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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 ende d September 30, 202 2

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 14 th 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
6.25% Subordinated Notes | HWCPZ | 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 definitions 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.

85,693,303 common shares were outstanding at October 31, 2022.

Table of Contents

Hancock Whitney Corporation

Ind ex

Part I. Financial Information | Page Number
ITEM 1. | Financial Statements | 5
| Consolidated Balance Sheets (unaudited) – September 30, 2022 and December 31, 2021 | 5
| Consolidated Statements of Income (unaudited) – Three and Nine Months Ended September 30, 2022 and 2021 | 6
| Consolidated Statements of Comprehensive Income (unaudited) – Three and Nine Months Ended September 30, 2022 and 2021 | 7
| Consolidated Statements of Changes in Stockholders’ Equity (unaudited) – Three and Nine Months Ended September 30, 2022 and 2021 | 8
| Consolidated Statements of Cash Flows (unaudited) – Nine Months Ended September 30, 2022 and 2021 | 9
| Notes to Consolidated Financial Statements (unaudited) – September 30, 2022 and 2021 | 10
ITEM 2. | Management's Discussion and Analysis of Financial Condition and Results of Operations | 39
ITEM 3. | Quantitative and Qualitative Disclosures about Market Risk | 64
ITEM 4. | Controls and Procedures | 66
Part II. Other Information |
ITEM 1. | Legal Proceedings | 67
ITEM 1A. | Risk Factors | 67
ITEM 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 67
ITEM 3. | Default on Senior Securities | N/A
ITEM 4. | Mine Safety Disclosures | N/A
ITEM 5. | Other Information | N/A
ITEM 6. | Exhibits | 68
Signatures | 69

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

AMERIBOR - Index created by the American Financial Exchange as a potential replacement for LIBOR; calculated daily as the volume-weighted average interest rate of the overnight unsecured loans on American Financial Exchange

AOCI – accumulated other comprehensive income or loss

ALCO – Asset Liability Management Committee

ALLL – allowance for loan and lease losses

ARRC – Alternative Reference Rates Committee

ASC – Accounting Standards Codification

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.

CEO – Chief Executive Officer

CFPB– Consumer Financial Protection Bureau

CFO – Chief Financial Officer

CME – Chicago Mercantile Exchange

CMO – collateralized mortgage obligation

Core Loans – loans excluding Paycheck Protection Program (PPP) loans

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

COVID-19 – disease caused by the novel coronavirus

CRE – commercial real estate

DEI – Diversity, equity and inclusion

DIF – Deposit Insurance Fund

Excess Liquidity – deposits held at the Federal Reserve above $200 million, plus excess investments in the securities portfolio above normal cash flows

FASB – Financial Accounting Standards Board

FDIC – Federal Deposit Insurance Corporation

FDICIA – Federal Deposit Insurance Corporation Improvement Act of 1991

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

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

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

Federal Reserve System – The 12 Federal Reserve Banks, with each one serving member banks in its own district. This system, supervised by the Federal Reserve Board, has broad regulatory powers over the money supply and the

credit structure. They implement the policies of the Federal Reserve Board and also conduct economic research.

FFIEC – Federal Financial Institutions Examination Council

FHA – Federal Housing Administration

FHLB – Federal Home Loan Bank

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

HTM – held to maturity securities

3

Table of Contents

IRS – Internal Revenue Service

LIBOR – London Interbank Offered Rate

LIHTC – Low Income Housing Tax Credit

LTIP – long-term incentive plan

MBS – mortgage-backed securities

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

MDBCF – Mississippi Department of Banking and Consumer Finance

NAICS – North American Industry Classification System

NII – net interest income

n/m – not meaningful

NSF – Non-sufficient funds

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

PPNR – Pre-provision net revenue

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

SBIC – Small Business Investment Company

SEC – U.S. Securities and Exchange Commission

Securities Act – Securities Act of 1933, as amended

Short-term Investments – the sum of Interest-bearing bank deposits and Federal funds sold

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

VERIP – Voluntary Early Retirement Incentive Program

4

Table of Contents

Part I. Financi al Information

Item 1. Financ ial Statements

Hancock Whitney Corporation and Subsidiaries

Consolidate d Balance Sheets

(Unaudited)

|  | September 30, |  |  | December 31, |
(in thousands, except per share data) |  | 2022 |  |  | 2021 |
ASSETS |  |  |  |  |  |
Cash and due from banks |  | $ | 589,586 |  |  | $ | 401,201 |
Interest-bearing bank deposits |  |  | 261,225 |  |  |  | 3,830,177 |
Federal funds sold |  |  | 440 |  |  |  | 458 |
Securities available for sale, at fair value (amortized cost of $6,342,379 and $6,984,530) |  |  | 5,466,843 |  |  |  | 6,986,698 |
Securities held to maturity (fair value of $2,606,080 and $1,631,482) |  |  | 2,866,348 |  |  |  | 1,565,751 |
Loans held for sale (includes $15,149 and $41,022 measured at fair value) |  |  | 33,008 |  |  |  | 93,069 |
Loans |  |  | 22,585,585 |  |  |  | 21,134,282 |
Less: allowance for loan losses |  |  | (306,116 | ) |  |  | (342,065 | )
Loans, net |  |  | 22,279,469 |  |  |  | 20,792,217 |
Property and equipment, net of accumulated depreciation of $297,664 and $280,065 |  |  | 346,566 |  |  |  | 350,309 |
Right of use assets, net of accumulated amortization of $42,468 and $34,425 |  |  | 100,105 |  |  |  | 102,239 |
Prepaid expenses |  |  | 46,449 |  |  |  | 38,793 |
Other real estate and foreclosed assets, net |  |  | 2,085 |  |  |  | 7,533 |
Accrued interest receivable |  |  | 111,907 |  |  |  | 96,938 |
Goodwill |  |  | 855,453 |  |  |  | 855,453 |
Other intangible assets, net |  |  | 59,464 |  |  |  | 70,226 |
Life insurance contracts |  |  | 725,820 |  |  |  | 664,535 |
Funded pension assets, net |  |  | 235,799 |  |  |  | 227,870 |
Deferred tax asset, net |  |  | 192,494 |  |  |  | — |
Other assets |  |  | 394,181 |  |  |  | 447,738 |
Total assets |  | $ | 34,567,242 |  |  | $ | 36,531,205 |
LIABILITIES AND STOCKHOLDERS' EQUITY |  |  |  |  |  |
Liabilities: |  |  |  |  |  |
Deposits |  |  |  |  |  |
Noninterest-bearing |  | $ | 14,290,817 |  |  | $ | 14,392,808 |
Interest-bearing |  |  | 14,660,457 |  |  |  | 16,073,089 |
Total deposits |  |  | 28,951,274 |  |  |  | 30,465,897 |
Short-term borrowings |  |  | 1,542,981 |  |  |  | 1,665,061 |
Long-term debt |  |  | 236,410 |  |  |  | 244,220 |
Accrued interest payable |  |  | 5,863 |  |  |  | 3,103 |
Lease liabilities |  |  | 119,817 |  |  |  | 122,079 |
Deferred tax liability, net |  |  | — |  |  |  | 19,434 |
Other liabilities |  |  | 530,458 |  |  |  | 341,059 |
Total liabilities |  |  | 31,386,803 |  |  |  | 32,860,853 |
Stockholders' equity: |  |  |  |  |  |
Common stock |  |  | 309,513 |  |  |  | 309,513 |
Capital surplus |  |  | 1,715,447 |  |  |  | 1,755,701 |
Retained earnings |  |  | 1,968,260 |  |  |  | 1,659,073 |
Accumulated other comprehensive loss, net |  |  | (812,781 | ) |  |  | (53,935 | )
Total stockholders' equity |  |  | 3,180,439 |  |  |  | 3,670,352 |
Total liabilities and stockholders' equity |  | $ | 34,567,242 |  |  | $ | 36,531,205 |
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 |  |  | 85,686 |  |  |  | 86,749 |

See notes to unaudited consolidated financial statements.

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Table of Contents

Hancock Whitney Corporation and Subsidiaries

Consolidated Stat ements of Income

(Unaudited)

|  | Three Months Ended |  |  | Nine Months Ended |
|  | September 30, |  |  | September 30, |
(in thousands, except per share data) |  | 2022 |  |  | 2021 |  |  | 2022 |  |  | 2021 |
Interest income: |  |  |  |  |  |  |  |  |  |  |  |
Loans, including fees |  | $ | 248,895 |  |  | $ | 204,102 |  |  | $ | 648,808 |  |  | $ | 626,881 |
Loans held for sale |  |  | 398 |  |  |  | 635 |  |  |  | 1,532 |  |  |  | 1,954 |
Securities-taxable |  |  | 43,860 |  |  |  | 33,936 |  |  |  | 120,039 |  |  |  | 98,287 |
Securities-tax exempt |  |  | 4,743 |  |  |  | 4,724 |  |  |  | 14,116 |  |  |  | 14,269 |
Short-term investments |  |  | 1,841 |  |  |  | 1,020 |  |  |  | 6,892 |  |  |  | 2,111 |
Total interest income |  |  | 299,737 |  |  |  | 244,417 |  |  |  | 791,387 |  |  |  | 743,502 |
Interest expense: |  |  |  |  |  |  |  |  |  |  |  |
Deposits |  |  | 13,580 |  |  |  | 5,090 |  |  |  | 22,409 |  |  |  | 21,381 |
Short-term borrowings |  |  | 2,749 |  |  |  | 1,470 |  |  |  | 5,127 |  |  |  | 4,558 |
Long-term debt |  |  | 3,101 |  |  |  | 3,148 |  |  |  | 9,349 |  |  |  | 13,624 |
Total interest expense |  |  | 19,430 |  |  |  | 9,708 |  |  |  | 36,885 |  |  |  | 39,563 |
Net interest income |  |  | 280,307 |  |  |  | 234,709 |  |  |  | 754,502 |  |  |  | 703,939 |
Provision for credit losses |  |  | 1,402 |  |  |  | (26,955 | ) |  |  | (30,886 | ) |  |  | (49,095 | )
Net interest income after provision for credit losses |  |  | 278,905 |  |  |  | 261,664 |  |  |  | 785,388 |  |  |  | 753,034 |
Noninterest income: |  |  |  |  |  |  |  |  |  |  |  |
Service charges on deposit accounts |  |  | 23,272 |  |  |  | 21,159 |  |  |  | 65,441 |  |  |  | 59,686 |
Trust fees |  |  | 16,048 |  |  |  | 16,041 |  |  |  | 48,636 |  |  |  | 47,351 |
Bank card and ATM fees |  |  | 21,412 |  |  |  | 19,833 |  |  |  | 63,678 |  |  |  | 58,436 |
Investment and annuity fees and insurance commissions |  |  | 6,492 |  |  |  | 7,167 |  |  |  | 21,920 |  |  |  | 21,956 |
Secondary mortgage market operations |  |  | 3,284 |  |  |  | 6,972 |  |  |  | 10,020 |  |  |  | 31,238 |
Securities transactions, net |  |  | — |  |  |  | — |  |  |  | (87 | ) |  |  | 333 |
Other income |  |  | 14,829 |  |  |  | 22,189 |  |  |  | 44,814 |  |  |  | 55,722 |
Total noninterest income |  |  | 85,337 |  |  |  | 93,361 |  |  |  | 254,422 |  |  |  | 274,722 |
Noninterest expense: |  |  |  |  |  |  |  |  |  |  |  |
Compensation expense |  |  | 98,985 |  |  |  | 92,601 |  |  |  | 279,133 |  |  |  | 289,034 |
Employee benefits |  |  | 19,937 |  |  |  | 19,377 |  |  |  | 62,355 |  |  |  | 85,213 |
Personnel expense |  |  | 118,922 |  |  |  | 111,978 |  |  |  | 341,488 |  |  |  | 374,247 |
Net occupancy expense |  |  | 12,411 |  |  |  | 11,974 |  |  |  | 36,316 |  |  |  | 37,839 |
Equipment expense |  |  | 4,527 |  |  |  | 4,894 |  |  |  | 14,097 |  |  |  | 14,067 |
Data processing expense |  |  | 26,768 |  |  |  | 24,766 |  |  |  | 77,176 |  |  |  | 71,598 |
Professional services expense |  |  | 9,679 |  |  |  | 12,748 |  |  |  | 25,895 |  |  |  | 37,472 |
Amortization of intangible assets |  |  | 3,428 |  |  |  | 4,082 |  |  |  | 10,762 |  |  |  | 12,746 |
Deposit insurance and regulatory fees |  |  | 3,596 |  |  |  | 3,680 |  |  |  | 10,839 |  |  |  | 10,042 |
Other real estate and foreclosed assets income, net |  |  | (1,782 | ) |  |  | (376 | ) |  |  | (3,634 | ) |  |  | (456 | )
Other expense |  |  | 15,953 |  |  |  | 20,957 |  |  |  | 47,599 |  |  |  | 66,990 |
Total noninterest expense |  |  | 193,502 |  |  |  | 194,703 |  |  |  | 560,538 |  |  |  | 624,545 |
Income before income taxes |  |  | 170,740 |  |  |  | 160,322 |  |  |  | 479,272 |  |  |  | 403,211 |
Income taxes expense |  |  | 35,351 |  |  |  | 30,740 |  |  |  | 98,970 |  |  |  | 77,739 |
Net income |  | $ | 135,389 |  |  | $ | 129,582 |  |  | $ | 380,302 |  |  | $ | 325,472 |
Earnings per common share-basic |  | $ | 1.56 |  |  | $ | 1.46 |  |  | $ | 4.35 |  |  | $ | 3.67 |
Earnings per common share-diluted |  | $ | 1.55 |  |  | $ | 1.46 |  |  | $ | 4.33 |  |  | $ | 3.67 |
Dividends paid per share |  | $ | 0.27 |  |  | $ | 0.27 |  |  | $ | 0.81 |  |  | $ | 0.81 |
Weighted average shares outstanding-basic |  |  | 85,706 |  |  |  | 86,834 |  |  |  | 86,141 |  |  |  | 86,800 |
Weighted average shares outstanding-diluted |  |  | 86,020 |  |  |  | 87,006 |  |  |  | 86,439 |  |  |  | 86,951 |

See notes to unaudited consolidated financial statements.

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Hancock Whitney Corporation and Subsidiaries

Consolidated Statements of Comprehensive Income

(Unaudited)

|  | Three Months Ended |  |  | Nine Months Ended |
|  | September 30, |  |  | September 30, |
(in thousands) |  | 2022 |  |  | 2021 |  |  | 2022 |  |  | 2021 |
Net income |  | $ | 135,389 |  |  | $ | 129,582 |  |  | $ | 380,302 |  |  | $ | 325,472 |
Other comprehensive income (loss) before income taxes: |  |  |  |  |  |  |  |  |  |  |  |
Net change in unrealized gain or loss on securities available for sale and cash flow hedges |  |  | (367,437 | ) |  |  | (48,569 | ) |  |  | (961,892 | ) |  |  | (143,924 | )
Reclassification of income realized and included in earnings |  |  | (1,441 | ) |  |  | (6,425 | ) |  |  | (10,849 | ) |  |  | (9,337 | )
Valuation adjustments to pension plan attributable to the Voluntary Early Retirement Program and curtailment |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 59,606 |
Other valuation adjustments to employee benefit plans |  |  | (410 | ) |  |  | — |  |  |  | (8,397 | ) |  |  | (10,651 | )
Amortization of unrealized net gain (loss) on securities transferred to held to maturity |  |  | 434 |  |  |  | (33 | ) |  |  | 961 |  |  |  | (134 | )
Other comprehensive loss before income taxes |  |  | (368,854 | ) |  |  | (55,027 | ) |  |  | (980,177 | ) |  |  | (104,440 | )
Income tax benefit |  |  | (83,250 | ) |  |  | (12,363 | ) |  |  | (221,331 | ) |  |  | (24,569 | )
Other comprehensive loss net of income taxes |  |  | (285,604 | ) |  |  | (42,664 | ) |  |  | (758,846 | ) |  |  | (79,871 | )
Comprehensive income (loss) |  | $ | (150,215 | ) |  | $ | 86,918 |  |  | $ | (378,544 | ) |  | $ | 245,601 |

See notes to unaudited consolidated financial statements.

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Hancock Whitney Corporation and Subsidiaries

Consolidated Statements of Cha nges in Stockholders’ Equity

(Unaudited)

Three Months Ended September 30, 2022 and 2021 |  |  |  |  |  |  |  |  |  |  |  | Accumulated |  |  |  |
|  | Common Stock |  |  |  |  |  |  |  |  | Other |  |  |  |
(in thousands, except parenthetical share data) |  | Shares Issued |  |  | Amount |  |  | Capital Surplus |  |  | Retained Earnings |  |  | Comprehensive Income (Loss) |  |  | Total |
Balance, June 30, 2022 |  |  | 92,947 |  |  | $ | 309,513 |  |  | $ | 1,710,898 |  |  | $ | 1,856,489 |  |  | $ | (527,177 | ) |  | $ | 3,349,723 |
Net income |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 135,389 |  |  |  | — |  |  |  | 135,389 |
Other comprehensive loss |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (285,604 | ) |  |  | (285,604 | )
Comprehensive loss |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 135,389 |  |  |  | (285,604 | ) |  |  | (150,215 | )
Cash dividends declared ($0.27 per common share) |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (23,668 | ) |  |  | — |  |  |  | (23,668 | )
Common stock activity, long-term incentive plans |  |  | — |  |  |  | — |  |  |  | 6,081 |  |  |  | 50 |  |  |  | — |  |  |  | 6,131 |
Issuance of stock from dividend reinvestment and stock purchase plans |  |  | — |  |  |  | — |  |  |  | 871 |  |  |  | — |  |  |  | — |  |  |  | 871 |
Repurchase of common stock (50,000 shares) |  |  | — |  |  |  | — |  |  |  | (2,403 | ) |  |  | — |  |  |  | — |  |  |  | (2,403 | )
Balance, September 30, 2022 |  |  | 92,947 |  |  | $ | 309,513 |  |  | $ | 1,715,447 |  |  | $ | 1,968,260 |  |  | $ | (812,781 | ) |  | $ | 3,180,439 |
Balance, June 30, 2021 |  |  | 92,947 |  |  | $ | 309,513 |  |  | $ | 1,770,973 |  |  | $ | 1,439,553 |  |  | $ | 42,862 |  |  | $ | 3,562,901 |
Net income |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 129,582 |  |  |  | — |  |  |  | 129,582 |
Other comprehensive loss |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (42,664 | ) |  |  | (42,664 | )
Comprehensive income |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 129,582 |  |  |  | (42,664 | ) |  |  | 86,918 |
Cash dividends declared ($0.27 per common share) |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (24,002 | ) |  |  | — |  |  |  | (24,002 | )
Common stock activity, long-term incentive plans |  |  | — |  |  |  | — |  |  |  | 5,432 |  |  |  | 48 |  |  |  | — |  |  |  | 5,480 |
Issuance of stock from dividend reinvestment and stock purchase plans |  |  | — |  |  |  | — |  |  |  | 978 |  |  |  | — |  |  |  | — |  |  |  | 978 |
Repurchase of common stock (56,349 shares) |  |  | — |  |  |  | — |  |  |  | (2,509 | ) |  |  | — |  |  |  | — |  |  |  | (2,509 | )
Balance, September 30, 2021 |  |  | 92,947 |  |  | $ | 309,513 |  |  | $ | 1,774,874 |  |  | $ | 1,545,181 |  |  | $ | 198 |  |  | $ | 3,629,766 |
Nine Months Ended September 30, 2022 and 2021 |  |  |  |  |  |  |  |  |  |  |  | Accumulated |  |  |  |
|  | Common Stock |  |  |  |  |  |  |  |  | Other |  |  |  |
(in thousands, except parenthetical share data) |  | Shares Issued |  |  | Amount |  |  | Capital Surplus |  |  | Retained Earnings |  |  | Comprehensive Income (Loss) |  |  | Total |
Balance, December 31, 2021 |  |  | 92,947 |  |  | $ | 309,513 |  |  | $ | 1,755,701 |  |  | $ | 1,659,073 |  |  | $ | (53,935 | ) |  | $ | 3,670,352 |
Net income |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 380,302 |  |  |  | — |  |  |  | 380,302 |
Other comprehensive loss |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (758,846 | ) |  |  | (758,846 | )
Comprehensive loss |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 380,302 |  |  |  | (758,846 | ) |  |  | (378,544 | )
Dividends declared ($0.81 per common share) |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (71,249 | ) |  |  | — |  |  |  | (71,249 | )
Common stock activity, long-term incentive plans |  |  | — |  |  |  | — |  |  |  | 15,967 |  |  |  | 134 |  |  |  | — |  |  |  | 16,101 |
Issuance of stock from dividend reinvestment and stock purchase plans |  |  | — |  |  |  | — |  |  |  | 2,671 |  |  |  | — |  |  |  | — |  |  |  | 2,671 |
Repurchase of common stock (1,204,368 shares) |  |  | — |  |  |  | — |  |  |  | (58,892 | ) |  |  | — |  |  |  | — |  |  |  | (58,892 | )
Balance, September 30, 2022 |  |  | 92,947 |  |  | $ | 309,513 |  |  | $ | 1,715,447 |  |  | $ | 1,968,260 |  |  | $ | (812,781 | ) |  | $ | 3,180,439 |
Balance, December 31, 2020 |  |  | 92,947 |  |  | $ | 309,513 |  |  | $ | 1,757,937 |  |  | $ | 1,291,506 |  |  | $ | 80,069 |  |  | $ | 3,439,025 |
Net income |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 325,472 |  |  |  | — |  |  |  | 325,472 |
Other comprehensive loss |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (79,871 | ) |  |  | (79,871 | )
Comprehensive income |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 325,472 |  |  |  | (79,871 | ) |  |  | 245,601 |
Cash dividends declared ($0.81 per common share) |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (72,046 | ) |  |  | — |  |  |  | (72,046 | )
Common stock activity, long-term incentive plans |  |  | — |  |  |  | — |  |  |  | 16,506 |  |  |  | 249 |  |  |  | — |  |  |  | 16,755 |
Issuance of stock from dividend reinvestment and stock purchase plans |  |  | — |  |  |  | — |  |  |  | 2,940 |  |  |  | — |  |  |  | — |  |  |  | 2,940 |
Repurchase of common stock (56,349 shares) |  |  | — |  |  |  | — |  |  |  | (2,509 | ) |  |  | — |  |  |  | — |  |  |  | (2,509 | )
Balance, September 30, 2021 |  |  | 92,947 |  |  | $ | 309,513 |  |  | $ | 1,774,874 |  |  | $ | 1,545,181 |  |  | $ | 198 |  |  | $ | 3,629,766 |

See notes to unaudited consolidated financial statements.

8

Table of Contents

Hancock Whitney Corporation and Subsidiaries

Consolidated Statem ents of Cash Flows

(Unaudited)

|  | Nine Months Ended |
|  | September 30, |
(in thousands) |  | 2022 |  |  | 2021 |
CASH FLOWS FROM OPERATING ACTIVITIES: |  |  |  |  |  |
Net income |  | $ | 380,302 |  |  | $ | 325,472 |
Adjustments to reconcile net income to net cash provided by operating activities: |  |  |  |  |  |
Depreciation and amortization |  |  | 23,210 |  |  |  | 21,743 |
Provision for credit losses |  |  | (30,886 | ) |  |  | (49,095 | )
Gain on other real estate and foreclosed assets |  |  | (5,210 | ) |  |  | (1,124 | )
Loss (gain) on sale of securities |  |  | 87 |  |  |  | (333 | )
Deferred tax expense |  |  | 9,396 |  |  |  | 1,378 |
(Increase) decrease in cash surrender value of life insurance contracts |  |  | (2,372 | ) |  |  | (21,122 | )
Impairment of or loss on disposal of assets |  |  | 140 |  |  |  | 15,165 |
Loss on extinguishment of debt |  |  | — |  |  |  | 4,165 |
Net decrease in loans held for sale |  |  | 54,010 |  |  |  | 43,867 |
Net amortization of securities premium/discount |  |  | 29,475 |  |  |  | 38,318 |
Amortization of intangible assets |  |  | 10,762 |  |  |  | 12,746 |
Stock-based compensation expense |  |  | 17,507 |  |  |  | 17,270 |
Net change in derivative collateral liability |  |  | 36,776 |  |  |  | 53,387 |
Increase in interest payable and other liabilities |  |  | 1,964 |  |  |  | 22,037 |
Decrease in other assets |  |  | 174,915 |  |  |  | 60,971 |
Other, net |  |  | (24,999 | ) |  |  | (13,970 | )
Net cash provided by operating activities |  |  | 675,077 |  |  |  | 530,875 |
CASH FLOWS FROM INVESTING ACTIVITIES: |  |  |  |  |  |
Proceeds from the sale of available for sale securities |  |  | 73,219 |  |  |  | 198,681 |
Proceeds from maturities of securities available for sale |  |  | 415,221 |  |  |  | 831,433 |
Purchases of securities available for sale |  |  | (517,178 | ) |  |  | (2,235,723 | )
Proceeds from maturities of securities held to maturity |  |  | 111,612 |  |  |  | 99,044 |
Purchases of securities held to maturity |  |  | (859,333 | ) |  |  | (59,362 | )
Proceeds received upon termination of fair value hedge instruments |  |  | 74,006 |  |  |  | — |
Net (increase) decrease in short-term investments |  |  | 3,568,970 |  |  |  | (1,728,995 | )
Net redemptions of Federal Home Loan Bank stock |  |  | 4,969 |  |  |  | 52,535 |
Proceeds from sales of loans and leases |  |  | 26,619 |  |  |  | 12,540 |
Net (increase) decrease in loans |  |  | (1,545,537 | ) |  |  | 915,652 |
Purchase of life insurance contracts |  |  | (65,000 | ) |  |  | (75,000 | )
Proceeds from the surrender of life insurance contracts |  |  | — |  |  |  | 44,045 |
Purchases of property and equipment |  |  | (22,352 | ) |  |  | (12,402 | )
Proceeds from sales of other real estate and foreclosed assets |  |  | 11,308 |  |  |  | 7,804 |
Other, net |  |  | 2,778 |  |  |  | 35,903 |
Net cash provided by (used in) investing activities |  |  | 1,279,302 |  |  |  | (1,913,845 | )
CASH FLOWS FROM FINANCING ACTIVITIES: |  |  |  |  |  |
Net increase (decrease) in deposits |  |  | (1,514,623 | ) |  |  | 1,510,280 |
Net increase (decrease) in short-term borrowings |  |  | (122,080 | ) |  |  | 77,715 |
Proceeds from the issuance of long-term debt |  |  | — |  |  |  | 22,388 |
Repayments of long-term debt |  |  | (480 | ) |  |  | (153,365 | )
Dividends paid |  |  | (70,926 | ) |  |  | (72,046 | )
Payroll tax remitted on net share settlement of equity awards |  |  | (1,891 | ) |  |  | (1,298 | )
Proceeds from exercise of stock options |  |  | 227 |  |  |  | 439 |
Proceeds from dividend reinvestment and stock purchase plans |  |  | 2,671 |  |  |  | 2,940 |
Repurchase of common stock |  |  | (58,892 | ) |  |  | (2,509 | )
Net cash provided by (used in) financing activities |  |  | (1,765,994 | ) |  |  | 1,384,544 |
NET INCREASE IN CASH AND DUE FROM BANKS |  |  | 188,385 |  |  |  | 1,574 |
CASH AND DUE FROM BANKS, BEGINNING |  |  | 401,201 |  |  |  | 526,306 |
CASH AND DUE FROM BANKS, ENDING |  | $ | 589,586 |  |  | $ | 527,880 |
SUPPLEMENTAL INFORMATION FOR NON-CASH |  |  |  |  |  |
INVESTING AND FINANCING ACTIVITIES |  |  |  |  |  |
Assets acquired in settlement of loans |  | $ | 328 |  |  | $ | 2,623 |

See notes to unaudited consolidated financial statements.

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HANCOCK WHITNEY CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLI DATED 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, 2021. 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.

Accounting Policies

There were no material changes or developments during the reporting period with respect to methodologies that the Company uses when applying what management believes are critical accounting policies and developing critical accounting estimates as disclosed in its Annual Report on Form 10-K for the year ended December 31, 2021.

Refer to Note 14 – Recent Accounting Pronouncements for a discussion of accounting standards issued but not yet adopted at September 30, 2022 and the anticipated impact to the Company’s financial statements.

2. 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, 2022 and December 31, 2021. Amortized cost of securities does not include accrued interest which is reflected in the accrued interest line item on the consolidated balance sheets totaling $27.9 million at September 30, 2022 and $25.5 million at December 31, 2021. During the nine months ended September 30, 2022, the Company transferred securities with an aggregate fair value of $561.8 million, inclusive of an unrealized loss of $15.4 million, from the available for sale portfolio to the held to maturity portfolio; as such, the securities were recorded with an amortized cost of $561.8 million within the held to maturity portfolio. The unrealized loss is reflected in accumulated other comprehensive income and is being amortized to interest income over the remaining lives of the securities.

| September 30, 2022 |  | December 31, 2021 |
|  |  | 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 | $ | 44,481 |  | $ | — |  | $ | 2,194 |  | $ | 42,287 |  | $ | 420,857 |  | $ | 3,781 |  | $ | 5,340 |  | $ | 419,298 |
Municipal obligations |  | 207,941 |  |  | 71 |  |  | 10,147 |  |  | 197,865 |  |  | 304,536 |  |  | 13,184 |  |  | 3,562 |  |  | 314,158 |
Residential mortgage-backed securities |  | 2,737,579 |  |  | 266 |  |  | 431,480 |  |  | 2,306,365 |  |  | 3,056,763 |  |  | 29,158 |  |  | 50,123 |  |  | 3,035,798 |
Commercial mortgage-backed securities |  | 3,247,495 |  |  | — |  |  | 423,575 |  |  | 2,823,920 |  |  | 3,064,828 |  |  | 61,645 |  |  | 48,614 |  |  | 3,077,859 |
Collateralized mortgage obligations |  | 81,383 |  |  | — |  |  | 6,294 |  |  | 75,089 |  |  | 119,046 |  |  | 1,837 |  |  | — |  |  | 120,883 |
Corporate debt securities |  | 23,500 |  |  | — |  |  | 2,183 |  |  | 21,317 |  |  | 18,500 |  |  | 210 |  |  | 8 |  |  | 18,702 |
﻿ | $ | 6,342,379 |  | $ | 337 |  | $ | 875,873 |  | $ | 5,466,843 |  | $ | 6,984,530 |  | $ | 109,815 |  | $ | 107,647 |  | $ | 6,986,698 |

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| September 30, 2022 |  | December 31, 2021 |
|  |  | 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 | $ | 407,097 |  | $ | — |  | $ | 48,703 |  | $ | 358,394 |  | $ | 14,857 |  | $ | — |  | $ | 20 |  | $ | 14,837 |
Municipal obligations |  | 701,353 |  |  | 23 |  |  | 37,888 |  |  | 663,488 |  |  | 621,405 |  |  | 37,941 |  |  | 205 |  |  | 659,141 |
Residential mortgage-backed securities |  | 755,206 |  |  | — |  |  | 81,840 |  |  | 673,366 |  |  | 268,907 |  |  | 682 |  |  | 1,499 |  |  | 268,090 |
Commercial mortgage-backed securities |  | 954,498 |  |  | — |  |  | 89,285 |  |  | 865,213 |  |  | 603,156 |  |  | 28,679 |  |  | 669 |  |  | 631,166 |
Collateralized mortgage obligations |  | 48,194 |  |  | — |  |  | 2,575 |  |  | 45,619 |  |  | 57,426 |  |  | 822 |  |  | — |  |  | 58,248 |
﻿ | $ | 2,866,348 |  | $ | 23 |  | $ | 260,291 |  | $ | 2,606,080 |  | $ | 1,565,751 |  | $ | 68,124 |  | $ | 2,393 |  | $ | 1,631,482 |

The following tables present the amortized cost and fair value of debt securities available for sale and held to maturity at September 30, 2022 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 |  | $ | 101 |  |  | $ | 101 |
Due after one year through five years |  |  | 848,598 |  |  |  | 797,561 |
Due after five years through ten years |  |  | 2,973,944 |  |  |  | 2,578,481 |
Due after ten years |  |  | 2,519,736 |  |  |  | 2,090,700 |
Total available for sale debt securities |  | $ | 6,342,379 |  |  | $ | 5,466,843 |

Debt Securities Held to Maturity |  | Amortized |  |  | Fair |
(in thousands) |  | Cost |  |  | Value |
Due in one year or less |  | $ | 10,000 |  |  | $ | 9,890 |
Due after one year through five years |  |  | 542,464 |  |  |  | 516,989 |
Due after five years through ten years |  |  | 865,852 |  |  |  | 782,394 |
Due after ten years |  |  | 1,448,032 |  |  |  | 1,296,807 |
Total held to maturity securities |  | $ | 2,866,348 |  |  | $ | 2,606,080 |

The Company held no securities classified as trading at September 30, 2022 and December 31, 2021.

