.

Other real estate and foreclosed asset (income) reflects gains in excess of expense of $0.5 million for the both the third and second quarter of 2020 and net expense of $2.1 million in the third quarter of 2019. The expense in third quarter of 2019 was largely due to the non-cash write-down of foreclosed asset, partially offset by gains on sales of a former corporate facility.

All other expenses, excluding amortization of intangibles, totaled $5.0 million for the third quarter of 2020, an increase of $0.2 million, or 5%, from the second quarter of 2020 and a decrease of $14.5 million, or 74%, from the third quarter of 2019. The linked-quarter increase was primarily due to higher telephone and postage expense. The third quarter of 2019 included $12.3 million in expenses related to the acquisition of MidSouth. The decrease compared to the same quarter last year also reflects lower other retirement expense in the third quarter of 2020 due to the performance of pension plan assets.

Total noninterest expense totaled $595.6 million for the first nine months of 2020, up $22.8 million, or 4%, from the same period last year. The first nine months of 2019 included $28.8 million in nonoperating expenses related to acquisition of MidSouth. Personnel expense was up $29.0 million, or 9%, related to the MidSouth acquisition, merit-based compensation increases and other costs

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associated with pandemic response, including the implementation of the Paycheck Protection Program. Other real estate expense increased $7.7 million, primarily attributable to $9.8 million in write-downs of equity interests in two energy related borrowers recorded in the first quarter of 2020. Data processing was up $4.2 million, or 7%, with an increase in ATM and card fee activity following the acquisition of MidSouth, as well as an increase in outside processing charges. These increases were partially offset by a $6.4 million, or 51%, decrease in other retirement expense with better performance from pension plan assets.

Income Taxes

The effective income tax rate for the third quarter of 2020 was approximately 19.2% compared to 38.9% in the second quarter of 2020 and 15.5% in the third quarter of 2019. The decrease in the third quarter 2020 effective tax rate was largely due to an improved projected annual pre-tax income forecast as compared to the prior quarter. Many factors impact the effective tax rate including, but not limited to, the level of pre-tax income and the relative impact of net tax benefits related to tax credit investments, tax-exempt interest, bank-owned life insurance, and nondeductible expenses.

Additionally, the effective tax rate could be impacted by discrete items that may occur in any given period, such as tax benefits from share-based compensation and changes in valuation allowances that are recognized as a separate component from continuing operations in the interim period the items impact. The effect of a change in tax laws or rates on existing deferred tax assets and liabilities are also recognized as a discrete item in the interim period that includes the enactment date of the change. As such, we recognized a discrete benefit of $7.1 million in the first quarter of 2020 related to our intent to carryback a net operating loss attribute that we inherited from an acquired entity to a 35% statutory tax rate year (provided for under the CARES Act).

Our effective tax rate has historically varied from the federal statutory rate primarily because of tax-exempt income and tax credits. Interest income on bonds issued by or loans to state and municipal governments and authorities, and earnings from the life insurance contract program are the major components of tax-exempt income. The main source of tax credits has been investments in tax-advantaged securities and tax credit projects. These investments are made primarily in the markets we serve and are directed at tax credits issued under the Federal and State New Market Tax Credit (“NMTC”) programs, Low-Income Housing Tax Credit (“LIHTC”) programs, as well as pre-2018 Qualified Zone Academy Bonds (“QZAB”) and Qualified School Construction Bonds (“QSCB”). These investments generate tax credits, which reduce current and future taxes and are recognized when earned as a benefit in the provision for income taxes.

We have invested in NMTC projects through investments in our own Community Development Entity (“CDE”), as well as other unrelated CDEs. Federal tax credits from NMTC investments are recognized over a seven-year period, while recognition of the benefits from state tax credits varies from three to five years. Our LIHTC investments to date are through variable interest entities for which the Company is not the primary beneficiary and, therefore, are not consolidated. LIHTC credits from the affordable housing projects are recognized over a ten-year period, beginning with the year the rental activity begins, as a reduction of the provision for income taxes.

Based on tax credit investments that have been made to date in 2020, we expect to realize benefits from federal and state tax credits over the next three years totaling $7.8 million, $8.6 million and $8.5 million for 2021, 2022, and 2023, respectively. We intend to continue making investments in tax credit projects. However, our ability to access new credits will depend upon, among other factors, federal and state tax policies and the level of competition for such credits.

The Company expects the effective tax rate for the fourth quarter of 2020 to be lower than the third quarter 2020 effective tax rate of 19.2% as tax strategies are evaluated and implemented prior to year-end.

Selected Financial Data

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

|  | Three Months Ended |  |  | Nine Months Ended |
|  | September 30, |  |  | June 30, |  |  | September 30, |  |  | September 30, |
|  | 2020 |  |  | 2020 |  |  | 2019 |  |  | 2020 |  |  | 2019 |
Common Share Data |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Earnings per share: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Basic |  | $ | 0.90 |  |  | $ | (1.36 | ) |  | $ | 0.77 |  |  | $ | (1.73 | ) |  | $ | 2.69 |
Diluted |  | $ | 0.90 |  |  | $ | (1.36 | ) |  | $ | 0.77 |  |  | $ | (1.73 | ) |  | $ | 2.69 |
Cash dividends paid |  | $ | 0.27 |  |  | $ | 0.27 |  |  | $ | 0.27 |  |  | $ | 0.81 |  |  | $ | 0.81 |
Book value per share (period-end) |  | $ | 39.07 |  |  | $ | 38.41 |  |  | $ | 39.49 |  |  | $ | 39.07 |  |  | $ | 39.49 |
Tangible book value per share (period-end) |  | $ | 28.11 |  |  | $ | 27.38 |  |  | $ | 28.73 |  |  | $ | 28.11 |  |  | $ | 28.73 |
Weighted average number of shares (000s): |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Basic |  |  | 86,358 |  |  |  | 86,301 |  |  |  | 86,377 |  |  |  | 86,614 |  |  |  | 85,934 |
Diluted |  |  | 86,400 |  |  |  | 86,301 |  |  |  | 86,462 |  |  |  | 86,614 |  |  |  | 86,010 |
Period-end number of shares (000s) |  |  | 86,400 |  |  |  | 86,342 |  |  |  | 90,822 |  |  |  | 86,400 |  |  |  | 90,822 |

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|  | Three Months Ended |  |  | Nine Months Ended |
|  | September 30, |  |  | June 30, |  |  | September 30, |  |  | September 30 |
(in thousands) |  | 2020 |  |  | 2020 |  |  | 2019 |  |  | 2020 |  |  | 2019 |
Income Statement: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest income |  | $ | 257,043 |  |  | $ | 266,342 |  |  | $ | 283,164 |  |  | $ | 800,728 |  |  | $ | 839,825 |
Interest income (te) (a) |  |  | 260,232 |  |  |  | 269,590 |  |  |  | 286,816 |  |  |  | 810,613 |  |  |  | 851,019 |
Interest expense |  |  | 21,860 |  |  |  | 28,476 |  |  |  | 60,225 |  |  |  | 96,491 |  |  |  | 177,764 |
Net interest income (te) |  |  | 238,372 |  |  |  | 241,114 |  |  |  | 226,591 |  |  |  | 714,122 |  |  |  | 673,255 |
Provision for credit losses |  |  | 24,999 |  |  |  | 306,898 |  |  |  | 12,421 |  |  |  | 578,690 |  |  |  | 38,552 |
Noninterest income |  |  | 83,748 |  |  |  | 73,943 |  |  |  | 83,230 |  |  |  | 242,078 |  |  |  | 232,983 |
Noninterest expense (excluding amortization of intangibles) |  |  | 190,986 |  |  |  | 191,370 |  |  |  | 208,665 |  |  |  | 580,346 |  |  |  | 557,747 |
Amortization of intangibles |  |  | 4,788 |  |  |  | 5,169 |  |  |  | 4,889 |  |  |  | 15,302 |  |  |  | 15,074 |
Income before income taxes |  |  | 98,158 |  |  |  | (191,628 | ) |  |  | 80,194 |  |  |  | (228,023 | ) |  |  | 283,671 |
Income tax expense (benefit) |  |  | 18,802 |  |  |  | (74,556 | ) |  |  | 12,387 |  |  |  | (79,274 | ) |  |  | 48,423 |
Net income (loss) |  | $ | 79,356 |  |  | $ | (117,072 | ) |  | $ | 67,807 |  |  | $ | (148,749 | ) |  | $ | 235,248 |
For informational purposes - included above, pre-tax |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Provision for credit loss associated with energy loan sale |  | $ | — |  |  | $ | 160,101 |  |  | $ | — |  |  | $ | 160,101 |  |  | $ | — |
Nonoperating merger-related expenses | . |  | — |  |  |  | — |  |  |  | 28,810 |  |  |  | — |  |  |  | 28,810 |

|  | Three Months Ended |  |  | Nine Months Ended |
|  | September 30, |  |  | June 30, |  |  | September 30, |  |  | September 30, |
|  | 2020 |  |  | 2020 |  |  | 2019 |  |  | 2020 |  |  | 2019 |
Performance Ratios |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Return on average assets |  |  | 0.97 | % |  |  | (1.42 | )% |  |  | 0.92 | % |  |  | (0.62 | )% |  |  | 1.10 | %
Return on average common equity |  |  | 9.42 | % |  |  | (13.59 | )% |  |  | 7.95 | % |  |  | (5.77 | )% |  |  | 9.69 | %
Return on average tangible common equity |  |  | 13.14 | % |  |  | (18.75 | )% |  |  | 10.77 | % |  |  | (7.99 | )% |  |  | 13.32 | %
Earning asset yield (te) (a) |  |  | 3.53 | % |  |  | 3.61 | % |  |  | 4.31 | % |  |  | 3.83 | % |  |  | 4.35 | %
Total cost of funds |  |  | 0.30 | % |  |  | 0.38 | % |  |  | 0.90 | % |  |  | 0.44 | % |  |  | 0.91 | %
Net Interest Margin (te) |  |  | 3.23 | % |  |  | 3.23 | % |  |  | 3.41 | % |  |  | 3.29 | % |  |  | 3.44 | %
Noninterest income to total revenue (te) |  |  | 26.00 | % |  |  | 23.47 | % |  |  | 26.86 | % |  |  | 25.32 | % |  |  | 25.71 | %
Efficiency ratio (b) |  |  | 59.29 | % |  |  | 60.74 | % |  |  | 58.05 | % |  |  | 60.69 | % |  |  | 58.37 | %
Average loan/deposit ratio |  |  | 83.72 | % |  |  | 85.97 | % |  |  | 87.47 | % |  |  | 85.61 | % |  |  | 87.21 | %
FTE employees (period-end) |  |  | 4,058 |  |  |  | 4,196 |  |  |  | 4,222 |  |  |  | 4,058 |  |  |  | 4,222 |
Capital Ratios |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Common stockholders' equity to total assets |  |  | 10.17 | % |  |  | 9.98 | % |  |  | 11.74 | % |  |  | 10.17 | % |  |  | 11.74 | %
Tangible common equity ratio (c) |  |  | 7.53 | % |  |  | 7.33 | % |  |  | 8.82 | % |  |  | 7.53 | % |  |  | 8.82 | %

(a) | Taxable equivalent (te) amounts were calculated using a federal income tax rate of 21%.

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

(c) | The tangible common equity ratio is common stockholders’ equity less intangible assets divided by total assets less intangible assets.

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|  | Three Months Ended |  |  | Nine Months Ended |
|  | September 30, |  |  | June 30, |  |  | September 30, |  |  | September 30, |
($ in thousands) |  | 2020 |  |  | 2020 |  |  | 2019 |  |  | 2020 |  |  | 2019 |
Asset Quality Information |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Nonaccrual loans (a) (b) |  | $ | 171,462 |  |  | $ | 183,979 |  |  | $ | 222,860 |  |  | $ | 171,462 |  |  | $ | 222,860 |
Restructured loans - still accruing |  |  | 9,115 |  |  |  | 9,848 |  |  |  | 60,897 |  |  |  | 9,115 |  |  |  | 60,897 |
Total nonperforming loans |  |  | 180,577 |  |  |  | 193,827 |  |  |  | 283,757 |  |  |  | 180,577 |  |  |  | 283,757 |
ORE and foreclosed assets |  |  | 11,640 |  |  |  | 18,724 |  |  |  | 30,955 |  |  |  | 11,640 |  |  |  | 30,955 |
Total nonperforming assets |  | $ | 192,217 |  |  | $ | 212,551 |  |  | $ | 314,712 |  |  | $ | 192,217 |  |  | $ | 314,712 |
Accruing loans 90 days past due (c) |  | $ | 10,439 |  |  | $ | 5,230 |  |  | $ | 7,872 |  |  | $ | 10,439 |  |  | $ | 7,872 |
Net charge-offs |  |  | 24,008 |  |  |  | 302,684 |  |  |  | 12,474 |  |  |  | 370,456 |  |  |  | 37,494 |
Allowance for loan losses |  | $ | 448,674 |  |  | $ | 442,638 |  |  | $ | 195,572 |  |  | $ | 448,674 |  |  | $ | 195,572 |
Reserve for unfunded lending commitments |  |  | 31,526 |  |  |  | 36,571 |  |  |  | — |  |  |  | 31,526 |  |  |  | — |
Allowance for credit losses |  | $ | 480,200 |  |  | $ | 479,209 |  |  | $ | 195,572 |  |  | $ | 480,200 |  |  | $ | 195,572 |
Total provision for credit losses |  | $ | 24,999 |  |  | $ | 306,898 |  |  | $ | 12,421 |  |  | $ | 578,690 |  |  | $ | 38,552 |
Ratios: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Nonperforming assets to loans, ORE and foreclosed assets |  |  | 0.86 | % |  |  | 0.94 | % |  |  | 1.49 | % |  |  | 0.86 | % |  |  | 1.49 | %
Accruing loans 90 days past due to loans |  |  | 0.05 | % |  |  | 0.02 | % |  |  | 0.04 | % |  |  | 0.05 | % |  |  | 0.04 | %
Nonperforming assets + accruing loans 90 days past due to loans, ORE and foreclosed assets |  |  | 0.91 | % |  |  | 0.96 | % |  |  | 1.53 | % |  |  | 0.91 | % |  |  | 1.53 | %
Net charge-offs to average loans |  |  | 0.43 | % |  |  | 5.30 | % |  |  | 0.25 | % |  |  | 2.23 | % |  |  | 0.25 | %
Allowance for loan losses to period-end loans |  |  | 2.02 | % |  |  | 1.96 | % |  |  | 0.93 | % |  |  | 2.02 | % |  |  | 0.93 | %
Allowance for credit losses to period-end loans |  |  | 2.16 | % |  |  | 2.12 | % |  |  | 0.93 | % |  |  | 2.16 | % |  |  | 0.93 | %
Allowance for loan losses to nonperforming loans + accruing loans 90 days past due |  |  | 234.89 | % |  |  | 222.37 | % |  |  | 67.06 | % |  |  | 234.89 | % |  |  | 67.06 | %
For informational purposes - included above |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Provision for credit loss associated with energy loan sale |  | $ | — |  |  | $ | 160,101 |  |  | $ | — |  |  | $ | 160,101 |  |  | $ | — |
Charge-offs associated with energy loan sale |  |  | — |  |  |  | 242,628 |  |  |  | — |  |  |  | 242,628 |  |  |  | — |

(a) | Included in nonaccrual loans are nonaccruing restructured loans totaling $39.9 million, $55.2 million and $101.1 million at September 30, 2020, June 30, 2020 and September 30, 2019, respectively.

