Equibles

10-Q

HANCOCK WHITNEY CORP (HWC)

10-Q 2024-11-07 For: 2024-09-30
View Original
Added on April 07, 2026

*

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark one)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2024

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<br><br>incorporation or organization) (I.R.S. Employer<br><br>Identification No.)

Hancock Whitney Plaza, 2510 14th Street,<br><br>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.

86,060,352 common shares were outstanding at October 31, 2024.

Table of Contents

Hancock Whitney Corporation

Index

Part I. Financial Information Page<br><br>Number
ITEM 1. Financial Statements 5
Consolidated Balance Sheets (unaudited) – September 30, 2024 and December 31, 2023 5
Consolidated Statements of Income (unaudited) – Three and Nine Months Ended September 30, 2024 and 2023 6
Consolidated Statements of Comprehensive Income (unaudited) – Three and Nine Months Ended September 30, 2024 and 2023 7
Consolidated Statements of Changes in Stockholders’ Equity (unaudited) – Three and Nine Months Ended September 30, 2024 and 2023 8
Consolidated Statements of Cash Flows (unaudited) – Nine Months Ended September 30, 2024 and 2023 9
Notes to Consolidated Financial Statements (unaudited) – September 30, 2024 and 2023 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 62
ITEM 4. Controls and Procedures 64
Part II. Other Information
ITEM 1. Legal Proceedings 65
ITEM 1A. Risk Factors 65
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds 65
ITEM 3. Default on Senior Securities N/A
ITEM 4. Mine Safety Disclosures N/A
ITEM 5. Other Information 65
ITEM 6. Exhibits 66
Signatures 67

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Hancock Whitney Corporation

Glossary of Defined Terms

Entities:

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

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

Company – Hancock Whitney Corporation and its consolidated subsidiaries

Parent – Hancock Whitney Corporation, exclusive of its subsidiaries

Bank – Hancock Whitney Bank

Other Terms:

ACL – allowance for credit losses

AFS – available for sale securities

AOCI – accumulated other comprehensive income or loss

ALCO – Asset Liability Management Committee

ALLL – allowance for loan and lease losses

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

CD – certificate of deposit

CDE – Community Development Entity

CECL – Current Expected Credit Losses

CEO – Chief Executive Officer

CFPB – Consumer Financial Protection Bureau

CFO – Chief Financial Officer

CME – Chicago Mercantile Exchange

CMO – collateralized mortgage obligation

Core client deposits – total deposits excluding public funds and brokered deposits

Core deposits – total deposits excluding certificates of deposits of $250,000 or more and brokered deposits

CRE – commercial real estate

CET1 – Common equity tier 1 capital as defined by Basel III capital rules

DEI – Diversity, equity and inclusion

DIF – Deposit Insurance Fund

ESG – Environmental, Social and Governance; term used in discussion of risks and corporate policies related to those items

EVE – Economic Value of Equity

Excess Liquidity – deposits held at the Federal Reserve above normal levels

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

ICS – Insured cash sweep

IRR – Interest rate risk

IRS – Internal Revenue Service

LIHTC – Low Income Housing Tax Credit

LTIP – long-term incentive plan

Table of Contents

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

MEFD – reportable modified loans to borrowers experiencing financial difficulty

NAICS – North American Industry Classification System

NII – net interest income

n/m – not meaningful

NSF – Non-sufficient funds

OCI – other comprehensive income or loss

OD – Overdraft

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

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

Pension Plan – the Hancock Whitney Corporation Pension Plan and Trust Agreement

PPNR – Pre-provision net revenue

QSCB – Qualified School Construction Bonds

QZAB – Qualified Zone Academy Bonds

Repos – securities sold under agreements to repurchase

RSU – restricted stock units

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

Supplemental disclosure items – certain highlighted items that are outside of our principal business and/or are not indicative of forward-looking trends

TBA – To Be Announced security contracts

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

TSR – total shareholder return

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

401(k) Plan – the Hancock Whitney Corporation 401(k) Savings Plan and Trust Agreement

Table of Contents

Part I. Financial Information

Item 1. Financial Statements

Hancock Whitney Corporation and Subsidiaries

Consolidated Balance Sheets

(Unaudited)

December 31,
(in thousands, except per share data) 2023
ASSETS
Cash and due from banks 569,876 $ 561,202
Interest-bearing bank deposits 794,807 626,646
Federal funds sold 424 436
Securities available for sale, at fair value (amortized cost of 5,745,280 and 5,496,718) 5,296,147 4,915,195
Securities held to maturity (fair value of 2,325,258 and 2,485,918) 2,473,633 2,684,779
Loans held for sale (includes 23,462 and 13,269 measured at fair value) 24,624 26,124
Loans 23,455,587 23,921,917
Less: allowance for loan losses (317,271 ) (307,907 )
Loans, net 23,138,316 23,614,010
Property and equipment, net of accumulated depreciation of 340,871 and 318,746 284,928 301,639
Right of use assets, net of accumulated amortization of 63,942 and 55,815 99,779 105,799
Prepaid expenses 50,091 45,234
Other real estate and foreclosed assets, net 27,732 3,628
Accrued interest receivable 148,078 157,179
Goodwill 855,453 855,453
Other intangible assets, net 37,430 44,637
Life insurance contracts 765,342 749,495
Funded pension assets, net 252,570 216,849
Deferred tax asset, net 107,842 153,384
Other assets 311,035 516,884
Total assets 35,238,107 $ 35,578,573
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits
Noninterest-bearing 10,499,476 $ 11,030,515
Interest-bearing 18,483,429 18,659,544
Total deposits 28,982,905 29,690,059
Short-term borrowings 1,265,944 1,154,829
Long-term debt 236,431 236,317
Accrued interest payable 26,910 45,000
Lease liabilities 118,714 125,618
Other liabilities 432,516 523,089
Total liabilities 31,063,420 31,774,912
Stockholders' equity:
Common stock 309,513 309,513
Capital surplus 1,723,086 1,739,671
Retained earnings 2,617,584 2,375,604
Accumulated other comprehensive loss, net (475,496 ) (621,127 )
Total stockholders' equity 4,174,687 3,803,661
Total liabilities and stockholders' equity 35,238,107 $ 35,578,573
Preferred shares authorized (par value of 20.00 per share) 50,000 50,000
Preferred shares issued and outstanding — —
Common shares authorized (par value of 3.33 per share) 350,000 350,000
Common shares issued 92,947 92,947
Common shares outstanding 86,136 86,345

All values are in US Dollars.

See notes to unaudited consolidated financial statements.

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Hancock Whitney Corporation and Subsidiaries

Consolidated Statements of Income

(Unaudited)

Three Months Ended Nine Months Ended
September 30, September 30,
(in thousands, except per share data) 2024 2023 2024 2023
Interest income:
Loans, including fees $ 369,349 $ 358,669 $ 1,102,632 $ 1,014,726
Loans held for sale 575 798 1,318 1,458
Securities-taxable 49,148 46,934 143,685 142,081
Securities-tax exempt 4,359 4,624 13,356 14,073
Short-term investments 6,045 4,802 17,714 21,365
Total interest income 429,476 415,827 1,278,705 1,193,703
Interest expense:
Deposits 147,227 130,797 439,320 297,783
Short-term borrowings 7,421 12,732 21,828 58,528
Long-term debt 3,064 3,064 9,192 9,253
Total interest expense 157,712 146,593 470,340 365,564
Net interest income 271,764 269,234 808,365 828,139
Provision for credit losses 18,564 28,498 40,255 42,151
Net interest income after provision for credit losses 253,200 240,736 768,110 785,988
Noninterest income:
Service charges on deposit accounts 23,144 22,264 67,658 64,377
Trust fees 18,014 16,593 53,564 50,720
Bank card and ATM fees 21,639 20,555 64,088 62,258
Investment and annuity fees and insurance commissions 10,890 8,520 32,523 25,628
Secondary mortgage market operations 3,379 2,609 9,816 7,076
Other income 18,829 15,433 45,271 39,470
Total noninterest income 95,895 85,974 272,920 249,529
Noninterest expense:
Compensation expense 94,371 95,650 288,061 282,174
Employee benefits 21,400 20,616 67,593 64,279
Personnel expense 115,771 116,266 355,654 346,453
Net occupancy expense 13,438 13,434 39,991 38,347
Equipment expense 4,689 4,776 13,229 14,555
Data processing expense 31,124 29,822 91,232 87,566
Professional services expense 10,984 9,519 29,478 27,565
Amortization of intangible assets 2,292 2,813 7,207 8,884
Deposit insurance and regulatory fees 5,480 5,851 20,419 18,234
Other real estate and foreclosed assets income, net (411 ) (26 ) (1,706 ) (153 )
Other expense 20,472 22,220 62,073 66,246
Total noninterest expense 203,839 204,675 617,577 607,697
Income before income taxes 145,256 122,035 423,453 427,820
Income taxes expense 29,684 24,297 84,712 85,821
Net income $ 115,572 $ 97,738 $ 338,741 $ 341,999
Earnings per common share-basic $ 1.33 $ 1.12 $ 3.89 $ 3.93
Earnings per common share-diluted $ 1.33 $ 1.12 $ 3.88 $ 3.92
Dividends paid per share $ 0.40 $ 0.30 $ 1.10 $ 0.90
Weighted average shares outstanding-basic 86,234 86,131 86,421 86,082
Weighted average shares outstanding-diluted 86,560 86,437 86,650 86,368

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) 2024 2023 2024 2023
Net income $ 115,572 $ 97,738 $ 338,741 $ 341,999
Other comprehensive income (loss) before income taxes:
Net change in unrealized loss on securities available for sale, cash flow hedges and equity method investment 219,703 (184,530 ) 121,552 (187,089 )
Reclassification of loss realized and included in earnings 13,964 12,854 41,689 33,619
Valuation adjustments to employee benefit plans — 214 22,014 (7,307 )
Amortization of unrealized net loss on securities transferred to held to maturity 461 421 1,279 1,343
Other comprehensive income (loss) before income taxes 234,128 (171,041 ) 186,534 (159,434 )
Income tax expense (benefit) 51,688 (38,833 ) 40,903 (36,622 )
Other comprehensive income (loss) net of income taxes 182,440 (132,208 ) 145,631 (122,812 )
Comprehensive income (loss) $ 298,012 $ (34,470 ) $ 484,372 $ 219,187

See notes to unaudited consolidated financial statements.

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Hancock Whitney Corporation and Subsidiaries

Consolidated Statements of Changes in Stockholders’ Equity

(Unaudited)

Three Months Ended September 30, 2024 and 2023 Accumulated
Other
(in thousands, except parenthetical share data) Amount Capital<br>Surplus Retained<br>Earnings Comprehensive<br>Loss Total
Balance, June 30, 2024 92,947 $ 309,513 $ 1,732,084 $ 2,537,057 $ (657,936 ) $ 3,920,718
Net income — — — 115,572 — 115,572
Other comprehensive income — — — — 182,440 182,440
Comprehensive income 298,012
Cash dividends declared (0.40 per common share) — — — (35,089 ) — (35,089 )
Common stock activity, long-term incentive plans — — 5,276 44 — 5,320
Issuance of stock from dividend reinvestment and stock purchase plans — — 1,077 — — 1,077
Repurchase of common stock (300,000 Shares) — — (15,351 ) — — (15,351 )
Balance, September 30, 2024 92,947 $ 309,513 $ 1,723,086 $ 2,617,584 $ (475,496 ) $ 4,174,687
Balance, June 30, 2023 92,947 $ 309,513 $ 1,727,745 $ 2,280,004 $ (762,786 ) $ 3,554,476
Net income — — — 97,738 — 97,738
Other comprehensive loss — — — — (132,208 ) (132,208 )
Comprehensive loss (34,470 )
Dividends declared (0.30 per common share) — — — (26,390 ) — (26,390 )
Common stock activity, long-term incentive plans — — 6,429 34 — 6,463
Issuance of stock from dividend reinvestment and stock purchase plans — — 924 — — 924
Balance, September 30, 2023 92,947 $ 309,513 $ 1,735,098 $ 2,351,386 $ (894,994 ) $ 3,501,003
Nine Months Ended September 30, 2024 and 2023 Accumulated
Other
(in thousands, except parenthetical share data) Amount Capital<br>Surplus Retained<br>Earnings Comprehensive Loss Total
Balance, December 31, 2023 92,947 $ 309,513 $ 1,739,671 $ 2,375,604 $ (621,127 ) $ 3,803,661
Net income — — — 338,741 — 338,741
Other comprehensive income — — — — 145,631 145,631
Comprehensive income 484,372
Dividends declared (1.10 per common share) — — — (96,890 ) — (96,890 )
Common stock activity, long-term incentive plans — — 10,293 129 — 10,422
Issuance of stock from dividend reinvestment and stock purchase plans — — 3,095 — — 3,095
Repurchase of common stock (612,993 Shares) — — (29,973 ) — — (29,973 )
Balance, September 30, 2024 92,947 $ 309,513 $ 1,723,086 $ 2,617,584 $ (475,496 ) $ 4,174,687
Balance, December 31, 2022 92,947 $ 309,513 $ 1,716,884 $ 2,088,413 $ (772,182 ) $ 3,342,628
Net income — — — 341,999 — 341,999
Other comprehensive loss — — — — (122,812 ) (122,812 )
Comprehensive income 219,187
Dividends declared (0.90 per common share) — — — (79,169 ) — (79,169 )
Common stock activity, long-term incentive plans — — 15,356 143 — 15,499
Issuance of stock from dividend reinvestment and stock purchase plans — — 2,858 — — 2,858
Balance, September 30, 2023 92,947 $ 309,513 $ 1,735,098 $ 2,351,386 $ (894,994 ) $ 3,501,003

All values are in US Dollars.

See notes to unaudited consolidated financial statements.

Table of Contents

Hancock Whitney Corporation and Subsidiaries

Consolidated Statements of Cash Flows

(Unaudited)

Nine Months Ended
September 30,
($ in thousands) 2024 2023
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 338,741 341,999
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 24,530 26,183
Provision for credit losses 40,255 42,151
Gain on other real estate and foreclosed assets (1,826 ) (375 )
Deferred tax expense 4,640 3,266
Increase cash surrender value of life insurance contracts (21,116 ) (13,452 )
(Gain) loss on disposal of assets (1,365 ) 981
Net (increase) decrease in loans held for sale 1,614 (14,572 )
Net amortization of securities premium/discount 10,211 14,233
Amortization of intangible assets 7,207 8,884
Stock-based compensation expense 17,171 18,677
Net change in derivative collateral liability (31,172 ) 101,108
Net increase (decrease) in interest payable and other liabilities (781 ) 26,642
Net (increase) decrease in other assets 52,594 (143,211 )
Other, net (6,520 ) (10,111 )
Net cash provided by operating activities 434,183 402,403
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturities of securities available for sale 293,734 246,825
Purchases of securities available for sale (542,759 ) (40,047 )
Proceeds from maturities of securities held to maturity 203,433 122,782
Purchases of securities held to maturity — (6,023 )
Proceeds received upon termination of fair value hedge instruments — 16,550
Payments made to terminate cash flow hedge instruments (13,730 ) (2,915 )
Net increase in short-term investments (168,149 ) (493,889 )
Net redemption (purchases) of Federal Home Loan Bank stock 122,528 (68,057 )
Proceeds from sales of loans and leases 100,518 79,422
Net (increase) decrease in loans 307,662 (978,775 )
Purchases of property and equipment (7,500 ) (24,572 )
Proceeds from sales of other real estate and foreclosed assets 5,695 1,862
Other, net (1,153 ) (4,325 )
Net cash provided by (used in) investing activities 300,279 (1,151,162 )
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in deposits (707,154 ) 1,249,988
Net increase (decrease) in short-term borrowings 111,115 (445,343 )
Dividends paid (96,153 ) (78,531 )
Payroll tax remitted on net share settlement of equity awards (6,880 ) (3,321 )
Proceeds from dividend reinvestment and stock purchase plans 3,095 2,858
Repurchase of common stock (29,811 ) —
Net cash provided by (used in) financing activities (725,788 ) 725,651
NET INCREASE (DECREASE) IN CASH AND DUE FROM BANKS 8,674 (23,108 )
CASH AND DUE FROM BANKS, BEGINNING 561,202 564,459
CASH AND DUE FROM BANKS, ENDING $ 569,876 $ 541,351
SUPPLEMENTAL INFORMATION FOR NON-CASH
INVESTING AND FINANCING ACTIVITIES
Assets acquired in settlement of loans $ 28,010 $ 4,067

See notes to unaudited consolidated financial statements.

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HANCOCK WHITNEY CORPORATION AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1. Basis of Presentation

The consolidated financial statements include the accounts of Hancock Whitney Corporation and all other entities in which it has a controlling interest (the “Company”). The financial statements include all adjustments that are, in the opinion of management, necessary to fairly state the Company’s financial condition, results of operations, changes in stockholders’ equity and cash flows for the interim periods presented. The Company has also evaluated all subsequent events for potential recognition and disclosure through the date of the filing of this Quarterly Report on Form 10-Q (this "Report" or "report'). 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, 2023. 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, 2023.

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, 2024 and December 31, 2023. Amortized cost of securities does not include accrued interest which is reflected in the accrued interest line item on the consolidated balance sheets totaling $29.6 million at September 30, 2024 and $27.4 million at December 31, 2023.

September 30, 2024 December 31, 2023
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 $ 171,333 $ 3,806 $ 1,371 $ 173,768 $ 97,741 $ 1,581 $ 1,514 $ 97,808
Municipal obligations 201,128 55 1,824 199,359 203,533 79 2,200 201,412
Residential mortgage-backed securities 2,469,381 6,687 280,396 2,195,672 2,440,411 2,734 329,279 2,113,866
Commercial mortgage-backed securities 2,839,988 13,836 185,916 2,667,908 2,683,872 7,176 253,576 2,437,472
Collateralized mortgage obligations 39,950 — 1,964 37,986 47,661 — 3,376 44,285
Corporate debt securities 23,500 — 2,046 21,454 23,500 — 3,148 20,352
Total $ 5,745,280 $ 24,384 $ 473,517 $ 5,296,147 $ 5,496,718 $ 11,570 $ 593,093 $ 4,915,195
September 30, 2024 December 31, 2023
--- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
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 $ 400,115 $ 661 $ 34,673 $ 366,103 $ 413,490 $ 179 $ 43,971 $ 369,698
Municipal obligations 628,365 915 15,255 614,025 664,488 1,252 19,593 646,147
Residential mortgage-backed securities 593,502 — 43,613 549,889 654,262 — 59,223 595,039
Commercial mortgage-backed securities 824,601 — 55,404 769,197 920,048 — 75,803 844,245
Collateralized mortgage obligations 27,050 — 1,006 26,044 32,491 — 1,702 30,789
Total $ 2,473,633 $ 1,576 $ 149,951 $ 2,325,258 $ 2,684,779 $ 1,431 $ 200,292 $ 2,485,918

Table of Contents

The following tables present the amortized cost and fair value of debt securities available for sale and held to maturity at September 30, 2024 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 collateral mortgage obligations.

Debt Securities Available for Sale Amortized Fair
($ in thousands) Cost Value
Due in one year or less $ 66,226 $ 66,092
Due after one year through five years 946,854 934,210
Due after five years through ten years 2,292,196 2,121,901
Due after ten years 2,440,004 2,173,944
Total available for sale debt securities $ 5,745,280 $ 5,296,147
Debt Securities Held to Maturity Amortized Fair
--- --- --- --- ---
($ in thousands) Cost Value
Due in one year or less $ 95,237 $ 94,381
Due after one year through five years 791,983 763,985
Due after five years through ten years 581,877 554,189
Due after ten years 1,004,536 912,703
Total held to maturity securities $ 2,473,633 $ 2,325,258

The Company held no securities classified as trading at September 30, 2024 and December 31, 2023.

There were no gross gains or gross losses on sales of securities during the nine months ended September 30, 2024 and 2023. Net gains or losses, when applicable, are reflected in the "Securities transactions, net" line item on the Consolidated Statements of Income.

Securities with carrying values totaling approximately $3.4 billion and $4.7 billion were pledged as collateral at September 30, 2024 and December 31, 2023, respectively, primarily to secure public deposits or securities sold under agreements to repurchase.

Credit Quality

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

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 with a material 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, 2024 Losses < 12 months Losses 12 months or > Total
($ in thousands) Fair<br>Value Gross<br>Unrealized<br>Losses Fair<br>Value Gross<br>Unrealized<br>Losses Fair<br>Value Gross<br>Unrealized<br>Losses
U.S. Treasury and government agency securities $ 7,982 $ 17 $ 7,545 $ 1,354 $ 15,527 $ 1,371
Municipal obligations 2,820 — 174,748 1,824 177,568 1,824
Residential mortgage-backed securities 38,596 72 1,674,765 280,324 1,713,361 280,396
Commercial mortgage-backed securities — — 2,246,784 185,916 2,246,784 185,916
Collateralized mortgage obligations — — 37,986 1,964 37,986 1,964
Corporate debt securities — — 19,454 2,046 19,454 2,046
Total $ 49,398 $ 89 $ 4,161,282 $ 473,428 $ 4,210,680 $ 473,517

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Available for Sale
December 31, 2023 Losses < 12 Months Losses 12 Months or > Total
($ in thousands) Fair<br>Value Gross<br>Unrealized<br>Losses Fair<br>Value Gross<br>Unrealized<br>Losses Fair<br>Value Gross<br>Unrealized<br>Losses
U.S. Treasury and government agency securities $ — $ — $ 7,790 $ 1,514 $ 7,790 $ 1,514
Municipal obligations 49,832 374 128,965 1,826 178,797 2,200
Residential mortgage-backed securities 3,062 25 1,795,154 329,254 1,798,216 329,279
Commercial mortgage-backed securities — — 2,227,703 253,576 2,227,703 253,576
Collateralized mortgage obligations — — 44,285 3,376 44,285 3,376
Corporate debt securities — — 19,852 3,148 19,852 3,148
Total $ 52,894 $ 399 $ 4,223,749 $ 592,694 $ 4,276,643 $ 593,093

At each reporting period, the Company evaluated its held to maturity municipal obligation portfolio for credit loss using probability of default and loss given default models. The models were run using a long-term average probability of default migration and with a probability weighting of Moody’s economic forecasts. The resulting credit losses, if any, were negligible and no allowance for credit loss was recorded.