The following table presents the proceeds from, gross gains on, and gross losses on sales of securities during the nine months ended September 30, 2022 and 2021. Net gains or losses are reflected in the "Securities transactions, net" line item on the Consolidated Statements of Income.

|  | Nine Months Ended September 30, |
(in thousands) |  | 2022 |  |  | 2021 |
Proceeds |  | $ | 73,219 |  |  | $ | 198,681 |
Gross gains |  |  | — |  |  |  | 1,649 |
Gross losses |  |  | 87 |  |  |  | 1,316 |
Net gain (loss) |  | $ | (87 | ) |  | $ | 333 |

Securities with carrying values totalin g $4.2 bi ll ion and $4.0 billion were pledged as collateral at September 30, 2022 and December 31, 2021, respectively, primarily to secure public deposits or securities sold under agreements to repurchase.

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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.

The Company evaluates 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 whether the decline in fair value was 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 in any period presented.

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, 2022 |  | 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 |  | $ | 42,288 |  |  | $ | 2,194 |  |  | $ | — |  |  | $ | — |  |  | $ | 42,288 |  |  | $ | 2,194 |
Municipal obligations |  |  | 196,102 |  |  |  | 10,147 |  |  |  | — |  |  |  | — |  |  |  | 196,102 |  |  |  | 10,147 |
Residential mortgage-backed securities |  |  | 763,658 |  |  |  | 76,195 |  |  |  | 1,535,412 |  |  |  | 355,285 |  |  |  | 2,299,070 |  |  |  | 431,480 |
Commercial mortgage-backed securities |  |  | 1,803,019 |  |  |  | 204,268 |  |  |  | 1,020,901 |  |  |  | 219,307 |  |  |  | 2,823,920 |  |  |  | 423,575 |
Collateralized mortgage obligations |  |  | 75,089 |  |  |  | 6,294 |  |  |  | — |  |  |  | — |  |  |  | 75,089 |  |  |  | 6,294 |
Corporate debt securities |  |  | 19,376 |  |  |  | 2,124 |  |  |  | 1,441 |  |  |  | 59 |  |  |  | 20,817 |  |  |  | 2,183 |
﻿ |  | $ | 2,899,532 |  |  | $ | 301,222 |  |  | $ | 2,557,754 |  |  | $ | 574,651 |  |  | $ | 5,457,286 |  |  | $ | 875,873 |

Available for Sale |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
December 31, 2021 |  | 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 |  | $ | 198,318 |  |  | 2,305 |  |  | $ | 63,534 |  | $ | 3,035 |  |  | $ | 261,852 |  | $ | 5,340 |
Municipal obligations |  |  | 43,021 |  |  | 2,372 |  |  |  | 25,126 |  |  | 1,190 |  |  |  | 68,147 |  |  | 3,562 |
Residential mortgage-backed securities |  |  | 1,293,179 |  |  | 20,581 |  |  |  | 819,596 |  |  | 29,541 |  |  |  | 2,112,775 |  |  | 50,122 |
Commercial mortgage-backed securities |  |  | 786,206 |  |  | 14,819 |  |  |  | 665,687 |  |  | 33,796 |  |  |  | 1,451,893 |  |  | 48,615 |
Collateralized mortgage obligations |  |  | — |  |  | — |  |  |  | — |  |  | — |  |  |  | — |  |  | — |
Corporate debt securities |  |  | 6,992 |  |  | 8 |  |  |  | — |  |  | — |  |  |  | 6,992 |  |  | 8 |
﻿ |  | $ | 2,327,716 |  | $ | 40,085 |  |  | $ | 1,573,943 |  | $ | 67,562 |  |  | $ | 3,901,659 |  | $ | 107,647 |

At each reporting period, the Company evaluates 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 resulting credit losses, if any, were negligible and no allowance for credit loss was recorded.

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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, 2022 |  | 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 |  | $ | 168,514 |  | $ | 19,895 |  |  | $ | 189,879 |  | $ | 28,808 |  |  | $ | 358,393 |  | $ | 48,703 |
Municipal obligations |  |  | 601,010 |  |  | 21,670 |  |  |  | 58,691 |  |  | 16,218 |  |  |  | 659,701 |  |  | 37,888 |
Residential mortgage-backed securities |  |  | 574,671 |  |  | 65,187 |  |  |  | 98,695 |  |  | 16,653 |  |  |  | 673,366 |  |  | 81,840 |
Commercial mortgage-backed securities |  |  | 810,889 |  |  | 79,651 |  |  |  | 54,324 |  |  | 9,634 |  |  |  | 865,213 |  |  | 89,285 |
Collateralized mortgage obligations |  |  | 45,619 |  |  | 2,575 |  |  |  | — |  |  | — |  |  |  | 45,619 |  |  | 2,575 |
﻿ |  | $ | 2,200,703 |  | $ | 188,978 |  |  | $ | 401,589 |  | $ | 71,313 |  |  | $ | 2,602,292 |  | $ | 260,291 |

Held to maturity |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
December 31, 2021 |  | 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 |  | $ | 14,837 |  | $ | 20 |  |  | $ | — |  | $ | — |  |  | $ | 14,837 |  | $ | 20 |
Municipal obligations |  |  | 7,795 |  |  | 205 |  |  |  | — |  |  | — |  |  |  | 7,795 |  |  | 205 |
Residential mortgage-backed securities |  |  | 253,661 |  |  | 1,499 |  |  |  | — |  |  | — |  |  |  | 253,661 |  |  | 1,499 |
Commercial mortgage-backed securities |  |  | 56,366 |  |  | 205 |  |  |  | 11,837 |  |  | 464 |  |  |  | 68,203 |  |  | 669 |
Collateralized mortgage obligations |  |  | — |  |  | — |  |  |  | — |  |  | — |  |  |  | — |  |  | — |
﻿ |  | $ | 332,659 |  | $ | 1,929 |  |  | $ | 11,837 |  | $ | 464 |  |  | $ | 344,496 |  | $ | 2,393 |

As of September 30, 2022 and December 31, 2021, the Company had 768 and 142 securities, respectively, with market values below their cost basis. None of the unrealized losses relate to the marketability of the securities or the issuer’s ability to meet contractual obligations. 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. The unrealized losses were deemed to be non-credit related at September 30, 2022 and December 31, 2021. The Company has adequate liquidity and, therefore does not plan to, and more likely than not, will not be required to liquidate these securities before recovery of the indicated impairment.

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3. 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, Dallas, and San Antonio; 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 $82.5 million and $67.8 million at September 30, 2022 and December 31, 2021, respectively. Included in commercial non-real estate loans at September 30, 2022 and December 31, 2021 w as $75.7 million a n d $531.1 million, respectively, of Paycheck Protection Program loans, described in more detail below. The following table presents loans, net of unearned income, by portfolio class at September 30, 2022 and December 31, 2021.

|  | September 30, |  |  | December 31, |
(in thousands) |  | 2022 |  |  | 2021 |
Commercial non-real estate |  | $ | 9,905,427 |  |  | $ | 9,612,460 |
Commercial real estate - owner occupied |  |  | 3,033,133 |  |  |  | 2,821,246 |
Total commercial and industrial |  |  | 12,938,560 |  |  |  | 12,433,706 |
Commercial real estate - income producing |  |  | 3,686,540 |  |  |  | 3,464,626 |
Construction and land development |  |  | 1,541,257 |  |  |  | 1,228,670 |
Residential mortgages |  |  | 2,843,723 |  |  |  | 2,423,890 |
Consumer |  |  | 1,575,505 |  |  |  | 1,583,390 |
Total loans |  | $ | 22,585,585 |  |  | $ | 21,134,282 |

The following briefly describes the composition of each loan category and portfolio class.

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%, 3%, or 5%, depending on the loan size, which 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.

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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 residential construction loans and loans secured by raw land not yet under development.

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, though the Company is no longer engaged in this type of lending and the remaining portfolio is in runoff. 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 calculation of the allowance for credit losses 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 allowance for credit losses was developed using multiple Moody’s Analytics (“Moody’s") macroeconomic forecasts applied to internally developed credit models for a two year reasonable and supportable period. The following tables present activity in the allowance for credit losses (ACL) by portfolio class for the nine months ended September 30, 2022 and 2021, as well as the corresponding recorded investment in loans at the end of each period.

|  |  | 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, 2022 |
Allowance for credit losses |  |  |  |  |  |  |  |  |
Allowance for loan losses: |  |  |  |  |  |  |  |  |
Beginning balance | $ | 95,888 |  | $ | 53,433 |  | $ | 149,321 |  | $ | 108,058 |  | $ | 22,102 |  | $ | 30,623 |  | $ | 31,961 |  | $ | 342,065 |
Charge-offs |  | (6,366 | ) |  | (946 | ) |  | (7,312 | ) |  | (1,066 | ) |  | (3 | ) |  | (102 | ) |  | (9,464 | ) |  | (17,947 | )
Recoveries |  | 9,460 |  |  | 606 |  |  | 10,066 |  |  | 878 |  |  | 132 |  |  | 1,463 |  |  | 4,479 |  |  | 17,018 |
Net provision for loan losses |  | (4,176 | ) |  | (5,076 | ) |  | (9,252 | ) |  | (30,458 | ) |  | 4,516 |  |  | (1,037 | ) |  | 1,211 |  |  | (35,020 | )
Ending balance - allowance for loan losses | $ | 94,806 |  | $ | 48,017 |  | $ | 142,823 |  | $ | 77,412 |  | $ | 26,747 |  | $ | 30,947 |  | $ | 28,187 |  | $ | 306,116 |
Reserve for unfunded lending commitments: |  |  |  |  |  |  |
Beginning balance | $ | 4,522 |  | $ | 323 |  | $ | 4,845 |  | $ | 1,694 |  | $ | 21,907 |  | $ | 22 |  | $ | 866 |  | $ | 29,334 |
Provision for losses on unfunded commitments |  | 238 |  |  | 10 |  |  | 248 |  |  | (205 | ) |  | 3,602 |  |  | (5 | ) |  | 494 |  |  | 4,134 |
Ending balance - reserve for unfunded lending commitments |  | 4,760 |  |  | 333 |  |  | 5,093 |  |  | 1,489 |  |  | 25,509 |  |  | 17 |  |  | 1,360 |  |  | 33,468 |
Total allowance for credit losses | $ | 99,566 |  | $ | 48,350 |  | $ | 147,916 |  | $ | 78,901 |  | $ | 52,256 |  | $ | 30,964 |  | $ | 29,547 |  | $ | 339,584 |
Allowance for loan losses: |  |  |  |  |  |  |
Individually evaluated | $ | 71 |  | $ | 31 |  | $ | 102 |  | $ | 17 |  | $ | 19 |  | $ | 276 |  | $ | 102 |  | $ | 516 |
Collectively evaluated |  | 94,735 |  |  | 47,986 |  |  | 142,721 |  |  | 77,395 |  |  | 26,728 |  |  | 30,671 |  |  | 28,085 |  |  | 305,600 |
Allowance for loan losses | $ | 94,806 |  | $ | 48,017 |  | $ | 142,823 |  | $ | 77,412 |  | $ | 26,747 |  | $ | 30,947 |  | $ | 28,187 |  | $ | 306,116 |
Reserve for unfunded lending commitments: |  |  |  |  |
Individually evaluated | $ | 3 |  | $ | — |  | $ | 3 |  | $ | — |  | $ | — |  | $ | — |  | $ | — |  | $ | 3 |
Collectively evaluated |  | 4,757 |  |  | 333 |  |  | 5,090 |  |  | 1,489 |  |  | 25,509 |  |  | 17 |  |  | 1,360 |  |  | 33,465 |
Reserve for unfunded lending commitments: | $ | 4,760 |  | $ | 333 |  | $ | 5,093 |  | $ | 1,489 |  | $ | 25,509 |  | $ | 17 |  | $ | 1,360 |  | $ | 33,468 |
Total allowance for credit losses | $ | 99,566 |  | $ | 48,350 |  | $ | 147,916 |  | $ | 78,901 |  | $ | 52,256 |  | $ | 30,964 |  | $ | 29,547 |  | $ | 339,584 |
Loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Individually evaluated | $ | 1,282 |  | $ | 929 |  | $ | 2,211 |  | $ | 1,270 |  | $ | 118 |  | $ | 3,680 |  | $ | 527 |  | $ | 7,806 |
Collectively evaluated |  | 9,904,145 |  |  | 3,032,204 |  |  | 12,936,349 |  |  | 3,685,270 |  |  | 1,541,139 |  |  | 2,840,043 |  |  | 1,574,978 |  |  | 22,577,779 |
Total loans | $ | 9,905,427 |  | $ | 3,033,133 |  | $ | 12,938,560 |  | $ | 3,686,540 |  | $ | 1,541,257 |  | $ | 2,843,723 |  | $ | 1,575,505 |  | $ | 22,585,585 |

In arriving at the September 30, 2022 allowance for credit losses, the Company weighted the September 2022 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, with a 25% probability. Key assumptions within the September 2022 baseline forecast include the following: (1) the global oil market remains mostly balanced in 2023, allowing oil prices to gradually drop; (2) the return to full-employment, defined as an

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unemployment rate of 3.5%, labor force participation of approximately 62.5% and a prime age employment to population ratio above 80%, is expected to be achieved in the coming months; (3) GDP is expected to grow in the second half of the year, with forecasted annual growth of 1.6% in 2022, 1.4% in 2023 and 2.6% in 2024; (4) the Federal Funds rate will reach a target rate of 3.5% by the end of 2022, with the possibility of future rate increases; rate cuts not forecasted to begin until 2025; and (5) future surges in COVID-19 infections will not have a significant negative impact on economic conditions. Consistent with the prior quarter, management determined that assumptions provided for in the downside slower near-term growth/mild recessionary scenario (S-2) to be more likely than the baseline scenario; as such, the S-2 scenario was given a 75% probability weighting in our allowance for credit losses calculation at September 30, 2022. The S-2 scenario assumes that the conflict between Russia and Ukraine spans longer than anticipated in the baseline scenario and results in longer and larger interruption of global commodity supply; in turn, supply chain issues worsen, increasing shortages of affected goods and further boosting inflation. The Federal Reserve would react with a more aggressive approach than assumed in the baseline scenario, generating greater corrections in equity and housing markets and declines in spending. As such, the S-2 scenario incorporates a mild recession beginning in the fourth quarter of 2022, spanning three quarters, with a peak-to-trough decline in GDP of about 1.4%. Further, the S-2 scenario assumes that unemployment rate averages 4.0% in 2022, 6.1% in 2023 and 4.9% in 2024, with the return to full employment not occurring until the third quarter of 2024 and that an increase in the number of COVID-19 cases, hospitalizations and deaths will impede growth in spending on air travel, retail and hotels.

Despite economic volatility and uncertainty, including the possibility of a recession in the near-term, the credit loss outlook on the loan portfolio as a whole has improved since year-end, at which time we were still experiencing lingering effects of the pandemic and uncertainty related to the Omicron variant of the coronavirus. Positive economic indicators of growth within the Company's footprint, relatively stable asset quality metrics and minimal credit losses in recent periods allowed for a modest release of credit loss reserves during the nine months ended September 30, 2022.

|  |  | 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, 2021 |
Allowance for credit losses |  |  |  |  |  |  |  |  |  |  |
Allowance for loan losses: |  |  |  |  |  |  |  |  |  |  |
Beginning balance | $ | 149,693 |  | $ | 69,134 |  | $ | 218,827 |  | $ | 109,474 |  | $ | 26,462 |  | $ | 48,842 |  | $ | 46,572 |  | $ | 450,177 |
Charge-offs |  | (32,369 | ) |  | (1,722 | ) |  | (34,091 | ) |  | (231 | ) |  | (267 | ) |  | (218 | ) |  | (9,874 | ) |  | (44,681 | )
Recoveries |  | 6,579 |  |  | 363 |  |  | 6,942 |  |  | 100 |  |  | 1,548 |  |  | 933 |  |  | 4,636 |  |  | 14,159 |
Net provision for loan losses |  | (17,594 | ) |  | (10,642 | ) |  | (28,236 | ) |  | 11,752 |  |  | (5,167 | ) |  | (18,484 | ) |  | (7,999 | ) |  | (48,134 | )
Ending balance - allowance for loan losses | $ | 106,309 |  | $ | 57,133 |  | $ | 163,442 |  | $ | 121,095 |  | $ | 22,576 |  | $ | 31,073 |  | $ | 33,335 |  | $ | 371,521 |
Reserve for unfunded lending commitments: |  |  |  |  |  |  |  |  |
Beginning balance | $ | 4,529 |  | $ | 381 |  | $ | 4,910 |  | $ | 1,099 |  | $ | 22,694 |  | $ | 19 |  | $ | 1,185 |  | $ | 29,907 |
Provision for losses on unfunded commitments |  | (176 | ) |  | (131 | ) |  | (307 | ) |  | 124 |  |  | (383 | ) |  | (8 | ) |  | (387 | ) |  | (961 | )
Ending balance - reserve for unfunded lending commitments |  | 4,353 |  |  | 250 |  |  | 4,603 |  |  | 1,223 |  |  | 22,311 |  |  | 11 |  |  | 798 |  |  | 28,946 |
Total allowance for credit losses | $ | 110,662 |  | $ | 57,383 |  | $ | 168,045 |  | $ | 122,318 |  | $ | 44,887 |  | $ | 31,084 |  | $ | 34,133 |  | $ | 400,467 |
Allowance for loan losses: |  |  |  |  |  |  |
Individually evaluated | $ | 113 |  | $ | 33 |  | $ | 146 |  | $ | 20 |  | $ | 20 |  | $ | 447 |  | $ | 202 |  | $ | 835 |
Collectively evaluated |  | 106,196 |  |  | 57,100 |  |  | 163,296 |  |  | 121,075 |  |  | 22,556 |  |  | 30,626 |  |  | 33,133 |  |  | 370,686 |
Allowance for loan losses | $ | 106,309 |  | $ | 57,133 |  | $ | 163,442 |  | $ | 121,095 |  | $ | 22,576 |  | $ | 31,073 |  | $ | 33,335 |  | $ | 371,521 |
Reserve for unfunded lending commitments: |  |  |  |  |  |  |
Individually evaluated | $ | — |  | $ | — |  | $ | — |  | $ | — |  | $ | — |  | $ | — |  | $ | — |  | $ | — |
Collectively evaluated |  | 4,353 |  |  | 250 |  |  | 4,603 |  |  | 1,223 |  |  | 22,311 |  |  | 11 |  |  | 798 |  |  | 28,946 |
Reserve for unfunded lending commitments: | $ | 4,353 |  | $ | 250 |  | $ | 4,603 |  | $ | 1,223 |  | $ | 22,311 |  | $ | 11 |  | $ | 798 |  | $ | 28,946 |
Total allowance for credit losses | $ | 110,662 |  | $ | 57,383 |  | $ | 168,045 |  | $ | 122,318 |  | $ | 44,887 |  | $ | 31,084 |  | $ | 34,133 |  | $ | 400,467 |
Loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Individually evaluated | $ | 5,929 |  | $ | 5,618 |  | $ | 11,547 |  | $ | 4,004 |  | $ | 127 |  | $ | 5,083 |  | $ | 1,315 |  | $ | 22,076 |
Collectively evaluated |  | 9,411,061 |  |  | 2,807,308 |  |  | 12,218,369 |  |  | 3,463,935 |  |  | 1,213,864 |  |  | 2,345,970 |  |  | 1,621,801 |  |  | 20,863,939 |
Total loans | $ | 9,416,990 |  | $ | 2,812,926 |  | $ | 12,229,916 |  | $ | 3,467,939 |  | $ | 1,213,991 |  | $ | 2,351,053 |  | $ | 1,623,116 |  | $ | 20,886,015 |

The release of credit reserves across most portfolios during the nine months ended September 30, 2021 reflects improvements in economic indicators and forecasted conditions and in asset quality metrics following the economic disruption brought on in 2020 by the COVID-19 pandemic. However, the allowance for credit losses remained elevated compared to historical levels as a result of uncertainty surrounding future performance as the impact of stimulus diminished and pandemic-related payment deferral and other modifications expired. In arriving at the allowance for credit losses at September 30, 2021, the Company weighted the baseline economic forecast at 50% and the downside slower near-term growth scenario S-2 at 50%.

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Nonaccrual loans and loans modified in troubled debt restructurings

The following table shows the composition of nonaccrual loans and those without an allowance for loan loss, by portfolio class.

|  |  | September 30, 2022 |  |  |  | December 31, 2021 |
(in thousands) |  |  | Total nonaccrual |  |  |  | Nonaccrual without allowance for loan loss |  |  |  | Total nonaccrual |  |  |  | Nonaccrual without allowance for loan loss |
Commercial non-real estate |  | $ |  | 4,528 |  |  | $ |  | 965 |  |  | $ |  | 6,974 |  |  | $ |  | 1,264 |
Commercial real estate - owner occupied |  |  |  | 2,237 |  |  |  |  | 701 |  |  |  |  | 4,921 |  |  |  |  | 729 |
Total commercial and industrial |  |  |  | 6,765 |  |  |  |  | 1,666 |  |  |  |  | 11,895 |  |  |  |  | 1,993 |
Commercial real estate - income producing |  |  |  | 1,883 |  |  |  |  | 1,200 |  |  |  |  | 5,458 |  |  |  |  | 5,207 |
Construction and land development |  |  |  | 353 |  |  |  |  | — |  |  |  |  | 844 |  |  |  |  | — |
Residential mortgages |  |  |  | 24,283 |  |  |  |  | 1,890 |  |  |  |  | 25,439 |  |  |  |  | 1,997 |
Consumer |  |  |  | 6,523 |  |  |  |  | — |  |  |  |  | 11,887 |  |  |  |  | 48 |
Total loans |  | $ |  | 39,807 |  |  | $ |  | 4,756 |  |  | $ |  | 55,523 |  |  | $ |  | 9,245 |

Nonaccrual loans include nonaccruing loans modified in troubled debt restructurings (“TDRs”) of $2.8 million and $6.8 million at September 30, 2022 and December 31, 2021, respectively. Total TDRs, both accruing and nonaccruing, were $4.8 million at September 30, 2022 and $10.6 million at December 31, 2021. All TDRs are individually evaluated for credit loss. At September 30, 2022 and December 31, 2021, the Company had no unfunded commitments to borrowers whose loan terms have been modified in a TDR.

The tables below provide detail by portfolio class TDRs that were modified during the three and nine months ended September 30, 2022 and 2021.

|  | Three Months Ended |
|  | September 30, 2022 |  |  | September 30, 2021 |
($ in thousands) 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 |  |  | — |  |  | $ | — |  |  | $ | — |  |  |  | — |  |  | $ | — |  |  | $ | — |
Commercial real estate - owner occupied |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Total commercial and industrial |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Commercial real estate - income producing |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Construction and land development |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Residential mortgages |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 1 |  |  |  | 196 |  |  |  | 196 |
Consumer |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Total loans |  |  | — |  | $ |  | — |  | $ |  | — |  |  |  | 1 |  |  | $ | 196 |  |  | $ | 196 |

|  | Nine Months Ended |
|  | September 30, 2022 |  |  | September 30, 2021 |
|  |  |  |  | Pre- Modification |  |  | Post- Modification |  |  |  |  |  | Pre- Modification |  |  | Post- Modification |
|  | Number |  |  | Outstanding |  |  | Outstanding |  |  | Number |  |  | Outstanding |  |  | Outstanding |
($ in thousands) |  | of |  |  | Recorded |  |  | Recorded |  |  | of |  |  | Recorded |  |  | Recorded |
Troubled Debt Restructurings: |  | Contracts |  |  | Investment |  |  | Investment |  |  | Contracts |  |  | Investment |  |  | Investment |
Commercial non-real estate |  |  | — |  |  | $ | — |  |  | $ | — |  |  |  | 3 |  |  | $ | 6,935 |  |  | $ | 6,935 |
Commercial real estate - owner occupied |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Total commercial and industrial |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 3 |  |  |  | 6,935 |  |  |  | 6,935 |
Commercial real estate - income producing |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Construction and land development |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Residential mortgages |  |  | 3 |  |  |  | 148 |  |  |  | 153 |  |  |  | 3 |  |  |  | 515 |  |  |  | 538 |
Consumer |  |  | 3 |  |  |  | 76 |  |  |  | 76 |  |  |  | 4 |  |  |  | 86 |  |  |  | 86 |
Total loans |  |  | 6 |  |  | $ | 224 |  |  | $ | 229 |  |  |  | 10 |  |  | $ | 7,536 |  |  | $ | 7,559 |

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The TDRs modified during the nine months ended September 30, 2022 reflected in the table above include $0.1 million of loans with interest rate reduction and $0.1 million with other modifications. The TDRs modified during the nine months ended September 30, 2021 include $7.1 million of loans with extended amortization terms or other payment concessions, and $0.5 million with other modifications.

Three commercial non-real estate loans totaling $3.1 million and four consumer and one residential mortgage loan totaling $0.2 million defaulted during the nine month period ended September 30, 2022 that had been modified in a TDR during the twelve months prior to default. One residential loan totaling $0.6 million that defaulted during the nine months ended September 30, 2021 had been modified in a TDR during the twelve months prior to default.

The TDR disclosures for the three and nine months ended September 30, 2021 do not include loans eligible for exclusion from TDR assessment under Section 4013 of the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), which expired on December 31, 2021. Any such loan having an eligible modification was reported in the aging analysis that follows based on the modified terms.

Aging Analysis

The tables below present the aging analysis of past due loans by portfolio class at September 30, 2022 and December 31, 2021.

September 30, 2022 | 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 | $ | 26,101 |  | $ | 5,828 |  | $ | 4,367 |  | $ | 36,296 |  | $ | 9,869,131 |  | $ | 9,905,427 |  | $ | 540 |
Commercial real estate - owner occupied |  | 8,626 |  |  | 756 |  |  | 910 |  |  | 10,292 |  |  | 3,022,841 |  |  | 3,033,133 |  |  | 540 |
Total commercial and industrial |  | 34,727 |  |  | 6,584 |  |  | 5,277 |  |  | 46,588 |  |  | 12,891,972 |  |  | 12,938,560 |  |  | 1,080 |
Commercial real estate - income producing |  | 111 |  |  | — |  |  | 1,308 |  |  | 1,419 |  |  | 3,685,121 |  |  | 3,686,540 |  |  | — |
Construction and land development |  | 136 |  |  | 496 |  |  | 195 |  |  | 827 |  |  | 1,540,430 |  |  | 1,541,257 |  |  | 176 |
Residential mortgages |  | 5,855 |  |  | 8,762 |  |  | 17,051 |  |  | 31,668 |  |  | 2,812,055 |  |  | 2,843,723 |  |  | 112 |
Consumer |  | 5,365 |  |  | 2,640 |  |  | 3,545 |  |  | 11,550 |  |  | 1,563,955 |  |  | 1,575,505 |  |  | 1,232 |
Total | $ | 46,194 |  | $ | 18,482 |  | $ | 27,376 |  | $ | 92,052 |  | $ | 22,493,533 |  | $ | 22,585,585 |  | $ | 2,600 |

December 31, 2021 | 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 | $ | 8,381 |  | $ | 3,123 |  | $ | 7,041 |  | $ | 18,545 |  | $ | 9,593,915 |  | $ | 9,612,460 |  | $ | 2,818 |
Commercial real estate - owner occupied |  | 704 |  |  | 653 |  |  | 1,563 |  |  | 2,920 |  |  | 2,818,326 |  |  | 2,821,246 |  |  | 142 |
Total commercial and industrial |  | 9,085 |  |  | 3,776 |  |  | 8,604 |  |  | 21,465 |  |  | 12,412,241 |  |  | 12,433,706 |  |  | 2,960 |
Commercial real estate - income producing |  | 281 |  |  | 107 |  |  | 5,307 |  |  | 5,695 |  |  | 3,458,931 |  |  | 3,464,626 |  |  | — |
Construction and land development |  | 2,624 |  |  | 1,022 |  |  | 587 |  |  | 4,233 |  |  | 1,224,437 |  |  | 1,228,670 |  |  | 83 |
Residential mortgages |  | 23,306 |  |  | 4,638 |  |  | 15,339 |  |  | 43,283 |  |  | 2,380,607 |  |  | 2,423,890 |  |  | 310 |
Consumer |  | 6,806 |  |  | 2,805 |  |  | 7,447 |  |  | 17,058 |  |  | 1,566,332 |  |  | 1,583,390 |  |  | 2,171 |
Total | $ | 42,102 |  | $ | 12,348 |  | $ | 37,284 |  | $ | 91,734 |  | $ | 21,042,548 |  | $ | 21,134,282 |  | $ | 5,524 |

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Credit Quality Indicators

The following tables present the credit quality indicators by segment and portfolio class of loans at September 30, 2022 and December 31, 2021. The Company routinely assesses the ratings of loans in its portfolio through an established and comprehensive portfolio management process.

|  | September 30, 2022 |
(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 |  | $ | 9,367,084 |  |  | $ | 2,894,509 |  |  | $ | 12,261,593 |  |  | $ | 3,637,570 |  |  | $ | 1,521,543 |  |  | $ | 17,420,706 |
Pass-Watch |  |  | 323,459 |  |  |  | 59,855 |  |  |  | 383,314 |  |  |  | 38,968 |  |  |  | 18,975 |  |  |  | 441,257 |
Special Mention |  |  | 75,801 |  |  |  | 5,945 |  |  |  | 81,746 |  |  |  | 5,916 |  |  |  | 166 |  |  |  | 87,828 |
Substandard |  |  | 139,083 |  |  |  | 72,824 |  |  |  | 211,907 |  |  |  | 4,086 |  |  |  | 573 |  |  |  | 216,566 |
Doubtful |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Total |  | $ | 9,905,427 |  |  | $ | 3,033,133 |  |  | $ | 12,938,560 |  |  | $ | 3,686,540 |  |  | $ | 1,541,257 |  |  | $ | 18,166,357 |

|  | December 31, 2021 |
(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 |  | $ | 9,279,719 |  |  | $ | 2,650,399 |  |  | $ | 11,930,118 |  |  | $ | 3,373,099 |  |  | $ | 1,216,177 |  |  | $ | 16,519,394 |
Pass-Watch |  |  | 157,815 |  |  |  | 86,133 |  |  |  | 243,948 |  |  |  | 67,157 |  |  |  | 9,289 |  |  |  | 320,394 |
Special Mention |  |  | 43,344 |  |  |  | 23,377 |  |  |  | 66,721 |  |  |  | 4,466 |  |  |  | 1,909 |  |  |  | 73,096 |
Substandard |  |  | 131,582 |  |  |  | 61,337 |  |  |  | 192,919 |  |  |  | 19,904 |  |  |  | 1,295 |  |  |  | 214,118 |
Doubtful |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Total |  | $ | 9,612,460 |  |  | $ | 2,821,246 |  |  | $ | 12,433,706 |  |  | $ | 3,464,626 |  |  | $ | 1,228,670 |  |  | $ | 17,127,002 |

|  | September 30, 2022 |  |  | December 31, 2021 |
(in thousands) |  | Residential mortgage |  |  | Consumer |  |  | Total |  |  | Residential mortgage |  |  | Consumer |  |  | Total |
Performing |  | $ | 2,818,424 |  |  | $ | 1,568,503 |  |  | $ | 4,386,927 |  |  | $ | 2,396,282 |  |  | $ | 1,570,516 |  |  | $ | 3,966,798 |
Nonperforming |  |  | 25,299 |  |  |  | 7,002 |  |  |  | 32,301 |  |  |  | 27,608 |  |  |  | 12,874 |  |  |  | 40,482 |
Total |  | $ | 2,843,723 |  |  | $ | 1,575,505 |  |  | $ | 4,419,228 |  |  | $ | 2,423,890 |  |  | $ | 1,583,390 |  |  | $ | 4,007,280 |

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.