(b) | Nonaccrual loans do not include purchased credit impaired loans accounted for under ASC 310-30 that would have otherwise been considered nonperforming, totaling $17.8 million at September 30, 2019. Effective January 1, 2020, with the adoption of ASC 326, such metrics include both originated and acquired balances.

(c) | Loans past due 90 days or more do not include purchased credit impaired loans accounted for under ASC 310-30 that would have otherwise been considered delinquent, totaling $8.2 million at September 30, 2019. Effective January 1, 2020, with the adoption of ASC 326, such metrics include both originated and acquired balances.

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|  | September 30, |  |  | June 30, |  |  | March 31, |  |  | December 31, |  |  | September 30, |
(in thousands) |  | 2020 |  |  | 2020 |  |  | 2020 |  |  | 2019 |  |  | 2019 |
Period-End Balance Sheet |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Total loans |  | $ | 22,240,204 |  |  | $ | 22,628,377 |  |  | $ | 21,515,681 |  |  | $ | 21,212,755 |  |  | $ | 21,035,952 |
Loans held for sale |  |  | 103,566 |  |  |  | 364,416 |  |  |  | 67,587 |  |  |  | 55,864 |  |  |  | 75,789 |
Securities |  |  | 7,056,276 |  |  |  | 6,381,803 |  |  |  | 6,374,490 |  |  |  | 6,243,313 |  |  |  | 6,404,719 |
Short-term investments |  |  | 779,057 |  |  |  | 760,194 |  |  |  | 876,314 |  |  |  | 110,229 |  |  |  | 49,513 |
Earning assets |  |  | 30,179,103 |  |  |  | 30,134,790 |  |  |  | 28,834,072 |  |  |  | 27,622,161 |  |  |  | 27,565,973 |
Allowance for loan losses |  |  | (448,674 | ) |  |  | (442,638 | ) |  |  | (426,003 | ) |  |  | (191,251 | ) |  |  | (195,572 | )
Goodwill and other intangible assets |  |  | 946,958 |  |  |  | 951,746 |  |  |  | 956,916 |  |  |  | 962,260 |  |  |  | 977,369 |
Other assets |  |  | 2,515,937 |  |  |  | 2,571,502 |  |  |  | 2,396,708 |  |  |  | 2,207,587 |  |  |  | 2,195,779 |
Total assets |  | $ | 33,193,324 |  |  | $ | 33,215,400 |  |  | $ | 31,761,693 |  |  | $ | 30,600,757 |  |  | $ | 30,543,549 |
Noninterest-bearing deposits |  | $ | 11,881,548 |  |  | $ | 11,759,085 |  |  | $ | 9,204,631 |  |  | $ | 8,775,632 |  |  | $ | 8,686,383 |
Interest-bearing transaction and savings deposits |  |  | 9,971,869 |  |  |  | 9,605,254 |  |  |  | 8,931,192 |  |  |  | 8,845,097 |  |  |  | 8,758,993 |
Interest-bearing public fund deposits |  |  | 3,176,225 |  |  |  | 3,326,033 |  |  |  | 3,251,445 |  |  |  | 3,364,416 |  |  |  | 2,954,966 |
Time deposits |  |  | 2,001,017 |  |  |  | 2,631,896 |  |  |  | 3,621,228 |  |  |  | 2,818,430 |  |  |  | 3,800,957 |
Total interest-bearing deposits |  |  | 15,149,111 |  |  |  | 15,563,183 |  |  |  | 15,803,865 |  |  |  | 15,027,943 |  |  |  | 15,514,916 |
Total deposits |  |  | 27,030,659 |  |  |  | 27,322,268 |  |  |  | 25,008,496 |  |  |  | 23,803,575 |  |  |  | 24,201,299 |
Short-term borrowings |  |  | 1,906,895 |  |  |  | 1,754,875 |  |  |  | 2,673,283 |  |  |  | 2,714,872 |  |  |  | 2,108,815 |
Long-term debt |  |  | 385,887 |  |  |  | 386,269 |  |  |  | 225,606 |  |  |  | 233,462 |  |  |  | 246,641 |
Other liabilities |  |  | 494,239 |  |  |  | 435,831 |  |  |  | 433,244 |  |  |  | 381,163 |  |  |  | 400,414 |
Stockholders' equity |  |  | 3,375,644 |  |  |  | 3,316,157 |  |  |  | 3,421,064 |  |  |  | 3,467,685 |  |  |  | 3,586,380 |
Total liabilities & stockholders' equity |  | $ | 33,193,324 |  |  | $ | 33,215,400 |  |  | $ | 31,761,693 |  |  | $ | 30,600,757 |  |  | $ | 30,543,549 |
For informational purposes only - included above |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
SBA Paycheck Protection Program (PPP) loans |  | $ | 2,323,691 |  |  | $ | 2,286,963 |  |  | $ | — |  |  | $ | — |  |  | $ | — |

|  | Three Months Ended |  |  | Nine Months Ended |
|  | September 30, |  |  | June 30, |  |  | September 30, |  |  | September 30, |
(in thousands) |  | 2020 |  |  | 2020 |  |  | 2019 |  |  | 2020 |  |  | 2019 |
Average Balance Sheet |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Total loans |  | $ | 22,407,825 |  |  | $ | 22,957,032 |  |  | $ | 20,197,114 |  |  | $ | 22,200,385 |  |  | $ | 20,158,313 |
Loans held for sale |  |  | 112,230 |  |  |  | 89,935 |  |  |  | 55,348 |  |  |  | 80,942 |  |  |  | 34,740 |
Securities (a) |  |  | 6,389,214 |  |  |  | 6,129,616 |  |  |  | 6,004,688 |  |  |  | 6,223,361 |  |  |  | 5,750,530 |
Short-term investments |  |  | 502,992 |  |  |  | 837,246 |  |  |  | 180,463 |  |  |  | 515,661 |  |  |  | 208,263 |
Earning assets |  |  | 29,412,261 |  |  |  | 30,013,829 |  |  |  | 26,437,613 |  |  |  | 29,020,349 |  |  |  | 26,151,846 |
Allowance for loan losses |  |  | (446,901 | ) |  |  | (425,844 | ) |  |  | (197,259 | ) |  |  | (371,646 | ) |  |  | (196,297 | )
Goodwill and other intangible assets |  |  | 949,287 |  |  |  | 954,252 |  |  |  | 886,868 |  |  |  | 954,328 |  |  |  | 884,254 |
Other assets |  |  | 2,770,783 |  |  |  | 2,594,469 |  |  |  | 2,020,884 |  |  |  | 2,560,792 |  |  |  | 1,875,236 |
Total assets |  | $ | 32,685,430 |  |  | $ | 33,136,706 |  |  | $ | 29,148,106 |  |  | $ | 32,163,823 |  |  | $ | 28,715,039 |
Noninterest-bearing deposits |  | $ | 11,585,617 |  |  | $ | 10,989,921 |  |  | $ | 8,092,482 |  |  | $ | 10,450,457 |  |  | $ | 8,139,439 |
Interest-bearing transaction and savings deposits |  |  | 9,806,826 |  |  |  | 9,387,292 |  |  |  | 8,179,240 |  |  |  | 9,332,604 |  |  |  | 8,096,299 |
Interest-bearing public fund deposits |  |  | 3,196,767 |  |  |  | 3,320,338 |  |  |  | 2,979,494 |  |  |  | 3,256,228 |  |  |  | 3,077,760 |
Time deposits |  |  | 2,174,585 |  |  |  | 3,005,071 |  |  |  | 3,840,139 |  |  |  | 2,894,969 |  |  |  | 3,800,771 |
Total interest-bearing deposits |  |  | 15,178,178 |  |  |  | 15,712,701 |  |  |  | 14,998,873 |  |  |  | 15,483,801 |  |  |  | 14,974,830 |
Total deposits |  |  | 26,763,795 |  |  |  | 26,702,622 |  |  |  | 23,091,355 |  |  |  | 25,934,258 |  |  |  | 23,114,269 |
Short-term borrowings |  |  | 1,733,298 |  |  |  | 2,254,731 |  |  |  | 2,063,335 |  |  |  | 2,044,923 |  |  |  | 1,790,058 |
Long-term debt |  |  | 386,015 |  |  |  | 276,891 |  |  |  | 234,240 |  |  |  | 298,436 |  |  |  | 230,528 |
Other liabilities |  |  | 450,729 |  |  |  | 436,845 |  |  |  | 375,438 |  |  |  | 444,225 |  |  |  | 335,113 |
Stockholders' equity |  |  | 3,351,593 |  |  |  | 3,465,617 |  |  |  | 3,383,738 |  |  |  | 3,441,981 |  |  |  | 3,245,071 |
Total liabilities & stockholders' equity |  | $ | 32,685,430 |  |  | $ | 33,136,706 |  |  | $ | 29,148,106 |  |  | $ | 32,163,823 |  |  | $ | 28,715,039 |
For informational purposes only - included above |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
SBA Paycheck Protection Program (PPP) loans |  | $ | 2,308,021 |  |  | $ | 1,727,797 |  |  | $ | — |  |  | $ | 1,348,786 |  |  | $ | — |

(a) | Average securities do not include unrealized holding gains/losses on available for sale securities.

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Reconciliation of Non-GAAP Measures

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

|  | Three Months Ended |  |  | Nine Months Ended |
|  | September 30, |  |  | June 30, |  |  | September 30, |  |  | September 30, |
(in thousands) |  | 2020 |  |  | 2020 |  |  | 2019 |  |  | 2020 |  |  | 2019 |
Net interest income |  | $ | 235,183 |  |  | $ | 237,866 |  |  | $ | 222,939 |  |  | $ | 704,237 |  |  | $ | 662,061 |
Noninterest income |  |  | 83,748 |  |  |  | 73,943 |  |  |  | 83,230 |  |  |  | 242,078 |  |  |  | 232,983 |
Total revenue |  | $ | 318,931 |  |  | $ | 311,809 |  |  | $ | 306,169 |  |  | $ | 946,315 |  |  | $ | 895,044 |
Taxable equivalent adjustment (a) |  |  | 3,189 |  |  |  | 3,248 |  |  |  | 3,652 |  |  |  | 9,885 |  |  |  | 11,194 |
Total revenue (te) |  | $ | 322,120 |  |  | $ | 315,057 |  |  | $ | 309,821 |  |  | $ | 956,200 |  |  | $ | 906,238 |
Noninterest expense |  |  | (195,774 | ) |  |  | (196,539 | ) |  |  | (213,554 | ) |  |  | (595,648 | ) |  |  | (572,821 | )
Nonoperating expense |  |  | — |  |  |  | — |  |  |  | 28,810 |  |  |  | — |  |  |  | 28,810 |
Operating pre-prevision net revenue (te) |  | $ | 126,346 |  |  | $ | 118,518 |  |  | $ | 125,077 |  |  | $ | 360,552 |  |  | $ | 362,227 |

Operating earnings per share - diluted

|  | Three Months Ended |  |  | Nine Months Ended |
|  | September 30, |  |  | June 30, |  |  | September 30, |  |  | September 30, |
(in thousands) |  | 2020 |  |  | 2020 |  |  | 2019 |  |  | 2020 |  |  | 2019 |
Net income (loss) |  | $ | 79,356 |  |  | $ | (117,072 | ) |  | $ | 67,807 |  |  | $ | (148,749 | ) |  | $ | 235,248 |
Net income and dividends allocated to participating securities |  |  | (1,436 | ) |  |  | (422 | ) |  |  | (1,141 | ) |  |  | (1,278 | ) |  |  | (3,980 | )
Net income (loss) available to common shareholders |  |  | 77,920 |  |  |  | (117,494 | ) |  |  | 66,666 |  |  |  | (150,027 | ) |  |  | 231,268 |
Nonoperating items, net of applicable income tax |  |  | — |  |  |  | — |  |  |  | 22,760 |  |  |  | — |  |  |  | 30,720 |
Nonoperating items allocated to participating securities |  |  | — |  |  |  | — |  |  |  | (383 | ) |  |  | — |  |  |  | (517 | )
Operating earnings (loss) available to common shareholders |  | $ | 77,920 |  |  | $ | (117,494 | ) |  | $ | 89,043 |  |  |  | (150,027 | ) |  |  | 261,471 |
Weighted average common shares - diluted |  |  | 86,400 |  |  |  | 86,301 |  |  |  | 86,462 |  |  |  | 86,614 |  |  |  | 86,010 |
Earnings per share - diluted |  | $ | 0.90 |  |  | $ | (1.36 | ) |  | $ | 0.77 |  |  | $ | (1.73 | ) |  | $ | 2.69 |
Operating earnings per share - diluted |  | $ | 0.90 |  |  | $ | (1.36 | ) |  | $ | 1.03 |  |  | $ | (1.73 | ) |  | $ | 3.04 |
Quarter earnings per share - diluted, impact of energy loan sale |  |  |  |  |  |  |  |  |  |  |  |  |
|  |  |  |  |  | Three Months Ended |  |  |  |  |  |  |  |  |  |  |  |  |
|  |  |  |  |  | June 30, |  |  |  |  |  |  |  |  |  |  |  |  |
(in thousands, except per share amounts) |  |  |  |  |  | 2020 |  |  |  |  |  |  |  |  |  |  |  |  |
1 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Provision for credit losses attributable to the sale of energy loans |  |  |  |  |  | $ | 160,101 |  |  |  |  |  |  |  |  |  |  |  |  |
Income tax benefit at a 21% rate |  |  |  |  |  |  | (33,621 | ) |  |  |  |  |  |  |  |  |  |  |  |
Impact of energy loan sale, net of income tax |  |  |  |  |  | $ | 126,480 |  |  |  |  |  |  |  |  |  |  |  |  |
Weighted average common shares - diluted |  |  |  |  |  |  | 86,323 |  |  |  |  |  |  |  |  |  |  |  |  |
Impact of energy loan sale per share - diluted |  |  |  |  |  | $ | (1.47 | ) |  |  |  |  |  |  |  |  |  |  |  |

(a) | Taxable equivalent adjustment (te) amounts are calculated using a federal income tax rate of 21%.