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

Held to Maturity
September 30, 2024 Losses < 12 Months Losses 12 Months or > Total
($ in thousands) Fair<br>Value Gross<br>Unrealized<br>Losses Fair<br>Value Gross<br>Unrealized<br>Losses Fair<br>Value Gross<br>Unrealized<br>Losses
U.S. Treasury and government agency securities $ — $ — $ 336,218 $ 34,673 $ 336,218 $ 34,673
Municipal obligations 21,719 53 498,414 15,202 520,133 15,255
Residential mortgage-backed securities — — 549,890 43,613 549,890 43,613
Commercial mortgage-backed securities — — 769,197 55,404 769,197 55,404
Collateralized mortgage obligations — — 26,044 1,006 26,044 1,006
Total $ 21,719 $ 53 $ 2,179,763 $ 149,898 $ 2,201,482 $ 149,951
Held to Maturity
--- --- --- --- --- --- --- --- --- --- --- --- ---
December 31, 2023 Losses < 12 Months Losses 12 Months or > Total
($ in thousands) Fair<br>Value Gross<br>Unrealized<br>Losses Fair<br>Value Gross<br>Unrealized<br>Losses Fair<br>Value Gross<br>Unrealized<br>Losses
U.S. Treasury and government agency securities $ 9,530 $ 63 $ 339,533 $ 43,908 $ 349,063 $ 43,971
Municipal obligations 343,401 1,801 226,165 17,792 569,566 19,593
Residential mortgage-backed securities — — 595,039 59,223 595,039 59,223
Commercial mortgage-backed securities — — 844,245 75,803 844,245 75,803
Collateralized mortgage obligations — — 30,789 1,702 30,789 1,702
Total $ 352,931 $ 1,864 $ 2,035,771 $ 198,428 $ 2,388,702 $ 200,292

As of September 30, 2024 and December 31, 2023, the Company had 663 and 698 securities, respectively, with market values below their cost basis. There were no material unrealized losses related 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, 2024 and December 31, 2023. At September 30, 2024, the Company had adequate liquidity and, therefore, neither planned to nor expected to be required to liquidate these securities before recovery of the amortized cost basis.

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3. Loans and Allowance for Credit Losses

The Company generally makes loans in its market areas of southern and central Mississippi; southern and central Alabama; northwest, central and southern Louisiana; the northern, central and panhandle regions of Florida; certain areas of east and northeast Texas; and the metropolitan areas of Nashville, Tennessee and Atlanta, Georgia. In addition, and to a lesser degree, the bank makes loans both regionally and nationally, generally through its specialty lines of business, including the equipment finance, commercial real estate and healthcare segments, often with sponsors in our market areas.

The following table presents loans at their amortized cost basis, by portfolio class at September 30, 2024 and December 31, 2023. The amortized cost basis is net of unearned income and excludes accrued interest totaling $114.3 million and $124.7 million at September 30, 2024 and December 31, 2023, respectively. Accrued interest is reflected in the accrued interest line item in the Consolidated Balance Sheets.

September 30, December 31,
($ in thousands) 2024 2023
Commercial non-real estate $ 9,588,309 $ 9,957,284
Commercial real estate - owner occupied 3,096,173 3,093,763
Total commercial and industrial 12,684,482 13,051,047
Commercial real estate - income producing 3,988,661 3,986,943
Construction and land development 1,423,615 1,551,091
Residential mortgages 3,988,309 3,886,072
Consumer 1,370,520 1,446,764
Total loans $ 23,455,587 $ 23,921,917

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, facilitating the acquisition of a business, and the purchase of equipment and machinery, including equipment leasing. These loans are primarily made based on the identified cash flows of the borrower and, when secured, have the added strength of the underlying collateral.

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

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

Commercial real estate – income producing

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

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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 generally 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 also include 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 for collectively evaluated portfolios is developed using multiple 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, 2024 and 2023, 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, 2024
Allowance for credit losses
Allowance for loan losses:
Beginning balance $ 101,737 $ 40,197 $ 141,934 $ 74,539 $ 27,039 $ 38,983 $ 25,412 $ 307,907
Charge-offs (33,869 ) — (33,869 ) (8,819 ) (264 ) (229 ) (13,249 ) (56,430 )
Recoveries 18,067 986 19,053 7 62 430 2,586 22,138
Net provision for loan losses 22,808 (3,643 ) 19,165 12,740 (2,044 ) 3,673 10,122 43,656
Ending balance - allowance for loan losses $ 108,743 $ 37,540 $ 146,283 $ 78,467 $ 24,793 $ 42,857 $ 24,871 $ 317,271
Reserve for unfunded lending commitments:
Beginning balance $ 5,507 $ 327 $ 5,834 $ 1,344 $ 20,019 $ 30 $ 1,667 $ 28,894
Provision for losses on unfunded commitments 752 (43 ) 709 (353 ) (4,250 ) (27 ) 520 (3,401 )
Ending balance - reserve for unfunded lending commitments 6,259 284 6,543 991 15,769 3 2,187 25,493
Total allowance for credit losses $ 115,002 $ 37,824 $ 152,826 $ 79,458 $ 40,562 $ 42,860 $ 27,058 $ 342,764
Allowance for loan losses:
Individually evaluated $ 4,283 $ 51 $ 4,334 $ — $ — $ 750 $ 197 $ 5,281
Collectively evaluated 104,460 37,489 141,949 78,467 24,793 42,107 24,674 311,990
Allowance for loan losses $ 108,743 $ 37,540 $ 146,283 $ 78,467 $ 24,793 $ 42,857 $ 24,871 $ 317,271
Reserve for unfunded lending commitments:
Individually evaluated $ 713 $ — $ 713 $ — $ — $ — $ — $ 713
Collectively evaluated 5,546 284 5,830 991 15,769 3 2,187 24,780
Reserve for unfunded lending commitments $ 6,259 $ 284 $ 6,543 $ 991 $ 15,769 $ 3 $ 2,187 $ 25,493
Total allowance for credit losses $ 115,002 $ 37,824 $ 152,826 $ 79,458 $ 40,562 $ 42,860 $ 27,058 $ 342,764
Loans:
Individually evaluated $ 12,435 $ 1,219 $ 13,654 $ 1,679 $ 5,694 $ 1,893 $ 3,096 $ 26,016
Collectively evaluated 9,575,874 3,094,954 12,670,828 3,986,982 1,417,921 3,986,416 1,367,424 23,429,571
Total loans $ 9,588,309 $ 3,096,173 $ 12,684,482 $ 3,988,661 $ 1,423,615 $ 3,988,309 $ 1,370,520 $ 23,455,587

In arriving at the allowance for credit losses at September 30, 2024, the Company weighted Moody’s September 2024 baseline economic forecast at 40% and downside mild recessionary S-2 scenario at 60%. The September 2024 baseline scenario maintains a generally optimistic outlook in its assumptions surrounding the drivers of economic growth, including its expectations of the effectiveness of the Federal Reserve's monetary policy in easing inflationary conditions without precipitating a recession. The S-2

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scenario is less optimistic compared to the baseline, with a decline in business and consumer sentiment, rising political tensions, continuing elevated inflation and interest rates, and reduced credit availability leading to a forecasted mild recession beginning in the fourth quarter of 2024 and lasting for three quarters.

The increase in the allowance for loan losses at September 30, 2024 compared to December 31, 2023, reflects a relatively consistent credit loss outlook with continued focus on risks that impact certain segments within the Company’s loan portfolio, resulting in modest allowance builds across several portfolios. The decline in the reserve for unfunded commitments compared to December 31, 2023 was largely volume driven.

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, 2023
Allowance for credit losses
Allowance for loan losses:
Beginning balance $ 96,461 $ 48,284 $ 144,745 $ 71,961 $ 30,498 $ 32,464 $ 28,121 $ 307,789
Charge-offs (44,837 ) — (44,837 ) (73 ) (72 ) (53 ) (10,787 ) (55,822 )
Recoveries 4,419 447 4,866 12 10 888 2,701 8,477
Net provision for loan losses 43,622 (7,152 ) 36,470 2,441 (2,213 ) 3,563 5,586 45,847
Ending balance - allowance for loan losses $ 99,665 $ 41,579 $ 141,244 $ 74,341 $ 28,223 $ 36,862 $ 25,621 $ 306,291
Reserve for unfunded lending commitments:
Beginning balance $ 4,984 $ 302 $ 5,286 $ 1,395 $ 25,110 $ 31 $ 1,487 $ 33,309
Provision for losses on unfunded commitments 270 10 280 39 (3,874 ) 4 (145 ) (3,696 )
Ending balance - reserve for unfunded lending commitments 5,254 312 5,566 1,434 21,236 35 1,342 29,613
Total allowance for credit losses $ 104,919 $ 41,891 $ 146,810 $ 75,775 $ 49,459 $ 36,897 $ 26,963 $ 335,904
Allowance for loan losses:
Individually evaluated $ 1,666 $ — $ 1,666 $ — $ — $ — $ — $ 1,666
Collectively evaluated 97,999 41,579 139,578 74,341 28,223 36,862 25,621 304,625
Allowance for loan losses $ 99,665 $ 41,579 $ 141,244 $ 74,341 $ 28,223 $ 36,862 $ 25,621 $ 306,291
Reserve for unfunded lending commitments:
Individually evaluated $ — $ — $ — $ — $ — $ — $ — $ —
Collectively evaluated 5,254 312 5,566 1,434 21,236 35 1,342 29,613
Reserve for unfunded lending commitments $ 5,254 $ 312 $ 5,566 $ 1,434 $ 21,236 $ 35 $ 1,342 $ 29,613
Total allowance for credit losses $ 104,919 $ 41,891 $ 146,810 $ 75,775 $ 49,459 $ 36,897 $ 26,963 $ 335,904
Loans:
Individually evaluated $ 17,658 $ — $ 17,658 $ — $ — $ — $ — $ 17,658
Collectively evaluated 10,057,927 3,081,327 13,139,254 4,027,553 1,614,846 3,721,106 1,463,262 23,966,021
Total loans $ 10,075,585 $ 3,081,327 $ 13,156,912 $ 4,027,553 $ 1,614,846 $ 3,721,106 $ 1,463,262 $ 23,983,679

The allowance for credit loss for the nine months ended September 30, 2023, was down slightly when compared to December 31, 2022, reflecting a relatively stable economic outlook, with shifts between portfolios and a relatively modest decline in reserve coverage. In arriving at the allowance for credit losses at September 30, 2023, the Company weighted the baseline economic forecast at 40% and the downside S-2 mild recession scenario at 60%.

Nonaccrual loans and certain reportable modified loan disclosures

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

September 30, 2024 December 31, 2023
($ in thousands) Total Nonaccrual Nonaccrual Without Allowance for Loan Loss Total Nonaccrual Nonaccrual Without Allowance for Loan Loss
Commercial non-real estate $ 21,397 $ 1,838 $ 20,840 $ 13,637
Commercial real estate - owner occupied 2,889 — 2,228 —
Total commercial and industrial 24,286 1,838 23,068 13,637
Commercial real estate - income producing 1,918 1,679 461 —
Construction and land development 6,316 5,694 815 —
Residential mortgages 39,112 — 26,137 —
Consumer 11,234 2,599 8,555 —
Total loans $ 82,866 $ 11,810 $ 59,036 $ 13,637

As a part of our loss mitigation efforts, we may provide modifications to borrowers experiencing financial difficulty to improve long-term collectability of the loans and to avoid the need for repossession or foreclosure of collateral. Nonaccrual loans include reportable nonaccruing modified loans to borrowers experiencing financial difficulty (“MEFDs”) totaling $5.4 million and $0.1 million at September 30, 2024 and December 31, 2023, respectively. Total reportable MEFDs, both accruing and nonaccruing, were $95.6

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million and $24.5 million at September 30, 2024 and December 31, 2023, respectively. The Company had unfunded exposure to borrowers whose loan terms have been modified as a reportable MEFD totaling $13.6 million and $0.7 million at September 30, 2024 and December 31, 2023, respectively.

The tables below provide detail by portfolio class for reportable MEFDs entered into during the three and nine months ended September 30, 2024 and 2023. Modified facilities are reported using the balance at the end of each period reported and are reflected only once in each table based on the type of modification or combination of modification.

Three Months Ended September 30, 2024
Term Extension Significant Payment Delay Term Extensions and <br>Significant Payment Delay Other
($ in thousands) Balance Percentage of Portfolio Balance Percentage of Portfolio Balance Percentage of Portfolio Balance Percentage of Portfolio
Commercial non-real estate $ 48,913 0.51 % $ — — $ 17,020 0.18 % $ — —
Commercial real estate - owner occupied — — — — — — — —
Total commercial and industrial 48,913 0.39 % — — 17,020 0.13 % — —
Commercial real estate - income producing 3,050 0.08 % — — — — — —
Construction and land development — — — — — — — —
Residential mortgages 988 0.02 % — — — — — —
Consumer — — — — — — — —
Total reportable modified loans $ 52,951 0.23 % $ — — $ 17,020 0.07 % $ — —
Nine Months Ended September 30, 2024
--- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
Term Extension Significant Payment Delay Term Extensions and <br>Significant Payment Delay Other
($ in thousands) Balance Percentage of Portfolio Balance Percentage of Portfolio Balance Percentage of Portfolio Balance Percentage of Portfolio
Commercial non-real estate $ 65,619 0.68 % $ — — $ 17,020 0.18 % $ — —
Commercial real estate - owner occupied — — — — — — — —
Total commercial and industrial 65,619 0.52 % — — 17,020 0.13 % — —
Commercial real estate - income producing 3,050 0.08 % — — — — — —
Construction and land development — — — — — — — —
Residential mortgages 3,618 0.09 % — — — — — —
Consumer 143 0.01 % — — — — — —
Total reportable modified loans $ 72,430 0.31 % $ — — $ 17,020 0.07 % $ — —
Three Months Ended September 30, 2023
--- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
Term Extension Significant Payment Delay Term Extensions and <br>Significant Payment Delay Other(1)
($ in thousands) Balance Percentage of Portfolio Balance Percentage of Portfolio Balance Percentage of Portfolio Balance Percentage of Portfolio
Commercial non-real estate $ 5,873 0.06 % $ — — $ 4,431 0.04 % $ — —
Commercial real estate - owner occupied — — — — 17,035 0.55 % — —
Total commercial and industrial 5,873 0.04 % — — 21,466 0.16 % — —
Commercial real estate - income producing — — — — — — — —
Construction and land development 86 0.01 % — — — — — —
Residential mortgages 120 0.00 % — — — — 66 0.00 %
Consumer 62 0.00 % — — — — — —
Total reportable modified loans $ 6,141 0.03 % $ — — $ 21,466 0.09 % $ 66 0.00 %

(1) Includes interest rate reduction and other than insignificant payment delays

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Nine Months Ended September 30, 2023
Term Extension Significant Payment Delay Term Extensions and <br>Significant Payment Delay Other(1)
($ in thousands) Balance Percentage of Portfolio Balance Percentage of Portfolio Balance Percentage of Portfolio Balance Percentage of Portfolio
Commercial non-real estate $ 6,969 0.07 % $ 100 0.00 % $ 4,431 0.04 % $ — —
Commercial real estate - owner occupied — — — — 17,035 0.55 % — —
Total commercial and industrial 6,969 0.05 % 100 0.00 % 21,466 0.16 % — —
Commercial real estate - income producing — — — — — — — —
Construction and land development 86 0.01 % — — — — — —
Residential mortgages 120 0.00 % — — — — 66 0.00 %
Consumer 62 0.00 % — — — — — —
Total reportable modified loans $ 7,237 0.03 % $ 100 0.00 % $ 21,466 0.09 % $ 66 0.00 %

(1) Includes interest rate reduction and other than insignificant payment delays

Reportable modifications to borrowers experiencing financial difficulty during the three months ended September 30, 2024 consisted of weighted average term extensions totaling approximately nine months for commercial loans, and two years for residential mortgage loans. Reportable modifications to borrowers experiencing financial difficulty during the nine months ended September 30, 2024 consisted of weighted average term extensions totaling approximately nine months for commercial loans, five years for residential mortgage loans and four years for consumer loans. The weighted average term of other than insignificant payment delays was three months for commercial loans during both the three and nine months ended September 30, 2024. Reported term extensions and payment delays are considered more than insignificant when they exceed six months when considering other modifications made in the past twelve months.

Reportable modifications to borrowers experiencing financial difficulty during both the three and nine months ended September 30, 2023 consisted of weighted average term extensions totaling approximately eight months for commercial loans, fifteen years for residential mortgage loans and five years for consumer loans. The weighted average term of other than insignificant payment delays was four months.

The tables below present the aging analysis of reportable modifications to borrowers experiencing financial difficulty by portfolio class at September 30, 2024 and December 31, 2023.

September 30, 2024 30-59<br>Days<br>Past Due 60-89<br>Days<br>Past Due Greater than<br>90 Days<br>Past Due Total<br>Past Due Current Total Reportable <br>Modified Loans
(in thousands)
Commercial non-real estate $ 149 $ — $ 3,955 $ 4,104 $ 82,459 $ 86,563
Commercial real estate - owner occupied — — 901 901 799 1,700
Total commercial and industrial 149 — 4,856 5,005 83,258 88,263
Commercial real estate - income producing — — — — 3,050 3,050
Construction and land development — — — — — —
Residential mortgages — — 334 334 3,551 3,885
Consumer — — 196 196 158 354
Total reportable modified loans $ 149 $ — $ 5,386 $ 5,535 $ 90,017 $ 95,552
December 31, 2023 30-59<br>Days<br>Past Due 60-89<br>Days<br>Past Due Greater than<br>90 Days<br>Past Due Total<br>Past Due Current Total Reportable <br>Modified Loans
--- --- --- --- --- --- --- --- --- --- --- --- ---
(in thousands)
Commercial non-real estate $ 3,149 $ 233 $ 4,430 $ 7,812 $ 14,145 $ 21,957
Commercial real estate - owner occupied — — — — 1,774 1,774
Total commercial and industrial 3,149 233 4,430 7,812 15,919 23,731
Commercial real estate - income producing — — — — — —
Construction and land development — — — — 85 85
Residential mortgages 66 — — 66 390 456
Consumer — — — — 274 274
Total reportable modified loans $ 3,215 $ 233 $ 4,430 $ 7,878 $ 16,668 $ 24,546

There were loans to three commercial borrowers totaling $3.6 million, two residential mortgage borrowers totaling $0.3 million and one consumer borrower totaling $0.2 million with reportable term extensions and/or significant payment delays and interest rate

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reduction modifications that had post modification payment defaults during the three month period ended September 30, 2024. For the nine month period ended September 30, 2024, there were loans to six commercial borrowers totaling $13.2 million, three residential mortgage borrowers totaling $0.4 million, and one consumer borrower totaling $0.2 million with reportable term extensions and/or significant payment delays and interest rate reduction modifications that had post modification payment defaults. There was one residential mortgage loan totaling $20 thousand with a reportable interest rate reduction and a term extension modification that had a post modification payment default during the three and nine month periods ended September 30, 2023. A payment default occurs if the loan is either 90 days or more delinquent or has been charged off as of the end of the period presented.

Aging Analysis

The tables below present the aging analysis of past due loans by portfolio class at September 30, 2024 and December 31, 2023.

September 30, 2024 60-89<br>Days<br>Past Due Greater than<br>90 Days<br>Past Due Total<br>Past Due Current Total<br>Loans Recorded<br>Investment<br>> 90 Days and<br>Still Accruing
( in thousands)
Commercial non-real estate 13,822 $ 5,275 $ 20,944 $ 40,041 $ 9,548,268 $ 9,588,309 $ 2,040
Commercial real estate - owner occupied 32,229 977 2,957 36,163 3,060,010 3,096,173 154
Total commercial and industrial 46,051 6,252 23,901 76,204 12,608,278 12,684,482 2,194
Commercial real estate - income producing 264 — 1,875 2,139 3,986,522 3,988,661 —
Construction and land development 528 338 2,534 3,400 1,420,215 1,423,615 68
Residential mortgages 9,700 14,821 30,618 55,139 3,933,170 3,988,309 229
Consumer 11,771 5,464 10,285 27,520 1,343,000 1,370,520 3,476
Total loans 68,314 $ 26,875 $ 69,213 $ 164,402 $ 23,291,185 $ 23,455,587 $ 5,967

All values are in US Dollars.

December 31, 2023 60-89<br>Days<br>Past Due Greater than<br>90 Days<br>Past Due Total<br>Past Due Current Total<br>Loans Recorded<br>Investment<br>> 90 Days and<br>Still Accruing
( in thousands)
Commercial non-real estate 12,311 $ 4,381 $ 21,132 $ 37,824 $ 9,919,460 $ 9,957,284 $ 5,782
Commercial real estate - owner occupied 1,614 1,596 1,715 4,925 3,088,838 3,093,763 431
Total commercial and industrial 13,925 5,977 22,847 42,749 13,008,298 13,051,047 6,213
Commercial real estate - income producing 3,938 606 408 4,952 3,981,991 3,986,943 —
Construction and land development 1,655 1,220 1,208 4,083 1,547,008 1,551,091 742
Residential mortgages 40,189 9,121 18,960 68,270 3,817,802 3,886,072 172
Consumer 11,059 5,957 6,611 23,627 1,423,137 1,446,764 2,482
Total loans 70,766 $ 22,881 $ 50,034 $ 143,681 $ 23,778,236 $ 23,921,917 $ 9,609

All values are in US Dollars.

Credit Quality Indicators

The following tables present the credit quality indicators by segment and portfolio class of loans at September 30, 2024 and December 31, 2023. The Company routinely assesses the ratings of loans in its portfolio through an established and comprehensive portfolio management process.

September 30, 2024
($ in thousands) Commercial<br>Non-Real<br>Estate Commercial<br>Real Estate -<br>Owner-<br>Occupied Total<br>Commercial<br>and Industrial Commercial<br>Real Estate -<br>Income<br>Producing Construction<br>and Land<br>Development Total<br>Commercial
Grade:
Pass $ 8,972,487 $ 2,955,381 $ 11,927,868 $ 3,832,191 $ 1,351,321 $ 17,111,380
Pass-Watch 185,234 93,417 278,651 133,406 65,314 477,371
Special Mention 93,200 9,187 102,387 6,491 602 109,480
Substandard 337,388 38,188 375,576 16,573 6,378 398,527
Doubtful — — — — — —
Total $ 9,588,309 $ 3,096,173 $ 12,684,482 $ 3,988,661 $ 1,423,615 $ 18,096,758

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December 31, 2023
($ in thousands) Commercial<br>Non-Real<br>Estate Commercial<br>Real Estate -<br>Owner-<br>Occupied Total<br>Commercial<br>and Industrial Commercial<br>Real Estate -<br>Income<br>Producing Construction<br>and Land<br>Development Total<br>Commercial
Grade:
Pass $ 9,524,018 $ 3,016,277 $ 12,540,295 $ 3,799,004 $ 1,542,460 $ 17,881,759
Pass-Watch 234,211 52,027 286,238 139,932 7,460 433,630
Special Mention 11,486 6,647 18,133 40,826 356 59,315
Substandard 187,569 18,812 206,381 7,181 815 214,377
Doubtful — — — — — —
Total $ 9,957,284 $ 3,093,763 $ 13,051,047 $ 3,986,943 $ 1,551,091 $ 18,589,081
September 30, 2024 December 31, 2023
--- --- --- --- --- --- --- --- --- --- --- --- ---
($ in thousands) Residential<br>Mortgage Consumer Total Residential <br>Mortgage Consumer Total
Performing $ 3,949,197 $ 1,359,286 $ 5,308,483 $ 3,859,935 $ 1,438,209 $ 5,298,144
Nonperforming 39,112 11,234 50,346 26,137 8,555 34,692
Total $ 3,988,309 $ 1,370,520 $ 5,358,829 $ 3,886,072 $ 1,446,764 $ 5,332,836

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

Commercial:

  • Pass – loans properly approved, documented, collateralized, and performing which do not reflect an abnormal credit risk.
  • Pass-Watch – credits in this category are of sufficient risk to cause concern. This category is reserved for credits that display negative performance trends. The “Watch” grade should be regarded as a transition category.
  • Special Mention – a criticized asset category defined as having potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may, at some future date, result in the deterioration of the repayment prospects for the credit or the institution’s credit position. Special mention credits are not considered part of the classified credit categories and do not expose the institution to sufficient risk to warrant adverse classification.
  • Substandard – an asset that is inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any. Assets so classified must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.
  • Doubtful – an asset that has all the weaknesses inherent in one classified substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.
  • Loss – credits classified as loss are considered uncollectable and are charged off promptly once so classified.