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•
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 tables present credit quality disclosures of amortized cost by segment and vintage for term loans and by revolving and revolving converted to amortizing at September 30, 2022 and December 31, 2021. The Company defines vintage as the later of origination, renewal or restructure date.

| Term Loans |  |  |  |  |  |  |  |
| Amortized Cost Basis by Origination Year |  |  |  |  |  |  |  |
September 30, 2022 |  | 2022 |  |  | 2021 |  |  | 2020 |  |  | 2019 |  |  | 2018 |  |  | Prior |  |  | Revolving Loans |  |  | Revolving Loans Converted to Term Loans |  |  | Total |
(in thousands) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial Loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  | $ | 3,769,590 |  |  | $ | 3,810,862 |  |  | $ | 2,297,865 |  |  | $ | 1,537,650 |  |  | $ | 854,345 |  |  | $ | 1,695,383 |  |  | $ | 3,355,846 |  |  | $ | 99,165 |  |  | $ | 17,420,706 |
Pass-Watch |  |  | 42,903 |  |  |  | 94,955 |  |  |  | 52,211 |  |  |  | 48,653 |  |  |  | 37,491 |  |  |  | 71,871 |  |  |  | 73,217 |  |  |  | 19,956 |  |  |  | 441,257 |
Special Mention |  |  | 32,940 |  |  |  | 11,387 |  |  |  | 26,631 |  |  |  | 3,732 |  |  |  | 1,507 |  |  |  | 5,787 |  |  |  | 5,814 |  |  |  | 30 |  |  |  | 87,828 |
Substandard |  |  | 48,755 |  |  |  | 21,437 |  |  |  | 14,430 |  |  |  | 30,482 |  |  |  | 23,389 |  |  |  | 25,043 |  |  |  | 48,842 |  |  |  | 4,188 |  |  |  | 216,566 |
Doubtful |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Total Commercial Loans |  | $ | 3,894,188 |  |  | $ | 3,938,641 |  |  | $ | 2,391,137 |  |  | $ | 1,620,517 |  |  | $ | 916,732 |  |  | $ | 1,798,084 |  |  | $ | 3,483,719 |  |  | $ | 123,339 |  |  | $ | 18,166,357 |
Residential Mortgage and Consumer Loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Performing |  | $ | 549,415 |  |  | $ | 662,455 |  |  | $ | 543,996 |  |  | $ | 272,160 |  |  | $ | 161,093 |  |  | $ | 997,873 |  |  | $ | 1,195,933 |  |  | $ | 4,002 |  |  | $ | 4,386,927 |
Nonperforming |  |  | 835 |  |  |  | 2,109 |  |  |  | 901 |  |  |  | 1,836 |  |  |  | 2,346 |  |  |  | 22,644 |  |  |  | 588 |  |  |  | 1,042 |  |  |  | 32,301 |
Total Consumer Loans |  | $ | 550,250 |  |  | $ | 664,564 |  |  | $ | 544,897 |  |  | $ | 273,996 |  |  | $ | 163,439 |  |  | $ | 1,020,517 |  |  | $ | 1,196,521 |  |  | $ | 5,044 |  |  | $ | 4,419,228 |

| Term Loans |  |  |  |  |  |  |  |
| Amortized Cost Basis by Origination Year |  |  |  |  |  |  |  |
December 31, 2021 |  | 2021 |  |  | 2020 |  |  | 2019 |  |  | 2018 |  |  | 2017 |  |  | Prior |  |  | Revolving Loans |  |  | Revolving Loans Converted to Term Loans |  |  | Total |
(in thousands) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial Loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  | $ | 4,946,459 |  |  | $ | 3,008,160 |  |  | $ | 2,035,849 |  |  | $ | 1,212,306 |  |  | $ | 937,639 |  |  | $ | 1,296,382 |  |  | $ | 3,002,064 |  |  | $ | 80,535 |  |  | $ | 16,519,394 |
Pass-Watch |  |  | 68,421 |  |  |  | 19,467 |  |  |  | 31,598 |  |  |  | 45,846 |  |  |  | 27,188 |  |  |  | 69,310 |  |  |  | 52,850 |  |  |  | 5,714 |  |  |  | 320,394 |
Special Mention |  |  | 17,536 |  |  |  | 2,683 |  |  |  | 10,296 |  |  |  | 12,410 |  |  |  | 10,669 |  |  |  | 3,656 |  |  |  | 9,603 |  |  |  | 6,243 |  |  |  | 73,096 |
Substandard |  |  | 43,895 |  |  |  | 43,494 |  |  |  | 36,763 |  |  |  | 14,664 |  |  |  | 28,337 |  |  |  | 16,125 |  |  |  | 20,358 |  |  |  | 10,482 |  |  |  | 214,118 |
Doubtful |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Total Commercial Loans |  | $ | 5,076,311 |  |  | $ | 3,073,804 |  |  | $ | 2,114,506 |  |  | $ | 1,285,226 |  |  | $ | 1,003,833 |  |  | $ | 1,385,473 |  |  | $ | 3,084,875 |  |  | $ | 102,974 |  |  | $ | 17,127,002 |
Residential Mortgage and Consumer Loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Performing |  | $ | 580,813 |  |  | $ | 467,497 |  |  | $ | 355,833 |  |  | $ | 223,494 |  |  | $ | 320,344 |  |  | $ | 892,361 |  |  | $ | 1,120,461 |  |  | $ | 5,995 |  |  | $ | 3,966,798 |
Nonperforming |  |  | 565 |  |  |  | 951 |  |  |  | 2,018 |  |  |  | 4,465 |  |  |  | 4,719 |  |  |  | 24,365 |  |  |  | 1,432 |  |  |  | 1,967 |  |  |  | 40,482 |
Total Consumer Loans |  | $ | 581,378 |  |  | $ | 468,448 |  |  | $ | 357,851 |  |  | $ | 227,959 |  |  | $ | 325,063 |  |  | $ | 916,726 |  |  | $ | 1,121,893 |  |  | $ | 7,962 |  |  | $ | 4,007,280 |

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, 2022 and December 31, 2021 were $4.5 million and $4.4 million,

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respectively, of consumer loans secured by single family residential real estate that were in process of foreclosure. In addition to the single family residential real estate loans in process of foreclosure, the Company also held $0.5 million and $2.4 million of foreclosed single family residential properties in other real estate owned at September 30, 2022 and December 31, 2021, respectively.

Loans Held for Sale

Loans held for sale totaled $33.0 million and $93.1 million at September 30, 2022 and December 31, 2021, respectively. Loans held for sale is composed primarily of residential mortgage loans originated for sale in the secondary market. At September 30, 2022, residential mortgage loans carried at the fair value option totaled $15.1 million with an unpaid principal balance of $15.3 million. At December 31, 2021, residential mortgage loans carried at the fair value option totaled $41.0 million with an unpaid principal balance of $40.1 million. All other loans held for sale are carried at lower of cost or market.

4. Short-Term Borrowings

The following table presents information concerning short-term borrowings at September 30, 2022 and December 31, 2021.

|  | September 30, |  |  | December 31, |
(in thousands) |  | 2022 |  |  | 2021 |
Federal funds purchased: |  |  |  |  |  |  |  |
Amount outstanding at period end |  | $ |  | 1,850 |  |  | $ |  | 1,850 |
Weighted-average interest at period end |  |  |  | 2.65 | % |  |  |  | 0.15 | %
Securities sold under agreements to repurchase: |  |  |  |  |  |  |  |
Amount outstanding at period end |  | $ |  | 541,131 |  |  | $ |  | 563,211 |
Weighted-average interest at period end |  |  |  | 0.16 | % |  |  |  | 0.05 | %
FHLB borrowings: |  |  |  |  |  |  |  |
Amount outstanding at period end |  | $ |  | 1,000,000 |  |  | $ |  | 1,100,000 |
Weighted-average interest at period end |  |  |  | 3.15 | % |  |  |  | 0.49 | %

The following table presents information concerning short-term borrowings for the three and nine months ended September 30, 2022 and 2021.

|  | Three Months Ended |  |  | Nine Months Ended |
|  | September 30, |  |  | September 30, |
(in thousands) |  | 2022 |  |  | 2021 |  |  | 2022 |  |  | 2021 |
Federal funds purchased: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Average amount outstanding during period |  | $ |  | 28,861 |  |  | $ |  | 3,283 |  |  | $ |  | 11,425 |  |  | $ |  | 4,284 |
Maximum amount at any month end during period |  | $ |  | 1,850 |  |  | $ |  | 4,300 |  |  | $ |  | 2,350 |  |  | $ |  | 4,400 |
Weighted-average interest rate during period |  |  |  | 2.59 | % |  |  |  | 0.23 | % |  |  |  | 2.29 | % |  |  |  | 0.46 | %
Securities sold under agreements to repurchase: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Average amount outstanding during period |  | $ |  | 516,546 |  |  | $ |  | 508,969 |  |  | $ |  | 542,105 |  |  | $ |  | 549,315 |
Maximum amount at any month end during period |  | $ |  | 541,131 |  |  | $ |  | 643,403 |  |  | $ |  | 640,592 |  |  | $ |  | 643,403 |
Weighted-average interest rate during period |  |  |  | 0.13 | % |  |  |  | 0.08 | % |  |  |  | 0.09 | % |  |  |  | 0.12 | %
FHLB borrowings: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Average amount outstanding during period |  | $ |  | 405,163 |  |  | $ |  | 1,100,000 |  |  | $ |  | 731,982 |  |  | $ |  | 1,100,000 |
Maximum amount at any month end during period |  | $ |  | 1,000,000 |  |  | $ |  | 1,100,000 |  |  | $ |  | 1,100,000 |  |  | $ |  | 1,100,000 |
Weighted-average interest rate during period |  |  |  | 2.34 | % |  |  |  | 0.49 | % |  |  |  | 0.84 | % |  |  |  | 0.49 | %

Federal funds purchased represent unsecured borrowings from other banks, generally on an overnight basis.

Securities sold under agreements to repurchase ("repurchase agreements") are funds borrowed on a secured basis by selling securities under agreements to repurchase, mainly in connection with treasury-management services offered to deposit customers. The customer repurchase agreements mature daily and are secured by agency securities. As the Company maintains effective control over assets sold under agreements to repurchase, the securities continue to be presented in the Consolidated Balance Sheets. Because the Company acts as a borrower transferring assets to the counterparty, and the agreements mature daily, the Company's risk is limited.

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The $1.0 billion of FHLB borrowings at September 30, 2022 consists of two 90-day floating rate notes maturing in November and December of 2022. The interest rates on these advances reset daily and are indexed to the Secured Overnight Financing Rate (SOFR). The $1.1 billion of FHLB borrowing at December 31, 2021 consisted of five fixed rate notes scheduled to mature between 2034 and 2035, that were classified as short-term as the FHLB had the option to put (terminate) the advances prior to maturity. These notes were called and repaid during the third and second quarters of 2022.

5. 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. The Bank also enters into interest rate derivative agreements as a service to certain qualifying customers. The Bank manages a matched book with respect to these customer derivatives in order to minimize its net interest rate risk exposure resulting from such agreements. In addition, the Bank also enters into risk participation agreements under which it may either sell or buy credit risk associated with a customer’s performance under certain interest rate derivative contracts related to loans in which participation interests have been sold to or purchased from other banks.

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Fair Values of Derivative Instruments on the Balance Sheet

The table below presents the notional or contractual amounts and fair values of the Company’s derivative financial instruments as well as their classification on the consolidated balance sheets at September 30, 2022 and December 31, 2021.

|  |  |  | September 30, 2022 |  |  | December 31, 2021 |
|  |  |  |  |  |  | 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 |  | $ | 2,050,000 |  |  | $ | — |  |  | $ | 122,433 |  |  | $ | 1,125,000 |  |  | $ | 5,884 |  |  | $ | 4,421 |
Interest rate swaps - securities |  | Fair Value |  |  | 934,900 |  |  |  | 62,610 |  |  |  | — |  |  |  | 1,837,650 |  |  |  | 22,138 |  |  |  | 10,690 |
|  |  |  |  | 2,984,900 |  |  |  | 62,610 |  |  |  | 122,433 |  |  |  | 2,962,650 |  |  |  | 28,022 |  |  |  | 15,111 |
Derivatives not designated as hedging instruments: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest rate swaps |  | N/A |  |  | 5,046,771 |  |  |  | 188,799 |  |  |  | 185,546 |  |  |  | 5,193,991 |  |  |  | 75,819 |  |  |  | 75,861 |
Risk participation agreements |  | N/A |  |  | 286,091 |  |  |  | 1 |  |  |  | 9 |  |  |  | 217,437 |  |  |  | 11 |  |  |  | 35 |
Interest rate-lock commitments on residential mortgage loans |  | N/A |  |  | 28,414 |  |  |  | 143 |  |  |  | 178 |  |  |  | 82,037 |  |  |  | 1,525 |  |  |  | 1 |
Forward commitments to sell residential mortgage loans |  | N/A |  |  | 18,517 |  |  |  | 158 |  |  |  | 69 |  |  |  | 46,739 |  |  |  | 1 |  |  |  | 645 |
To Be Announced (TBA) securities |  | N/A |  |  | 15,000 |  |  |  | 431 |  |  |  | 4 |  |  |  | 55,000 |  |  |  | 15 |  |  |  | 53 |
Foreign exchange forward contracts |  | N/A |  |  | 153,430 |  |  |  | 4,667 |  |  |  | 4,601 |  |  |  | 48,364 |  |  |  | 778 |  |  |  | 758 |
Visa Class B derivative contract |  | N/A |  |  | 43,111 |  |  |  | — |  |  |  | 2,295 |  |  |  | 43,439 |  |  |  | — |  |  |  | 4,116 |
|  |  |  |  | 5,591,334 |  |  |  | 194,199 |  |  |  | 192,702 |  |  |  | 5,687,007 |  |  |  | 78,149 |  |  |  | 81,469 |
Total derivatives |  |  |  | $ | 8,576,234 |  |  | $ | 256,809 |  |  | $ | 315,135 |  |  | $ | 8,649,657 |  |  | $ | 106,171 |  |  | $ | 96,580 |
Less: netting adjustment (2) |  |  |  |  |  |  |  | (137,709 | ) |  |  | (88,697 | ) |  |  |  |  |  | (30,304 | ) |  |  | (61,534 | )
Total derivative assets/liabilities |  |  |  |  |  |  | $ | 119,100 |  |  | $ | 226,438 |  |  |  |  |  | $ | 75,867 |  |  | $ | 35,046 |

(1)
Derivative assets and liabilities are reported at fair value in other assets or other liabilities, respectively, in the consolidated balance sheets.
(2)
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. T he Company terminated six swap agreements in 2021 and received cash of approximately $23.7 million, which was recorded as accumulated other comprehensive income and is being accreted into earnings through the original maturity dates of the respective contracts. The notional amounts of the swap agreements in place at September 30, 2022 expire as follows: $125 million in 2022; $150 million in 2023; $50 million in 2025; $600 million in 2026; $1 billion in 2027, and $100 million thereafter.

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. At September 30, 2022, these instruments have hedge start dates between February 2024 and July 2026, and maturity dates from December 2027 through March 2031. The fair value of the hedged item attributable to interest rate risk is presented in interest income along with the change in the fair value of the hedging instrument.

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The hedged available for sale securities are part of closed portfolios 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, 2022, the amortized cost basis of the closed portfolio of pre-payable commercial mortgage backed securities totaled $1.0 billion. The amount that represents the hedged items was $872.2 million and the basis adjustment associated with the hedged items totaled $62.7 million.

T he Company terminated 21 fair value swap agreements during the nine months ended September 30, 2022 and received cash of approximately $74.0 million. At the time of termination, the value of the swap was recorded as an adjustment to the book value of the underlying security, thereby changing its current book yield and extending its duration.

Derivatives Not Designated as Hedges

Customer interest rate derivative program

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

Risk participation agreements

The Bank also enters into risk participation agreements under which it may either assume or sell credit risk associated with a borrower’s performance under certain interest rate derivative contracts. In those instances where the Bank has assumed credit risk, it is not a direct counterparty to the derivative contract with the borrower and has entered into the risk participation agreement because it is a party to the related loan agreement with the borrower. In those instances in which the Bank has sold credit risk, it is the sole counterparty to the derivative contract with the borrower and has entered into the risk participation agreement because other banks participate in the related loan 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 Bank 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 loans to investors on either a best efforts or a mandatory delivery basis. The Company uses these forward sales commitments, which may include To Be Announced (“TBA”) security contracts, on the open market to protect the value of its rate locks and mortgage loans held for sale from changes in interest rates and pricing between the origination of the rate lock and the final sale of these loans. These instruments meet the definition of derivative financial instruments and are reflected in other assets and other liabilities in the Consolidated Balance Sheets, with changes to the fair value recorded in noninterest income within the secondary mortgage market operations line item in the Consolidated Statements of Income.

The loans sold on a mandatory basis commit the Company to deliver a specific principal amount of mortgage loans to an investor at a specified price, by a specified date. If the Company fails to deliver the amount of mortgages necessary to fulfill the commitment by the specified date, we may be obligated to pay a pair-off fee, based on then-current market prices, to the investor/counterparty to compensate the investor for the shortfall. Mandatory delivery forward commitments include TBA security contracts on the open market to provide protection against changes in interest rates on the locked mortgage pipeline. The Company expects that mandatory delivery contracts, including TBA security contracts, will experience changes in fair value opposite to the changes in the fair value of derivative loan commitments. Certain assumptions, including pull through rates and rate lock periods, are used in managing the existing and future hedges. The accuracy of underlying assumptions could impact the ultimate effectiveness of any hedging strategies.

Forward commitments under best effort contracts commit the Company to deliver a specific individual mortgage loan to an investor if the loan to the underlying borrower closes. Generally, best efforts cash contracts have no pair-off risk regardless of market movement. The price the investor will pay the seller for an individual loan is specified prior to the loan being funded, generally the same day the Company enters into the interest rate lock commitment with the potential borrower. The Company expects that these best efforts forward loan sale commitments will experience a net neutral shift in fair value with related derivative loan commitments.

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At the closing of the loan, the rate lock commitment derivative expires and the Company generally records a loan held for sale at fair value under the election of fair value option.

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. The Bank has not elected to designate these foreign exchange forward contract derivatives as hedges; as such, 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 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, 2022 and December 31, 2021, the fair value of the liability associated with this contract was $2.3 million and $4.1 million, respectively. Refer to Note 13 – Fair Value of Financial Instruments for discussion of the valuation inputs and process for this derivative liability.

Effect of Derivative Instruments on the Statements of Income

The effects of derivative instruments on the Consolidated Statements of Income for the three and nine months ended September 30, 2022 and 2021 are presented in the table below.

|  |  |  | Three Months Ended |  |  | Nine Months Ended |
(in thousands) |  |  |  | September 30, |  |  | September 30, |
Derivative Instruments: |  | Location of Gain (Loss) Recognized in the Statements of Income: |  | 2022 |  |  | 2021 |  |  | 2022 |  |  | 2021 |
Cash flow hedges: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Variable rate loans |  | Interest income - loans |  | $ | 1,752 |  |  | $ | 6,950 |  |  | $ | 14,519 |  |  | $ | 19,941 |
Fair value hedges: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Securities |  | Interest income - securities - taxable |  |  | 1,596 |  |  |  | 21 |  |  |  | 2,625 |  |  |  | (6 | )
Securities |  | Noninterest income - securities transactions, net |  |  | — |  |  |  | — |  |  |  | 1,620 |  |  |  | 2,499 |
Derivatives not designated as hedging: |  |  |  |  |  |  |  |  |  |
Residential mortgage banking |  | Noninterest income - secondary mortgage market operations |  |  | (365 | ) |  |  | (1,249 | ) |  |  | 2,595 |  |  |  | 2,223 |
Customer and all other instruments |  | Noninterest income - other noninterest income |  |  | 1,309 |  |  |  | 2,970 |  |  |  | 6,386 |  |  |  | 11,755 |
Total gain |  |  |  | $ | 4,292 |  |  | $ | 8,692 |  |  | $ | 27,745 |  |  | $ | 36,412 |

Credit Risk-Related Contingent Features

Certain of the Bank’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, 2022, 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, 2022 and December 31, 2021 was $15.6 million and $49.4 million, respectively, for which the Company had posted collateral of $14.9 million and $15.0 million, respectively.

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Offsetting Assets and Liabilities

The Bank’s derivative instruments with certain counterparties contain legally enforceable netting provisions that allow for net settlement of multiple transactions to a single amount, which may be positive, negative, or zero. Agreements with certain bilateral counterparties require both parties to maintain collateral in the event that the fair values of derivative instruments exceed established exposure thresholds. For centrally cleared derivatives, the Company is subject to initial margin posting and daily variation margin exchange with the central clearinghouses. Offsetting information in regards to all derivative assets and liabilities, including accrued interest, subject to these master netting agreements at September 30, 2022 and December 31, 2021 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, 2022 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Derivative Assets |  | $ | 253,109 |  |  | $ | (138,429 | ) |  | $ | 114,680 |  |  | $ | 37,879 |  |  | $ | 14,850 |  |  | $ | 91,651 |
Derivative Liabilities |  | $ | 127,592 |  |  | $ | (89,713 | ) |  | $ | 37,879 |  |  | $ | 37,879 |  |  | $ | — |  |  | $ | — |

(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, 2021 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Derivative Assets |  | $ | 36,790 |  |  | $ | (29,882 | ) |  | $ | 6,908 |  |  | $ | 6,908 |  |  | $ | — |  |  | $ | — |
Derivative Liabilities |  | $ | 85,448 |  |  | $ | (63,204 | ) |  | $ | 22,244 |  |  | $ | 6,908 |  |  | $ | 66,207 |  |  | $ | (50,871 | )

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

6. Stockholders’ Equity

Common Shares Outstanding

Common shares outstanding excludes treasury shares totaling 6.2 million and 5.1 million, with a first-in-first-out cost basis of $233.8 million and $175.8 million, at September 30, 2022 and December 31, 2021, respectively. Shares outstanding also excludes unvested restricted share awards totaling 1.0 million and 1.1 million at September 30, 2022 and December 31, 2021.

Stock Buyback Program

On April 22, 2021, the Company’s board of directors approved a stock buyback program whereby the Company is authorized to repurchase up to 4.3 million shares of its common stock through the program’s expiration date of December 31, 2022. 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 otherwise, in one or more transactions. The Company is not obligated to purchase any shares under this program, and the board of directors has the ability to terminate or amend the program at any time prior to the expiration date. During the nine months ended September 30, 2022, the Company repurchased 1,204,368 shares of its common stock at an average cost of $48.90 per share, inclusive of commissions. To date, the Company has repurchased 1,654,244 shares at an average cost of $48.77 per share under this program.

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Accumulated Other Comprehensive Income (Loss)

A roll forward of the components of Accumulated Other Comprehensive Income (Loss) is presented in the table that follows:

﻿ | Available for Sale Securities |  | HTM Securities Transferred from AFS |  | Employee Benefit Plans |  | Cash Flow Hedges |  | Equity Method Investment |  | Total |
(in thousands) |  |  |  |  |  |  |  |  |  |  |  |
Balance, December 31, 2020 | $ | 171,224 |  | $ | 276 |  | $ | (125,573 | ) | $ | 39,511 |  | $ | (5,369 | ) | $ | 80,069 |
Net change in unrealized gain or loss |  | (144,715 | ) |  | — |  |  | — |  |  | 353 |  |  | 438 |  |  | (143,924 | )
Reclassification of net income or loss realized and included in earnings |  | 2,166 |  |  | — |  |  | 3,970 |  |  | (19,941 | ) |  | 4,468 |  |  | (9,337 | )
Valuation adjustments to pension plan attributable to VERIP and curtailment |  | — |  |  | — |  |  | 59,606 |  |  | — |  |  | — |  |  | 59,606 |
Other valuation adjustments to employee benefit plans |  | — |  |  | — |  |  | (10,651 | ) |  | — |  |  | — |  |  | (10,651 | )
Amortization of unrealized net gain on securities transferred to HTM |  | — |  |  | (134 | ) |  | — |  |  | — |  |  | — |  |  | (134 | )
Income tax (expense) benefit |  | 31,952 |  |  | 30 |  |  | (11,783 | ) |  | 4,370 |  |  | — |  |  | 24,569 |
Balance, September 30, 2021 | $ | 60,627 |  | $ | 172 |  | $ | (84,431 | ) | $ | 24,293 |  | $ | (463 | ) | $ | 198 |
Balance, December 31, 2021 | $ | 11,037 |  | $ | 153 |  | $ | (80,946 | ) | $ | 16,284 |  | $ | (463 | ) | $ | (53,935 | )
Net change in unrealized gain or loss |  | (844,250 | ) |  | — |  |  | — |  |  | (118,110 | ) |  | 468 |  |  | (961,892 | )
Reclassification of net income or loss realized and included in earnings |  | 1,707 |  |  | — |  |  | 1,963 |  |  | (14,519 | ) |  | — |  |  | (10,849 | )
Valuation adjustments to employee benefit plans |  | — |  |  | — |  |  | (8,397 | ) |  | — |  |  | — |  |  | (8,397 | )
Transfer of net unrealized loss from AFS to HTM securities portfolio |  | 15,405 |  |  | (15,405 | ) |  | — |  |  | — |  |  | — |  |  | — |
Amortization of unrealized net gain or loss on securities transferred to HTM |  | — |  |  | 961 |  |  | — |  |  | — |  |  | — |  |  | 961 |
Income tax (expense) benefit |  | 186,685 |  |  | 3,260 |  |  | 1,452 |  |  | 29,934 |  |  | — |  |  | 221,331 |
Balance, September 30, 2022 | $ | (629,416 | ) | $ | (11,031 | ) | $ | (85,928 | ) | $ | (86,411 | ) | $ | 5 |  | $ | (812,781 | )

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 cash flow hedges of variable rate loans described in Note 5 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 in 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) |  | 2022 |  |  | 2021 |  |  | the statement of income
Loss on sale of AFS securities |  | $ | (1,707 | ) |  | $ | (2,166 | ) |  | Noninterest income
Tax effect |  |  | 385 |  |  |  | 487 |  |  | Income taxes
Net of tax |  |  | (1,322 | ) |  |  | (1,679 | ) |  | Net income
Amortization of unrealized net gain (loss) on securities transferred to HTM |  |  | (961 | ) |  |  | 134 |  |  | Interest income
Tax effect |  |  | 217 |  |  |  | (30 | ) |  | Income taxes
Net of tax |  |  | (744 | ) |  |  | 104 |  |  | Net income
Amortization of defined benefit pension and post-retirement items |  |  | (1,963 | ) |  |  | (3,970 | ) |  | Other noninterest expense (b)
Tax effect |  |  | 443 |  |  |  | 884 |  |  | Income taxes
Net of tax |  |  | (1,520 | ) |  |  | (3,086 | ) |  | Net income
Reclassification of unrealized gain on cash flow hedges |  |  | 5,786 |  |  |  | 18,771 |  |  | Interest income
Tax effect |  |  | (1,306 | ) |  |  | (4,188 | ) |  | Income taxes
Net of tax |  |  | 4,480 |  |  |  | 14,583 |  |  | Net income
Amortization of gain on terminated cash flow hedges |  |  | 8,733 |  |  |  | 1,170 |  |  | Interest income
Tax effect |  |  | (1,971 | ) |  |  | (261 | ) |  | Income taxes
Net of tax |  |  | 6,762 |  |  |  | 909 |  |  | Net income
Reclassification of unrealized loss on equity method investment |  |  | — |  |  |  | (4,468 | ) |  | Noninterest income
Tax effect |  |  | — |  |  |  | — |  |  | Income taxes
Net of tax |  |  | — |  |  |  | (4,468 | ) |  | Net income
Total reclassifications, net of tax |  | $ | 7,656 |  |  | $ | 6,363 |  |  | 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 10 – Retirement Plans for additional details)

