Your Dream. Our Mission.
hancockwhitney.com
We conduct business in accordance with
these core values:
Honor & Integrity
Strength & Stability
Commitment to Service
Teamwork
Personal Responsibility
Hancock Whitney Corporation
2021 Annual Report
H
a
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k
W
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i
t
n
e
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2
0
2
1
A
n
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u
a
l
R
e
p
o
r
t
Earnings Per Share – Diluted
$5.22
$3.72 $3.72
$2.48
($0.54)
2017
2018
2019
2020
2021
600
500
400
300
200
100
0
Hancock Whitney Corporation
Financial Highlights
PPNR(a)
(in millions)
$491.2 $501.7
$434.4
$455.2
$401.8
(Dollars in thousands, except per share amounts)
INCOME STATEMENT DATA
Net income (loss)
Net interest income (TE)*
Pre-provision net revenue (PPNR)(a)
2017
2020
COMMON SHARE DATA
2018
2019
2021
Total Loans
Earnings Per Share – Diluted
PPNR(a)
(in billions)
(in millions)
Tangible book value per share (period-end)
Total Deposits
PPNR(a)
(in billions)
Cash dividends per share
(in millions)
Earnings per share – diluted
Book value per share (period-end)
6
5
4
3
2
1
0
-1
25
600
6
5
500
20
4
400
15
3
300
2
10
200
1
5
100
0
0
0
-1
$5.22
$21.2 $21.8 $21.1
$5.22
$455.2
$491.2 $501.7
$20.0
$434.4
$3.72 $3.72
$19.0
$401.8
$2.48
($0.54)
2021
2017
2017
2017
2018
2018
2018
2019
2019
2019
2020
2020
2020
2021
2021
2021
Total Deposits
Total Loans
PPNR(a)
(in billions)
(in billions)
(in millions)
$21.1
600
25
35
500
30
2021
20
15
400
300
10
200
100
5
0
0
35
30
25
20
15
10
5
0
$21.2 $21.8 $21.1
$491.2 $501.7
$30.5
$27.7
$19.0
$401.8
25
$20.0
$455.2
$434.4
$22.3 $23.2 $23.8
20
15
10
5
0
2017
2017
2017
2018
2018
2019
2019
2020
2020
2021
2021
2020
2021
2018
2019
Total Deposits
(in billions)
$30.5
$27.7
$22.3 $23.2 $23.8
2017
2018
2019
2020
2021
$434.4
$401.8
$5.22
$323.4
($0.54)
Subsidiaries of Hancock Whitney Corporation
InvestorRelations@hancockwhitney.com
500
400
300
200
100
0
2021
2020
$463,215
($45,174)
$944,414
$501,741
$955,523
PPNR(TE)
(in millions)
$491,159
$286.7
$42.31
$256.4
$31.64
$1.08
2014
$53.61
2015
$44.24
2016
2017
$32.52
$50.02
$14.32
$34.02
Return on Average Assets
(Operating)*
$8,552,449
$7,356,497
1.25%
$21,134,282 $21,789,931
PPNR(TE)
(in millions)
$33,610,435 $30,616,277
$36,531,205 $33,638,602
0.96%
$401.8
$323.4
$286.7
$30,465,897 $27,697,877
+54 bps
$3,439,025
0.67%
$3,670,352
$256.4
0.66%
$39.65
$28.79
$1.08
Hancock Whitney Bank
Hancock Whitney Investment Services, Inc.
Hancock Whitney Equipment Finance, LLC
Earnings releases and other financial information about the company are
available on the company’s Investor Relations website:
investors.hancockwhitney.com
Corporate Information
Annual Meeting
Financial Information
The annual meeting of stockholders will be held at 10:30 a.m. Central Time,
Copies of Hancock Whitney Corporation financial reports, including its
Wednesday, April 27, 2022, virtually.
Annual Report on Form 10-K filed with the Securities and Exchange
Commission, are available without charge upon request to:
Corporate Offices
Hancock Whitney Plaza
2510 14th Street
Gulfport, MS 39501
228-868-4000
800-522-6542
Trisha Voltz Carlson
Executive Vice President
Investor Relations Manager
Hancock Whitney Corporation
P.O. Box 4019
Gulfport, MS 39502-4019
Board of Directors
Jerry L. Levens*
Frank E. Bertucci
Hardy B. Fowler
John M. Hairston
Randall W. Hanna
James H. Horne
Suzette K. Kent
H. Merritt Lane, III
Constantine “Dean” S. Liollio
Sonya C. Little
Thomas H. Olinde
Sonia A. Pérez
Christine L. Pickering
Robert W. Roseberry
Joan C. Teofilo
C. Richard Wilkins
Dividend Reinvestment and Stock Purchase Plan
Stockholders seeking full details about the plan may call 888-490-1239,
email help@astfinancial.com, access the website at www.astfinancial.com,
or write:
John M. Hairston
President & CEO
Michael M. Achary
Chief Financial Officer
Cindy S. Collins
Chief Compliance Officer
Alan M. Ganucheau
Treasurer
American Stock Transfer & Trust Company, LLC
6201 15th Avenue
Brooklyn, NY 11219
Joseph S. Exnicios
Cecil “Chip” W. Knight, Jr.
President, Hancock Whitney Bank
Chief Banking Officer
Hancock Whitney Equipment Finance and Leasing, LLC
2018
Hancock Whitney New Markets Fund, LLC
Common Stock
under the symbol HWC.
The company’s common stock is traded on the Nasdaq Global Select Market
1.21%
Stockholder Information
$434.4
888-490-1239, email help@astfinancial.com, access the website at
Stockholders seeking information may call the transfer agent at
www.astfinancial.com, or write:
American Stock Transfer & Trust Company, LLC
6201 15th Avenue
Brooklyn, NY 11219
1.21%
Cash Dividend Direct Deposit
Stockholders may elect to have their Hancock Whitney Corporation dividends
directly deposited into a checking, savings, or money market account. This
service provides a safe, convenient method of receiving dividends and
is offered at no cost to stockholders. To obtain more information and an
enrollment form, call 888-490-1239, email help@astfinancial.com, access
2019
the website at www.astfinancial.com, or write:
American Stock Transfer & Trust Company, LLC
6201 15th Avenue
Brooklyn, NY 11219
D. Shane Loper
Chief Operating Officer
Joy Lambert Phillips
General Counsel &
Corporate Secretary
Stephen E. Barker
Sr. Accounting &
Finance Executive
Joshua R. Caldwell
Chief Internal Auditor
Miles S. Milton
Chief Wealth Management Officer
Michael Otero
Chief Risk Officer
Rudi Hall Wetzel
Chief Human Resources Officer
Christopher S. Ziluca
Chief Credit Officer
*Independent Chairman of the Board
1.32%
(0.14)%
Stockholders may also contact the company directly by emailing
shareholderservices@hancockwhitney.com.
Corporate & Affiliate Bank Officers
2015
2014
13.07%
2016
2015
2017
(1.32)%
2018
2016
2017
2019
2018
2.95%
57.29%
3.27%
60.07%
1.62%
Return on Average Assets
(Operating)*
7.71%
2.07%
7.64%
1.25%
(1.82)%
7.88%
+54 bps
17.74
8.25%
0.96%
0.67%
0.66%
600
35
30
25
20
15
10
5
0
500
400
300
200
100
0
35
30
25
20
15
10
5
0
Market data
High sales price
$455.2
$434.4
$22.3 $23.2 $23.8
Low sales price
$401.8
$30.5
$491.2 $501.7
$27.7
Period-end closing price
PERIOD-END BALANCE SHEET DATA
Securities
Loans
PPNR(TE)
(in millions)
500
2017
2017
400
Earning assets
2018
2018
Total assets
2019
2019
2020
2020
2021
2021
$323.4
$286.7
Total deposits
300
$256.4
200
Common stockholders’ equity
Total Deposits
(in billions)
PERFORMANCE RATIOS
100
Return on average assets
0
Return on average common equity
$30.5
$27.7
2014
2015
2016
Net interest margin (TE)*
$22.3 $23.2 $23.8
Efficiency ratio(b)
500
$434.4
$401.8
400
300
200
100
2017
0
2018
Tangible common equity ratio(c)
Allowance for loan losses as percent of period-end loans
Return on Average Assets
(Operating)*
PPNR(TE)
(in millions)
Return on average tangible common equity
1.25%
1.21%
1.3
1.2
$434.4
$401.8
2020
2021
0.96%
$323.4
+54 bps
500
Leverage (Tier 1) ratio
1.1
2017
400
2018
1.0
2019
300
200
100
0.9
$286.7
0.8
$256.4
0.67%
0.66%
0.7
0.6
0.5
1.3
1.2
1.1
1.0
0.9
0.8
0.7
0.6
0.5
0.4
1.3
1.2
1.1
1.0
0.9
0.8
0.7
0.6
0.5
0.4
0.4
2014
0
*Taxable equivalent (TE) amounts are calculated using a federal income tax rate of 35% for the year ended
December 31, 2017 and 21% for all other years presented.
2017
2016
2018
2017
2019
2016
2015
2016
2015
2017
2018
2015
2018
(a) Pre-provision net revenue (PPNR) is net interest income (TE) and noninterest income less noninterest
expense. Management believes that PPNR is a useful financial measure because it enables investors to
assess the company’s ability to generate capital to cover credit losses through a credit cycle.
Return on Average Assets
(Operating)*
(b) The efficiency ratio is noninterest expense to total net interest income (TE) and noninterest income,
excluding amortization of purchased intangibles and nonoperating items.
1.25%
1.21%
1.3
1.2
(c) The tangible common equity ratio is common stockholders’ equity less intangible assets divided by total
assets less intangible assets.
1.1
1.0
0.96%
0.9
0.8
0.7
0.67%
0.66%
+54 bps
Financial Highlights
We had a strong finish to a record year! 2021 ended with a reported
earnings per diluted share (EPS) of $5.22, compared to a loss in
2020, while operating pre-provision net revenue (PPNR) totaled
$538 million in 2021, an increase of $46.5 million, or 9%, from
2020. Additionally, the company grew to over $36 billion in assets,
as both core loan and deposit growth exceeded expectations.
Revenue initiatives are progressing, and we were pleased to report
positive quarterly net loan growth for the first time this year in the
fourth quarter of 2021. Core loans grew 4%, compared to 2020,
excluding paycheck protection loans (PPP), with growth across
most of the footprint and in specialty lines of business, reflecting
improving economic activity, increased line utilization and the
contribution from newly hired bankers in growth markets.
Despite the economic impact from the pandemic on our markets
and clients, our credit metrics are greatly improved, and today are
among the best in class. Criticized commercial loans are down over
$100 million, or 27%, compared to 2020, and nonperforming loans
declined $85 million, or 59%, from a year ago. With quarterly net
charge-offs nearing historically low levels, we are pleased at how
our portfolio has performed during these unprecedented times,
allowing us to recapture in 2021 some of the reserves added in
2020 at the beginning of the pandemic.
During the year, we saw deposits grow as seasonal year-end
deposits, Hurricane Ida-related funds and stimulus funding
added almost $3.0 billion. Putting this excess liquidity to work by
deploying into loans, bonds or even funding some deposit runoff
will be one of the major keys to our success in 2022.
Meeting and then beating our fourth quarter of 2021 operating
expense goal was another major theme, with operating expenses
coming in $3 million below our established goal of $187 million.
The past year’s efficiency efforts have been significant and
impactful, and, we believe, set the foundation for achieving our
55% efficiency ratio goal by the fourth quarter of 2022.
Capital remains solid. The work we started pre-pandemic, coupled
with the de-risking efforts in early 2020, have put us on a path
to achieving updated corporate strategic objectives or CSOs,
including the path to a 55% efficiency ratio. We look forward to
carrying the momentum from the strong finish in 2021 to a brighter
2022, not only for our company, but for our clients, associates
and communities, as we hopefully begin to emerge from today’s
ongoing pandemic environment.
I want to thank my colleagues at Hancock Whitney for their
perseverance and dedication to clients and each other as they
worked as a team to build momentum through 2021.
For America and most of the world, 2021 felt like déjà vu.
The global pandemic persisted, and uncertainty still prevailed
as COVID-19 continued to affect the lives and livelihoods of
millions. Some of the worst weather nature had to offer hit
hometowns served by Hancock Whitney. Yet, because of our
associates and the core values we embrace, Hancock Whitney
stood strong and safe. We steadfastly forged forward to serve
clients and communities and relentlessly focused on strategies
and efficiencies to ready us for brighter days ahead.
To Our Shareholders:
Both founded in the 19th century and serving communities
across the Gulf of Mexico crescent, Hancock Bank and Whitney
Bank came together in 2011. In 2021, we celebrated 10 years
since that merger of two grand old banks, a transaction that
brought century-old historical and community connections
between the two organizations full circle. Today, we operate
under the original Hancock Bank charter with a combined
name paying homage to both banks’ legacies—Hancock
Whitney. The core values our founders set forth 123 years ago
still guide how we do business and how we grow as a regional
financial services leader, the largest financial services company
based in South Mississippi and Louisiana’s largest local bank.
As we look back on the past decade, our progress is
extraordinary. In 2011, for the seven months post merger, our
average stock price was $30.04. In 2021 the average price
rose to $45.08—an increase of 50%. Our combined assets
in 2011 were approximately $20 billion. We ended 2021 with
assets of $36.5 billion. We now rank (by assets) as a top 45
bank headquartered in the United States.
Through the 2011 merger and other acquisitions, the company
has expanded its Commitment to Service to clients and
communities spanning the Gulf South from Texas, across
Louisiana, Mississippi and Alabama, all the way to Central
Florida. As we introduced new products and services, including
a more advanced online and mobile banking presence, we
welcomed new leaders and banking professionals to financial
services teams across our footprint.
Despite the ongoing challenges the coronavirus and its variants
created, as well as an unusually active Atlantic hurricane
season, approximately 3,500 associates persevered with
unwavering teamwork to be there for clients and communities
when they needed us most.
1
60
50
40
30
20
10
0
-10
1/1/21
2021 YTD Stock Performance
47.03% Hancock Whitney Corp.
37.08% Compensation Peer Group
35.05% KBW Large Banks
33.20% KBW Regional Banks
30.08% Investor Peer Group
4/1/21
7/1/21
10/1/21
12/31/21
communities; $100,000 supported Second Harvest Food Bank
of Greater New Orleans and Acadiana in relieving post-storm food
insecurity; and $500,000 was earmarked for additional needs
as identified.
The company devoted $750,000 to distribute critical supplies,
including 40,000 meals, 160 tons of ice, 100,000 bottles of water
and 40,000 gallons of fuel to local people and associates in need.
We also contributed $500,000 to the Hancock Whitney Associate
Assistance Fund for emergency grants available to associates
affected by the storm.
2021 also introduced us to a different type of storm impacting
clients and associates in parts of Texas, Louisiana, and
Mississippi—an ice storm. Without hesitation, associates across
the company instinctively knew how to help meet needs, working
closely with clients, volunteering in communities, and collecting
essential supplies.
Board of Directors
This year, Hancock Whitney Corporation welcomed two new
directors, Sonia A. Pérez and H. Merritt Lane III, to the company’s
board of directors. Both appointees bring their respective industry
backgrounds and regional knowledge to the board, as well as solid
experience in public and large companies.
Sonia A. Pérez has served as Southeast States President for
AT&T, Inc., since 2018. In this capacity, Ms. Pérez is responsible
for the development of the company’s overall strategic plan in
the Southeast region, leading a workforce of more than 9,600
employees, overseeing operations such as technology deployment
and infrastructure investment, and directing teams responsible
for implementing public policy and legislative, regulatory, and
philanthropic initiatives. She holds a bachelor’s degree in
journalism from the University of Texas.
Weathering the Storms
During our century-plus service to the Gulf South, we have
gained extensive experience in storm-related business continuity.
When Hurricane Ida threatened clients, associates, and several
markets from Southeast Louisiana to the Florida Panhandle, the
company preemptively launched its operational sustainability
protocols on Friday, August 27, 2021. Immediately following Ida’s
landfall on August 29 (the 16th anniversary of Hurricane Katrina),
Hancock Whitney activated post-storm recovery efforts to ensure
client and associate welfare and restore business operations in
affected markets.
The day after the storm, the company’s Gulfport corporate
headquarters, technology center, and operations centers opened
without storm damage, reinforced with technological and structural
enhancements the company has implemented since Hurricane
Katrina. Within 48 hours, associates deployed our mobile banking
unit designed for disaster relief services to affected areas to provide
basic banking services and sustain our “last-to-close-first-to-open”
commitment to clients and communities.
Hancock Whitney committed $2.5 million to help clients, associates
and communities caught in Ida’s path. Approximately $500,000
went to help restore city infrastructure; $200,000 funded special
grants to facilitate storm relief and recovery in underserved
2
H. Merritt Lane III has served as Chairman, President, and Chief
Executive Officer of Canal Barge Company, Inc., a New Orleans-
based marine transport, services, and liquid storage company,
since 1994. He joined Canal Barge Company in 1986 and held
several marketing and executive positions prior to his appointment
as the company’s president in 1994. Mr. Lane holds a Bachelor of
Science degree in finance from the University of Virginia.
Considered the voice of the country’s $22.8 trillion banking
industry, the American Bankers Association (ABA) named
Hancock Whitney the national recipient of the prestigious ABA
Foundation Community Commitment Award for Economic
Inclusion. The award recognizes Hancock Whitney’s efforts to help
Gulf South small businesses grow and thrive, particularly in
underserved communities.
One member of our board will not be standing for re-election in
2022. I want to thank Robert W. Roseberry for his 20 years of
service and expertise as a member of the Hancock Whitney Board
of Directors. Robert joined Hancock Holding Company when his
previous bank, Lamar Capital Corporation, merged with Hancock
Bank in 2001. Having been in the banking industry for 50 years,
Robert has been an invaluable resource to the board given his
experience managing and operating a large private company as
well as his in-depth knowledge of the Mississippi market. We
sincerely thank Robert for his service to Hancock Whitney.
Among the Best
We are proud that BauerFinancial, Inc., the nation’s leading bank
rating and analysis firm, continuously recommends us as one of
the strongest, safest financial institutions in the country, now for
130 consecutive quarters. We attribute those standings to the
highest principles of accountability to which we subscribe, our
shareholders and clients expect, and our associates help uphold.
Greenwich Associates, the leading global provider of data,
analytics, and insights to the financial services industry and known
for recognizing the best of the best among banks for quality service
to clients, again selected Hancock Whitney for 17 national and
regional awards for middle market and small business banking
excellence and best brand. This latest recognition raises the bank’s
grand total of awards to 201, with 21 Best Brand Awards since
2013 and 180 Excellence Awards since 2005.
Additionally, in 2021, Forbes named Hancock Whitney one of the
Top 100 Banks in America for the second year in a row, and as one
of the World’s Best Banks.
Strategic Plan Designed to
Provide Meaningful
Shareholder Returns
This year, we dedicated ourselves to achieving
a goal of 55% efficiency ratio, which we intend
to accomplish by continuing the momentum
we established in 2021 via core loan growth,
maintaining focus on expense management, using
strategic procurement to reduce costs to offset
items like assumed wage inflation and new banker
hires and deploying excess liquidity into loans and
reinvesting in the bond portfolio.
In 2021, new bankers were added in growth
or new markets across the footprint, including
middle market, commercial and healthcare,
maintaining Hancock Whitney as one of the top
employers of choice on the Gulf Coast. By adding
new bankers in these markets, we expect revenue
to grow while our operating expense goes down.
Our path to 55% efficiency ratio is driven by our
desire to regain pre-pandemic pace and establish
forward momentum by leveraging current
infrastructure for growth. This goal will help us
remain the source of strength for the clients,
associates and communities we serve.
We remain honored and humbled that so many of the community
organizations and local media outlets continue to recognize us
as a partner for progress and opportunity, too. New Orleans
CityBusiness named Hancock Whitney Best In-State Bank for the
fifth year in a row. Gambit Magazine tapped us as the Best Bank/
Credit Union in New Orleans for the third year in a row, and Inside
New Orleans recognized us as New Orleans Readers and Editors
Home Favorites. For our partnerships supporting local Spanish-
speaking communities, the Hispanic Chamber of Commerce
honored Hancock Whitney with the Excelencia President’s Choice
Award and the Houston Business Journal presented us the 2021
Diversity in Business Award.
3
Community Commitment
Through financial support, associate leadership, and volunteerism
with countless local, state, and regional organizations, Hancock
Whitney reinforces our founding purpose to help create
opportunities for people and the communities we serve.
Throughout the year, we carried on our “Healthcare Heroes”
and “Frontline Fridays” initiatives, engaging local restaurants
and caterers to provide food for medical professionals caring for
COVID-19 patients.
• Rock The Street, Wall Street (RTSWS) at Gulfport High
School—the first RTSWS program in Mississippi—which
encourages high school girls to consider studies and
careers in finance and other math-related fields.