LIQUIDITY

Liquidity management ensures that funds are available to meet the cash flow requirements of our depositors and borrowers, while also meeting the operating, capital and strategic cash flow needs of the Company, the Bank and other subsidiaries. As part of the overall asset and liability management process, liquidity management strategies and measurements have been developed to manage and monitor liquidity risk. The Company enacted strategies in 2020 to strengthen liquidity through various measures to ensure funds are available to meet the needs of our day to day operations and those of our customers during this unprecedented period of disruption in financial and credit markets. At September 30, 2020, we had over $18 billion in net available sources of funds, summarized as follows:

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|  | September 30, 2020 |
(in millions) |  | Total Available |  |  | Amount Used |  |  | Net Availability |
Internal Sources |  |  |  |  |  |  |  |  |  |  |  |
Cash and Free Securities |  | $ | 4,719 |  |  | $ | — |  |  | $ | 4,719 |
External Sources |  |  |  |  |  |  |  |  |  |  |  |
Federal Home Loan Bank |  |  | 6,248 |  |  |  | 2,591 |  |  |  | 3,657 |
Federal Reserve Bank |  |  | 4,567 |  |  |  | — |  |  |  | 4,567 |
Brokered Deposits |  |  | 4,055 |  |  |  | 105 |  |  |  | 3,950 |
Other |  |  | 1,244 |  |  |  | — |  |  |  | 1,244 |
Total Liquidity |  | $ | 20,834 |  |  | $ | 2,696 |  |  | $ | 18,138 |

The asset portion of the balance sheet provides liquidity primarily through loan principal repayments, maturities and repayments of investment securities and occasional sales of various assets. Short-term investments such as federal funds sold, securities purchased under agreements to resell and interest-bearing deposits with the Federal Reserve Bank or with other commercial banks are additional sources of liquidity to meet cash flow requirements. Free securities represent unpledged securities that can be sold or used as collateral for borrowings, and include unpledged securities assigned to short-term dealer repurchase agreements or to the Federal Reserve Bank discount window. Management has established an internal target for the ratio of free securities to total securities of 20% or greater. As shown in the table below, our ratio of free securities to total securities was 54.68% at September 30, 2020, compared to 48.83% at June 30, 2020 and 54.44% at September 30, 2019. The total of pledged securities at September 30, 2020 was $3.2 billion, down $73.9 million from June 30, 2020. Securities and FHLB letters of credit are pledged as collateral related to public funds and repurchase agreements.

|  |  | September 30, |  |  | June 30, |  |  | March 31, |  |  | December 31, |  |  | September 30, |
Liquidity Metrics |  |  | 2020 |  |  | 2020 |  |  | 2020 |  |  | 2019 |  |  | 2019 |
Free securities / total securities |  |  |  | 54.68 | % |  |  | 48.83 | % |  |  | 25.42 | % |  |  | 47.27 | % |  |  | 54.44 | %
Core deposits / total deposits |  |  |  | 96.22 | % |  |  | 94.53 | % |  |  | 90.48 | % |  |  | 93.54 | % |  |  | 90.31 | %
Wholesale funds / core deposits |  |  |  | 9.42 | % |  |  | 10.37 | % |  |  | 17.76 | % |  |  | 13.99 | % |  |  | 15.54 | %
Quarter-to-date average loans /quarter-to-date average deposits |  |  |  | 83.72 | % |  |  | 85.97 | % |  |  | 87.28 | % |  |  | 88.22 | % |  |  | 87.47 | %

The liability portion of the balance sheet provides liquidity mainly through the ability to use cash sourced from various customers’ interest-bearing and noninterest-bearing deposit and sweep accounts. At September 30, 2020, deposits totaled $27.0 billion, a decrease of $291.6 million, or 1%, from June 30, 2020 and an increase of $2.8 billion, or 12%, from September 30, 2019. The decrease from June 30, 2020 is primarily attributable to a decrease in certificates of deposit (“CDs”). The increase from September 30, 2019 is largely attributable to the increase in noninterest-bearing deposits following the funding of PPP loans and the issuance of government stimulus payments. Core deposits consist of total deposits excluding CDs of $250,000 or more and brokered deposits. Core deposits totaled $26.0 billion at September 30, 2020, an increase of $178.9 million from June 30, 2020, and $4.2 billion from September 30, 2019. The ratio of core deposits to total deposits was 96.22% at September 30, 2020, compared to 94.53% at June 30, 2020 and 90.31% at September 30, 2019. Brokered deposits totaled $157.0 million as of September 30, 2020, a decrease of $381.4 million compared to June 30, 2020 and a decrease of $885.0 million compared to September 30, 2019. Brokered deposits declined compared to both comparative periods as brokered certificates that matured during the period were not reissued as part of our effort to utilize excess liquidity.

The use of brokered deposits as a funding source is subject to certain policies regarding the amount, term and interest rate. In the second quarter of 2020, the Bank implemented a reciprocal deposit program that allows depositors to place their uninsured deposits with other FDIC insured financial institutions in order to obtain FDIC insurance on those deposits, and allows us to reciprocate those deposits. To-date, there has been only minimal activity in this program.

Purchases of federal funds, securities sold under agreements to repurchase and other short-term borrowings from customers provide additional sources of liquidity to meet short-term funding requirements. Besides funding from customer sources, the Bank has a line of credit with the FHLB that is secured by blanket pledges of certain mortgage loans. At September 30, 2020, the Bank had borrowings of approximately $1.1 billion and had approximately $3.7 billion available under this line. The unused borrowing capacity at the Federal Reserve’s discount window is approximately $4.6 billion; there were no outstanding borrowings with the Federal Reserve at any date during any period covered by this report.

Wholesale funds, which are comprised of short-term borrowings, long-term debt and brokered deposits were 9.42% of core deposits at September 30, 2020, compared to 10.37% at June 30, 2020 and 15.54% at September 30, 2019. At September 30, 2020, wholesale funds totaled $2.5 billion, a decrease of $229.7 million, or 8.6%, from June 30, 2020 and a decrease of $947.6 million, or 27.9%, from

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September 30, 2019. The linked quarter decrease in wholesale funds was primarily attributable to the decrease in brokered deposits, offset by an increase in repurchase agreements. The year over year decrease in wholesale funds was attributable to decreases in brokered deposits and short-term borrowings, partially offset by the June 2020 issuance of subordinated debt. The Company has established an internal target for wholesale funds to be less than 25% of core deposits.

Another key measure used to monitor our liquidity position is the loan-to-deposit ratio (average loans outstanding for the reporting period divided by average deposits outstanding). The loan-to-deposit ratio measures the amount of funds the Company lends for each dollar of deposits on hand. Our average loan-to-deposit ratio for the third quarter of 2020 was 83.72%, compared to 85.97% for the second quarter of 2020 and 87.47% for the third quarter of 2019. Management has an established target range for the loan-to-deposit ratio of 87% to 89%, but may operate outside that range under certain circumstances. The loan to deposit ratio is currently impacted by the $2.3 billion of low-risk SBA guaranteed PPP lending that is expected to be largely repaid through the forgiveness process beginning in fourth quarter of 2020 through early 2021.

Cash generated from operations is another important source of funds to meet liquidity needs. The consolidated statements of cash flows present operating cash flows and summarize all significant sources and uses of funds during the nine months ended September 30, 2020 and 2019.

Dividends received from the Bank have been the primary source of funds available to the Parent for the payment of dividends to our stockholders and for servicing its debt. The liquidity management process takes into account the various regulatory provisions that can limit the amount of dividends the Bank can distribute to the Parent. On June 9, 2020, the Parent completed the issuance of subordinated notes payable with an aggregate principal amount of $172.5 million, providing additional liquidity that can be used by the Parent or to provide capital to the Bank, if deemed appropriate.

CAPITAL RESOURCES

Stockholders’ equity totaled $3.4 billion at September 30, 2020, up $59.5 million from June 30, 2020 and down $210.7 million from September 30, 2019. The tangible common equity ratio was 7.53% at September 30, 2020, compared to 7.33% at June 30, 2020 and 8.82% at September 30, 2019. The increase in the tangible common equity ratio from June 30, 2020 is primarily attributable to tangible net earnings, partially offset by dividends paid. The decrease from September 30, 2019 is attributable to the decrease in retained earnings as a result of net loss, dividends paid and the cumulative effect of the adoption of CECL, share repurchases, and the growth in tangible assets, largely driven by the origination of PPP loans; these factors were partially offset by net gains on fair value adjustments included in accumulated other comprehensive income. Following the de-risking strategies executed during the first half of 2020, the tangible common equity ratio declined below management’s internal target of at least 8.00%; however, the ratio has increased in third quarter and based on current expectations, we estimate the ratio to approximate 8.00% by the end of the year.

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The regulatory capital ratios of the Company and the Bank at September 30, 2020 remained well in excess of current regulatory minimum requirements, including capital conser vation buffers, by at least $428 million. The Company and the Bank have been categorized as “well-capitalized” in the most recent notices received from our regulators. Refer to the Supervision and Regulation section in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 for further discussion of our capital requirements.

The following table shows the regulatory capital ratios for the Company and the Bank as calculated under current rules for the indicated periods. The capital ratios at September 30, 2020, June 30, 2020 and March 31, 2020 reflect the election to use the interim final five-year transition rule issued on March 27, 2020 available for institutions required to adopt CECL as of January 1, 2020. The new CECL transition rule allows for the option to delay for two years the estimated impact of CECL on regulatory capital (0%), followed by a three-year transition (25% in 2022, 50% in 2023, 75% in 2024, and 100% thereafter). In addition, the two-year delay also includes full impact of January 1, 2020 impact plus an estimated impact of CECL calculated quarterly as 25% of the current ACL over the January 1, balance (modified transition amount). The modified transition amount will be recalculated each quarter in 2020 and 2021, with the December 31, 2021 impact carrying through remaining three-year transition. The election to use the revised final CECL transition rules favorably impacted our leverage ratio upon adoption by 19 bps and our tier 1 common, tier 1 equity and total capital regulatory ratios by 22 bps.

|  | Well- |  |  | September 30, |  |  | June 30, |  |  | March 31, |  |  | December 31, |  |  | September 30, |
|  | Capitalized |  |  | 2020 |  |  | 2020 |  |  | 2020 |  |  | 2019 |  |  | 2019 |
Total capital (to risk weighted assets) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Hancock Whitney Corporation |  |  | 10.00 | % |  |  | 12.92 | % |  |  | 12.36 | % |  |  | 11.87 | % |  |  | 11.90 | % |  |  | 12.43 | %
Hancock Whitney Bank |  |  | 10.00 | % |  |  | 11.78 | % |  |  | 11.17 | % |  |  | 11.45 | % |  |  | 11.53 | % |  |  | 11.19 | %
Tier 1 common equity capital (to risk weighted assets) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Hancock Whitney Corporation |  |  | 6.50 | % |  |  | 10.30 | % |  |  | 9.78 | % |  |  | 10.02 | % |  |  | 10.50 | % |  |  | 11.02 | %
Hancock Whitney Bank |  |  | 6.50 | % |  |  | 10.53 | % |  |  | 9.91 | % |  |  | 10.20 | % |  |  | 10.74 | % |  |  | 10.39 | %
Tier 1 capital (to risk weighted assets) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Hancock Whitney Corporation |  |  | 8.00 | % |  |  | 10.30 | % |  |  | 9.78 | % |  |  | 10.02 | % |  |  | 10.50 | % |  |  | 11.02 | %
Hancock Whitney Bank |  |  | 8.00 | % |  |  | 10.53 | % |  |  | 9.91 | % |  |  | 10.20 | % |  |  | 10.74 | % |  |  | 10.39 | %
Tier 1 leverage capital |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Hancock Whitney Corporation |  |  | 5.00 | % |  |  | 7.70 | % |  |  | 7.37 | % |  |  | 8.40 | % |  |  | 8.76 | % |  |  | 9.49 | %
Hancock Whitney Bank |  |  | 5.00 | % |  |  | 7.86 | % |  |  | 7.47 | % |  |  | 8.55 | % |  |  | 8.96 | % |  |  | 8.95 | %

On September 23, 2019, the Company’s board of directors approved a stock buyback program that authorizes the Company to repurchase up to 5.5 million shares of our common stock through the expiration date of December 31, 2020. The program allows the Company to repurchase its common shares in the open market, by block purchase, through accelerated share repurchase programs, in privately negotiated transactions, or as otherwise determined by the Company in one or more transactions. The Company is not obligated to purchase any shares under this program, and the board of directors may terminate or amend the program at any time prior to the expiration date.

On October 18, 2019, the Company entered into an accelerated share repurchase (“ASR”) agreement with Morgan Stanley & Co. LLC (“Morgan Stanley”) to repurchase $185 million of the Company’s common stock. Pursuant to the ASR agreement, the Company made a $185 million payment to Morgan Stanley on October 21, 2019, and received on the same day an initial delivery of approximately 3.6 million shares of the Company’s common stock. On March 18, 2020, pursuant to the terms of the agreement, the final settlement of the ASR commenced whereby the Company received approximately $12.1 million and a final delivery of 1.0 million shares.