7. Other Noninterest Income

Components of other noninterest income are as follows:

|  | Three Months Ended |  |  | Nine Months Ended |
|  | September 30, |  |  | September 30, |
(in thousands) |  | 2022 |  |  | 2021 |  |  | 2022 |  |  | 2021 |
Income from bank-owned life insurance |  | $ | 4,784 |  |  | $ | 3,907 |  |  | $ | 12,602 |  |  | $ | 14,535 |
Credit related fees |  |  | 2,628 |  |  |  | 2,568 |  |  |  | 7,840 |  |  |  | 8,383 |
Income from derivatives |  |  | 1,309 |  |  |  | 2,970 |  |  |  | 6,386 |  |  |  | 11,755 |
Gain on sale of Mastercard Class B common stock |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 2,800 |
Gain on sale of Hancock Horizon Funds |  |  | — |  |  |  | 4,576 |  |  |  | — |  |  |  | 4,576 |
Other miscellaneous |  |  | 6,108 |  |  |  | 8,168 |  |  |  | 17,986 |  |  |  | 13,673 |
Total other noninterest income |  | $ | 14,829 |  |  | $ | 22,189 |  |  | $ | 44,814 |  |  | $ | 55,722 |

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8. Other Noninterest Expense

Components of other noninterest expense are as follows:

|  | Three Months Ended |  |  | Nine Months Ended |
|  | September 30, |  |  | September 30, |
(in thousands) |  | 2022 |  |  | 2021 |  |  | 2022 |  |  | 2021 |
Corporate value and franchise taxes and other non-income taxes |  | $ | 4,010 |  |  | $ | 3,414 |  |  | $ | 12,816 |  |  | $ | 11,300 |
Advertising |  |  | 3,533 |  |  |  | 3,638 |  |  |  | 10,211 |  |  |  | 8,400 |
Telecommunications and postage |  |  | 3,027 |  |  |  | 3,087 |  |  |  | 8,923 |  |  |  | 9,568 |
Entertainment and contributions |  |  | 2,231 |  |  |  | 2,280 |  |  |  | 7,632 |  |  |  | 5,214 |
Tax credit investment amortization |  |  | 1,004 |  |  |  | 1,112 |  |  |  | 3,012 |  |  |  | 3,337 |
Printing and supplies |  |  | 971 |  |  |  | 914 |  |  |  | 2,892 |  |  |  | 2,833 |
Travel expense |  |  | 1,239 |  |  |  | 765 |  |  |  | 3,022 |  |  |  | 1,789 |
Net other retirement expense |  |  | (7,570 | ) |  |  | (7,294 | ) |  |  | (22,123 | ) |  |  | (20,645 | )
Loss on facilities and equipment from consolidation |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 15,462 |
Loss on extinguishment of debt |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 4,165 |
Other miscellaneous |  |  | 7,508 |  |  |  | 13,041 |  |  |  | 21,214 |  |  |  | 25,567 |
Total other noninterest expense |  | $ | 15,953 |  |  | $ | 20,957 |  |  | $ | 47,599 |  |  | $ | 66,990 |

9. Earnings Per Common Share

The Company calculates earnings per share using the two-class method. The two-class method allocates net income to each class of common stock and participating security according to common dividends declared and participation rights in undistributed earnings. Participating 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 per common share follows.

|  | Three Months Ended |  |  | Nine Months Ended |
|  | September 30, |  |  | September 30, |
(in thousands, except per share data) |  | 2022 |  |  | 2021 |  |  | 2022 |  |  | 2021 |
Numerator: |  |  |  |  |  |  |  |  |  |  |  |
Net income to common shareholders |  | $ | 135,389 |  |  | $ | 129,582 |  |  | $ | 380,302 |  |  | $ | 325,472 |
Net income allocated to participating securities - basic and diluted |  |  | 2,014 |  |  |  | 2,419 |  |  |  | 5,776 |  |  |  | 6,650 |
Net income allocated to common shareholders - basic and diluted |  | $ | 133,375 |  |  | $ | 127,163 |  |  | $ | 374,526 |  |  | $ | 318,822 |
Denominator: |  |  |  |  |  |  |  |  |  |  |  |
Weighted-average common shares - basic |  |  | 85,706 |  |  |  | 86,834 |  |  | $ | 86,141 |  |  | $ | 86,800 |
Dilutive potential common shares |  |  | 314 |  |  |  | 172 |  |  |  | 298 |  |  |  | 151 |
Weighted-average common shares - diluted |  |  | 86,020 |  |  |  | 87,006 |  |  | $ | 86,439 |  |  | $ | 86,951 |
Earnings per common share: |  |  |  |  |  |  |  |  |  |  |  |
Basic |  | $ | 1.56 |  |  | $ | 1.46 |  |  | $ | 4.35 |  |  | $ | 3.67 |
Diluted |  | $ | 1.55 |  |  | $ | 1.46 |  |  | $ | 4.33 |  |  | $ | 3.67 |

Potential common shares consist of stock options, nonvested performance-based awards, nonvested restricted stock units, and 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. Potential common shares totaling 2,212 and 5,671 for the three and nine months ended September 30, 2022, respectively, and 796 for the nine months ended September 30, 2021, did not enter the calculation of diluted earnings per share as the impact would have been anti-dilutive. For the three months ended September 30, 2021, there were no potential common shares that would have had an anti-dilutive impact on earnings per share.

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10. Retirement Plans

The Company offers a qualified defined benefit pension plan, the Hancock Whitney Corporation Pension Plan and Trust Agreement (“Pension Plan”), covering certain eligible associates. Eligibility is based on minimum age and service-related requirements. The Pension Plan excludes any individual hired or rehired by the Company after June 30, 2017 from eligibility to participate, and the accrued benefits of any 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.

The Company also offers a defined contribution retirement benefit plan (401(k) plan), the Hancock Whitney Corporation 401(k) Savings Plan and Trust Agreement (“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 current 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, under which accrued benefits were frozen as of December 31, 2012 and, as such, no future benefits are accrued under this plan.

The Company sponsors defined benefit post-retirement 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 benefit cost included in expense for the periods indicated.

﻿ |  |  |  |  |  |  |  | Other Post- |
(in thousands) |  | Pension Benefits |  |  | Retirement Benefits |
For the Three Months Ended September 30, |  | 2022 |  |  | 2021 |  |  | 2022 |  |  | 2021 |
Service cost |  | $ | 2,855 |  |  | $ | 2,620 |  |  | $ | 25 |  |  | $ | 23 |
Interest cost |  |  | 3,756 |  |  |  | 3,552 |  |  |  | 77 |  |  |  | 91 |
Expected return on plan assets |  |  | (11,714 | ) |  |  | (11,463 | ) |  |  | — |  |  |  | — |
Amortization of net (gain) or loss and prior service costs |  |  | 450 |  |  |  | 717 |  |  |  | (139 | ) |  |  | (192 | )
Net periodic benefit cost |  | $ | (4,653 | ) |  | $ | (4,574 | ) |  | $ | (37 | ) |  | $ | (78 | )
(in thousands) |  | Pension Benefits |  |  | Retirement Benefits |
For the Nine Months Ended September 30, |  | 2022 |  |  | 2021 |  |  | 2022 |  |  | 2021 |
Service cost |  | $ | 8,584 |  |  | $ | 8,996 |  |  | $ | 75 |  |  | $ | 71 |
Interest cost |  |  | 10,881 |  |  |  | 9,982 |  |  |  | 230 |  |  |  | 257 |
Expected return on plan assets |  |  | (34,900 | ) |  |  | (34,854 | ) |  |  | — |  |  |  | — |
Amortization of net (gain) or loss and prior service costs |  |  | 2,380 |  |  |  | 4,471 |  |  |  | (417 | ) |  |  | (501 | )
Special termination benefits |  |  | — |  |  |  | 16,052 |  |  |  | — |  |  |  | 4,137 |
Net periodic benefit cost (benefit) |  | $ | (13,055 | ) |  | $ | 4,647 |  |  | $ | (112 | ) |  | $ | 3,964 |

During the nine months ended September 30, 2021, the Company completed a Voluntary Early Retirement Incentive Program (VERIP), which was accepted by approximately 260 eligible Pension Plan participants. The event constituted a curtailment of the Pension Plan and resulted in a re-measurement of the projected benefit obligation at April 30, 2021. The program had two components: a supplemental cash incentive, substantially all of which was paid through the Pension Plan with existing plan assets, and coverage in a post-retirement medical plan, with each component having specific age and years of service requirements. The impact of offering these incentives is classified as special termination benefits in the tables above.

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11. 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, 2021. During the nine months ended September 30, 2022, the Company's shareholders approved an amendment to the 2020 Long-Term Incentive Plan to increase the number of shares available under the plan by 1,400,000.

At September 30, 2022, the Company had 1,476 outstanding and exercisable stock options, with a weighted average exercise price of $53.73, weighted average remaining contractual term of less than one year and no aggregate intrinsic value. During the nine months ended September 30, 2022, 7,630 stock options with an aggregate intrinsic value o f $0.1 million were exercised.

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 stock units and restricted and performance-based share awards at September 30, 2022 are presented in the following table.

|  |  |  |  | Weighted |
|  |  |  |  | Average |
|  | Number of |  |  | Grant Date |
|  | Shares |  |  | Fair Value |
Nonvested at January 1, 2022 |  |  | 1,453,085 |  |  | $ | 34.58 |
Granted |  |  | 538,387 |  |  |  | 52.41 |
Vested |  |  | (118,830 | ) |  |  | 34.24 |
Forfeited |  |  | (113,946 | ) |  |  | 35.53 |
Nonvested at September 30, 2022 |  |  | 1,758,696 |  |  | $ | 40.00 |

At September 30, 2022, there was $50.1 million of total unrecognized compensation expense related to nonvested restricted and performance share awards and units expected to vest in the future. This compensation is expected to be recognized in expense over a weighted average period of 3.0 years. The total fair value of shares that vested during the nine months ended September 30, 2022 was $3.4 million.

During the nine months ended September 30, 2022, the Company granted 441,953 restricted stock units (RSUs) to certain eligible employees. Unlike restricted share awards (RSAs), which comprise the majority of the unvested share-based compensation awards, the holders of unvested restricted stock units have no rights as a shareholder of the Company, including voting or dividend rights. The Company has elected to award dividend equivalents on each restricted stock unit. Such dividend equivalents are forfeited should the employee terminate employment prior to the vesting of the RSU.

During the nine months ended September 30, 2022, the Company granted 36,475 performance share awards subject to a total shareholder return (“TSR”) performance metric with a grant date fair value of $61.47 per share and 36,475 performance share awards subject to an operating earnings per share performance metric with a grant date fair value of $47.36 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 50 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.

12. 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

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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. The Company had a reserve for unfunded lending commitments of $33.5 million and $29.3 million at September 30, 2022 and December 31, 2021, respectively.

The following table presents a summary of the Company’s off-balance sheet financial instruments as of September 30, 2022 and December 31, 2021:

﻿ |  | September 30, |  |  | December 31, |
(in thousands) |  | 2022 |  |  | 2021 |
Commitments to extend credit |  | $ | 10,285,394 |  |  | $ | 9,444,803 |
Letters of credit |  |  | 373,002 |  |  |  | 396,956 |

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.

13. Fair Value Measurements

The 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 financial assets and liabilities that are measured at fair value on a recurring basis in the consolidated balance sheets at September 30, 2022 and December 31, 2021:

﻿ |  | September 30, 2022 |
(in thousands) |  | Level 1 |  |  | Level 2 |  |  | Level 3 |  |  | Total |
Assets |  |  |  |  |  |  |  |  |  |  |  |
Available for sale debt securities: |  |  |  |  |  |  |  |  |  |  |  |
U.S. Treasury and government agency securities |  | $ | — |  |  | $ | 42,287 |  |  | $ | — |  |  | $ | 42,287 |
Municipal obligations |  |  | — |  |  |  | 197,865 |  |  |  | — |  |  |  | 197,865 |
Corporate debt securities |  |  | — |  |  |  | 21,317 |  |  |  | — |  |  |  | 21,317 |
Residential mortgage-backed securities |  |  | — |  |  |  | 2,306,365 |  |  |  | — |  |  |  | 2,306,365 |
Commercial mortgage-backed securities |  |  | — |  |  |  | 2,823,920 |  |  |  | — |  |  |  | 2,823,920 |
Collateralized mortgage obligations |  |  | — |  |  |  | 75,089 |  |  |  | — |  |  |  | 75,089 |
Total available for sale securities |  |  | — |  |  |  | 5,466,843 |  |  |  | — |  |  |  | 5,466,843 |
Mortgage loans held for sale |  |  | — |  |  |  | 15,149 |  |  |  | — |  |  |  | 15,149 |
Derivative assets (1) |  |  | — |  |  |  | 119,100 |  |  |  | — |  |  |  | 119,100 |
Total recurring fair value measurements - assets |  | $ | — |  |  | $ | 5,601,092 |  |  | $ | — |  |  | $ | 5,601,092 |
Liabilities |  |  |  |  |  |  |  |  |  |  |  |
Derivative liabilities (1) |  | $ | — |  |  | $ | 224,143 |  |  | $ | 2,295 |  |  | $ | 226,438 |
Total recurring fair value measurements - liabilities |  | $ | — |  |  | $ | 224,143 |  |  | $ | 2,295 |  |  | $ | 226,438 |

﻿ |  | December 31, 2021 |
(in thousands) |  | Level 1 |  |  | Level 2 |  |  | Level 3 |  |  | Total |
Assets |  |  |  |  |  |  |  |  |  |  |  |
Available for sale debt securities: |  |  |  |  |  |  |  |  |  |  |  |
U.S. Treasury and government agency securities |  | $ | — |  |  | $ | 419,298 |  |  | $ | — |  |  | $ | 419,298 |
Municipal obligations |  |  | — |  |  |  | 314,158 |  |  |  | — |  |  |  | 314,158 |
Corporate debt securities |  |  | — |  |  |  | 18,702 |  |  |  | — |  |  |  | 18,702 |
Residential mortgage-backed securities |  |  | — |  |  |  | 3,035,798 |  |  |  | — |  |  |  | 3,035,798 |
Commercial mortgage-backed securities |  |  | — |  |  |  | 3,077,859 |  |  |  | — |  |  |  | 3,077,859 |
Collateralized mortgage obligations |  |  | — |  |  |  | 120,883 |  |  |  | — |  |  |  | 120,883 |
Total available for sale securities |  |  | — |  |  |  | 6,986,698 |  |  |  | — |  |  |  | 6,986,698 |
Mortgage loans held for sale |  |  |  |  |  | 41,022 |  |  |  |  |  |  | 41,022 |
Derivative assets (1) |  |  | — |  |  |  | 75,867 |  |  |  | — |  |  |  | 75,867 |
Total recurring fair value measurements - assets |  | $ | — |  |  | $ | 7,103,587 |  |  | $ | — |  |  | $ | 7,103,587 |
Liabilities |  |  |  |  |  |  |  |  |  |  |  |
Derivative liabilities (1) |  | $ | — |  |  | $ | 30,930 |  |  | $ | 4,116 |  |  | $ | 35,046 |
Total recurring fair value measurements - liabilities |  | $ | — |  |  | $ | 30,930 |  |  | $ | 4,116 |  |  | $ | 35,046 |

(1)
For further disaggregation of derivative assets and liabilities, see Note 5 - Derivatives.

Securities classified as level 2 include obligations of U.S. Government agencies and U.S. Government-sponsored agencies, including “off-the-run” U.S. Treasury securities, 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.

Loans held for sale consist of residential mortgage loans carried under the fair value option. The fair value for these instruments is classified as level 2 based on market prices obtained from potential buyers.

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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 relies 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 and To Be Announced securities for mandatory delivery contracts. 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 5 – 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, 2022 and the year ended December 31, 2021 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, 2020 |  | $ | 5,645 |
Cash settlement |  |  | (1,767 | )
Losses included in earnings |  |  | 238 |
Balance at December 31, 2021 |  |  | 4,116 |
Cash settlement |  |  | (1,994 | )
Losses included in earnings |  |  | 173 |
Balance at September 30, 2022 |  | $ | 2,295 |

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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.

($ in thousands) |  |  |  |  |  |
﻿ |  | Fair Value |
Level 3 Class |  | September 30, 2022 |  |  | December 31, 2021 |
Derivative liability |  | $ | 2,295 |  |  | $ | 4,116 |
Valuation technique |  | Discounted cash flow |  |  | Discounted cash flow |
Unobservable inputs: |  |  |  |  |  |
Visa Class A appreciation - range |  | 6-12% |  |  | 6%-12% |
Visa Class A appreciation - weighted average |  | 9% |  |  | 9% |
Conversion rate - range |  | 1.61 x-1.60 x |  |  | 1.62 x-1.60 x |
Conversion rate -weighted average |  | 1.6030 x |  |  | 1.6091 x |
Time until resolution |  | 3-15 months |  |  | 3-24 months |

The Company’s policy is to recognize transfers between valuation hierarchy levels as of the end of a reporting period.

Fair Value of Assets Measured on a Nonrecurring Basis

Certain assets and liabilities are measured at fair value on a nonrecurring basis. Collateral-dependent loans individually evaluated for credit loss 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, 2022 |
(in thousands) |  | Level 1 |  |  | Level 2 |  |  | Level 3 |  |  | Total |
Collateral-dependent loans individually evaluated for credit loss |  | $ | — |  |  | $ | 4,756 |  |  | $ | — |  |  | $ | 4,756 |
Other real estate owned and foreclosed assets, net |  |  | — |  |  |  | — |  |  |  | 2,085 |  |  |  | 2,085 |
Total nonrecurring fair value measurements |  | $ | — |  |  | $ | 4,756 |  |  | $ | 2,085 |  |  | $ | 6,841 |

﻿ |  | December 31, 2021 |
(in thousands) |  | Level 1 |  |  | Level 2 |  |  | Level 3 |  |  | Total |
Collateral-dependent loans individually evaluated for credit loss |  | $ | — |  |  | $ | 13,253 |  |  | $ | — |  |  | $ | 13,253 |
Other real estate owned and foreclosed assets, net |  |  | — |  |  |  | — |  |  |  | 7,533 |  |  |  | 7,533 |
Total nonrecurring fair value measurements |  | $ | — |  |  | $ | 13,253 |  |  | $ | 7,533 |  |  | $ | 20,786 |

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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 described earlier in this 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 either carried under the fair value option or at the lower of cost or market. Given the short duration of these instruments, 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 – At September 30, 2022, short-term FHLB borrowings was comprised of floating-rate instruments that reprice daily and, therefore, the carrying amount of the instruments is a reasonable estimate of fair value and is reflected as Level 1 in the respective table below. At December 31, 2021, short-term FHLB borrowings was comprised of fixed-rate instruments for which the fair value was estimated by discounting the future contractual cash flows using current market rates at which borrowings with similar terms and options could be obtained and, therefore, is reflected as Level 2 in respective the table below.

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 described earlier in this note.

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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, 2022 |
﻿ |  |  |  |  |  |  | Total Fair |  | Carrying |
(in thousands) | Level 1 |  | Level 2 |  | Level 3 |  | Value |  | Amount |
Financial assets: |  |  |  |  |  |  |  |  |  |
Cash, interest-bearing bank deposits, and federal funds sold | $ | 851,251 |  | $ | — |  | $ | — |  | $ | 851,251 |  | $ | 851,251 |
Available for sale securities |  | — |  |  | 5,466,843 |  |  | — |  |  | 5,466,843 |  |  | 5,466,843 |
Held to maturity securities |  | — |  |  | 2,606,080 |  |  | — |  |  | 2,606,080 |  |  | 2,866,348 |
Loans, net |  | — |  |  | 4,756 |  |  | 21,457,199 |  |  | 21,461,955 |  |  | 22,279,469 |
Loans held for sale |  | — |  |  | 33,008 |  |  | — |  |  | 33,008 |  |  | 33,008 |
Derivative financial instruments |  | — |  |  | 119,100 |  |  | — |  |  | 119,100 |  |  | 119,100 |
Financial liabilities: |  |  |  |  |  |  |  |  |  |
Deposits | $ | — |  | $ | — |  | $ | 28,925,735 |  | $ | 28,925,735 |  | $ | 28,951,274 |
Federal funds purchased |  | 1,850 |  |  | — |  |  | — |  |  | 1,850 |  |  | 1,850 |
Securities sold under agreements to repurchase |  | 541,131 |  |  | — |  |  | — |  |  | 541,131 |  |  | 541,131 |
FHLB short-term borrowings |  | 1,000,000 |  |  | — |  |  | — |  |  | 1,000,000 |  |  | 1,000,000 |
Long-term debt |  | — |  |  | 197,059 |  |  | — |  |  | 197,059 |  |  | 236,410 |
Derivative financial instruments |  | — |  |  | 224,143 |  |  | 2,295 |  |  | 226,438 |  |  | 226,438 |

﻿ | December 31, 2021 |
(in thousands) | Level 1 |  | Level 2 |  | Level 3 |  | Total Fair Value |  | Carrying Amount |
Financial assets: |  |  |  |  |  |  |  |  |  |
Cash, interest-bearing bank deposits, and federal funds sold | $ | 4,231,836 |  | $ | — |  | $ | — |  | $ | 4,231,836 |  | $ | 4,231,836 |
Available for sale securities |  | — |  |  | 6,986,698 |  |  | — |  |  | 6,986,698 |  |  | 6,986,698 |
Held to maturity securities |  | — |  |  | 1,631,482 |  |  | — |  |  | 1,631,482 |  |  | 1,565,751 |
Loans, net |  | — |  |  | 13,253 |  |  | 20,720,568 |  |  | 20,733,821 |  |  | 20,792,217 |
Loans held for sale |  | — |  |  | 93,069 |  |  | — |  |  | 93,069 |  |  | 93,069 |
Derivative financial instruments |  | — |  |  | 75,867 |  |  | — |  |  | 75,867 |  |  | 75,867 |
Financial liabilities: |  |  |  |  |  |  |  |  |  |
Deposits | $ | — |  | $ | — |  | $ | 30,432,646 |  | $ | 30,432,646 |  | $ | 30,465,897 |
Federal funds purchased |  | 1,850 |  |  | — |  |  | — |  |  | 1,850 |  |  | 1,850 |
Securities sold under agreements to repurchase |  | 563,211 |  |  | — |  |  | — |  |  | 563,211 |  |  | 563,211 |
FHLB short-term borrowings |  | — |  |  | 1,119,026 |  |  | — |  |  | 1,119,026 |  |  | 1,100,000 |
Long-term debt |  | — |  |  | 253,677 |  |  | — |  |  | 253,677 |  |  | 244,220 |
Derivative financial instruments |  | — |  |  | 30,930 |  |  | 4,116 |  |  | 35,046 |  |  | 35,046 |

14. Recent Accounting Pronouncements

Accounting Standards Issued But Not Yet Adopted

In March 2022, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2022-01, "Derivatives and Hedging (Topic 815): Fair Value Hedging - Portfolio Layer Method," to provide clarification of and expand upon certain provisions of Topic 815 that became effective with the issuance of ASU 2017-12. The amendments in this update include the following provisions: (1) expand the current last-of-layer method to allow multiple hedged layers of a single closed portfolio and, accordingly, renaming the last-of-layer method to the portfolio layer method; (2) expand the scope of the portfolio layer method to include nonprepayable financial assets; (3) specify that eligible hedging instruments in a single-layer hedge may include spot-starting or forward-starting constant-notional swaps, or spot or forward-starting amortizing-notional swaps and that the number of hedged layers corresponds with the number of hedges designated; (4) provide additional guidance on the accounting for and disclosure of hedge basis adjustments that are applicable to the portfolio layer method whether a single hedged layer or multiple hedged layers are designated, and; (5) specify how hedge basis adjustments should be considered when determining credit losses for the assets included in the closed portfolio. The amendments in this update apply to all entities that elect to apply the portfolio layer method of hedge accounting in accordance with Topic 815.

The amendments in this Update are effective for fiscal years beginning after December 15, 2022, and interim periods within those fiscal years. Early adoption is permitted on any date on or after the issuance of this update, with the effect of adopting the amendments related to basis adjustments reflected as of the beginning of the fiscal year of adoption (that is, the initial application date). Upon adoption, any entity may designate multiple hedged layers of a single closed portfolio solely on a prospective basis. All entities are required to apply the amendments related to hedge basis adjustments under the portfolio layer method, except for those related to

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disclosures, on a modified retrospective basis by means of a cumulative-effect adjustment to the opening balance of retained earnings on the initial application date. Entities have the option to apply the amendments related to disclosures on a prospective basis from the initial application date or on a retrospective basis to each prior period presented after the date of adoption of the amendments in Update 2017-12. Within 30 days after the adoption, an entity may reclassify debt securities classified in the held-to-maturity category at the date of adoption to the available-for-sale category only if the entity applies portfolio layer method hedging to one or more closed portfolios that include those debt securities. The Company is currently evaluating this standard, including consideration of early adoption, however, the impact of adoption is not expected to be material to the consolidated results of operation.

In March 2022, the FASB issued ASU 2022-02, "Financial Instruments: Credit Losses (Topic 326) - Troubled Debt Restructurings and Vintage Disclosures." The amendments in this update cover two issues: (1) the elimination of TDR recognition and measurement guidance as prescribed by ASC 310-40 and, instead, require that an entity evaluate (consistent with the accounting for other loan modifications) whether the modification represents a new loan or a continuation of an existing loan. The amendments enhance existing disclosure requirements and introduce new requirements related to certain modifications of receivables made to borrowers experiencing financial difficulty; and, (2) for public business entities, the requirement that an entity disclose current-period gross write-offs by year of origination for financing receivables and net investment in leases within the scope of Subtopic 326-20. Gross write-off information must be included in the vintage disclosures required for public business entities in accordance with paragraph 326-20-50-6, which requires that an entity disclose the amortized cost basis of financing receivables by credit quality indicator and class of financing receivable by year of origination.

The amendments in this update are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. For the elimination of recognition and measurement guidance on troubled debt restructurings by creditors in Subtopic 310-40, an entity may elect to apply a modified retrospective transition by means of a cumulative-effect adjustment to the opening retained earnings as of the beginning of the fiscal year of adoption, or a prospective approach applied to modifications occurring after the date of adoption. The remainder of amendments should be applied prospectively. Early adoption of the amendments in this update is permitted, including adoption in an interim period. An entity may elect to early adopt the amendments about TDRs and related disclosure enhancements separately from the amendments related to vintage disclosures. The Company is currently evaluating this standard; however, the impact of adoption is not expected to be material to the consolidated results of operation.

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

FORWARD-LOOKING STATEMENTS

The objective of this discussion and analysis is to provide material information relevant to the assessment of the financial condition and results of operations of Hancock Whitney Corporation and subsidiaries during the nine months ended September 30, 2022 and selected comparable prior periods, including an evaluation of the amounts and certainty of cash flows from operations and outside sources. This discussion and analysis is intended to highlight and supplement financial and operating data and information presented elsewhere in this report, including the consolidated financial statements and related notes. The discussion 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. Forward-looking statements are subject to risks and uncertainties. Should one or more of these risks or uncertainties materialize, our actual results may differ from those expressed or implied by the forward-looking statements. 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:

•
general economic and business conditions in our local markets, including conditions affecting employment levels, interest rates, inflation, supply chains, the threat of recession, volatile equity capital markets, collateral values, customer income, creditworthiness and confidence, spending and savings that may affect customer bankruptcies, defaults, charge-offs and deposit activity;
•
the ongoing impact of the COVID-19 pandemic on the economy and our operations;
•
balance sheet and revenue growth expectations may differ from actual results;
•
the risk that our provision for credit losses may be inadequate or may be negatively affected by credit risk exposure;
•
loan growth expectations;
•
the impact of Paycheck Protection Program (PPP) loans and forgiveness on our results;
•
management’s predictions about charge-offs;
•
the risk that our enterprise risk management framework may not identify or address risks adequately, which may result in unexpected losses;
•
the impact of 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, including the impact of changes in interest rates;
•
future expense levels;
•
improvements in expense to revenue (efficiency ratio), including the risk that we may not realize and/or sustain the expected benefits from our efficiency and growth initiatives or that we may not be able to realize these cost savings or revenue benefits in the time period expected, which could negatively affect our future profitability;
•
success of revenue-generating and cost reduction 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 third-party vendors;
•
risks related to potential claims, damages, penalties, fines and reputational damage resulting from pending or future litigation, regulatory proceedings or enforcement actions;
•
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;
•
the extensive use, reliability, disruption, and accuracy of the models and data we rely on;
•
risks related to our implementation of new lines of business, new products and services or new technologies;
•
projected tax rates;
•
future profitability;
•
purchase accounting impacts, such as accretion levels;
•
our ability to identify and address potential cybersecurity risks on our systems and/or third party vendors and service providers on which we rely, 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;

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•
our ability to receive dividends from Hancock Whitney Bank could affect our liquidity, including our ability to pay dividends or take other capital actions;
•
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;
•
programs associated with the government’s response to the COVID-19 pandemic;
•
the financial impact of future tax legislation;
•
the effects of war or other conflicts, including Russia's military action in Ukraine, acts of terrorism, climate change, natural disasters such as hurricanes, freezes, flooding, man-made disasters, such as oil spills in the Gulf of Mexico, health emergencies, epidemics or pandemics, or other catastrophic events that may affect general economic conditions; and
•
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, 2021 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 in the Consolidated Financial Results table 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 the provisions of subpart 229.1400 of the Securities and Exchange Commission’s Regulation S-K, “Disclosures by Bank and Savings and Loan Registrants,” 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.

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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.

Current Economic Environment

Economic conditions in the third quarter of 2022 continued to be influenced by the persistent high level of inflation. While the annual inflation rate, as measured by the consumer price index, slowed to 8.2% in September 2022 from the recent peak of 9.1% in June 2022, prolonged labor market shortages and resulting wage pressures and supply chain disruption remain significant impediments to the easing of inflation. After two consecutive quarters of contraction in Real Gross Domestic Product (GDP), the third quarter of 2022 reflected modest growth of 2.6%. Employment indicators also remain strong, with the unemployment rate at 3.5% in September 2022. The Federal Reserve has taken an aggressive approach to combat inflation, issuing a series of interest rate increases that began in March 2022 totaling 300 basis points, including 75-basis point rate increases in July and September 2022. The Federal Reserve has also accelerated quantitative tightening with its September 2022 announcement that the agency will allow its balance sheet to decline by $95 billion per month, as compared to $47.5 billion per month from June through August 2022. The full extent of the impact of the Federal Reserve’s actions to date to reduce inflation and the potential scope of additional Federal Reserve actions are uncertain and may have a significant negative impact on the U.S. economy, including the possibility of an economic recession in the near or mid-term.

Despite persistent inflationary pressures, much of our market area continued to show indications of economic health in the third quarter. We experienced strong loan demand across our portfolio that contributed to a more than 3% linked-quarter growth rate in loans, and our credit quality indicators remain near historically low levels. The growth in the loan portfolio, which was partially funded by the remaining excess liquidity in our balance sheet, was across our geographic footprint and diverse across most business lines. This shift in earning assets from excess liquidity into higher-yielding loans, along with the net impact of the most recent interest rate increases, contributed to a 50 basis point expansion of our net interest margin in the quarter. Increased customer spending amid inflationary conditions, and heightened competition for deposits in the rising interest rate environment has put some pressure on our deposit base, which was down over 3% linked-quarter.