• 49 Southeast Texas nonprofits in Beaumont, Texas with
grants totaling approximately $1.1 million at the annual
“Harvest of Giving” awards ceremony. Presented on
behalf of six prominent Beaumont area foundations, the
grants support organizations committed to enhancing arts,
community services, education, health, and social welfare.
In 2021, the company awarded $400,000 in competitive grants
to 22 non-profit organizations making a difference in underserved
communities through financial health and wellness or affordable
housing programs. Hancock Whitney directed half of the grant
funding to organizations serving FEMA-designated disaster areas
impacted by Hurricane Ida.
• Mississippi Aquarium’s annual fundraiser with the title
sponsorship after a one-year pandemic-imposed hiatus.
• The Semper Fi & America’s Fund in Gulfport, Florida with
the 2021 Patriots at Pasadena Charity Golf Tournament
title sponsorship.
In addition, Hancock Whitney supported:
Ready for the Future
The prolonged pandemic has affected so many members of our
Hancock Whitney family. We’ve witnessed firsthand the threats
the virus and its variants pose for those we serve and those we
love. As an organization, we consider the health of our clients and
associates a priority and continue to follow Centers for Disease
Control guidelines. Additionally, we have offered vaccination
incentives to our associates and have encouraged team members
to consult with their healthcare providers to make informed choices
for themselves and their families.
Our financial results for 2021 position us well as we press ahead
toward what we hope will be a return to a semblance of normalcy.
While the world has changed, our mission remains the same—to
help our clients achieve their financial goals and dreams and our
communities thrive.
On behalf of our board of directors, executive leaders, and all of
our associates, we thank you for investing in your Hancock Whitney
Corporation and, through your confidence and trust, empowering
us to remain a respected corporate steward for opportunities
benefitting the people and places we serve.
With appreciation,
John M. Hairston
President & CEO
• Entrepreneurship and small business on the Gulf Coast by
dedicating a full floor of its historic Gulfport Building as a
Mississippi Small Business Development Center Business
Resource Center.
• The Youth Service Bureau by sharing office space in our
downtown Franklinton, Louisiana, financial center to help
the organization better serve more area residents through
advocacy, counseling, education, and intervention for
at-risk youth and their families.
• The Amistad Research Center with a $5,000 contribution
to help keep the Rural African American Museum
in Opelousas, Louisiana, from closing because of
the pandemic.
• Florida A&M University in Tallahassee with a $10,000
investment to support scholarships for student athletes from
low-to-moderate-income backgrounds who demonstrate
academic excellence. Our local bankers will also provide to
student athletes’ customized financial education designed
for young adults who are managing their own finances
and household, including personal finance management,
savings, borrowing, and loan management.
• Bishop State Community College Foundation by matching
a $10,000 gift from the 100 Black Men of Greater Mobile,
Inc. over the next two years, to establish the 100 Black Men
of Greater Mobile Scholars Scholarship Fund.
• The University of Southern Mississippi Oseola McCarty
Scholarship Endowment with a $75,000 commitment.
• Jackson State University with a $25,000 pledge to help
establish the Hancock Whitney Bank Endowed Scholarship
to help JSU female students pursue degrees in math,
finance, accounting, and economics.
4
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-K
(cid:1409)(cid:1409)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2021
OR
(cid:1407)(cid:1407)
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 001-36872
Hancock Whitney Corporation
(Exact name of registrant as specified in its charter)
Mississippi
(State or other jurisdiction of incorporation or organization)
64-0693170
(I.R.S. Employer Identification Number)
Hancock Whitney Plaza, 2510 14th Street,
Gulfport, Mississippi
(Address of principal executive offices)
39501
(Zip Code)
Securities registered pursuant to Section 12(b) of the Act:
(228) 868-4727
Registrant’s telephone number, including area code
Tit
Title of Each Class
COMMON STOCK, $3.33 PAR VALUE
6.25% SUBORDINATED NOTES
Trading
Symbol
HWC
HWCPZ
Name of Exchange on Which Registered
The NASDAQ Stock Market, LLC
The NASDAQ Stock Market, LLC
Securities registered pursuant to Section 12(g) of the Act: NONE
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes (cid:1409) No (cid:1407)
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes (cid:1407) No (cid:1409)
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 (cid:1409) No (cid:1407)
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 (cid:1409) No (cid:1407)
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer small reporting company or an
emerging growth company. See 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
Non-accelerated filer
(cid:1409)
(cid:1407)
(cid:3)
Emerging growth company (cid:1407)(cid:3)
Accelerated filer
Smaller reporting company
(cid:1407)
(cid:1407)
(cid:3)
(cid:3)
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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal
control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that
prepared or issued its audit report. (cid:1409)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes (cid:1407) No (cid:1409)
The aggregate market value of the voting stock held by nonaffiliates of the registrant was $3.8 billion based upon the closing market price on
NASDAQ on June 30, 2021. For purposes of this calculation only, shares held by nonaffiliates are deemed to consist of (a) shares held by all
shareholders other than directors and executive officers of the registrant plus (b) shares held by directors and officers as to which beneficial
ownership has been disclaimed.
On January 31, 2022, the registrant had 86,765,754 shares of common stock outstanding.
Portions of the definitive proxy statement for our annual meeting of shareholders to be filed with the Securities and Exchange
Commission (“SEC” or “the Commission”) are incorporated by reference into Part III of this Report.
DOCUMENTS INCORPORATED BY REFERENCE
Hancock Whitney Corporation
Form 10-K
Index
PART I
ITEM 1. BUSINESS
ITEM 1A. RISK FACTORS
ITEM 1B. UNRESOLVED STAFF COMMENTS
ITEM 2. PROPERTIES
ITEM 3. LEGAL PROCEEDINGS
ITEM 4. MINE SAFETY DISCLOSURES
PART II
ITEM 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS
AND ISSUER PURCHASES OF EQUITY SECURITIES
ITEM 6. RESERVED
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
ITEM 9A. CONTROLS AND PROCEDURES
ITEM 9B. OTHER INFORMATION
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
ITEM 11. EXECUTIVE COMPENSATION
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
ITEM 16 FORM 10-K SUMMARY
5
20
34
34
34
34
35
36
37
75
76
134
134
134
134
135
135
135
135
136
139
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
Hancock Whitey Investment Services – a wholly owned subsidiary of Hancock Whitney Corporation, through which Hancock
Whitney Corporation conducts broker-dealer services
Company – Hancock Whitney Corporation and its consolidated subsidiaries
Parent – Hancock Whitney Corporation, exclusive of its subsidiaries
Bank – Hancock Whitney Bank
Other Terms:
ACL – Allowance for credit losses
AFS – Available for sale securities
AMERIBOR - Ameribor Index created by the American Financial Exchange as a potential replacement for LIBOR; calculated daily
as the volume-weighted average interest rate of the overnight unsecured loans on American Financial Exchange
AOCI – Accumulated other comprehensive income or loss
ALCO – Asset Liability Management Committee
ALLL – Allowance for loan and lease losses
ARRC – Alternative reference rate committee
ASC – Accounting standards codification
ASR– Accelerated share repurchase
ASU– Accounting standards update
ATM – Automated teller machine
Basel III - Basel Committee's 2010 Regulatory Capital Framework (Third Accord)
Beta – amount by which deposit or loan costs change in response to movement in short-term interest rates
BOLI – Bank-owned life insurance
bp(s) – basis point(s)
C&I – Commercial and industrial loans
CARES Act- Coronavirus Aid Relief and Economic Security Act
CD – Certificate of deposit
CDE – Community development entity
CECL – Current Expected Credit Losses the term commonly used to refer to the methodology of estimating credit losses required by
ASC 326, “Financial Instruments – Credit Losses.” ASC 326 was adopted by the Company on January 1, 2020, superseding the
methodology prescribed by ASC 310.
CEO – Chief Executive Officer
CFPB– Consumer Financial Protection Bureau
CFO – Chief Financial Officer
CMO – Collateralized mortgage obligation
Core loans – Loans excluding Paycheck Protection Program (PPP) loans
Coronavirus – The novel coronavirus declared a pandemic during the first quarter of 2020, resulting in prolonged market disruptions
COSO – Committee of Sponsoring Organizations of the Treadway Commission
COVID-19 – disease caused by the novel coronavirus
CRA – Community Reinvestment Act of 1977
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
Dodd-Frank Act – The Dodd-Frank Wall Street Reform and Consumer Protection Act
FASB – Financial Accounting Standards Board
FDIC – Federal Deposit Insurance Corporation
1
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
IRS – Internal Revenue Service
LIBOR – London Interbank Offered Rate
LIHTC – Low income housing tax credit
LTIP – Long-term incentive plan
MBS – Mortgage-backed securities
MD&A – Management’s discussion and analysis of financial condition and results of operations
MidSouth – MidSouth Bancorp, Inc., an entity the Company acquired on September 21, 2019
MDBCF – Mississippi Department of Banking and Consumer Finance
NAICS – North American Industry Classification System
NII– Net interest income
n/m – not meaningful
NSF – Non-sufficient funds
OCI – Other comprehensive income or loss
OD – Overdraft
ORE – Other real estate defined as foreclosed and surplus real estate
PCD – Purchased credit deteriorated loans, as defined by ASC 326
PCI – Purchased credit impaired loans as defined by ASC 310-30
PPNR – Pre-provision net revenue
PPP– Paycheck Protection Program, a loan program administered by the Small Business Administration designed to provide a direct
incentive for small businesses to keep workers on payroll during interruptions caused by the COVID-19 pandemic.
Reference rate reform – Refers to the global transition away from LIBOR and other interbank offered rates toward new reference
rates that are more reliable and robust
Repos – Securities sold under agreements to repurchase
SBA – Small Business Administration
SEC – U.S. Securities and Exchange Commission
Securities Act – Securities Act of 1933, as amended
SOFR – Secured Overnight Financing Rate
TDR – Troubled debt restructuring (as defined in ASC 310-40)
TSR – Total shareholder return
te – taxable equivalent adjustment, or the term used to indicate that a financial measure is presented on a fully taxable equivalent basis
USA Patriot Act– Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism
Act of 2001
U.S. Treasury – The United States Department of the Treasury
VERIP – Voluntary Early Retirement Incentive Program
Volcker Rule – Section 619 of the Dodd-Frank Act and regulations promulgated thereunder, as applicable
2
PART I
FORWARD-LOOKING STATEMENTS
This report contains forward-looking statements within the meaning and protections of section 27A of the Securities Act of 1933, as
amended, and section 21E of the Securities Exchange Act of 1934, as amended. Important factors that could cause actual results to
differ materially from the forward-looking statements we make in this annual report are set forth in this Annual Report on Form 10-K
and in other reports or documents that we file from time to time with the SEC and include, but are not limited to, the following:
•
•
•
•
•
•
•
the negative impacts and disruptions resulting from the outbreak of the novel coronavirus and variants thereof, or COVID-19,
on the economies and communities we serve, which has had and will likely continue to have an adverse impact on our
business operations and performance, and has and may continue to have a negative impact on our credit portfolio, stock price,
borrowers and the economy as a whole both globally and domestically;
government or regulatory responses to the COVID-19 pandemic;
general economic and business conditions in our local markets, including conditions affecting employment levels, interest
rates, inflation, collateral values, customer income, creditworthiness and confidence, spending and savings that may affect
customer bankruptcies, defaults, charge-offs and deposit activity;
balance sheet and revenue growth expectations may differ from actual results;
the risk that our provision for loan losses may be inadequate or may be negatively affected by credit risk exposure;
loan growth expectations;
the impact of Paycheck Protection Program (PPP) loans on our results;
• management’s predictions about charge-offs;
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
the risk that our enterprise risk management framework may not identify or address risks adequately, which may result in
unexpected losses;
the impact of future business combinations upon our performance and financial condition including our ability to successfully
integrate the businesses;
deposit trends;
credit quality trends;
changes in interest rates;
the impact of reference rate reform;
net interest margin trends, including the impact of changes in interest rates;
success of revenue-generating initiatives;
future expense levels;
improvements in expense to revenue (efficiency ratio), including the risk that we may not realize the expected benefits from
our efficiency and growth initiatives or that we may not be able to realize these cost savings or revenue benefits in the time
period expected, which could negatively affect our future profitability;
the effectiveness of derivative financial instruments and hedging activities to manage risks;
risks related to our reliance on third parties to provide key components of our business infrastructure, including the risks
related to disruptions in services or financial difficulties of a third-party vendor;
risks related to the ability of our operational framework to manage risks associated with our business such as credit risk and
operation risk, including third-party vendors and other service providers, which could among other things, result in a breach
of operating or security systems as a result of a cyber-attack or similar act;
projected tax rates;
future profitability;
purchase accounting impacts, such as accretion levels;
our ability to identify and address potential cybersecurity risks, including data security breaches, credential stuffing,
ransomware and other malware, “denial-of-service” attacks, “hacking” and identity theft, a failure of which could disrupt our
business and result in the disclosure of and/or misuse or misappropriation of confidential or proprietary information,
disruption or damage to our systems, increased costs, losses, or adverse effects to our reputation;
•
the extensive use, reliability, disruption, and accuracy of the models and data we rely on;
3
•
•
risks related to our implementation of new lines of business, new products and services or new technologies;
our ability to receive dividends from Hancock Whitney Bank could affect our liquidity, including our ability to pay dividends
or take other capital actions;
• A net loss or a material decrease in net income over several quarters could result in a decrease in, or the elimination of, our
quarterly cash dividend;
•
•
•
•
•
•
the impact on our financial results, reputation, and business if we are unable to comply with all applicable federal and state
regulations or other supervisory actions or directives and any necessary capital initiatives;
our ability to effectively compete with other traditional and non-traditional financial services companies, some of whom
possess greater financial resources than we do or are subject to different regulatory standards than we are;
our ability to maintain adequate internal controls over financial reporting;
potential claims, damages, penalties, fines and reputational damage resulting from pending or future litigation, regulatory
proceedings and enforcement actions, including costs and effects of litigation related to our participation in stimulus
programs associated with the government’s response to the COVID-19 pandemic;
the financial impact of future tax legislation; and
changes in laws and regulations affecting our businesses, including governmental monetary and fiscal policies, legislation
and regulations relating to bank products and services, as well as changes in the enforcement and interpretation of such laws
and regulations by applicable governmental and self-regulatory agencies, which could require us to change certain business
practices, increase compliance risk, reduce our revenue, impose additional costs on us, or otherwise negatively affect our
businesses.
Also, any statement that does not describe historical or current facts is a forward-looking statement. These statements often include the
words “believes,” “expects,” “anticipates,” “estimates,” “intends,” “plans,” “forecast,” “goals,” “targets,” “initiatives,” “focus,”
“potentially,” “probably,” “projects,” “outlook” or similar expressions or future conditional verbs such as “may,” “will,” “should,”
“would,” and “could.” Forward-looking statements are based upon the current beliefs and expectations of management and on
information currently available to management. Our statements speak as of the date hereof, and we do not assume any obligation to
update these statements or to update the reasons why actual results could differ from those contained in such statements in light of new
information or future events. Factors that could cause actual results to differ from those expressed in the Company’s forward-looking
statements include, but are not limited to, those risk factors outlined in Item 1A. “Risk Factors.”
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.
4
ITEM 1. BUSINESS
ORGANIZATION
Hancock Whitney Corporation (the “Company”) is a financial services company that is both a bank holding company and a financial
holding company registered under the Bank Holding Company Act of 1956, as amended. The Company provides comprehensive
financial services through its bank subsidiary, Hancock Whitney Bank (the “Bank”), a Mississippi state bank, and other nonbank
affiliates. Our principal executive offices are located at 2510 14th Street, Gulfport, Mississippi, 39501, and our telephone number is
(800) 522-6542. Our common stock trades on the Nasdaq Global Select Market under the ticker symbol “HWC.”
At December 31, 2021, our balance sheet had grown to $36.5 billion, with loans totaling $21.1 billion and deposits totaling
$30.5 billion.
NATURE OF BUSINESS AND MARKETS
The Bank offers a broad range of traditional and online banking services to commercial, small business and retail customers,
providing a variety of transaction and savings deposit products, treasury management services, secured and unsecured loan products
(including revolving credit facilities), and letters of credit and similar financial guarantees. The Bank also provides trust and
investment management services to retirement plans, corporations and individuals.
We offer other services through bank and nonbank subsidiaries. Our nonbank subsidiary of the holding company, Hancock Whitney
Investment Services, Inc., provides investment brokerage services, annuity and life insurance products, and participates in select
underwriting transactions, primarily for banking clients with which we have an existing relationship. The Bank’s subsidiaries Hancock
Whitney Equipment Finance, LLC and Hancock Whitney Equipment Finance and Leasing, LLC, provide commercial finance
products to middle market and corporate clients, including leases and related structures. We have other subsidiaries of the bank for
purposes such as facilitating investments in new market tax credit activities and holding certain foreclosed assets.
We operate primarily in the Gulf South region of the U.S., comprised of southern and central Mississippi; southern and central
Alabama; southern, central and northwest Louisiana; the northern, central, and panhandle regions of Florida; and certain areas of east
and northeast Texas, including the Houston, Beaumont, Dallas and San Antonio areas, among others. We also operate a loan
production office in Nashville, Tennessee. At December 31, 2021, we had 177 banking locations and 240 ATMs across our footprint.
Our operating strategy is to provide customers with the financial sophistication and range of products of a regional bank, while
successfully retaining the commercial appeal and level of service of a community bank.
Some of the most common forms of commerce along the Gulf Coast and other areas we serve are retail trade, healthcare and social
assistance, hospitality and tourism, petrochemical refining, energy and related services, military and government related activities,
educational complexes, transportation services and port facilities, among others.
Our priority is to continue to grow revenue in our existing markets with controlled expenses while providing five-star service through
enhanced technology and processes that make banking simpler for our clients. We have and will continue to invest in promoting new
and enhanced products that contribute to the goals of continuing to diversify our sources of revenue for both new and existing clients.
We have and will continue to evaluate future acquisition opportunities that have the potential to increase shareholder value, provided
overall economic conditions and our capital levels support such a transaction.
Additional information regarding the Company and the Bank is available at investors.hancockwhitney.com.
Loan Production, Underwriting Standards and Credit Review
The Bank’s primary lending focus is to provide commercial, consumer and real estate loans to consumers, small and middle market
businesses, and corporate clients in the markets served by the Bank. We seek to provide quality loan products that are attractive to the
borrower and profitable to the Bank. We look to build strong, profitable client relationships over time and maintain a strong presence
and position of influence in the communities we serve. Through our relationship-based approach, we have developed a deep
knowledge of our customers and the markets in which they operate. We continually work to ensure consistency of the lending
processes across our banking footprint, to strengthen the underwriting criteria we employ to evaluate new loans and loan renewals,
and to diversify our loan portfolio in terms of type, industry and geographical concentration. We believe that these measures position
the Bank to meet the credit needs of businesses and consumers in the markets we serve while pursuing a balanced strategy of loan
profitability, growth and credit quality.
The following describes the underwriting procedures of the lending function and presents our principal categories of loans. The results
of our lending activities and the relative risk of the loan portfolio are discussed in Item 7. “Management’s Discussion and Analysis of
Financial Condition and Results of Operations.”
5
The Bank has a set of loan policies, underwriting standards and key underwriting functions designed to achieve a consistent lending
and credit review approach. Our underwriting standards address the following criteria:
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
collateral requirements;
guarantor requirements (including policies on financial statements, tax returns, and guarantees);
requirements regarding appraisals and their review;
loan approval hierarchy;
standard consumer and small business credit scoring underwriting criteria (including credit score thresholds, maximum
maturity and amortization, loan-to-value limits, global debt service coverage, and debt to income limits);
commercial real estate and commercial and industrial underwriting guidelines (including minimum debt service coverage
ratio, maximum amortization, minimum equity requirements, maximum loan-to-value ratios);
lending limits; and
credit approval authorities.
Additionally, our loan concentration policy sets limits and manages our exposures within specified concentration tolerances, including
those to particular borrowers, foreign entities, industries, and property types for commercial real estate. This policy sets standards for
portfolio risk management and reporting, monitoring of large borrower concentration limits and systematic tracking of large
commercial loans and our portfolio mix. We continually monitor our concentration of commercial real estate, healthcare, shared
national credits, leveraged loans and energy-related loans to ensure the mix is consistent with our risk tolerance. In addition, as a result
of the COVID-19 economic environment, we have enhanced our due diligence on customers, portfolios and concentrations. This
additional focus will continue for the duration of the public health emergency, and likely longer, to ensure alignment between risk
appetite and concentration risk management. We define concentration as the total of funded and unfunded commitments as a
percentage of total Bank capital (as defined for risk-based capital ratios). Portfolio segment concentrations (shown as a percentage of
risk-based capital) as of December 31, 2021 are as follows:
Portfolio Segment Concentrations
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
Commercial non-real estate — 482%
Commercial real estate - owner occupied — 92%
Commercial real estate-income producing — 113%
Construction and land development — 95%
Residential mortgage — 76%
Consumer — 106%
The following details the more significant industry concentrations for commercial non-real estate and owner occupied real estate
included above (shown as a percentage of risk-based capital) as of December 31, 2021:
Significant Industry Concentrations
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
Real estate and rental and leasing — 58%
Healthcare and social assistance — 55%
Construction — 54%
Manufacturing — 52%
Finance and insurance — 49%
(cid:120) Wholesale trade — 47%
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
Retail trade — 46%
Professional, scientific and technology services — 34%
Transportation and warehousing — 34%
Accommodation and food services — 21%
Government and public administration — 19%
Other services (except public administration) — 18%
Mining, quarrying and oil and gas extraction — 15%
6
Our underwriting process is structured to require oversight that is proportional to the size and complexity of the lending relationship.