In January 2020, the Company repurchased 315,851 shares of its common stock at a price of $40.26 per share in a privately negotiated transaction. The Company has repurchased a total of 4.9 million shares of the 5.5 million authorized under the buyback program at an average price of $37.65 per share through the ASR agreement and the privately negotiated transaction. The Company has suspended further repurchases of shares under this program.

On June 9, 2020, the Parent completed the issuance of subordinated notes with an aggregate principal amount of $172.5 million and a stated maturity of June 15, 2060, that qualify as tier 2 capital in the calculation of certain regulatory capital ratios.

On August 27, 2020, our board of directors declared a regular third quarter cash dividend of $0.27 per share, consistent with the prior quarter. The dividend was paid on September 15, 2020. The Company intends to pay its next quarterly dividend and is in consultation with its regulators regarding the dividend payment, while the board evaluates the dividend payout policy quarterly.

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As of September 30, 2020, the Compan y has PPP loans totaling $2.3 billion that are guaranteed by the SBA, and when meeting certain regulatory criteria, are subject to forgiveness. These loans carry a 0% risk-weighting in the t ier 1 and t otal c apital regulatory ratios due to the full guarantee by the SBA. However, these loans are reflected in average assets used to compute t ier 1 l everage.

BALANCE SHEET ANALYSIS

Securities

Investment in securities totaled $7.1 billion at September 30, 2020, up $674.5 million, or 11%, from June 30, 2020 and up $651.6 million, or 10%, from September 30, 2019. At September 30, 2020, securities available for sale totaled $5.7 billion and securities held to maturity totaled $1.4 billion. The purpose of our securities portfolio is to increase profitability, mitigate interest rate risk, provide liquidity and comply with regulatory requirements. Our securities portfolio includes securities categorized as available for sale and held to maturity. Available for sale securities are carried at fair value and may be sold prior to maturity. Unrealized gains or losses on available for sale securities, net of deferred taxes, are recorded as accumulated other comprehensive income in shareholders’ equity.

Our securities portfolio consists mainly of residential and commercial mortgage-backed securities and collateralized mortgage obligations that are issued or guaranteed by U.S. government agencies. We invest only in high quality investment grade securities with a targeted portfolio effective duration generally between two and five and a half years. At September 30, 2020, the average expected maturity of the portfolio was 5.54 years with an effective duration of 4.00 years and a nominal weighted-average yield of 2.20%. Management simulations indicate that the effective duration would increase to 4.29 years with a 100 bp increase in the yield curve and increase to 4.50 years with a 200 bp increase. At June 30, 2020, the average expected maturity of the portfolio was 5.51 years with an effective duration of 3.79 years and a nominal weighted-average yield of 2.41%. The average maturity of the portfolio at September 30, 2019 was 5.75 years, with an effective duration was 4.0 years and the nominal weighted-average yield was 2.63%. The changes in expected maturity, effective duration, and nominal weighted-average yield compared to prior quarter and year-over-year were primarily related to securities portfolio growth and the reinvestment of the securities portfolio maturities, paydowns and sales.

Effective January 1, 2020 and in conjunction with the adoption of CECL, and again as of September 30, 2020, the Company evaluated its securities portfolio for credit loss. Based on our assessment, expected credit loss was negligible for both periods and therefore, no allowance for credit loss was recorded.

Loans

Total loans at September 30, 2020 were $22.2 billion, down $0.4 billion, or 2%, from June 30, 2020, and up $1.2 billion, or 6%, from September 30, 2019. The linked-quarter decline was primarily related to limited demand throughout our footprint stemming from the current economic environment. Growth compared to the same quarter last year reflect the originations of PPP loans, partially offset by the sale of a portion of the energy loan portfolio and a decrease in demand across our footprint.

The following table shows the composition of our loan portfolio at each date indicated:

|  | September 30, |  |  | June 30, |  |  | March 31, |  |  | December 31, |  |  | September 30, |
(in thousands) |  | 2020 |  |  | 2020 |  |  | 2020 |  |  | 2019 |  |  | 2019 |
Total loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial non-real estate |  | $ | 10,257,788 |  |  | $ | 10,465,280 |  |  | $ | 9,321,340 |  |  | $ | 9,166,947 |  |  | $ | 8,893,004 |
Commercial real estate - owner occupied |  |  | 2,779,407 |  |  |  | 2,762,259 |  |  |  | 2,731,320 |  |  |  | 2,738,460 |  |  |  | 2,734,379 |
Total commercial and industrial |  |  | 13,037,195 |  |  |  | 13,227,539 |  |  |  | 12,052,660 |  |  |  | 11,905,407 |  |  |  | 11,627,383 |
Commercial real estate - income producing |  |  | 3,406,554 |  |  |  | 3,350,299 |  |  |  | 3,232,783 |  |  |  | 2,994,448 |  |  |  | 3,060,568 |
Construction and land development |  |  | 1,096,149 |  |  |  | 1,128,959 |  |  |  | 1,098,726 |  |  |  | 1,157,451 |  |  |  | 1,190,718 |
Residential mortgages |  |  | 2,754,388 |  |  |  | 2,877,316 |  |  |  | 2,979,985 |  |  |  | 2,990,631 |  |  |  | 3,004,958 |
Consumer |  |  | 1,945,918 |  |  |  | 2,044,264 |  |  |  | 2,151,527 |  |  |  | 2,164,818 |  |  |  | 2,152,325 |
Total loans |  | $ | 22,240,204 |  |  | $ | 22,628,377 |  |  | $ | 21,515,681 |  |  | $ | 21,212,755 |  |  | $ | 21,035,952 |

Commercial and industrial (“C&I”) loans, including both non-real estate and owner occupied real estate secured loans, totaled approximately $13.0 billion, or 59% of the total loan portfolio, at September 30, 2020, a decrease of $0.2 billion, or 1%, from June 30, 2020 and an increase of $1.4 billion, or 12%, from September 30, 2019. The linked-quarter decline is primarily due to lower demand across our footprint. The year over year increase is related to PPP loan originations, partially offset by the energy loan sale and lower demand across most regions and specialty lines as a result of the economic impact of the pandemic.

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The Bank lends mainly to middle market and smaller commercial entities, although it participates in larger shared credit loan facilities. Shared national credits funded at September 30, 2020 totaled approximately $1.6 billion, or 7% of total loans, a decrease of $145.3 million from June 30, 2020, due primarily to the energy loan sale. At September 30, 2020, approximately $291.1 million of our shared nation al credits were with healthcare-related customers.

Loans to borrowers in the energy sector totaled $337.8 million at September 30, 2020, down $14.1 million, or 4%, from June 30, 2020 and $696.0 million, or 67%, compared to September 30, 2019. The linked quarter decrease in energy-related loans resulted from net paydowns. The year-over-year decrease was largely due to the sale of $497 million of energy loans in June 2020, net paydowns and charge-offs, partially offset by acquired MidSouth energy loans. At September 30, 2020, the majority of the remaining energy portfolio is comprised of customers engaged in onshore and offshore services and products to support exploration and production activities, with approximately 70% of the balances in increments of $10 million or less.

Our loan portfolio is well diversified by product, client, and geography throughout our footprint. Nevertheless, we may be exposed to certain concentrations of credit risk which exist in relation to different borrowers or groups of borrowers, specific types of collateral, industries, loan products, or regions. The following table provides detail of the more significant industry concentrations for our commercial and industrial loan portfolio, which is based on NAICS codes for all industries, with the exceptions of energy, which is based on the borrower’s source of revenue (i.e. manufacturer whose income is derived from energy-related business is reported as energy), and PPP loans, as those are expected to be 100% SBA guaranteed and therefore have limited credit risk.

|  | September 30, |  |  | June 30, |  |  | March 31, |  |  | December 31, |  |  | September 30, |
|  | 2020 |  |  | 2020 |  |  | 2020 |  |  | 2019 |  |  | 2019 |
|  |  |  |  |  | Pct of |  |  |  |  |  |  | Pct of |  |  |  |  |  |  | Pct of |  |  |  |  |  |  | Pct of |  |  |  |  |  |  | Pct of |
( $ in thousands ) |  | Balance |  |  | Total |  |  | Balance |  |  | Total |  |  | Balance |  |  | Total |  |  | Balance |  |  | Total |  |  | Balance |  |  | Total |
Commercial & industrial loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Real estate and rental and leasing |  | $ | 1,273,360 |  |  |  | 10 | % |  | $ | 1,326,198 |  |  |  | 10 | % |  | $ | 1,420,629 |  |  |  | 12 | % |  | $ | 1,432,319 |  |  |  | 12 | % |  | $ | 1,454,795 |  |  |  | 13 | %
Healthcare and social assistance |  |  | 1,135,986 |  |  |  | 9 | % |  |  | 1,129,983 |  |  |  | 9 | % |  |  | 1,201,423 |  |  |  | 10 | % |  |  | 1,144,369 |  |  |  | 10 | % |  |  | 1,084,884 |  |  |  | 9 | %
Retail trade |  |  | 1,035,295 |  |  |  | 8 | % |  |  | 1,057,248 |  |  |  | 8 | % |  |  | 1,066,780 |  |  |  | 9 | % |  |  | 1,098,810 |  |  |  | 9 | % |  |  | 1,060,765 |  |  |  | 9 | %
Manufacturing |  |  | 934,582 |  |  |  | 7 | % |  |  | 967,054 |  |  |  | 7 | % |  |  | 959,653 |  |  |  | 8 | % |  |  | 928,467 |  |  |  | 8 | % |  |  | 957,622 |  |  |  | 8 | %
Transportation and warehousing |  |  | 825,113 |  |  |  | 3 | % |  |  | 839,192 |  |  |  | 6 | % |  |  | 828,215 |  |  |  | 7 | % |  |  | 768,971 |  |  |  | 6 | % |  |  | 705,536 |  |  |  | 6 | %
Public administration |  |  | 696,160 |  |  |  | 6 | % |  |  | 723,565 |  |  |  | 5 | % |  |  | 761,284 |  |  |  | 6 | % |  |  | 774,401 |  |  |  | 7 | % |  |  | 765,492 |  |  |  | 7 | %
Finance and insurance |  |  | 655,468 |  |  |  | 5 | % |  |  | 693,044 |  |  |  | 5 | % |  |  | 740,915 |  |  |  | 6 | % |  |  | 677,500 |  |  |  | 6 | % |  |  | 632,197 |  |  |  | 5 | %
Wholesale trade |  |  | 664,648 |  |  |  | 5 | % |  |  | 691,671 |  |  |  | 5 | % |  |  | 784,354 |  |  |  | 7 | % |  |  | 751,794 |  |  |  | 6 | % |  |  | 691,648 |  |  |  | 6 | %
Accommodation, food services and entertainment |  |  | 632,582 |  |  |  | 5 | % |  |  | 640,167 |  |  |  | 5 | % |  |  | 616,473 |  |  |  | 5 | % |  |  | 613,982 |  |  |  | 5 | % |  |  | 611,663 |  |  |  | 5 | %
Construction |  |  | 631,239 |  |  |  | 5 | % |  |  | 599,238 |  |  |  | 5 | % |  |  | 700,313 |  |  |  | 6 | % |  |  | 724,614 |  |  |  | 6 | % |  |  | 637,512 |  |  |  | 5 | %
Professional, scientific, and technical services |  |  | 481,296 |  |  |  | 5 | % |  |  | 476,011 |  |  |  | 4 | % |  |  | 503,325 |  |  |  | 4 | % |  |  | 515,634 |  |  |  | 4 | % |  |  | 492,424 |  |  |  | 4 | %
Other services (except public administration) |  |  | 433,718 |  |  |  | 4 | % |  |  | 442,407 |  |  |  | 4 | % |  |  | 456,084 |  |  |  | 4 | % |  |  | 451,889 |  |  |  | 4 | % |  |  | 476,731 |  |  |  | 4 | %
Energy |  |  | 335,677 |  |  |  | 3 | % |  |  | 348,547 |  |  |  | 3 | % |  |  | 935,076 |  |  |  | 8 | % |  |  | 958,486 |  |  |  | 8 | % |  |  | 1,026,680 |  |  |  | 9 | %
Educational services |  |  | 309,664 |  |  |  | 2 | % |  |  | 323,673 |  |  |  | 2 | % |  |  | 326,708 |  |  |  | 3 | % |  |  | 342,544 |  |  |  | 3 | % |  |  | 353,366 |  |  |  | 3 | %
Other |  |  | 668,716 |  |  |  | 5 | % |  |  | 682,578 |  |  |  | 5 | % |  |  | 751,428 |  |  |  | 5 | % |  |  | 721,627 |  |  |  | 6 | % |  |  | 676,068 |  |  |  | 7 | %
Total commercial & industrial loans |  | $ | 10,713,504 |  |  |  | 82 | % |  | $ | 10,940,576 |  |  |  | 83 | % |  | $ | 12,052,660 |  |  |  | 100 | % |  | $ | 11,905,407 |  |  |  | 100 | % |  | $ | 11,627,383 |  |  |  | 100 | %
PPP loans |  |  | 2,323,691 |  |  |  | 18 | % |  |  | 2,286,963 |  |  |  | 17 | % |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Total commercial & industrial loans |  | $ | 13,037,195 |  |  |  | 100 | % |  | $ | 13,227,539 |  |  |  | 100 | % |  | $ | 12,052,660 |  |  |  | 100 | % |  | $ | 11,905,407 |  |  |  | 100 | % |  | $ | 11,627,383 |  |  |  | 100 | %

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Commercial real estate – income producing loans totaled approximately $3.4 billion at September 30, 2020, an increase of $56.3 million, or 2%, from June 30, 2020 and $346.0, or 11%, from September 30, 2019. Construction and land development loans, totaling approximately $1.1 billion at September 30, 2020, decreased $32.8 million, or 3%, from June 30, 2020 and $94.6 million, or 8%, from September 30, 2019. The following table details for the preceding five quarters the end-of-period aggregated commercial real estate – income producing and construction loan balances by property type. Loans reflected in 1-4 Family Residential Construction include both loans to construction builders as well as single family borrowers.