Residential and Consumer:

  • Performing – accruing loans.
  • Nonperforming – loans for which there are good reasons to doubt that payments will be made in full. Nonperforming loans include all loans with nonaccrual status.

Vintage Analysis

The following tables present credit quality disclosures of amortized cost by class and vintage for term loans and by revolving and revolving converted to amortizing at September 30, 2024 and December 31, 2023. The Company defines vintage as the later of origination, renewal or modification date. The gross charge-offs presented in the tables that follow are for the nine months ended September 30, 2024 and the year ended December 31, 2023.

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Term Loans Revolving Loans
September 30, 2024 Amortized Cost Basis by Origination Year Revolving Converted to
($ in thousands) 2024 2023 2022 2021 2020 Prior Loans Term Loans Total
Commercial Non-Real Estate:
Pass $ 1,242,683 $ 1,148,392 $ 1,251,664 $ 845,389 $ 355,496 $ 1,018,069 $ 3,039,288 $ 71,506 $ 8,972,487
Pass-Watch 5,172 49,166 19,600 26,650 12,865 19,682 37,897 14,202 185,234
Special Mention 410 21,334 16,905 — 6,253 53 47,735 510 93,200
Substandard 20,158 66,281 123,382 18,152 7,965 3,379 77,009 21,062 337,388
Doubtful — — — — — — — — —
Total $ 1,268,423 $ 1,285,173 $ 1,411,551 $ 890,191 $ 382,579 $ 1,041,183 $ 3,201,929 $ 107,280 $ 9,588,309
Gross Charge-offs $ 568 $ 7,126 $ 5,634 $ 7,165 $ 162 $ 1,885 $ 4,706 $ 6,623 $ 33,869
Commercial Real Estate - Owner Occupied:
Pass $ 221,770 $ 356,662 $ 643,008 $ 584,204 $ 458,822 $ 643,226 $ 46,773 $ 916 $ 2,955,381
Pass-Watch 16,589 4,744 25,530 9,248 6,073 28,133 976 2,124 93,417
Special Mention 3,840 — 3,011 687 — 1,149 500 — 9,187
Substandard 1,712 900 20,333 278 969 13,996 — — 38,188
Doubtful — — — — — — — — —
Total $ 243,911 $ 362,306 $ 691,882 $ 594,417 $ 465,864 $ 686,504 $ 48,249 $ 3,040 $ 3,096,173
Gross Charge-offs $ — $ — $ — $ — $ — $ — $ — $ — $ —
Commercial Real Estate - Income Producing:
Pass $ 289,495 $ 505,801 $ 1,017,675 $ 828,154 $ 593,144 $ 566,508 $ 29,945 $ 1,469 $ 3,832,191
Pass-Watch 22,416 2,869 24,497 10,192 55,297 17,490 645 — 133,406
Special Mention 183 150 — — — 6,158 — — 6,491
Substandard 1,849 4,120 8,687 1,679 — 238 — — 16,573
Doubtful — — — — — — — — —
Total $ 313,943 $ 512,940 $ 1,050,859 $ 840,025 $ 648,441 $ 590,394 $ 30,590 $ 1,469 $ 3,988,661
Gross Charge-offs $ — $ — $ 8,819 $ — $ — $ — $ — $ — $ 8,819
Construction and Land Development:
Pass $ 195,031 $ 448,519 $ 347,998 $ 144,087 $ 33,912 $ 15,810 $ 161,331 $ 4,633 $ 1,351,321
Pass-Watch 576 2,271 61,862 313 31 204 57 — 65,314
Special Mention — 602 — — — — — — 602
Substandard 209 937 1,351 3,581 26 274 — — 6,378
Doubtful — — — — — — — — —
Total $ 195,816 $ 452,329 $ 411,211 $ 147,981 $ 33,969 $ 16,288 $ 161,388 $ 4,633 $ 1,423,615
Gross Charge-offs $ — $ 113 $ 94 $ 30 $ — $ 20 $ — $ 7 $ 264
Residential Mortgage:
Performing $ 139,957 $ 421,239 $ 1,063,683 $ 905,026 $ 457,681 $ 958,095 $ 3,311 $ 205 $ 3,949,197
Nonperforming 96 4,733 7,394 5,557 930 20,402 — — 39,112
Total $ 140,053 $ 425,972 $ 1,071,077 $ 910,583 $ 458,611 $ 978,497 $ 3,311 $ 205 $ 3,988,309
Gross Charge-offs $ — $ 57 $ 67 $ 2 $ — $ 103 $ — $ — $ 229
Consumer Loans:
Performing $ 50,157 $ 44,130 $ 40,744 $ 24,123 $ 19,084 $ 49,064 $ 1,108,488 $ 23,496 $ 1,359,286
Nonperforming 49 63 456 706 787 3,750 716 4,707 11,234
Total $ 50,206 $ 44,193 $ 41,200 $ 24,829 $ 19,871 $ 52,814 $ 1,109,204 $ 28,203 $ 1,370,520
Gross Charge-offs $ 31 $ 1,317 $ 1,996 $ 904 $ 162 $ 760 $ 6,395 $ 1,684 $ 13,249

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Term Loans Revolving Loans
December 31, 2023 Amortized Cost Basis by Origination Year Revolving Converted to
($ in thousands) 2023 2022 2021 2020 2019 Prior Loans Term Loans Total
Commercial Non-Real Estate:
Pass $ 1,557,202 $ 1,812,370 $ 1,106,433 $ 483,739 $ 398,626 $ 923,143 $ 3,186,189 $ 56,316 $ 9,524,018
Pass-Watch 30,360 60,228 20,730 8,245 4,988 9,117 94,252 6,291 234,211
Special Mention 411 6,206 936 27 26 836 2,620 424 11,486
Substandard 48,264 48,178 18,882 8,058 3,079 1,660 54,453 4,995 187,569
Doubtful — — — — — — — — —
Total $ 1,636,237 $ 1,926,982 $ 1,146,981 $ 500,069 $ 406,719 $ 934,756 $ 3,337,514 $ 68,026 $ 9,957,284
Gross Charge-offs $ 7,885 $ 1,179 $ 1,484 $ 27,000 $ 81 $ 1,750 $ 11,971 $ 8,480 $ 59,830
Commercial Real Estate - Owner Occupied:
Pass $ 374,466 $ 689,626 $ 620,272 $ 501,054 $ 284,032 $ 493,707 $ 40,533 $ 12,587 $ 3,016,277
Pass-Watch 2,574 9,587 9,654 3,451 8,791 17,581 389 — 52,027
Special Mention 837 — 617 — 110 5,083 — — 6,647
Substandard 2,322 4,956 967 1,295 584 7,374 1,314 — 18,812
Doubtful — — — — — — — — —
Total $ 380,199 $ 704,169 $ 631,510 $ 505,800 $ 293,517 $ 523,745 $ 42,236 $ 12,587 $ 3,093,763
Gross Charge-offs $ — $ — $ — $ — $ — $ — $ — $ — $ —
Commercial Real Estate - Income Producing:
Pass $ 456,334 $ 953,501 $ 966,402 $ 618,003 $ 323,344 $ 367,010 $ 65,486 $ 48,924 $ 3,799,004
Pass-Watch 9,469 3,064 3,886 75,182 23,827 22,504 2,000 — 139,932
Special Mention 156 32,255 — 354 — 8,061 — — 40,826
Substandard 4,086 1,921 286 — 122 766 — — 7,181
Doubtful — — — — — — — — —
Total $ 470,045 $ 990,741 $ 970,574 $ 693,539 $ 347,293 $ 398,341 $ 67,486 $ 48,924 $ 3,986,943
Gross Charge-offs $ 73 $ — $ — $ — $ — $ — $ — $ — $ 73
Construction and Land Development:
Pass $ 388,453 $ 676,687 $ 248,036 $ 62,086 $ 6,008 $ 18,834 $ 139,587 $ 2,769 $ 1,542,460
Pass-Watch 3,067 2,820 827 83 128 323 212 — 7,460
Special Mention 294 — — — 62 — — — 356
Substandard — 87 96 49 9 279 295 — 815
Doubtful — — — — — — — — —
Total $ 391,814 $ 679,594 $ 248,959 $ 62,218 $ 6,207 $ 19,436 $ 140,094 $ 2,769 $ 1,551,091
Gross Charge-offs $ — $ 7 $ 54 $ — $ — $ 11 $ — $ — $ 72
Residential Mortgage:
Performing $ 439,024 $ 910,361 $ 950,400 $ 489,262 $ 176,041 $ 891,232 $ 3,615 $ — $ 3,859,935
Nonperforming 561 2,233 3,260 730 2,366 16,987 — — 26,137
Total $ 439,585 $ 912,594 $ 953,660 $ 489,992 $ 178,407 $ 908,219 $ 3,615 $ — $ 3,886,072
Gross Charge-offs $ — $ — $ — $ — $ — $ 55 $ — $ — $ 55
Consumer Loans:
Performing $ 75,615 $ 59,454 $ 36,693 $ 28,076 $ 31,802 $ 39,150 $ 1,144,401 $ 23,018 $ 1,438,209
Nonperforming 176 237 245 438 445 2,528 369 4,117 8,555
Total $ 75,791 $ 59,691 $ 36,938 $ 28,514 $ 32,247 $ 41,678 $ 1,144,770 $ 27,135 $ 1,446,764
Gross Charge-offs $ 567 $ 2,388 $ 1,473 $ 215 $ 573 $ 824 $ 7,735 $ 1,618 $ 15,393

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, 2024 and December 31, 2023 were $6.6 million and $7.1 million, 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 foreclosed single family residential properties in other real estate owned totaling $1.7 million and $1.6 million at September 30, 2024 and December 31, 2023, respectively.

Loans Held for Sale

Loans held for sale totaled $24.6 million and $26.1 million at September 30, 2024 and December 31, 2023, respectively. Loans held for sale is composed primarily of residential mortgage loans originated for sale in the secondary market. At September 30, 2024, residential mortgage loans carried at the fair value option totaled $23.5 million with an unpaid principal balance of $22.9 million. At December 31, 2023, residential mortgage loans carried at the fair value option totaled $13.3 million with an unpaid principal balance of $12.9 million. All other loans held for sale are carried at the lower of cost or market.

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4. Investments in Low Income Housing Tax Credit Entities

The Company invests in certain affordable housing project limited partnerships that are qualified low-income housing tax credit developments. These investments are considered variable interest entities for which the Company is not the primary beneficiary and, therefore, are not consolidated. These partnerships generate low-income tax credits that are earned over a 10-year period, beginning with the year the rental activity begins. The Company has elected to use the practical expedient method of amortization, which approximates the proportional amortization method, whereby the investment cost is amortized in proportion to the allocated tax credits over the 10 year tax credit period. Additionally, the Company recognizes deferred taxes on the basis difference of the tax equity investment to reflect the financial impact of other tax benefits (e.g., tax operating losses) not included in the practical expedient amortization. The tax credits, when realized, are reflected in the consolidated statements of income as a reduction of income tax expense. The Company’s investments in affordable housing limited partnerships totaled $37.5 million and $37.8 million at September 30, 2024 and December 31, 2023, respectively, with a carry balance net of accumulated amortization included in the other assets line item on our Consolidated Balance Sheets totaling $26.5 million and $29.6 million, respectively, for those same periods. The net impact of the low-income housing tax credit program was not material to our Consolidated Statements of Income or Cash Flows for the three and nine months ended September 30, 2024 and 2023.

5. Short-term Borrowings

Short-term borrowings include Federal Home Loan Bank (FHLB) advances totaling $300.0 million and $700.0 million at September 30, 2024 and December 31, 2023, respectively. At September 30, 2024, the FHLB advances outstanding was comprised of two fixed-rate facilities with a weighted average interest rate of 4.97% that both matured on October 1, 2024. The FHLB advances outstanding at December 31, 2023 included one fixed rate advance with an interest rate of 5.58% that matured on January 2, 2024. As these short-term advances mature, they are generally paid off and replaced with new short-term FHLB advances, if warranted, depending on funding needs.

Also included in short-term borrowings are securities sold under agreements to repurchase that mature daily and are secured by U.S. agency securities totaling $765.7 million and $454.5 million at September 30, 2024 and December 31, 2023, respectively. The Company borrows funds on a secured basis by selling securities under agreements to repurchase, mainly in connection with treasury management services offered to its deposit customers. As the Company maintains effective control over assets sold under agreements to repurchase, the securities continue to be carried on the consolidated statements of financial condition. Because the Company acts as borrower transferring assets to the counterparty, and the agreements mature daily, the Company’s risk is limited.

The remaining balances in short-term borrowings for both periods are federal funds purchased, which are unsecured borrowings from other banks, generally on an overnight basis.

6. 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, 2024 and December 31, 2023.

September 30, 2024 December 31, 2023
Derivative (1) Derivative (1)
($ in thousands) Type of<br>Hedge Notional or<br>Contractual<br>Amount Assets Liabilities Notional or<br>Contractual<br>Amount Assets Liabilities
Derivatives designated as hedging instruments:
Interest rate swaps - variable rate loans Cash Flow $ 1,350,000 $ — $ 33,120 $ 1,550,000 $ — $ 73,611
Interest rate swaps - securities Fair Value 477,500 22,071 — 477,500 22,819 —
Total derivatives designated as hedging instruments $ 1,827,500 $ 22,071 $ 33,120 $ 2,027,500 $ 22,819 $ 73,611
Derivatives not designated as hedging instruments:
Interest rate swaps N/A $ 4,989,753 $ 94,228 $ 94,490 $ 5,128,144 $ 131,271 $ 129,994
Risk participation agreements N/A 389,443 19 19 364,906 34 18
Interest rate-lock commitments on residential mortgage loans N/A 39,343 714 — 13,355 — 286
Forward commitments to sell residential mortgage loans N/A 23,698 — 440 18,563 372 —
To Be Announced (TBA) securities N/A 29,500 88 44 13,500 — 47
Foreign exchange forward contracts N/A 106,754 1,704 1,664 83,134 1,864 1,840
Visa Class B derivative contract N/A 42,617 — 2,261 42,617 — 1,342
Total derivatives not designated as hedging instruments $ 5,621,108 $ 96,753 $ 98,918 $ 5,664,219 $ 133,541 $ 133,527
Total derivatives $ 7,448,608 $ 118,824 $ 132,038 $ 7,691,719 $ 156,360 $ 207,138
Less: netting adjustment (2) (49,009 ) (9 ) (65,648 ) —
Total derivative assets/liabilities $ 69,815 $ 132,029 $ 90,712 $ 207,138
  • Derivative assets and liabilities are reported in other assets and other liabilities, respectively, in the consolidated balance sheets.
  • 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. The Company terminated four and six swap agreements during the nine months ended September 30, 2024 and 2023, respectively, and paid cash of approximately $13.7 million and $2.9 million, respectively, for those same periods. The net cash paid for these transactions was recorded as accumulated other comprehensive income/loss and is being amortized into earnings through the original maturity dates of the respective contracts. The notional amounts of the swap agreements in place at September 30, 2024 expire as follows: $50 million in

2025

; $425 million in

2026

; $825 million in

2027

; and $50 million in

2028

.

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, 2024, these single layer instruments have hedge start dates between January 2025 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 portfolio layer method (formerly referred to as last-of-layer). At September 30, 2024, the amortized cost basis of the closed portfolio of pre-payable commercial mortgage backed securities totaled $514.2 million, excluding any basis adjustment. The amount that represents the hedged items was $455.3 million and the basis adjustment associated with the hedged items was a loss totaling $22.2 million.

The Company terminated three fair value swap agreements during the nine months ended September 30, 2023 and received cash of approximately $16.6 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, if held, or impacting the net gain or loss, if sold. There were no fair value swap agreements terminated during the nine months ended September 30, 2024.

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. In 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.

During the second quarter of 2024, Visa allowed Class B holders to convert some but not all of their Class B shares to Class A shares. As a result of this conversion event, the Bank and its counterparty agreed to modify the transaction agreement to reflect the partial exchange and include certain provisions related to conversion rate changes. The conversion plan approved by Visa requires a minimum of 12 months before another exchange event and thus extends the expected time for a full resolution of the matter.

The contract includes a contingent accelerated termination clause based on the credit ratings of the Company. At September 30, 2024 and December 31, 2023, the fair value of the liability associated with this contract was $2.3 million and $1.3 million, respectively. Refer to Note 14 – Fair Value Measurements 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, 2024 and 2023 are presented in the table below.

Three Months Ended Nine Months Ended
( in thousands) September 30, September 30,
Derivative Instruments: 2024 2023 2024 2023
Cash flow hedges:
Variable rate loans $ (12,649 ) $ (11,116 ) $ (38,120 ) $ (28,609 )
Fair value hedges:
Securities 3,215 3,023 9,437 8,786
Derivatives not designated as hedging:
Residential mortgage banking (370 ) 235 182 736
Customer and all other instruments 923 418 (2,939 ) 1,585
Total loss $ (8,881 ) $ (7,440 ) $ (31,440 ) $ (17,502 )

All values are in US Dollars.

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

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September 30, 2024, 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, 2024 and December 31, 2023 was $30.2 million and $65.6 million, respectively, for which the Company had posted collateral of $28.7 million and $66.0 million, respectively.

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, 2024 and December 31, 2023 is presented in the following tables.

As of September 30, 2024 Gross Amounts Offset in Net Amounts Presented in Gross Amounts Not Offset in the<br>Statement of Financial Condition
($ in thousands) Gross Amounts<br>Recognized the Statement<br>of Financial Condition the Statement<br>of Financial Condition Financial<br>Instruments Cash<br>Collateral Net<br>Amount
Derivative Assets $ 106,440 $ (51,000 ) $ 55,440 $ 52,690 $ 54,804 $ (52,054 )
Derivative Liabilities $ 52,696 $ (6 ) $ 52,690 $ 52,690 $ — $ —
As of December 31, 2023 Gross Amounts Offset in Net Amounts Presented in Gross Amounts Not Offset in the<br>Statement of Financial Condition
--- --- --- --- --- --- --- --- --- --- --- --- --- --- ---
($ in thousands) Gross Amounts<br>Recognized the Statement<br>of Financial Condition the Statement<br>of Financial Condition Financial<br>Instruments Cash<br>Collateral Net<br>Amount
Derivative Assets $ 152,740 $ (68,282 ) $ 84,458 $ 84,458 $ — $ —
Derivative Liabilities $ 87,567 $ — $ 87,567 $ 84,458 $ 96,176 $ (93,067 )

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

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7. Stockholders’ Equity

Common Shares Outstanding

Common shares outstanding excludes treasury shares totaling 6.5 and 6.3 million at September 30, 2024 and December 31, 2023, respectively, with a first-in-first-out cost basis of $255.1 million and $236.7 million at September 30, 2024 and December 31, 2023, respectively. Shares outstanding also excludes unvested restricted share awards totaling 0.3 million at both September 30, 2024 and December 31, 2023.

Stock Buyback Program

On January 26, 2023, the Company’s board of directors approved a stock buyback program whereby the Company is authorized to repurchase up to approximately 4.3 million shares of its outstanding common stock through the program’s expiration date of December 31, 2024. 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 from time to time, depending on market conditions and other factors, and in accordance with applicable regulations of the Securities and Exchange Commission. 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, 2024, the Company repurchased 612,913 shares of its common stock at an average cost of $48.63 per share, inclusive of commissions, under this program. No shares were repurchased under this program in 2023. The Company has accrued $0.2 million of estimated excise tax associated with share repurchases during the nine months ended September 30, 2024.

Accumulated Other Comprehensive Income (Loss)

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

($ in thousands) Available<br>for Sale<br>Securities HTM Securities<br>Transferred<br>from AFS Employee<br>Benefit Plans Cash<br>Flow Hedges Equity Method Investment Total
Balance, December 31, 2023 $ (450,748 ) $ (9,385 ) $ (103,061 ) $ (58,306 ) $ 373 $ (621,127 )
Net change in unrealized gain (loss) 132,391 — — (10,495 ) (344 ) 121,552
Reclassification of net loss realized and included in earnings — — 3,569 38,120 — 41,689
Valuation adjustments to employee benefit plans — — 22,014 — — 22,014
Amortization of unrealized net loss on securities transferred to HTM — 1,279 — — — 1,279
Income tax expense (28,958 ) (268 ) (5,555 ) (6,122 ) — (40,903 )
Balance, September 30, 2024 $ (347,315 ) $ (8,374 ) $ (83,033 ) $ (36,803 ) $ 29 $ (475,496 )
Balance, December 31, 2022 $ (584,408 ) $ (10,734 ) $ (97,952 ) $ (79,093 ) $ 5 $ (772,182 )
Net change in unrealized gain (loss) (142,980 ) — — (44,823 ) 714 (187,089 )
Reclassification of net loss realized and included in earnings — — 5,010 28,609 — 33,619
Valuation adjustments to employee benefit plans — — (7,307 ) — — (7,307 )
Amortization of unrealized net loss on securities transferred to HTM — 1,343 — — — 1,343
Income tax (expense) benefit 32,757 (302 ) 517 3,650 — 36,622
Balance, September 30, 2023 $ (694,631 ) $ (9,693 ) $ (99,732 ) $ (91,657 ) $ 719 $ (894,994 )

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 6 - Derivatives will be reclassified into income over the life of the hedge. Accumulated other comprehensive loss resulting from terminated interest rate swaps are being 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) 2024 2023 the statement of income
Amortization of unrealized net loss on securities transferred to HTM $ (1,279 ) $ (1,343 ) Interest income
Tax effect 268 302 Income taxes
Net of tax (1,011 ) (1,041 ) Net income
Amortization of defined benefit pension and post-retirement items (3,569 ) (5,010 ) Other noninterest expense (b)
Tax effect 775 1,128 Income taxes
Net of tax (2,794 ) (3,882 ) Net income
Reclassification of unrealized loss on cash flow hedges (37,257 ) (34,506 ) Interest income
Tax effect 8,257 7,768 Income taxes
Net of tax (29,000 ) (26,738 ) Net income
Amortization of gain (loss) on terminated cash flow hedges (863 ) 5,897 Interest income
Tax effect 191 (1,327 ) Income taxes
Net of tax (672 ) 4,570 Net income
Total reclassifications, net of tax $ (33,477 ) $ (27,091 ) Net income
  • Amounts in parentheses indicate reduction in net income.
  • 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 11 – Retirement Plans for additional details).