We delegate designated regional managers, relationship managers, and credit officers loan authority that can be utilized to approve
credit commitments for a single borrowing relationship. The limit of delegated authority is based upon the experience, skill and
training of the relationship manager or credit officer. Certain types and sizes of loans and relationships must be approved by either one
of the Bank’s centralized underwriting units or by Regional or Senior Regional Commercial Credit Officers, either individually or
jointly with the Chief Credit Officer, depending upon the overall size of the borrowing relationship.
Loans are underwritten in accordance with the underwriting standards and loan policies of the Bank. Loans are underwritten primarily
on the basis of the borrower’s ability to make timely debt service payments, and secondarily on collateral value. Generally, real estate
secured loans and mortgage loans are made when the borrower produces evidence of the ability to make timely debt service payments
along with appropriate equity investment in the property. Appropriate and regulatory compliant third party valuations are required at
the time of origination for real estate secured loans.
The following briefly describes the composition of our loan portfolio by segment:
Commercial and industrial
The Bank offers a variety of commercial loan services to a diversified customer base over a range of industries, including wholesale
and retail trade in various durable and nondurable products, manufacturing of such products, financial and professional services,
healthcare services, energy, marine transportation and maritime construction, and agricultural production, among others. Commercial
and industrial loans are made available to businesses for working capital (including financing of inventory and receivables), business
expansion, to facilitate the acquisition of a business, and the purchase of equipment and machinery, including equipment leasing.
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, 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. Asset-based loans, such as accounts receivables and commodity interest secured
loans, may have limits on borrowing that are based on the collateral values. In the case of loans secured by accounts receivable, the
availability of funds for the repayment of these loans may be substantially dependent on the ability of the borrower to collect amounts
due from its customers.
Commercial non-real estate loans also include loans made under the Small Business Administration’s (SBA) Paycheck Protection
Program (PPP). The PPP closed for new originations in 2021 and is not expected to be reopened. PPP loans are guaranteed by the
SBA and are forgivable to the debtor upon satisfaction of certain criteria. The loans bear interest at 1% per annum and have two or
five year terms, depending on the date of origination. These loans also earn an origination fee of 1% to 5%, depending on the loan
size, that is deferred and amortized over the estimated life of the loan using the effective yield method.
Commercial real estate – owner occupied loans consist of commercial mortgages on properties where repayment is generally
dependent on the cash flow from the ongoing operations and activities of the borrower. Like commercial non-real estate, these loans
are primarily made based on the identified cash flows of the borrower, but also have the added strength of the value of underlying real
estate collateral.
Commercial real estate – income producing
Commercial real estate – income producing loans consist of loans secured by commercial mortgages on properties where the loan is
made to real estate developers or investors and repayment is dependent on the sale, refinance or income generated from the operation
of the property. Properties financed include retail, office, multifamily, senior housing, hotel/motel, skilled nursing facilities and other
commercial properties.
Repayment of commercial real estate – income producing loans is generally dependent on the successful operation of the property
securing the loan. Commercial real estate loans may be adversely affected by conditions in the real estate markets or in the general
economy. The properties securing the commercial real estate – income producing portfolios are diverse in terms of type and
geographic location. We monitor and evaluate these loans based on collateral, geography and risk grade criteria. This portfolio has
experienced minimal losses in the last several years; however, past experience has shown that commercial real estate conditions can be
volatile, so we actively monitor concentrations within this portfolio segment, among others.
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 generally 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.
Acquisition and development loans are underwritten utilizing feasibility studies, independent appraisal reviews, sensitivity analysis of
real estate absorption and lease rates, and financial analysis of the developers and property owners. Construction loans are generally
based upon cost estimates, the amount of sponsor equity investment, and the projected value of the completed project. The Bank
7
monitors the construction process to mitigate or identify risks as they arise. Construction loans often involve the disbursement of
substantial funds with repayment largely dependent on the success of the ultimate project. Sources of repayment for these types of
construction loans may be pre-committed permanent loans from approved long-term lenders, sales of developed property, or an
interim loan commitment from the Bank until permanent financing is obtained. These loans are typically closely monitored by on-site
inspections and are considered to have higher risks than other real estate loans due to their ultimate repayment being sensitive to
interest rate changes, governmental regulation of real property, general economic conditions, and the availability of long-term
financing to repay the construction loan in full.
Owner occupied loans for the development and improvement of real property to commercial customers to be used in their business
operations are underwritten subject to normal commercial and industrial credit standards and are generally subject to project tracking
processes, similar to those required for commercial real estate – income producing loans.
This portfolio also includes residential construction loans and loans secured by raw land not yet under development.
Residential Mortgages
Residential mortgages consist of closed-end loans secured by first liens on 1- 4 family residential properties. The portfolio includes
both fixed and adjustable rate loans, although most longer-term, fixed-rate loans originated are sold in the secondary mortgage market.
The sale of fixed-rate mortgage loans allows the Bank to manage the interest rate risks related to such lending operations.
Consumer
Consumer loans include second lien mortgage home loans, home equity lines of credit and nonresidential consumer purpose loans.
Nonresidential consumer loans include both direct and indirect loans. Direct nonresidential consumer loans are made to finance the
purchase of personal property, including automobiles, recreational vehicles and boats, and for other personal purposes (secured and
unsecured), and deposit account secured loans. Indirect nonresidential loans include automobile financing provided to the consumer
through an agreement with automobile dealerships, though we are 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.
The Bank approves consumer loans based on income and financial information submitted by prospective borrowers as well as credit
reports collected from various credit agencies. Financial stability and credit history of the borrower are the primary factors the Bank
considers in granting such loans. The availability of collateral is also a factor considered in making such loans. Consideration is also
given to whether the borrower is located in the Bank’s primary market areas.
Securities Portfolio
The investment portfolio primarily consists of U.S. agency debt securities, U.S. agency mortgage-related securities and obligations of
states and municipalities classified as either available for sale or held to maturity. We consider the available for sale portfolio as one of
many sources of liquidity available to fund our operations. Investments are made in accordance with an investment policy approved by
the Board Risk Committee. Company policies generally limit investments to agency securities and municipal securities determined to
be investment grade according to an internally generated score, which generally includes a rating of not less than “Baa” or its
equivalent by a nationally recognized statistical rating organization. The investment portfolio is tested monthly under multiple
stressed interest rate scenarios, the results of which are used to manage our interest rate risk position. The rate scenarios include
regulatory and management agreed upon instantaneous and ramped rate movements that may be up to plus 500 basis points. The
combined portfolio has a target effective duration of two to five and a half years.
A significant portion of the securities portfolio is used to secure certain deposits and other liabilities requiring collateralization. We
limit the percentage of securities that can be pledged in order to keep a portion of securities available to support liquidity. The
securities portfolio can also be pledged to increase our line of credit available at the Federal Home Loan Bank (FHLB) of Dallas and
the Federal Reserve Bank of Atlanta.
The investments subcommittee of the asset/liability committee (ALCO) is responsible for the oversight, monitoring and management
of the investment portfolio. The investments subcommittee is also responsible for the development of investment strategies for the
consideration and approval of ALCO. Final authority and responsibility for all aspects of the conduct of investment activities rests
with the Board Risk Committee, all in accordance with the overall guidance and limitations of the investment policy. See Item 7.
“Management’s Discussion and Analysis of Financial Condition and Results of Operations-Enterprise Risk Management,” for further
discussion.
Deposits
The Bank has several programs designed to attract deposit accounts from consumers and businesses at interest rates generally
consistent with market conditions. Deposits are the most significant funding source for the Company’s interest-earning assets. Interest
paid on deposits represents a significant component of our interest expense. Deposits are attracted principally from clients within our
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retail branch network through the offering of a broad array of deposit products to individuals and businesses, including noninterest-
bearing demand deposit accounts, interest-bearing transaction accounts, savings accounts, money market deposit accounts, and time
deposit accounts. Terms vary among deposit products with respect to commitment periods, minimum balances and applicable fees.
Interest rates offered on interest-bearing deposits are determined based on a number of factors, including, but not limited to,
(1) interest rates offered in local markets by competitors, (2) current and expected economic conditions, (3) anticipated future interest
rates, (4) the expected amount and timing of funding needs, and (5) the availability and cost of alternative funding sources. Deposit
flows are generally controlled primarily through pricing, and to a lesser extent, through promotional activities. More recently, deposit
levels have also been influenced by pandemic-driven factors, such as inflows from government stimulus payments and PPP loan
proceeds, and a general slowdown in consumer and business spending, and other factors, such as hurricane-related insurance proceeds.
Management believes that the rates that it offers on deposit accounts are generally competitive with other financial institutions in the
Bank’s market areas. Client deposits are attractive sources of funding because of their stability and low relative cost. Deposits are
regarded as an important part of the overall client relationship.
The Bank also holds deposits of public entities. The Bank’s strategy for acquiring public funds, as with any type of deposit, is
determined by ALCO’s funding and liquidity subcommittee while pricing strategies are determined by ALCO’s deposit pricing
subcommittee. Typically, many public fund deposits are allocated based upon the rate of interest offered and the ability of a bank to
provide collateralization. The Bank can influence the level of its public fund deposits through pricing decisions. Public deposits
typically require the pledging of collateral, most commonly marketable securities and Federal Home Loan Bank letters of credit. This
is taken into account when determining the level of interest to be paid on public deposits. The pledging of collateral, monitoring and
management reporting represents additional operational requirements for the Bank. Public fund deposits are more volatile than other
core deposits because they tend to be price sensitive and have large balances. Public funds are only one of many possible sources of
liquidity that the Bank has available to draw upon as part of its liquidity funding strategy as set by ALCO.
Brokered deposits, including time deposits and money market accounts, totaled $30 million at December 31, 2021. Brokered deposits
are funds which the Bank obtains through deposit brokers who sell participations in a given bank deposit account or instrument to one
or more investors. These brokered deposits are fully insured by the FDIC because they are participated out by the deposit broker in
shares of $250,000 or less. Brokered deposit issuances are approved by ALCO as one component of its funding strategy to support
ongoing asset growth until such time as customer deposit growth ultimately replaces the brokered deposits. As a result of transaction
and savings deposit growth since 2020 that largely stemmed from the deposit of government stimulus funds and PPP loans, the
Company has not renewed maturing brokered deposits. Under the Federal Deposit Insurance Corporation Improvement Act of 1991
(“FDICIA”), the Bank may continue to accept brokered deposits as long as it is either “well-capitalized” or “adequately-capitalized.”
Trust Services
The Bank, through its trust department, offers a full range of trust services on a fee basis. In its trust capacities, the Bank provides
investment management services on an agency basis and acts as trustee for pension plans, profit sharing plans, corporate and
municipal bond issues, living trusts, life insurance trusts and various other types of trusts created by or for individuals, businesses, and
charitable and religious organizations. At December 31, 2021, the trust department of the Bank had approximately $28.0 billion of
assets under administration, comprised of investment management and investment advisory agency accounts of $5.6 billion and other
custody and safekeeping accounts of $10.1 billion, corporate trust accounts of $6.0 billion, and personal, employee benefit, estate and
other trust accounts totaling $6.3 billion.
HUMAN CAPITAL RESOURCES
Our employees, whom we refer to as associates, are our most valuable asset. Associates are the collective face, voice, and spirit of our
organization. To the people and communities we serve, our associates are Hancock Whitney. Our century-old culture and core values
are the consistent beacon that guides how our associates carry on our legacy with honor, integrity, and service. Additionally, the
policies and practices we define for associates further reinforce the founding principles fundamental to who we are and how we do
business. The diversity of our associates makes us a stronger and more resilient company, one that fosters a culture of inclusion and
belonging, and one that supports our associates, clients, communities, and shareholders in achieving their goals and dreams.
We promise our associates an environment where they can grow, they have a voice, and they are important. We are committed to
providing an associate experience and total rewards package that attracts, develops, and retains top quality talent. We continually
review and develop strategies that support the needs of our associates while balancing business needs. In 2021, the Company’s human
capital strategy focused on supporting the ever-changing needs of our associates, our ongoing response to the COVID-19 pandemic,
and various initiatives to improve operations and overall efficiency while maintaining our commitment to our clients and
communities.
Workforce Demographics
As of December 31, 2021, the Company had 3,486 full-time equivalent associates, predominately located in our core footprint of
Mississippi, Louisiana, Alabama, Florida, Texas and Tennessee, compared to 3,986 associates as of December 31, 2020. During 2021,
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we reduced our full-time equivalent headcount by approximately 13% through regular voluntary attrition, a voluntary early retirement
incentive program (VERIP), and other initiatives to improve overall efficiency. Further discussion of these initiatives appear in Part II,
Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this document.
Diversity, Equity, and Inclusion
Diversity, Equity, and Inclusion (DEI) are fundamental to our purpose. We pledge exceptional service to our clients and communities
and believe our commitment to DEI further strengthens our ability to meet the needs of our associates, communities, clients, and
shareholders. Different perspectives, backgrounds, and experiences produce stronger teams and collaborative innovation resulting in
improved overall organizational performance. This wider range of influence and diverse thought allows us to better serve the people
and communities depending on us.
Underscoring an ongoing commitment to championing a culture of inclusion and belonging, the Company established a DEI Council
sponsored by the President and CEO in 2018, which consists of associates from a variety of locations, business segments, genders,
races, ethnicities, tenures, and experiences who work together as thought leaders to promote and foster an inclusive workplace culture
that appreciates differences and values all perspectives. Additionally, the Company named a Director of DEI in 2020 to serve as a
champion and dedicated resource to lead our DEI efforts. The Director of DEI and the Chief Human Resources Officer serve as chair
and co-chair, respectively, of the DEI Council and partner with Company leaders on strategies to attract, hire, develop, and retain a
diverse workforce of top talent, regardless of race, color, religious beliefs, national origin, ancestry, citizenship, sex, gender, sexual
orientation, gender identity, marital status, age, disability, genetic information, protected veteran status or any other dimension of
diversity. We monitor and track the progress of our efforts and regularly implement programs and practices to support a diverse and
inclusive workplace. As of December 31, 2021, approximately 67% of our associates have self-identified as female and approximately
27% have self-identified as a person of color.
Continuing on our efforts to build and attract a diverse workforce, in 2021, we cultivated new relationships and strengthened existing
partnerships and recruiting efforts with key organizations. We enhanced our campus recruiting, internship, and scholarship programs
across the footprint and expanded efforts at historically black colleges and universities by funding the establishment of scholarships
and programs to support black students. Further, we deepened partnerships with diverse external professional organizations such as
Ochsner Health System Employee Resource Groups, City of New Orleans Supplier Diversity Office, and Lighthouse Business &
Professional Women, and leveraged our associates for candidate referrals. In 2021, approximately 76% of our new hires self-identified
as a female and approximately 43% of new hires self-identified as a person of color.
Further supporting and celebrating the existing workforce, associates are provided diversity education, experiences, and resources to
help inspire behaviors that contribute to an inclusive, high-performing culture in which all associates may thrive. In 2021, the
Company enhanced its diversity-learning opportunities with new experiential learning platforms including Fierce Conversations 3D
Simulations, Understanding Cultural Bias, and associate conversation series to help drive inclusive behaviors and inspire a growth
mindset. Additionally, we increased our focus on associate volunteer activities tied to strengthening DEI within our footprint.
Compensation and Benefits
We strive to provide a comprehensive total rewards package that meets the various needs of our associates including market-
competitive pay and robust benefit options that attract and retain top talent. To ensure our total rewards programs remain competitive,
we engage in nationally recognized third-party compensation and benefits surveys and utilize the expertise of an independent
executive compensation firm and an outside benefits broker and consulting firm to objectively evaluate our compensation and benefits
packages and benchmark them against industry peers and similarly situated organizations on an annual basis.
Our compensation philosophy is a performance-based strategy which aligns our programs with our business goals and objectives. Base
salaries are established considering competitive market rates for specific roles as well as the experience and performance levels of our
associates. The Company rewards associates for individual performance through merit-based compensation increases and provides
additional opportunities for financial advancement through promotions and various incentive opportunities.
We promote a pay-for-performance philosophy and motivate a majority of our associate population with incentive compensation
designed to drive strategies, behaviors, and business goals while effectively balancing risk and reward. We also use long-term
incentive compensation to attract and retain top talent while keeping associates focused on long-term company performance,
significant milestone achievements, and creation of shareholder value.
We recognize the well-being of our associates is critical to the success of the organization. We offer a competitive and comprehensive
benefits program to support associates throughout all life stages. Our benefits include comprehensive health, dental, life, and disability
coverage that are funded in whole or in part by the Company as well as a 401(k) plan featuring a company match of a dollar-for-dollar
on the first one percent and 50 cents on the dollar on the next five percent of associate contributions and a fixed employer contribution
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of two percent of pay for associates who do not participate in our grandfathered pension program. We also provide our associates with
programs and tools to support their overall well-being including paid time off, personal health advocate, employee assistance,
behavioral assistance, and tuition reimbursement programs, as well as a range of resources to support the well-being of our associates
and their families throughout the full spectrum of their careers and lives.
Talent Acquisition, Development, and Retention
The Company is dedicated to attracting, developing, and retaining exceptional talent and strives to keep associates motivated,
rewarded, and appreciated through our commitment to DEI; competitive total rewards packages; and career development. Of the
approximately 1,300 requisitions filled in 2021, 47% were filled by internal associates. Approximately 12% of our workforce received
a promotion in 2021, consisting of 76% females and 28% persons of color.
Recognizing the development of our associates is critical to our success, the Company invests in resources to ensure associates have
access to the tools needed to do their jobs effectively and succeed within the organization, including technical, skills-based,
management, and leadership programs, as well as formal talent, performance management, and succession planning processes.
Through customized learning plans, associates are provided targeted resources to ensure they gain the knowledge and skills needed to
successfully perform their duties in accordance with the Company’s practices. Associates also have access to a full suite of optional
classes and self-directed resources to personalize career development and prioritize their unique needs and growth opportunities.
Additionally, the Company also supports the use of external resources such as professional conferences, specialized seminars, banking
schools and other development and leadership programs to supplement associates’ professional development and provides a tuition
assistance program for those seeking to deepen their education at undergraduate and graduate levels.
Associate Health, Safety, and Well-Being
The health, safety, and well-being of our associates, along with operating in a safe, secure, and responsible manner, are top priorities
for the Company. In addition to the variety of benefits and programs to support the physical, emotional, intellectual, financial, and
occupational well-being of our associates, the Hancock Whitney Associate Assistance Fund provides assistance for associates with
personal and financial needs during time of unexpected or unavoidable emergencies or disasters. The fund is managed by the Gulf
Coast Community Foundation and funded by contributions from the Company as well as associates, board members, and partner
organizations.
In 2021, the Company continued its response efforts to the COVID-19 pandemic to ensure the health and safety of our associates,
clients, and communities. Safety protocols and procedures remain in place, and we continue to monitor and update our practices in
line with CDC guidance and make adjustments to operations in financial centers and office locations as necessary to ensure the health
and safety of our associates. The Company also launched an Associate COVID-19 Vaccination Incentive Program (VIP), which
provided a one-time $150 cash bonus and cash drawing opportunities for associates who receive the full manufacturer-recommended
doses of the COVID-19 vaccine and voluntarily submit acceptable proof of vaccination. At December 31, 2021, approximately 70%
of associates voluntarily reported having received the recommended doses of the COVID-19 vaccine.
Rooted in the Gulf South, our company and associates are frequently impacted by hurricanes and other storms. We believe it is
paramount to provide relief and recovery resources to help associates and their families remain safe and recover quickly when a storm
hits. On August 29, 2021, approximately 25% of our associates were impacted by Hurricane Ida in some way. As a commitment to our
associates’ recovery, the Company made a $500,000 contribution to the Hancock Whitney Associate Assistance Fund to provide relief
and recovery grants for impacted associates. Additionally, the Company coordinated lodging, blue tarp assistance, meals, and other
resources to further support associates in need, totaling more than $1.6 million.
COMPETITION
The financial services industry is highly competitive and may become more competitive as a result of recent and ongoing legislative,
regulatory, and technological changes, as well as continued consolidation within the financial services industry and the entrance of
new nontraditional competitors into our markets, including financial technology (fintech) companies. The traditional factors in the
competition for deposits and loans are interest rates and fee structures associated with the various products offered. We also compete
through the efficiency, quality and range of services and products we provide, as well as the convenience provided by an extensive
network of customer access channels including local branch offices, ATMs, online and mobile banking, and telebanking centers. In
attracting deposits and in our lending activities, we generally compete with other commercial banks, savings associations, credit
unions, mortgage banking firms, securities brokerage firms, mutual funds and insurance companies, and other financial and non-
financial institutions offering similar products.