|  | September 30, |  |  | June 30, |  |  | March 31, |  |  | December 31, |  |  | September 30, |
|  | 2020 |  |  | 2020 |  |  | 2020 |  |  | 2019 |  |  | 2019 |
|  |  |  |  |  | Pct of |  |  |  |  |  |  | Pct of |  |  |  |  |  |  | Pct of |  |  |  |  |  |  | Pct of |  |  |  |  |  |  | Pct of |
( $ in thousands ) |  | Balance |  |  | Total |  |  | Balance |  |  | Total |  |  | Balance |  |  | Total |  |  | Balance |  |  | Total |  |  | Balance |  |  | Total |
Commercial real estate - income producing and construction loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Retail |  | $ | 744,994 |  |  |  | 17 | % |  | $ | 712,844 |  |  |  | 16 | % |  | $ | 708,087 |  |  |  | 16 | % |  | $ | 663,196 |  |  |  | 16 | % |  | $ | 636,484 |  |  |  | 15 | %
Multifamily |  |  | 625,992 |  |  |  | 14 | % |  |  | 601,749 |  |  |  | 13 | % |  |  | 552,464 |  |  |  | 13 | % |  |  | 520,444 |  |  |  | 13 | % |  |  | 539,994 |  |  |  | 13 | %
Healthcare related properties |  |  | 559,196 |  |  |  | 12 | % |  |  | 546,641 |  |  |  | 12 | % |  |  | 569,166 |  |  |  | 13 | % |  |  | 517,855 |  |  |  | 12 | % |  |  | 562,726 |  |  |  | 13 | %
Office |  |  | 504,168 |  |  |  | 11 | % |  |  | 537,476 |  |  |  | 12 | % |  |  | 475,565 |  |  |  | 11 | % |  |  | 447,972 |  |  |  | 11 | % |  |  | 447,872 |  |  |  | 11 | %
Industrial |  |  | 530,450 |  |  |  | 12 | % |  |  | 538,955 |  |  |  | 12 | % |  |  | 535,070 |  |  |  | 12 | % |  |  | 498,291 |  |  |  | 12 | % |  |  | 491,984 |  |  |  | 12 | %
Hotel, motel and restaurants |  |  | 524,275 |  |  |  | 12 | % |  |  | 510,021 |  |  |  | 11 | % |  |  | 502,866 |  |  |  | 12 | % |  |  | 477,728 |  |  |  | 11 | % |  |  | 431,082 |  |  |  | 10 | %
1-4 family residential construction |  |  | 464,347 |  |  |  | 10 | % |  |  | 457,011 |  |  |  | 10 | % |  |  | 439,739 |  |  |  | 10 | % |  |  | 443,835 |  |  |  | 11 | % |  |  | 486,848 |  |  |  | 11 | %
Other land loans |  |  | 273,915 |  |  |  | 6 | % |  |  | 258,858 |  |  |  | 6 | % |  |  | 246,377 |  |  |  | 6 | % |  |  | 250,357 |  |  |  | 6 | % |  |  | 262,298 |  |  |  | 6 | %
Other |  |  | 275,366 |  |  |  | 6 | % |  |  | 315,703 |  |  |  | 8 | % |  |  | 302,175 |  |  |  | 7 | % |  |  | 332,221 |  |  |  | 8 | % |  |  | 391,998 |  |  |  | 9 | %
Total commercial real estate - income producing and construction loans |  | $ | 4,502,703 |  |  |  | 100 | % |  | $ | 4,479,258 |  |  |  | 100 | % |  | $ | 4,331,509 |  |  |  | 100 | % |  | $ | 4,151,899 |  |  |  | 100 | % |  | $ | 4,251,286 |  |  |  | 100 | %

Our residential mortgages loan portfolio totaled $2.8 billion at September 30, 2020, down $122.9 million, or 4%, from June 30, 2020 and down $250.6 million, or 8%, compared to September 30, 2019. The low interest rate environment has led to increased activity in mortgages originated for sale, resulting in a decline in our residential mortgage portfolio. Generally, fixed-rate longer-term loans originated are sold in the secondary market. The consumer loan portfolio totaled $1.9 billion at September 30, 2020, down $98.3 million, or 5%, compared to June 30, 2020, and down $206.4 million, or 10%, compared to September 30, 2019. The decline in the consumer loan portfolio is due in part to the wind down of indirect auto lending.

The markets that we serve have been negatively impacted by the widespread economic shutdown and market turmoil caused by the pandemic and prolonged depressed oil prices. While we expect to see impacts across all of our portfolios, we have identified four principle sectors that are of particular focus where we expect there may be a greater effect and a more challenging recovery. We are closely monitoring our concentrations in these industries and others with active and frequent borrower dialogue, payment deferral, and other accommodations and financial support, where warranted. While these industries and others have been significantly impacted by the pandemic, the long-term impacts remain unknown and are dependent on several factors, including the severity of the economic downturn, length of time until full recovery and the effectiveness of government stimulus plans.

The table below summarizes our funded commercial loan exposure to these sectors under focus at September 30, 2020 and the relative concentration to the total loan portfolio, excluding low-risk SBA guaranteed PPP loans. Loans within our sectors under focus total approximately 24% of total loans outstanding, excluding PPP loans, and comprise nearly 50% of both our commercial criticized and pass watch rated loans.

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( $ in thousands ) |  | Balance |  |  | Percentage of Total Loans * |
Sectors under focus * |  |  |  |  |  |  |  |
Healthcare and social assistance |  |  |  |  |  |  |  |
Hospitals |  | $ | 288,073 |  |  |  | 1.40 | %
Offices of physicians & dentists |  |  | 477,719 |  |  |  | 2.40 | %
Assisted living (investor CRE) |  |  | 372,119 |  |  |  | 2.00 | %
Assisted living (non- investor CRE) |  |  | 207,470 |  |  |  | 1.00 | %
All other healthcare |  |  | 242,173 |  |  |  | 1.20 | %
Total healthcare and social assistance |  |  | 1,587,554 |  |  |  | 8.00 | %
Hospitality |  |  |  |  |  |  |  |
Hotel |  |  | 523,117 |  |  |  | 2.60 | %
Restaurants full service, casual dining and bars |  |  | 370,109 |  |  |  | 1.90 | %
Restaurants limited service |  |  | 121,086 |  |  |  | 0.60 | %
Entertainment |  |  | 147,291 |  |  |  | 0.70 | %
Total hospitality |  |  | 1,161,603 |  |  |  | 5.80 | %
Retail trade |  |  |  |  |  |  |  |
Retail CRE |  |  | 670,955 |  |  |  | 3.40 | %
Retail goods and services |  |  | 1,096,208 |  |  |  | 5.50 | %
Total retail trade |  |  | 1,767,163 |  |  |  | 8.90 | %
Energy |  |  | 337,828 |  |  |  | 1.70 | %
Total Sectors under focus |  | $ | 4,854,148 |  |  |  | 24.40 | %

* Excludes PPP loans

Management’s expectation for loan growth through the remainder of the year is tempered given the ongoing economic environment. We expect forgiveness of PPP loans to begin in fourth quarter and continue through early 2021. As such, continued contraction of total loans is anticipated for the fourth quarter of 2020.

Allowance for Credit Losses and Asset Quality

The Company's allowance for credit losses was $480.2 million at September 30, 2020, compared to $479.2 million at June 30, 2020 and $195.2 million at December 31, 2019. The adoption of the CECL standard on January 1, 2020 includes increases totaling $49.4 million in the funded allowance for loan losses and $27.3 million in the reserve for unfunded lending commitments. These increases are the result of the difference between estimated incurred losses at the adoption date and the forward-looking projected losses over the remaining estimated term of the financial instruments. The higher reserves from the change in accounting principal is largely driven by our longer-term assets as well as expected future funding of construction lending and certain other revolving products. Refer to Note 1 – Basis of Presentation – Critical Accounting Policies and Estimates for a description of the CECL methodology and Note 16 – Recent Accounting Pronouncements for additional discussion of the impact of adoption.

The $1.0 million increase in the third quarter 2020 allowance for credit losses is primarily due to higher individually evaluated reserves (generally used for nonperforming and troubled debt restructured loans), largely offset by lower collectively evaluated reserves driven by a modestly improved economic forecast and lower overall outstanding balances. The Company probability-weighted three Moody’s macroeconomic scenarios in the calculation of our collectively evaluated allowance for credit losses. Consistent with the second quarter, the baseline scenario was weighted most heavily at 50% and the upside scenario S-1 (faster near-term growth) and downside scenario S-2 (slower near-term growth) were each weighted 25% to incorporate reasonably possible alternative economic outcomes. All three economic scenarios utilized reflect a gradual recovery from the recessionary first half of 2020, with second quarter 2020 unemployment as the peak; however, the upside and downside scenarios have varying degrees of size and timing of additional fiscal stimulus and duration of recovery. The baseline scenario reflects what we believe to be the most likely outcome, and, therefore was given the greatest probability weighting, and the alternative scenarios reflect reasonably possible outcomes due to the uncertainty, both upside and downside, in the economy in the near-term.

The September 2020 baseline forecast assumes that the new cases of COVID-19 peaked in July 2020 and does not include new widespread business closures. In this scenario, a vaccine is expected by April 2021 and infections are expected to abate by June 2021. Positive job numbers reported to-date have led to a slighter quicker recovery in the U.S. job market than included in the June 2020 forecast. This scenario assumes that an additional stimulus bill is passed in 2020 to aid in the recovery. Additional information on the September Baseline forecast is provided in the “Economic Outlook and Ongoing Impact of COVID-19” of this document. The stronger near-term growth S-1 forecast reflects a quicker economic recovery than the baseline forecast, with more rapid GDP growth and lower unemployment rates through our reasonable and supportable forecast period. The slower near-term growth S-2 forecast

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reflects a slower economic recovery than the baseline forecast, with higher incidence of infection and death and restrictions on travel and business winding down somewhat more slowly, resulting in higher unemployment rates than the Baseline scenario in the reasonable and supportable period. The S-2 scenario also reflects a delay in additional economic stimulus with sustained recovery not occurring until the second half of 2021.

The $285 million increase in the allowance for credit loss for September 30, 2020 compared to December 31, 2019, reflects the $76.7 million cumulative effect adjustment for the adoption of CECL and a net reserve build of $208.2 million which included increases for pandemic-related impacts to the economy, net of the second quarter allowance release of $82.5 million related to the energy loan sale.

Our allowance for credit loss coverage to total loans remains strong at 2.16% at September 30, 2020, or 2.40% when excluding SBA guaranteed PPP loans, compared to 2.12% at June 30, 2020, or 2.36% excluding PPP loans, and 0.92% at December 31, 2019.

The allowance for credit losses on the commercial nonenergy portfolio increased to $357.2 million, or 2.08% of that portfolio, at September 30, 2020 compared to the June 30, 2020 allowance of $350.5 million, or 2.01%. The commercial nonenergy portfolio includes concentration in lessors of real estate to various pandemic-impacted industries including hospitality and tourism which includes hotels, restaurants, and bars, certain nonessential healthcare, certain types of retail outlets, and other industries that have been significantly impacted by the widespread shutdown. The increase in allowance is primarily due to individually evaluated reserves, largely in the healthcare sector, with increased coverage reflecting declining loan balances as demand has been limited throughout the footprint. The allowance for credit losses on the energy portfolio increased to $21.4 million, or 6.33% of that portfolio, compared to the June 30, 2020 allowance of $19.9 million, or 5.66%, with the increase also due to individually evaluated credits. Our residential mortgage reserve for credit loss decreased to $51.8 million, or 1.88%, at September 30, 2020, compared to $57.4 million, or 2.02%, at June 30, 2020, due primarily to favorable movement in forecasted variables for home prices. Our allowance for credit losses on the consumer portfolio was $49.8 million, or 2.56 %, at September 30, 2020, compared to $51.5 million, or 2.52 %, at June 30, 2020.

Criticized commercial loans totaled $412 million at September 30, 2020, up from $348 million at June 30, 2020. The increase in commercial criticized loans includes $39 million attributable to the commercial nonenergy portfolio and $25 million attributable to the energy portfolio and was largely concentrated in pandemic-impacted portfolios. Criticized loans are defined as those having potential weaknesses that deserve management’s close attention (risk-rated as special mention, substandard and doubtful), including both accruing and nonaccruing loans. The Company routinely assesses the ratings of loans in its portfolio through an established and comprehensive portfolio management process. In addition, the Company often looks at portfolios of loans to determine if there are areas of risk not specifically identified in its loan by loan approach. In alignment with regulatory guidance, we have been working with our customers by providing various types of loan deferrals to manage the effects of economic stress. While a significant number of these deferrals have expired, our ability to predict future cash flow is limited due to economic uncertainty, and we expect that further risk rating adjustments may be required.

Net charge-offs were $24.0 million, or .43% of average total loans on an annualized basis in the third quarter of 2020, compared to $302.7 million, or 5.30% of average total loans in the second quarter of 2020. Commercial net charge-offs totaled $23.2 million in the third quarter of 2020, consisting largely of charges related to healthcare-dependent credits. This compared to second quarter commercial charge-offs of $299.4 million, which included $242.6 million of charge-offs from the energy loan sale. Our residential mortgage portfolio reflected minimal net recoveries in both the third and second quarters of 2020 and consumer net charge-offs were $1.1 million in the third quarter of 2020, down from $3.9 million in the prior quarter. Third quarter 2020 consumer charge-offs were favorably impacted by loan deferrals and are expected to return to more normalized levels in the near term.