Economic Outlook

We utilize economic forecasts produced by Moody’s Analytics (Moody’s) that provide various scenarios to assist in the development of our economic outlook. This outlook discussion utilizes the September 2022 Moody’s forecast, the most current available at September 30, 2022. The forecasts are anchored on a baseline forecast scenario, which Moody’s defines as the “most likely outcome” of where the economy is headed based on current conditions. Several upside and downside scenarios are produced that are derived from the baseline scenario.

While incorporating a degree of optimism in terms of the effectiveness of monetary policy and the ultimate resolution of inflation, the assumptions underlying September 2022 baseline scenario are somewhat less optimistic than those included in the June 2022 scenario. Key assumptions within the September 2022 baseline forecast include the following: (1) the global oil market remains mostly balanced in 2023, allowing oil prices to gradually drop; (2) the return to full-employment, defined as an unemployment rate of 3.5%, labor force participation of approximately 62.5% and a prime age employment to population ratio above 80%, is expected to be achieved in the coming months; (3) GDP is expected to grow in the second half of the year, with forecasted annual growth of 1.6% in 2022, 1.4% in 2023 and 2.6% in 2024; (4) the Federal Funds rate will reach a target rate of 3.5% by the end of 2022, with the possibility of future rate increases; rate cuts not forecasted to begin until 2025; and (5) future surges in COVID-19 infections will not have a significant negative impact upon economic conditions.

The alternative Moody’s forecast scenarios have varying depictions of economic performance as compared to the baseline. Consistent with the prior quarter, management determined that assumptions provided for in the downside slower near-term growth/mild recessionary scenario (S-2) to be more likely than the baseline scenario; as such, the S-2 scenario was given a 75% probability weighting in our allowance for credit losses calculation at September 30, 2022. The S-2 scenario assumes that the conflict between

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Russia and Ukraine spans longer than anticipated in the baseline scenario and results in longer and larger interruption of global commodity supply; in turn, supply chain issues worsen, increasing shortages of affected goods and further boosting inflation. The Federal Reserve would react with a more aggressive approach than assumed in the baseline scenario, generating greater corrections in equity and housing markets and declines in spending. As such, the S-2 scenario incorporates a mild recession beginning in the fourth quarter of 2022, spanning three quarters, with a peak-to-trough in GDP decline of about 1.4%. Further, the S-2 scenario assumes that unemployment rate averages 4.0% in 2022, 6.1% in 2023 and 4.9% in 2024, with the return to full employment not occurring until the third quarter of 2024 and that an increase in the number of COVID-19 cases, hospitalizations and deaths will impede growth in spending on air travel, retail and hotels.

At September 30, 2022, the credit loss outlook for our portfolio as a whole was comparatively consistent with the prior period. To-date, our asset quality metrics have been relatively stable, with modest growth in commercial criticized loans, little change in nonperforming loans and only minimal credit losses. We continue to closely monitor our portfolio for customers that are sensitive to prolonged inflation and the rising interest rate environment. We expect slower loan growth in the fourth quarter when compared to the third quarter, reflecting slowing demand and a focus on lending to resilient borrowers in light of current economic pressures. We also expect a typical seasonal uptick in deposits during the fourth quarter.

The effects of inflation and the Federal Reserve's actions to counter those effects in the form of further interest rate increases and quantitative tightening have and are likely to continue to reduce economic growth in the near term. While uncertainty over the consequences of these actions remains, we expect continued interest rate increases will contribute favorably to our net interest income and net interest margin and overall operating results.

Highlights of the Third Quarter 2022

We reported net income for the third quarter of 2022 of $135.4 million, or $1.55 per diluted common share, compared to $121.4 million, or $1.38 per diluted common share, in the second quarter of 2022 and $129.6 million, or $1.46 per diluted common share, in the third quarter of 2021. There were no nonoperating items in the third and second quarters of 2022. There was $1.4 million, or $0.01 per share after-tax, of net nonoperating income in the third quarter of 2021, attributable to a gain on the sale of the remaining Hancock Horizon funds and a severance expense reversal, partially offset by hurricane-related expenses.

Third quarter 2022 results compared to second quarter 2022:

•
Net income of $135.4 million, or $1.55 per diluted share, was up $14.0 million, or $0.17 per diluted share
•
Pre-provision net revenue (PPNR), a non-GAAP measure, totaled $174.7 million, up $27.9 million, or 19%
•
Loans of $22.6 billion increased $739.5 million, or 3%
•
Nonperforming loans and criticized commercial loans remain at near-historical lows, increasing only $1.2 million, or 3%, and $23.4 million, or 8%, respectively
•
Deposits of $29.0 billion decreased $915.2 million, or 3%, reflecting decreases of $529.6 million in interest-bearing deposits and $385.5 million in noninterest-bearing deposits
•
Net interest margin increased 50 basis points (bps) to 3.54%
•
Common equity tier 1 ratio of 11.10% was up 2 bps, and tangible common equity ratio of 6.73% was down 48 bps
•
Efficiency ratio improved to 51.62%, down from 54.95%

The results for the third quarter of 2022 were one of the best in our Company’s history. We experienced strong loan growth of $739.5 million across our footprint and lines of business. The rising interest rate environment contributed to a $27.9 million increase in pre-provision net revenue and a 50 basis point expansion of our net interest margin. Our asset quality metrics remain near historically low levels, our capital levels are sound, and we once again lowered our efficiency ratio that remains well below our target of 55%. We are mindful of macroeconomic trends that could impact us and believe that we are well positioned should a recessionary period begin.

We continue to invest in new bankers across our footprint, adding a total of five during the third quarter to markets in Dallas, San Antonio, Nashville and Tampa. Technology enhancement also continues to be a focus as we strive to improve the customer experience and improve shareholder value.

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Consolidated Financial Results

The following table contains the consolidated financial results for the periods indicated.

| Three Months Ended |  | Nine Months Ended |
(in thousands, except per share data) | September 30, 2022 |  | June 30, 2022 |  | March 31, 2022 |  | December 31, 2021 |  | September 30, 2021 |  | September 30, 2022 |  | September 30, 2021 |
Income Statement Data: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest income | $ |  | 299,737 |  | $ |  | 254,864 |  | $ |  | 236,786 |  | $ |  | 238,756 |  | $ |  | 244,417 |  | $ |  | 791,387 |  | $ |  | 743,502 |
Interest income (te) (a) |  |  | 302,340 |  |  |  | 257,449 |  |  |  | 239,331 |  |  |  | 241,391 |  |  |  | 247,185 |  |  |  | 799,120 |  |  |  | 752,046 |
Interest expense |  |  | 19,430 |  |  |  | 9,132 |  |  |  | 8,323 |  |  |  | 9,460 |  |  |  | 9,708 |  |  |  | 36,885 |  |  |  | 39,563 |
Net interest income (te) |  |  | 282,910 |  |  |  | 248,317 |  |  |  | 231,008 |  |  |  | 231,931 |  |  |  | 237,477 |  |  |  | 762,235 |  |  |  | 712,483 |
Provision for credit losses |  |  | 1,402 |  |  |  | (9,761 | ) |  |  | (22,527 | ) |  |  | (28,399 | ) |  |  | (26,955 | ) |  |  | (30,886 | ) |  |  | (49,095 | )
Noninterest income |  |  | 85,337 |  |  |  | 85,653 |  |  |  | 83,432 |  |  |  | 89,612 |  |  |  | 93,361 |  |  |  | 254,422 |  |  |  | 274,722 |
Noninterest expense |  |  | 193,502 |  |  |  | 187,097 |  |  |  | 179,939 |  |  |  | 182,462 |  |  |  | 194,703 |  |  |  | 560,538 |  |  |  | 624,545 |
Income before income taxes |  |  | 170,740 |  |  |  | 154,049 |  |  |  | 154,483 |  |  |  | 164,845 |  |  |  | 160,322 |  |  |  | 479,272 |  |  |  | 403,211 |
Income tax expense |  |  | 35,351 |  |  |  | 32,614 |  |  |  | 31,005 |  |  |  | 27,102 |  |  |  | 30,740 |  |  |  | 98,970 |  |  |  | 77,739 |
Net income | $ |  | 135,389 |  | $ |  | 121,435 |  | $ |  | 123,478 |  | $ |  | 137,743 |  | $ |  | 129,582 |  | $ |  | 380,302 |  | $ |  | 325,472 |
For informational purposes - included above, pre-tax |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Nonoperating item included in noninterest income: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Gain on hurricane-related insurance settlement | $ |  | — |  | $ |  | — |  | $ |  | — |  | $ |  | 3,600 |  | $ |  | — |  | $ |  | — |  | $ |  | — |
Gain on sale of Hancock Horizon Funds |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 4,576 |  |  |  | — |  |  |  | 4,576 |
Gain on sale of Mastercard Class B common stock |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 2,800 |
Nonoperating items included in noninterest expense: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Efficiency initiatives |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (649 | ) |  |  | (1,867 | ) |  |  | — |  |  |  | 38,945 |
Hurricane related expenses |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (680 | ) |  |  | 5,092 |  |  |  | — |  |  |  | 5,092 |
Loss on redemption of subordinated notes |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 4,165 |
Balance Sheet Data: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Period end balance sheet data |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Loans | $ |  | 22,585,585 |  | $ |  | 21,846,068 |  | $ |  | 21,323,341 |  | $ |  | 21,134,282 |  | $ |  | 20,886,015 |  | $ |  | 22,585,585 |  | $ |  | 20,886,015 |
Earning assets |  |  | 31,213,449 |  |  |  | 31,292,910 |  |  |  | 32,997,323 |  |  |  | 33,610,435 |  |  |  | 32,348,036 |  |  |  | 31,213,449 |  |  |  | 32,348,036 |
Total assets |  |  | 34,567,242 |  |  |  | 34,637,525 |  |  |  | 36,317,291 |  |  |  | 36,531,205 |  |  |  | 35,318,308 |  |  |  | 34,567,242 |  |  |  | 35,318,308 |
Noninterest-bearing deposits |  |  | 14,290,817 |  |  |  | 14,676,342 |  |  |  | 14,976,670 |  |  |  | 14,392,808 |  |  |  | 13,653,376 |  |  |  | 14,290,817 |  |  |  | 13,653,376 |
Total deposits |  |  | 28,951,274 |  |  |  | 29,866,432 |  |  |  | 30,499,709 |  |  |  | 30,465,897 |  |  |  | 29,208,157 |  |  |  | 28,951,274 |  |  |  | 29,208,157 |
Stockholders' equity |  |  | 3,180,439 |  |  |  | 3,349,723 |  |  |  | 3,450,951 |  |  |  | 3,670,352 |  |  |  | 3,629,766 |  |  |  | 3,180,439 |  |  |  | 3,629,766 |
Average balance sheet data |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Loans | $ |  | 22,138,709 |  | $ |  | 21,657,528 |  | $ |  | 21,122,038 |  | $ |  | 20,770,130 |  | $ |  | 20,941,173 |  | $ |  | 21,643,149 |  | $ |  | 21,355,483 |
Earning assets |  |  | 31,783,801 |  |  |  | 32,780,813 |  |  |  | 33,201,926 |  |  |  | 32,913,659 |  |  |  | 32,097,381 |  |  |  | 32,583,652 |  |  |  | 31,773,473 |
Total assets |  |  | 34,377,773 |  |  |  | 35,380,247 |  |  |  | 36,003,803 |  |  |  | 35,829,027 |  |  |  | 35,207,960 |  |  |  | 35,247,985 |  |  |  | 34,821,420 |
Noninterest-bearing deposits |  |  | 14,323,646 |  |  |  | 14,655,800 |  |  |  | 14,363,324 |  |  |  | 14,126,335 |  |  |  | 13,535,961 |  |  |  | 14,447,445 |  |  |  | 13,053,586 |
Total deposits |  |  | 29,180,626 |  |  |  | 29,979,940 |  |  |  | 30,029,793 |  |  |  | 29,750,665 |  |  |  | 29,237,306 |  |  |  | 29,727,009 |  |  |  | 28,872,317 |
Stockholders' equity |  |  | 3,405,463 |  |  |  | 3,383,789 |  |  |  | 3,607,061 |  |  |  | 3,642,003 |  |  |  | 3,606,087 |  |  |  | 3,464,699 |  |  |  | 3,512,651 |
Common Shares Data: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Earnings per share - basic | $ |  | 1.56 |  | $ |  | 1.39 |  | $ |  | 1.40 |  | $ |  | 1.56 |  | $ |  | 1.46 |  | $ |  | 4.35 |  | $ |  | 3.67 |
Earnings per share - diluted |  |  | 1.55 |  |  |  | 1.38 |  |  |  | 1.40 |  |  |  | 1.55 |  |  |  | 1.46 |  |  |  | 4.33 |  |  |  | 3.67 |
Cash dividends per common share |  |  | 0.27 |  |  |  | 0.27 |  |  |  | 0.27 |  |  |  | 0.27 |  |  |  | 0.27 |  |  |  | 0.81 |  |  |  | 0.81 |
Book value per share (period end) |  |  | 37.12 |  |  |  | 39.08 |  |  |  | 39.91 |  |  |  | 42.31 |  |  |  | 41.81 |  |  |  | 37.12 |  |  |  | 41.81 |
Tangible book value per share (period end) |  |  | 26.44 |  |  |  | 28.37 |  |  |  | 29.25 |  |  |  | 31.64 |  |  |  | 31.10 |  |  |  | 26.44 |  |  |  | 31.10 |
Weighted average number of shares - diluted |  |  | 86,020 |  |  |  | 86,354 |  |  |  | 86,936 |  |  |  | 87,132 |  |  |  | 87,006 |  |  |  | 86,439 |  |  |  | 86,951 |
Period end number of shares |  |  | 85,686 |  |  |  | 85,714 |  |  |  | 86,460 |  |  |  | 86,749 |  |  |  | 86,823 |  |  |  | 85,686 |  |  |  | 86,823 |

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| Three Months Ended |  | Nine Months Ended |
($ in thousands) | September 30, 2022 |  | June 30, 2022 |  | March 31, 2022 |  | December 31, 2021 |  | September 30, 2021 |  | September 30, 2022 |  | September 30, 2021 |
Performance and other data: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Return on average assets |  |  | 1.56 | % |  |  | 1.38 | % |  |  | 1.39 | % |  |  | 1.53 | % |  |  | 1.46 | % |  |  | 1.44 | % |  |  | 1.25 | %
Return on average common equity |  |  | 15.77 | % |  |  | 14.39 | % |  |  | 13.88 | % |  |  | 15.00 | % |  |  | 14.26 | % |  |  | 14.68 | % |  |  | 12.39 | %
Return on average tangible common equity |  |  | 21.58 | % |  |  | 19.77 | % |  |  | 18.66 | % |  |  | 20.13 | % |  |  | 19.22 | % |  |  | 19.98 | % |  |  | 16.89 | %
Tangible common equity (b) |  |  | 6.73 | % |  |  | 7.21 | % |  |  | 7.15 | % |  |  | 7.71 | % |  |  | 7.85 | % |  |  | 6.73 | % |  |  | 7.85 | %
Tangible common equity Tier 1 (CET1) ratio |  |  | 11.10 | % |  |  | 11.08 | % |  |  | 11.12 | % |  |  | 11.09 | % |  |  | 11.17 | % |  |  | 11.10 | % |  |  | 11.17 | %
Net interest margin (te) |  |  | 3.54 | % |  |  | 3.04 | % |  |  | 2.81 | % |  |  | 2.80 | % |  |  | 2.94 | % |  |  | 3.13 | % |  |  | 3.00 | %
Noninterest income as a percentage of total revenue (te) |  |  | 23.17 | % |  |  | 25.65 | % |  |  | 26.53 | % |  |  | 27.87 | % |  |  | 28.22 | % |  |  | 25.03 | % |  |  | 27.83 | %
Efficiency ratio (c ) |  |  | 51.62 | % |  |  | 54.95 | % |  |  | 56.03 | % |  |  | 56.57 | % |  |  | 57.44 | % |  |  | 54.08 | % |  |  | 57.52 | %
Allowance for credit loss as a percentage of total loans |  |  | 1.50 | % |  |  | 1.55 | % |  |  | 1.63 | % |  |  | 1.76 | % |  |  | 1.92 | % |  |  | 1.50 | % |  |  | 1.92 | %
Annualized net charge-offs to average loans |  |  | 0.02 | % |  |  | (0.01 | )% |  |  | 0.01 | % |  |  | 0.01 | % |  |  | 0.03 | % |  |  | 0.01 | % |  |  | 0.19 | %
Nonperforming assets as a percentage of loans, ORE and foreclosed assets |  |  | 0.19 | % |  |  | 0.20 | % |  |  | 0.24 | % |  |  | 0.32 | % |  |  | 0.34 | % |  |  | 0.19 | % |  |  | 0.34 | %
FTE headcount |  |  | 3,607 |  |  |  | 3,594 |  |  |  | 3,543 |  |  |  | 3,486 |  |  |  | 3,429 |  |  |  | 3,607 |  |  |  | 3,429 |
Reconciliation of operating revenue and operating pre-provision net revenue (non-GAAP measure) (te) (d) |
Net interest income | $ |  | 280,307 |  | $ |  | 245,732 |  | $ |  | 228,463 |  | $ |  | 229,296 |  | $ |  | 234,709 |  | $ |  | 754,502 |  | $ |  | 703,939 |
Noninterest income |  |  | 85,337 |  |  |  | 85,653 |  |  |  | 83,432 |  |  |  | 89,612 |  |  |  | 93,361 |  |  |  | 254,422 |  |  |  | 274,722 |
Total revenue |  |  | 365,644 |  |  |  | 331,385 |  |  |  | 311,895 |  |  |  | 318,908 |  |  |  | 328,070 |  |  |  | 1,008,924 |  |  |  | 978,661 |
Taxable equivalent adjustment |  |  | 2,603 |  |  |  | 2,585 |  |  |  | 2,545 |  |  |  | 2,635 |  |  |  | 2,768 |  |  |  | 7,733 |  |  |  | 8,544 |
Nonoperating revenue |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (3,600 | ) |  |  | (4,576 | ) |  |  | — |  |  |  | (7,376 | )
Total revenue (te) | $ |  | 368,247 |  | $ |  | 333,970 |  | $ |  | 314,440 |  | $ |  | 317,943 |  | $ |  | 326,262 |  | $ |  | 1,016,657 |  | $ |  | 979,829 |
Noninterest expense |  |  | (193,502 | ) |  |  | (187,097 | ) |  |  | (179,939 | ) |  |  | (182,462 | ) |  |  | (194,703 | ) |  |  | (560,538 | ) |  |  | (624,545 | )
Nonoperating expense |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (1,329 | ) |  |  | 3,225 |  |  |  | — |  |  |  | 48,202 |
Operating pre-provision net revenue (te) | $ |  | 174,745 |  | $ |  | 146,873 |  | $ |  | 134,501 |  | $ |  | 134,152 |  | $ |  | 134,784 |  | $ |  | 456,119 |  | $ |  | 403,486 |

(a)
For analytical purposes, management adjusts interest income and net interest income for tax-exempt items to a taxable equivalent basis using a federal income tax rate of 21%
(b)
The tangible common equity ratio is common stockholders’ equity less intangible assets divided by total assets less intangible assets
(c)
The efficiency ratio is noninterest expense to total net interest (te) and noninterest income, excluding amortization of purchased intangibles and nonoperating items
(d)
Refer to the non-GAAP financial measures section of this analysis for a discussion of these measures

RESULTS OF OPERATIONS

Net Interest Income

Net interest income (te) for the third quarter of 2022 was $282.9 million, up $34.6 million, or 14%, compared to the second quarter of 2022 and up $45.4 million, or 19%, from the third quarter of 2021.

The increase in net interest income (te) compared to the second quarter of 2022 is largely attributable to the impact of the recent Federal Reserve interest rate increases, with variable-rate assets repricing, new loans and securities added at higher yields, and a lag in increasing our deposit rate offerings. Net interest income further benefitted from an additional accrual day during the third quarter ($2.0 million) and lower net premium/discount amortization on the securities portfolio ($1.9 million). These improvements were partially offset by lower levels of the accretion of PPP loan fees ($0.8 million) and a 13 bp increase in the cost of funds.

The net interest margin for the third quarter of 2022 was 3.54%, up 50 bps from 3.04% in the second quarter of 2022. The widening of net interest margin from the prior quarter was largely due to the series of Federal Reserve interest rate increases, coupled with a favorable shift in the earning asset mix, including average core loan growth of $603 million, securities portfolio growth of $198 million and a $1.7 billion reduction in lower-yielding short-term investments. Approximately 58% of our loan portfolio is tied to variable rates, including hybrid adjustable rate mortgages (ARMs). These improvements were partially offset by a 13 bp increase in the cost of funds and a 1 bp decline due to the impact of PPP loan forgiveness, resulting from a $122 million decrease in average PPP loans during the third quarter. The increase in cost of funds reflects increases in deposit costs as we began to increase rates to remain competitive, and in short-term borrowing costs as we entered into new variable-rate FHLB advances during the quarter.

The $45.4 million increase in net interest income (te) compared to the third quarter of 2021 is primarily attributable to a $55.1 million increase in interest income (te), partially offset by a $9.7 million increase in interest expense. The increase in interest income is largely due to the interest rate increases, a favorable change in the earning asset mix, and a $4.0 million decrease in premium amortization on the securities portfolio. The favorable change in the earning asset mix reflects a $1.2 billion increase in loans, $0.8 billion growth in the securities portfolio and a $2.3 billion decrease in short-term investments. The increase in interest income was partially offset by $13.4 million of lower PPP loan fees, a $1.1 million decrease in nonaccrual interest recoveries and a $0.4 million decrease in purchase accounting discount accretion. The increase in interest expense was driven by both a 23 bp increase in the cost of deposits, as interest

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rate offerings were increased to remain competitive, and a 97 bp increase in the cost of borrowings due to a change in mix from fixed-rate to variable-rate instruments within FHLB borrowings.

The net interest margin was up 60 bps compared to the third quarter of 2021 as a result of the rising interest rate environment and a more favorable mix of average earning assets. Compared to the third quarter of 2021, the yield on earning assets was up 72 bps to 3.78%, while the cost of funds increased 12 bps to 0.24%.

Net interest income (te) for the nine months ended September 30, 2022 was $762.2 million, up $49.8 million, or 7%, from the same period in 2021. The increase is attributable to an increase in interest income of $47.1 million and a decrease in interest expense of $2.7 million. Interest income (te) increased largely due to the impact of the series of interest rate increases upon new and repricing earning assets and a favorable change in the earning asset mix and, to a lesser extent, a decrease of $8.9 million of net premium amortization on the securities portfolio. The impact was partially offset by a $38.4 million reduction of PPP fees and decreases of $2.7 million of purchase accounting discount accretion and $7.6 million of nonaccrual interest recoveries. The decrease in interest expense is primarily due to lower cost of funds, driven by an improved mix of deposits and a decline in higher-cost borrowings. The net interest margin for the nine months ended September 30, 2022 was 3.13%, up 13 bps compared to the same period in 2021. The increase is reflective of an increase in the yield on average earning assets of 12 bps, primarily driven by higher interest rates, an improved earning asset mix, and a 2 bp reduction in the cost of funds.

We expect to see further widening of our net interest margin in the near term, but at a slower pace than experienced in the third quarter. We remain asset sensitive and expect to continue to benefit from additional Federal Reserve interest rate increases, our favorable mix of deposits and controlled funding costs.

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

|  | Three Months Ended |
|  | September 30, 2022 |  |  | June 30, 2022 |  |  | September 30, 2021 |
(dollars in millions) |  | Volume |  |  | Interest (d) |  |  | Rate |  |  | Volume |  |  | Interest (d) |  |  | Rate |  |  | Volume |  |  | Interest (d) |  |  | Rate |
Average earning assets |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial & real estate loans (te) (a) |  | $ | 17,855.9 |  |  | $ | 203.0 |  |  |  | 4.51 | % |  | $ | 17,562.0 |  |  | $ | 165.9 |  |  |  | 3.79 | % |  | $ | 16,918.4 |  |  | $ | 150.3 |  |  |  | 3.52 | %
Residential mortgage loans |  |  | 2,713.4 |  |  |  | 22.7 |  |  |  | 3.34 | % |  |  | 2,534.6 |  |  |  | 21.1 |  |  |  | 3.33 | % |  |  | 2,376.5 |  |  |  | 21.5 |  |  |  | 3.63 | %
Consumer loans |  |  | 1,569.4 |  |  |  | 23.2 |  |  |  | 5.87 | % |  |  | 1,560.9 |  |  |  | 19.6 |  |  |  | 5.03 | % |  |  | 1,646.3 |  |  |  | 20.4 |  |  |  | 4.90 | %
Loan fees & late charges |  |  | — |  |  |  | 1.3 |  |  |  | 0.00 | % |  |  | — |  |  |  | 1.9 |  |  |  | 0.00 | % |  |  | — |  |  |  | 13.5 |  |  |  | 0.00 | %
Total loans (te) (b) |  |  | 22,138.7 |  |  |  | 250.2 |  |  |  | 4.49 | % |  |  | 21,657.5 |  |  |  | 208.5 |  |  |  | 3.86 | % |  |  | 20,941.2 |  |  |  | 205.7 |  |  |  | 3.90 | %
Loans held for sale |  |  | 35.2 |  |  |  | 0.4 |  |  |  | 4.48 | % |  |  | 48.1 |  |  |  | 0.4 |  |  |  | 3.69 | % |  |  | 82.6 |  |  |  | 0.6 |  |  |  | 3.06 | %
US Treasury and government agency securities |  |  | 420.3 |  |  |  | 2.0 |  |  |  | 1.94 | % |  |  | 387.6 |  |  |  | 1.7 |  |  |  | 1.79 | % |  |  | 395.6 |  |  |  | 1.6 |  |  |  | 1.59 | %
Mortgage-backed securities and collateralized mortgage obligations |  |  | 7,822.4 |  |  |  | 40.9 |  |  |  | 2.09 | % |  |  | 7,658.2 |  |  |  | 36.3 |  |  |  | 1.90 | % |  |  | 7,033.7 |  |  |  | 31.4 |  |  |  | 1.79 | %
Municipals (te) |  |  | 911.5 |  |  |  | 6.8 |  |  |  | 2.97 | % |  |  | 912.4 |  |  |  | 6.8 |  |  |  | 2.96 | % |  |  | 925.0 |  |  |  | 6.8 |  |  |  | 2.93 | %
Other securities |  |  | 23.3 |  |  |  | 0.2 |  |  |  | 3.54 | % |  |  | 21.2 |  |  |  | 0.2 |  |  |  | 3.34 | % |  |  | 14.5 |  |  |  | 0.1 |  |  |  | 3.56 | %
Total securities (te) (c) |  |  | 9,177.5 |  |  |  | 49.9 |  |  |  | 2.17 | % |  |  | 8,979.4 |  |  |  | 45.0 |  |  |  | 2.00 | % |  |  | 8,368.8 |  |  |  | 39.9 |  |  |  | 1.91 | %
Total short-term investments |  |  | 432.4 |  |  |  | 1.8 |  |  |  | 1.69 | % |  |  | 2,095.8 |  |  |  | 3.5 |  |  |  | 0.67 | % |  |  | 2,704.8 |  |  |  | 1.0 |  |  |  | 0.15 | %
Total earning assets (te) |  | $ | 31,783.8 |  |  | $ | 302.3 |  |  |  | 3.78 | % |  | $ | 32,780.8 |  |  | $ | 257.4 |  |  |  | 3.15 | % |  | $ | 32,097.4 |  |  | $ | 247.2 |  |  |  | 3.06 | %
Average interest-bearing liabilities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest-bearing transaction and savings deposits |  | $ | 11,164.4 |  |  | $ | 4.3 |  |  |  | 0.15 | % |  | $ | 11,412.9 |  |  | $ | 1.3 |  |  |  | 0.05 | % |  | $ | 11,341.0 |  |  | $ | 1.7 |  |  |  | 0.06 | %
Time deposits |  |  | 954.4 |  |  |  | 0.4 |  |  |  | 0.18 | % |  |  | 1,005.2 |  |  |  | 0.4 |  |  |  | 0.15 | % |  |  | 1,274.9 |  |  |  | 1.0 |  |  |  | 0.32 | %
Public funds |  |  | 2,738.2 |  |  |  | 8.9 |  |  |  | 1.28 | % |  |  | 2,906.0 |  |  |  | 3.3 |  |  |  | 0.46 | % |  |  | 3,085.4 |  |  |  | 2.3 |  |  |  | 0.30 | %
Total interest-bearing deposits |  |  | 14,857.0 |  |  |  | 13.6 |  |  |  | 0.36 | % |  |  | 15,324.1 |  |  |  | 5.0 |  |  |  | 0.13 | % |  |  | 15,701.3 |  |  |  | 5.0 |  |  |  | 0.13 | %
Repurchase agreements |  |  | 516.6 |  |  |  | 0.2 |  |  |  | 0.13 | % |  |  | 523.0 |  |  |  | 0.1 |  |  |  | 0.08 | % |  |  | 509.0 |  |  |  | 0.1 |  |  |  | 0.08 | %
Other short-term borrowings |  |  | 434.0 |  |  |  | 2.5 |  |  |  | 2.36 | % |  |  | 701.2 |  |  |  | 0.9 |  |  |  | 0.49 | % |  |  | 1,103.3 |  |  |  | 1.4 |  |  |  | 0.49 | %
Long-term debt |  |  | 238.4 |  |  |  | 3.1 |  |  |  | 5.20 | % |  |  | 240.3 |  |  |  | 3.1 |  |  |  | 5.20 | % |  |  | 248.0 |  |  |  | 3.2 |  |  |  | 5.08 | %
Total borrowings |  |  | 1,189.0 |  |  |  | 5.8 |  |  |  | 1.96 | % |  |  | 1,464.5 |  |  |  | 4.1 |  |  |  | 1.12 | % |  |  | 1,860.3 |  |  |  | 4.7 |  |  |  | 0.99 | %
Total interest-bearing liabilities |  |  | 16,046.0 |  |  |  | 19.4 |  |  |  | 0.48 | % |  |  | 16,788.6 |  |  |  | 9.1 |  |  |  | 0.22 | % |  |  | 17,561.6 |  |  |  | 9.7 |  |  |  | 0.22 | %
Net interest-free funding sources |  |  | 15,737.8 |  |  |  |  |  |  |  |  |  | 15,992.2 |  |  |  |  |  |  |  |  |  | 14,535.8 |  |  |  |  |  |  |
Total cost of funds |  | $ | 31,783.8 |  |  | $ | 19.4 |  |  |  | 0.24 | % |  | $ | 32,780.8 |  |  | $ | 9.1 |  |  |  | 0.11 | % |  | $ | 32,097.4 |  |  | $ | 9.7 |  |  |  | 0.12 | %
Net interest spread (te) |  |  |  |  | $ | 282.9 |  |  |  | 3.30 | % |  |  |  |  | $ | 248.3 |  |  |  | 2.93 | % |  |  |  |  | $ | 237.5 |  |  |  | 2.83 | %
Net interest margin |  | $ | 31,783.8 |  |  | $ | 282.9 |  |  |  | 3.54 | % |  | $ | 32,780.8 |  |  | $ | 248.3 |  |  |  | 3.04 | % |  | $ | 32,097.4 |  |  | $ | 237.5 |  |  |  | 2.94 | %