The continuing consolidation within the financial services industry is leading to larger, better capitalized and geographically diverse
institutions with enhanced product and technology capabilities. Additionally, competition from fintechs, is increasing. In addition to
fintechs, certain technology companies are working to provide financial services directly to their customers. These nontraditional
financial service providers have been successful in developing digital and other products and services that effectively compete with
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traditional banking services, but are in some cases subject to fewer regulatory restrictions than banks and bank holding companies,
allowing them to operate with greater flexibility and lower cost structures. Although digital products and services have been important
competitive features of financial institutions for some time, the COVID-19 pandemic has accelerated the move toward digital financial
services products and we expect that trend to continue.
AVAILABLE INFORMATION
We make available free of charge, on or through our investor relations website www.hancockwhitney.com/investors, our Annual
Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and other filings pursuant to Section 13(a) or
15(d) of the Securities Exchange Act of 1934, and amendments to such filings, as soon as reasonably practicable after each is
electronically filed with, or furnished to, the SEC. The SEC maintains a website that contains the Company’s reports, proxy
statements, and the Company’s other SEC filings. The address of the SEC’s website is www.sec.gov. We include our website address
throughout this filing only as textual references. The information contained on our website is not incorporated in this document by
reference.
Also available on our investor relations website are our corporate governance documents, including Corporate Governance
Guidelines, Code of Business Ethics for Officers and Associates, Whistleblower Policy, Code of Ethics for Financial Officers, Code of
Ethics for Directors and Committee Charting. These documents are also available in print to any stockholder who requests a copy.
SUPERVISION AND REGULATION
Bank holding companies and banks are extensively regulated under federal and state law. This discussion is a summary and is
qualified in its entirety by reference to the particular statutory and regulatory provisions described below and is not intended to be an
exhaustive description of the statutes or regulations applicable to the Company or the Bank or all aspects of those statutes and
regulations.
Changes in laws and regulations may alter the structure, regulation and competitive relationships of financial institutions. In addition,
bank regulatory agencies may issue enforcement actions, policy statements, interpretive letters and similar written guidance applicable
to the Company or the Bank. It cannot be predicted whether and in what form new laws and regulations, or interpretations thereof,
may be adopted or the extent to which the business of the Company and the Bank may be affected thereby, but they may have a
material adverse effect on our business, operations, and earnings.
Supervision, regulation, and examination of the Company, the Bank, and our respective subsidiaries by the appropriate regulatory
agencies, as described herein, are intended primarily for the protection of consumers, bank depositors and the Deposit Insurance Fund
(“DIF”) of the FDIC, and the U.S. banking and financial system, rather than holders of our capital stock.
Bank Holding Company Regulation
The Company is subject to extensive supervision and regulation by the Board of Governors of the Federal Reserve System (the
“Federal Reserve”) pursuant to the Bank Holding Company Act of 1956, as amended (the “BHC Act”). We are required to file with
the Federal Reserve periodic reports and such other information as the Federal Reserve may request. Ongoing supervision is provided
through regular examinations by the Federal Reserve and other means that allow the regulators to gauge management’s ability to
identify, assess and control risk in all areas of operations in a safe and sound manner and to ensure compliance with laws and
regulations. The Company is subject to regulation by the State of Mississippi under its general business corporation laws, and to
supervision by the Mississippi Department of Banking and Consumer Finance (the “MDBCF”). The Federal Reserve may also
examine our non-bank subsidiaries. Various federal and state bodies regulate and supervise our brokerage, investment advisory and
insurance agency operations. These include, but are not limited to, the SEC, the Financial Industry Regulatory Authority (“FINRA”),
federal and state banking regulators and various state regulators of insurance and brokerage activities.
Violations of laws and regulations, or other unsafe and unsound practices, may result in regulatory agencies imposing fines or
penalties, cease and desist orders, or taking other enforcement actions. Under certain circumstances, these agencies may enforce these
remedies directly against officers, directors, employees and other parties participating in the affairs of a bank or bank holding
company. Under federal and state laws and regulations pertaining to the safety and soundness of insured depository institutions,
federal and state banking regulators have the authority to compel or restrict certain actions on our part if they determine that we have
insufficient capital or other resources, or are otherwise operating in a manner that may be deemed to be inconsistent with safe and
sound banking practices. Under this authority, our regulators can require us or our subsidiaries to enter into informal or formal
supervisory agreements, including board resolutions, memoranda of understanding, written agreements and consent or cease and desist
orders, pursuant to which we would be required to take identified corrective actions to address cited concerns and to refrain from
taking certain actions.
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If we become subject to and are unable to comply with the terms of any future regulatory actions or directives, supervisory
agreements, or orders, then we could become subject to additional, heightened supervisory actions and orders, possibly including
consent orders, prompt corrective action restrictions and/or other regulatory actions, including prohibitions on the payment of
dividends on our common stock and, if issued, preferred stock. If our regulators were to take such additional supervisory actions, then
we could, among other things, become subject to significant restrictions on our ability to develop any new business, as well as
restrictions on our existing business, and we could be required to raise additional capital, dispose of certain assets and liabilities within
a prescribed period of time, or both. The terms of any such supervisory action could have a material negative effect on our business,
reputation, operating flexibility, financial condition, and the value of our common stock and preferred stock.
Activity Limitations. The Company is registered with the Federal Reserve as a bank holding company and has elected to be treated as
a financial holding company under the BHC Act. Bank holding companies generally are limited to the business of banking, managing
or controlling banks, and other activities that the Federal Reserve determines to be closely related to banking, or managing or
controlling banks as to be a proper incident thereto. Bank holding companies are prohibited from acquiring or obtaining control of
more than five percent (5%) of the outstanding voting interests of any company that engages in activities other than those activities
permissible for bank holding companies. Examples of activities that the Federal Reserve has determined to be permissible are making,
acquiring, brokering, or servicing loans; leasing personal property; providing certain investment or financial advice; performing
certain data processing services; acting as agent or broker in selling credit life insurance and other insurance products in certain
locations; securities brokerage; and performing certain insurance underwriting activities. The BHC Act does not place geographic
limits on permissible non-banking activities of bank holding companies. Even with respect to permissible activities, however, the
Federal Reserve has the power to order a holding company or its subsidiaries to terminate any activity or its control of any subsidiary
when the Federal Reserve has reasonable cause to believe that continuation of such activity or control of such subsidiary would pose a
serious risk to the financial safety, soundness or stability of any bank subsidiary of that holding company.
As a financial holding company, we are permitted to engage directly or indirectly in a broader range of activities than those permitted
for a bank holding company that has not elected to be a financial holding company. Financial holding companies may also engage in
activities that are considered to be financial in nature, as well as those incidental or, if determined by the Federal Reserve,
complementary to financial activities. If the Company or the Bank ceases to be “well capitalized” or “well managed” under applicable
regulatory standards, or if the Bank receives a rating of less than satisfactory under the Community Reinvestment Act of 1977
(“CRA”), the Federal Reserve may, among other things, place limitations on our ability to conduct these broader financial activities
or, if the deficiencies persist, require us to divest the banking subsidiary or the businesses engaged in activities permissible only for
financial holding companies.
As further described below, the Company and the Bank are each well-capitalized under applicable regulatory standards as of
December 31, 2021, and the Bank has a rating of “Satisfactory” in its most recent CRA evaluation.
Source of Strength Obligations. A bank holding company such as us is required to act as a source of financial and managerial strength
to its subsidiary bank and to maintain resources adequate to support its bank. The term “source of financial strength” means the ability
of a company, such as us, that directly or indirectly owns or controls an insured depository institution, such as the Bank, to provide
financial assistance to such insured depository institution in the event of financial distress. The appropriate federal banking agency for
the depository institution (in the case of the Bank, this agency is the FDIC) may require reports from us to assess our ability to serve as
a source of strength and to enforce compliance with the source of strength requirements by requiring us to provide financial assistance
to the Bank in the event of financial distress. If we were to enter bankruptcy or become subject to the orderly liquidation process
established by the Dodd-Frank Act, any commitment by us to a federal bank regulatory agency to maintain the capital of the Bank
would be assumed by the bankruptcy trustee or the FDIC, as appropriate, and entitled to a priority of payment. In addition, the FDIC
provides that any insured depository institution generally will be liable for any loss incurred by the FDIC in connection with the
default of, or any assistance provided by the FDIC to, a commonly controlled insured depository institution. The Bank is an FDIC-
insured depository institution and thus subject to these requirements.
Acquisitions. The BHC Act requires every bank holding company to obtain the prior approval of the Federal Reserve or waiver of
such prior approval before it (1) acquires ownership or control of any voting shares of any bank if, after such acquisition, such bank
holding company will own or control more than five percent (5%) of the voting shares of such bank, (2) acquires all of the assets of a
bank, or (3) merges with any other bank holding company. In reviewing a proposed covered acquisition, among other factors, the
Federal Reserve considers (1) the financial and managerial resources of the companies involved, including pro forma capital ratios; (2)
the risk to the stability of the United States banking or financial system; (3) the convenience and needs of the communities to be
served, including performance under the CRA; and (4) the effectiveness of the companies in combating money laundering. The
Federal Reserve also reviews any indebtedness to be incurred by a bank holding company in connection with a proposed acquisition to
ensure that the bank holding company can service such indebtedness without adversely affecting its ability to serve as a source of
strength to its bank subsidiaries. Well capitalized and well managed bank holding companies are permitted to acquire control of banks
in any state, subject to federal regulatory approval, without regard to whether such a transaction is prohibited by the laws of any state.
However, a bank holding company may not, following an interstate acquisition, control more than 10% of nationwide insured deposits
or 30% of deposits within any state in which the acquiring bank operates. States have the right to lower the 30% limit, although no
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states within the Company’s current market area have done so. Federal banking regulators are also required to take into account
compliance with the CRA in evaluating any proposal for interstate bank acquisitions.
Change in Control. Federal law restricts the amount of voting stock of a bank holding company or a bank that a person may acquire
without the prior approval of banking regulators. Under the Change in Bank Control Act and the regulations thereunder, a person or
group must give advance notice to and obtain approval from the Federal Reserve before acquiring control of any bank holding
company, such as the Company. The Change in Bank Control Act creates a rebuttable presumption of control if a member or group
acquires a certain percentage or more of a bank holding company’s voting stock. As a result, a person or entity generally must provide
prior notice to the Federal Reserve before acquiring the power to vote 10% or more of our outstanding common stock. The overall
effect of such laws is to make it more difficult to acquire a bank holding company by tender offer or similar means than it might be to
acquire control of another type of corporation. Consequently, shareholders of the Company may be less likely to benefit from the rapid
increases in stock prices that may result from tender offers or similar efforts to acquire control of other companies. Investors should be
aware of these requirements when acquiring shares of our stock.
Anti-tying rules. A bank holding company and its subsidiaries are prohibited from engaging in certain tying arrangements in
connection with extensions of credit, leases or sales of property, or furnishing of services.
Volcker Rule. The Volcker Rule prohibits us and our subsidiaries from (i) engaging in certain proprietary trading for our own account,
and (ii) acquiring or retaining an ownership interest in or sponsoring a “covered fund,” all subject to certain exceptions. The Volcker
Rule also specifies certain limited activities in which we and our subsidiaries may continue to engage, and required us to implement a
compliance program. In 2020, amendments to the proprietary trading and covered funds regulations issued by the federal banking
agencies, the SEC and the Commodity Futures Trading Commission took effect, simplifying compliance and providing additional
exclusions and exemptions.
Capital Requirements
The Company and the Bank are required under federal law to maintain certain minimum capital levels based on ratios of capital to
total assets and capital to risk-weighted assets. The required capital ratios are minimums, and the federal banking agencies may
determine that a banking organization, based on its size, complexity or risk profile, must maintain a higher level of capital in order to
operate in a safe and sound manner. Risks such as concentration of credit risks and the risk arising from non-traditional activities, as
well as the institution’s exposure to a decline in the economic value of its capital due to changes in interest rates, and an institution’s
ability to manage those risks are important factors that are to be taken into account by the federal banking agencies in assessing an
institution’s overall capital adequacy. The following is a brief description of the relevant provisions of these capital rules and their
potential impact on our capital levels.
The Company and the Bank are subject to the following risk-based capital ratios: a common equity Tier 1 ("CET1") risk-based capital
ratio, a Tier 1 risk-based capital ratio, which includes CET1 and additional Tier 1 capital, and a total risk-based capital ratio, which
includes Tier 1 and Tier 2 capital. CET1 is primarily comprised of the sum of common stock instruments and related surplus net of
treasury stock, retained earnings, and certain qualifying minority interests, less certain adjustments and deductions, including with
respect to goodwill, intangible assets, mortgage servicing assets and deferred tax assets subject to temporary timing differences.
Additional Tier 1 capital is primarily comprised of noncumulative perpetual preferred stock, tier 1 minority interests and
grandfathered trust preferred securities. Tier 2 capital consists of instruments disqualified from Tier 1 capital, including qualifying
subordinated debt, other preferred stock and certain hybrid capital instruments, and a limited amount of allowance for credit loss up to
a maximum of 1.25% of risk-weighted assets, subject to certain eligibility criteria. The capital rules also define the risk-weights
assigned to assets and off-balance sheet items to determine the risk-weighted asset components of the risk-based capital rules,
including, for example, certain “high volatility” commercial real estate, past due assets, structured securities and equity holdings.
The leverage capital ratio, which serves as a minimum capital standard, is the ratio of Tier 1 capital to quarterly average total assets
net of goodwill, certain other intangible assets, and certain required deduction items. The required minimum leverage ratio for all
banks and bank holding companies is 4%.
In addition, the capital rules also require a capital conservation buffer of CET1 capital of 2.5% above each of the minimum capital
ratio requirements (CET1, Tier 1, and total risk-based capital), which is designed to absorb losses during periods of economic stress.
These buffer requirements must be met for a bank or bank holding company to be able to pay dividends, engage in share buybacks or
make discretionary bonus payments to executive management without restriction.
The Federal Deposit Insurance Corporation Improvement Act of 1991 (“FDICIA”), among other things, requires the federal bank
regulatory agencies to take “prompt corrective action” regarding depository institutions that do not meet minimum capital
requirements. FDICIA establishes five regulatory capital tiers: “well capitalized,” “adequately capitalized,” “undercapitalized,”
“significantly undercapitalized,” and “critically undercapitalized.” A depository institution’s capital tier will depend upon how its
capital levels compare to various relevant capital measures and certain other factors, as established by regulation. FDICIA generally
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prohibits a depository institution from making any capital distribution (including payment of a dividend) or paying any management
fee to its holding company if the depository institution would thereafter be undercapitalized. FDICIA imposes progressively more
restrictive restraints on operations, management and capital distributions, depending on the category in which an institution is
classified. Undercapitalized depository institutions are subject to restrictions on borrowing from the Federal Reserve System. In
addition, undercapitalized depository institutions may not accept brokered deposits absent a waiver from the FDIC, are subject to
growth limitations and are required to submit capital restoration plans for regulatory approval. A depository institution’s holding
company must guarantee any required capital restoration plan, up to an amount equal to the lesser of 5 percent of the depository
institution’s assets at the time it becomes undercapitalized or the amount of the capital deficiency when the institution fails to comply
with the plan. Federal banking agencies may not accept a capital plan without determining, among other things, that the plan is based
on realistic assumptions and is likely to succeed in restoring the depository institution’s capital. If a depository institution fails to
submit an acceptable plan, it is treated as if it is significantly undercapitalized. The Bank was well capitalized at December 31, 2021,
and brokered deposits are not restricted.
To be well-capitalized, the Bank must maintain at least the following capital ratios:
(cid:120)
(cid:120)
(cid:120)
(cid:120)
6.5% CET1 to risk-weighted assets;
8.0% Tier 1 capital to risk-weighted assets;
10.0% Total capital to risk-weighted assets; and
5.0% leverage ratio.
The Federal Reserve has not yet revised the well-capitalized standard for bank holding companies to reflect the higher capital
requirements imposed under the current capital rules applicable to banks. For purposes of the Federal Reserve’s Regulation Y,
including determining whether a bank holding company meets the requirements to be a financial holding company, bank holding
companies, such as the Company, must maintain a Tier 1 risk-based capital ratio of 6.0% or greater and a total risk-based capital ratio
of 10.0% or greater to be well-capitalized. If the Federal Reserve were to apply the same or a very similar well-capitalized standard to
bank holding companies as that applicable to the Bank, the Company’s capital ratios as of December 31, 2021 would exceed such
revised well-capitalized standard. Also, the Federal Reserve may require bank holding companies, including the Company, to maintain
capital ratios substantially in excess of mandated minimum levels, depending upon general economic conditions and a bank holding
company’s particular condition, risk profile and growth plans.
Failure to be well-capitalized or to meet minimum capital requirements could result in certain mandatory and possible additional
discretionary actions by regulators that, if undertaken, could have an adverse material effect on our operations or financial condition.
For example, only a well-capitalized depository institution may accept brokered deposits without prior regulatory approval. Failure to
be well-capitalized or to meet minimum capital requirements could also result in restrictions on the Company’s or the Bank’s ability to
pay dividends or otherwise distribute capital or to receive regulatory approval of applications or other restrictions on its growth.
Throughout 2021, the Company’s and the Bank’s regulatory capital ratios were above the applicable well-capitalized standards and
met the capital conservation buffer requirements. Based on current estimates, we believe that the Company and the Bank will continue
to exceed all applicable well-capitalized regulatory capital requirements and the capital conservation buffer in 2022. Risk-based
capital ratios and the leverage capital ratio at December 31, 2021 for the Company and the Bank were as follows:
Minimum Capital
Tier 1 leverage capital ratio
Risk-based capital ratios
Common Equity Tier 1 capital
Tier 1 capital
Total risk-based capital (Tier 1 plus
Tier 2)
*Applies to Bank
Minimum
Well-Capitalized Plus Capital
Under Prompt
Conservation
Corrective Action*
5.00
Buffer
4.00 %
Company
Bank
N/A %
8.25 %
8.36 %
4.50 %
6.00 %
6.50
8.00
7.00 %
8.50 %
11.09 %
11.09 %
11.24 %
11.24 %
8.00 %
10.00
10.50 %
12.84 %
12.33 %
The results above reflect the five-year transition option related to the cumulative effect of adopting of the provisions of Accounting
Standards Codification (“ASC”) Topic 326 – Financial Instruments – Credit Losses, effective January 1, 2020. ASC 326, commonly
referred to as Current Expected Credit Losses, or CECL, that replaced the “incurred loss” methodology for financial assets measured
at amortized cost, and changed the approaches for recognizing and recording credit losses on available-for-sale debt securities and
purchased credit impaired financial assets. The five-year transition rule provides a full delay of the estimated impact of CECL on
15
regulatory capital transition (0%) for the first two years, followed by a three-year transition (25% of the impact included in 2022, 50%
in 2023, 75% in 2024 and 100% thereafter). The two-year delay includes the full impact of day one CECL plus the estimated impact
of current CECL activity calculated quarterly as 25% of the current ACL over the day one balance (“modified transition amount”).
The modified transition amount was recalculated each quarter in 2020 and 2021, with the December 31, 2021 impact of $24.9 million
plus day one impact of $44.1 million (net of tax) carrying through the remaining three years of the transition
Payment of Dividends
Hancock Whitney Corporation is a legal entity separate and distinct from Hancock Whitney Bank and other subsidiaries. Its primary
source of cash, other than securities offerings, is dividends from the Bank. Under the Federal Deposit Insurance Act, no dividends may
be paid by an insured bank if the bank is in arrears in the payment of any insurance assessment due to the FDIC. The payment of
dividends by the Bank may also be affected by other regulatory requirements and policies, such as the maintenance of adequate
capital. If, in the opinion of the applicable regulatory authority, a bank under its jurisdiction is engaged in, or is about to engage in, an
unsafe or unsound practice (which, depending on the financial condition of the bank, could include the payment of dividends), such
authority may require, after notice and hearing, that such bank cease and desist from such practice. The FDIC has formal and informal
policies which provide that insured banks should generally pay dividends only out of current operating earnings.
Under a Federal Reserve policy adopted in 2009, the board of directors of a bank holding company must consider certain factors to
ensure that its dividend level is prudent relative to maintaining a strong financial position, and is not based on overly optimistic
earnings scenarios, such as potential events that could affect its ability to pay, while still maintaining a strong financial position. As a
general matter, the Federal Reserve has indicated that the board of directors of a bank holding company should consult with the
Federal Reserve and eliminate, defer or significantly reduce the bank holding company’s dividends if:
(cid:120)
(cid:120)
(cid:120)
its net income available to shareholders for the past four quarters, net of dividends previously paid during that period, is
not sufficient to fully fund the dividends;
its prospective rate of earnings retention is not consistent with its capital needs and overall current and prospective
financial condition; or
it will not meet, or is in danger of not meeting, its minimum regulatory capital adequacy ratios.