8. Other Noninterest Income

Components of other noninterest income are as follows:

Three Months Ended Nine Months Ended
September 30, September 30,
($ in thousands) 2024 2023 2024 2023
Income from bank-owned life insurance $ 4,364 $ 3,633 $ 12,353 $ 10,283
Credit related fees 2,905 3,253 9,166 9,249
Income (loss) from customer and other derivatives 923 418 (2,939 ) 1,585
Net gains on sales of premises, equipment and other assets 2,943 1,297 6,765 2,310
Other miscellaneous 7,694 6,832 19,926 16,043
Total other noninterest income $ 18,829 $ 15,433 $ 45,271 $ 39,470

9. Other Noninterest Expense

Components of other noninterest expense are as follows:

Three Months Ended Nine Months Ended
September 30, September 30,
($ in thousands) 2024 2023 2024 2023
Corporate value and franchise taxes and other non-income taxes $ 4,691 $ 5,238 $ 14,848 $ 15,732
Advertising 3,331 3,621 9,509 10,353
Telecommunications and postage 2,406 2,590 7,108 8,373
Entertainment and contributions 2,707 2,765 8,570 7,978
Tax credit investment amortization 1,585 1,494 4,694 4,297
Printing and supplies 814 968 2,768 3,107
Travel expense 1,534 1,368 4,233 4,065
Net other retirement expense (4,396 ) (3,228 ) (13,727 ) (10,195 )
Other miscellaneous 7,800 7,404 24,070 22,536
Total other noninterest expense $ 20,472 $ 22,220 $ 62,073 $ 66,246

10. Earnings Per Common Share

The Company calculates earnings per common 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.

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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) 2024 2023 2024 2023
Numerator:
Net income to common shareholders $ 115,572 $ 97,738 $ 338,741 $ 341,999
Net income allocated to participating securities - basic and diluted 772 992 2,366 3,574
Net income allocated to common shareholders - basic and diluted $ 114,800 $ 96,746 $ 336,375 $ 338,425
Denominator:
Weighted-average common shares - basic 86,234 86,131 $ 86,421 $ 86,082
Dilutive potential common shares 326 306 229 286
Weighted-average common shares - diluted 86,560 86,437 $ 86,650 $ 86,368
Earnings per common share:
Basic $ 1.33 $ 1.12 $ 3.89 $ 3.93
Diluted $ 1.33 $ 1.12 $ 3.88 $ 3.92

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 with weighted averages totaling 10,390 and 13,940 for the three and nine months ended September 30, 2024, respectively, and 97,558 and 109,801 for the three and nine months ended September 30, 2023, respectively, did not enter the calculation of diluted earnings per share as the impact would have been anti-dilutive.

11. 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.

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

 Three Months Ended September 30,
Pension Benefits Other Post-Retirement Benefits
(in thousands) 2024 2023 2024 2023
Service cost $ 1,900 $ 1,979 $ 7 $ 8
Interest cost 6,056 6,052 135 160
Expected return on plan assets (11,901 ) (11,177 ) — —
Amortization of net (gain) or loss and prior service costs 1,530 1,981 (215 ) (243 )
Net periodic benefit cost $ (2,415 ) $ (1,165 ) $ (73 ) $ (75 )
 Nine Months Ended September 30,
--- --- --- --- --- --- --- --- --- --- --- --- ---
Pension Benefits Other Post-Retirement Benefits
($ in thousands) 2024 2023 2024 2023
Service cost (benefit) $ 5,806 $ 5,938 $ 25 $ (13 )
Interest cost 17,986 17,803 443 525
Expected return on plan assets (35,724 ) (33,533 ) — —
Amortization of net (gain) or loss and prior service costs 4,154 5,662 (585 ) (652 )
Net periodic benefit cost $ (7,778 ) $ (4,130 ) $ (117 ) $ (140 )

12. 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, 2023.

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, 2024 are presented in the following table.

Weighted
Average
Number of Grant Date
Shares Fair Value
Nonvested at January 1, 2024 1,457,401 $ 44.65
Granted 784,293 42.26
Vested (496,536 ) 41.15
Forfeited (168,740 ) 43.89
Nonvested at September 30, 2024 1,576,418 $ 44.65

At September 30, 2024, there was $50.0 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

3.1

years. The total fair value of shares that vested during the nine months ended September 30, 2024 was $18.2 million. During the nine months ended September 30, 2024, the Company granted 545,643 restricted stock units (RSUs) to certain eligible employees. Unlike restricted share awards (RSAs), 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 not deferred under the Company's nonqualified deferred compensation plan. Such dividend equivalents are forfeited should the employee terminate employment prior to the vesting of the RSU.

During the nine months ended September 30, 2024, the Company granted 47,734 performance share awards subject to a total shareholder return (“TSR”) performance metric with a grant date fair value of $43.23 per share and 47,734 performance share awards subject to an adjusted earnings per share performance metric with a grant date fair value of $36.25 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 49 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 adjusted earnings per share that ultimately vest will be based on the Company’s attainment of certain adjusted earnings per share goals over the two-year performance period. The maximum number of

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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.

13. Commitments and Contingencies

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

Commitments to extend credit include revolving commercial credit lines, nonrevolving loan commitments issued mainly to finance the acquisition and development or construction of real property or equipment, and credit card and personal credit lines. The availability of funds under commercial credit lines and loan commitments generally depends on whether the borrower continues to meet credit standards established in the underlying contract and 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 contractual 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 $25.5 million and $28.9 million at September 30, 2024 and December 31, 2023, respectively.

The following table presents a summary of the Company’s off-balance sheet financial instruments as of September 30, 2024 and December 31, 2023:

 September 30, December 31,
($ in thousands) 2024 2023
Commitments to extend credit $ 9,201,078 $ 9,852,367
Letters of credit 430,127 481,910

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.

Federal Deposit Insurance Corporation (FDIC) Special Assessment

In November 2023, the FDIC approved a final rule to implement a special deposit insurance assessment to recover losses to the Deposit Insurance Fund (DIF) arising from the full protection of uninsured depositors under the systemic risk exception following the receiverships of Silicon Valley Bank and Signature Bank in the spring of 2023. In the fourth quarter of 2023, the Company recorded a pre-tax special assessment expense totaling $26.1 million based on the November 2023 final rule. In 2024, the FDIC provided notice that the estimated losses attributable to the protection of uninsured depositors at Silicon Valley Bank and Signature Bank had increased and the Company increased the loss accrual to $30.7 million.

The loss estimates resulting from the failures of these institutions may be subject to further change pending the projected and actual outcome of loss share agreements, joint ventures, and outstanding litigation. The exact amount of losses incurred will not be determined until the FDIC terminates the receiverships of these banks; therefore, the Company's exact exposure for FDIC special assessment remains unknown.

14. Fair Value Measurements

The Financial Accounting Standards Board (FASB) defines fair value as the exchange price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between

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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.

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 on the consolidated balance sheets at September 30, 2024 and December 31, 2023:

 September 30, 2024
($ in thousands) Level 1 Level 2 Level 3 Total
Assets
Available for sale debt securities:
U.S. Treasury and government agency securities $ — $ 173,768 $ — $ 173,768
Municipal obligations — 199,359 — 199,359
Corporate debt securities — 21,454 — 21,454
Residential mortgage-backed securities — 2,195,672 — 2,195,672
Commercial mortgage-backed securities — 2,667,908 — 2,667,908
Collateralized mortgage obligations — 37,986 — 37,986
Total available for sale securities — 5,296,147 — 5,296,147
Mortgage loans held for sale — 23,462 — 23,462
Derivative assets (1) — 69,815 — 69,815
Total recurring fair value measurements - assets $ — $ 5,389,424 $ — $ 5,389,424
Liabilities
Derivative liabilities (1) $ — $ 129,768 $ 2,261 $ 132,029
Total recurring fair value measurements - liabilities $ — $ 129,768 $ 2,261 $ 132,029
 December 31, 2023
--- --- --- --- --- --- --- --- ---
($ in thousands) Level 1 Level 2 Level 3 Total
Assets
Available for sale debt securities:
U.S. Treasury and government agency securities $ — $ 97,808 $ — $ 97,808
Municipal obligations — 201,412 — 201,412
Corporate debt securities — 20,352 — 20,352
Residential mortgage-backed securities — 2,113,866 — 2,113,866
Commercial mortgage-backed securities — 2,437,472 — 2,437,472
Collateralized mortgage obligations — 44,285 — 44,285
Total available for sale securities — 4,915,195 — 4,915,195
Mortgage loans held for sale — 13,269 — 13,269
Derivative assets (1) — 90,712 — 90,712
Total recurring fair value measurements - assets $ — $ 5,019,176 $ — $ 5,019,176
Liabilities
Derivative liabilities (1) $ — $ 205,796 $ 1,342 $ 207,138
Total recurring fair value measurements - liabilities $ — $ 205,796 $ 1,342 $ 207,138

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

Securities classified as level 2 include obligations of U.S. Government agencies and U.S. Government-sponsored agencies, including 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

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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.

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, Overnight Index swap rate curves and SOFR swap curves (where applicable), 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 derivative instruments, which are all 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 6 – 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, 2024 and the year ended December 31, 2023 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, 2022 1,883
Cash settlement (2,547 )
Losses included in earnings 2,006
Balance at December 31, 2023 1,342
Cash settlement (1,178 )
Losses included in earnings 2,097
Balance at September 30, 2024 2,261

All values are in US Dollars.

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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. The assumptions reflected in the table below for September 30, 2024 were updated in consideration of the recent exchange offer from Visa.

( in thousands)

Level 3 Class December 31, 2023
Derivative liability 2,261 $ 1,342
Valuation technique Discounted cash flow
Unobservable inputs:
Visa Class A appreciation - range 6-12%
Visa Class A appreciation - weighted average 9%
Conversion rate - range 1.60x-1.59x
Conversion rate -weighted average 1.5950x
Time until resolution 3-9 months

All values are in US Dollars.

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 are 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, 2024
($ in thousands) Level 1 Level 2 Level 3 Total
Collateral-dependent loans individually evaluated for credit loss $ — $ 26,016 $ — $ 26,016
Other real estate owned and foreclosed assets, net — — 27,732 27,732
Total nonrecurring fair value measurements $ — $ 26,016 $ 27,732 $ 53,748
 December 31, 2023
--- --- --- --- --- --- --- --- ---
($ in thousands) Level 1 Level 2 Level 3 Total
Collateral-dependent loans individually evaluated for credit loss $ — $ 15,882 $ — $ 15,882
Other real estate owned and foreclosed assets, net — — 3,628 3,628
Total nonrecurring fair value measurements $ — $ 15,882 $ 3,628 $ 19,510

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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 is discussed earlier in this note. The same measurement techniques were applied to the valuation of securities held to maturity.

Loans, Net – The fair value measurement for certain collateral dependent loans that are individually evaluated for credit loss 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, 2024, short-term FHLB borrowings consisted of two short-term fixed rate borrowings (less than 15 days outstanding). At December 31, 2023, short-term FHLB borrowings consisted of one short-term fixed rate borrowing (five calendar days outstanding). Given the short duration of the instruments, the carrying amount is a reasonable estimate of fair value.

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 is 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, 2024
 Total Fair Carrying
($ in thousands) Level 1 Level 2 Level 3 Value Amount
Financial assets:
Cash, interest-bearing bank deposits, and federal funds sold $ 1,364,683 $ 424 $ — $ 1,365,107 $ 1,365,107
Available for sale securities — 5,296,147 — 5,296,147 5,296,147
Held to maturity securities — 2,325,258 — 2,325,258 2,473,633
Loans, net — 26,016 22,882,745 22,908,761 23,138,316
Loans held for sale — 24,624 — 24,624 24,624
Derivative financial instruments — 69,815 — 69,815 69,815
Financial liabilities:
Deposits $ — $ — $ 28,978,151 $ 28,978,151 $ 28,982,905
Federal funds purchased — 200,275 — 200,275 200,275
Securities sold under agreements to repurchase — 765,669 — 765,669 765,669
FHLB short-term borrowings — 300,000 — 300,000 300,000
Long-term debt — 202,109 — 202,109 236,431
Derivative financial instruments — 129,768 2,261 132,029 132,029
 December 31, 2023
--- --- --- --- --- --- --- --- --- --- ---
($ in thousands) Level 1 Level 2 Level 3 Total Fair<br>Value Carrying<br>Amount
Financial assets:
Cash, interest-bearing bank deposits, and federal funds sold $ 1,188,284 $ — $ — $ 1,188,284 $ 1,188,284
Available for sale securities — 4,915,195 — 4,915,195 4,915,195
Held to maturity securities — 2,485,918 — 2,485,918 2,684,779
Loans, net — 15,882 23,170,377 23,186,259 23,614,010
Loans held for sale — 26,124 — 26,124 26,124
Derivative financial instruments — 90,712 — 90,712 90,712
Financial liabilities:
Deposits $ — $ — $ 29,679,228 $ 29,679,228 $ 29,690,059
Federal funds purchased 350 — — 350 350
Securities sold under agreements to repurchase 454,479 — — 454,479 454,479
FHLB short-term borrowings 700,000 — — 700,000 700,000
Long-term debt — 196,182 — 196,182 236,317
Derivative financial instruments — 205,796 1,342 207,138 207,138

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15. Recent Accounting Pronouncements

Accounting Standards Adopted During the Nine Months Ended September 30, 2024

In March 2023, FASB issued Accounting Standards Update (ASU) 2023-02, “Investments – Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method,” to allow reporting entities to have the option to elect and expand the use of the proportional amortization method of accounting for qualifying tax credit equity investments structures that meet certain criteria. Existing guidance under Subtopic 323-740 provides the option to apply the proportional amortization method only to investments in low-income-housing tax credit structures; equity investments in other tax credit structures are typically accounted for under Topic 321, Investments – Equity Securities. Under the provisions of this update, the accounting policy election to apply the proportional amortization method can be made on a tax-credit-program-by-tax-credit-program basis for programs that meet certain conditions and is not made at the reporting entity or individual investment level. Application of the proportional amortization method to any eligible tax credit investments will result in the cost of the investment being amortized in proportion to the income tax credits and other income tax benefits received, with the amortization being presented as a component of income tax expense (benefit), as opposed to current guidance under Topic 321, where any investment income, gains and losses and tax credits are all presented gross in the statement of income. For public business entities, the amendments are effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years and must be applied on either a modified retrospective or a retrospective basis. The Company adopted this standard effective January 1, 2024, and has elected not to apply the proportional amortization method to the new market tax program, which includes our existing qualifying new market tax credit investments. The election for any eligible future investments in other tax credit programs will be made at the time of investment. The adoption of this standard had no effect on the Company’s consolidated financial position or results of operations.

Accounting Standards Issued But Not Yet Adopted

In November 2023, the FASB issued ASU 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures,” to improve the disclosures about a public entity’s reportable segments and to enable investors to develop more decision-useful financial analyses. The amendments in this update (1) require that a public entity disclose, on an annual and interim basis significant segment expenses that are regularly provided to the chief operating decision maker (CODM) and included within each reported measure of segment profit or loss (collectively referred to as the “significant expense principle”); (2) require that a public entity disclose, on an annual and interim basis, an amount for other segment items by reportable segment and a description of its composition; (3) require that a public entity provide all annual disclosures about a reportable segment’s profit or loss and assets currently required by Topic 280 in interim periods; (4) clarify that if the CODM uses more than one measure of a segment’s profit or loss in assessing segment performance and deciding how to allocate resources, a public entity may report one or more of those additional measures of segment profit; (5) require that a public entity disclose the title and position of the CODM and an explanation of how the CODM uses the reported measure(s) of segment profit or loss in assessing segment performance and deciding how to allocate resources; and (6) require that a public entity that has a single reportable segment provide all the disclosures required by the amendments in this update and all existing segment disclosures in Topic 280. The amendments in this update are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. A public entity should apply the amendments in this update retrospectively to all prior periods presented in the financial statements. The Company is currently assessing the provisions of this guidance. As the update contains only amendments to disclosure requirements, adoption will have no impact to the Company’s operating results or financial condition.

In December 2023, the FASB issued ASU 2023-09 "Income Taxes (Topic 740): Improvements to Income Tax Disclosures," to enhance the transparency and decision usefulness of income tax disclosures by requiring additional categories of information about federal, state, and foreign income taxes to be included in the rate reconciliation and by requiring more detail to be disclosed on certain reconciling item categories that meet a quantitative threshold. Additionally, the amendment requires all entities to disclose on an annual basis (1) the amount of income taxes paid (net of refunds received) disaggregated by federal (national), state, and foreign taxes, and (2) the amount of income taxes paid (net of refunds received) disaggregated by individual jurisdictions in which income taxes paid is equal to or greater than 5 percent of total income taxes paid (net of refunds received). The amendments to this update related to other disclosures require that all entities disclose (1) income (or loss) from continuing operations before income tax expense (or benefit) disaggregated between domestic and foreign, and (2) income tax expense (or benefit) from continuing operations disaggregated by federal (national), state, and foreign. The amendments in this update are effective for annual periods beginning after December 15, 2024. Early adoption is permitted. Entities should apply the amendments on a prospective basis and retrospective application is permitted. As the update contains only amendments to disclosure requirements, adoption will have no impact to the Company’s operating results or financial condition.

In March 2024, the FASB issued ASU 2024-02, “Codification Improvements – Amendments to Remove References to Concepts Statements,” to remove from the FASB codification extraneous references to FASB Concept Statements. FASB Concepts Statements are nonauthoritative, and the removal of references to such from the FASB codification will simplify the codification and draw a

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distinction between authoritative guidance and nonauthoritative literature. Generally, the amendments in this update are not intended to result in significant accounting change for most entities. The amendments in this update are effective for public business entities for fiscal years beginning after December 15, 2024, and early application is permitted for any fiscal year or interim period for which financial statements have not yet been issued (or made available for issuance). If an entity adopts the amendments in an interim period, it must adopt them as of the beginning of the fiscal year that includes that interim period. An entity should apply the amendments in this update on a prospective basis for new transactions recognized on or after the date of first application, or on a retrospective basis to the beginning of the earliest comparative period presented in which the amendments were first applied. The Company is currently assessing the provisions of this guidance to determine if one or more are applicable, but does not expect the application of any relevant provisions to have a material impact to its financial condition or results of operations.

In November 2024, the FASB issued ASU 2024-03, “Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40),” to improve the disclosures about a public business entity’s expenses in commonly presented expense captions. The amendments in this update require disclosure, in the notes to financial statements, of specified information about certain costs and expenses. At each interim and annual reporting period an entity shall: 1) Disclose the amounts of purchases of inventory, employee compensation, depreciation, intangible asset amortization, and or other amounts of depletion expense included in each relevant expense caption; 2) Include certain amounts that are already required to be disclosed under GAAP in the same disclosure as the other disaggregation requirements; 3) Disclose a qualitative description of the amounts remaining in relevant expense captions that are not separately disaggregated quantitatively; and, 4) Disclose the total amount of selling expenses and, in annual reporting periods, an entity’s definition of selling expenses. An entity is not precluded from providing additional voluntary disclosures that may provide investors with additional decision-useful information. The amendments in this update are effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Early adoption is permitted. The amendments in this update should be applied either prospectively to financial statements issued for reporting periods after the effective date of this update, or retrospectively to any or all prior periods presented in the financial statements. The company is currently assessing the provisions of this guidance. As the update contains only amendments to disclosure requirements, adoption will have no impact to the Company’s operating results or financial condition.

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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 its subsidiaries during the nine months ended September 30, 2024 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, the threat of recession, volatile equity capital markets, property and casualty insurance costs, collateral values, customer income, creditworthiness and confidence, spending and savings that may affect customer bankruptcies, defaults, charge-offs and deposit activity; and the impact of the foregoing on customer behavior (including the velocity and levels of deposit withdrawals and loan repayment);
  • adverse developments in the banking industry highlighted by high-profile bank failures and the potential impact of such developments on customer confidence, liquidity and regulatory responses to these developments (including increases in the cost of our deposit insurance assessments), the Company's ability to effectively manage its liquidity risk and any growth plans, and the availability of capital and funding;
  • 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;
  • management’s predictions about charge-offs;
  • fluctuations in commercial and residential real estate values, especially as they relate to the value of collateral supporting the Company's loans;
  • 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, including growth, pricing and betas;
  • credit quality trends;
  • changes in interest rates, including actions taken by the Federal Reserve Board and the impact of fluctuations in interest rates on our financial projections, models and guidance;
  • net interest margin trends, including the impact of ongoing elevated interest rates;
  • changes in the cost and availability of funding due to changes in the deposit and credit markets;
  • success of revenue-generating and cost reducing initiatives;
  • future expense levels;
  • changes in expense to revenue (efficiency ratio), including the risk that we may not realize and/or sustain benefits from efficiency and growth initiatives or that we may not be able to realize cost savings or revenue benefits in the time period expected, which could negatively affect our future profitability;
  • the effectiveness of derivative financial instruments and hedging activities to manage risks;
  • risks related to our reliance on third parties to provide key components of our business infrastructure, including the risks related to disruptions in services or financial difficulties of a third-party vendor;
  • risks related to 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 material breach of operating or security systems as a result of a cyber-attack or similar acts;
  • the extensive use, reliability, disruption, and accuracy of the models and data upon which we rely;
  • risks related to our implementation of new lines of business, new products and services, new technologies, and expansion of our existing business opportunities;
  • projected tax rates;
  • future profitability;

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  • purchase accounting impacts, such as accretion levels;
  • our ability to identify and address potential cybersecurity risks, which may be exacerbated by recent developments in generative artificial intelligence, on our systems and/or third party vendors and service providers on which we rely, a material failure of which could disrupt our business and result in the disclosure of and/or misuse or misappropriation of confidential or proprietary information, disruption or damage to our systems, increased costs, losses, or adverse effects to our reputation;
  • our ability to receive dividends from Hancock Whitney Bank could affect our liquidity, including our ability to pay dividends or take other capital actions;
  • the risk that we may be required to make substantial expenditures to keep pace with regulatory initiatives and the rapid technology changes in the financial services market;
  • 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;
  • our ability to maintain adequate internal controls over financial reporting;
  • the financial impact of future tax legislation;
  • the effects of war or other conflicts, 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/or increase costs, including, but not limited to, property and casualty and other insurance costs;
  • risks related to environmental, social and governance ("ESG") legislation, rulemaking, activism and litigation, the scope and pace of which could alter our reputation and shareholder, associate, customer and third-party affiliations;
  • changes in laws and regulations affecting our businesses, including governmental monetary and fiscal policies, legislation and regulations relating to bank products and services, increased regulatory scrutiny resulting from bank failures, 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; and
  • the risk that the regulatory environment may not be conducive to or may prohibit the consummation of future mergers and/or business combinations, may increase the length of time and amount of resources required to consummate such transactions, and the potential to reduce anticipated benefits from such mergers or combinations.

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 can be found in Part I, Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2023, or 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.

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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.

We present certain additional non-GAAP financial measures to assist the reader with a better understanding of the Company’s performance period over period, and to provide investors with assistance in understanding the success management has experienced in executing its strategic initiatives. The Company highlights certain items that are outside of our principal business and/or are not indicative of forward-looking trends in supplemental disclosure items below our GAAP financial data and presents certain "Adjusted" ratios that exclude these disclosed items. These adjusted ratios provide management and the reader with a measure that may be more indicative of forward-looking trends in our business, as well as demonstrates the effects of significant gains or losses and changes.