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

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(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 $1.2 million, $1.2 million, and $1.6 million for the three months ended September 30, 2022, June 30, 2022, and September 30, 2021, respectively.

|  | Nine Months Ended |
|  | September 30, 2022 |  |  | September 30, 2021 |
(dollars in millions) |  | Volume |  |  | Interest (d) |  |  | Rate |  |  | Volume |  |  | Interest (d) |  |  | Rate |
Average earning assets |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial & real estate loans (te) (a) |  | $ | 17,515.1 |  |  | $ | 519.3 |  |  |  | 3.96 | % |  | $ | 17,160.4 |  |  | $ | 455.4 |  |  |  | 3.55 | %
Residential mortgage loans |  |  | 2,564.1 |  |  |  | 64.8 |  |  |  | 3.37 | % |  |  | 2,472.5 |  |  |  | 70.1 |  |  |  | 3.78 | %
Consumer loans |  |  | 1,563.9 |  |  |  | 61.2 |  |  |  | 5.23 | % |  |  | 1,722.6 |  |  |  | 62.7 |  |  |  | 4.87 | %
Loan fees & late charges |  |  | — |  |  |  | 7.6 |  |  |  | 0.00 | % |  |  | — |  |  |  | 43.4 |  |  |  | 0.00 | %
Total loans (te) (b) |  |  | 21,643.1 |  |  |  | 652.9 |  |  |  | 4.03 | % |  |  | 21,355.5 |  |  |  | 631.6 |  |  |  | 3.95 | %
Loans held for sale |  |  | 49.1 |  |  |  | 1.5 |  |  |  | 4.17 | % |  |  | 94.6 |  |  |  | 2.0 |  |  |  | 2.76 | %
US Treasury and government agency securities |  |  | 402.0 |  |  |  | 5.4 |  |  |  | 1.79 | % |  |  | 301.0 |  |  |  | 3.7 |  |  |  | 1.66 | %
Mortgage-backed securities and collateralized mortgage obligations |  |  | 7,612.7 |  |  |  | 111.7 |  |  |  | 1.96 | % |  |  | 6,770.4 |  |  |  | 91.8 |  |  |  | 1.81 | %
Municipals (te) |  |  | 913.5 |  |  |  | 20.2 |  |  |  | 2.96 | % |  |  | 929.8 |  |  |  | 20.4 |  |  |  | 2.93 | %
Other securities |  |  | 21.8 |  |  |  | 0.5 |  |  |  | 3.40 | % |  |  | 12.8 |  |  |  | 0.4 |  |  |  | 3.73 | %
Total securities (te) (c) |  |  | 8,950.0 |  |  |  | 137.8 |  |  |  | 2.05 | % |  |  | 8,014.0 |  |  |  | 116.3 |  |  |  | 1.94 | %
Total short-term investments |  |  | 1,941.4 |  |  |  | 6.9 |  |  |  | 0.47 | % |  |  | 2,309.4 |  |  |  | 2.1 |  |  |  | 0.12 | %
Total earning assets (te) |  | $ | 32,583.6 |  |  | $ | 799.1 |  |  |  | 3.28 | % |  | $ | 31,773.5 |  |  | $ | 752.0 |  |  |  | 3.16 | %
Average interest-bearing liabilities |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Interest-bearing transaction and savings deposits |  | $ | 11,332.6 |  |  | $ | 6.7 |  |  |  | 0.08 | % |  | $ | 11,152.9 |  |  | $ | 7.8 |  |  |  | 0.09 | %
Time deposits |  |  | 1,015.5 |  |  |  | 1.5 |  |  |  | 0.19 | % |  |  | 1,497.8 |  |  |  | 5.7 |  |  |  | 0.51 | %
Public funds |  |  | 2,931.4 |  |  |  | 14.2 |  |  |  | 0.65 | % |  |  | 3,168.0 |  |  |  | 7.8 |  |  |  | 0.33 | %
Total interest-bearing deposits |  |  | 15,279.5 |  |  |  | 22.4 |  |  |  | 0.20 | % |  |  | 15,818.7 |  |  |  | 21.3 |  |  |  | 0.18 | %
Repurchase agreements |  |  | 542.1 |  |  |  | 0.3 |  |  |  | 0.09 | % |  |  | 549.3 |  |  |  | 0.5 |  |  |  | 0.12 | %
Other short-term borrowings |  |  | 743.4 |  |  |  | 4.8 |  |  |  | 0.86 | % |  |  | 1,104.3 |  |  |  | 4.1 |  |  |  | 0.49 | %
Long-term debt |  |  | 240.2 |  |  |  | 9.4 |  |  |  | 5.19 | % |  |  | 338.4 |  |  |  | 13.6 |  |  |  | 5.37 | %
Total borrowings |  |  | 1,525.7 |  |  |  | 14.5 |  |  |  | 1.27 | % |  |  | 1,992.0 |  |  |  | 18.2 |  |  |  | 1.22 | %
Total interest-bearing liabilities |  |  | 16,805.2 |  |  |  | 36.9 |  |  |  | 0.29 | % |  |  | 17,810.7 |  |  |  | 39.5 |  |  |  | 0.30 | %
Net interest-free funding sources |  |  | 15,778.4 |  |  |  |  |  |  |  |  |  | 13,962.8 |  |  |  |  |  |  |
Total cost of funds |  | $ | 32,583.6 |  |  | $ | 36.9 |  |  |  | 0.15 | % |  | $ | 31,773.5 |  |  | $ | 39.5 |  |  |  | 0.17 | %
Net interest spread (te) |  |  |  |  | $ | 762.2 |  |  |  | 2.99 | % |  |  |  |  | $ | 712.5 |  |  |  | 2.87 | %
Net interest margin |  | $ | 32,583.6 |  |  | $ | 762.2 |  |  |  | 3.13 | % |  | $ | 31,773.5 |  |  | $ | 712.5 |  |  |  | 3.00 | %

(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 $3.9 million and $6.7 million for the nine months ended September 30, 2022, and 2021, respectively.

Provision for Credit Losses

During the third quarter of 2022, we recorded a provision for credit losses of $1.4 million, compared to negative provisions for credit losses of $9.8 million in the second quarter of 2022 and $27.0 million in the third quarter of 2021. The third quarter of 2022 provision included net charge-offs of $1.3 million and a reserve build of $0.1 million, compared to net recoveries of $0.7 million and a reserve release of $9.1 million in the second quarter of 2022, and net charge-offs of $1.8 million and a reserve release of $28.8 million in the third quarter of 2021. Following the significant reserve build in 2020 in response to the economic fallout resulting from the COVID-19 pandemic, improvement in overall credit performance and in economic indicators in 2021 and in the first half of 2022 allowed for the gradual release of reserves.

For the nine months ended September 30, 2022, we recorded a negative provision for credit losses of $30.9 million, compared to a negative provision of $49.1 million for the nine months ended September 30, 2021. Included in the negative provision for the nine months ended September 30, 2022 was a reserve release of $31.8 million and net charge-offs of $0.9 million, or 0.01% of average total loans on an annualized basis, compared to a reserve release of $79.6 million and net charge-offs of $30.5 million, or 0.19% in the

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same period in 2021. The year-to-date reserve releases in both periods are also reflective of improvements in economic indicators in our markets and overall credit performance that followed the economic fallout of the COVID-19 pandemic experienced in 2020.

Net charge-offs in the third quarter of 2022 were $1.3 million, or 0.02% of average total loans on an annualized basis, compared to net recoveries $0.7 million, or (0.01)% in the second quarter of 2022, and net charge-offs of $1.8 million, or 0.03%, in the third quarter of 2021. The third quarter of 2022 included net recoveries of $0.3 million in the commercial portfolio and $0.9 million in the residential mortgage portfolio, and $2.5 million of net charge-offs in the consumer portfolio. The second quarter of 2022 included net recoveries of $1.6 million in the commercial portfolio and $0.4 million in the residential mortgage portfolio, and $1.4 million of net charge-offs in the consumer portfolio. The third quarter of 2021 included $0.5 million of net charge-offs in the commercial portfolio and $1.7 million in the consumer portfolio, and $0.4 million of net recoveries in the residential mortgage portfolio. For the nine months ended September 30, 2022, net charge-offs of $0.9 million is attributable to consumer net charge-offs of $5.0 million, largely offset by net recoveries in the commercial portfolio totaling $2.7 million and in the residential mortgage portfolio totaling $1.4 million. Net charge-off for the nine months ended September 30, 2021 totaled $30.5 million, including $26.0 million of net charge-offs in the commercial portfolio (including $14.5 million of energy related charge-offs) and $5.2 million of net charge-offs in the consumer portfolio, partially offset by net recoveries of $0.7 million in the residential mortgage portfolio.

We expect to see low to modest charge-offs and provision for credit losses in the fourth quarter of 2022. Loan growth, portfolio mix, asset quality metrics and future assumptions in economic forecasts will drive the level of credit loss reserves.

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

Noninterest Income

Noninterest income totaled $85.3 million for the third quarter of 2022, down $0.3 million, or less than 1%, from the second quarter of 2022, and down $8.0 million, or 9%, from the third quarter of 2021. There were no nonoperating items included in noninterest income in the third and second quarters of 2022. There was $4.6 million of nonoperating noninterest income in the third quarter of 2021 attributable to a gain on the sale of Hancock Horizon Funds. Excluding this item, operating noninterest income decreased $3.4 million, or 4%, from the same quarter last year. The decrease in noninterest income from the second quarter of 2022 was largely attributable to a decrease in investment and annuity fees and insurance commissions, income from derivatives, and trust fees, partially offset by an increase in net service charges on deposit accounts. The decrease in operating noninterest income from the third quarter of 2021 is largely due to a decline in secondary mortgage market operations income, miscellaneous income, income from derivatives, and investment and annuity fees and insurance commissions, partially offset by improvements in service charges on deposit accounts, and bank card and ATM fees.

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, |  |  | September 30, |
(in thousands) |  | 2022 |  |  | 2022 |  |  | 2021 |  |  | 2022 |  |  | 2021 |
Service charges on deposit accounts |  | $ | 23,272 |  |  | $ | 20,495 |  |  | $ | 21,159 |  |  | $ | 65,441 |  |  | $ | 59,686 |
Trust fees |  |  | 16,048 |  |  |  | 17,309 |  |  |  | 16,041 |  |  |  | 48,636 |  |  |  | 47,351 |
Bank card and ATM fees |  |  | 21,412 |  |  |  | 21,870 |  |  |  | 19,833 |  |  |  | 63,678 |  |  |  | 58,436 |
Investment and annuity fees and insurance commissions |  |  | 6,492 |  |  |  | 8,001 |  |  |  | 7,167 |  |  |  | 21,920 |  |  |  | 21,956 |
Secondary mortgage market operations |  |  | 3,284 |  |  |  | 2,990 |  |  |  | 6,972 |  |  |  | 10,020 |  |  |  | 31,238 |
Income from bank-owned life insurance |  |  | 4,784 |  |  |  | 4,273 |  |  |  | 3,907 |  |  |  | 12,602 |  |  |  | 14,535 |
Credit related fees |  |  | 2,628 |  |  |  | 2,543 |  |  |  | 2,568 |  |  |  | 7,840 |  |  |  | 8,383 |
Income from customer and other derivatives |  |  | 1,309 |  |  |  | 2,728 |  |  |  | 2,970 |  |  |  | 6,386 |  |  |  | 11,755 |
Securities transactions, net |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (87 | ) |  |  | 333 |
Gain on sale of Hancock Horizon Funds |  |  | — |  |  |  | — |  |  |  | 4,576 |  |  |  | — |  |  |  | 4,576 |
Gain on Sale of Mastercard Class B common stock |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 2,800 |
Other miscellaneous |  |  | 6,108 |  |  |  | 5,444 |  |  |  | 8,168 |  |  |  | 17,986 |  |  |  | 13,673 |
Total noninterest income |  | $ | 85,337 |  |  | $ | 85,653 |  |  | $ | 93,361 |  |  | $ | 254,422 |  |  | $ | 274,722 |

Service charges on deposit accounts are composed of overdraft and nonsufficient funds fees, business and corporate account analysis fees, overdraft protection fees and other customer transaction-related charges. Service charges on deposits totaled $23.3 million for the third quarter of 2022, up $2.8 million, or 14%, from the second quarter of 2022, and up $2.1 million, or 10%, from the third quarter of

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2021. The increase from the second quarter of 2022 is primarily attributable to a higher level of consumer account fees, and to a lesser degree, higher business account fees. The increase from the third quarter of 2021 was largely due to an increase in business account fees, which include activity-related service charges, and higher consumer-related account fees. As noted in prior filings, we have announced plans to eliminate consumer (retail) non-sufficient funds fees and certain overdraft fees. The elimination of these fees is targeted to begin in December 2022. We expect these fees to decrease revenue in this line item, on average, by approximately $2 million to $3 million per quarter in 2023, with an annual estimated impact of approximately $10 million to $11 million. We believe these changes are in line with the evolving retail banking industry, as traditional banks adjust products to meet consumer needs and provide them with the tools needed to help manage their overall finances. We expect to see improving account acquisition rates in 2023 with this change and as we launch additional retail products and features.

Trust fee income represents revenue generated from a full range of trust services, including asset management and custody services provided to individuals, businesses and institutions. Trust fees decreased $1.3 million, or 7%, from the prior quarter and were virtually flat when compared to the same quarter a year ago. The decrease compared to the prior quarter is primarily due to seasonal tax preparation and other one-time corporate trust fees recorded during the second quarter.

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 $21.4 million for the third quarter of 2022, down $0.5 million, or 2%, from the second quarter of 2022 and up $1.6 million, or 8%, from the same quarter last year. The decrease from the prior quarter was largely attributable to declines in debit card, merchant and ATM fees. The increase from the same quarter last year was largely attributable to an increase in commercial credit card fees, with an increase in both transaction volume and amounts, as well as increases in consumer credit card fees, debit card fees, and to a lesser extent, ATM fees and merchant fees, as the prior comparative period was negatively impacted by Hurricane Ida disruptions.

Investment and annuity fees and insurance commissions, which includes both fees earned from sales of annuity and insurance products, as well as managed account fees, decreased $1.5 million, or 19%, compared to the second quarter of 2022 and decreased $0.7 million, or 9%, compared to the same quarter a year ago. The decreases compared to both the prior quarter and the same quarter last year were largely attributable to a temporary business disruption as a result of conversion to an outsourced sales and service platform that began in mid-August 2022. The variance from the third quarter of 2021 was also favorably impacted by better overall market conditions.

Income from secondary mortgage market operations is comprised of income produced from the origination and sales of residential mortgage loans in the secondary market. We offer a full range of mortgage products to our customers and typically sell longer-term fixed-rate loans while retaining the majority of adjustable-rate loans, as well as loans generated through programs to support customer relationships. Income from secondary mortgage market operations was $3.3 million in the third quarter of 2022, up $0.3 million, or 10%, from the second quarter of 2022 and down $3.7 million, or 53%, from the third quarter of 2021. The decrease from the same quarter last year is largely attributable to the rising interest rate environment, with both a decline in refinancing activity and a lower percentage of originated loans sold in the secondary market, as we are retaining a higher volume of mortgage loans in our held for investment portfolio. The level of mortgage applications during the third quarter of 2022 were up 11% compared to the prior quarter and down approximately 30% when compared to the third quarter of 2021. The percentage of mortgage loans sold in the secondary market to total originations (as opposed to those held in our portfolio), was 21% in the third quarter of 2022, relatively flat when compared to the prior quarter, but down from 45% in the same quarter last year. Secondary mortgage market operations income will vary based on application volume and pull through rates. We expect current levels of quarterly income from secondary mortgage market operations to continue in the near-term as the demand for mortgage loans and refinancing slows in the rising interest rate environment.

Income from bank-owned life insurance (BOLI) is typically 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 $4.8 million for the third quarter of 2022, up $0.5 million, or 12%, from the second quarter of 2022, and up $0.9 million, or 22%, from the third quarter of 2021. The increase from the prior quarter is primarily attributable to an increase in benefit proceeds, and the increase from the same quarter last year is due to both an increase in benefit proceeds and a volume-driven increase attributable to the purchase of additional policies during the first quarter of 2022.

Credit-related fees include fees assessed on letters of credit and unused portions of loan commitments. Credit-related fees were $2.6 million for the third quarter of 2022, up $0.1 million, or 3%, from the second quarter of 2022 and up $0.1 million, or 2%, from the third quarter of 2021. The increase from the prior quarter is attributable to an increase in both letter of credit fees and unused commitment fees, which will vary with credit line utilization. The increase compared to the same quarter last year was due to higher letter of credit fees.

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Income from customer and other derivatives is largely derived from our customer interest rate derivative program and totaled $1.3 million for the third quarter of 2022, compared to $2.7 million in the second quarter of 2022 and $3.0 million in the third quarter of 2021. The decrease from both comparative periods is primarily attributable to the impact of interest rate increases upon the customer derivative program, as the rate increases have lessened the demand for variable rate loans and, in turn, the demand for associated derivative instruments. 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 is comprised of various items, including income from small business investment companies (SBIC), FHLB stock dividends and syndication fees. Other miscellaneous income (excluding nonoperating items) totaled $6.1 million, up $0.7 million compared to the second quarter of 2022 and down $2.1 million compared to the third quarter of 2021. The increase compared to the prior period was largely driven by an increase in Small Business Investment Company (SBIC) income, partially offset by a decrease in gains on sales of assets. The decrease compared to the same quarter last year is primarily attributable to a decrease in gain on sales of assets, partially offset by an increase in SBIC income and syndication fees.

Noninterest income for the first nine months of 2022 was $254.4 million, down $20.3 million or 7%, from the same period last year. There were no nonoperating income items in the nine months ended September 30, 2022 compared to $7.4 million in the same period in 2021, which were attributable to gains on the sale of Mastercard Class B stock and the sale of the Hancock Horizon funds. Excluding the nonoperating items, operating noninterest income was down $12.9 million, or 5%, compared to the same period in 2021. The decline in fee income is largely related to a $21.2 million, or 68%, decrease in secondary mortgage market operations income, the result of both a decrease in demand for refinancing and a higher rate of retention of residential mortgage loans, and a $5.4 million, or 46%, decline in derivative income, as recent interest rate increases have affected the demand for interest rate swap arrangements. BOLI income also declined $1.9 million, or 13%. These decreases were partially offset with increases in SBIC income of $6.4 million, service charges of $5.8 million, or 10%, bank card and ATM fees which were up $5.2 million, or 9%, and trust fees, which were up $1.3 million, or 3%.

We expect our fourth quarter 2022 noninterest income to be down slightly linked quarter, with the full-year 2022 noninterest income, excluding nonoperating items, to decline 3% to 4%, from the 2021 level of $353.4 million, due largely to the decline in secondary mortgage market operations income.

Noninterest Expense

Noninterest expense for the third quarter of 2022 was $193.5 million, up $6.4 million, or 3%, from the second quarter of 2022, and down $1.2 million, or 1%, from the third quarter of 2021. There were no nonoperating noninterest expense items in the third and second quarters of 2022 and $3.2 million of net nonoperating expense items in the third quarter of 2021, that included hurricane-related expenses partially offset by a severance expense reversal related to internally placed employees. Excluding the nonoperating items, operating noninterest expense was up $2.0 million, or 1%, from the same quarter last year. The increase in noninterest expense from the second quarter was largely driven by higher personnel expense, miscellaneous expense and professional expense, partially offset by gains on other real estate and foreclosed assets and decreases in corporate value, franchise and other non-income taxes. Compared to the same quarter last year, the increase in operating noninterest expense was due to higher personnel expense and data processing expense, partially offset by a decrease in professional services expense and gains on other real estate and foreclosed assets. A more detailed discussion of the variances follows.

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

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|  | Three Months Ended |  |  | Nine Months Ended |
|  | September 30, |  |  | June 30, |  |  | September 30, |  |  | September 30, |  |  | September 30, |
(in thousands) |  | 2022 |  |  | 2022 |  |  | 2021 |  |  | 2022 |  |  | 2021 |
Compensation expense |  | $ | 98,985 |  |  | $ | 94,155 |  |  | $ | 92,601 |  |  | $ | 279,133 |  |  | $ | 289,034 |
Employee benefits |  |  | 19,937 |  |  |  | 21,015 |  |  |  | 19,377 |  |  |  | 62,355 |  |  |  | 85,213 |
Personnel expense |  |  | 118,922 |  |  |  | 115,170 |  |  |  | 111,978 |  |  |  | 341,488 |  |  |  | 374,247 |
Net occupancy expense |  |  | 12,411 |  |  |  | 12,225 |  |  |  | 11,974 |  |  |  | 36,316 |  |  |  | 37,839 |
Equipment expense |  |  | 4,527 |  |  |  | 4,703 |  |  |  | 4,894 |  |  |  | 14,097 |  |  |  | 14,067 |
Data processing expense |  |  | 26,768 |  |  |  | 26,169 |  |  |  | 24,766 |  |  |  | 77,176 |  |  |  | 71,598 |
Professional services expense |  |  | 9,679 |  |  |  | 8,423 |  |  |  | 12,748 |  |  |  | 25,895 |  |  |  | 37,472 |
Amortization of intangible assets |  |  | 3,428 |  |  |  | 3,586 |  |  |  | 4,082 |  |  |  | 10,762 |  |  |  | 12,746 |
Deposit insurance and regulatory fees |  |  | 3,596 |  |  |  | 3,503 |  |  |  | 3,680 |  |  |  | 10,839 |  |  |  | 10,042 |
Other real estate and foreclosed asset expense |  |  | (1,782 | ) |  |  | (88 | ) |  |  | (376 | ) |  |  | (3,634 | ) |  |  | (456 | )
Corporate value, franchise and other non-income taxes |  |  | 4,010 |  |  |  | 4,558 |  |  |  | 3,414 |  |  |  | 12,816 |  |  |  | 11,300 |
Advertising |  |  | 3,533 |  |  |  | 3,512 |  |  |  | 3,638 |  |  |  | 10,211 |  |  |  | 8,400 |
Telecommunications and postage |  |  | 3,027 |  |  |  | 2,971 |  |  |  | 3,087 |  |  |  | 8,923 |  |  |  | 9,568 |
Entertainment and contributions |  |  | 2,231 |  |  |  | 2,440 |  |  |  | 2,280 |  |  |  | 7,632 |  |  |  | 5,214 |
Tax credit investment amortization |  |  | 1,004 |  |  |  | 1,004 |  |  |  | 1,112 |  |  |  | 3,012 |  |  |  | 3,337 |
Printing and supplies |  |  | 971 |  |  |  | 918 |  |  |  | 914 |  |  |  | 2,892 |  |  |  | 2,833 |
Travel expense |  |  | 1,239 |  |  |  | 1,123 |  |  |  | 765 |  |  |  | 3,022 |  |  |  | 1,789 |
Net other retirement expense |  |  | (7,570 | ) |  |  | (7,781 | ) |  |  | (7,294 | ) |  |  | (22,123 | ) |  |  | (20,645 | )
Loss on extinguishment of debt |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 4,165 |
Loss on facilities and equipment from consolidation |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 15,462 |
Other miscellaneous |  |  | 7,508 |  |  |  | 4,661 |  |  |  | 13,041 |  |  |  | 21,214 |  |  |  | 25,567 |
Total noninterest expense |  | $ | 193,502 |  |  | $ | 187,097 |  |  | $ | 194,703 |  |  | $ | 560,538 |  |  | $ | 624,545 |

Nonoperating Expenses (included above)

|  | Three Months Ended |  |  | Nine Months Ended |
|  | September 30, |  |  | June 30, |  |  | September 30, |  |  | September 30, |
(in thousands) |  | 2022 |  |  | 2022 |  |  | 2021 |  |  | 2022 |  |  | 2021 |
Nonoperating expense |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Compensation expense |  | $ | — |  |  | $ | — |  |  | $ | (1,862 | ) |  | $ | — |  |  | $ | 3,299 |
Employee benefits |  |  | — |  |  |  | — |  |  |  | 3 |  |  |  | — |  |  |  | 20,192 |
Personnel expense |  |  | — |  |  |  | — |  |  |  | (1,859 | ) |  |  | — |  |  |  | 23,491 |
Net occupancy |  |  | — |  |  |  | — |  |  |  | 2 |  |  |  | — |  |  |  | 2 |
Equipment expense |  |  | — |  |  |  | — |  |  |  | 2 |  |  |  | — |  |  |  | 2 |
Advertising |  |  | — |  |  |  | — |  |  |  | 2 |  |  |  | — |  |  |  | 2 |
Entertainment and contributions |  |  | — |  |  |  | — |  |  |  | 174 |  |  |  | — |  |  |  | 174 |
Travel expense |  |  | — |  |  |  | — |  |  |  | 5 |  |  |  | — |  |  |  | 5 |
Printing and supplies |  |  | — |  |  |  | — |  |  |  | 22 |  |  |  | — |  |  |  | 22 |
Loss on extinguishment of debt |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 4,165 |
Loss on facilities and equipment from consolidation |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 15,462 |
Other miscellaneous |  |  | — |  |  |  | — |  |  |  | 4,877 |  |  |  | — |  |  |  | 4,877 |
Total nonoperating expenses |  | $ | — |  |  | $ | — |  |  | $ | 3,225 |  |  | $ | — |  |  | $ | 48,202 |

Personnel expense consists of salaries, incentive compensation, long-term incentives, payroll taxes, and other employee benefits such as 401(k), pension, and insurance for medical, life and disability. Personnel expense totaled $118.9 million for the third quarter of 2022, up $3.8 million, or 3%, compared to the prior quarter and up $6.9 million, or 6%, compared to the same quarter last year. Excluding the third quarter 2021 nonoperating items noted above, personnel expense was up $5.1 million, or 4%. The increase from the prior quarter was largely due to increased performance-based incentives, an additional work day, and increased headcount, including new banker hires. The increase from the same quarter last year was largely due to annual merit increases, higher performance based incentives, and increased headcount, partially offset by the impact of efficiency measures implemented in early 2021.

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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 $16.9 million in the third quarter of 2022, virtually flat compared to the prior quarter, and up $0.1 million, or less than 1%, from the same quarter last year.

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 $26.8 million for the third quarter of 2022, up $0.6 million, or 2%, compared to the second quarter of 2022, and up $2.0 million, or 8%, compared to the third quarter of 2021. The increase from both the second quarter of 2022 and the third quarter of 2021 is largely attributable to implementation of technology enhancement projects, and the variance from the same quarter last year is also due in part to processing expense related to the increase in bank card activity.

Professional services expense for the third quarter of 2022 totaled $9.7 million, up $1.3 million, or 15%, compared to the previous quarter and down $3.1 million, or 24%, from the third quarter of 2021. The increase from the second quarter of 2022 is primarily due to higher consulting expense related to various ongoing projects. The decrease from the same quarter last year is largely attributable to lower consulting expense primarily related to PPP support, as well as a reduction in legal fees.

Deposit insurance and regulatory fees totaled $3.6 million, up $0.1 million, or 3%, from the second quarter of 2022 and down $0.1 million, or 2%, from the third quarter of 2021. The modest variances from both comparative periods reflect relatively stable FDIC risk-based assessments. In October 2022, the FDIC adopted a final rule to increase the initial base deposit insurance assessment schedules uniformly by 2 bps beginning with the first quarterly assessment period of 2023. The increased assessment is expected to remain in effect until the Deposit Insurance Fund reserve ratio to insured deposits meets the FDIC’s long-term goal for reserve ratios of the deposit insurance fund.

Other real estate and foreclosed assets expense reflected net gains of $1.8 million in the third quarter of 2022 compared to net gains of $0.1 million in the second quarter of 2022 and $0.4 million in the third quarter of 2021. The increase when compared to both periods is due largely to a $1.6 million gain on the sale of equity interest received in satisfaction of debt that was sold in the third quarter of 2022. Gains or losses on the sale of other real estate and foreclosed assets may occur periodically and are dependent on the number and type of assets for sale and current market conditions.

Corporate value, franchise and other non-income tax expense for the third quarter of 2022 totaled $4.0 million, down $0.5 million, or 12%, from the prior quarter and up $0.6 million, or 17%, compared to the same quarter last year. The decrease from the second quarter of 2022 is largely attributable to a decline in bank share tax expense, primarily the result of updated assumptions in estimating the assessment. The increase from the same quarter last year is largely due to the bank share tax benefit realized during 2021 from the net loss recorded in 2020.

Business development-related expenses (including advertising, travel, entertainment and contributions) totaled $7.1 million for the third quarter of 2022, down $0.1 million, or 1%, from the second quarter of 2022, and up $0.3 million, or 5%, from the third quarter of 2021. The increase over last year was largely due to higher travel expenses.

All other expenses, excluding amortization of intangibles and nonoperating items, totaled $4.9 million for the third quarter of 2022, up $3.2 million, or 179%, from the second quarter of 2022, and down $1.0 million, or 17%, from the third quarter of 2021. The variances from both comparative periods are influenced by the level of miscellaneous losses and pension-related other retirement expense and other miscellaneous smaller items.

Noninterest expense totaled $560.5 million for the nine months ended September 30, 2022, down $64.0 million, or 10%, from the same period in 2021. The nine months ended September 30, 2021 included $48.2 million of nonoperating expense items, including $38.9 million of cost related to initiatives to improve overall efficiency, $5.1 million of hurricane-related expense and $4.2 million related to the early redemption of subordinated notes. Excluding the nonoperating expenses incurred in 2021, operating expense was down $15.8 million, or 3%. The decline in operating expense was largely due to a $9.3 million, or 2%, decrease in personnel expense due to the impact of the VERIP and reduction in force initiatives completed in 2021, partially offset by new banker hires and other headcount additions, and annual merit increases. Further, professional services expense declined $11.6 million, or 31%, largely due to the lower PPP consulting costs, other real estate expense and foreclosed assets expense declined $3.2 million, and net occupancy and equipment decreased $1.5 million, or 3%. These declines were partially offset by increases in data processing expense, which was up $5.6 million, or 8%, due both to increased card processing activity and expense associated with technology initiatives, and business development-related expense, which was up $5.6 million, or 37%, due in part to investment in our higher growth markets.

On a linked-quarter basis, we expect noninterest expense to be up slightly in the fourth quarter 2022, but full-year 2022 noninterest expense to be down slightly from the 2021 level of $760.1 million.