Bank Regulation
The operation of the Bank is subject to state and federal statutes applicable to state banks and the regulations of the Federal Reserve,
the FDIC and the Consumer Financial Protection Bureau (“CFPB”). The operations of the Bank may also be subject to applicable
Office of the Comptroller of the Currency (“OCC”) regulation to the extent state banks are granted parity with national banks. Such
statutes and regulations relate to, among other things, investments, loans, mergers and consolidations, issuances of securities,
payments of dividends, establishment of branches, consumer protection and other aspects of the Bank’s operations. Violations of laws
and regulations, or other unsafe and unsound practices, may result in these agencies imposing fines or penalties, cease and desist
orders, or taking other enforcement actions. Under certain circumstances, these agencies may enforce these remedies directly against
officers, directors, employees and other parties participating in the affairs of a bank or bank holding company.
Safety and Soundness. The Federal Deposit Insurance Act requires the federal prudential bank regulatory agencies, such as the FDIC,
to prescribe, by regulation or guideline, operational and managerial standards for all insured depository institutions relating to: (1)
internal controls; (2) information systems and audit systems; (3) loan documentation; (4) credit underwriting; (5) interest rate risk
exposure; and (6) asset quality. The agencies also must prescribe standards for asset quality, earnings, and stock valuation, as well as
standards for compensation, fees and benefits. The federal banking agencies have adopted regulations and Interagency Guidelines
Establishing Standards for Safety and Soundness to implement these required standards. These guidelines set forth the safety and
soundness standards used to identify and address problems at insured depository institutions before capital becomes impaired. Under
the regulations, if a regulator determines that a bank fails to meet any standards prescribed by the guidelines, the regulator may require
the bank to submit an acceptable plan to achieve compliance, consistent with deadlines for the submission and review of such safety
and soundness compliance plans.
Examinations. The Bank is subject to regulation, reporting, and periodic examinations by the FDIC, the Mississippi Department of
Banking and Consumer Finance (the “MDBCF”), and the CFPB. These regulatory authorities routinely examine the Bank’s loan and
investment quality, consumer compliance, management policies, procedures and practices and other aspects of operations. The FDIC
has adopted the Federal Financial Institutions Examination Council’s (“FFIEC”) rating system and assigns each financial institution a
confidential composite rating based on an evaluation and rating of six essential components of an institution’s financial condition and
operations, including Capital Adequacy, Asset Quality, Management, Earnings, Liquidity and Sensitivity to Market Risk
(“CAMELS”), as well as the quality of risk management practices.
16
Consumer Protection. The CFPB has rule writing, examination, and enforcement authority with regard to the Bank’s (and the
Company’s) compliance with a wide array of consumer financial protection laws, including the Truth in Lending Act, the Real Estate
Settlement Procedures Act, the Truth in Savings Act, the Electronic Funds Transfer Act, the Equal Credit Opportunity Act, the Home
Mortgage Disclosure Act, the S.A.F.E. Mortgage Licensing Act, the Fair Credit Reporting Act (except Sections 615(e) and 628), the
Fair Debt Collection Practices Act, and the Gramm-Leach-Bliley Act (sections 502 through 509 relating to privacy), among others.
The CFPB has broad authority to enforce a prohibition on unfair, deceptive, or abusive acts and practices. The Bank is subject to
direct supervision and examination by the CFPB. The CFPB also may examine our other direct or indirect subsidiaries that offer
consumer financial products or services. In addition, the Dodd-Frank Act permits states to adopt consumer protection laws and
regulations that are stricter than those regulations promulgated by the CFPB, and state attorneys general are permitted to enforce
consumer protection rules adopted by the CFPB against certain institutions.
Branching. The Dodd-Frank Act authorizes national and state banks to establish de novo branches in other states to the same extent a
bank chartered in those states would be so permitted.
Deposit Insurance Assessments. The deposits of the Bank are insured by the FDIC up to applicable limits. The Deposit Insurance
Fund (“DIF”) of the FDIC insures the deposits of the Bank generally up to a maximum of $250,000 per depositor, per insured bank,
for each account ownership category. The FDIC charges insured depository institutions quarterly premiums to maintain the DIF.
Deposit insurance assessments are based on average total consolidated assets minus its average tangible equity and applies one of four
risk categories determined by reference to its capital levels, supervisory ratings, and certain other factors. The assessment rate
schedule can change from time to time, at the discretion of the FDIC, subject to certain limits.
Insurance of deposits may be terminated by the FDIC upon a finding that an institution has engaged in unsafe or unsound practices, is
in an unsafe or unsound condition to continue operations or has violated any applicable law, regulation, rule, order or condition
imposed by the FDIC. The Bank does not believe that it is taking or is subject to any action, condition or violation that could lead to
termination of its deposit insurance. In addition, the Federal Deposit Insurance Act provides that, in the event of the liquidation or other
resolution of an insured depository institution, the claims of depositors of the institution, including the claims of the FDIC as subrogee of
insured depositors, and certain claims for administrative expenses of the FDIC as a receiver, will have priority over other general
unsecured claims against the institution, including those of the parent bank holding company.
Transactions with Affiliates and Insiders. The Bank is subject to restrictions on extensions of credit and certain other transactions
between the Bank and the Company or any nonbank affiliate. Generally, these covered transactions with either the Company or any
affiliate are limited to 10% of the Bank’s capital and surplus, and all such transactions between the Bank and the Company and all of
its nonbank affiliates combined are limited to 20% of the Bank’s capital and surplus. Loans and other extensions of credit from the
Bank to the Company or any affiliate generally are required to be secured by eligible collateral in specified amounts. In addition, any
transaction between the Bank and the Company or any affiliate are required to be on an arm’s length basis. Federal banking laws also
place similar restrictions on certain extensions of credit by insured banks, such as the Bank, to their directors, executive officers and
principal shareholders.
Mergers, Subsidiaries. The FDIC is also authorized to approve mergers, consolidations and assumption of deposit liability
transactions between insured banks and between insured banks and uninsured banks or institutions to prevent capital or surplus
diminution in such transactions where the resulting, continuing or assumed bank is an insured nonmember state bank.
Reserves. Although the Bank is not a member of the Federal Reserve, it is subject to Federal Reserve regulations that require the Bank
to maintain reserves against transaction accounts (primarily checking accounts). These reserve requirements are subject to annual
adjustment by the Federal Reserve. Effective March 26, 2020, reserve requirement ratios were reduced to zero percent.
Anti-Money Laundering. A continued focus of governmental policy relating to financial institutions in recent years has been
combating money laundering and terrorist financing. The USA PATRIOT Act broadened the application of anti-money laundering
regulations to apply to additional types of financial institutions such as broker-dealers, investment advisors and insurance companies,
and strengthened the ability of the U.S. Government to help prevent, detect and prosecute international money laundering and the
financing of terrorism. The principal provisions of Title III of the USA PATRIOT Act require that regulated financial institutions,
including state member banks: (i) establish an anti-money laundering program that includes training and audit components; (ii)
comply with regulations regarding the verification of the identity of any person seeking to open an account; (iii) take additional
required precautions with non-U.S. owned accounts; and (iv) perform certain verification and certification of money laundering risk
for their foreign correspondent banking relationships. Failure of a financial institution to comply with the USA PATRIOT Act’s
requirements could have serious legal and reputational consequences for the institution. The Bank has augmented its systems and
procedures to meet the requirements of these regulations and will continue to revise and update its policies, procedures and controls to
reflect changes required by law.
17
FinCEN has adopted rules that require financial institutions to obtain beneficial ownership information with respect to legal entities
with which such institutions conduct business, subject to certain exclusions and exemptions. Bank regulators are focusing their
examinations on anti-money laundering compliance, and we continue to monitor and augment, where necessary, our anti-money
laundering compliance programs.
Bank regulators routinely examine institutions for compliance with these anti-money laundering obligations and recently have been
active in imposing “cease and desist” and other regulatory orders and money penalty sanctions against institutions found to be in
violation of these requirements. On January 1, 2021, Congress passed federal legislation that made sweeping changes to federal anti-
money laundering laws, subject to pending implementation by regulatory rulemaking.
Economic Sanctions. The Office of Foreign Assets Control (“OFAC”) is responsible for helping to ensure that U.S. entities do not
engage in transactions with certain prohibited parties, as defined by various Executive Orders and acts of Congress. OFAC publishes,
and routinely updates, lists of names of persons and organizations suspected of aiding, harboring or engaging in terrorist acts,
including the Specially Designated Nationals and Blocked Persons List. If we find a name on any transaction, account or wire transfer
that is on an OFAC list, we must undertake certain specified activities, which could include blocking or freezing the account or
transaction requested, and we must notify the appropriate authorities.
Concentrations in Lending. During 2006, the federal bank regulatory agencies released guidance on “Concentrations in Commercial
Real Estate Lending” (the “Guidance”) and advised financial institutions of the risks posed by CRE lending concentrations. The
Guidance requires that appropriate processes be in place to identify, monitor and control risks associated with real estate lending
concentrations. Higher allowances for loan losses and capital levels may also be required. The Guidance is triggered when CRE loan
concentrations exceed either:
(cid:120)
(cid:120)
Total reported loans for construction, land development, and other land of 100% or more of a bank’s total risk based
capital; or
Total reported loans secured by multifamily and nonfarm nonresidential properties and loans for construction, land
development, and other land of 300% or more of a bank’s total risk based capital.
The Guidance also applies when a bank has a sharp increase in CRE loans or has significant concentrations of CRE secured by a
particular property type.
Community Reinvestment Act. The Bank is subject to the provisions of the CRA, which imposes a continuing and affirmative obligation,
consistent with their safe and sound operation, to help meet the credit needs of entire communities where the bank accepts deposits,
including low- and moderate-income neighborhoods. The FDIC’s assessment of the Bank’s CRA record is made available to the public.
Further, a less than satisfactory CRA rating will slow, if not preclude, expansion of banking activities and prevent a company from
becoming or remaining a financial holding company. Federal CRA regulations require, among other things, that evidence of
discrimination against applicants on a prohibited basis, and illegal or abusive lending practices be considered in the CRA evaluation. The
Bank has a rating of “Satisfactory” in its most recent CRA evaluation.
Consumer Regulation. Activities of the Bank are subject to a variety of statutes and regulations designed to protect consumers. These
laws and regulations include, among numerous other things, provisions that:
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
limit the interest and other charges collected or contracted for by the Bank, including rules respecting the terms of credit
cards and of debit card overdrafts;
govern the Bank’s disclosures of credit terms to consumer borrowers;
require the Bank to provide information to enable the public and public officials to determine whether it is fulfilling its
obligation to help meet the housing needs of the communities it serves;
prohibit the Bank from discriminating on the basis of race, creed or other prohibited factors when it makes decisions to
extend credit;
govern the manner in which the Bank may collect consumer debts; and
prohibit unfair, deceptive or abusive acts or practices in the provision of consumer financial products and services.
Mortgage Rules. Pursuant to rules adopted by the CFPB, banks that make residential mortgage loans are required to make a good faith
determination that a borrower has the ability to repay a mortgage loan prior to extending such credit, require that certain mortgage
loans contain escrow payments, obtain new appraisals under certain circumstances, comply with integrated mortgage disclosure rules,
and follow specific rules regarding the compensation of loan originators and the servicing of residential mortgage loans. In 2020, the
Coronavirus Aid, Relief and Economic Security (“CARES”) Act granted certain forbearance rights and protection against foreclosure
to borrowers with a “federally backed mortgage loan,” including certain first or subordinate lien loans designed principally for the
occupancy of one to four families. These consumer protections continue during the COVID 19 pandemic emergency.
18
Risk-retention rules. Banks that sponsor the securitization of asset-backed securities are generally required to retain not less than 5%
of the credit risk of any loan they securitize, except for residential mortgages that meet certain low-risk standards.
Privacy, Credit Reporting and Cybersecurity. The Bank is subject to federal and state banking regulations that limit its ability to
disclose non-public information about consumers to non-affiliated third parties and prescribe standards for the protection of consumer
information. These limitations require us to periodically disclose our privacy policies to consumers and allow consumers to prevent
disclosure of certain personal information to a non-affiliated third party under certain circumstances. Consumers also have the option
to direct banks and other financial institutions not to share information about transactions and experiences with affiliated companies
for the purpose of marketing products or services. Banking institutions are required to implement a comprehensive information
security program that includes administrative, technical, and physical safeguards to ensure the security and confidentiality of customer
records and information, as well as maintain procedures for notifying customers in the event of a security breach. These security and
privacy policies and procedures for the protection of confidential and personal information are in effect across our lines of business.
The Company has adopted and implemented our Comprehensive Information Security Policy to comply with these federal
requirements.
The Bank uses credit bureau data in underwriting activities. Use of such data is regulated under the Fair Credit Reporting Act and
Regulation V on a uniform, nationwide basis, including credit reporting, prescreening, and sharing of information between affiliates
and the use of credit data. The Fair and Accurate Credit Transactions Act, which amended the Fair Credit Reporting Act, permits
states to enact identity theft laws that are not inconsistent with the conduct required by the provisions of that Act.
Furthermore, the federal banking regulators regularly issue guidance regarding cybersecurity intended to enhance cyber risk
management. A financial institution is expected to implement multiple lines of defense against cyber-attacks and ensure that their risk
management procedures address the risk posed by potential cyber threats. A financial institution is further expected to maintain
procedures to effectively respond to a cyber-attack and resume operations following any such attack. The Company has adopted and
implemented an Information Security Program to comply with the regulatory cybersecurity guidance. Effective April 1, 2022, the
federal banking agencies will implement a new rule that requires banks to notify their regulators within 36 hours of a “computer-
security incident” that rises to the level of a “notification incident.”
Debit Interchange Fees. Interchange fees are fees that merchants pay to credit card companies and card-issuing banks such as the
Bank for processing electronic payment transactions on their behalf. The maximum permissible interchange fee that an issuer may
receive for an electronic debit transaction is the sum of 21 cents per transaction and 5 basis points multiplied by the value of the
transaction, subject to an upward adjustment of 1 cent if an issuer certifies that it has implemented policies and procedures reasonably
designed to achieve the fraud-prevention standards set forth by the Federal Reserve. In addition, the legislation prohibits card issuers
and networks from entering into arrangements requiring that debit card transactions be processed on a single network or only two
affiliated networks, and allows merchants to determine transaction routing.
Nonbanking Subsidiaries
The Company’s nonbanking subsidiaries may also be subject to a variety of state and federal laws. For example, Hancock Whitney
Investment Services, Inc. is subject to supervision and regulation by the SEC, FINRA and the State of Mississippi.
Compensation
In June 2010, the federal banking agencies issued joint guidance on executive compensation designed to help ensure that a banking
organization’s incentive compensation policies do not encourage imprudent risk taking and are consistent with the safety and
soundness of the organization. In addition, in June 2012, the Commission issued final rules to implement the Dodd-Frank Act’s
requirement that the Commission direct the national securities exchanges to adopt certain listing standards related to the compensation
committee of a company’s board of directors as well as its compensation advisers.
In 2016, the Federal Reserve, FDIC and SEC proposed rules that would, depending upon the assets of the institution, directly regulate
incentive compensation arrangements and would require enhanced oversight and recordkeeping. As of December 31, 2021, these rules
had not been implemented. We have instituted measures to ensure that our incentive compensation plans do not encourage
inappropriate risks, consistent with three key principles—that incentive compensation arrangements should appropriately balance risk
and financial rewards, be compatible with effective controls and risk management, and be supported by strong corporate governance.
Accounting and Controls
The Company is also required to file certain reports with, and otherwise comply with the rules and regulations of the SEC under
federal securities laws. For example, we are required to comply with various corporate governance and financial reporting
requirements under the Sarbanes-Oxley Act of 2002, as well as rules and regulations adopted by the SEC, the Public Company
19
Accounting Oversight Board, and Nasdaq. In particular, we are required to include management and independent registered public
accounting firm reports on internal controls over financial reporting as part of our Annual Report on Form 10-K in order to comply
with Section 404 of the Sarbanes-Oxley Act. We have evaluated our controls, including compliance with the SEC rules on internal
controls. The assessments of our financial reporting controls as of December 31, 2021 are included in this report under Item 9A.
“Controls and Procedures.” Our failure to comply with these internal control rules may materially adversely affect our reputation,
ability to obtain the necessary certifications to financial statements, and the value of our securities.
Effect of Governmental Monetary and Fiscal Policies
The difference between the interest rate paid on deposits and other borrowings and the interest rate received on loans and securities
comprises most of a bank’s earnings. In order to mitigate the interest rate risk inherent in the industry, the banking business is
becoming increasingly dependent on the generation of fee and service charge revenue.
The earnings and growth of a bank will be affected by both general economic conditions and the monetary and fiscal policy of the
U.S. government and its agencies, particularly the Federal Reserve. The Federal Reserve sets national monetary policy such as seeking
to curb inflation and combat recession. This is accomplished by its open-market operations in U.S. government securities, adjustments
in the amount of reserves that financial institutions are required to maintain and adjustments to the discount rates on borrowings and
target rates for federal funds transactions. The actions of the Federal Reserve in these areas influence the growth of bank loans,
investments and deposits and also affect interest rates on loans and deposits. The nature and timing of any future changes in monetary
policies and their potential impact on the Company cannot be predicted.
INFORMATION ABOUT OUR EXECUTIVE OFFICERS
The names, ages, positions and business experience of our executive officers as of February 25, 2022:
Name
John M. Hairston
Michael M. Achary
Joseph S. Exnicios
D. Shane Loper
Joy Lambert Phillips
Cecil W. Knight, Jr.
Michael Otero
Ruena H. Wetzel
Christopher S. Ziluca
Age
58
61
66
56
66
58
55
60
60
Position
President of the Company since 2014; Chief Executive Officer since 2008 and Chief
Operating Officer from 2008 to 2014; Director since 2006.
Senior Executive Vice President since 2017; Executive Vice President from 2008 to 2016;
Chief Financial Officer since 2007 and Principal Accounting Officer since 2022.
Senior Executive Vice President since 2017; Executive Vice President from 2011 to 2016;
President of Hancock Whitney Bank since 2011.
Senior Executive Vice President since 2017; Executive Vice President from 2008 to 2016;
Chief Operating Officer since 2014; Chief Administrative Officer from 2013 to 2014; Chief
Risk Officer from 2012 to 2013; Chief Risk and Administrative Officer from 2010 to 2012.
Senior Executive Vice President since 2020; Executive Vice President from 2009 to 2020;
Corporate Secretary since 2011; General Counsel since 1999.
Executive Vice President since 2016; Chief Banking Officer since 2016; President and owner
of Alidade partners, LLC from 2012 to 2016.
Executive Vice President since 2013; Chief Risk Officer since 2020; Chief Internal Auditor
from 2013 to 2018.
Executive Vice President since 2011; Chief Human Resources Officer since 2011.
Executive Vice President since 2018; Chief Credit Officer since 2018; Senior Vice President
and Chief Credit Officer of Webster Bank from 2010 to 2018.
ITEM 1A. RISK FACTORS
We face a number of material risks and uncertainties in connection with our operations. Our business, results of operations and
financial condition could be materially adversely affected by the factors described below. The COVID-19 pandemic has adversely
affected our business and significant risk and market disruption remain as the public health crisis continues. While we describe risks
stemming from operating in the COVID-19 economic environment separately from each of the other risks we identify as material, a
number of the risks described are interrelated, and certain of these risks could trigger effects of other risks described below. Also, the
risks and uncertainties described below are not the only ones that we may face. Additional risks and uncertainties not presently known
to us, or that we do not currently consider to be material, could also potentially impair and/or have an adverse effect on our business,
results of operations, and financial condition.
20
Risks Related to Economic and Market Conditions
The COVID-19 pandemic has adversely impacted our business and financial results, and the ultimate impact will depend on future
developments, which are highly uncertain and cannot be predicted, including the scope and duration of the pandemic and actions
taken by governmental authorities in response to the pandemic.
The COVID-19 pandemic has created extensive disruptions to the global economy and to the lives of individuals throughout the
world, and will likely continue to have an impact for at least the near term. The pandemic and related efforts to contain it have
disrupted global economic activity, adversely affected the functioning of financial markets, impacted interest rates, increased
economic and market uncertainty, and disrupted trade, supply chains and the labor market. During the past two years, governments,
businesses, and the public have taken unprecedented actions to contain the spread of COVID-19 and to mitigate its effects, including
quarantines, travel bans, shelter-in-place orders, closures of businesses and schools, fiscal stimulus packages, vaccine and mask
mandates, and legislation designed to deliver monetary aid and other relief. At present, most restrictions on movement have been lifted
and widely available vaccines have proved to be effective in minimizing serious illness or death from the novel coronavirus; however,
the emergence of new variants of the virus have impeded the ability to fully resolve the public health risk and, as such, disruption of
typical social and economic conditions persists. The scope, duration, and full effects of COVID-19 continue to evolve and are not yet
fully known. If these effects continue for a prolonged period, it could result in sustained economic stress or recession, and such effects
could have a material adverse impact on us in a number of ways related to credit, collateral, customer demand, funding, operations,
interest rate risk, liquidity and litigation, as described in more detail below.