We define Adjusted Pre-Provision Net Revenue as net income excluding provision expense and income tax expense, plus the taxable equivalent adjustment (as defined above), less supplemental disclosure items (as defined above). Management believes that adjusted pre-provision net revenue is a useful financial measure because it enables investors and others to assess the Company’s ability to generate capital to cover credit losses through a credit cycle. We define Adjusted Revenue as net interest income (te) and noninterest income less supplemental disclosure items. We define Adjusted Noninterest Expense as noninterest expense less supplemental disclosure items. We define our Efficiency Ratio as noninterest expense to total net interest income (te) and noninterest income, excluding amortization of purchased intangibles and supplemental disclosure items, if applicable. Management believes adjusted revenue, adjusted noninterest expense and the efficiency ratio are useful measures as they provide a greater understanding of ongoing operations and enhance comparability with prior periods.

Current Economic Environment

The Federal Reserve signaled in its July 2024 meeting that it will be attentive to both sides of a dual mandate of maximum employment and stable prices and cut the benchmark interest rate by 50 basis points in September, indicating a shift in focus to maintenance of a strong labor market. Inflation remains a key driver of economic conditions and monetary policy, with headline and core (excluding food and energy) inflation at an annual rate of 2.4% and 3.3%, respectively, in September 2024, still above the Federal Reserve's target inflation rate of 2.0%. The labor market has shown signs of weakening in recent months, with the unemployment rate rising to a nearly three-year high of 4.3% in July 2024. Despite the migration in employment statistics, the relative health of the labor market remains solid, with wage growth and a reduction in the unemployment rate to 4.1% in September, serving as positive economic indicators. Consumer spending remains robust, leading to healthy Gross Domestic Product (GDP) growth of 2.8% on an annualized basis in the third quarter of 2024. U.S. economic activity has remained resilient through substantial burden in recent years, where a continuation of strong consumer spending, the overall health of the labor market and the most recent and anticipated future interest rate cuts may help prevent or reduce the severity of a potential recession in the near-term. However, ongoing price pressures, some volatility in labor markets and uncertainty surrounding the Federal Reserve's future actions with respect to monetary policy may adversely affect capital markets and could result in below-trend economic growth. Economic trends may be further influenced by factors outside of inflation, such as continued pressure on the commercial real estate sector, uncertainty surrounding the impact of change in presidential administration, and ongoing geopolitical conflicts.

Within the financial services sector, institutions continue to contend with industry-specific headwinds. The elevated interest rate environment and heightened competition for deposits has fostered a shift within deposit composition toward higher cost products, although the pace of movement has continued to slow, allowing deposit costs to stabilize. The interest rate environment has also steadily affected the affordability of credit to consumers and businesses, moderating loan demand. At the same time, economic uncertainty and industry turmoil have prompted financial institutions to tighten credit standards. Many financial institutions, including ours, have also experienced some degree of deterioration in credit quality metrics from the mostly-benign credit environment experienced during the majority of the last three years.

Within our markets, loan growth remains tempered in response to heightened interest rates and increased insurance costs. Further, we have continued to reduce exposure to syndicated credits as we focus on full-service relationships. However, interest rates on new, renewed and repricing variable rate loans continue to result in higher yields on earning assets that, coupled with stabilization in funding costs, has contributed to net interest margin expansion during the quarter.

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Economic Outlook

We utilize economic forecasts produced by Moody’s that provide various scenarios to assist in the development of our economic outlook. This outlook discussion utilizes the September 2024 Moody’s forecasts, the most current available at the time of our computation of the September 30, 2024 allowance for credit losses. 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 that display varying depictions of economic performance as compared to the baseline.

Management applied a weighting of 40% to the baseline and 60% to the mild recessionary S-2 scenario in the computation of the allowance for credit losses at September 30, 2024, consistent with the scenarios and respective weighting used at June 30, 2024. Our overall credit loss outlook has not changed significantly, and we continue to believe slower near-term growth or a mild recession is reasonably possible due to uncertainty in current economic conditions.

The baseline scenario continues to incorporate the belief that the Federal Reserve will bring inflation at or near its target rate of 2.0% without precipitating a recession. Key assumptions within the September 2024 baseline forecast include the following: (1) the Federal Reserve will make 25-basis point cuts to its benchmark interest rate in both September and December 2024, with subsequent cuts occurring until the benchmark rate reaches 3.0% in 2027; (2) the economy is at near full-employment, and the unemployment rate will remain near its current level of 4% in the coming years; (3) GDP will display modest annual growth of 2.6% in 2024, 2.1% in 2025, and 2.0% in 2026; and (4) the 10-year U.S. Treasury yield will average 4.2% in 2024, and will remain near this level through the end of the decade.

The S-2 scenario presents a downside alternative to the baseline. Compared to baseline, the S-2 scenario assumes that elevated interest rates weaken credit-sensitive spending more than anticipated, fiscal disputes in Congress lead to declines in business and consumer sentiment, geopolitical conflicts will create longer and farther-reaching disturbances, and continued disruption in the financial services industry will lead to additional tightening of credit standards. Further, the scenario assumes the unemployment rate will increase considerably to 6.7% in 2025 before improving to 4.9% in 2026 and 4.0% in 2027. As the economy weakens, the Federal Reserve commences rate cuts in the third quarter of 2024, deeper than those assumed in the baseline. As a result of these pressures, the U.S. falls into a mild recession beginning in the fourth quarter of 2024 that lasts for three quarters, with the stock market contracting 21% and a peak-to-trough decline in GDP of 1%.

The credit loss outlook for our portfolio as a whole has not changed materially since June 30, 2024. We continue to closely monitor our portfolio for customers that are sensitive to prolonged inflation, the elevated interest rate environment and/or other economic circumstances that may impact credit quality. We expect end-of-period loan balances at December 31, 2024 to be flat or slightly down from the previous year end.

There are a number of uncertainties in the current economic outlook, including the Federal Reserve's actions with respect to monetary policy. The full extent of the impact of these factors, among others, is uncertain and may have a negative impact on the U.S. economy, including the possibility of slower growth or an economic recession in the near or mid-term.

Highlights of the Third Quarter 2024

We reported net income for the third quarter of 2024 of $115.6 million, or $1.33 per diluted common share, compared to $114.6 million, or $1.31 per diluted common share, in the second quarter of 2024 and $97.7 million, or $1.12 per diluted common share, in the third quarter of 2023.

Third quarter 2024 results compared to second quarter 2024:

  • Net income of $115.6 million, or $1.33 per diluted share, up $1.0 million, or $0.02 per diluted share
  • Pre-provision net revenue, a non-GAAP measure, totaled $166.5 million, up $10.1 million, or 6%
  • Period-end loans totaled $23.5 billion, down $456.0 million, or 2%; reflects continued reduction of shared national credit portfolio
  • Criticized commercial loans and nonaccrual loans continued to normalize from the recent benign credit environment; annualized net charge-offs increased to 0.30% compared to 0.12%
  • Allowance for credit losses coverage of 1.46%, up 3 basis points (bps)
  • Period-end deposits totaled $29.0 billion, down $217.8 million, or 1%
  • Net interest margin of 3.39%, up 2 bps from 3.37%
  • Common equity tier 1 ratio of 13.78%, up 53 bps, and tangible common equity ratio of 9.56%, up 79 bps
  • Efficiency ratio, a non-GAAP measure, improved to 54.42%, compared to 56.18%

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Our results for the third quarter of 2024 represent solid performance that again reflected improved profitability and efficiency. Net interest income increased, reflecting higher loan and securities yields and a flat cost of funds, fee income continued to increase and operating expenses were down. Strong earnings facilitated continued growth in our capital ratios that generally compare favorably to our peers. Credit metrics continued to normalize compared to the earlier post-pandemic benign environment. As a result, we remain focused on identifying specific and broader risk indicators that may be impacting certain segments in our portfolio. However, we have not seen signs of significant weakening, in any particular industry, sector or geographic segment, beyond what we believe has been experienced by the banking industry as a whole, and we continue to maintain a robust allowance for credit loss coverage of 1.46% in light of the current credit and economic environment. We remain focused on balance sheet optimization and effective expense control, and we believe we are well positioned to continue to enhance shareholder value.

Consolidated Financial Results

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

Three Months Ended Nine Months Ended
September 30, June 30, March 31, December 31, September 30, September 30,
(in thousands, except per share data) 2024 2024 2024 2023 2023 2024 2023
Income Statement Data:
Interest income $ 429,476 $ 427,545 $ 421,684 $ 426,794 $ 415,827 $ 1,278,705 $ 1,193,703
Interest income (te) (a) 432,169 430,373 424,514 429,628 418,679 1,287,056 1,201,976
Interest expense 157,712 157,115 155,513 157,334 146,593 470,340 365,564
Net interest income (te) 274,457 273,258 269,001 272,294 272,086 816,716 836,412
Provision for credit losses 18,564 8,723 12,968 16,952 28,498 40,255 42,151
Noninterest income 95,895 89,174 87,851 38,951 85,974 272,920 249,529
Noninterest expense 203,839 206,016 207,722 229,151 204,675 617,577 607,697
Income before income taxes 145,256 144,865 133,332 62,308 122,035 423,453 427,820
Income tax expense 29,684 30,308 24,720 11,705 24,297 84,712 85,821
Net income $ 115,572 $ 114,557 $ 108,612 $ 50,603 $ 97,738 $ 338,741 $ 341,999
Supplemental disclosure items-included above, pre-tax:
Included in noninterest income:
Gain on sale of parking facility $ — $ — $ — $ 16,126 $ — $ — $ —
Loss on securities portfolio restructure — — — (65,380 ) — — —
Included in noninterest expense:
FDIC special assessment — — 3,800 26,123 — 3,800 —
Balance Sheet Data:
Period end balance sheet data
Loans $ 23,455,587 $ 23,911,616 $ 23,970,938 $ 23,921,917 $ 23,983,679 $ 23,455,587 $ 23,983,679
Earning assets 32,045,222 32,056,415 31,985,610 32,175,097 32,733,591 32,045,222 32,733,591
Total assets 35,238,107 35,412,291 35,247,119 35,578,573 36,298,301 35,238,107 36,298,301
Noninterest-bearing deposits 10,499,476 10,642,213 10,802,127 11,030,515 11,626,371 10,499,476 11,626,371
Total deposits 28,982,905 29,200,718 29,775,906 29,690,059 30,320,337 28,982,905 30,320,337
Stockholders' equity 4,174,687 3,920,718 3,853,436 3,803,661 3,501,003 4,174,687 3,501,003
Average balance sheet data
Loans $ 23,552,002 $ 23,917,361 $ 23,810,163 $ 23,795,681 $ 23,830,724 $ 23,759,083 $ 23,526,808
Earning assets 32,263,748 32,539,363 32,556,821 33,128,130 33,137,565 32,452,619 33,171,798
Total assets 34,780,386 34,998,880 35,101,869 35,538,300 35,626,927 34,959,722 35,665,505
Noninterest-bearing deposits 10,359,390 10,526,903 10,673,060 11,132,354 11,453,236 10,519,199 12,184,410
Total deposits 28,940,163 29,069,097 29,560,956 29,974,941 29,757,180 29,189,160 29,311,176
Stockholders' equity 4,021,211 3,826,296 3,818,840 3,560,978 3,572,487 3,889,265 3,518,105
Common Share Data:
Earnings per share - basic $ 1.33 $ 1.31 $ 1.25 $ 0.58 $ 1.12 $ 3.89 $ 3.93
Earnings per share - diluted 1.33 1.31 1.24 0.58 1.12 3.88 3.92
Cash dividends per common share 0.40 0.40 0.30 0.30 0.30 1.10 0.90
Book value per share (period-end) 48.47 45.40 44.49 44.05 40.64 48.47 40.64
Tangible book value per share (period-end) 38.10 35.04 34.12 33.63 30.16 38.10 30.16
Weighted average number of shares - diluted 86,560 86,765 86,726 86,604 86,437 86,650 86,368
Period-end number of shares 86,136 86,355 86,622 86,345 86,148 86,136 86,148

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Three Months Ended Nine Months Ended
September 30, June 30, March 31, December 31, September 30, September 30,
($ in thousands) 2024 2024 2024 2023 2023 2024 2023
Performance and other data:
Return on average assets 1.32 % 1.32 % 1.24 % 0.56 % 1.09 % 1.29 % 1.28 %
Return on average common equity 11.43 % 12.04 % 11.44 % 5.64 % 10.85 % 11.63 % 13.00 %
Return on average tangible common equity 14.70 % 15.73 % 14.96 % 7.55 % 14.53 % 15.12 % 17.51 %
Tangible common equity ratio (b) 9.56 % 8.77 % 8.61 % 8.37 % 7.34 % 9.56 % 7.34 %
Tangible common equity Tier 1 (CET1) ratio 13.78 % 13.25 % 12.65 % 12.33 % 12.06 % 13.78 % 12.06 %
Net interest margin (te) 3.39 % 3.37 % 3.32 % 3.27 % 3.27 % 3.36 % 3.37 %
Noninterest income as a percentage of total revenue (te) 25.89 % 24.60 % 24.62 % 12.51 % 24.01 % 25.05 % 22.98 %
Efficiency ratio (c) 54.42 % 56.18 % 56.44 % 55.58 % 56.38 % 55.67 % 55.14 %
Allowance for loan losses as a percentage of period-end loans 1.35 % 1.32 % 1.31 % 1.29 % 1.28 % 1.35 % 1.28 %
Allowance for credit losses as a percentage of period-end loans 1.46 % 1.43 % 1.42 % 1.41 % 1.40 % 1.46 % 1.40 %
Annualized net charge-offs to average loans 0.30 % 0.12 % 0.15 % 0.27 % 0.64 % 0.19 % 0.27 %
Nonaccrual loans as a percentage of loans 0.35 % 0.36 % 0.34 % 0.25 % 0.25 % 0.35 % 0.25 %
FTE headcount 3,458 3,541 3,564 3,591 3,681 3,458 3,681
Reconciliation of pre-provision net revenue (te) and adjusted pre-provision <br>net revenue(te) (non-GAAP measures) (d)
Net income (GAAP) $ 115,572 $ 114,557 $ 108,612 $ 50,603 $ 97,738 $ 338,741 $ 341,999
Provision for credit losses 18,564 8,723 12,968 16,952 28,498 40,255 42,151
Income tax expense 29,684 30,308 24,720 11,705 24,297 84,712 85,821
Pre-provision net revenue 163,820 153,588 146,300 79,260 150,533 463,708 469,971
Taxable equivalent adjustment 2,693 2,828 2,830 2,834 2,852 8,351 8,273
Pre-provision net revenue (te) 166,513 156,416 149,130 82,094 153,385 $ 472,059 $ 478,244
Adjustments from supplemental disclosure items
Gain on sale of parking facility — — — (16,126 ) — — —
Loss on securities portfolio restructure — — — 65,380 — — —
FDIC special assessment — — 3,800 26,123 — 3,800 —
Adjusted pre-provision net revenue (te) $ 166,513 $ 156,416 $ 152,930 $ 157,471 $ 153,385 $ 475,859 $ 478,244
Reconciliation of revenue (te), adjusted revenue (te) and efficiency ratio <br>(non-GAAP measures) (d)
Net interest income $ 271,764 $ 270,430 $ 266,171 $ 269,460 $ 269,234 $ 808,365 $ 828,139
Noninterest income 95,895 89,174 87,851 38,951 85,974 272,920 249,529
Total GAAP revenue 367,659 359,604 354,022 308,411 355,208 1,081,285 1,077,668
Taxable equivalent adjustment 2,693 2,828 2,830 2,834 2,852 8,351 8,273
Total revenue (te) 370,352 362,432 356,852 311,245 358,060 1,089,636 1,085,941
Adjustments from supplemental disclosure items
Gain on sale of parking facility — — — (16,126 ) — — —
Loss on securities portfolio restructure — — — 65,380 — — —
Adjusted revenue $ 370,352 $ 362,432 $ 356,852 $ 360,499 $ 358,060 $ 1,089,636 $ 1,085,941
GAAP noninterest expense $ 203,839 $ 206,016 $ 207,722 $ 229,151 $ 204,675 $ 617,577 $ 607,697
Amortization of intangibles (2,292 ) (2,389 ) (2,526 ) (2,672 ) (2,813 ) (7,207 ) (8,884 )
Adjustments from supplemental disclosure items
FDIC special assessment — — (3,800 ) (26,123 ) — (3,800 ) —
Adjusted noninterest expense for efficiency $ 201,547 $ 203,627 $ 201,396 $ 200,356 $ 201,862 $ 606,570 $ 598,813
Efficiency ratio (c) 54.42 % 56.18 % 56.44 % 55.58 % 56.38 % 55.67 % 55.14 %
  • 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%.
  • The tangible common equity ratio is common stockholders’ equity less intangible assets divided by total assets less intangible assets.
  • The efficiency ratio is noninterest expense to total net interest (te) and noninterest income, excluding amortization of purchased intangibles and supplemental disclosure items.
  • 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 2024 was $274.5 million, up $1.2 million, or less than 1%, compared to the second quarter of 2024, and was $816.7 million for the first nine months of 2024, down $19.7 million, or 2%, from the comparable period in 2023.

The $1.2 million increase in net interest income (te) compared to the second quarter of 2024 is largely attributable to an additional accrual day, higher loan and securities yields, and lower rates on borrowings, partially offset by an increase in deposit costs. Interest income (te) was up $1.8 million, primarily due to the additional accrual day, with increases in loan and securities yields more than offset by the decline in average loan balances. Interest expense was up $0.6 million, largely due to the additional accrual day and a net increase of 1 bp in the rate paid on interest-bearing deposits, partially offset by both a decrease in the average balance and rates paid on short-term borrowings. The net interest margin for the third quarter of 2024 was 3.39%, up 2 bps from 3.37% in the second quarter of 2024. The increase in the net interest margin from the prior quarter was largely driven by higher loan yields, higher securities yields, and lower borrowing costs, partially offset by an increase in deposit costs.

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The $19.7 million decrease in net interest income (te) for the nine months ended September 30, 2024 compared to the same period in 2023 reflects the growth in and prevailing rates on interest-bearing liabilities outpacing those of earning assets. The decline in net interest income (te) includes a $104.8 million increase in interest expense, partially offset by an $85.1 million increase in interest income (te). The increase in interest expense is largely due to a shift in the mix of deposits from noninterest-bearing and low interest-bearing transaction and savings deposits into higher cost products at competitive interest rates, partially offset by a decrease in the cost of borrowings, largely the result of the decrease in average FHLB advances. The increase in interest income (te) was largely driven by higher loan yields. The net interest margin for the nine months ended September 30, 2024 was down 1 bp from the comparative period in 2023, driven largely by the increase in cost of deposits outpacing the yield on earning assets. The rate on interest-bearing liabilities was up 63 bps compared to the first nine months of 2023, with the rate on interest-bearing deposits up 82 bps. The yield on average earning assets was up 46 bps, primarily driven by a 43 bp improvement in the loan yield.

We expect modest expansion in the net interest margin in the fourth quarter of 2024, with this guidance assuming two 25 bp rate cuts by the Federal Reserve during the period.

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

Three Months Ended
September 30, 2024 June 30, 2024 September 30, 2023
($ in millions) Volume Interest (d) Rate Volume Interest (d) Rate Volume Interest (d) Rate
Average earning assets
Commercial & real estate loans (te) (a) $ 18,179.9 $ 298.5 6.53 % $ 18,532.6 $ 301.4 6.54 % $ 18,679.0 $ 294.1 6.25 %
Residential mortgage loans 3,997.0 39.9 3.99 % 4,000.6 37.7 3.77 % 3,669.9 33.7 3.67 %
Consumer loans 1,375.1 30.6 8.85 % 1,384.2 30.6 8.90 % 1,481.8 32.2 8.61 %
Loan fees & late charges — 1.9 0.00 % — 2.0 0.00 % — 0.3 0.00 %
Total loans (te) (b) 23,552.0 370.9 6.27 % 23,917.4 371.7 6.24 % 23,830.7 360.3 6.01 %
Loans held for sale 26.5 0.6 8.63 % 25.0 0.4 7.06 % 43.4 0.8 7.30 %
US Treasury and government agency securities 556.4 4.1 2.92 % 531.9 3.7 2.80 % 535.3 3.4 2.52 %
Mortgage-backed securities and<br>   collateralized mortgage obligations 6,807.9 44.2 2.60 % 6,807.4 43.2 2.54 % 7,450.5 42.7 2.29 %
Municipals (te) 831.1 6.2 2.96 % 851.4 6.3 2.96 % 879.2 6.5 2.98 %
Other securities 23.5 0.2 3.86 % 23.5 0.2 3.86 % 23.5 0.2 3.51 %
Total securities (te) (c) 8,218.9 54.7 2.66 % 8,214.2 53.4 2.60 % 8,888.5 52.8 2.37 %
Total short-term investments 466.3 6.0 5.16 % 382.8 4.9 5.14 % 375.0 4.8 5.08 %
Total earning assets (te) $ 32,263.7 $ 432.2 5.34 % $ 32,539.4 $ 430.4 5.31 % $ 33,137.6 $ 418.7 5.02 %
Average interest-bearing liabilities
Interest-bearing transaction and savings deposits $ 10,905.3 $ 65.1 2.37 % $ 10,728.7 $ 61.4 2.30 % $ 10,583.2 $ 51.4 1.93 %
Time deposits 4,904.9 57.5 4.66 % 4,846.2 56.8 4.71 % 4,868.7 53.8 4.38 %
Public funds 2,770.6 24.6 3.54 % 2,967.3 26.4 3.58 % 2,852.0 25.6 3.57 %
Total interest-bearing deposits 18,580.8 147.2 3.15 % 18,542.2 144.6 3.14 % 18,303.9 130.8 2.84 %
Repurchase agreements 609.8 2.5 1.61 % 678.2 3.1 1.83 % 538.1 2.2 1.64 %
Other short-term borrowings 362.4 4.9 5.43 % 460.7 6.3 5.54 % 772.9 10.5 5.40 %
Long-term debt 236.4 3.1 5.18 % 236.4 3.1 5.19 % 236.3 3.1 5.19 %
Total borrowings 1,208.6 10.5 3.46 % 1,375.3 12.5 3.65 % 1,547.3 15.8 4.06 %
Total interest-bearing liabilities 19,789.4 157.7 3.17 % 19,917.5 157.1 3.17 % 19,851.2 146.6 2.93 %
Net interest-free funding sources 12,474.3 12,621.9 13,286.4
Total cost of funds $ 32,263.7 $ 157.7 1.94 % $ 32,539.4 $ 157.1 1.94 % $ 33,137.6 $ 146.6 1.76 %
Net interest spread (te) $ 274.5 2.17 % $ 273.3 2.14 % $ 272.1 2.09 %
Net interest margin $ 32,263.7 $ 274.5 3.39 % $ 32,539.4 $ 273.3 3.37 % $ 33,137.6 $ 272.1 3.27 %
  • Taxable equivalent (te) amounts were calculated using a federal income tax rate of 21%.
  • Includes nonaccrual loans.
  • Average securities do not include unrealized holding gains/losses on available for sale securities.
  • Included in interest income is net purchase accounting accretion of $0.5 million, $0.8 million, and $0.6 million for the three months ended September 30, 2024, June 30, 2024, and September 30, 2023, respectively.