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Income Taxes

The effective income tax rate for the third quarter of 2022 was approximately 20.7% compared to 21.2% in the second quarter of 2022 and 19.2% in the third quarter of 2021. Fluctuations in the effective tax rate are primarily the result of changes in forecasted pre-tax earnings, largely attributable to rising interest rates. Many factors impact the effective income tax rate including, but not limited to, the level of pre-tax income and relative impact of net tax benefits related to tax credit investments, tax-exempt interest income, bank-owned life insurance, and nondeductible expenses. Based on the current forecast, management expects the effective income tax rate for 2022 to approximate 21%, absent any changes in tax law.

Our effective tax rate has historically varied from the federal statutory rate primarily because of tax-exempt income and tax credits. Interest income on bonds issued by or loans to state and municipal governments and authorities, and earnings from the bank-owned life insurance program are the major components of tax-exempt income. The 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 Entities (“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. We have also invested in affordable housing projects that generate federal LIHTC tax credits that are recognized over a ten-year period, beginning in the year the rental activity begins. The amortization of the LIHTC investment cost is recognized as a component of income tax expense in proportion to the tax credits recognized over the ten-year credit period.

Based on tax credit investments that have been made to date in 2022, we expect to realize benefits from federal and state tax credits over the next three years totaling $11.2 million, $11.3 million and $8.7 million in 2023, 2024 and 2025, 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.

In August 2022, the Inflation Reduction Act of 2022 (IRA of 2022) was signed into law to address inflation, healthcare costs, climate change and renewal energy incentives, among other things. Included in the IRA of 2022 are provisions for the creation of a 15% corporate alternative minimum tax rate (CAMT) that is effective for tax years beginning January 1, 2023 for corporations with an average annual adjusted financial statement income in excess of $1 billion. Based on information available to date, we do not anticipate our consolidated corporate group to be subject to the 15% CAMT, absent any further changes in law.

LIQUIDITY AND CAPITAL RESOURCES

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

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monitor liquidity risk. The Company has access to sufficient liquidity for cash requirements, both on balance sheet and with $18.1 billion in net available sources of funds at September 30, 2022, summarized as follows:

|  | September 30, 2022 |
(in thousands) |  | Total Available |  |  | Amount Used |  |  | Net Availability |
Internal Sources |  |  |  |  |  |  |  |  |
Free Securities, cash and other |  | $ | 4,344,000 |  |  | $ | — |  |  | $ | 4,344,000 |
External Sources |  |  |  |  |  |  |  |  |
Federal Home Loan Bank (a) |  |  | 5,866,000 |  |  |  | 1,100,000 |  |  |  | 4,766,000 |
Federal Reserve Bank |  |  | 3,247,000 |  |  |  | — |  |  |  | 3,247,000 |
Brokered deposits |  |  | 4,342,691 |  |  |  | 9,190 |  |  |  | 4,333,501 |
Other |  |  | 1,434,000 |  |  |  | — |  |  |  | 1,434,000 |
Total Liquidity |  | $ | 19,233,691 |  |  | $ | 1,109,190 |  |  | $ | 18,124,501 |

(a) Amount used includes funded advances and letters of credit.

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 49.79% at September 30, 2022, compared to 52.61% at June 30, 2022 and 53.95% at December 31, 2021. 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 |  | 2022 |  |  | 2022 |  | 2022 |  | 2021 |  | 2021 |
Free securities / total securities |  |  | 49.79 | % |  |  | 52.61 | % |  | 50.63 | % |  | 53.95 | % |  | 56.73 | %
Core deposits / total deposits |  |  | 98.93 | % |  |  | 99.00 | % |  | 98.94 | % |  | 98.66 | % |  | 98.27 | %
Wholesale funds / core deposits |  |  | 6.23 | % |  |  | 2.97 | % |  | 6.21 | % |  | 6.45 | % |  | 7.19 | %
Quarter-to-date average loans /quarter-to-date average deposits |  |  | 75.87 | % |  |  | 72.24 | % |  | 70.34 | % |  | 69.81 | % |  | 71.62 | %

The liability portion of the balance sheet provides liquidity mainly through the ability to use cash sourced from customers’ interest-bearing and noninterest-bearing deposit accounts. At September 30, 2022, deposits totaled $29.0 billion, a decrease of $915.2 million, or 3%, from June 30, 2022, and $1.5 billion, or 5%, from December 31, 2021. Both the linked-quarter decrease and the decrease from December 31, 2021 are primarily attributable to seasonal tax outflows in public funds, increased spending amid the inflationary environment, and increased competition for deposits as interest rates increase. Core deposits consist of total deposits excluding certificates of deposit of $250,000 or more and brokered deposits. Core deposits totaled $28.6 billion at September 30, 2022, down $925.0 million, or 3%, compared to June 30, 2022 and $1.4 billion, or 5%, compared to December 31, 2021. Core deposits have fluctuated over the past year due largely to pandemic related factors, including several forms of economic stimulus and reduced consumer spending. The ratio of core deposits to total deposits was 98.93% at September 30, 2022, compared to 99.00% at June 30, 2022 and 98.66% at December 31, 2021. Brokered deposits totaled $4.9 million as of September 30, 2022, compared to $4.3 million at June 30, 2022 and $30.2 million at December 31, 2021. The use of brokered deposits as a funding source is subject to certain policies regarding the amount, term and interest rate.

Purchases of federal funds, securities sold under agreements to repurchase and other short-term borrowings from customers provide additional sources of liquidity to meet short-term funding requirements. Besides funding from customer sources, the Bank has a line of credit with the FHLB that is secured by blanket pledges of certain mortgage loans. At September 30, 2022, the Bank had borrowings of approximately $1.0 billion and had approximately $4.8 billion available under this line. The unused borrowing capacity at the Federal Reserve’s discount window is approximately $3.2 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 6.23% of core deposits at September 30, 2022, compared to 2.97% at June 30, 2022 and 6.45% at December 31, 2021. At September 30, 2022, wholesale funds

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totaled $1.8 billion, an increase of $905.0 million, or 103%, from June 30, 2022 and a decrease of $155.2 million, or 8%, from December 31, 2021. The linked-quarter increase was primarily due to a net increase of $800 million in FHLB advances during the third quarter of 2022. The Company has established an internal target for wholesale funds to be less than 25% of core deposits.

Another 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 2022 was 75.87%, compared to 72.24% for the second quarter of 2022 and 69.81% for the fourth quarter of 2021. Management has an established target range for the loan-to-deposit ratio of 87% to 89%, but will operate outside that range under certain circumstances, such as those caused by the continuing economic impact of the pandemic.

Cash generated from operations is another important source of funds to meet liquidity needs. The Consolidated Statements of Cash Flows included in Part, I Item 1 of this document present operating cash flows and summarize all significant sources and uses of funds during the nine months ended September 30, 2022 and 2021.

Dividends received from the Bank have been the primary source of funds available to the Parent for the payment of dividends to our stockholders and for servicing its debt. The liquidity management process takes into account the various regulatory provisions that can limit the amount of dividends the Bank can distribute to the Parent. The Parent targets cash and other liquid assets to provide liquidity in an amount sufficient to fund approximately four quarters of ongoing cash or liquid asset needs, consisting primarily of common stockholder dividends, debt service requirements, and any expected early extinguishment of debt. The Parent may operate below the target level on a temporary basis if a return to the target can be achieved in the near-term, generally not to exceed four quarters. The Parent had cash and liquid assets of $100.8 million at September 30, 2022.

During the third quarter of 2022, we repurchased 50,000 shares of our common stock at an average cost of $48.05 per share, inclusive of commissions, under a Board authorization to repurchase up to 4,338,000 shares of the company’s common stock, set to expire December 31, 2022. To-date, the Company has repurchased 1,654,244 shares under this plan at a total cost of $80.7 million.

On June 15, 2021, the Parent utilized excess liquidity to redeem all of its issued and outstanding 5.95% subordinated notes due with an aggregate principal amount of $150 million.

Capital Resources

Stockholders’ equity totaled $3.2 billion at September 30, 2022, down $169.3 million from June 30, 2022 and $489.9 million from December 31, 2021. The decrease from June 30, 2022 is largely due to $285.6 million of other comprehensive loss, net of tax, primarily attributable to fair value adjustments on securities available for sale and cash flow hedges, along with dividends of $23.7 million, and the repurchase of $2.4 million of common stock. These factors were partially offset by $135.4 million of net income and $7.0 million of long-term incentive plan and dividend reinvestment activity. The decrease from December 31, 2021 is largely due to $758.8 million of other comprehensive loss, net of tax, that was largely due to fair value adjustments on securities available for sale and cash flow hedges, along with dividends of $71.2 million, and the repurchase of $58.9 million of common stock. These factors were partially offset by net income of $380.3 million and $18.7 million of long-term incentive plan and dividend reinvestment activity.

The tangible common equity (TCE) ratio was 6.73% at September 30, 2022, compared to 7.21% at June 30, 2022 and 7.71% at December 31, 2021. The decrease from June 30, 2022 is largely attributable to other comprehensive loss due primarily to fair value adjustments on the available for sale securities portfolio and cash flow hedges, and dividends, partially offset by both earnings and long term incentive plan and dividend reinvestments. The decline from December 31, 2021 was primarily due to other comprehensive loss, dividends and common stock repurchases, partially offset by earnings, tangible asset contraction and long-term incentive plan and dividend reinvestment activity.

The regulatory capital ratios of the Company and the Bank at September 30, 2022 remained well in excess of current regulatory minimum requirements, including capital conservation buffers, by at least $471 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, 2021 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 reflect the election to use the CECL five-year transition rule that allowed for the option to delay

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for two years the estimated impact of CECL on regulatory capital (0% in 2020 and 2021), followed by a three-year transition (25% in 2022, 50% in 2023, 75% in 2024, and 100% thereafter). The two-year delay includes the full impact of January 1, 2020 cumulative effect impact plus an estimated impact of CECL calculated quarterly as 25% of the current ACL over the January 1, 2020 balance (modified transition amount). The modified transition amount was recalculated each quarter in 2020 and 2021, with the December 31, 2021 impact of $24.9 million plus day one impact of $44.1 million (net of tax) carrying through the remaining three years of the transition, as adjusted by the applicable transition percentage.

|  | Well- |  |  | September 30, |  |  | June 30, |  |  | March 31, |  |  | December 31, |  |  | September 30, |
|  | Capitalized |  |  | 2022 |  |  | 2022 |  |  | 2022 |  |  | 2021 |  |  | 2021 |
Total capital (to risk weighted assets) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Hancock Whitney Corporation |  |  | 10.00 | % |  |  | 12.67 | % |  |  | 12.70 | % |  |  | 12.82 | % |  |  | 12.84 | % |  |  | 13.06 | %
Hancock Whitney Bank |  |  | 10.00 | % |  |  | 12.16 | % |  |  | 12.28 | % |  |  | 12.33 | % |  |  | 12.33 | % |  |  | 12.51 | %
Tier 1 common equity capital (to risk weighted assets) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Hancock Whitney Corporation |  |  | 6.50 | % |  |  | 11.10 | % |  |  | 11.08 | % |  |  | 11.12 | % |  |  | 11.09 | % |  |  | 11.17 | %
Hancock Whitney Bank |  |  | 6.50 | % |  |  | 11.20 | % |  |  | 11.28 | % |  |  | 11.27 | % |  |  | 11.24 | % |  |  | 11.30 | %
Tier 1 capital (to risk weighted assets) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Hancock Whitney Corporation |  |  | 8.00 | % |  |  | 11.10 | % |  |  | 11.08 | % |  |  | 11.12 | % |  |  | 11.09 | % |  |  | 11.17 | %
Hancock Whitney Bank |  |  | 8.00 | % |  |  | 11.20 | % |  |  | 11.28 | % |  |  | 11.27 | % |  |  | 11.24 | % |  |  | 11.30 | %
Tier 1 leverage capital |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Hancock Whitney Corporation |  |  | 5.00 | % |  |  | 9.27 | % |  |  | 8.68 | % |  |  | 8.38 | % |  |  | 8.25 | % |  |  | 8.15 | %
Hancock Whitney Bank |  |  | 5.00 | % |  |  | 9.35 | % |  |  | 8.83 | % |  |  | 8.49 | % |  |  | 8.36 | % |  |  | 8.25 | %

Our regulatory ratios reflect the impact of PPP loans, which are guaranteed by the SBA and, when meeting certain criteria, are subject to forgiveness to the debtor by the SBA. These loans carry a 0% risk-weighting in the tier 1 and total capital regulatory ratios due to the full guarantee by the SBA. However, these loans are reflected in average assets used to compute tier 1 leverage. PPP loans totaled $76 million, $151 million and $531 million at September 30, 2022, June 30, 2022 and December 31, 2021, respectively.

On April 22, 2021, our board of directors authorized the repurchase of up to 4,338,000 shares of the Company’s common stock (approximately 5% of the shares of common stock outstanding as of March 31, 2021). The authorization is currently set to expire on December 31, 2022. The shares may be repurchased in the open market, by block purchase, through accelerated share repurchase plans, in privately negotiated transactions or otherwise, in one or more transactions, from time to time, depending upon market conditions and other factors, and in accordance with applicable regulations of the Securities and Exchange Commission. The repurchase authorization may be terminated or amended by the Board at any time prior to the expiration date. During the third quarter of 2022, 50,000 shares were repurchased under this program at an average cost of $48.05 per share, inclusive of commissions. To date, 1,654,244 shares with an average cost of $48.77 per share have been repurchased under this program.

The Inflation Reduction Act of 2022 signed into law during in August 2022 includes a provision for an excise tax equal to 1% of the fair market value of any stock repurchased by covered corporations during a taxable year, subject to certain limits and provisions. The excise tax is effective beginning in fiscal year 2023. While we may complete transactions subject to the new excise tax, we do not expect a material impact to our statement of condition or result of operations.

On July 28, 2022, our board of directors declared a regular third quarter cash dividend of $0.27 per share, consistent with the prior quarter. The quarterly common stock cash dividend was paid on September 15, 2022 to shareholders of record on September 6, 2022. The Company has paid uninterrupted dividends to its shareholders since 1967.

BALANCE SHEET ANALYSIS

Short-Term Investments

Short-term assets are held to ensure funds are available to meet the cash flow needs of both borrowers and depositors. Short-term investments, including interest-bearing bank deposits and federal funds sold, were $0.3 billion at September 30, 2022, down $0.6 billion from June 30, 2022, and $3.6 billion from December 31, 2021. Average short-term investments of $0.4 billion for the third quarter of 2022 were down $1.7 billion compared to the second quarter of 2022 and $3.3 billion from the fourth quarter of 2021. Typically, these balances will change on a daily basis depending upon movement in customer loan and deposit accounts. The decline in short-term investments from each comparative period is the result of the redeployment of excess liquidity that had been present on our balance sheet for the better part of two years attributable to pandemic-related factors.

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Securities

The purpose of the securities portfolio is to increase profitability, mitigate interest rate risk, provide liquidity and comply with regulatory pledging 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 stockholders' equity.

Investment in securities totaled $8.3 billion at September 30, 2022, down $198.2 million, or 2%, from June 30, 2022 and $219.3 million, or 3%, from December 31, 2021. The decrease from June 30, 2022 is attributable to a negative market valuation adjustment on the available for sale portfolio of $296.5 million, partially offset by net purchases of $98.3 million. The decrease from December 31, 2021 was attributable to a negative market valuation adjustment of $877.7 million on the available for sale portfolio, partially offset by net purchases of $658.4 million. The net purchases of securities compared to year-end reflect investment of a portion of excess cash held in federal funds into higher-yielding securities.

At September 30, 2022, securities available for sale totaled $5.5 billion and securities held to maturity totaled $2.9 billion. To provide some protection from the impact of future interest rate changes upon accumulated other comprehensive income, we reclassified securities available for sale with an aggregate fair value of $561.8 million to the securities held to maturity portfolio during the first quarter of 2022.

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, 2022, the average expected maturity of the portfolio was 5.88 years with an effective duration of 4.93 years and a nominal weighted-average yield of 2.18%. Under an immediate, parallel rate shock of 100 bps and 200 bps, the effective durations would be 4.89 and 4.82 years, respectively. At June 30, 2022, the average expected maturity of the portfolio was 5.91 years with an effective duration of 4.93 years and a nominal weighted-average yield of 2.08%. The average maturity of the portfolio at December 31, 2021 was 5.80 years, with an effective duration of 4.25 years and a nominal weighted-average yield of 1.87%. The changes in expected maturity, effective duration, and nominal weighted-average yield were largely the result of market conditions at the time of reinvestment of maturities, paydowns and growth from the investment of excess liquidity. At September 30, 2022, approximately $1.0 billion of our available for sale securities are hedged with $0.9 billion in fair value hedges in order to provide protection and flexibility to reposition and/or reprice the portfolio in a rising interest rate environment, effectively reducing the duration (market price risk) on the hedged securities. Our strategy in the near term will be to invest in the securities portfolio as rates rise and monitor our hedge positions to adjust interest rate sensitivity.

At the end of each reporting period, we evaluate the securities portfolio for credit loss. Based on our assessments, expected credit loss was negligible for all periods in 2022 and 2021, and therefore no allowance for credit loss was recorded.

Loans

Total loans at September 30, 2022 were $22.6 billion, up $739.5 million, or 3%, from June 30, 2022 and $1.5 billion, or 7%, from December 31, 2021. The linked-quarter increase was primarily attributable to growth of $815.1 million in core loans (excluding PPP loans), partially offset by a decrease of $75.7 million in PPP loans. New loans, increased credit line utilization, and fewer paydowns contributed to core growth in all markets across our footprint, with commercial and industrial (including healthcare), residential mortgage and construction and land development as the main drivers. The increase compared to December 31, 2021 includes core loan growth of $1.9 billion, partially offset by a decrease of $455.3 million of PPP loans.

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) |  | 2022 |  |  | 2022 |  |  | 2022 |  |  | 2021 |  |  | 2021 |
Total loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial non-real estate |  | $ | 9,905,427 |  |  | $ | 9,645,092 |  |  | $ | 9,584,480 |  |  | $ | 9,612,460 |  |  | $ | 9,416,990 |
Commercial real estate - owner occupied |  |  | 3,033,133 |  |  |  | 2,964,474 |  |  |  | 2,868,233 |  |  |  | 2,821,246 |  |  |  | 2,812,926 |
Total commercial and industrial |  |  | 12,938,560 |  |  |  | 12,609,566 |  |  |  | 12,452,713 |  |  |  | 12,433,706 |  |  |  | 12,229,916 |
Commercial real estate - income producing |  |  | 3,686,540 |  |  |  | 3,641,243 |  |  |  | 3,563,299 |  |  |  | 3,464,626 |  |  |  | 3,467,939 |
Construction and land development |  |  | 1,541,257 |  |  |  | 1,408,727 |  |  |  | 1,286,655 |  |  |  | 1,228,670 |  |  |  | 1,213,991 |
Residential mortgages |  |  | 2,843,723 |  |  |  | 2,615,807 |  |  |  | 2,462,900 |  |  |  | 2,423,890 |  |  |  | 2,351,053 |
Consumer |  |  | 1,575,505 |  |  |  | 1,570,725 |  |  |  | 1,557,774 |  |  |  | 1,583,390 |  |  |  | 1,623,116 |
Total loans |  | $ | 22,585,585 |  |  | $ | 21,846,068 |  |  | $ | 21,323,341 |  |  | $ | 21,134,282 |  |  | $ | 20,886,015 |

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Commercial and industrial (“C&I”) loans, including both non-real estate and owner occupied real estate secured loans, totaled approximately $12.9 billion, or 57% of the total loan portfolio, at September 30, 2022, an increase of $329.0 million, or 3%, from June 30, 2022, and $504.9 million, or 4%, from December 31, 2021. The growth in the portfolio for all periods is net of the reduction in PPP loans due to repayment primarily through the SBA’s forgiveness program. Our commercial and Industrial loan growth was diverse across our footprint and industries.

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, 2022 totaled approximately $2.6 billion, or 11% of total loans, an increase of $170 million from June 30, 2022 and $492 million at December 31, 2021. At September 30, 2022, approximately $503 million of our shared national credits were with healthcare-related customers, with the remainder in commercial real estate and other diverse industries.

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. a 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, |
|  | 2022 |  |  | 2022 |  |  | 2022 |  |  | 2021 |  |  | 2021 |
|  |  |  |  | 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 |  | $ | 1,483,053 |  |  |  | 11 | % |  | $ | 1,457,730 |  |  |  | 12 | % |  | $ | 1,363,548 |  |  |  | 11 | % |  | $ | 1,311,241 |  |  |  | 11 | % |  | $ | 1,298,560 |  |  |  | 11 | %
Health care and social assistance |  |  | 1,414,675 |  |  |  | 11 | % |  |  | 1,283,176 |  |  |  | 10 | % |  |  | 1,182,345 |  |  |  | 10 | % |  |  | 1,284,578 |  |  |  | 10 | % |  |  | 1,219,769 |  |  |  | 10 | %
Retail trade |  |  | 1,156,774 |  |  |  | 9 | % |  |  | 1,128,931 |  |  |  | 9 | % |  |  | 1,104,686 |  |  |  | 9 | % |  |  | 1,086,204 |  |  |  | 9 | % |  |  | 1,069,225 |  |  |  | 9 | %
Manufacturing |  |  | 1,118,510 |  |  |  | 9 | % |  |  | 1,038,052 |  |  |  | 8 | % |  |  | 984,699 |  |  |  | 8 | % |  |  | 919,830 |  |  |  | 7 | % |  |  | 928,041 |  |  |  | 8 | %
Construction |  |  | 1,013,468 |  |  |  | 8 | % |  |  | 1,026,278 |  |  |  | 8 | % |  |  | 1,027,469 |  |  |  | 8 | % |  |  | 923,040 |  |  |  | 7 | % |  |  | 861,075 |  |  |  | 7 | %
Wholesale trade |  |  | 996,690 |  |  |  | 8 | % |  |  | 991,718 |  |  |  | 8 | % |  |  | 856,534 |  |  |  | 7 | % |  |  | 823,295 |  |  |  | 7 | % |  |  | 808,252 |  |  |  | 7 | %
Finance and insurance |  |  | 980,664 |  |  |  | 7 | % |  |  | 913,300 |  |  |  | 7 | % |  |  | 911,910 |  |  |  | 7 | % |  |  | 896,105 |  |  |  | 7 | % |  |  | 796,980 |  |  |  | 7 | %
Transportation and warehousing |  |  | 854,893 |  |  |  | 7 | % |  |  | 831,602 |  |  |  | 7 | % |  |  | 771,865 |  |  |  | 6 | % |  |  | 780,934 |  |  |  | 6 | % |  |  | 785,367 |  |  |  | 6 | %
Professional, scientific, and technical services |  |  | 692,848 |  |  |  | 5 | % |  |  | 642,337 |  |  |  | 5 | % |  |  | 662,559 |  |  |  | 5 | % |  |  | 621,739 |  |  |  | 5 | % |  |  | 521,965 |  |  |  | 4 | %
Accommodation, food services and entertainment |  |  | 648,229 |  |  |  | 5 | % |  |  | 664,282 |  |  |  | 5 | % |  |  | 644,919 |  |  |  | 5 | % |  |  | 595,698 |  |  |  | 5 | % |  |  | 604,550 |  |  |  | 5 | %
Public administration |  |  | 556,918 |  |  |  | 4 | % |  |  | 570,032 |  |  |  | 5 | % |  |  | 588,755 |  |  |  | 5 | % |  |  | 596,301 |  |  |  | 5 | % |  |  | 625,979 |  |  |  | 5 | %
Other services (except public administration) |  |  | 404,684 |  |  |  | 3 | % |  |  | 399,936 |  |  |  | 3 | % |  |  | 401,243 |  |  |  | 3 | % |  |  | 424,090 |  |  |  | 4 | % |  |  | 421,884 |  |  |  | 3 | %
Information |  |  | 327,587 |  |  |  | 3 | % |  |  | 307,717 |  |  |  | 3 | % |  |  | 286,132 |  |  |  | 2 | % |  |  | 280,019 |  |  |  | 2 | % |  |  | 245,933 |  |  |  | 2 | %
Educational services |  |  | 268,245 |  |  |  | 2 | % |  |  | 279,322 |  |  |  | 2 | % |  |  | 274,848 |  |  |  | 2 | % |  |  | 255,127 |  |  |  | 2 | % |  |  | 251,383 |  |  |  | 2 | %
Energy |  |  | 246,344 |  |  |  | 2 | % |  |  | 246,961 |  |  |  | 2 | % |  |  | 249,235 |  |  |  | 2 | % |  |  | 266,235 |  |  |  | 2 | % |  |  | 264,791 |  |  |  | 2 | %
Other |  |  | 699,259 |  |  |  | 5 | % |  |  | 676,877 |  |  |  | 5 | % |  |  | 807,138 |  |  |  | 7 | % |  |  | 838,211 |  |  |  | 7 | % |  |  | 590,832 |  |  |  | 4 | %
Total commercial & industrial loans |  |  | 12,862,841 |  |  |  | 99 | % |  |  | 12,458,251 |  |  |  | 99 | % |  |  | 12,117,885 |  |  |  | 97 | % |  |  | 11,902,647 |  |  |  | 96 | % |  |  | 11,294,586 |  |  |  | 92 | %
PPP loans |  |  | 75,719 |  |  |  | 1 | % |  |  | 151,315 |  |  |  | 1 | % |  |  | 334,828 |  |  |  | 3 | % |  |  | 531,059 |  |  |  | 4 | % |  |  | 935,330 |  |  |  | 8 | %
Total commercial & industrial loans |  | $ | 12,938,560 |  |  |  | 100 | % |  | $ | 12,609,566 |  |  |  | 100 | % |  | $ | 12,452,713 |  |  |  | 100 | % |  | $ | 12,433,706 |  |  |  | 100 | % |  | $ | 12,229,916 |  |  |  | 100 | %

Commercial real estate – income producing loans totaled approximately $3.7 billion at September 30, 2022, an increase of $45 million, or 1%, from June 30, 2022 and $222 million, or 6%, from December 31, 2021. Construction and land development loans, totaling approximately $1.5 billion at September 30, 2022, increased $133 million, or 9%, from June 30, 2022 and $313 million, or 25%, from December 31, 2021. The following table details 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.

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|  | September 30, |  |  | June 30, |  |  | March 31, |  |  | December 31, |  |  | September 30, |
|  | 2022 |  |  | 2022 |  |  | 2022 |  |  | 2021 |  |  | 2021 |
|  |  |  |  | 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: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Multifamily |  | $ | 872,944 |  |  |  | 17 | % |  | $ | 776,723 |  |  |  | 15 | % |  | $ | 695,090 |  |  |  | 14 | % |  | $ | 647,300 |  |  |  | 14 | % |  | $ | 696,924 |  |  |  | 15 | %
Healthcare related properties |  |  | 851,998 |  |  |  | 16 | % |  |  | 879,474 |  |  |  | 18 | % |  |  | 815,090 |  |  |  | 17 | % |  |  | 766,338 |  |  |  | 16 | % |  |  | 677,137 |  |  |  | 15 | %
Retail |  |  | 803,300 |  |  |  | 15 | % |  |  | 780,454 |  |  |  | 16 | % |  |  | 793,126 |  |  |  | 17 | % |  |  | 777,594 |  |  |  | 17 | % |  |  | 756,619 |  |  |  | 16 | %
Industrial |  |  | 602,739 |  |  |  | 12 | % |  |  | 573,993 |  |  |  | 11 | % |  |  | 568,886 |  |  |  | 12 | % |  |  | 561,022 |  |  |  | 12 | % |  |  | 577,988 |  |  |  | 12 | %
Office |  |  | 585,614 |  |  |  | 11 | % |  |  | 569,055 |  |  |  | 11 | % |  |  | 554,005 |  |  |  | 11 | % |  |  | 501,771 |  |  |  | 11 | % |  |  | 487,510 |  |  |  | 10 | %
1-4 family residential construction |  |  | 588,122 |  |  |  | 11 | % |  |  | 548,286 |  |  |  | 11 | % |  |  | 516,580 |  |  |  | 11 | % |  |  | 469,690 |  |  |  | 10 | % |  |  | 441,925 |  |  |  | 9 | %
Hotel/motel and restaurants |  |  | 453,847 |  |  |  | 9 | % |  |  | 448,949 |  |  |  | 9 | % |  |  | 441,285 |  |  |  | 9 | % |  |  | 437,241 |  |  |  | 9 | % |  |  | 504,536 |  |  |  | 11 | %
Other land loans |  |  | 222,723 |  |  |  | 4 | % |  |  | 221,905 |  |  |  | 4 | % |  |  | 214,446 |  |  |  | 4 | % |  |  | 257,594 |  |  |  | 5 | % |  |  | 291,415 |  |  |  | 7 | %
Other |  |  | 246,510 |  |  |  | 5 | % |  |  | 251,131 |  |  |  | 5 | % |  |  | 251,446 |  |  |  | 5 | % |  |  | 274,746 |  |  |  | 6 | % |  |  | 247,876 |  |  |  | 5 | %
Total commercial real estate - income producing and construction loans |  | $ | 5,227,797 |  |  |  | 100 | % |  | $ | 5,049,970 |  |  |  | 100 | % |  | $ | 4,849,954 |  |  |  | 100 | % |  | $ | 4,693,296 |  |  |  | 100 | % |  | $ | 4,681,930 |  |  |  | 100 | %

Our residential mortgages loan portfolio totaled $2.8 billion at September 30, 2022, up $228 million, or 9%, from June 30, 2022 and $420 million, or 17%, and from December 31, 2021. The increase in residential mortgage loans from the prior comparative periods is largely due to a lower percentage sold in the secondary market, partially offset by paydowns. The percentage of the originations sold in the secondary market was 21% in both the third and second quarters of 2022 and 35% in the fourth quarter of 2021.

The consumer loan portfolio totaled $1.6 billion at September 30, 2022, up $5 million, or less than 1%, from June 30, 2022, and down $8 million, or less than 1%, from December 31, 2021. Changes in the consumer loan portfolio balance include the impact of our exit from the indirect automobile lending market, where the existing portfolio is in run-off, declining $26 million linked-quarter and $88 million compared to December 31, 2021.

Management expects loan growth of approximately $200 million to $450 million in the fourth quarter, with full-year 2022 loan growth estimated to be about 8% to 9% over the December 31, 2021 balance of $21.1 billion.

Allowance for Credit Losses and Asset Quality

The Company's allowance for credit losses was $339.6 million at September 30, 2022, compared to $339.5 million at June 30, 2022, and $400.5 million at September 30, 2021 and $371.4 million at December 31, 2021.