Credit Risk. Timely loan repayment and the value of collateral supporting our loans are affected by the strength of our
borrowers’ businesses. The continuation of the COVID-19 public health crisis has constrained and is likely to continue to constrain
commercial activity and financial transactions. At present, labor shortages and supply chain interruptions continue to present
obstacles to economic recovery and have contributed to inflationary conditions. These conditions have and are expected to continue
to result in overall economic and financial market instability and affect businesses’ profitability and individuals’ purchasing power,
all of which may cause our customers to be unable to make scheduled loan payments. If the economic effects of COVID-19 result in
widespread and sustained repayment shortfalls on loans in our portfolio, we could incur significant delinquencies, foreclosures and
credit losses, particularly if the available collateral is insufficient to cover our exposure. The future effects of COVID-19 on
economic activity could negatively affect the collateral values associated with our existing loans, the ability to liquidate the real
estate collateral securing our residential and commercial real estate loans, our ability to maintain loan origination volume and to
obtain additional financing, the future demand for or profitability of our lending and services, and the financial condition and credit
risk of our customers. Further, in the event of delinquencies, regulatory changes and policies designed to protect borrowers may slow
or prevent us from making business decisions in response to such delinquencies or may result in a delay in taking certain remediation
actions, such as foreclosure. In addition, we have unfunded commitments to extend credit to customers that could pose additional
credit risk in an economic downturn. Furthermore, in an effort to support our communities during the pandemic, we participated in
the Paycheck Protection Program (“PPP”) under the CARES Act and the Consolidated Appropriations Act, 2021, whereby loans to
small businesses are originated. These loans require forbearance of loan payments for a specified time and also limit our ability to
pursue all available remedies in the event of a loan default. If the borrower fails to qualify for loan forgiveness, or if the SBA
determines there is a deficiency in the manner in which any PPP loans were originated, funded or serviced by the Bank, we are
subject to repayment risk as well as the heightened risk of holding these loans at unfavorable interest rates as compared to loans to
customers that we would have otherwise extended credit.
Strategic Risk. Our financial condition and results of operations may be affected by a variety of external factors, such as
economic conditions, labor shortages, and the various responses of governmental and nongovernmental authorities to economic
instability. These and other factors may impact the price or marketability of our products and services, cause changes in interest
rates that may reduce our earnings and/or increase our funding costs, reduce demand for our financial products, or impact our ability
to implement strategic initiatives. The COVID-19 pandemic has significantly increased economic and demand uncertainty and has
led to severe disruption and volatility in the global capital markets. Furthermore, many of the governmental actions in response to
the pandemic were directed toward curtailing household and business activity to contain COVID-19. The future effects of COVID-
19 on economic activity could negatively affect the future banking products we provide, including the level of our loan originations.
Operational Risk. If restrictions are reinstituted that affect our workforce’s access to our facilities, it could limit our ability
to meet customer servicing expectations and have a material adverse effect on our operations. In addition, quarantines and health
concerns have continued to result in a larger percentage of associates working remotely when compared to pre-pandemic levels. We
rely on business processes and branch activity that largely depend on people and technology, including access to information
technology systems as well as information, applications, payment systems and other services provided by third parties. Technology
in employees’ homes may not be as robust as in our offices and could cause the employees’ access to the networks, information
systems, applications, and other tools available to employees to be more limited or less reliable to them than in our offices. The
continuation of work-from-home measures also introduces additional operational risk, including a small measure of increased
cybersecurity risk. These cyber risks include slightly greater phishing, malware, and other cybersecurity attacks, vulnerability to
disruptions of our information technology infrastructure and telecommunications systems for remote operations, increased risk of
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unauthorized dissemination of confidential information, limited ability to restore the systems in the event of a systems failure or
interruption, greater risk of a security breach resulting in destruction or misuse of valuable information, and potential impairment of
our ability to perform critical functions, including wiring funds, all of which could expose us to risks of data or financial loss,
litigation and liability and could seriously disrupt our operations and the operations of any impacted customers.
Moreover, we rely on many third parties in our business operations, including the appraiser of the real property collateral, vendors
that supply essential services such as loan servicers, providers of financial information, systems and analytical tools and providers of
electronic payment and settlement systems, and local and federal government agencies, offices, and courthouses. These entities may
limit the availability and access of their services due to the pandemic and related labor shortages. For example, loan origination
could be delayed due to the limited availability of real estate appraisers for the collateral. Loan closings could be delayed due to staff
reductions in recording offices or the closing of courthouses in certain counties or parishes, which slows the process for title work,
mortgage and UCC filings in those counties or parishes. If our third-party service providers continue to have limited capacities for a
prolonged period or if additional limitations or potential disruptions in these services materialize, it may negatively affect our
operations.
Further, we use quantitative models to help manage certain aspects of our business and to assist with certain business decisions,
including estimating credit losses, grading loans and extending credit, estimating the effects of changing interest rates and other
market measures on our financial condition and results of operations. Our modeling methodologies rely on many assumptions,
historical analyses and correlations. These assumptions may be incorrect, particularly in times of market distress or volatility, as we
have experienced and expect to continue to experience as a result of the COVID-19 pandemic, and the historical correlations on
which we rely may not continue to be relevant. As a result, our models may not capture or fully express the risks we face or may
lead us to misjudge the business and economic environment in which we operate. If our models fail to produce reliable results on an
ongoing basis, we may not make appropriate risk management or other business or financial decisions. Furthermore, strategies that
we employ to manage and govern the risks associated with our use of models may not be effective or fully reliable, and as a result,
we may realize losses or other lapses.
Interest Rate Risk. Our net interest income, lending activities, deposits and profitability are and are likely to continue to be
negatively affected by volatility in interest rates. In March 2020, the Federal Reserve lowered the target range for the federal funds
rate to a range from 0 to 0.25 percent in response to the economic disruption that occurred at the outset of the COVID-19 pandemic,
which has continued into 2022. The prolonged period of low interest rates has and is expected to continue to cause downward
pressure on our net interest margin, including reduced yield on our variable rate loans and on new loans, and realized yields on
investments securities. However, we expect the Federal Reserve to raise rates more than once in the next twelve months. Increasing
interest rates can have a negative impact on our business by reducing the amount of money our customers borrow or by adversely
affecting their ability to repay outstanding loan balances that may increase due to adjustments in their variable rates. In addition, in a
rising interest rate environment we may have to offer more attractive interest rates to depositors to compete for deposits, or pursue
other sources of liquidity, such as wholesale funds. Higher income volatility from changes in interest rates and spreads to
benchmark indices could result in a decrease in net interest income and a decrease in current fair market values of our assets.
Fluctuations in interest rates impacts both the level of income and expense recorded on most of our assets and liabilities and the
market value of all interest-earning assets and interest-bearing liabilities, which in turn could have a material adverse effect on our
net income, operating results, or financial condition. A prolonged period of volatile and unstable market conditions would likely
increase our funding costs and negatively affect market risk mitigation strategies.
We have ongoing policies and procedures designed to manage the risks associated with changes in market interest rates and actively
manage these risks through hedging and other risk mitigation strategies. However, if our assumptions are wrong or overall economic
conditions are significantly different than anticipated, our risk mitigation techniques may be ineffective or costly.
Because there have been no comparable recent global pandemics that resulted in a similar global impact, we do not yet know the full
extent of and the long-term impact of COVID-19 on our business, operations, or the global economy as a whole. Any future
developments are highly uncertain and cannot be predicted, including the scope and duration of the pandemic, the effectiveness of
our work from home arrangements, third party providers’ ability to support our operations, and any actions taken by governmental
authorities and other third parties in response to the pandemic. The uncertainty surrounding this crisis has and could continue to
materially and adversely affect our business, operations, operating results, financial condition, liquidity or capital levels.
Liquidity and Litigation Risk. Federal, state and local governments have mandated or encouraged financial services
companies to make accommodations to borrowers and other customers financially affected by the COVID-19 pandemic. Legal and
regulatory responses to concerns about the COVID-19 pandemic could result in additional regulation or restrictions affecting the
conduct of our business. The Company instituted a program to assist customers financially impacted by COVID-19, including
temporary waivers of certain fees and charges and payment deferment and other loan relief, as appropriate. The Company has also
granted certain longer-term loan modifications for customers financially impacted by COVID-19. If these deferrals and
modifications are not effective in mitigating the impact of COVID-19 on the Company’s customers, it may adversely affect its
business and results of operations more substantially over a longer period of time.
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Since the inception of the PPP, we and other banks have been subject to litigation regarding the process and procedures that such
banks used in processing applications for the PPP and some banks have received negative media attention associated with the PPP.
The Company and the Bank could be exposed to additional litigation risk and to negative media attention. Any financial liability,
litigation costs or reputational damage caused by PPP-related litigation or negative media attention could have a material adverse
impact on our business, financial condition and results of operations.
The PPP has also attracted interest from federal and state enforcement authorities, oversight agencies, regulators and Congressional
committees. State attorneys general and other federal and state agencies may assert that they are not subject to the provisions of the
CARES Act and the PPP regulations entitling the Bank to rely on borrower certifications, and they may take more aggressive actions
against the Bank for alleged violations of the provisions governing the Bank’s participation in the PPP. Federal and state regulators
can impose or request that we consent to substantial sanctions, restrictions and requirements if they determine there are violations of
laws, rules or regulations or weaknesses or failures with respect to general standards of safety and soundness, which could adversely
affect our business, reputation, results of operation and financial condition.
We may be vulnerable to certain sectors of the economy and to economic conditions both generally and locally across the specific
markets in which we operate.
Our financial performance may be adversely affected by macroeconomic factors that affect the U.S. economy. Unfavorable economic
conditions, particularly in the Gulf South region, could significantly affect the demand for our loans and other products, the ability of
borrowers to repay loans, and the value of collateral securing loans.
Volatility in global financial markets may have a spillover effect that would ultimately impair the performance of the U.S. economy
and, in turn, our results of operations and financial condition.
We are subject to lending concentration risk.
Our loan portfolio contains several industry, collateral and other concentrations including, but not limited to, commercial and
residential real estate, healthcare, hospitality, shared national credits, leveraged loans and energy. Due to the exposure in these
concentrations, disruptions in markets, economic conditions, including those resulting from the global response to COVID-19,
changes in laws or regulations or other events could significantly impact the ability of our borrowers to repay and may have a material
adverse effect on our business, financial condition and results of operations.
A substantial portion of our loan portfolio is secured by real estate. In weak economies, or in areas where real estate market conditions
are distressed, we may experience a higher than normal level of nonperforming real estate loans. The collateral value of the portfolio
and the revenue stream from those loans could come under stress, and additional provisions for the allowance for credit losses could
be necessitated. Our ability to dispose of foreclosed real estate at prices at or above the respective carrying values could also be
impaired, causing additional losses.
Certain changes in interest rates, mortgage origination, inflation, or the financial markets could affect our results of operations,
demand for our products and our ability to deliver products efficiently.
Our assets and liabilities are primarily monetary in nature and we are subject to significant risks tied to changes in interest rates that
are highly sensitive to many factors that are beyond our control. Inflation can influence the growth of total assets in the banking
industry and the resulting level of capitalization. Inflation also affects the level of market interest rates, and therefore, the pricing of
financial instruments. We believe the most significant potential impact of inflation on our financial results is our ability to manage the
impact of changes in interest rates. Further, an increase in inflation could cause our operating costs related to salaries and benefits,
technology and supplies to increase at a faster pace than revenues.
Our ability to operate profitably is largely dependent upon net interest income. Net interest income is the primary component of our
earnings and is affected by both local external factors such as economic conditions in the Gulf South and local competition for loans
and deposits, as well as broader influences, such as federal monetary policy and market interest rates. Unexpected movement in
interest rates markedly changing the slope of the current yield curve could cause our net interest margins to decrease, subsequently
reducing net interest income. In addition, such changes could adversely affect the valuation of our assets and liabilities.
In addition, loan originations, and potentially loan revenues, could be adversely impacted by sharply rising interest rates. If market
rates of interest increase, it would increase debt service requirements for some of our borrowers; adversely affect those borrowers’
ability to pay as contractually obligated; potentially reduce loan demand or result in additional delinquencies or charge-offs; and
increase the cost of our deposits, which are a primary source of funding.
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The fair market value of our securities portfolio and the investment income from these securities also fluctuate depending on general
economic and market conditions. In addition, actual net investment income and/or cash flows from investments that carry prepayment
risk, such as mortgage-backed and other asset-backed securities, may differ from those anticipated at the time of investment as a result
of interest rate fluctuations.
An underperforming stock market could adversely affect wealth management fees associated with managed securities portfolios and
could also reduce brokerage transactions, therefore reducing investment brokerage revenues.
Although management believes it has implemented an effective asset and liability management strategy to manage the potential
effects of changes in interest rates, including the use of adjustable rate and/or short-term assets, and FHLB advances or longer term
repurchase agreements, any substantial, unexpected change in market interest rates could have a material adverse effect on our
financial condition and results of our operation and our strategies may not always be successful in managing the risk associated with
changes in interest rates.
Changes in the policies of monetary authorities and other government action could adversely affect our profitability.
Interest rates and our financial performance are affected by credit policies of monetary authorities, particularly the Federal Reserve.
The instruments of monetary policy employed by the Federal Reserve include open market transactions in U.S. government securities,
changes in the discount rate or the federal funds rate on bank borrowings and changes in reserve requirements against bank deposits.
In view of changing conditions in the national economy and in the money markets, we cannot predict the potential impact of future
changes in interest rates, deposit levels, and loan demand on our business and earnings. Furthermore, the actions of the U.S.
government and other governments may result in currency fluctuations, exchange controls, market disruption, material decreases in
the values of certain of our financial assets and other adverse effects.
The Federal Reserve reduced rates to near zero in March 2020 in response to economic disruption that occurred at the outset of the
COVID-19 pandemic, which has continued into 2022. The prolonged period of low interest rates has and is expected to continue to
cause downward pressure on our net interest margin, including reduced yield on our variable rate loans and on new loans, and realized
yields on investments securities. Further rate changes are dependent on the Federal Reserve’s assessment of economic data as it
becomes available. We expect the Federal Reserve to raise rates more than once in the next twelve months. Historically, when the
Federal Reserve Board increases the Fed Funds rate, overall interest rates have also risen, which may negatively impact the U.S.
economy, and could have a negative impact on our business by reducing the amount of money our customers borrow or by adversely
affecting their ability to repay outstanding loan balances that may increase due to adjustments in their variable rates. In addition, in a
rising interest rate environment we may have to offer more attractive interest rates to depositors to compete for deposits, or pursue
other sources of liquidity, such as wholesale funds. Further, when interest-bearing liabilities reprice or mature more quickly than
interest-earning assets, an increase in interest rates generally would tend to result in a decrease in net interest income.
Changes in monetary policy, including changes in interest rates, could influence (i) the amount of interest we receive on loans and
securities, (ii) the amount of interest we pay on deposits and borrowings, (iii) our ability to originate loans and obtain deposits, (iv) the
fair value of our assets and liabilities, and (v) the reinvestment risk associated with changes in the duration of our mortgage-backed
securities portfolio.
Changes in U.S. trade policies and other factors beyond the Company's control, including the imposition of tariffs and retaliatory
tariffs, may adversely impact its business, financial condition and results of operations.
Recent changes and potential for additional changes to U.S. trade policies, legislation, treaties and tariffs, including trade policies and
tariffs affecting other countries, including China, the European Union, Canada and Mexico and retaliatory tariffs by such countries
may adversely impact our business, financial condition and results of operations. Tariffs, retaliatory tariffs or other trade restrictions
on products and materials that the Company's customers import or export, including among others, agricultural products, could cause
the prices of our customers' products to increase, could reduce demand for such products, or reduce our customer margins, and
adversely impact their revenues, financial results and ability to service debt.
In addition, to the extent changes in the political environment have a negative impact on the Company or on the markets in which the
Company operates its business, its results of operations and financial condition could be materially and adversely impacted.
The financial soundness and stability of other financial institutions could adversely affect us.
Our ability to engage in routine funding transactions could be adversely affected by the actions and financial soundness and stability
of other financial institutions as a result of credit, trading, clearing or other relationships with such institutions. We routinely execute
transactions with counterparties in the financial industry, including brokers and dealers, commercial banks and other institutional
clients. As a result, defaults by, and even rumors regarding, other financial institutions, or the financial services industry generally,
could impair our ability to effect such transactions and could lead to losses or defaults by us. In addition, a number of our transactions
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expose us to credit risk in the event of default of a counterparty or client. Additionally, our credit risk may be increased if the
collateral we hold in connection with such transactions cannot be realized or can only be liquidated at prices that are not sufficient to
cover the full amount of our financial exposure. Any such losses could have a material adverse effect on our financial condition and
results of operations.
We may be adversely impacted by the transition from LIBOR.
In July 2017, the United Kingdom Financial Conduct Authority (the authority that regulates LIBOR) announced it intends to stop
compelling banks to submit rates for the calculation of LIBOR after 2021. In November 2020, the administrator of LIBOR announced
it will consult on its intention to extend the retirement date of certain offered rates whereby the publication of the one week and two
month LIBOR offered rates will cease after December 31, 2021; but, the publication of the remaining LIBOR offered rates will
continue until June 30, 2023.The Alternative Reference Rates Committee (“ARRC”) has published recommended alternative rates for
certain financial instruments currently indexed to USD-LIBOR. ARRC has proposed a paced market transition plan from USD-
LIBOR and organizations are currently considering industry wide and company-specific transition plans as it relates to derivatives and
cash markets exposed to USD-LIBOR. ARRC has identified the Secured Overnight Financing Rate (“SOFR”) as its preferred
alternative rate for LIBOR. SOFR is a measure of the cost of borrowing cash overnight, collateralized by U.S. Treasury securities, and
is based on directly observable U.S. Treasury-backed repurchase transactions. On July 29, 2021, ARCC formally recommended SOFR
as its preferred alternative replacement rate for LIBOR. At this time, it is not possible to predict whether these specific
recommendations and proposals will be broadly accepted, whether they will continue to evolve, and what the effect of their
implementation may be on the markets for floating-rate financial instruments.
Upon the cessation of the use of LIBOR, interest rates on our floating rate obligations, loans, derivatives, and other financial
instruments tied to LIBOR rates, as well as the revenue and expenses associated with those financial instruments, may be adversely
affected. In addition, the cessation of the use of LIBOR as a benchmark interest rate could adversely affect the value of our floating
rate obligations, loans, derivatives, and other financial instruments tied to LIBOR rates.
A substantial portion of our variable rate loans, along with certain derivative and other financial instruments, are indexed to
LIBOR. While the majority of these instruments contain either provisions for the designation of an alternate benchmark
rate or “fallback” provisions providing for alternative rate calculations in the event LIBOR is unavailable, not all of our loans,
derivatives or financial instruments contain such provisions, and the existing provisions and/or recent modifications to our documents
to address transition may not adequately address the actual changes to LIBOR or the financial impact of successor benchmark
rates. We may not be able to successfully amend these loans, derivatives and financial instruments to provide for alternative
benchmarks or alternative rate calculations and such amendments could prove costly and may impact our ability to maintain hedge
accounting treatment on certain cash flow hedges. Even with provisions allowing for designation of alternative benchmarks
or “fallback” provisions, the discontinuance of LIBOR could result in customer uncertainty and disputes arising as a consequence of
the transition from LIBOR. All of this could result in damage to our reputation, loss of customers and additional costs to us, all of
which could be material.
Tax law and regulatory changes could adversely affect our financial condition and results of operations.
Changes to tax laws, including a repeal of all or part of the Tax Cuts and Jobs Act, could significantly impact our business in the form
of greater than expected income tax expense and taxes payable. Such changes may also negatively impact the financial condition of
our customers and/or overall economic conditions. Further, we expect the current administration to seek to implement reforms that
could include a heightened focus and scrutiny on BSA/AML-related compliance, expansion of consumer protections, the regulation of
loan portfolios and credit concentrations to borrowers impacted by climate change, increased capital and liquidity requirements and
limitations on share repurchases and dividends, all of which could increase our costs and impact our business.
Governmental responses to market disruptions and other events may be inadequate and may have unintended consequences.
Congress and financial regulators may implement measures designed to stabilize financial markets in periods of disruption, including
in reaction to the financial impact of COVID-19 and inflation. The overall impact of these efforts on the financial markets may be
ineffective and could adversely affect our business.
We compete with a number of financial services companies that are not subject to the same degree of regulatory oversight. The impact
of the existing regulatory framework and any future changes to it could negatively affect our ability to compete with these institutions,
which could have a material adverse effect on our results of operations and prospects.