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Nine Months Ended
September 30, 2024 September 30, 2023
($ in millions) Volume Interest (d) Rate Volume Interest (d) Rate
Average earning assets
Commercial & real estate loans (te) (a) $ 18,380.4 $ 895.6 6.51 % $ 18,558.6 $ 834.2 6.01 %
Residential mortgage loans 3,986.9 114.5 3.83 % 3,452.8 93.1 3.60 %
Consumer loans 1,391.8 92.5 8.88 % 1,515.4 92.1 8.12 %
Loan fees & late charges — 4.8 0.00 % — (0.1 ) 0.00 %
Total loans (te) (b) 23,759.1 1,107.4 6.22 % 23,526.8 1,019.3 5.79 %
Loans held for sale 22.3 1.3 7.88 % 30.6 1.4 6.38 %
US Treasury and government agency securities 534.7 11.2 2.80 % 538.0 10.1 2.50 %
Mortgage-backed securities and<br>   collateralized mortgage obligations 6,802.6 129.8 2.54 % 7,556.0 129.2 2.28 %
Municipals (te) 849.4 18.9 2.96 % 892.7 20.0 2.98 %
Other securities 23.5 0.7 3.74 % 23.5 0.6 3.51 %
Total securities (te) (c) 8,210.2 160.6 2.61 % 9,010.2 159.9 2.37 %
Total short-term investments 461.0 17.7 5.13 % 604.2 21.4 4.73 %
Total earning assets (te) $ 32,452.6 $ 1,287.0 5.30 % $ 33,171.8 $ 1,202.0 4.84 %
Average interest-bearing liabilities
Interest-bearing transaction and savings deposits $ 10,812.7 $ 186.6 2.31 % $ 10,570.5 $ 120.0 1.52 %
Time deposits 4,905.5 173.3 4.72 % 3,559.3 104.1 3.91 %
Public funds 2,951.8 79.4 3.59 % 2,997.0 73.7 3.29 %
Total interest-bearing deposits 18,670.0 439.3 3.14 % 17,126.8 297.8 2.32 %
Repurchase agreements 635.9 8.3 1.74 % 494.3 4.7 1.27 %
Other short-term borrowings 329.1 13.5 5.50 % 1,434.9 53.8 5.02 %
Long-term debt 236.4 9.2 5.19 % 240.1 9.3 5.14 %
Total borrowings 1,201.4 31.0 3.45 % 2,169.3 67.8 4.18 %
Total interest-bearing liabilities 19,871.4 470.3 3.16 % 19,296.1 365.6 2.53 %
Net interest-free funding sources 12,581.2 13,875.7
Total cost of funds $ 32,452.6 $ 470.3 1.94 % $ 33,171.8 $ 365.6 1.47 %
Net interest spread (te) $ 816.7 2.13 % $ 836.4 2.31 %
Net interest margin $ 32,452.6 $ 816.7 3.36 % $ 33,171.8 $ 836.4 3.37 %
  • Taxable equivalent (te) amounts were calculated using a federal income tax rate of 21%.
  • Includes nonaccrual loans.
  • Average securities do not include unrealized holding gains/losses on available for sale securities.
  • Included in interest income is net purchase accounting accretion of $1.6 million and $2.1 million for the nine months ended September 30, 2024 and 2023, respectively.

Provision for Credit Losses

During the third quarter of 2024, we recorded a provision for credit losses expense of $18.6 million, compared to $8.7 million in the second quarter of 2024. The provision in the third quarter of 2024 included net charge-offs of $18.0 million and a reserve build of $0.6 million, compared to net charge-offs of $7.3 million and a reserve build of $1.4 million in the second quarter of 2024. A higher level of net charge-offs was the primary driver of the increase in provision expense linked quarter. Annualized net charge-offs as a percentage of average loans in the second quarter of 2024 was 0.30%, up from 0.12%, in the second quarter of 2024. The third quarter of 2024 net charge-offs included $14.5 million in the commercial portfolio, $3.5 million in the consumer portfolio and less than $0.1 million in the residential mortgage portfolio. The second quarter of 2024 net charge-offs included $4.1 million in the commercial portfolio and $3.3 million in the consumer portfolio, partially offset by net recoveries of $0.1 million in the residential mortgage portfolio.

We recorded a provision for credit losses of $40.3 million for the nine months ended September 30, 2024, compared to $42.2 million for the same period in 2023. The provision for credit losses in the first nine months of 2024 included net charge-offs of $34.3 million and a reserve build of $6.0 million, compared to net charge-offs of $47.3 million and a reserve release of $5.2 million in the same period in 2023. The provision for credit losses for the nine months ended September 30, 2023 includes a $29.7 million charge-off attributable to a single individually evaluated credit that stemmed from borrower-specific circumstances. Net charge-offs in the first nine months of 2024 of $34.3 million, or 0.19% of average loans, is comprised of net charge-offs of $23.8 million in the commercial portfolio and $10.7 million in the consumer portfolio, partially offset by net recoveries of $0.2 million in the residential mortgage portfolio. Net charge-offs in the first nine months of 2023 of $47.3 million, or 0.27% of average loans, is comprised of net charge-offs

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of $40.1 million in the commercial portfolio and $8.1 million in the consumer portfolio, partially offset by net recoveries of $0.8 million in the residential mortgage portfolio.

We expect to see modest charge-offs and provision for credit losses in the remainder of 2024. However, 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 $95.9 million for the third quarter of 2024, up $6.7 million, or 8%, from the second quarter of 2024. The increase in noninterest income from the second quarter of 2024 is primarily driven by increases in our specialty lines, with growth across most revenue lines. For the nine months ended September 30, 2024, noninterest income totaled $272.9 million, up $23.4 million, or 9%, from the same period in 2023. The increase is attributable to most fee income lines, partially offset by a decline in derivative income. A more detailed discussion of these and other noninterest income variances follows.

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) 2024 2024 2023 2024 2023
Service charges on deposit accounts $ 23,144 $ 22,275 $ 22,264 $ 67,658 $ 64,377
Trust fees 18,014 18,473 16,593 53,564 50,720
Bank card and ATM fees 21,639 21,827 20,555 64,088 62,258
Investment and annuity fees and insurance commissions 10,890 9,789 8,520 32,523 25,628
Secondary mortgage market operations 3,379 3,546 2,609 9,816 7,076
Income from bank-owned life insurance 4,364 3,760 3,633 12,353 10,283
Credit related fees 2,905 3,130 3,253 9,166 9,249
Income (loss) from customer and other derivatives 923 (1,060 ) 418 (2,939 ) 1,585
Net gains on sales of premises, equipment and other assets 2,943 1,043 1,297 6,765 2,310
Other miscellaneous 7,694 6,391 6,832 19,926 16,043
Total noninterest income $ 95,895 $ 89,174 $ 85,974 $ 272,920 $ 249,529

Service charges on deposit accounts are composed of overdraft fees, nonsufficient funds fees on business accounts, business and corporate account analysis fees, overdraft protection fees and other customer transaction-related charges. Service charges on deposits totaled $23.1 million for the third quarter of 2024, up $0.9 million, or 4%, compared to the second quarter of 2024, primarily driven by an increase in both consumer and business overdraft fees. For the nine months ended September 30, 2024, services charges on deposits totaled $67.7 million, up $3.3 million, or 5%, from the same period in 2023. The year over year increase was driven primarily by analysis fees on business accounts as a result of activity levels, balance outflows and sales performance, and consumer and business overdraft fees, partially offset by a decline in consumer service charges as a result of the elimination of paper statement fees.

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 totaled $18.0 million for the third quarter of 2024, down $0.5 million, or 2%, from the second quarter of 2024, largely attributable to decreases in personal trust revenue as a result of seasonal tax preparation fees recorded in the prior quarter. For the nine months ended September 30, 2024, trust fees totaled $53.6 million, an increase of $2.8 million, or 6%, from the same period in 2023. The year over year increase was primarily attributable to personal and institutional trust revenue, driven by market value and sales volumes.

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 $21.6 million for the third quarter of 2024, down $0.2 million, or 1%, from the second quarter of 2024. The linked quarter decrease was primarily driven by a decline in merchant fees. Bank card and ATM fees for the nine months ended September 30, 2024 totaled $64.1 million, up $1.8 million, or 3%, from the same period in 2023. The year over year change was driven primarily by increases in purchasing card activity and merchant fees, partially offset by a decline in ATM fees.

Investment and annuity fees and insurance commissions, which include both fees earned from sales of annuity and insurance products, as well as managed account fees, totaled $10.9 million, up $1.1 million, or 11%, from the second quarter of 2024. The linked-quarter increase was largely driven by sales volume for annuities, fixed income trading and insurance, and to an increase in recurring fees as a result of higher market values of securities. Investment and annuity fees and insurance commissions for the nine months ended

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September 30, 2024 totaled $32.5 million, up $6.9 million, or 27%, from the same period in 2023. The year over year increase includes a $3.0 million increase in investment fees, and a $4.3 million increase in annuity fees and other investment fees, reflective of continued strong annuity sales performance and fixed-income trading commissions amid the elevated interest rate environment and favorable market conditions, partially offset by a $0.5 million decline in corporate underwriting fees.

Income from secondary mortgage market operations is comprised of income produced from the origination and sales of residential mortgage loans in the secondary market. 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. Secondary mortgage market operations income will vary based on mortgage application volume, pull through rates, the percentage of loans ultimately sold in the secondary market and the timing of such sales. Income from secondary mortgage market operations was $3.4 million in the third quarter of 2024, down $0.2 million, or 5%, from the second quarter of 2024. For the nine months ended September 30, 2024, income from secondary mortgage market operations totaled $9.8 million, up $2.7 million, or 39%, from the same period in 2023. The year over year increase was largely driven by an upward trend in the percentage of mortgage loans sold in the secondary market as opposed to those held in our portfolio.

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 BOLI was $4.4 million for the third quarter of 2024, up $0.6 million, or 16%, from the second quarter of 2024, primarily attributable to an increase in mortality gains. Income from BOLI for the nine months ended September 30, 2024 totaled $12.4 million, up $2.1 million, or 20%, from the same period in 2023 and is reflective of increases in both income from mortality gains and changes in cash surrender value.

Credit-related fees include fees assessed on letters of credit and unused portions of loan commitments. Credit-related fees were $2.9 million for the third quarter of 2024, down $0.2 million, or 7%, compared to the second quarter of 2024, primarily driven by a decrease in standby letter of credit fees. Credit-related fees for the nine months ended September 30, 2024 totaled $9.2 million, down $0.1 million, or 1%, from the same period in 2023. Income from these products will vary based on letters of credit issued, credit line utilization and prevailing assessment rates.

Income or loss from customer and other derivatives is largely from our customer interest rate derivative program. Income from customer and other derivatives totaled $0.9 million for the third quarter of 2024, compared to a loss of $1.1 million in the second quarter of 2024. Derivative income can be volatile and is dependent upon the composition of the portfolio, volume and mix of sales and termination activity, and market value adjustments due to market interest rate movement. The linked-quarter improvement is largely reflective of $1.4 million of expense resulting from assumption changes to the Visa B derivative liability recorded in the prior quarter that did not recur. For the nine months ended September 30, 2024, loss from customer and other derivatives totaled $2.9 million, compared to income of $1.6 million for the same period in 2023. The current period includes a $1.5 million loss resulting from assumption changes associated with customer derivatives recorded in the first quarter of 2024 and a $0.5 million unfavorable variance in income from the Visa B derivative liability. The remainder of the year-over-year decline is largely a result of changes in the interest rate environment in each of the comparative periods, which affects demand for variable rate loans and related derivative products, valuation adjustments, and related collateral income/expense for the program as a whole.

Net gains on sales of premises, equipment and other assets consists primarily of net revenue earned from sales of excess-bank owned facilities and equipment no longer in use, gains on sales of Small Business Administration (SBA) and other non-residential mortgage loans, and leases and other assets associated with the equipment finance line of business. Net gains on sales of premises, equipment and other assets totaled $2.9 million for the third quarter of 2024, compared to $1.0 million for the second quarter of 2024. The linked-quarter increase was largely driven by gains on sales of SBA loans. Net gains on sales of premises, equipment and other assets for the nine months ended September 30, 2024 totaled $6.8 million, compared to $2.3 million in the same period in 2023. The year over year increase was largely driven by an increase in the volume of SBA loan sales and income earned from such, and gains on the sale of bank premises and equipment. The level of net gains or losses on sales of these assets in a given reporting period will vary based on a variety of circumstances.

Other miscellaneous income is comprised of various items, including income from investments in small business investment companies (SBIC), Federal Home Loan Bank (FHLB) stock dividends, and fees from loan syndication and other specialty lines of business. Other miscellaneous income totaled $7.7 million, up $1.3 million, or 20%. The linked-quarter change was largely driven by increases of $0.7 million in SBIC income and $0.2 million in loan syndication fees. For the nine months ended September 30, 2024, other miscellaneous income totaled $19.9 million, up $3.9 million, or 24%, from the same period in 2023, the primary driver of which was a $2.2 million increase in dividends on FHLB stock.

We expect noninterest income to be up six to seven percent for the full year of 2024 from the 2023 adjusted noninterest income of $337.7 million.

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Noninterest Expense

Noninterest expense for the third quarter of 2024 was $203.8 million, down $2.2 million, or 1%, from the second quarter of 2024, with decreases in personnel expense, other miscellaneous losses and deposit insurance and regulatory fees, partially offset by an increase in professional services expense and a decrease in net gains from other real estate and foreclosed asset. For the nine months ended September 30, 2024, noninterest expense totaled $617.6 million, up $9.9 million, or 2%, from the same period in 2023. Year to date noninterest expense includes a $3.8 million supplemental disclosure item attributable to an FDIC special assessment. Excluding the impact of the supplemental disclosure item, noninterest expense for the nine months ended September 30, 2024 was up $6.1 million, or 1%, from the same period in 2023. The year over year increase was largely driven by personnel expense and data processing expense, partially offset by a decrease in net other retirement expense. A more detailed discussion of these and other noninterest expense variances follows.

The components of noninterest expense 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) 2024 2024 2023 2024 2023
Compensation expense $ 94,371 $ 97,121 $ 95,650 $ 288,061 $ 282,174
Employee benefits 21,400 21,605 20,616 67,593 64,279
Personnel expense 115,771 118,726 116,266 355,654 346,453
Net occupancy expense 13,438 13,158 13,434 39,991 38,347
Equipment expense 4,689 4,312 4,776 13,229 14,555
Data processing expense 31,124 31,371 29,822 91,232 87,566
Professional services expense 10,984 9,458 9,519 29,478 27,565
Amortization of intangible assets 2,292 2,389 2,813 7,207 8,884
Deposit insurance and regulatory fees 5,480 6,008 5,851 20,419 18,234
Other real estate and foreclosed asset income, net (411 ) (1,099 ) (26 ) (1,706 ) (153 )
Corporate value and franchise taxes and other non-income taxes 4,691 5,086 5,238 14,848 15,732
Advertising 3,331 3,271 3,621 9,509 10,353
Telecommunications and postage 2,406 2,289 2,590 7,108 8,373
Entertainment and contributions 2,707 2,685 2,765 8,570 7,978
Tax credit investment amortization 1,585 1,555 1,494 4,694 4,297
Printing and supplies 814 1,072 968 2,768 3,107
Travel expense 1,534 1,596 1,368 4,233 4,065
Net other retirement expense (4,396 ) (4,507 ) (3,228 ) (13,727 ) (10,195 )
Other miscellaneous 7,800 8,646 7,404 24,070 22,536
Total noninterest expense $ 203,839 $ 206,016 $ 204,675 $ 617,577 $ 607,697
Supplemental Disclosure Items Included in Noninterest Expense
Deposit insurance and regulatory fees
FDIC deposit insurance special assessment $ — $ — $ — $ 3,800 $ —

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 $115.8 million for the third quarter of 2024, down $3.0 million, or 2%, from the previous quarter. The linked quarter variance reflects a decrease in full-time equivalent employees and higher salary deferrals, partially offset by an increase in incentive-based compensation. For the nine months ended September 30, 2024, personnel expense totaled $355.7 million, up $9.2 million, or 3%, from the same period in 2023. The year over year change reflects annual increases across most salary and benefit categories that were partially offset by savings attributable to a decrease in headcount.

Occupancy and equipment expenses are primarily composed of lease expenses, depreciation, maintenance and repairs, rent, taxes, and other equipment expenses. Occupancy and equipment expenses totaled $18.1 million for the third quarter of 2024, up $0.7 million, or 4%, from the prior quarter, with increased cost associated with general repairs, maintenance and utilities, partially offset by decreases in leased facility expense. For the nine months ended September 30, 2024, occupancy and equipment expenses totaled $53.2 million, up $0.3 million, or 1%, from the same period in 2023.

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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, and credit card reward expenses, and may vary with transaction volume and timing of technology enhancement initiatives. Data processing expense was $31.1 million for the third quarter of 2024, down $0.2 million, or 1%, from the second quarter of 2024. For the nine months ended September 30, 2024, data processing expense totaled $91.2 million up $3.7 million, or 4%, from the same period in 2023, driven in part by certain activity-based processing fees, expenses associated with ongoing technology enhancements, increases in card rewards expense, and ATM servicing arrangement costs, as the current period reflects a full nine months of expense associated with an arrangement entered into in 2023.

Professional services expense includes accounting and audit, legal, consulting and certain outsourced service expense. Professional services expense for the third quarter of 2024 totaled $11.0 million, up $1.5 million, or 16%, from the second quarter of 2024, with increases in most categories. For the nine months ended September 30, 2024, professional services expense totaled $29.5 million, up $1.9 million, or 7%, from the same period in 2023, primarily driven by expenses incurred for certain outsourcing initiatives, partially offset by a decrease in consulting fees. Professional service expense may vary from period to period, generally related to consulting and legal needs.

Deposit insurance and regulatory fees for the third quarter of 2024 totaled $5.5 million, down $0.5 million, or 9%, from the second quarter of 2024. For the nine months ended September 30, 2024, deposit insurance and regulatory fees totaled $20.4 million, up $2.2 million, or 12%, from the same period in 2023. Included in the nine months ended September 30, 2024 is a supplemental disclosure item of $3.8 million attributable to a special assessment by the FDIC to cover losses incurred under the systemic risk exception following the failure of two large regional banks. Excluding the impact of the supplemental disclosure item, both the linked-quarter and year over year changes in deposit insurance and regulatory fees were primarily attributable to modest changes in our risk-based assessment calculation.

The FDIC special assessment expense recorded to date is management's estimate of our portion of the cost attributable to the systemic risk exception based on information from the FDIC. However, the loss estimates resulting from the failures of Silicon Valley Bank and Signature Bank may be subject to further change pending the projected and actual outcome of loss share agreements, joint ventures, and outstanding litigation. The exact amount of losses incurred will not be determined until the FDIC terminates the receiverships of these banks; therefore, the exact exposure to the Company remains unknown.

Net gains from other real estate and foreclosed assets totaled $0.4 million in the third quarter of 2024, compared to $1.1 million in the second quarter of 2024. For the nine months ended September 30, 2024, net gains from other real estate and foreclosed assets totaled $1.7 million, compared to $0.2 million for the same period in 2023. The level of net income or losses associated with maintaining the other real estate owned portfolio can vary depending on sales activity, valuation adjustments and income or expense associated with operating and maintaining foreclosed property. 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 2024 totaled $4.7 million, down $0.4 million, or 8%, compared to the prior quarter. For the nine months ended September 30, 2024, corporate value, franchise and other non-income tax expense totaled $14.8 million, down $0.9 million, or 6%, from the same period in 2023. The linked-quarter and year over year declines are largely attributable to bank share tax. The calculation of bank share tax is based on multiple variables, including average quarterly assets, earnings and stockholders’ equity to determine the taxable assessment value.

Business development-related expenses (including advertising, travel, entertainment and contributions) totaled $7.6 million for the third quarter of 2024, virtually flat compared to the second quarter of 2024. For the nine months ended September 30, 2024, business development-related expenses totaled $22.3 million, down $0.1 million, or less than 1%, from the same period in 2023. The timing and level of business development expense can vary based on business needs and promotional campaigns.

All other expenses, excluding amortization of intangibles, is comprised of a variety of other operational expenses and losses, tax credit investment amortization, and net other retirement expense. All other expenses totaled $8.2 million for the third quarter of 2024, down $0.8 million, or 9%, from the second quarter of 2024, largely in other miscellaneous expense. For the nine months ended September 30, 2024, all other expenses totaled $24.9 million, down $3.2 million, or 11%, from the same period in 2023, driven in large part by a $3.5 million decrease in net other retirement expense.

We expect noninterest expense to be up one to two percent for the full year of 2024 from the 2023 adjusted noninterest expense of $810.7 million.

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Income Taxes

The effective income tax rate for the third quarter of 2024 was 20.4% compared to 20.9% in the second quarter of 2024. The effective income tax rate for the nine months ended September 30, 2024 was 20.0%, relatively unchanged from the same period in 2023.

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. Additionally, discrete tax items recognized in any given period affect the comparability of the effective income tax rate between periods. Such items include share-based compensation, valuation allowance changes, uncertain tax position changes and tax law changes. Based on the current forecast, management expects the effective income tax rate for 2024 will be in the 20% to 21% range, 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 2024, we expect to realize benefits from federal and state tax credits over the next three years totaling $9.8 million, $8.2 million, and $8.0 million in 2025, 2026, and 2027, 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.

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 monitor liquidity risk. The following table summarizes available liquidity at September 30, 2024:

September 30, 2024
($ in thousands) Total <br>Available Amount <br>Used Net <br>Availability
Available Sources of Funding:
Internal Sources:
Free securities $ 4,343,629 $ — $ 4,343,629
External Sources:
Federal Home Loan Bank (a) 6,889,014 1,333,088 5,555,926
Federal Reserve Bank 3,319,794 — 3,319,794
Brokered deposits 4,347,436 190,493 4,156,943
Other 1,229,000 200,000 1,029,000
Total Available Sources of Funding $ 20,128,873 $ 1,723,581 $ 18,405,292
Cash and other interest-bearing bank deposits 1,365,107
Total Liquidity $ 19,770,399

(a) Amount used includes letters of credit.

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Liquidity levels of financial institutions continue to be in heightened focus since the failure of several major regional U.S. banks that experienced large-scale deposit runs in the first half of 2023. Dampened depositor confidence over a financial institution's ability to protect deposit balances in excess of the federally insured limit is thought to pose a higher likelihood of a deposit run, and, in turn, the risk that the institution may have insufficient liquidity to meet customer demand. At September 30, 2024, our available on and off-balance sheet liquidity of $19.8 billion is well in excess of our estimated uninsured, noncollateralized deposits of approximately $10.8 billion.