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

|  | Three Months Ended |  |  | Nine Months Ended |
|  | September 30, |  |  | June 30, |  |  | September 30, |  |  | September 30, |
(in thousands) |  | 2020 |  |  | 2020 |  |  | 2019 |  |  | 2020 |  |  | 2019 |
Provision and Allowance for Credit Losses |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Allowance for loan losses: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Allowance for loan losses at beginning of period |  | $ | 442,638 |  |  | $ | 426,003 |  |  | $ | 195,625 |  |  | $ | 191,251 |  |  | $ | 194,514 |
Loans charged-off: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial non real estate |  |  | 24,557 |  |  |  | 298,853 |  |  |  | 11,729 |  |  |  | 364,123 |  |  |  | 33,382 |
Commercial real estate - owner-occupied |  |  | 122 |  |  |  | 1,192 |  |  |  | 66 |  |  |  | 1,828 |  |  |  | 137 |
Total commercial & industrial |  |  | 24,679 |  |  |  | 300,045 |  |  |  | 11,795 |  |  |  | 365,951 |  |  |  | 33,519 |
Commercial real estate - income producing |  |  | 710 |  |  |  | 671 |  |  |  | — |  |  |  | 2,211 |  |  |  | 10 |
Construction and land development |  |  | 2 |  |  |  | 5 |  |  |  | 7 |  |  |  | 7 |  |  |  | 7 |
Total commercial |  |  | 25,391 |  |  |  | 300,721 |  |  |  | 11,802 |  |  |  | 368,169 |  |  |  | 33,536 |
Residential mortgages |  |  | 29 |  |  |  | - |  |  |  | 221 |  |  |  | 170 |  |  |  | 660 |
Consumer |  |  | 2,904 |  |  |  | 5,196 |  |  |  | 5,002 |  |  |  | 13,640 |  |  |  | 13,169 |
Total charge-offs |  |  | 28,324 |  |  |  | 305,917 |  |  |  | 17,025 |  |  |  | 381,979 |  |  |  | 47,365 |
Recoveries of loans previously charged-off: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial non real estate |  |  | 1,532 |  |  |  | 1,073 |  |  |  | 2,932 |  |  |  | 4,831 |  |  |  | 5,662 |
Commercial real estate - owner-occupied |  |  | 552 |  |  |  | 26 |  |  |  | 63 |  |  |  | 659 |  |  |  | 284 |
Total commercial & industrial |  |  | 2,084 |  |  |  | 1,099 |  |  |  | 2,995 |  |  |  | 5,490 |  |  |  | 5,946 |
Commercial real estate - income producing |  |  | — |  |  |  | 39 |  |  |  | 516 |  |  |  | 46 |  |  |  | 518 |
Construction and land development |  |  | 98 |  |  |  | 217 |  |  |  | 11 |  |  |  | 549 |  |  |  | 108 |
Total commercial |  |  | 2,182 |  |  |  | 1,355 |  |  |  | 3,522 |  |  |  | 6,085 |  |  |  | 6,572 |
Residential mortgages |  |  | 317 |  |  |  | 549 |  |  |  | 167 |  |  |  | 1,078 |  |  |  | 433 |
Consumer |  |  | 1,817 |  |  |  | 1,329 |  |  |  | 862 |  |  |  | 4,360 |  |  |  | 2,866 |
Total recoveries |  |  | 4,316 |  |  |  | 3,233 |  |  |  | 4,551 |  |  |  | 11,523 |  |  |  | 9,871 |
Total net charge-offs |  |  | 24,008 |  |  |  | 302,684 |  |  |  | 12,474 |  |  |  | 370,456 |  |  |  | 37,494 |
Provision for loan losses |  |  | 30,044 |  |  |  | 319,319 |  |  |  | 12,421 |  |  |  | 578,468 |  |  |  | 38,552 |
Cumulative effect of change in accounting principle (a) |  |  | — |  |  |  | - |  |  |  | — |  |  |  | 49,411 |  |  |  | — |
Allowance for loan losses at end of period |  | $ | 448,674 |  |  | $ | 442,638 |  |  | $ | 195,572 |  |  | $ | 448,674 |  |  | $ | 195,572 |
Reserve for Unfunded Lending Commitments: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Reserve for Unfunded Lending Commitments at beginning of period |  | $ | 36,571 |  |  | $ | 48,992 |  |  | $ | — |  |  | $ | 3,974 |  |  | $ | — |
Cumulative effect of change in accounting principle (a) |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 27,330 |  |  |  | — |
Provision for losses on unfunded lending commitments |  |  | (5,045 | ) |  |  | (12,421 | ) |  |  | — |  |  |  | 222 |  |  |  | — |
Reserve for unfunded lending commitments at end of period |  | $ | 31,526 |  |  | $ | 36,571 |  |  | $ | — |  |  | $ | 31,526 |  |  | $ | — |
Total Allowance for Credit Losses |  | $ | 480,200 |  |  | $ | 479,209 |  |  | $ | 195,572 |  |  | $ | 480,200 |  |  | $ | 195,572 |
Total Provision for Credit Losses |  | $ | 24,999 |  |  | $ | 306,898 |  |  | $ | 12,421 |  |  | $ | 578,690 |  |  | $ | 38,552 |
Ratios: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Gross charge-offs to average loans |  |  | 0.50 | % |  |  | 5.36 | % |  |  | 0.33 | % |  |  | 2.30 | % |  |  | 0.31 | %
Recoveries to average loans |  |  | 0.08 | % |  |  | 0.06 | % |  |  | 0.09 | % |  |  | 0.07 | % |  |  | 0.07 | %
Net charge-offs to average loans |  |  | 0.43 | % |  |  | 5.30 | % |  |  | 0.25 | % |  |  | 2.23 | % |  |  | 0.25 | %
Allowance for loan losses to period-end loans |  |  | 2.02 | % |  |  | 1.96 | % |  |  | 0.93 | % |  |  | 2.02 | % |  |  | 0.93 | %
Allowance for credit losses to period-end loans |  |  | 2.16 | % |  |  | 2.12 | % |  |  | 0.93 | % |  |  | 2.16 | % |  |  | 0.93 | %
For informational purposes - included above |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Provision for credit loss associated with energy |  | $ | — |  |  | $ | 160,101 |  |  | $ | — |  |  | $ | 160,101 |  |  | $ | — |
Charge-offs associated with energy loan sale |  | $ | — |  |  | $ | 242,628 |  |  | $ | — |  |  | $ | 242,628 |  |  | $ | — |

| (a) | Represents the increase in the allowance upon the January 1, 2020 adoption of ASC 326, commonly referred to as Current Expected Credit Losses, or CECL.

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

|  | September 30, |  |  | December 31, |
(in thousands) |  | 2020 |  |  | 2019 |
Loans accounted for on a nonaccrual basis: (a) |  |  |  |  |  |  |  |
Commercial non-real estate |  | $ | 41,401 |  |  | $ | 49,628 |
Commercial non-real estate - restructured |  |  | 36,783 |  |  |  | 129,050 |
Total commercial non-real estate |  |  | 78,184 |  |  |  | 178,678 |
Commercial real estate - owner occupied |  |  | 14,394 |  |  |  | 7,413 |
Commercial real estate - owner-occupied - restructured |  |  | 289 |  |  |  | 295 |
Total commercial real estate - owner-occupied |  |  | 14,683 |  |  |  | 7,708 |
Commercial real estate - income producing |  |  | 6,932 |  |  |  | 2,489 |
Commercial real estate - income producing - restructured |  |  | 96 |  |  |  | 105 |
Total commercial real estate - income producing |  |  | 7,028 |  |  |  | 2,594 |
Construction and land development |  |  | 3,192 |  |  |  | 1,051 |
Construction and land development - restructured |  |  | 42 |  |  |  | 166 |
Total construction and land development |  |  | 3,234 |  |  |  | 1,217 |
Residential mortgage |  |  | 40,865 |  |  |  | 36,638 |
Residential mortgage - restructured |  |  | 2,731 |  |  |  | 2,624 |
Total residential mortgage |  |  | 43,596 |  |  |  | 39,262 |
Consumer |  |  | 24,737 |  |  |  | 16,159 |
Consumer - restructured |  |  | — |  |  |  | 215 |
Total consumer |  |  | 24,737 |  |  |  | 16,374 |
Total nonaccrual loans |  | $ | 171,462 |  |  | $ | 245,833 |
Restructured loans - still accruing: |  |  |  |  |  |  |  |
Commercial non-real estate |  | $ | 5,195 |  |  | $ | 59,136 |
Commercial real estate - owner occupied |  |  | — |  |  |  | — |
Commercial real estate - income producing |  |  | 357 |  |  |  | 373 |
Construction and land development |  |  | 123 |  |  |  | 111 |
Residential mortgage |  |  | 2,308 |  |  |  | 514 |
Consumer |  |  | 1,132 |  |  |  | 1,131 |
Total restructured loans - still accruing |  |  | 9,115 |  |  |  | 61,265 |
Total nonperforming loans |  |  | 180,577 |  |  |  | 307,098 |
ORE and foreclosed assets |  |  | 11,640 |  |  |  | 30,405 |
Total nonperforming assets (b) |  | $ | 192,217 |  |  | $ | 337,503 |
Loans 90 days past due still accruing to loans (c) |  | $ | 10,439 |  |  | $ | 6,582 |
Total restructured loans |  | $ | 49,056 |  |  | $ | 193,720 |
Ratios: |  |  |  |  |  |  |  |
Nonperforming assets to loans plus ORE and foreclosed assets |  |  | 0.86 | % |  |  | 1.59 | %
Allowance for loan losses to nonperforming loans and accruing loans 90 days past due |  |  | 234.89 | % |  |  | 60.97 | %
Loans 90 days past due still accruing to loans |  |  | 0.05 | % |  |  | 0.03 | %

(a) | Nonaccrual loans do not include purchased credit impaired loans accounted for under ASC 310-30 that would have otherwise been considered nonperforming, totaling $17.5 million at December 31, 2019. Effective January 1, 2020 with the adoption of ASC 326, such metrics include both originated and acquired.

(b) | Includes total nonaccrual loans, total restructured loans - still accruing and ORE and foreclosed assets.

(c) | Accruing loans past due 90 days or more do not include purchased credit impaired loans accounted for under ASC 310-30 that would have otherwise been considered delinquent, totaling $8.3 million at December 31, 2019. Effective January 1, 2020 with the adoption of ASC 326, such metrics include both originated and acquired.

Nonperforming assets totaled $192.2 million at September 30, 2020, down $20.3 million from June 30, 2020, and $145.3 million from December 31, 2019. Nonperforming loans decreased approximately $13.3 million compared to June 30, 2020, and $126.5 million from December 31, 2019. The decline in nonperforming loans compared to the prior quarter was largely due to charge-offs, while the decrease from year-end was primarily due to the energy loan sale. ORE and foreclosed assets decreased to $11.6 million at September 30, 2020, from $18.7 million at June 30, 2020, and $30.4 million at December 31, 2019. The decrease compared to year-end includes the first quarter 2020 write-downs of equity interest in two energy-related companies received in borrower bankruptcy restructurings

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on two energy credits totaling $9.8 million. Nonperforming assets as a percent of total loans, ORE and other foreclosed assets was 0.86% at September 30, 2020, down 8 bps from June 30, 2020, and 73 bps from December 31, 2019.

Short-Term Investments

Short-term liquidity assets are held to ensure funds are available to meet the cash flow needs of both borrowers and depositors. Short-term liquidity investments, including interest-bearing bank deposits and federal funds sold, were $779.1 million at September 30, 2020, up $18.9 million from June 30, 2020 and $729.5 million from September 30, 2019. Typically, these balances will change on a daily basis depending upon movement in customer loan and deposit accounts. Average short-term investments of $503.0 million for the third quarter of 2020 were down $334.3 million compared to the second quarter of 2020, and up $322.5 million compared to the third quarter of 2019.

Deposits

Deposits provide the most significant source of funding for our interest earning assets. Our ability to compete for market share depends on our deposit pricing and our wide range of products and services that are focused on customer needs. In order to meet our customers’ needs, we offer high-quality banking services with convenient delivery channels, including online and mobile banking. We provide specialized services to our commercial customers to promote commercial deposit growth. These services include treasury management, industry expertise and lockbox services.

Total deposits were $27.0 billion at September 30, 2020, down $291.6 million, or 1%, from June 30, 2020, primarily driven by a decrease in certificates of deposit, both retail and brokered. Total deposits increased $2.8 billion, or 12%, from September 30, 2019, primarily due to strong growth in noninterest-bearing deposits, largely the result of proceeds from PPP loan funding remaining on deposit. Average deposits for the third quarter of 2020 were $26.8 billion, up $61.2 million, or less than 1%, from the second quarter of 2020 and up $3.7 billion, or 16%, from the third quarter of 2019.

Noninterest-bearing demand deposits were $11.9 billion at September 30, 2020, up $122.5 million, or 1%, from June 30, 2020, and $3.2 billion, or 37%, from September 30, 2019. The continued elevated balances are primarily due to residual impacts of the stimulus response to the pandemic. We expect the balance to decline during the fourth quarter as these funds are utilized. The year over year increase reflects the deposit of proceeds from PPP loans funded primarily during the second quarter of 2020. Noninterest-bearing demand deposits comprised 44% of total deposits at September 30, 2020, 43% at June 30, 2020 and 36% at September 30, 2019.

Interest-bearing transaction and savings accounts of $10.0 billion at September 30, 2020 increased $366.6 million, or 4%, from June 30, 2020 and $1.2 billion, or 14%, from September 30, 2019. These increases were primarily driven by movement from maturing certificates of deposit in the low interest rate environment, as well as PPP loan proceeds that remain in customer accounts.

Interest-bearing public fund deposits totaled $3.2 billion at September 30, 2020, down $149.8 million, or 5%, from June 30, 2020, and up $221.3 million, or 7%, from September 30, 2019. Time deposits other than public funds totaled $2.0 billion at September 30, 2020, down $630.9 million, or 24%, from June 30, 2020, with a $392.2 million decrease in brokered certificates of deposit and a $238.7 million decrease in retail certificates of deposits. The decrease in time deposits resulted from higher level of maturities and slower production due to the pandemic. Maturing brokered deposits were not replaced due to excess liquidity. Time deposits other than public funds were down $1.8 billion, or 47%, from September 30, 2019, with a decrease of $936.4 million in brokered certificates of deposit and $863.6 million in retail certificates of deposits.

Short-Term Borrowings

At September 30, 2020, short-term borrowings totaled $1.9 billion, up $152 million, or 9%, from June 30, 2020 driven by an increase in repurchase agreements. Short-term borrowings decreased $201.9 million, or 10%, from September 30, 2019, mainly due to decreases of $337.5 million in FHLB borrowings and $125.2 million in federal funds purchased, partially offset by an increase of $260.7 million in repurchase agreements.

Average short-term borrowings of $1.7 billion in the third quarter of 2020 were down $521.4 million, or 23%, compared to the second quarter of 2020, and $330.0 million, or 16%, compared to the third quarter of 2019.