We may need to rely on the financial markets to provide needed capital.
Our common stock is listed and traded on the NASDAQ Global Select Market. If our capital resources are inadequate to meet our
capital requirements in the future, we may need to raise additional debt or equity capital. If conditions in the capital markets are not
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favorable, we may be constrained in raising capital. We maintain a consistent analyst following; therefore, downgrades in our
prospects by one or more of our analysts may cause our stock price to fall and significantly limit our ability to access the markets for
additional capital requirements. An inability to raise additional capital on acceptable terms when and if needed could have a material
adverse effect on our business, financial condition or results of operations.
The interest rates that we pay on our securities are also influenced by, among other things, the credit ratings that we, our affiliates
and/or our securities receive from recognized rating agencies. Our credit ratings are based on a number of factors, including our
financial strength and some factors not entirely within our control such as conditions affecting the financial services industry
generally, and remain subject to change at any time. A downgrade to the credit rating of us or our affiliates could affect our ability to
access the capital markets, increase our borrowing costs and negatively impact our profitability. A downgrade to us, our affiliates or
our securities could create obligations or liabilities under the terms of our outstanding securities that could increase our costs or
otherwise have a negative effect on our results of operations or financial condition. Additionally, a downgrade to the credit rating of
any particular security issued by us or our affiliates could negatively affect the ability of the holders of that security to sell the
securities and the prices at which any such securities may be sold.
Because our decision to incur debt and issue securities in future offerings will depend on market conditions and other factors beyond
our control, we cannot predict or estimate the amount, timing or nature of our future offerings and debt financings. Further, market
conditions could require us to accept less favorable terms for the issuance of our securities in the future. In addition, geopolitical and
worldwide market conditions may cause disruption or volatility in the U.S. equity and debt markets, which could hinder our ability to
issue debt and equity securities in the future on favorable terms.
Risks Related to the Financial Services Industry
We must maintain adequate sources of funding and liquidity.
Effective liquidity management is essential for the operation of our business. We require sufficient liquidity to support our operations
and fund outstanding liabilities, as well as to meet regulatory requirements. Our access to sources of liquidity in amounts adequate to
fund our activities on terms that are acceptable to us could be impaired by factors that affect us specifically or the financial services
industry or economy generally. Factors that could detrimentally impact our access to liquidity sources include an economic downturn
that affects the geographic markets in which our loans and operations are concentrated, or any material deterioration of the credit
markets. Our access to deposits may also be affected by the liquidity needs of our depositors and the loss of deposits to alternative
investments. Although we have historically been successful in replacing maturing deposits and advances as necessary, we might not
be able to duplicate that success in the future, especially if a large number of our depositors were to withdraw their amounts on
deposit. A failure to maintain an adequate level of liquidity could materially and adversely affect our business, financial condition and
results of operations. Conversely, liquidity in excess of current demand or operating needs may result in lower-earning assets that may
adversely affect our results of operation.
Greater loan losses than expected may adversely affect our earnings.
We are exposed to the risk that our borrowers will be unable to repay their loans in accordance with their terms and that any collateral
securing the payment of their loans may not be sufficient to assure repayment. Credit risk is inherent in our business and any material
level of credit failure could have a material adverse effect on our operating results. Our credit risk with respect to our real estate and
construction loan portfolio relates principally to the creditworthiness of our corporate borrowers and the value of the real estate
pledged as security for the repayment of loans. Our credit risk with respect to our commercial and consumer loan portfolio will depend
on the general creditworthiness of businesses and individuals within our local markets. Our credit risk with respect to our energy loan
portfolio is subject to commodity pricing that is determined by factors outside of our control.
We make various assumptions and judgments about the collectability of our loan portfolio and provide an allowance for estimated
loan losses based on a number of factors. This process requires subjective and complex judgments, including analysis of economic or
market conditions that might impair the ability of borrowers to repay their loans. If our assumptions or judgments prove to be
incorrect, the allowance for credit losses may not be sufficient to cover actual credit losses. We may have to increase our allowance in
the future in response to the request of one of our primary banking regulators, to adjust for changing conditions and assumptions, to
adjust for changes in resolution strategies, or as a result of any deterioration in the quality of our loan and lease portfolio. Losses in
excess of the existing allowance or any provisions for loan losses taken to increase the allowance will reduce our net income and could
materially adversely affect our financial condition and results of operations. Future provisions for loan losses may vary materially
from the amounts of past provisions.
Effective January 1, 2020, the Company adopted Accounting Standards Update 2016-13, “Financial Instruments - Credit Losses
(Topic 326): Measurement of Credit Losses on Financial Instruments,” commonly referred to as Current Expected Credit Losses, or
CECL. Under CECL, entities are required to recognize at the reporting date the full amount of expected credit losses for the lifetime of
the financial assets, based on historical experience, current conditions and reasonable and supportable forecasts. While the standard
does not impact actual losses, it does accelerate the timing of the recognition of expected losses and adds additional uncertainty and
potential volatility with added length of forecast period and additional assumptions such as prepayment speeds and funding of lending
26
commitments not previously impacting the allowance. Changes in forecast assumptions may result in an unfavorable impact to our
results of operations and our capital level.
We depend on the accuracy and completeness of information about clients and counterparties.
In deciding whether to extend credit or enter into other transactions with clients and counterparties, we rely in substantial part on
information furnished by or on behalf of clients and counterparties, including financial statements and other financial information. We
also may rely on representations of clients and counterparties as to the accuracy and completeness of that information and, with
respect to financial statements, on reports of independent auditors if made available. If this information is inaccurate, we may be
subject to loan defaults, financial losses, regulatory action, reputational harm or other adverse effects with respect to our business,
financial condition and results of operations.
We are subject to a variety of risks in connection with any sale of loans we may conduct.
From time to time we may sell all or a portion of one of more loan portfolios, and in connection therewith we may make certain
representations and warranties to the purchaser concerning the loans sold and the procedures under which those loans have been
originated and serviced. If any of these representations and warranties are incorrect, we may be required to indemnify the purchaser
for any related losses, or we may be required to repurchase part or all of the affected loans. We may also be required to repurchase
loans as a result of borrower fraud or in the event of early payment default by the borrower on a loan we have sold. If we are required
to make any indemnity payments or repurchases and do not have a remedy available to us against a solvent counterparty to the loan or
loans, we may not be able to recover our losses resulting from these indemnity payments and repurchases. Consequently, our results of
operations may be adversely affected.
Risks Related to Our Operations
A failure in our operational systems or infrastructure, or those of third parties, could impair our liquidity, disrupt our businesses,
result in the unauthorized disclosure of confidential information, damage our reputation and cause financial losses.
Our ability to adequately conduct and grow our business is dependent on our ability to create and maintain an appropriate operational
and organizational control infrastructure. Operational risk can arise in numerous ways including employee fraud, theft or malfeasance;
customer fraud; and control lapses in bank operations and information technology. Because the nature of the financial services
business involves a high volume of transactions, certain errors in processing or recording transactions appropriately may be repeated
or compounded before they are discovered. We have recently and plan to continue to make investments in new technologies for sales
and service, including mobile and online banking, as well as teller, customer service and loan origination platforms. These new
technologies and/or operational changes may lead to increased operational risk. Our dependence on our employees and automated
systems, including the automated systems used by acquired entities and third parties, to record and process transactions may further
increase the risk that technical failures or tampering of those systems will result in losses that are difficult to detect. We are also
subject to disruptions of our operating systems arising from events that are wholly or partially beyond our control. In addition,
products, services and processes are continually changing and we may not fully appreciate or identify new operational risks that may
arise from such changes. Failure to maintain an appropriate operational infrastructure can lead to loss of service to customers,
additional expenditures related to the detection and correction of operational failures, reputational damage and loss of customer
confidence, legal actions, and noncompliance with various laws and regulations.
We continuously monitor our operational and technological capabilities and make modifications and improvements when we believe it
to be appropriate to do so. However, there are inherent limits to such capabilities. In some instances, we may build and maintain these
capabilities ourselves. We also outsource some of these functions to third parties. These third parties may experience errors or
disruptions that could adversely impact us and over which we may have limited control. Third parties may fail to properly perform
services or comply with applicable laws and regulations, and replacing third party providers could entail significant delay and
expense. We also face risk from the integration of new infrastructure platforms and/or new third party providers of such platforms into
existing businesses.
Our operational and communications systems and infrastructure may fail or may be the subject of a breach or cyber-attack that, if
successful, could adversely affect our business and disrupt business continuity.
We depend on our ability to process, record and monitor a large number of client transactions and to communicate with clients and
other institutions on a continuous basis. Our clients depend on us for access to their assets and account information.
Our online, business, financial, accounting, data processing, or other operating systems and facilities may stop operating properly or
become disabled or damaged as a result of a number of factors, including events that are wholly or partially beyond our control. For
example, there could be sudden increases in client transaction volume; electrical or telecommunications outages; natural disasters such
as earthquakes, tornadoes, floods, and hurricanes; pandemics; events arising from local or larger scale political or social matters,
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including terrorist acts; occurrences of employee error, fraud, or malfeasance; and, as described below, cyber-attacks. Furthermore, for
most financial institutions, transitioning from existing systems and software (or transitioning legacy systems and software) to a new
provider is a significant and expensive undertaking and includes a number of risks, including crashes and system downtime, transition
costs, decreased productivity, security risk, and legal and regulatory compliance risks.
Although we have response plans, business continuity plans and other safeguards in place, our operations and communications may be
adversely affected by significant and widespread disruption to our systems and infrastructure that support our businesses and clients.
While we continue to evolve and modify our response and business continuity plans, there can be no assurance in an escalating threat
environment that they will be effective in avoiding disruption and business impacts. Our insurance may not be adequate to compensate
us for all resulting losses, and the cost to obtain adequate coverage may increase for us or the industry.
Security risks for financial institutions such as ours have dramatically increased in recent years, in part because of the proliferation of
new technologies, the use of the internet and telecommunications technologies to conduct financial transactions, and the increased
sophistication, resources and activities of hackers, terrorists, activists, organized crime, and other external parties, including nation
state actors. In addition, clients may use devices or software to access our products and services that are beyond our control
environment, which may provide additional avenues for attackers to gain access to confidential information. Although we have
information security procedures and controls in place, certain of our technologies, systems, networks, and clients’ devices and
software have in the past and in the future likely will continue to be the target of cyber-attacks or information security breaches that
could result in the unauthorized release, gathering, monitoring, use, loss, change or destruction of our or our clients’ confidential,
proprietary and other information (including personal identifying information of individuals), or otherwise disrupt our or our clients’
or other third parties’ business operations. From time to time, we, like other financial institutions, become aware of information
security vulnerabilities in software emanating from outside vendors and must take active steps to mitigate and prevent the potential
exploitation of such vulnerabilities. Further, U.S. financial institutions and financial services companies will continue to face breaches
in security of their websites or other systems, including attempts to shut down access to their networks and systems in an attempt to
extract compensation from them to regain control. Financial institutions have also experienced, and will continue to be the target of,
distributed denial-of-service attacks, a sophisticated and targeted attack intended to disable or degrade internet service or to sabotage
systems.
We and others in our industry are, and will continue to be, regularly the subject of attempts by attackers to gain unauthorized access to
our networks, systems, data and other infrastructure, or to obtain, change, or destroy confidential data (including personal identifying
information of individuals) through a variety of means, including computer hacking, acts of vandalism or theft, malware, computer
viruses or other malicious codes, phishing, employee error or malfeasance, catastrophes, unforeseen events or other cyber-attacks. In
the future, these attacks may result in unauthorized individuals obtaining access to our confidential information or that of our clients,
or otherwise accessing, damaging, or disrupting our systems or infrastructure. The higher instance of remote work on the part of our
associates and our customers in response to COVID-19 has heightened these risks.
To date, we have seen no material adverse impact on our business or operations from cyber-attacks or events. Any future significant
compromise or breach of our data security, whether external or internal, or misuse of customer, associate, supplier or Company data,
could result in significant disruption of our operations, reimbursement and other costs, lost sales, fines, lawsuits and other legal
exposure, a loss of trust in us on the part of our clients, vendors or other counterparties, client attrition and damage to our reputation.
Any of these could materially and adversely affect our results of operations, our financial condition, and/or our share price. However,
the ever-evolving threats mean we and our third-party service providers and vendors must continually evaluate and adapt our
respective systems and processes and overall security environment, as well as those of any companies we acquire. We are
continuously enhancing our controls, processes and practices designed to protect our networks, systems, data and other infrastructure
from attack, damage or unauthorized access. This continued enhancement will require us to expend additional resources, including to
investigate and remediate any information security vulnerabilities that may be detected. Despite our ongoing investments in security
resources, talent, and business practices, there is no guarantee that these measures will be adequate to safeguard against all data
security breaches, system compromises or misuses of data.
We, or third-parties from whom we license critical information technology systems, may be alleged to have infringed upon
intellectual property rights owned by others.
Competitors or other third parties may allege that we, or consultants or other third parties retained or indemnified by us or from whom
we license critical information technology systems, infringe on their intellectual property rights. Given the complex, rapidly changing
and competitive technological and business environment in which we operate, and the potential risks and uncertainties of intellectual
property-related litigation, an assertion of an infringement claim against us or our vendors may cause us to spend significant amounts
to defend the claim (even if we ultimately prevail); to pay significant money damages; to lose significant revenues; to be prohibited
from using the relevant systems, processes, technologies or other intellectual property; to cease offering certain products or services or
to incur significant license, royalty or technology development expenses. Moreover, it has become common in recent years for
individuals and groups to purchase intellectual property assets for the sole purpose of making claims of infringement and attempting to
extract settlements from companies like ours. Even in instances where we believe that claims and allegations of intellectual property
infringement against us are without merit, defending against such claims is time consuming and expensive and could result in the
28
diversion of time and attention of our management and employees. In addition, although in some cases a third party may have agreed
to indemnify us for such costs, such indemnifying party may refuse, or be unable, to uphold its contractual obligations.
Employee misconduct could expose us to significant legal liability and reputational harm.
We are vulnerable to reputational harm because we operate in an industry in which integrity and the confidence of our customers are
of critical importance. Our employees could engage in fraudulent, illegal, wrongful or suspicious activities, improper use or disclosure
of confidential information and/or activities resulting in consumer harm that adversely affects our customers and/or our business. The
precautions we take to detect and prevent such misconduct may not always be effective, and we may be exposed to regulatory
sanctions and/or penalties, and serious harm to our reputation, financial condition, customer relationships and ability to attract new
customers.
Returns on pension plan assets may not be adequate to cover future funding requirements.
Investments in the portfolio of our defined benefit pension plan may not provide adequate returns to fully fund benefits as they come
due, thus causing higher annual plan expenses and requiring additional contributions by us to the defined benefit pension plan.
The value of our goodwill and other intangible assets may decline in the future.
A significant decline in our expected future cash flows, a significant adverse change in the business climate, slower growth rates or a
significant and sustained decline in the price of our common stock may necessitate our taking charges in the future to reflect an
impairment of our goodwill. Future regulatory actions could also have a material impact on assessments of goodwill for impairment.
Adverse events or circumstances could impact the recoverability of our intangible assets including significant loss of core deposits,
customer relationships acquired in our trust and asset management transaction, losses of acquired credit card accounts and/or balances,
increased competition or adverse changes in the economy. To the extent these intangible assets are deemed unrecoverable, a non-cash
impairment charge would be recorded. While an impairment charge does not impact regulatory capital, it could have a material
adverse effect on our results of operations.
Risks Related to Our Business Strategy
We are subject to industry competition which may have an impact upon our success.
Our profitability depends on our ability to compete successfully in a highly competitive market for banking and financial services, and
we expect such challenges to continue. Certain of our competitors are larger and have more resources than we do. We face
competition in our regional market areas from other commercial banks, savings associations, credit unions, mortgage banking firms,
securities brokerage firms, mutual funds and insurance companies, and other financial institutions that offer similar services. Some of
our nonbank competitors are not subject to the same extensive supervision and regulation to which we or the Bank are subject, and
may accordingly have greater flexibility in competing for business. Over time, certain sectors of the financial services industry have
become more concentrated, as institutions involved in a broad range of financial services have been acquired by other firms. These
developments could result in our competitors gaining greater capital and other resources, or being able to offer a broader range of
products and services with more geographic range.
Some of our competitors have reduced or eliminated certain service charges on deposit accounts, including overdraft fees, and
additional competitors may be willing to reduce or eliminate service or other fees in order to attract additional customers. If the
Company chooses to reduce or eliminate certain categories of fees, including those related to deposit accounts, fee income related to
these products and services would be reduced. If the Company chooses not to take such actions, we may be at a competitive
disadvantage in attracting customers for certain fee producing products.
Another competitive factor is that the financial services market, including banking services, is undergoing rapid changes with frequent
introductions of new technology-driven products and services, primarily as a result of the increased digitization of banking services,
the demand for which was accelerated by the COVID-19 pandemic. We compete with many forms of payments offered by both bank
and non-bank providers, including a variety of new and evolving alternative payment mechanisms, systems and products, such as
aggregators and web-based and wireless payment platforms or technologies, digital or “crypto” currencies, prepaid systems and
payment services targeting users of social networks, communications platforms and online gaming. Our future success may depend, in
part, on our ability to use technology competitively to offer products and services that provide convenience to customers and create
additional efficiencies in our operations. The widespread adoption of new technologies has and will continue to require us to make
substantial capital expenditures to modify or adapt our systems to remain competitive and offer new products and services. Our ability
to effectively implement new technologies to improve our operations and systems will impact our competitive position in the financial
services industry. Furthermore, we may not be successful in introducing new products and services in response to industry trends or
developments in technology, or those new products may not be accepted by customers.
29
If we are unable to successfully compete with traditional competitors as well as the evolving landscape of fintech companies and other
nontraditional competitors to attract and retain customers, our business, financial condition or results of operations may also be
adversely affected, perhaps materially. In particular, if we experience an outflow of deposits as a result of our customers desiring to do
business with our competitors, we may be forced to rely more heavily on borrowings and other sources of funding to operate our
business and meet withdrawal demands, thereby adversely affecting our net interest margin.
The implementation of new lines of business or new products and services may subject us to additional risk.
We continuously evaluate our service offerings and may implement new lines of business or offer new products and services within
existing lines of business in the future. There are substantial risks and uncertainties associated with these efforts. The development of
new lines of business or new products and services often requires the commitment of significant resources that may not be recouped if
not successful. Variables beyond our control or that we do not foresee may prevent the successful implementation of new lines of
business, products or services. Initial timetables for the introduction and development of new lines of business and/or new products or
services may not be achieved and price and profitability targets may not prove feasible. External factors, such as compliance with
regulations, competitive alternatives, and shifting market preferences, may also impact the successful implementation of a new line of
business and/or a new product or service. Furthermore, any new line of business and/or new product or service could require the
establishment of new key and other controls and have a significant impact on our existing system of internal controls. Failure to
successfully manage these risks in the development and implementation of new lines of business and/or new products or services
could have a material adverse effect on our business and, in turn, our financial condition and results of operations.
We may not realize the expected benefits from our efficiency and growth initiatives, which could negatively impact our future
profitability.
Operating costs must decrease or grow at a slower pace than overall revenue in order to thrive in the competitive banking
environment. We have and will continue to implement strategies to grow our loan portfolio and increase noninterest income in order
to realize earnings growth and to remain competitive with the other banks in the markets we serve. We are continuously focused on
growth initiatives and strategies for expense reductions to increase efficiencies. While we have had success in cost-savings and
revenue growth in the past, there is no guarantee that these initiatives will be successful in the future. In addition, while expense
control continues to be a top focus for us, management also expects to continue to make strategic investments in technology that are
expected to improve our customer experience and support future growth, which will require an increase in expenditures. There can be
no assurance that we will ultimately realize the anticipated benefits of our expense reduction and growth strategies, which may impair
our earnings growth. Further, we may not be able to realize cost savings or revenue benefits in the time period expected, which could
negatively affect our near-term profitability.
Our future growth and financial performance may be negatively affected if we are unable to successfully execute our growth
plans, which may include acquisitions and de novo branching.
We may not be able to continue our organic, or internal, growth, which depends upon economic conditions, our ability to identify
appropriate markets for expansion, our ability to recruit and retain qualified personnel, our ability to fund growth at a reasonable cost,
sufficient capital to support our growth initiatives, competitive factors, banking laws, and other factors.
We may seek to supplement our internal growth through acquisitions. We cannot predict the number, size or timing of acquisitions, or
whether any such acquisition will occur at all. Our acquisition efforts have traditionally focused on targeted banking entities in
markets in which we currently operate and markets in which we believe we can compete effectively. However, as consolidation of the
financial services industry continues, the competition for suitable acquisition candidates may increase and, as the number of
appropriate targets decreases, the prices for potential acquisitions could increase which could reduce our potential returns, and reduce
the attractiveness of these opportunities to us. We may compete with other financial services companies for acquisition opportunities,
and many of these competitors have greater financial resources than we do and may be able to pay more for an acquisition than we are
able or willing to pay.