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. Total pledged securities were $3.4 billion at September 30, 2024, compared to $3.6 billion at June 30, 2024 and $4.7 billion at December 31, 2023. 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 56.52% at September 30, 2024, compared to 53.24% at June 30, 2024 and 38.80% December 31, 2023. The decrease in pledged securities and related increase in free securities compared to December 31, 2023 is the result of pledging of approximately $1.0 billion of FHLB letters of credit in lieu of securities in both the second and third quarters of 2024. Both 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 2024 2024 2024 2023 2023
Free securities / total securities 56.52 % 53.24 % 44.86 % 38.80 % 46.12 %
Core deposits / total deposits 92.95 % 93.06 % 92.61 % 92.51 % 90.85 %
Wholesale funds / core deposits 6.28 % 6.63 % 4.71 % 7.21 % 10.24 %
Liquid assets / total liabilities 18.38 % 16.30 % 13.19 % 12.69 % 14.94 %
Quarter-to-date average loans / quarter-to-date average deposits 81.38 % 82.28 % 80.55 % 79.39 % 80.08 %

The liability portion of the balance sheet provides liquidity mainly through the ability to use cash sourced from customer deposit accounts. At September 30, 2024, deposits totaled $29.0 billion, down $217.8 million from June 30, 2024 and $707.2 million from December 31, 2023.

Brokered time deposits at September 30, 2024 totaled $190.5 million, down $9.6 million from June 30, 2024 and down $399.3 million from December 31, 2023. The brokered deposits held at September 30, 2024 bear interest at a weighted average rate of 5.53% with maturities between November 2024 and February 2025. The decrease from both comparative periods is attributable to net maturities of instruments that were not replaced. The use of brokered deposits as a funding source is subject to certain policies regarding the amount, term and interest rate.

Core deposits consist of total deposits excluding certificates of deposit of $250,000 or more and brokered deposits. Core deposits totaled $26.9 billion at September 30, 2024, down $233.1 million, or 1%, from June 30, 2024 and down $525.6 million, or 2%, from December 31, 2023. Changes in the level of core deposits will vary based on the level of total deposits and the mix therein. The ratio of core deposits to total deposits was 92.95% at September 30, 2024, compared to 93.06% at June 30, 2024 and 92.51% at December 31, 2023.

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, 2024, the Bank had $300 million in borrowings and approximately $5.6 billion available under this line. The unused borrowing capacity at the Federal Reserve’s discount window is approximately $3.3 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 6.28% of core deposits at September 30, 2024, compared to 6.63% at June 30, 2024 and 7.21% at December 31, 2023. At September 30, 2024, wholesale funds totaled $1.7 billion, a decrease of $107.6 million, or 6%, from June 30, 2024 and $288.0 million, or 15%, from December 31, 2023. The amount of wholesale funds outstanding will vary based on retail deposit levels and current funding needs. The Company has established an internal target for wholesale funds to be less than 25% of core deposits.

Other key measures used to monitor liquidity include the liquid asset ratio and the loan-to-deposit ratio. The liquid asset ratio (liquid assets, consisting of cash, short-term investments and free securities, divided by total liabilities) measures our ability to meet

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short-term obligations. Our liquid asset ratio was 18.38% at September 30, 2024, compared to 16.30% at June 30, 2024 and 12.69% at December 31, 2023. Management has established a minimum liquid asset ratio of 7.5% and an internal target of 12% or greater. The loan to deposit ratio (average loans outstanding for the reporting period divided by average deposits outstanding) 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 2024 was 81.38%, compared to 82.28% for the second quarter of 2024 and 79.39% for the fourth quarter of 2023. 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.

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, 2024 and 2023.

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 six quarters of ongoing cash or liquid asset needs, consisting primarily of common stockholder dividends, debt service requirements, and any expected share repurchase or 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 $253.8 million at September 30, 2024, exceeding our internal target.

Capital Resources

Stockholders’ equity totaled $4.2 billion at September 30, 2024, up $254.0 million, or 6%, from June 30, 2024 and $371.0 million, or 10% from December 31, 2023. The increase from June 30, 2024 is primarily attributable to other comprehensive income of $182.4 million, net income of $115.6 million and $6.4 million of long-term incentive plan and dividend reinvestment activity. These factors were partially offset by dividends of $35.1 million and share repurchases of $15.4 million. The increase from December 31, 2023 is attributable to net income of $338.7 million, other comprehensive income of $145.6 million, and $13.5 million of long-term incentive plan and dividend reinvestment activity, partially offset by $96.9 million of dividends, and $30.0 million of share repurchases.

The tangible common equity (TCE) ratio was 9.56% at September 30, 2024, up 79 bps from 8.77% at June 30, 2024, driven primarily by other comprehensive income (+52 bps), tangible net earnings (+34 bps), a decrease in tangible assets (+5 bps) and stock-based compensation activity (+2 bps), partially offset by dividends (-10 bps) and common share repurchases (-4 bps).

The regulatory capital ratios of the Company and the Bank at September 30, 2024 remained well in excess of current regulatory minimum requirements, including capital conservation buffers, by at least $1.1 billion. 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, 2023 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 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 included 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 a 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, equating to $17.2 million at September 30, 2024.

Well- September 30, June 30, March 31, December 31, September 30,
Capitalized 2024 2024 2024 2023 2023
Total capital (to risk weighted assets)
Hancock Whitney Corporation 10.00 % 15.56 % 15.00 % 14.34 % 13.93 % 13.63 %
Hancock Whitney Bank 10.00 % 14.52 % 14.00 % 13.39 % 13.04 % 12.82 %
Tier 1 common equity capital (to risk weighted assets)
Hancock Whitney Corporation 6.50 % 13.78 % 13.25 % 12.65 % 12.33 % 12.06 %
Hancock Whitney Bank 6.50 % 13.36 % 12.87 % 12.29 % 12.03 % 11.83 %
Tier 1 capital (to risk weighted assets)
Hancock Whitney Corporation 8.00 % 13.78 % 13.25 % 12.65 % 12.33 % 12.06 %
Hancock Whitney Bank 8.00 % 13.36 % 12.87 % 12.29 % 12.03 % 11.83 %
Tier 1 leverage capital
Hancock Whitney Corporation 5.00 % 11.03 % 10.71 % 10.49 % 10.10 % 10.01 %
Hancock Whitney Bank 5.00 % 10.69 % 10.40 % 10.19 % 9.86 % 9.82 %

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We regularly perform stress analysis on our capital levels. One such scenario includes the hypothetical impact of including accumulated other comprehensive losses on market valuations of available for sale securities and cash flow hedges in regulatory capital and a further stress scenario that includes both those losses plus losses on the held to maturity investment portfolio in regulatory capital. We estimate that our regulatory capital ratios would remain in excess of the well-capitalized minimums under both of these stress scenarios at September 30, 2024.

On July 25, 2024, our board of directors declared the regular quarterly common stock cash dividend of $0.40 per share. The quarterly common stock cash dividend was paid on September 16, 2024 to shareholders of record on September 5, 2024. The Company has paid uninterrupted dividends to its shareholders since 1967.

On January 26, 2023, our board of directors authorized the repurchase of up to 4,297,000 shares of the Company’s common stock (approximately 5% of the shares of common stock outstanding as of December 31, 2022). The authorization is set to expire on December 31, 2024. 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 Company is not obligated to purchase any shares under this program and the repurchase authorization may be terminated or amended by the Board at any time prior to the expiration date. During the third quarter of 2024, 300,000 shares were repurchased under this program at an average price of $50.63 per share, inclusive of commissions. At September 30, 2024, 612,993 shares had been repurchased under this program at an average price of $48.63 per share, inclusive of commissions. The Company has accrued an estimated excise tax liability on net share repurchases of $0.2 million at September 30, 2024.

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 $795.2 million at September 30, 2024, up $213.6 million from June 30, 2024 and $168.1 million from December 31, 2023. Average short-term investments of $466.3 million for the third quarter of 2024 were up $83.4 million from the second quarter of 2024. Year-to-date average short term investments for the nine months ended September 30, 2024 totaled $461.0 million, down $143.2 million compared to the same period in 2023. Typically, the balance of short-term investments will change on a daily basis depending upon movement in customer loan and deposit accounts. The comparative average balance for the nine months ended September 2023 was impacted by excess liquidity held in response to the disruption in the financial industry caused by bank failures.

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 or loss in stockholders' equity.

Investment in securities totaled $7.8 billion at September 30, 2024, up $233.9 million, or 3%, from June 30, 2024 and $169.8 million, or 2%, from December 31, 2023. The increases from June 30, 2024 and December 31, 2023 were largely driven by favorable increases in the fair valuation adjustment on the available for sale portfolio of $191.5 million and $132.4 million, respectively.

At September 30, 2024, securities available for sale totaled $5.3 billion and securities held to maturity totaled $2.5 billion.

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, 2024, the average expected maturity of the portfolio was 5.78 years with an effective duration of 4.25 years and a nominal weighted-average yield of 2.62%. Under an immediate, parallel rate shock using increases of 100 bps and 200 bps, the effective durations would be 4.33 and 4.35 years, respectively. At December 31, 2023, the average expected maturity of the portfolio was 6.22 years with an effective duration of 4.60 years and a nominal weighted-average yield of 2.48%. The changes in expected maturity, effective duration, and nominal weighted-average yield were largely the result of maturities and paydowns and reinvestment in the portfolio during the year. At September 30, 2024, approximately $514 million of our available for sale securities are hedged with $478 million 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.

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At the end of each reporting period, we evaluate the securities portfolio for credit loss. Based on our assessments, expected credit loss was not material for any period presented, and therefore no allowance for credit loss was recorded.

Loans

Total loans at September 30, 2024 were $23.5 billion, down $456.0 million, or 2%, from June 30, 2024 and down $466.3 million, or 2%, from December 31, 2023. The decrease in loans from both comparative periods reflects a decline in our shared national credit portfolio as we remain focused on originating more granular loans and higher pay-offs on income producing commercial real estate loans, discussed in more detail below.

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) 2024 2024 2024 2023 2023
Total loans:
Commercial non-real estate $ 9,588,309 $ 9,847,759 $ 9,926,333 $ 9,957,284 $ 10,075,585
Commercial real estate - owner occupied 3,096,173 3,094,258 3,080,192 3,093,763 3,081,327
Total commercial and industrial 12,684,482 12,942,017 13,006,525 13,051,047 13,156,912
Commercial real estate - income producing 3,988,661 4,053,812 4,042,797 3,986,943 4,027,553
Construction and land development 1,423,615 1,528,393 1,541,773 1,551,091 1,614,846
Residential mortgages 3,988,309 4,000,211 3,983,321 3,886,072 3,721,106
Consumer 1,370,520 1,387,183 1,396,522 1,446,764 1,463,262
Total loans $ 23,455,587 $ 23,911,616 $ 23,970,938 $ 23,921,917 $ 23,983,679

Commercial and industrial (“C&I”) loans includes both non-real estate and owner occupied real estate secured loans. The Bank lends mainly to middle market and smaller commercial entities, although it participates in larger shared credit loan facilities. C&I totaled $12.7 billion at September 30, 2024, down $257.5 million, or 2%, from June 30, 2024 and down $366.6 million, or 3%, from December 31, 2023. The decreases from both comparative periods are reflective of our strategic reduction of exposure to shared national credits. In addition, loan growth in this portfolio segment has tempered, as demand has been affected by the interest rate environment.

Shared national credits outstanding at September 30, 2024 totaled approximately $2.28 billion, or 9.7% of total loans, down $253.6 million from June 30, 2024 and down $340.5 million from December 31, 2023. The decline from both comparative periods was driven by the previously mentioned strategic reduction of exposure to large credit-only relationships. At September 30, 2024, our larger concentrations in shared national credits includes approximately $336 million of manufacturing credits, $329 million of real estate rental and leasing credits, $318 million of healthcare-related credits, and $310 million of finance and insurance credits, with the remainder of the balance in 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 exception 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).

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September 30, June 30, March 31, December 31, September 30,
2024 2024 2024 2023 2023
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:
Health care and social assistance $ 1,373,275 11 % $ 1,421,071 11 % $ 1,500,050 11 % $ 1,481,669 11 % $ 1,465,057 11 %
Retail trade 1,262,357 10 % 1,258,798 10 % 1,285,503 10 % 1,236,830 9 % 1,231,718 9 %
Real estate and rental and leasing 1,216,311 9 % 1,255,485 10 % 1,254,432 10 % 1,270,568 10 % 1,289,505 10 %
Manufacturing 1,152,823 9 % 1,127,144 9 % 1,108,134 9 % 1,120,232 9 % 1,159,312 9 %
Wholesale trade 1,076,834 9 % 1,133,992 9 % 1,090,634 8 % 1,111,643 8 % 1,046,650 8 %
Transportation and warehousing 974,147 8 % 981,175 8 % 951,673 7 % 872,379 7 % 884,057 7 %
Construction 968,213 7 % 1,005,536 8 % 992,489 8 % 998,802 8 % 1,047,345 8 %
Professional, scientific, and technical services 747,559 6 % 741,955 6 % 762,181 6 % 735,381 6 % 766,440 6 %
Accommodation, food services and entertainment 735,563 6 % 727,601 6 % 705,308 5 % 706,141 5 % 726,582 5 %
Finance and insurance 729,627 6 % 778,041 6 % 862,004 7 % 878,824 7 % 931,750 7 %
Public administration 412,246 3 % 422,262 3 % 443,547 3 % 461,390 3 % 477,830 4 %
Other services (except public administration) 404,696 3 % 391,496 3 % 386,709 3 % 396,674 3 % 392,561 3 %
Information 395,155 3 % 441,342 3 % 435,439 3 % 424,532 3 % 442,928 3 %
Admin, support, waste mgmt, remediation services 337,175 3 % 338,350 3 % 296,396 2 % 357,390 3 % 360,617 3 %
Educational services 243,023 2 % 251,740 2 % 252,309 2 % 247,003 2 % 247,427 2 %
Energy 188,619 1 % 200,145 2 % 204,746 2 % 204,633 2 % 205,030 1 %
Other 466,859 4 % 465,884 4 % 474,971 4 % 546,956 4 % 482,103 4 %
Total commercial & industrial loans $ 12,684,482 100 % $ 12,942,017 100 % $ 13,006,525 100 % $ 13,051,047 100 % $ 13,156,912 100 %

Commercial real estate - income producing loans totaled approximately $4.0 billion at September 30, 2024, down $65.2 million, or 2%, from June 30, 2024 and up $1.7 million, or less than 1%, from December 31, 2023. Construction and land development loans totaled approximately $1.4 billion at September 30, 2024, down $104.8 million, or 7%, from June 30, 2024, and down $127.5 million, or 8%, from December 31, 2023. The decrease in commercial real estate - income producing loans was largely driven by payoffs and paydowns outpacing loan growth, including transfers of construction loans moving to permanent financing. The declines in both commercial real estate - income producing and construction loan portfolios is reflective of our efforts to limit our growth in income producing real estate with a focus on resilient projects given the current economic environment. 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.

September 30, June 30, March 31, December 31, September 30,
2024 2024 2024 2023 2023
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 $ 1,324,329 25 % $ 1,448,473 26 % $ 1,366,673 24 % $ 1,268,342 23 % $ 1,189,768 21 %
Retail 836,827 15 % 838,782 15 % 818,665 15 % 812,556 15 % 848,914 15 %
Industrial 761,464 14 % 741,813 13 % 777,519 14 % 753,074 13 % 724,359 13 %
Healthcare related properties 746,342 14 % 758,806 14 % 800,164 14 % 777,473 14 % 864,331 15 %
Hotel, motel and restaurants 491,065 9 % 489,829 9 % 474,636 9 % 477,761 9 % 464,014 8 %
Office 485,672 9 % 507,395 9 % 503,446 9 % 514,763 9 % 547,516 10 %
1-4 family residential construction 264,819 5 % 302,179 5 % 362,495 7 % 429,107 8 % 527,325 9 %
Other land loans 181,459 3 % 176,069 3 % 180,857 3 % 187,514 3 % 198,722 4 %
Other 320,299 6 % 318,859 6 % 300,115 5 % 317,444 6 % 277,450 5 %
Total commercial real estate - income producing and construction loans $ 5,412,276 100 % $ 5,582,205 100 % $ 5,584,570 100 % $ 5,538,034 100 % $ 5,642,399 100 %

The residential mortgage loan portfolio totaled $4.0 billion at September 30, 2024, virtually flat compared to June 30, 2024 and up $102.2 million, or 3%, from December 31, 2023. The composition of the residential mortgage loan portfolio will depend on the volume of loans originated and the percentage ultimately sold in the secondary market.

The consumer loan portfolio totaled $1.4 billion at September 30, 2024, down $16.7 million, or 1%, from June 30, 2024 and down $76.2 million, or 5%, from December 31, 2023. Changes in the consumer loan portfolio reflect both slowing demand and the impact of our exit from the indirect automobile lending market, where the existing portfolio is in run-off. The indirect loan portfolio totaled $24.2 million at September 30, 2024, down $8.0 million from June 30, 2024 and down $28.3 million from December 31, 2023.

Average loans for the third quarter of 2024 of $23.6 billion were down $365.4 million, or 2%, compared to the second quarter of 2024.

Management expects December 31, 2024 period-end loans to be flat or down slightly compared to the December 31, 2023 balance of $23.9 billion.

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Allowance for Credit Losses and Asset Quality

Our allowance for credit losses was $342.8 million at September 30, 2024, up $0.6 million from June 30, 2024 and $6.0 million from December 31, 2023. The increase in the allowance for credit losses from June 30, 2024 is attributable to an $18.6 million provision for credit losses, partially offset by $18.0 million of net charge-offs. Our overall credit loss outlook is not significantly different from that at June 30, 2024. However, uncertainty related to ongoing inflationary pressure, elevated interest rates and the outcome of the Federal Reserve’s actions with respect to monetary policy, and stress in the commercial real estate sector continues to result in an elevated reserve relative to pre-pandemic levels. The allowance for loan loss increased $1.1 million and the reserve for unfunded lending commitments decreased $0.6 million from June 30, 2024. The modest increase in the allowance for loan losses at September 30, 2024 compared to June 30, 2024 reflects a relatively consistent credit loss outlook with continued focus on risks that impact certain segments of our loan portfolio, resulting in modest allowance builds across several portfolios. The decline in the reserve for unfunded commitments compared to June 30, 2024 was largely volume driven.

We utilized the September 2024 Moody's economic scenarios to inform our allowance for credit losses at September 30, 2024. After considering the variables underlying each of the Moody's economic scenarios, management probability-weighed the baseline scenario at 40% and the downside S-2 mild recessionary scenario at 60% in the computation of the allowance for credit losses at September 30, 2024, consistent with the weighting used in the prior quarter. Each of the scenarios considered have varying degrees of severity and duration of inflationary pressure, including volatility in commodities prices and impacts to the labor market, the consequences of the Federal Reserve's actions with regard to monetary policy, the effects of disruption in the financial services industry, and impacts from geopolitical unrest. Refer to the Economic Outlook section of this discussion and analysis for further information on the Moody’s scenarios and our weighting assumptions.

Our allowance for credit losses coverage to total loans was 1.46% at September 30, 2024, up from 1.43% at June 30, 2024 and 1.41% at December 31, 2023. The allowance for credit losses on the commercial portfolio totaled $272.8 million, or 1.51% of that portfolio, at September 30, 2024, up from $273.8 million, or 1.48%, at June 30, 2024. The allowance for credit losses on the residential mortgage portfolio totaled $42.9 million, or 1.07% of that portfolio, at September 30, 2024, up from $41.7 million, or 1.04%, at June 30, 2024. The allowance for credit losses on the consumer portfolio totaled $27.1 million, or 1.97% of that portfolio, at September 30, 2024, up from $26.7 million, or 1.93%, at June 30, 2024.

Criticized commercial loans totaled $508.0 million at September 30, 2024, up $128.2 million, or 34%, from $379.8 million at June 30, 2024 and $234.3 million, or 86%, from $273.7 million at December 31, 2023. 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 reviews portfolios of loans to determine if there are areas of risk not specifically identified in its loan by loan approach. Criticized commercial loans comprised 2.81% of that portfolio at September 30, 2024, up from 2.05% at June 30, 2024 and 1.47% at December 31, 2023. Management believes the migration in the level of criticized loans to be mostly indicative of continued normalization compared to the earlier post-pandemic benign credit environment, including certain downgrades resulting from the most recent regulatory examination of loans within our shared national credit portfolio. We remain focused on identifying specific and broader risk indicators that may be impacting certain segments in our portfolio, and we have not seen signs of significant weakening in any particular industry, sector or geographic segment beyond what we believe has been experienced by the banking industry as a whole. Our criticized commercial loans at September 30, 2024 are diversified across many industries, with the largest concentrations being wholesale trade, totaling $83.5 million; manufacturing, totaling $74.8 million; transportation and warehousing, totaling $73.8 million; construction, totaling $56.9 million; real estate and rental and leasing, totaling $53.4 million; retail trade, totaling $45.8 million; accommodation, food services and entertainment, totaling $28.3 million; and professional, scientific, and technical services, totaling $21.7 million. Commercial loans risk rated pass-watch totaled $477.4 million at September 30, 2024, up $26.9 million, or 6%, from June 30, 2024 and up $43.7 million, or 10%, from December 31, 2023. The pass-watch risk rating includes credits with negative performance trends that reflect sufficient risk to cause concern, but have not risen to the level of criticized.

Net charge-offs were $18.0 million, or 0.30% of average total loans on an annualized basis in the third quarter of 2024, compared to $7.3 million, or 0.12% in the second quarter of 2024. The increase in net charge-offs compared to the prior quarter was driven by commercial loans where charge-off levels can vary from period-to-period due to the larger size of credits. The third quarter of 2024 net charge-offs included $14.5 million in the commercial portfolio, $3.5 million in the consumer portfolio and less than $0.1 million in the residential mortgage portfolio. The second quarter of 2024 net charge-offs included $4.1 million in the commercial portfolio and $3.3 million in the consumer portfolio, partially offset by net recoveries of $0.1 million in the residential mortgage portfolio.

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The following table provides a rollforward for the allowance for credit loss, coverage ratios and net charge-off ratios for the periods indicated.