Customer repurchase agreements and FHLB borrowings are the major sources of short-term borrowings. Customer repurchase agreements are offered mainly to commercial customers to assist them with their cash management strategies or to provide a temporary investment vehicle for their excess liquidity pending redeployment for corporate or investment purposes. While customer

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repurchase agreements provide a recurring source of funds to the Bank, amounts available will vary. FHLB borrowings are funds from the Federal Home Loan Bank that are collateralized by certain residential mortgage and commercial real estate loans included in the Bank’s loan portfolio, subject to specific criteria.

Long-Term Debt

Long-term debt totaled $385.9 million at September 30, 2020 and $386.3 million at June 30, 2020, compared to $246.6 million at September 30, 2019. On June 9, 2020, the Parent completed the issuance of subordinated notes payable with an aggregate principal amount of $172.5 million with a stated maturity of June 15, 2060. The notes accrue interest at a fixed rate of 6.25% per annum, with quarterly interest payments that began September 15, 2020. Subject to prior approval by the Federal Reserve, the Company may redeem the notes in whole or in part on any interest payment date on or after June 15, 2025. This debt qualifies as tier 2 capital in the calculation of certain regulatory capital ratios.

Long-term debt also includes subordinated notes payable with an aggregate principal amount of $150 million with a stated maturity of June 15, 2045with a fixed rate of 5.95% per annum. Subject to prior approval by the Federal Reserve, the Company may redeem these notes in whole or in part on any of its quarterly interest payment dates after June 15, 2020. This debt also qualifies as tier 2 capital in the calculation of certain regulatory capital ratios. The remaining long-term debt is comprised primarily of borrowings associated with tax credit fund activities.

OFF-BALANCE SHEET ARRANGEMENTS

Loan Commitments and Letters of Credit

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

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

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

The contract amounts of these instruments reflect the Company's exposure to credit risk. The Company undertakes the same credit evaluation in making loan commitments and assuming conditional obligations as it does for on-balance sheet instruments and may require collateral or other credit support. At September 30, 2020, the Company had a reserve for unfunded lending commitments totaling $31.5 million.

The following table shows the commitments to extend credit and letters of credit at September 30, 2020 according to expiration date.

|  |  |  |  |  | Expiration Date |
|  |  |  |  |  | Less than |  |  | 1-3 |  |  | 3-5 |  |  | More than |
(in thousands) |  | Total |  |  | 1 year |  |  | years |  |  | years |  |  | 5 years |
Commitments to extend credit |  | $ | 7,803,139 |  |  | $ | 3,794,225 |  |  | $ | 1,756,576 |  |  | $ | 1,415,153 |  |  | $ | 837,185 |
Letters of credit |  |  | 369,538 |  |  |  | 279,980 |  |  |  | 81,560 |  |  |  | 7,998 |  |  |  | — |
Total |  | $ | 8,172,677 |  |  | $ | 4,074,205 |  |  | $ | 1,838,136 |  |  | $ | 1,423,151 |  |  | $ | 837,185 |

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CRITICAL ACCOUNTING POLICIES AND ESTIMATES

On January 1, 2020, the Company adopted Accounting Standards Codification (“ASC”) 326, “Financial Instruments – Credit Losses,” more commonly referred to as “CECL.” The provisions of this guidance required a material change to the manner in which the Company estimates and reports losses on financial instruments. Changes to the Company’s accountings policies related to CECL are disclosed in Note 1 – Basis of Presentation – Critical Accounting Estimates, with further discussion of changes to significant accounting estimates noted below. Further, the Company performed a quantitative interim test of goodwill impairment during the nine months ended September 30, 2020. There were no other material changes or developments during the reporting period with respect to methodologies that the Company uses when applying what management believes are critical accounting policies and developing critical accounting estimates as disclosed in its Annual Report on Form 10-K for the year ended December 31, 2019.

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

Allowance for Credit Loss

The allowance for credit losses is established in accordance with the CECL standard which introduces several additional subjective inputs to the allowance estimation process. The standard requires that management incorporate an economic forecast for a reasonable and supportable period, which is two years based on our current policy. The Company utilizes third party forecasts that consist of multiple economic scenarios, including a baseline, with a probability distribution of 50% better or worse economic performance and various upside and downside scenarios utilized an aggregated state (or regional) levels across our footprint or national level, depending on the portfolio. The economic forecasts are generally lagging and may not incorporate all events and circumstances through the financial statement date. The Company’s management considers available forecasts, current events not captured and our specific portfolio characteristics and applies weights to the scenario output based on a best estimate of likely outcomes. During 2020, the United States and global financial markets experienced unprecedented volatility, with significant uncertainty surrounding the pandemic, including varying degrees of economic shutdown and a significant and sustained decline in oil prices. The lack of a vaccine or decidedly effective medical treatment for the virus has significantly reduced travel and impaired tourism and trade, which has deteriorated the Gulf Coast economy. Changing economic conditions and resulting government response in the form of interest rate adjustments and several current and expected future stimulus packages have introduced enhanced estimation uncertainty in the forecasts used to estimate expected credit loss. Our credit loss models were built using historical data that may not correlate to economic conditions stemming from the pandemic. The estimate of the life of a loan considers both contractual cash flows as well as estimated prepayments and forecasted draws on unfunded loan commitments that were also built on historical data that may react differently given the current environment. Such forecasted information is inherently uncertain, particularly in the volatile environment resulting from the pandemic. Forecast uncertainty includes the severity of the impact to local and global economic conditions as well as the timing of recovery, among other things. Therefore, actual results may differ significantly from management’s estimates.

The quantitative loss rate analysis is supplemented by a review of qualitative factors that considers whether conditions differ from those existing during the historical periods used in the development of the credit loss models. Such factors include, but are not limited to, problem loan trends, changes in loan profiles and volumes, changes in lending policies and procedures, current economic and business conditions, credit concentrations, model limitations and other factors not captured by our models. While quantitative data for these factors is used where available, there is a high level of judgment applied in these processes.

For credits that are individually evaluated, a specific allowance is calculated as the shortfall between the credit’s value and the bank’s exposure. The loan’s value is measured by either the loan’s observable market price, the fair value of the collateral of the loan (less liquidation costs) if it is collateral dependent, or by the present value of expected future cash flows discounted at the loan’s effective interest rate. Collateral on impaired loans includes, but is not limited to, commercial and residential real estate, oil and gas reserves, marine vessels, accounts receivable and other corporate assets. Values for impaired credits are highly subjective and based on information available at the time of valuation and the current resolution strategy. These values are difficult to assess and have heightened uncertainty resulting from the impact of the pandemic on market conditions. Actual results could differ from these estimates.

Management considers the appropriateness of these critical assumptions as part of its allowance review and believes the ACL level is appropriate based on information available through the financial statement date. Refer to Note 4 – Loans and Allowance for Credit Losses for further discussion of significant assumptions used in the current allowance calculation.

Goodwill Impairment Testing

Goodwill, which represents the excess of cost over the fair value of the net assets of an acquired business, is not amortized but is assessed for impairment on an annual basis, or more often if events or circumstances indicate that it is more likely than not that a goodwill impairment exists. The Company completed its annual impairment test of goodwill as of September 30, 2019 by performing a qualitative (“Step Zero”) assessment. The qualitative assessment involved the examination of changes in macroeconomic conditions,

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industry and market conditions, overall financial performance, cost factors and other relevant entity-specific events, including changes in management and other key personnel and changes in the share price of the Company’s common stock. As a result of the assessment, the Company concluded that its goodwill was not impaired.

During the third quarter of 2020, the Company assessed the indicators of goodwill impairment and noted certain events that indicated that it is “more likely than not” that a goodwill impairment exists, necessitating an interim test of impairment. Triggering events stemming from and in response to the COVID-19 pandemic include continued economic disruption, operating losses driven by a higher provision for credit losses and a lower interest rate environment, and a sustained decrease in the share price of the Company. As such, the Company performed a quantitative assessment of goodwill impairment as of September 30, 2020, which included determining the estimated fair value of the reporting unit and comparing that fair value to the reporting unit's carrying amount. The results of the test indicated that the estimated fair value of the reporting unit exceeded its carrying amount at September 30, 2020; therefore, goodwill was not impaired as of the testing date.

The Company used multiple approaches to measure its fair value at September 30, 2020. The primary approaches included an income approach using the discounted net present value of estimated future cash flows and a market approach using transaction or price-to-forward earnings multiples methodology using the actual price paid in recent acquisition transactions for similar entities, discounted for the current recessionary environment, neither of which resulted in impairment. The results from each of the primary approaches were weighted equally, with the valuation of the reporting unit approximately 14% in excess of net book value at September 30, 2020.

Both valuation techniques employed by the Company require significant assumptions. Depending upon the specific approach, assumptions are made regarding the economic environment, expected net interest margins, growth rates, discount rate used to present value future cash flows, asset quality metrics, control premiums, and price-to-forward earnings multiples. Changes to any one of these assumptions could result in significantly different results. Changes in the amount and/or timing of Company’s expected future cash flows or estimated growth rates, lack of improvement and/or further decline in the price of the Company’s common stock relative to our book value per share, and/or further deterioration in the economic environment beyond current estimates could result in an impairment charge to goodwill in future reporting periods. Annual impairment testing will be performed in the fourth quarter of 2020 in coordination with a more robust corporate-wide annual budget process and interim testing is expected to continue until indicators of goodwill impairment no longer exist.

NEW ACCOUNTING PRONOUNCEMENTS

Refer to Note 16 to our consolidated financial statements included elsewhere in this report.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

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

The following table presents an analysis of our interest rate risk as measured by the estimated changes in net interest income resulting from an instantaneous and sustained parallel shift in rates at September 30, 2020. Shifts are measured in 100 basis point increments in a range from -500 to +500 basis points from base case, with +100 through +300 basis points presented in the table below. Our interest rate sensitivity modeling incorporates a number of assumptions including loan and deposit repricing characteristics, the rate of loan prepayments and other factors. The base scenario assumes that the current interest rate environment is held constant over a 24-month forecast period and is the scenario to which all others are compared in order to measure the change in net interest income. Policy limits on the change in net interest income under a variety of interest rate scenarios are approved by the Board of Directors. All policy scenarios assume a static volume forecast where the balance sheet is held constant, although other scenarios are modeled.

|  | Estimated Increase |
|  | (Decrease) in NII |
Change in Interest Rates |  | Year 1 |  |  | Year 2 |
(basis points) |  |  |  |  |  |  |  |
+100 |  |  | 3.10 | % |  |  | 6.23 | %
+200 |  |  | 7.04 | % |  |  | 13.05 | %
+300 |  |  | 10.80 | % |  |  | 19.36 | %

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The results indicate a general asset sensitivity across most scenarios driven primarily by repricing in variable rate loans and a funding mix which is composed of material volumes of non-interest bearing and lower rate sensitive deposits. When deemed to be prudent, management has taken actions to mitigate exposure to interest rate risk with on- or off-balance sheet financial instruments and intends to do so in the future. Possible actions include, but are not limited to, changes in the pricing of loan and deposit products, modifying the composition of earning assets and interest-bearing liabilities, and adding to, modifying or terminating existing interest rate swap agreements or other financial instruments used for interest rate risk management purposes.

Even if interest rates change in the designated amounts, there can be no assurance that our assets and liabilities would perform as anticipated. Additionally, a change in the U.S. Treasury rates in the designated amounts accompanied by a change in the shape of the U.S. Treasury yield curve would cause significantly different changes to net interest income than indicated above. Strategic management of our balance sheet and earnings is fluid and would be adjusted to accommodate these movements. As with any method of measuring interest rate risk, certain shortcomings are inherent in the methods of analysis presented above. For example, although certain assets and liabilities may have similar maturities or periods to repricing, they may react in different degrees to changes in market interest rates. Also, the interest rates on certain types of assets and liabilities may fluctuate in advance of changes in market interest rates, while interest rates on other types may lag behind changes in market rates. Certain assets such as adjustable-rate loans have features which restrict changes in interest rates on a short-term basis and over the life of the asset. Also, the ability of many borrowers to service their debt may decrease in the event of an interest rate increase. We consider all of these factors in monitoring exposure to interest rate risk.

In July 2017, the United Kingdom Financial Conduct Authority (the authority that regulates LIBOR) announced that it intends to stop compelling banks to submit rates for the calculation of LIBOR after 2021. Working groups comprised of various regulators and other industry groups have been formed in the United States and other countries in order to provide guidance on this topic. In particular, the Alternative Reference Rates Committee (“ARRC”) has proposed that the Secured Overnight Financing Rate (“SOFR”) is the rate that represents best practice as the alternative to LIBOR for use in derivatives and other financial contracts that are currently indexed to LIBOR. The ARRC has also published recommended fallback language for LIBOR-linked financial instruments, among numerous other areas of guidance. ARRC has proposed a paced market transition plan to SOFR from LIBOR, and organizations are currently working on industry-wide and company-specific transition plans as it relates to derivatives and cash markets exposed to LIBOR. However, at this time, no consensus exists as to what rate or rates may become acceptable alternatives to LIBOR and it is impossible to predict the effect of any such alternatives on the value of LIBOR-based securities and variable rate loans, debentures, or other securities or financial arrangements, given LIBOR’s role in determining market interest rates globally.

Management has established a LIBOR Transition Working Group (the “Group”) whose purpose is to direct the overall transition process for the Company. The Group is an internal, cross-functional team with representatives from business lines, support and control functions and legal counsel. During the third quarter of 2019, key provisions in our loan documents were modified to ensure new and renewed loans include appropriate pre-cessation trigger language and LIBOR fallback language for transition from LIBOR to the new benchmark when such transition occurs. All direct exposures resulting from existing financial contracts that mature after 2021 have been inventoried and are monitored on an ongoing basis. Remediation of these exposures will be consistent with industry timing. The Group has also inventoried indirect LIBOR exposures within the Company's systems, models and processes. The results of this assessment will drive development and prioritization of remediation plans, and the Group is continuing to monitor developments and taking steps to ensure readiness when the LIBOR benchmark rate is discontinued.

At September 30, 2020, approximately 28% of our loan portfolio consisted of variable rate loans tied to LIBOR, along with related derivatives and other financial instruments.

Item 4. Controls and Procedures

In connection with the preparation of this Quarterly Report on Form 10-Q, an evaluation was carried out by the Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Disclosure controls and procedures are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and that such information is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosures. Based on that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that, as of September 30, 2020, the Company’s disclosure controls and procedures were effective.