The $0.1 million linked-quarter increase in the allowance for credit losses is attributable to $1.3 million of net charge-offs and a provision for credit losses of $1.4 million, reflective of a relatively consistent credit loss outlook on the portfolio as a whole and growth across the portfolios, particularly in commercial non-real estate, construction and land development, and mortgage segments. Both collectively evaluated reserves and individually evaluated reserves (generally used for nonperforming and troubled debt restructured loans) were virtually unchanged compared to the prior quarter. Risks related to the pandemic have mostly subsided, but uncertainty related to inflationary pressure and the outcome of the Federal Reserve’s monetary policy has resulted in a continued elevated reserve. Consistent with the prior period, the slower near-term growth S-2 scenario (anchored on the baseline) was weighted more heavily at 75% and the baseline scenario was weighted 25% to incorporate reasonably possible alternative economic outcomes. Both economic scenarios utilized have varying degrees of severity and duration of inflationary pressure, including volatility in commodities prices stemming from geopolitical unrest, and the consequences of the Federal Reserve's actions with regard to monetary policy, with the S-2 scenario reflecting a mild recession.

The September 2022 baseline forecast assumes the global oil market remains mostly balanced in 2023, allowing oil prices to gradually drop; the return to full-employment to be achieved in the coming months; GDP will grow in the second half of the year, with forecasted annual growth of 1.6% in 2022, 1.4% in 2023 and 2.6% in 2024; the Federal Funds rate will reach a target rate of 3.5% by the end of 2022, with the possibility of future rate increases and no rate cuts until 2025; and, future surges in COVID-19 infections will not have a significant impact upon economic conditions. The S-2 scenario assumes that the conflict between Russia and Ukraine spans longer than anticipated in the baseline scenario and leads to worsened supply chain issues and further boosting inflation. The Federal Reserve would in turn react with a more aggressive approach than assumed in the baseline scenario, generating greater corrections in equity and housing markets and declines in spending. As such, the S-2 scenario incorporates a mild recession beginning in the fourth quarter of 2022 that spans three quarters. Further, the S-2 scenario assumes that the return to full employment will not be achieved until the third quarter of 2024 and that an increase in the number of COVID-19 cases, hospitalizations and deaths will impede growth in spending on air travel, retail and hotels. Additional information on the Moody’s forecast is provided in the “Economic Outlook” section of this document.

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In the third quarter of 2022, the provision for credit losses included a reserve build of $0.1 million, compared to a reserve release of $9.1 million in the second quarter of 2022 and release of $28.7 million in the third quarter of 2021. While economic growth, continued improvement in credit quality metrics and minimal credit losses allowed for the release of certain reserves during the preceding six quarters, current period loan growth and economic uncertainty resulted in a relatively flat allowance compared to the second quarter. Our allowance for credit loss coverage to total loans was 1.50% at September 30, 2022, compared to 1.55% at June 30, 2022, and 1.76% at December 31, 2021. While our reserve coverage to total loans declined linked quarter as a result of strong portfolio growth and stable credit metrics, it remains elevated compared to normalized levels, reflecting the current economic uncertainty.

The allowance for credit losses on the commercial portfolio was relatively unchanged at $279.1 million, or 1.54% of that portfolio, at September 30, 2022 compared to the June 30, 2022 allowance of $280.0 million, or 1.59%, primarily due to stable credit performance. Our residential mortgage allowance for credit loss increased modestly to $31.0 million, 1.09% of that portfolio at September 30, 2022, compared to $28.6 million, or 1.09%, at June 30, 2022, due to both growth in the portfolio and changes in certain forecasted economic variables. Our allowance for credit losses on the consumer portfolio was $29.5 million, or 1.88% at September 30, 2022, compared to $30.9 million, or 1.97%, at June 30, 2022.

Criticized commercial loans totaled $304.4 million at September 30, 2022, up $23.4 million, or 8%, from $281.0 million at June 30, 2022, and up $17.2 million, or 6% from $287.2 million at December 31, 2021. The increase in commercial criticized loans is the result of net activity where downgraded credits exceeded payoffs, paydowns, upgrades, and charge-offs during the quarter. 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.

Net charge-offs were $1.3 million, or 0.02% of average total loans on an annualized basis in the third quarter of 2022, compared to net recoveries of $0.7 million, or (0.01)% of average total loans in the second quarter of 2022 and net charge-offs of $1.8 million, or 0.03% in the third quarter of 2021. Our commercial portfolio had net recoveries of $0.3 million and $1.6 million in the third and second quarters of 2022, respectively, while the third quarter of 2021 had net charge-offs totaling $0.5 million. Our residential mortgage portfolio had net recoveries of $0.9 million in the third quarter of 2022 and $0.4 million in both the second quarter of 2022 and the third quarter of 2021. Consumer net charge-offs were $2.5 million in the third quarter of 2022, $1.4 million in the second quarter of 2022, and $1.7 million in the third quarter of 2021.

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

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|  | Three Months Ended |  |  | Nine Months Ended |
|  | September 30, |  |  | June 30, |  |  | September 30, |  |  | September 30, |
(in thousands) |  | 2022 |  |  | 2022 |  |  | 2021 |  |  | 2022 |  |  | 2021 |
Provision and Allowance for Credit Losses |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Allowance for loan losses: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Allowance for loan losses at beginning of period |  | $ | 308,175 |  |  | $ | 317,843 |  |  | $ | 399,668 |  |  | $ | 342,065 |  |  | $ | 450,177 |
Loans charged-off: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial non real estate |  |  | 2,619 |  |  |  | 1,088 |  |  |  | 3,437 |  |  |  | 6,366 |  |  |  | 32,369 |
Commercial real estate - owner-occupied |  |  | 89 |  |  |  | 857 |  |  |  | 40 |  |  |  | 946 |  |  |  | 1,722 |
Total commercial & industrial |  |  | 2,708 |  |  |  | 1,945 |  |  |  | 3,477 |  |  |  | 7,312 |  |  |  | 34,091 |
Commercial real estate - income producing |  |  | — |  |  |  | 1,062 |  |  |  | — |  |  |  | 1,066 |  |  |  | 231 |
Construction and land development |  |  | — |  |  |  | 3 |  |  |  | 11 |  |  |  | 3 |  |  |  | 267 |
Total commercial |  |  | 2,708 |  |  |  | 3,010 |  |  |  | 3,488 |  |  |  | 8,381 |  |  |  | 34,589 |
Residential mortgages |  |  | 42 |  |  |  | 18 |  |  |  | 11 |  |  |  | 102 |  |  |  | 218 |
Consumer |  |  | 3,837 |  |  |  | 2,947 |  |  |  | 3,256 |  |  |  | 9,464 |  |  |  | 9,874 |
Total charge-offs |  |  | 6,587 |  |  |  | 5,975 |  |  |  | 6,755 |  |  |  | 17,947 |  |  |  | 44,681 |
Recoveries of loans previously charged-off: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial non real estate |  |  | 2,857 |  |  |  | 4,461 |  |  |  | 2,392 |  |  |  | 9,460 |  |  |  | 6,579 |
Commercial real estate - owner-occupied |  |  | 115 |  |  |  | 102 |  |  |  | 76 |  |  |  | 606 |  |  |  | 363 |
Total commercial & industrial |  |  | 2,972 |  |  |  | 4,563 |  |  |  | 2,468 |  |  |  | 10,066 |  |  |  | 6,942 |
Commercial real estate - income producing |  |  | — |  |  |  | — |  |  |  | 100 |  |  |  | 878 |  |  |  | 100 |
Construction and land development |  |  | 6 |  |  |  | 58 |  |  |  | 384 |  |  |  | 132 |  |  |  | 1,548 |
Total commercial |  |  | 2,978 |  |  |  | 4,621 |  |  |  | 2,952 |  |  |  | 11,076 |  |  |  | 8,590 |
Residential mortgages |  |  | 936 |  |  |  | 466 |  |  |  | 496 |  |  |  | 1,463 |  |  |  | 933 |
Consumer |  |  | 1,377 |  |  |  | 1,574 |  |  |  | 1,537 |  |  |  | 4,479 |  |  |  | 4,636 |
Total recoveries |  |  | 5,291 |  |  |  | 6,661 |  |  |  | 4,985 |  |  |  | 17,018 |  |  |  | 14,159 |
Total net charge-offs (recoveries) |  |  | 1,296 |  |  |  | (686 | ) |  |  | 1,770 |  |  |  | 929 |  |  |  | 30,522 |
Provision for loan losses |  |  | (763 | ) |  |  | (10,354 | ) |  |  | (26,377 | ) |  |  | (35,020 | ) |  |  | (48,134 | )
Allowance for loan losses at end of period |  | $ | 306,116 |  |  | $ | 308,175 |  |  | $ | 371,521 |  |  | $ | 306,116 |  |  | $ | 371,521 |
Reserve for Unfunded Lending Commitments: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Reserve for unfunded lending commitments at beginning of period |  | $ | 31,303 |  |  | $ | 30,710 |  |  | $ | 29,524 |  |  | $ | 29,334 |  |  | $ | 29,907 |
Provision for losses on unfunded lending commitments |  |  | 2,165 |  |  |  | 593 |  |  |  | (578 | ) |  |  | 4,134 |  |  |  | (961 | )
Reserve for unfunded lending commitments at end of period |  | $ | 33,468 |  |  | $ | 31,303 |  |  | $ | 28,946 |  |  | $ | 33,468 |  |  | $ | 28,946 |
Total Allowance for Credit Losses |  | $ | 339,584 |  |  | $ | 339,478 |  |  | $ | 400,467 |  |  | $ | 339,584 |  |  | $ | 400,467 |
Total Provision for Credit Losses |  | $ | 1,402 |  |  | $ | (9,761 | ) |  | $ | (26,955 | ) |  | $ | (30,886 | ) |  | $ | (49,095 | )
Coverage Ratios: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Allowance for loan losses to period-end loans |  |  | 1.36 | % |  |  | 1.41 | % |  |  | 1.78 | % |  |  | 1.36 | % |  |  | 1.78 | %
Allowance for credit losses to period-end loans |  |  | 1.50 | % |  |  | 1.55 | % |  |  | 1.92 | % |  |  | 1.50 | % |  |  | 1.92 | %
Charge-offs ratios: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Gross charge-offs to average loans |  |  | 0.12 | % |  |  | 0.11 | % |  |  | 0.13 | % |  |  | 0.11 | % |  |  | 0.28 | %
Recoveries to average loans |  |  | 0.09 | % |  |  | 0.12 | % |  |  | 0.09 | % |  |  | 0.11 | % |  |  | 0.09 | %
Net charge-offs to average loans |  |  | 0.02 | % |  |  | (0.01 | )% |  |  | 0.03 | % |  |  | 0.01 | % |  |  | 0.19 | %
Net Charge-offs to average loans by portfolio |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial non real estate |  |  | (0.01 | )% |  |  | (0.14 | )% |  |  | 0.04 | % |  |  | (0.04 | )% |  |  | 0.35 | %
Commercial real estate - owner-occupied |  |  | (0.00 | )% |  |  | 0.10 | % |  |  | (0.01 | )% |  |  | 0.02 | % |  |  | 0.06 | %
Total commercial & industrial |  |  | (0.01 | )% |  |  | (0.08 | )% |  |  | 0.03 | % |  |  | (0.03 | )% |  |  | 0.29 | %
Commercial real estate - income producing |  |  | — |  |  |  | 0.12 | % |  |  | (0.01 | )% |  |  | 0.01 | % |  |  | 0.01 | %
Construction and land development |  |  | (0.00 | )% |  |  | (0.02 | )% |  |  | (0.12 | )% |  |  | (0.01 | )% |  |  | (0.15 | )%
Total commercial |  |  | (0.01 | )% |  |  | (0.04 | )% |  |  | 0.01 | % |  |  | (0.02 | )% |  |  | 0.20 | %
Residential mortgages |  |  | (0.13 | )% |  |  | (0.07 | )% |  |  | (0.08 | )% |  |  | (0.07 | )% |  |  | (0.04 | )%
Consumer |  |  | 0.62 | % |  |  | 0.35 | % |  |  | 0.41 | % |  |  | 0.43 | % |  |  | 0.41 | %

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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, |  |  | June 30, |  |  | March 31, |  |  | December 31, |  |  | September 30, |
(in thousands) |  | 2022 |  |  | 2022 |  |  | 2022 |  |  | 2021 |  |  | 2021 |
Loans accounted for on a nonaccrual basis: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial non-real estate |  | $ | 3,563 |  |  | $ | 3,600 |  |  | $ | 4,065 |  |  | $ | 4,058 |  |  | $ | 7,167 |
Commercial non-real estate - restructured |  |  | 965 |  |  |  | 1,230 |  |  |  | 1,247 |  |  |  | 2,915 |  |  |  | 2,781 |
Total commercial non-real estate |  |  | 4,528 |  |  |  | 4,830 |  |  |  | 5,312 |  |  |  | 6,973 |  |  |  | 9,948 |
Commercial real estate - owner occupied |  |  | 2,009 |  |  |  | 2,165 |  |  |  | 2,514 |  |  |  | 3,104 |  |  |  | 4,922 |
Commercial real estate - owner-occupied - restructured |  |  | 228 |  |  |  | 228 |  |  |  | 235 |  |  |  | 1,817 |  |  |  | 1,798 |
Total commercial real estate - owner-occupied |  |  | 2,237 |  |  |  | 2,393 |  |  |  | 2,749 |  |  |  | 4,921 |  |  |  | 6,720 |
Commercial real estate - income producing |  |  | 1,814 |  |  |  | 1,842 |  |  |  | 1,880 |  |  |  | 5,377 |  |  |  | 4,167 |
Commercial real estate - income producing - restructured |  |  | 69 |  |  |  | 74 |  |  |  | 76 |  |  |  | 81 |  |  |  | 82 |
Total commercial real estate - income producing |  |  | 1,883 |  |  |  | 1,916 |  |  |  | 1,956 |  |  |  | 5,458 |  |  |  | 4,249 |
Construction and land development |  |  | 349 |  |  |  | 676 |  |  |  | 578 |  |  |  | 837 |  |  |  | 1,230 |
Construction and land development - restructured |  |  | 4 |  |  |  | 4 |  |  |  | 6 |  |  |  | 7 |  |  |  | 8 |
Total construction and land development |  |  | 353 |  |  |  | 680 |  |  |  | 584 |  |  |  | 844 |  |  |  | 1,238 |
Residential mortgage |  |  | 22,753 |  |  |  | 18,649 |  |  |  | 20,709 |  |  |  | 23,483 |  |  |  | 23,423 |
Residential mortgage - restructured |  |  | 1,530 |  |  |  | 1,713 |  |  |  | 2,036 |  |  |  | 1,956 |  |  |  | 2,541 |
Total residential mortgage |  |  | 24,283 |  |  |  | 20,362 |  |  |  | 22,745 |  |  |  | 25,439 |  |  |  | 25,964 |
Consumer |  |  | 6,476 |  |  |  | 7,885 |  |  |  | 9,093 |  |  |  | 11,888 |  |  |  | 12,238 |
Consumer - restructured |  |  | 47 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Total consumer |  |  | 6,523 |  |  |  | 7,885 |  |  |  | 9,093 |  |  |  | 11,888 |  |  |  | 12,238 |
Total nonaccrual loans |  | $ | 39,807 |  |  | $ | 38,066 |  |  | $ | 42,439 |  |  | $ | 55,523 |  |  | $ | 60,357 |
Restructured loans - still accruing: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial non-real estate |  | $ | 316 |  |  | $ | 329 |  |  | $ | 494 |  |  | $ | 515 |  |  | $ | 480 |
Commercial real estate - owner occupied |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Commercial real estate - income producing |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Construction and land development |  |  | 114 |  |  |  | 116 |  |  |  | 117 |  |  |  | 118 |  |  |  | 119 |
Residential mortgage |  |  | 1,016 |  |  |  | 1,142 |  |  |  | 1,363 |  |  |  | 2,169 |  |  |  | 1,407 |
Consumer |  |  | 479 |  |  |  | 905 |  |  |  | 929 |  |  |  | 986 |  |  |  | 1,065 |
Total restructured loans - still accruing |  |  | 1,925 |  |  |  | 2,492 |  |  |  | 2,903 |  |  |  | 3,788 |  |  |  | 3,071 |
Total nonperforming loans |  |  | 41,732 |  |  |  | 40,558 |  |  |  | 45,342 |  |  |  | 59,311 |  |  |  | 63,428 |
ORE and foreclosed assets |  |  | 2,085 |  |  |  | 3,467 |  |  |  | 6,345 |  |  |  | 7,533 |  |  |  | 8,423 |
Total nonperforming assets (a) |  | $ | 43,817 |  |  | $ | 44,025 |  |  | $ | 51,687 |  |  | $ | 66,844 |  |  | $ | 71,851 |
Loans 90 days past due still accruing |  | $ | 2,600 |  |  | $ | 4,697 |  |  | $ | 4,258 |  |  | $ | 5,524 |  |  | $ | 9,970 |
Total restructured loans |  | $ | 4,768 |  |  | $ | 5,741 |  |  | $ | 6,503 |  |  | $ | 10,564 |  |  | $ | 10,281 |
Ratios: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Nonaccrual loans to total loans |  |  | 0.18 | % |  |  | 0.17 | % |  |  | 0.20 | % |  |  | 0.26 | % |  |  | 0.29 | %
Nonperforming assets to loans plus ORE and foreclosed assets |  |  | 0.19 | % |  |  | 0.20 | % |  |  | 0.24 | % |  |  | 0.32 | % |  |  | 0.34 | %
Allowance for loan losses to nonaccrual loans and accruing loans 90 days past due |  |  | 721.85 | % |  |  | 720.66 | % |  |  | 680.65 | % |  |  | 560.33 | % |  |  | 528.28 | %
Allowance for loan losses to nonperforming loans and accruing loans 90 days past due |  |  | 690.51 | % |  |  | 680.97 | % |  |  | 640.81 | % |  |  | 527.59 | % |  |  | 506.17 | %
Loans 90 days past due still accruing to loans |  |  | 0.01 | % |  |  | 0.02 | % |  |  | 0.02 | % |  |  | 0.03 | % |  |  | 0.05 | %

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

Nonperforming assets totaled $43.8 million at September 30, 2022, down $0.2 million from June 30, 2022, and $23.0 million from December 31, 2021. Nonperforming loans increased $1.2 million compared to June 30, 2022, and decreased $17.6 million compared to December 31, 2021. The minimal increase in nonperforming loans compared to June 30, 2022 was largely attributable to downgrades, partially offset by payoffs and charge-offs. ORE and foreclosed assets were $2.1 million at September 30, 2022, down from $3.5 million at June 30, 2022, and $7.5 million at December 31, 2021. Nonperforming assets as a percentage of total loans, ORE and other foreclosed assets was 0.19% at September 30, 2022, down 1 bp from June 30, 2022, and 13 bps from December 31, 2021.

We expect to see low to modest charge-offs and provision for credit losses in the fourth quarter of 2022. Loan growth, portfolio mix, asset quality metrics and future assumptions in economic forecasts will drive the level of credit loss reserves.

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Deposits

Deposits provide the most significant source of funding for our interest earning assets. Generally, 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. Since early 2020, deposit levels have also been influenced by pandemic-driven factors, such as inflows from government stimulus payments, deposits related to funding PPP loans into business checking accounts and a slowdown in customer spending during the height of the pandemic. In the third quarter of 2022, in addition to expected seasonal contraction, we began to see outflows of some of the deposit bases built over the preceding two years, as spending levels have increased amid inflationary conditions, and increased competition for deposits as customers seek higher returns at other financial institutions and/or in other investment vehicles.

Total deposits were $29.0 billion at September 30, 2022, with noninterest-bearing deposits comprising nearly half of the total. Total deposits were down $915.2 million, or 3%, from June 30, 2022, and $1.5 billion from December 31, 2021. Average deposits for the third quarter of 2022 were $29.2 billion, down $799.3 million, or 3%, from the second quarter of 2022, $570.0 million, or 2%, from fourth quarter of 2021, and $56.7 million, or less than 1%, from the third quarter of 2021.

The following table shows the composition of our deposits at each date indicated.

|  | September 30, |  |  | June 30, |  |  | March 31, |  |  | December 31, |  |  | September 30, |
(in thousands) |  | 2022 |  |  | 2022 |  |  | 2022 |  |  | 2021 |  |  | 2021 |
Noninterest-bearing deposits |  | $ | 14,290,817 |  |  | $ | 14,676,342 |  |  | $ | 14,976,670 |  |  | $ | 14,392,808 |  |  | $ | 13,653,366 |
Interest-bearing retail transaction and savings deposits |  |  | 10,924,309 |  |  |  | 11,359,561 |  |  |  | 11,488,607 |  |  |  | 11,677,333 |  |  |  | 11,306,731 |
Interest-bearing public fund deposits: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Public fund transaction and savings deposits |  |  | 2,737,074 |  |  |  | 2,832,720 |  |  |  | 2,962,811 |  |  |  | 3,216,651 |  |  |  | 2,938,943 |
Public fund time deposits |  |  | 59,288 |  |  |  | 50,943 |  |  |  | 51,496 |  |  |  | 77,956 |  |  |  | 116,445 |
Total interest-bearing public fund deposits |  |  | 2,796,362 |  |  |  | 2,883,663 |  |  |  | 3,014,307 |  |  |  | 3,294,607 |  |  |  | 3,055,388 |
Retail time deposits |  |  | 934,866 |  |  |  | 937,676 |  |  |  | 1,010,935 |  |  |  | 1,091,959 |  |  |  | 1,183,482 |
Brokered time deposits |  |  | 4,920 |  |  |  | 9,190 |  |  |  | 9,190 |  |  |  | 9,190 |  |  |  | 9,190 |
Total interest-bearing deposits |  |  | 14,660,457 |  |  |  | 15,190,090 |  |  |  | 15,523,039 |  |  |  | 16,073,089 |  |  |  | 15,554,791 |
Total deposits |  | $ | 28,951,274 |  |  | $ | 29,866,432 |  |  | $ | 30,499,709 |  |  | $ | 30,465,897 |  |  | $ | 29,208,157 |

Noninterest-bearing demand deposits were $14.3 billion at September 30, 2022, down $385.5 million, or 3%, from June 30, 2022, and $102.0 million, or 1%, from December 31, 2021. The linked-quarter decrease reflects a decline in noninterest-bearing commercial, consumer and public funds deposits due in part to typical seasonality, while the year-over-year changes are likely the result of pandemic and hurricane related cash inflows. Noninterest-bearing demand deposits comprised 49% of total deposits at September 30, 2022 and June 30, 2022, and 47% at December 31, 2021.

Interest-bearing transaction and savings accounts of $10.9 billion at September 30, 2022 were down $435.3 million, or 4%, from June 30, 2022, and $753.0 million, or 6%, from December 31, 2021. Interest-bearing public fund deposits totaled $2.8 billion at September 30, 2022, down $87.3 million, or 3%, from June 30, 2022, and $498.2 million, or 15%, from December 31, 2021. The linked quarter decrease in public funds also reflects a typical seasonal outflow. Retail time deposits totaled $0.9 billion at September 30, 2022, down $2.8 million, or less than 1%, from June 30, 2022, and $157.1 million, or 14%, from December 31, 2021. The decrease in time deposits from both periods was due in part to maturing retail and jumbo certificates of deposit which were not renewed, likely due to prevailing rates that reflect management’s strategic approach to controlling the cost of funds.

Management expects seasonal deposit growth in the fourth quarter, with year-end deposits expected to be down 3% to 4% from the December 31, 2021 level of $30.5 billion.

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Short-Term Borrowings

At September 30, 2022, short-term borrowings totaled $1.5 billion, up $913.0 million, or 145%, from June 30, 2022, and down $202.2 million, or 12%, from September 30, 2021, and down $122.1 million, or 7%, from December 31, 2021. The increase from June 30, 2022 is primarily attributable to $1.0 billion of new floating-rate FHLB borrowings as a source of funding for loan growth amid some deposit contraction. While the variance from the December 31, 2021 is much less significant, it is reflective of repayment of $1.1 billion of low fixed-rate FHLB borrowings during the second and third quarters of 2022, and the addition of $1.0 billion in new floating-rate advances. The remaining variance for both periods is largely due to changes in customer repurchase agreements discussed below. Average short-term borrowings of $950.6 million in the third quarter of 2022 were down $273.6 million, or 22%, compared to the prior quarter, $741.0 million, or 45%, from the fourth quarter of 2021 and $661.7 million, or 41%, compared to the same quarter last year.

Short-term borrowings are a core portion of the Company’s funding strategy and can fluctuate depending on our funding needs and the sources utilized. Customer repurchase agreements and FHLB borrowings are the major sources of short-term borrowings. Customer repurchase agreements are offered mainly to commercial customers to assist them with their cash management strategies or to provide a temporary investment vehicle for their excess liquidity pending redeployment for corporate or investment purposes. While customer repurchase agreements provide a recurring source of funds to the Bank, 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 $236.4 million at September 30, 2022, down $3.7 million, or 2%, from June 30, 2022, and $7.8 million, or 3%, from December 31, 2021.

Long-term debt at September 30, 2022 includes subordinated notes payable with an aggregate principal amount of $172.5 million, a stated maturity of June 15, 2060, and a fixed rate of 6.25% per annum that qualify as Tier 2 capital of certain regulatory capital ratios. 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, 2025.

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, non-revolving 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 our future cash requirements.

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.

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The contract amounts of these instruments reflect our exposure to credit risk. The Bank 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, 2022, the Company had a reserve for unfunded lending commitments totaling $33.5 million.

The following table shows the commitments to extend credit and letters of credit at September 30, 2022 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 |  | $ | 10,285,394 |  |  | $ | 4,092,399 |  |  | $ | 2,425,858 |  |  | $ | 2,935,821 |  |  | $ | 831,316 |
Letters of credit |  |  | 373,002 |  |  |  | 329,424 |  |  |  | 39,013 |  |  |  | 4,565 |  |  |  | — |
Total |  | $ | 10,658,396 |  |  | $ | 4,421,823 |  |  | $ | 2,464,871 |  |  | $ | 2,940,386 |  |  | $ | 831,316 |

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

There were no material changes or developments during the reporting period with respect to methodologies that the Company uses when applying what management believes are critical accounting policies and developing critical accounting estimates as disclosed in its Annual Report on Form 10-K for the year ended December 31, 2021.

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

NEW ACCOUNTING PRONOUNCEMENTS

Refer to Note 14 to our consolidated financial statements included elsewhere in this report.

Item 3. Quantitative and Qualitat ive 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 interest 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, 2022. Shifts are measured in 100 basis point increments in a range from -500 to +500 basis points from base case, with -100 through +200 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 such as loan floors and the impact of off-balance sheet hedges. 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 |  |  | -4.55 | % |  |  | -7.11 | %
+100 |  |  | 4.10 | % |  |  | 6.56 | %
+200 |  |  | 8.14 | % |  |  | 13.02 | %

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The results indicate a moderate level of asset sensitivity across most scenarios driven primarily by a large volume of variable rate loans indexed to short-term rates and a funding mix which has a high composition 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.

LIBOR Transition

In 2017, the United Kingdom’s Financial Conduct Authority announced that after 2021 it would no longer compel banks to submit the rates required to calculate the London Interbank Offered Rate (“LIBOR”). In November 2020, the administrator of LIBOR announced it will consult on its intention to extend the retirement date of certain offered rates whereby the publication of the one week and two month LIBOR offered rates will cease after December 31, 2021, but the publication of the remaining LIBOR offered rates will continue until June 30, 2023. Given consumer protection, litigation, and reputation risks, the bank regulatory agencies have indicated that entering into new contracts that use LIBOR as a reference rate after December 31, 2021, would create safety and soundness risks and that they will examine bank practices accordingly. Therefore, the agencies encouraged banks to cease entering into new contracts that use LIBOR as a reference rate as soon as practicable and in any event by December 31, 2021. The company discontinued the use of LIBOR for new contracts as of December 31, 2021, with limited exceptions as permitted by regulatory guidance or internal policies.

Regulators, industry groups and certain committees (e.g., the Alternative Reference Rates Committee ("ARRC") have, among other things, published recommended fallback language for LIBOR-linked financial instruments, identified recommended alternatives for certain LIBOR rates (e.g., AMERIBOR or the Secured Overnight Financing Rate ("SOFR") as the recommended alternative to U.S. Dollar LIBOR), and proposed implementations of the recommended alternatives in floating rate instruments.

We have a significant number of loans, derivative contracts, borrowings and other financial instruments with attributes that are either directly or indirectly dependent on LIBOR. The transition from LIBOR has resulted in and could continue to result in added costs and employee efforts and could present additional risk. Since proposed alternative rates are calculated differently, payments under contracts referencing new rates will differ from those referencing LIBOR. The transition will change our market risk profiles, requiring changes to risk and pricing models, valuation tools, product design and hedging strategies.

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. Beginning in 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 is in process and 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. Although we are currently unable to assess what the ultimate impact of the transition from LIBOR will be, failure to adequately manage the transition could have a material adverse effect on our business, financial condition and results of operations.

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The Bank has adopted several replacement benchmarks to use in place of LIBOR benchmark rates, with AMERIBOR along with Chicago Mercantile Exchange Inc. (“CME”) Term SOFR and FRB-NY SOFR as the primary rates. The replacement benchmark rates adopted by the Bank have been affirmed to comply with the 19 principles set forth by the International Organization of Securities Commissions ("IOSCO") for Financial Benchmarks, and it further provides the Bank confidence these replacement benchmarks are based on transparent, market-based transactions. The Bank began using these replacement benchmarks towards the end of the third quarter of 2021.

At September 30, 2022, approximately 26% 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, 2022, 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, 2022, that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.

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PART II. OTH ER INFORMATION

Item 1. Lega l 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. Ri sk Factors

The Company disclosed risk factors in its Annual Report on Form 10-K for the year ended December 31, 2021. 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.

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

The Company has in place a Board approved stock buyback program whereby the Company is authorized to repurchase up to 4.3 million shares of its common stock through the program’s expiration date of December 31, 2022. 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 otherwise, in one or more transactions. Following is a summary of repurchases during the three months ended September 30, 2022.

|  | Total number of shares or units purchased |  |  | Average price paid per share |  |  | Total number of shares purchased as part of a publicly announced plan or program |  |  | Maximum number of shares that may yet be purchased under such plans or programs |
July 1, 2022 - July 31, 2022 |  |  | — |  |  | $ | — |  |  |  | — |  |  |  | 2,695,756 |
August 1, 2022 - August 31, 2022 |  |  | 16,497 |  |  | $ | 48.23 |  |  |  | 16,497 |  |  |  | 2,679,259 |
September 1, 2022 - September 30, 2022 |  |  | 33,503 |  |  | $ | 47.96 |  |  |  | 33,503 |  |  |  | 2,645,756 |
|  |  | 50,000 |  |  | $ | 48.05 |  |  |  | 50,000 |  |  |  |

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Item 6. E xhibits

(a) Exhibits:

Exhibit Number |  | Description |  | Filed Herewith |  | Form |  | Exhibit |  | Filing Date
3.1 |  | Second Amended and Restated Articles of Hancock Whitney Corporation |  |  |  | 8-K |  | 3.1 |  | 11/03/2022
3.2 |  | Second Amended and Restated Bylaws of Hancock Whitney Corporation |  |  |  | 8-K |  | 3.2 |  | 11/03/2022
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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SIGNA TURES

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)
|  |  | November 3, 2022

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