Three Months Ended Nine Months Ended
September 30, June 30, September 30, September 30,
($ in thousands) 2024 2024 2023 2024 2023
Provision and Allowance for Credit Losses
Allowance for loan losses:
Allowance for loan losses at beginning of period $ 316,148 $ 313,726 $ 314,496 $ 307,907 $ 307,789
Loans charged-off:
Commercial non real estate 16,565 7,674 37,334 33,869 44,837
Commercial real estate - owner-occupied — — — — —
Total commercial & industrial 16,565 7,674 37,334 33,869 44,837
Commercial real estate - income producing — — — 8,819 73
Construction and land development 39 150 — 264 72
Total commercial 16,604 7,824 37,334 42,952 44,982
Residential mortgages 162 11 25 229 53
Consumer 4,347 4,116 3,875 13,249 10,787
Total charge-offs 21,113 11,951 41,234 56,430 55,822
Recoveries of loans previously charged-off:
Commercial non real estate 2,013 2,950 1,725 18,067 4,419
Commercial real estate - owner-occupied 125 759 97 986 447
Total commercial & industrial 2,138 3,709 1,822 19,053 4,866
Commercial real estate - income producing 2 2 2 7 12
Construction and land development — 1 4 62 10
Total commercial 2,140 3,712 1,828 19,122 4,888
Residential mortgages 134 94 408 430 888
Consumer 812 860 748 2,586 2,701
Total recoveries 3,086 4,666 2,984 22,138 8,477
Total net charge-offs 18,027 7,285 38,250 34,292 47,345
Provision for loan losses 19,150 9,707 30,045 43,656 45,847
Allowance for loan losses at end of period $ 317,271 $ 316,148 $ 306,291 $ 317,271 $ 306,291
Reserve for Unfunded Lending Commitments:
Reserve for unfunded lending commitments at beginning of period $ 26,079 $ 27,063 $ 31,160 $ 28,894 $ 33,309
Provision for losses on unfunded lending commitments (586 ) (984 ) (1,547 ) (3,401 ) (3,696 )
Reserve for unfunded lending commitments at end of period $ 25,493 $ 26,079 $ 29,613 $ 25,493 $ 29,613
Total Allowance for Credit Losses $ 342,764 $ 342,227 $ 335,904 $ 342,764 $ 335,904
Total Provision for Credit Losses $ 18,564 $ 8,723 $ 28,498 $ 40,255 $ 42,151
Coverage Ratios:
Allowance for loan losses to period-end loans 1.35 % 1.32 % 1.28 % 1.35 % 1.28 %
Allowance for credit losses to period-end loans 1.46 % 1.43 % 1.40 % 1.46 % 1.40 %
Charge-offs ratios:
Gross charge-offs to average loans 0.36 % 0.20 % 0.69 % 0.32 % 0.32 %
Recoveries to average loans 0.05 % 0.08 % 0.05 % 0.12 % 0.05 %
Net charge-offs to average loans 0.30 % 0.12 % 0.64 % 0.19 % 0.27 %
Net Charge-offs to average loans by portfolio
Commercial non real estate 0.60 % 0.19 % 1.40 % 0.22 % 0.54 %
Commercial real estate - owner-occupied (0.02 )% (0.10 )% (0.01 )% (0.04 )% (0.02 )%
Total commercial & industrial 0.45 % 0.12 % 1.07 % 0.15 % 0.41 %
Commercial real estate - income producing (0.00 )% (0.00 )% (0.00 )% 0.29 % 0.00 %
Construction and land development 0.01 % 0.04 % (0.00 )% 0.02 % 0.00 %
Total commercial 0.32 % 0.09 % 0.75 % 0.17 % 0.29 %
Residential mortgages 0.00 % (0.01 )% (0.04 )% (0.01 )% (0.03 )%
Consumer 1.02 % 0.95 % 0.84 % 1.02 % 0.71 %

The following table sets forth for the periods indicated nonaccrual loans and reportable loan modifications to borrowers experiencing financial difficulty by type, and foreclosed and surplus ORE and other foreclosed assets. The table also includes loans past due 90 days or more and still accruing.

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September 30, June 30, March 31, December 31, September 30,
($ in thousands) 2024 2024 2024 2023 2023
Loans accounted for on a nonaccrual basis:
Commercial non-real estate $ 17,443 $ 13,952 $ 17,487 $ 20,840 $ 22,108
Commercial non-real estate - modified 3,954 3,999 — — —
Total commercial non-real estate 21,397 17,951 17,487 20,840 22,108
Commercial real estate - owner occupied 1,988 3,741 2,197 2,228 2,432
Commercial real estate - owner-occupied - modified 901 919 — — —
Total commercial real estate - owner-occupied 2,889 4,660 2,197 2,228 2,432
Commercial real estate - income producing 1,918 23,603 24,066 461 344
Commercial real estate - income producing - modified — — — — —
Total commercial real estate - income producing 1,918 23,603 24,066 461 344
Construction and land development 6,316 1,774 2,228 815 742
Construction and land development - modified — — — — —
Total construction and land development 6,316 1,774 2,228 815 742
Residential mortgage 38,571 27,958 25,757 26,039 26,885
Residential mortgage - modified 541 335 167 98 20
Total residential mortgage 39,112 28,293 25,924 26,137 26,905
Consumer 11,234 9,972 10,180 8,555 7,800
Consumer - modified — — — — —
Total consumer 11,234 9,972 10,180 8,555 7,800
Total nonaccrual loans $ 82,866 $ 86,253 $ 82,082 $ 59,036 $ 60,331
ORE and foreclosed assets 27,732 2,114 2,793 3,628 4,527
Total nonaccrual loans and ORE and foreclosed assets $ 110,598 $ 88,367 $ 84,875 $ 62,664 $ 64,858
Modified loans - still accruing:
Commercial non-real estate $ 82,609 $ 49,892 $ 31,442 $ 21,956 $ 11,500
Commercial real estate - owner occupied 799 802 1,761 1,774 17,035
Commercial real estate - income producing 3,050 3,483 1,573 — —
Construction and land development — 82 84 85 86
Residential mortgage 3,344 2,738 2,180 359 166
Consumer 354 425 385 274 62
Total modified loans - still accruing $ 90,156 $ 57,422 $ 37,425 $ 24,448 $ 28,849
Total reportable modified loans $ 95,552 $ 62,675 $ 37,592 $ 24,546 $ 28,869
Loans 90 days past due still accruing $ 5,967 $ 6,069 $ 7,938 $ 9,609 $ 24,170
Ratios:
Nonaccrual loans to total loans 0.35 % 0.36 % 0.34 % 0.25 % 0.25 %
Nonaccrual loans plus ORE and foreclosed assets to loans plus ORE and foreclosed assets 0.47 % 0.37 % 0.35 % 0.26 % 0.27 %
Allowance for loan losses to nonaccrual loans 382.87 % 366.54 % 382.21 % 521.56 % 507.68 %
Allowance for loan losses to nonaccrual loans and accruing loans 90 days past due 357.15 % 342.44 % 348.51 % 448.55 % 362.47 %
Loans 90 days past due still accruing to loans 0.03 % 0.03 % 0.03 % 0.04 % 0.10 %

Nonaccrual loans plus ORE and foreclosed assets totaled $110.6 million at September 30, 2024, up $22.2 million from June 30, 2024 and $47.9 million from December 31, 2023. Nonaccrual loans of $82.9 million decreased $3.4 million from June 30, 2024 and increased $23.8 million from December 31, 2023. Despite the increase in the level of nonaccrual loans from December 31, 2023, the ratio to total loans remains relatively low at 0.35% of the total portfolio and we believe is largely representative of a continued normalization of credit metrics following a mostly benign credit environment in recent years. ORE and foreclosed assets were $27.7 million at September 30, 2024, up $25.6 million from June 30, 2024, and $24.1 million from December 31, 2023, with the increase from both comparative periods largely attributable to foreclosed property from one commercial borrower. Nonaccrual loans plus ORE and other foreclosed assets as a percentage of total loans, ORE and other foreclosed assets was 0.47% at September 30, 2024, up 10 bps from June 30, 2024 and 21 bps from December 31, 2023.

We expect to continue to see modest charge-offs and provision for credit losses for the remainder of 2024. Loan growth, portfolio mix, asset quality metrics and future assumptions in economic forecasts will drive the level of credit loss reserves.

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, among other factors. 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.

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The failures of several large U.S. banks in the first half of 2023 created disruption in the financial services industry. While many factors played a role in the ultimate failures, these institutions had significant industry/demographic concentration within their deposit bases and a high ratio of uninsured deposits. Lack of diversity in concentration within a deposit base may increase the risk of events or trends that could prompt a larger-scale demand for deposits outflow. Concerns over a financial institution's ability to protect deposit balances in excess of the federally insured limit may increase the risk of a deposit run. We consider our deposit base to be seasoned, stable and well-diversified. We also offer our customers an insured cash sweep product (ICS) that allows customers to secure deposits above FDIC insured limits. We continue to see demand for the ICS product, with the balance totaling $376.5 million at September 30, 2024, compared to $403.9 million at June 30, 2024 and $303.8 million at December 31, 2023. At September 30, 2024, we have calculated our average deposit account size by dividing period-end deposits by the population of accounts with balances to be approximately $36,900, which includes $196,300 in our commercial and small business lines (excluding public funds), $123,300 in our wealth management business line, and $18,500 in our consumer business line.

Further, at September 30, 2024, our sources of liquidity exceed uninsured deposits. We have estimated the Bank’s amount of uninsured deposits using the methodologies and assumptions required for FDIC regulatory reporting to be approximately $13.8 billion at September 30, 2024, virtually unchanged compared to both June 30, 2024 and December 31, 2023. Our uninsured deposit total at September 30, 2024 includes approximately $3.0 billion of public funds that have pledged securities as collateral, leaving approximately $10.8 billion of noncollateralized, uninsured deposits compared to total liquidity of $19.8 billion. Our ratio of noncollateralized, uninsured deposits to total deposits was approximately 37.1% at September 30, 2024, compared to 35.9% at June 30, 2024 and 34.4% at December 31, 2023.

Total deposits were $29.0 billion at September 30, 2024, down $217.8 million, or 1%, from June 30, 2024 and down $707.2 million, or 2%, from December 31, 2023. Average deposits for the third quarter of 2024 were $28.9 billion, down $128.9 million, or less than 1%, from the second quarter of 2024.

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) 2024 2024 2024 2023 2023
Noninterest-bearing deposits $ 10,499,476 $ 10,642,213 $ 10,802,127 $ 11,030,515 $ 11,626,371
Interest-bearing retail transaction and savings deposits 10,902,720 10,824,142 10,969,720 10,680,741 10,678,462
Interest-bearing public fund deposits:
Public fund transaction and savings deposits 2,622,580 2,837,048 2,989,966 3,069,341 2,761,267
Public fund time deposits 81,525 84,676 76,304 73,674 91,969
Total interest-bearing public fund deposits 2,704,105 2,921,724 3,066,270 3,143,015 2,853,236
Retail time deposits 4,686,111 4,612,564 4,543,018 4,246,027 4,005,025
Brokered time deposits 190,493 200,075 394,771 589,761 1,157,243
Total interest-bearing deposits 18,483,429 18,558,505 18,973,779 18,659,544 18,693,966
Total deposits $ 28,982,905 $ 29,200,718 $ 29,775,906 $ 29,690,059 $ 30,320,337

Noninterest-bearing demand deposits totaled $10.5 billion at September 30, 2024, down $142.7 million, or 1%, from June 30, 2024 and $531.0 million, or 5%, from December 31, 2023. Noninterest-bearing demand deposits comprised 36% of total deposits at September 30, 2024, unchanged compared to June 30, 2024 and down slightly from 37% at December 31, 2023. Noninterest-bearing deposit levels have trended downward in recent quarters as customers shift to interest-bearing products amid the elevated interest rate environment and as consumer and business spending remains strong. The current level of noninterest-bearing deposits to total deposits of 36% represents what we consider to be a more typical, pre-pandemic mix of noninterest-bearing and interest-bearing deposits.

Interest-bearing transaction and savings accounts totaled $10.9 billion at September 30, 2024, up $78.6 million, or 1%, from June 30, 2024 and $222.0 million, or 2%, from December 31, 2023. Interest-bearing public fund deposits totaled $2.7 billion at September 30, 2024, down $217.6 million, or 7%, from June 30, 2024 and down $438.9 million, or 14%, from December 31, 2023. The decrease in public funds deposits from both comparative periods is mostly reflective of typical seasonal outflows as the calendar year approaches the fourth quarter. Retail time deposits totaled $4.7 billion at September 30, 2024, up $73.5 million, or 2%, from June 30, 2024 and $440.1 million, or 10%, from December 31, 2023. Despite maturity concentrations and promotional rate reductions during the period, retail time deposits increased linked-quarter as rate offerings remain attractive. Brokered time deposits totaled $190.5 million at September 30, 2024, down $9.6 million from June 30, 2024 and $399.3 million from December 31, 2023 as a result of net maturities of instruments that were not replaced. Our brokered deposits bear interest at a weighted average rate of 5.53% with maturities between November 2024 and February 2025.

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The rate paid on interest-bearing deposits for the third quarter of 2024 was 3.15%, up slightly from 3.14% in the second quarter of 2024, with increases in the rates paid on interest-bearing transaction and savings deposits being mostly offset by decreases in rates paid on time deposits and public funds deposits offsetting. Rates paid on deposits will vary based on prevailing interest rates and promotional rate offerings on the various product types. The following table sets forth average balances and weighted-average rates paid on deposits for the third and second quarters of 2024 and the third quarter of 2023.

Three months ended
September 30, 2024 June 30, 2024 September 30, 2023
($ in millions) Balance Rate Mix Balance Rate Mix Balance Rate Mix
Interest-bearing deposits:
Interest-bearing transaction deposits $ 2,739.8 1.67 % 9.5 % $ 2,610.5 1.55 % 9.0 % $ 2,393.3 1.11 % 8.0 %
Money market deposits 6,121.7 3.35 21.2 6,036.1 3.32 20.8 5,888.5 3.01 19.8
Savings deposits 2,052.0 0.40 7.1 2,094.9 0.29 7.2 2,314.5 0.01 7.8
Time deposits 4,896.7 4.67 16.9 4,833.4 4.72 16.6 4,855.7 4.39 16.3
Public Funds 2,770.6 3.54 9.6 2,967.3 3.58 10.2 2,851.9 3.57 9.6
Total interest-bearing deposits 18,580.8 3.15 % 64.3 18,542.2 3.14 % 63.8 18,303.9 2.84 % 61.5
Noninterest-bearing demand deposits 10,359.4 35.7 10,526.9 36.2 11,453.2 38.5
Total deposits $ 28,940.2 100.0 % $ 29,069.1 100.0 % $ 29,757.1 100.0 %

The following sets forth the maturities of time certificates of deposit greater than $250,000 at September 30, 2024.

September 30,
($ in thousands) 2024
Three months $ 1,260,075
Over three months through six months 301,044
Over six months through one year 282,021
Over one year 13,312
Total $ 1,856,452

Management expects December 31, 2024 period-end deposits to be flat to down slightly from the December 31, 2023 balance of $29.7 billion.

Short-Term Borrowings

At September 30, 2024, short-term borrowings totaled $1.3 billion, down $98.0 million from June 30, 2024 and up $111.1 million from December 31, 2023. Changes from June 30, 2024 and December 31, 2023 reflect decreases in FHLB advances of $350 million and $400 million, respectively, with the remainder of the variances attributable to fluctuations in customer repurchase agreements and federal funds purchased. Average short-term borrowings of $972.1 million in the third quarter of 2024 were down $166.7 million, or 15%, from the second quarter of 2024.

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, 2024, virtually unchanged from June 30, 2024 and December 31, 2023.

Long-term debt at September 30, 2024 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.

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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 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.

The contractual 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, 2024, the Company had a reserve for credit losses on unfunded lending commitments totaling $25.5 million.

The following table shows the commitments to extend credit and letters of credit at September 30, 2024 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 $ 9,201,078 $ 3,696,146 $ 2,404,772 $ 2,262,267 $ 837,893
Letters of credit 430,127 366,992 11,278 51,729 128
Total $ 9,631,205 $ 4,063,138 $ 2,416,050 $ 2,313,996 $ 838,021

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, 2023.

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 15 to our consolidated financial statements included elsewhere in this report.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Our primary market risk is interest rate risk that stems from uncertainty with respect to the absolute and relative levels of future market interest rates that affect our financial products and services. In an attempt to manage our exposure to interest rate risk, management measures the sensitivity of our net interest income and cash flows under various market interest rate scenarios,

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establishes interest rate risk management policies and implements asset/liability management strategies designed to promote a relatively stable net interest margin under varying rate environments.

Net Interest Income at Risk

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, 2024. Shifts are measured in 100 basis point increments in a range from -500 to +500 basis points from base case, with -300 through +300 basis points presented in the table below. Our interest rate sensitivity modeling incorporates a number of assumptions including loan and deposit repricing characteristics, the rate of loan prepayments and other factors. The base scenario assumes that the current interest rate environment is held constant over a 24-month forecast period and is the scenario to which all others are compared in order to measure the change in net interest income. Policy limits on the change in net interest income under a variety of interest rate scenarios are approved by the Board of Directors. All policy scenarios assume a static volume forecast where the balance sheet is held constant, although other scenarios are modeled.

Estimated Increase
(Decrease) in NII
Change in Interest Rates Year 1 Year 2
(basis points)
- 300 -6.83 % -13.32 %
- 200 -4.02 % -8.75 %
- 100 -1.79 % -4.10 %
+ 100 1.73 % 3.65 %
+ 200 3.17 % 6.90 %
+ 300 4.61 % 10.19 %

The results indicate a general asset sensitivity across most scenarios driven primarily by repricing of cash flows in the investment and loan portfolios. As short-term rates have remained elevated, the funding mix has shifted to more rate sensitive deposits and wholesale sources resulting in lower overall net interest income at risk as deposit repricing is expected to offset rate adjustments in the floating rate loan book. Furthermore, due to the funding mix shift, the Company is currently less sensitive to changes in short-term rate movements with interest rate risk being driven more by changes in the mid to long-term segment of the yield curve. When deemed 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. All of these factors are considered in monitoring exposure to interest rate risk.

Economic Value of Equity (EVE)

EVE simulation involves calculating the present value of all future cash flows from assets and subtracting the present value of all future cash outflows from liabilities including the impact of off-balance sheet items such as interest rate hedges. This analysis results in a theoretical market value of the bank's equity or EVE. Management’s focus on EVE analysis is not on the resulting calculation of EVE itself, but instead on the sensitivity of EVE to changes in market rates. Policy limits on the change in EVE under a variety of interest rate scenarios are approved by the Board of Directors. The following table presents an analysis of the change in the Bank’s

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EVE resulting from instantaneous and parallel shifts in rates as of September 30, 2024. Shifts are measured in 100 basis point increments ranging from -500 to +500 basis points from base case, with -300 through +300 basis points presented in table below.

Estimated Change<br>in EVE at
Change in Interest Rates September 30, 2024
(basis points)
- 300 3.73%
- 200 3.30%
- 100 2.17%
+ 100 -2.85%
+ 200 -6.11%
+ 300 -9.47%

The net changes in EVE presented in the preceding table are within the parameters approved by the Boards of Directors. Because EVE measures the present value of cash flows over the estimated lives of instruments, the change in EVE does not directly correlate to the degree that earnings would be impacted over a shorter time horizon (i.e., the current year). Further, EVE does not consider factors such as future balance sheet growth, changes in product mix, changes in yield curve relationships, possible hedging activities, or changing product spreads, each of which could mitigate the adverse impact of changes in interest rates.

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, 2024, 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, 2024, that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

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

Item 1A. Risk Factors

In addition to the other information set forth in this Report, in evaluating an investment in the Company’s securities, investors should consider carefully, among other things, the risk factors previously disclosed in Part I, Item 1A of our 2023 Form 10-K. which could materially affect the Company's business, financial position, results of operations, cash flows, or future results. Please be aware that these risks may change over time and other risks may prove to be important in the future. New risks may emerge at any time, and we cannot predict such risks or estimate the extent to which they may affect our business, financial condition or results of operations, or the trading price of our securities.

There are no material changes during the period covered by this Report to the risk factors previously disclosed in our 2023 Form 10-K.

Item 2. Unregistered Sales of Equity 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 4,297,000 shares of its common stock through the program’s expiration date of December 31, 2024. 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 in accordance with the rules and regulations of the Securities and Exchange Commission. The Company is not obligated to purchase any shares under this program and the repurchase authorization may be terminated or amended by the Board at any time prior to the expiration date.

The following is a summary of common share repurchases during the three months ended September 30, 2024.

Total Number of Shares or Units Purchased (a) Average <br>Price Paid<br>per Share (b) 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, 2024 - July 31, 2024 10,000 $ 54.97 10,000 3,974,007
August 1, 2024 - August 31, 2024 261,037 $ 50.24 260,000 3,714,007
September 1, 2024 - September 30, 2024 30,302 $ 52.69 30,000 3,684,007
301,339 $ 50.64 300,000

(a) Includes common stock purchased in connection with our share-based payment plans related shares used to cover payroll tax withholding requirements. See Note 18 – Share-Based Payment Arrangements in our 2023 Form 10-K, which includes additional information regarding our share-based incentive plans.

(b) Average price paid does not include the one percent excise tax charged on public company net share repurchases.

Item 5. Other Information

Pursuant to Item 408(a) of Regulation S-K, none of the Company's directors or executive officers adopted, terminated or modified a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement during the three months ended September 30, 2024.

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Item 6. Exhibits

(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 5/1/2020
3.2 Second Amended and Restated Bylaws of Hancock Whitney Corporation 8-K 3.2 5/1/2020
31.1 Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 X
31.2 Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 X
32.1 Certification of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 X
32.2 Certification of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 X
101.INS Inline XBRL Instance Document X
101.SCH Inline XBRL Taxonomy Extension Schema Document X
101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document X
101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document X
101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document X
101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document X
104 Cover Page Interactive Data File X

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SIGNATURES

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

Hancock Whitney Corporation
By: /s/ John M. Hairston
John M. Hairston
President & Chief Executive Officer
(Principal Executive Officer)
/s/ Michael M. Achary
Michael M. Achary
Senior Executive Vice President & Chief Financial Officer<br><br>(Principal Financial Officer)
November 7, 2024

EX-31.1

EXHIBIT 31.1

CERTIFICATION

I, John M. Hairston, certify that:

  • I have reviewed this Quarterly Report on Form 10-Q of Hancock Whitney Corporation;
  • Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
  • Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
  • The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
  • Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
  • Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
  • Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
  • Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
  • The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s Board of Directors (or persons performing the equivalent functions):
  • All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
  • Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
November 7, 2024 By: /s/ John M. Hairston
Date John M. Hairston
President & Chief Executive Officer
(Principal Executive Officer)

EX-31.2

EXHIBIT 31.2

CERTIFICATION

I, Michael M. Achary, certify that:

  • I have reviewed this Quarterly Report on Form 10-Q of Hancock Whitney Corporation;
  • Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
  • Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
  • The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
  • Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
  • Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
  • Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
  • Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
  • The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
  • All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
  • Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
November 7, 2024 By: /s/ Michael M. Achary
Date Michael M. Achary
Senior Executive Vice President & Chief Financial Officer
(Principal Financial Officer)

EX-32.1

EXHIBIT 32.1

CERTIFICATION

Certification Pursuant to 18 U.S.C. Section 1350

(Adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002)

In connection with this Quarterly Report on Form 10-Q of Hancock Whitney Corporation (the “Company”) for the quarter ended September 30, 2024, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), John M. Hairston, as Chief Executive Officer of the Company hereby certifies, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of his knowledge:

  • The Report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and
  • The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
November 7, 2024 By: /s/ John M. Hairston
Date John M. Hairston
President & Chief Executive Officer
(Principal Executive Officer)

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

This certification shall not be deemed filed by the Company for purposes of §18 of the Securities Exchange Act of 1934, as amended.

EX-32.2

EXHIBIT 32.2

CERTIFICATION

Certification Pursuant to 18 U.S.C. Section 1350

(Adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002)

In connection with this Quarterly Report on Form 10-Q of Hancock Whitney Corporation (the “Company”) for the quarter ended September 30, 2024, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Michael M. Achary, as Chief Financial Officer of the Company hereby certifies, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of his knowledge:

  • The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
  • The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
November 7, 2024 By: /s/ Michael M. Achary
Date Michael M. Achary
Senior Executive Vice President & Chief Financial Officer
(Principal Financial Officer)

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

This certification shall not be deemed filed by the Company for purposes of §18 of the Securities Exchange Act of 1934, as amended.

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