Our management, including the Chief Executive Officer and Chief Financial Officer, identified no change in our internal control over financial reporting that occurred during the three month period ended September 30, 2020, that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting. Consideration by management was given to operational changes that were made in response to the COVID-19 pandemic.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

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

Item 1A. Risk Factors

The Company disclosed risk factors in its Annual Report on Form 10-K for the year ended December 31, 2019. The risks described may not be the only risks facing us. Additional risks and uncertainties not currently known to us or that are currently considered to not be material also may materially adversely affect our business, financial condition, and/or operating results. The following risk factors have been included in this Quarterly Report on Form 10-Q in response to the global market disruptions that have resulted from the COVID-19 pandemic.

The COVID-19 pandemic has adversely impacted our business and financial results, and the ultimate impact will depend on future developments, which are highly uncertain and cannot be predicted, including the scope and duration of the pandemic and actions taken by governmental authorities in response to the pandemic.

The COVID-19 pandemic has created and will likely continue to create extensive disruptions to the global economy and to the lives of individuals throughout the world. Governments, businesses, and the public are taking unprecedented actions to contain the spread of COVID-19 and to mitigate its effects, including quarantines, travel bans, shelter-in-place orders, closures of businesses and schools, fiscal stimulus, and legislation designed to deliver monetary aid and other relief. While the scope, duration, and full effects of COVID-19 are rapidly evolving and not fully known, the pandemic and related efforts to contain it have disrupted global economic activity, adversely affected the functioning of financial markets, impacted interest rates, increased economic and market uncertainty, and disrupted trade and supply chains. If these effects continue for a prolonged period or result in sustained economic stress or recession, many of the risk factors identified in the “Risk Factors” section included in our Annual Report on Form 10-K for the year ended December 31, 2019 could be exacerbated and such effects could have a material adverse impact on us in a number of ways related to credit, collateral, customer demand, funding, operations, interest rate risk, liquidity and litigation, as described in more detail below.

Credit Risk. Our risks of timely loan repayment and the value of collateral supporting the loans are affected by the strength of our borrowers’ business. Concern about the spread of COVID-19 has caused and is likely to continue to cause business shutdowns, limitations on commercial activity and financial transactions, labor shortages, supply chain interruptions, increased unemployment and commercial property vacancy rates, reduced profitability and ability for property owners to make mortgage payments, and overall economic and financial market instability, all of which may cause our customers to be unable to make scheduled loan payments. If the effects of COVID-19 result in widespread and sustained repayment shortfalls on loans in our portfolio, we could incur significant delinquencies, foreclosures and credit losses, particularly if the available collateral is insufficient to cover our exposure. The future effects of COVID-19 on economic activity could negatively affect the collateral values associated with our existing loans, the ability to liquidate the real estate collateral securing our residential and commercial real estate loans, our ability to maintain loan origination volume and to obtain additional financing, the future demand for or profitability of our lending and services, and the financial condition and credit risk of our customers. Further, in the event of delinquencies, regulatory changes and policies designed to protect borrowers may slow or prevent us from making our business decisions or may result in a delay in our taking certain remediation actions, such as foreclosure. In addition, we have unfunded commitments to extend credit to customers. During a challenging economic environment, increased borrowings under these commitments could adversely impact our liquidity. Furthermore, in an effort to support our communities during the pandemic, we are participating in the Paycheck Protection Program (“PPP”) under the CARES Act whereby loans to small businesses are made and those loans are subject to the regulatory requirements that would require forbearance of loan payments for a specified time or that could limit our ability to pursue all available remedies in the event of a loan default. If the borrower under the PPP loan fails to qualify for loan forgiveness, or if the SBA determines there is a deficiency in the manner in which any PPP loans were originated, funded or serviced by the Bank, we are subject to repayment risk as well as the heightened risk of holding these loans at unfavorable interest rates as compared to loans to customers that we would have otherwise extended credit.

Strategic Risk. Our financial condition and results of operations may be affected by a variety of external factors that may affect the price or marketability of our products and services, changes in interest rates that may increase our funding costs, reduced demand for our financial products due to economic conditions and the various response of governmental and nongovernmental authorities. The COVID-19 pandemic has significantly increased economic and demand uncertainty and has led to severe disruption and volatility in the global capital markets. Furthermore, many of the governmental actions in response to the pandemic have been

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directed toward curtailing household and business activity to contain COVID-19. These actions have been rapidly changing. For example, in many of our markets, local governments have acted to temporarily close or restrict the operations of most businesses. The future effects of COVID-19 on economic activity could negatively affect the future banking products we provide, including a decline in loan originations.

Operational Risk. Current and future restrictions on our workforce’s access to our facilities could limit our ability to meet customer servicing expectations and have a material adverse effect on our operations. We rely on business processes and branch activity that largely depend on people and technology, including access to information technology systems as well as information, applications, payment systems and other services provided by third parties. In response to COVID-19, we have modified our business practices with a portion of our employees working remotely from their homes to have our operations uninterrupted as much as possible. Further, technology in employees’ homes may not be as robust as in our offices and could cause the networks, information systems, applications, and other tools available to employees to be more limited or less reliable than in our offices. The continuation of these work-from-home measures also introduces additional operational risk, including increased cybersecurity risk. These cyber risks include greater phishing, malware, and other cybersecurity attacks, vulnerability to disruptions of our information technology infrastructure and telecommunications systems for remote operations, increased risk of unauthorized dissemination of confidential information, limited ability to restore the systems in the event of a systems failure or interruption, greater risk of a security breach resulting in destruction or misuse of valuable information, and potential impairment of our ability to perform critical functions, including wiring funds, all of which could expose us to risks of data or financial loss, litigation and liability and could seriously disrupt our operations and the operations of any impacted customers.

Moreover, we rely on many third parties in our business operations, including the appraiser of the real property collateral, vendors that supply essential services such as loan servicers, providers of financial information, systems and analytical tools and providers of electronic payment and settlement systems, and local and federal government agencies, offices, and courthouses. In light of the developing measures responding to the pandemic, many of these entities may limit the availability and access of their services. For example, loan origination could be delayed due to the limited availability of real estate appraisers for the collateral. Loan closings could be delayed related to reductions in available staff in recording offices or the closing of courthouses in certain counties or parishes, which slows the process for title work, mortgage and UCC filings in those counties or parishes. If the third-party service providers continue to have limited capacities for a prolonged period or if additional limitations or potential disruptions in these services materialize, it may negatively affect our operations.

Further, we use quantitative models to help manage certain aspects of our business and to assist with certain business decisions, including estimating credit losses, grading loans and extending credit, estimating the effects of changing interest rates and other market measures on our financial condition and results of operations. Our modeling methodologies rely on many assumptions, historical analyses and correlations. These assumptions may be incorrect, particularly in times of market distress, as we have experienced and expect to continue to experience as a result of the COVID-19 pandemic, and the historical correlations on which we rely may not continue to be relevant. As a result, our models may not capture or fully express the risks we face or may lead us to misjudge the business and economic environment in which we operate. If our models fail to produce reliable results on an ongoing basis, we may not make appropriate risk management or other business or financial decisions. Furthermore, strategies that we employ to manage and govern the risks associated with our use of models may not be effective or fully reliable, and as a result, we may realize losses or other lapses.

If our models fail to produce reliable results on an ongoing basis, we may not make appropriate risk management or other business or financial decisions. Furthermore, strategies that we employ to manage and govern the risks associated with our use of models may not be effective or fully reliable, and as a result, we may realize losses or other lapses.

Interest Rate Risk. Our net interest income, lending activities, deposits and profitability are and are likely to continue to be negatively affected by volatility in interest rates caused by uncertainties stemming from COVID-19. In March 2020, the Federal Reserve lowered the target range for the federal funds rate to a range from 0 to 0.25 percent, citing concerns about the impact of COVID-19 on markets and stress in the energy sector. A prolonged period of extremely volatile and unstable market conditions would likely increase our funding costs and negatively affect market risk mitigation strategies. Higher income volatility from changes in interest rates and spreads to benchmark indices will likely cause a loss of future net interest income and a decrease in current fair market values of our assets. Fluctuations in interest rates will impact both the level of income and expense recorded on most of our assets and liabilities and the market value of all interest-earning assets and interest-bearing liabilities, which in turn could have a material adverse effect on our net income, operating results, or financial condition.

Because there have been no comparable recent global pandemics that resulted in similar global impact, we do not yet know the full extent of and the long-term impact of COVID-19’s effects on our business, operations, or the global economy as a whole. Any future developments will be highly uncertain and cannot be predicted, including the scope and duration of the pandemic, the effectiveness of our work from home arrangements, third party providers’ ability to support our operations, and any actions taken by governmental

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authorities and other third parties in response to the pandemic. The uncertain future development of this crisis could materially and adversely affect our business, operations, operating results, financial condition, liquidity or capital levels.

Liquidity and Litigation Risk. Federal, state and local governments have mandated or encouraged financial services companies to make accommodations to borrowers and other customers affected by the COVID-19 pandemic. Legal and regulatory responses to concerns about the COVID-19 pandemic could result in additional regulation or restrictions affecting the conduct of our business in the future. In addition to the potential effects from negative economic conditions noted above, the Company instituted a program to help COVID-19 impacted customers. This program included waiving certain fees and charges and offering payment deferment and other loan relief, as appropriate, for customers impacted by COVID-19. The Company’s liquidity could be negatively impacted if a significant number of customers apply and are approved for the deferral of payments or request additional deferrals. In addition, if these deferrals are not effective in mitigating the effect of COVID-19 on the Company’s customers, it may adversely affect its business and results of operations more substantially over a longer period of time. A significant amount of the loan growth the Company experienced year-to-date in 2020 was a direct result of PPP loans; this loan growth is likely to end in the near-term. Furthermore, since the inception of the PPP, a number of banks have been subject to litigation regarding the process and procedures that such banks used in processing applications for the PPP and claims related to agent fees. In addition, some banks have received negative media attention associated with the PPP. The Company and the Bank are exposed to similar litigation risk and negative media attention, from both customers and non-customers that approached the Bank regarding PPP loans, regarding its process and procedures used in processing applications for the PPP, or litigation from agents with respect to agent fees. If any such litigation against the Company or the Bank is not resolved in a manner favorable to the Company or the Bank, it may result in significant financial liability or adversely affect the Company’s reputation. In addition, litigation can be costly, regardless of outcome. Any financial liability, litigation costs or reputational damage caused by PPP related litigation or negative media attention could have a material adverse impact on our business, financial condition and results of operations.

The PPP has also attracted interest from federal and state enforcement authorities, oversight agencies, regulators and Congressional committees. State attorney generals and other federal and state agencies may assert that they are not subject to the provisions of the CARES Act and the PPP regulations entitling the Bank to rely on borrower certifications, and they may take more aggressive actions against the Bank for alleged violations of the provisions governing the Bank’s participation in the PPP. Federal and state regulators can impose or request that we consent to substantial sanctions, restrictions and requirements if they determine there are violations of laws, rules or regulations or weaknesses or failures with respect to general standards of safety and soundness, which could adversely affect our business, reputation, results of operation and financial condition.

We are subject to lending concentration risk.

Our loan portfolio contains several industry and collateral concentrations including, but not limited to, commercial and residential real estate, energy, healthcare and hospitality. Due to the exposure in these concentrations, disruptions in markets, economic conditions, including those resulting from the global response to COVID-19, changes in laws or regulations or other events could cause a significant impact on the ability of borrowers to repay and may have a material adverse effect on our business, financial condition and results of operations.

A substantial portion of our loan portfolio is secured by real estate. In weak economies, or in areas where real estate market conditions are distressed, we may experience a higher than normal level of nonperforming real estate loans. The collateral value of the portfolio and the revenue stream from those loans could come under stress, and additional provisions for the allowance for credit losses could be necessitated. Our ability to dispose of foreclosed real estate at prices at or above the respective carrying values could also be impaired, causing additional losses.

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Item 2. Unregistered Sales of Eq uity Securities and Use of Proceeds

None.

Item 6. Exhibits

(a) Exhibits:

Exhibit Number |  | Description |  | Filed Herewith |  | Form |  | Exhibit |  | Filing Date
2.1 |  | Master Purchase Agreement by and among Hancock Whitney Bank, OCM Engy Holdings, LLC, et al |  | X |  |  |  |  |  |
3.1 |  | Second Amended and Restated Articles of Hancock Whitney Corporation |  |  |  | 8-K |  | 3.1 |  | 5/1/2020
3.2 |  | Second Amended and Restated Bylaws of Hancock Whitney Corporation |  |  |  | 8-K |  | 3.2 |  | 5/1/2020
31.1 |  | Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |  | X |  |  |  |  |  |
31.2 |  | Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |  | X |  |  |  |  |  |
32.1 |  | Certification of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |  | X |  |  |  |  |  |
32.2 |  | Certification of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |  | X |  |  |  |  |  |
101.INS |  | Inline XBRL Instance Document |  | X |  |  |  |  |  |
101.SCH |  | Inline XBRL Taxonomy Extension Schema Document |  | X |  |  |  |  |  |
101.CAL |  | Inline XBRL Taxonomy Extension Calculation Linkbase Document |  | X |  |  |  |  |  |
101.DEF |  | Inline XBRL Taxonomy Extension Definition Linkbase Document |  | X |  |  |  |  |  |
101.LAB |  | Inline XBRL Taxonomy Extension Label Linkbase Document |  | X |  |  |  |  |  |
101.PRE |  | Inline XBRL Taxonomy Extension Presentation Linkbase Document |  | X |  |  |  |  |  |
104 |  | Cover Page Interactive Data File |  | X |  |  |  |  |  |

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SIGNATURES

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

| Hancock Whitney Corporation |
| By: |  | /s/ John M. Hairston
|  |  | John M. Hairston
|  |  | President & Chief Executive Officer
|  |  | (Principal Executive Officer)
|  |  | /s/ Michael M. Achary
|  |  | Michael M. Achary
|  |  | Senior Executive Vice President & Chief Financial Officer (Principal Financial Officer)
|  |  | /s/ Stephen E. Barker
|  |  | Stephen E. Barker
|  |  | Executive Vice President, Senior Accounting and Finance Executive (Principal Accounting Officer)
|  |  | November 4, 2020

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