We also may be required to use a substantial amount of our available cash and other liquid assets, or seek additional debt or equity
financing, to fund future acquisitions. Such events could make us more susceptible to economic downturns and competitive pressures,
and additional debt service requirements may impose a significant burden on our results of operations and financial condition. If we
are unable to locate suitable acquisition candidates willing to sell on terms acceptable to us, or we are otherwise unable to obtain
additional debt or equity financing necessary for us to continue making acquisitions, we would be required to find other methods to
grow our business and we may not grow at the same rate we have in the past, or at all.
We must generally satisfy several conditions, including receiving federal regulatory approval, in order execute most acquisition
transactions. In determining whether to approve a proposed bank acquisition, federal bank regulators will consider, among other
factors, the effect of the acquisition on competition, financial condition, and future prospects. The regulators also review current and
projected capital ratios and levels; the competence, experience, and integrity of management and its record of compliance with laws
and regulations; the convenience and needs of the communities to be served (including the acquiring institution’s record of
compliance under the Community Reinvestment Act) and the effectiveness of the acquiring institution in combating money laundering
30
activities. We cannot be certain when or if, or on what terms and conditions, any required regulatory approvals will be granted. We
may also be required to sell banks or branches as a condition to receiving regulatory approval, which condition may not be acceptable
to us or, if acceptable to us, may reduce the benefit of any acquisition. Additionally, federal and/or state regulators may charge us with
regulatory and compliance failures of an acquired business that occurred prior to the date of acquisition, and such failures may result
in the imposition of formal or informal enforcement actions.
We cannot provide assurance that we will be able to successfully consolidate any business or assets we acquire with our existing
business. The integration of acquired operations and assets may require substantial management effort, time and resources and may
divert management’s focus from other strategic opportunities and operational matters. Acquisitions may not perform as expected when
the transaction was consummated and may be dilutive to our overall operating results and stockholders’ equity per share of common
stock. Specifically, acquisitions could result in higher than expected deposit attrition, loss of key employees or other consequences
that could adversely affect our ability to maintain relationships with customers and employees. We may also sell or consider selling
one or more of our businesses. Such a sale would generally be subject to certain federal and/or state regulatory approvals, and may not
be able to generate gains on sale or related increases in shareholder’s equity commensurate with desirable levels.
In addition to the acquisition of existing financial institutions, as opportunities arise, we may explore de novo branching as a part of
our internal growth strategy and possibly enter into new markets through de novo branching. De novo branching and any acquisition
carry numerous risks, including the following:
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
the inability to obtain all required regulatory approvals;
significant costs and anticipated operating losses associated with establishing a de novo branch or a new bank;
the inability to secure the services of qualified senior management;
the failure of the local market to accept the services of a new bank owned and managed by a bank holding company
headquartered outside of the market area of the new bank;
economic downturns in the new market;
the inability to obtain attractive locations within a new market at a reasonable cost; and
the additional strain on management resources and internal systems and controls.
We have experienced, to some extent, many of these risks with our de novo branching to date.
Changes in retail distribution strategies and consumer behavior may adversely impact our investments in bank premises,
equipment, technology and other assets and may lead to increased expenditures to change our retail distribution channel.
We have significant investments in bank premises and equipment for our branch network. Advances in technology such as e-
commerce, telephone, internet and mobile banking, and in-branch self-service technologies including automated teller machines and
other equipment, as well as an increasing customer preference for these other methods of accessing our products and services, could
decrease the value of our branch network, technology, or other retail distribution physical assets and may cause us to change our retail
distribution strategy, close and/or sell certain branches or parcels of land held for development and restructure or reduce our remaining
branches and work force. In 2021, the Company recorded $13.9 million in losses on facilities and equipment related to such
consolidation. Similar actions in the future could lead to additional losses on disposition of such assets or could adversely impact the
carrying value of any long-lived assets and may lead to increased expenditures to renovate, reconfigure or close a number of our
remaining branches or to otherwise reform our retail distribution channel.
Risks Related to the Legal and Regulatory Environment
We are subject to regulation by various federal and state entities.
We are subject to the regulations of the Commission, the Federal Reserve, the FDIC, the CFPB and the MDBCF. New regulations
issued by these or other agencies may adversely affect our ability to carry on our business activities. We are subject to various federal
and state laws, and certain changes in these laws and regulations may adversely affect our operations. Other than the federal securities
laws, the laws and regulations governing our business are intended primarily for the protection of our depositors, our customers, the
financial system and the FDIC insurance fund, not our shareholders or other creditors. Further, we must obtain approval from our
regulators before engaging in certain activities, and our regulators have the ability to compel us to, or restrict us from, taking certain
actions entirely, such as increasing dividends, entering into merger or acquisition transactions, acquiring or establishing new branches,
and entering into certain new businesses. Noncompliance with certain of these regulations may impact our business plans, including
our ability to branch, offer certain products, or execute existing or planned business strategies.
For additional information regarding laws and regulations to which our business is subject, see “Supervision and Regulation.”
Any of the laws or regulations to which we are subject, including tax laws, regulations or their interpretations, may be modified or
changed from time to time, and we cannot be assured that such modifications or changes will not adversely affect us. Failure to
appropriately comply with any such laws or regulations could result in sanctions by regulatory authorities, civil monetary penalties or
damage to our reputation, all of which could adversely affect our business, financial condition or results of operations.
31
In addition, as the regulatory environment related to information security, data collection and use, and privacy becomes increasingly
rigorous, with new and constantly changing requirements applicable to our business, compliance with those requirements could also
result in additional costs.
We and other financial institutions have been the subject of litigation, investigations and other proceedings which could result in
legal liability and damage to our reputation.
We and certain of our directors, officers and subsidiaries may be named from time to time as defendants in various class actions and
other litigation relating to our business and activities. Past, present and future litigation has included or could include claims for
substantial compensatory and/or punitive damages or claims for indeterminate amounts of damages. We are also involved from time
to time in other reviews, investigations and proceedings (both formal and informal) by governmental, law enforcement and self-
regulatory agencies regarding our business. These matters could result in adverse judgments, settlements, fines, penalties, injunctions,
amendments and/or restatements of our Commission filings and/or financial statements, determinations of material weaknesses in our
disclosure controls and procedures or other relief. Substantial legal liability or significant regulatory action against us, as well as
matters in which we are involved that are ultimately determined in our favor, could materially adversely affect our business, financial
condition or results of operations, cause significant reputational harm to our business, divert management attention from the operation
of our business and/or result in additional litigation.
In addition, in recent years, a number of judicial decisions have upheld the right of borrowers to sue lending institutions on the basis of
various evolving legal theories, collectively termed “lender liability.” Generally, lender liability is founded on the premise that a
lender has either violated a duty, whether implied or contractual, of good faith and fair dealing owed to the borrower or has assumed a
degree of control over the borrower resulting in the creation of a fiduciary duty owed to the borrower or its other creditors or
shareholders. We have been and in the future could become subject to claims based on this or other evolving legal theories.
Risks Related to Our Common Stock
Future issuances of equity securities could dilute the interests of holders of our common stock, and our common stock ranks
junior to indebtedness.
Our common stock ranks junior to all of our existing and future indebtedness with respect to distributions and liquidation. In addition,
future issuances of equity securities, including pursuant to outstanding options, could dilute the interests of our existing shareholders,
including you, and could cause the market price of our common stock to decline. Moreover, to the extent that we issue restricted stock
units, phantom shares, stock appreciation rights, options or warrants to purchase our common stock in the future and those stock
appreciation rights, options or warrants are exercised or as the restricted stock units vest, our shareholders may experience further
dilution.
Holders of our shares of common stock do not have preemptive rights. Additionally, sales of a substantial number of shares of our
common stock in the public markets and the availability of those shares for sale could adversely affect the market price of our
common stock.
Our ability to deliver and pay dividends depends primarily upon the results of operations of our subsidiary Bank, and we may not
pay, or be permitted to pay, dividends in the future.
We are a bank holding company that conducts substantially all of our operations through our subsidiary Bank. As a result, our ability
to make dividend payments on our common stock will depend primarily upon the receipt of dividends and other distributions from the
Bank.
The ability of the Bank to pay dividends or make other payments to us, as well as our ability to pay dividends on our common stock, is
limited by the Bank’s obligation to maintain sufficient capital and by other general regulatory restrictions on its dividends, which have
tightened since the financial crisis. The Federal Reserve has stated that bank holding companies should not pay dividends from
sources other than current earnings. If these requirements are not satisfied, we may be unable to pay dividends on our common stock.
We may also decide to limit the payment of dividends even when we have the legal ability to pay them in order to retain earnings for
use in our business, which could adversely affect the market value of our common stock. There can be no assurance of whether or
when we may pay dividends in the future.
Mississippi law, and anti-takeover provisions in our amended articles of incorporation and bylaws could make a third-party
acquisition of us difficult and may adversely affect share value.
Our amended articles of incorporation and bylaws contain provisions that make it more difficult for a third party to acquire us (even if
doing so might be beneficial to our shareholders) and for holders of our securities to receive any related takeover premium for their
securities.
32
We are also subject to certain provisions of state and federal law and our articles of incorporation that may make it more difficult for
someone to acquire control of us. Under federal law, subject to certain exemptions, a person, entity, or group must notify the federal
banking agencies before acquiring 10% or more of the outstanding voting stock of a bank holding company, including shares of our
common stock. Banking agencies review the acquisition to determine if it will result in a change of control. The banking agencies
have 60 days to act on the notice, and take into account several factors, including the resources of the acquirer and the antitrust effects
of the acquisition. Additionally, a bank holding company must obtain the prior approval of the Federal Reserve before, among other
things, acquiring direct or indirect ownership or control of more than 5% of the voting shares of any bank. There are also Mississippi
statutory provisions and provisions in our articles of incorporation that may be used to delay or block a takeover attempt. As a result,
these statutory provisions and provisions in our articles of incorporation could result in our being less attractive to a potential acquirer
and limit the price that investors might be willing to pay in the future for shares of our common stock.
Shares of our common stock are not insured deposits and may lose value.
Shares of our common stock are not savings accounts, deposits or other obligations of any depository institution and are not insured or
guaranteed by the FDIC or any other governmental agency or instrumentality, any other deposit insurance fund or by any other public
or private entity, and are subject to investment risk, including the possible loss of principal.
Securities analysts might not continue coverage on our common stock, which could adversely affect the market for our common
stock.
The trading price of our common stock depends in part on the research and reports that securities analysts publish about us and our
business. We do not have any control over these analysts, and they may not continue to cover our common stock. If securities analysts
do not continue to cover our common stock, the lack of research coverage may adversely affect the market price of our common stock.
If securities analysts continue to cover our common stock, and our common stock is the subject of an unfavorable report, the price of
our common stock may decline. If one or more of these analysts cease to cover us or fail to publish regular reports on us, we could
lose visibility in the financial markets, which could cause the price or trading volume of our common stock to decline.
General Risk Factors
We must attract and retain skilled personnel.
Our success depends, in substantial part, on our ability to attract and retain skilled, experienced personnel in key positions within the
organization. Competition for qualified candidates in the activities and markets that we serve is intense. If we are not able to hire,
adequately compensate, or retain these key individuals, we may be unable to execute our business strategies and may suffer adverse
consequences to our business, financial condition and results of operations. Recent labor shortages as a result of the COVID-19
pandemic may also restrict our ability to attract and retain personnel.
Natural and man-made disasters, including those caused or exacerbated by climate change, could affect our ability to operate.
Our market areas are often impacted by hurricanes and flooding. Natural disasters, such as hurricanes, flooding, tornados, freezes and
other natural and man-made disasters, such as oil spills in the Gulf of Mexico, can disrupt our operations, result in significant damage
to our properties or properties and businesses of our borrowers, including property pledged as collateral, interrupt our ability to
conduct business, negatively affect the local economies in which we operate, and increase circumstances leading to litigation.
We cannot predict whether or to what extent damage caused by future hurricanes and other disasters will affect our operations or the
economies in our market areas, but such events could cause a decline in loan originations, a decline in the value or destruction of
properties securing the loans and an increase in the risk of delinquencies, foreclosures, loan losses and litigation. Climate change may
increase the nature, severity and frequency of adverse weather conditions in our footprint, making the impact from these types of
natural disasters on us or our customers worse.
We rely on the existence of, and ability of private and public insurance programs to provide coverage for these types of events. The
unavailability of these types of coverage or the inability of these entities to perform could have a materially adverse impact on our
operations.
Societal, legislative and regulatory responses to climate change could adversely affect our business and performance, including
indirectly through impacts on our customers.
Concerns over the long-term impacts of climate change have led and will continue to lead to governmental efforts around the world to
mitigate those impacts. Consumers and businesses also may change their behavior on their own as a result of these concerns. The
Company and its customers will need to respond to new laws and regulations as well as consumer and business preferences resulting
from climate change concerns. We and our customers may face cost increases, asset value reductions and operating process changes.
The impact on our customers will likely vary depending on their specific attributes, including a significant presence in areas that are
33
vulnerable to natural and man-made disasters that may be exacerbated by climate change or reliance on or role in carbon intensive
activities. Among the impacts to the Company could be a drop in demand for our products and services, particularly in certain sectors.
In addition, we could face reductions in creditworthiness on the part of some customers or in the value of assets securing loans. Our
efforts to take these risks into account may not be effective in protecting us from the negative impact of new laws and regulations or
changes in consumer or business behavior.
We are exposed to reputational risk.
Negative public opinion can result from our actual or alleged improper activities, such as lending practices, data security breaches,
corporate governance policies and decisions, and acquisitions, any of which may damage our reputation. Negative public opinion can
also result from action or inaction related to environmental, social and corporate governance matters. Additionally, actions taken by
government regulators and community organizations may also damage our reputation. Negative public opinion could adversely affect
our ability to attract and retain customers or expose us to litigation and regulatory action.
Changes in accounting policies or in accounting standards could materially affect how we report our financial condition and
results of operations.
The preparation of consolidated financial statements in conformity with U.S generally accepted accounting principles (“GAAP”),
including the accounting rules and regulations of the Commission and the FASB, requires management to make significant estimates
and assumptions that impact our financial statements by affecting the value of our assets or liabilities and results of operations. Some
of our accounting policies are critical because they require management to make difficult, subjective and complex judgments about
matters that are inherently uncertain and because materially different amounts may be reported if different estimates or assumptions
are used. If such estimates or assumptions underlying our financial statements are incorrect, our financial condition and results of
operations could be adversely affected.
From time to time, the FASB and the Commission change the financial accounting and reporting standards or the interpretation of
such standards that govern the preparation of our external financial statements. These changes are beyond our control, can be difficult
to predict, may require extraordinary efforts or additional costs to implement and could materially impact how we report our financial
condition and results of operations. Additionally, we may be required to apply a new or revised standard retrospectively, resulting in
the restatement of prior period financial statements in material amounts.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
The Company’s main office, which is the headquarters of the holding company, is located at Hancock Whitney Plaza, in Gulfport,
Mississippi. The Bank makes portions of the main office facilities and certain other facilities available for lease to third parties,
although such incidental leasing activity is not material to the Company’s overall operations.
The Company operates 177 full service banking and financial services offices and 240 automated teller machines across our market,
primarily in the Gulf south corridor, including southern and central Mississippi; southern and central Alabama; southern, central and
northwest Louisiana; the northern, central, and panhandle regions of Florida; and certain areas of east Texas, including Houston,
Beaumont, Dallas and San Antonio, among others. Additionally, the Company operates a loan production office in Nashville,
Tennessee and a trust and asset management office in Marshall, Texas. The Company owns approximately 71% of these facilities, and
the remaining banking facilities are subject to leases, each of which we consider reasonable and appropriate for its location. We ensure
that all properties, whether owned or leased, are maintained in suitable condition. We also evaluate our banking facilities on an
ongoing basis to identify possible under-utilization and to determine the need for functional improvements, relocations, closures or
possible sales. The Bank and its subsidiaries hold a variety of property interests acquired in settlement of loans. Some of these
properties were acquired in transactions before 1979 and are carried at nominal amounts on our balance sheet and reflected income of
less than $0.1 million in our 2021 operating results.
ITEM 3. LEGAL PROCEEDINGS
We and our subsidiaries are 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 4. MINE SAFETY DISCLOSURES
Not applicable.
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PART II
ITEM 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES
Market Information
The Company’s common stock trades on the Nasdaq Global Select Market under the ticker symbol “HWC.” There were 8,636 active
holders of record of the Company’s common stock at January 31, 2022 and 86,765,754 shares outstanding.
Stock Performance Graph
The following performance graph and related information are neither “soliciting material” nor “filed” with the SEC, nor shall such
information be incorporated by reference into any future filings under the Securities Act of 1933 or the Securities Exchange Act of
1934, each as amended, except to the extent the Company specifically incorporates it by reference into such filing.
The performance graph compares the cumulative five-year shareholder return on the Company’s common stock, assuming an
investment of $100 on December 31, 2016 and the reinvestment of dividends thereafter, to that of the common stocks of United States
companies reported in the Nasdaq Total Return Index and the common stocks of the KBW Regional Banks Total Return Index. The
KBW Regional Banks Total Return Index is a proprietary stock index of Keefe, Bruyette & Woods, Inc., that tracks the returns of 50
regional banking companies throughout the United States.
350
300
250
200
150
100
50
0
2016
2017
2018
2019
2020
2021
Hancock Whitney Corporation
KBW Regional Banks Index
NASDAQ Composite-Total Return
35
Equity Compensation Plan Information
The following table provides information as of December 31, 2021 with respect to shares of common stock that may be issued under
the Company’s equity compensation plans.
Plan Category
Equity compensation plans approved by
security holders
Equity compensation plans not approved by
security holders
Total
Number of Securities to
be Issued Upon Exercise
of Outstanding Options,
Warrants and Rights
(a)
Weighted-
Average Exercise
Price of Outstanding
Options, Warrants
and Rights
(b)
Number of Securities
Remaining Available for
Future Issuance Under
Equity Compensation Plans
(Excluding Securities
Reflected in Column (a))
(c)
597,300 (1) $
1,476 (3)
598,776
29.73 (2)
53.73 (3)
1,662,469
—
1,662,469
(1)
(2)
(3)
Includes 65,506 shares potentially issuable upon the vesting of outstanding restricted share units and 36,792 shares potentially issuable upon the vesting of
outstanding performance share units that represent awards deferred into the Company’s Nonqualified Deferred Compensation Plan. Also includes 226,490
performance share awards at 100% of target. If the highest level of performance conditions is met, the total performance shares issued would be 450,580 and the
total performance share units issued would be 73,584.
The weighted average exercise price relates only to the exercise of outstanding options included in column (a)
Represents securities to be issued upon the exercise of options that were assumed by the Company in the acquisition of MidSouth Bancorp, Inc.
Issuer Purchases of Equity Securities
On April 22, 2021, the Company’s board of directors approved a stock buyback program whereby the Company is authorized to
repurchase up to 4.3 million shares of its common stock through the program’s expiration date of December 31, 2022. The program
allows the Company to repurchase its common shares in the open market, by block purchase, through accelerated share repurchase
programs, in privately negotiated transactions, or otherwise, in one or more transactions. The Company is not obligated to purchase
any shares under this program, and the board of directors has the ability to terminate or amend the program at any time prior to the
expiration date. During the year ended December 31, 2021, the Company repurchased 449,876 shares of its common stock at an
average cost of $48.45 per share, inclusive of commissions.
Common stock repurchase activity during the fourth quarter of 2021 was as follows:
Total Number of
Shares of Units
Purchased
Average Price Paid
Per Share
Total Number of
Shares Purchased as
a Part of Publicly
Announced Plans
or Programs
Maximum Number
of Shares That May
Yet Be Purchased
Under Plans or
Programs
— $
217,455 $
176,072 $
393,527 $
—
49.42
48.50
49.01
—
217,455
176,072
393,527
4,243,651
4,026,196
3,850,124
3,850,124
Oct 1, 2021 - Oct 31, 2021
Nov 1, 2021 - Nov 30, 2021
Dec 1, 2021 - Dec 31, 2021
Total
ITEM 6.
Reserved.
36
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The objective of this discussion and analysis is to provide material information relevant to the assessment of the financial condition
and results of operations of Hancock Whitney Corporation and subsidiaries during the year ended December 31, 2021 and selected
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, which 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. See Forward-Looking Statements in Part I of this Annual Report.
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. A reconciliation of those measures to GAAP measures are provided in Table 1. “Consolidated Financial
Results” and Table 28. “Quarterly Consolidated Financial Results” of this section. The following is an overview of the non-GAAP
measures used and the reasons why management believes they are useful and important in understanding the Company’s financial
condition and results of operations included below.
Consistent with the provisions of Subpart 229.1400 of 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 interest income from certain loans and investments using the statutory federal tax rate (21% for all periods
presented) to increase tax-exempt interest income to a taxable-equivalent basis. This measure is the preferred industry measurement of
net interest income and it enhances comparability of net interest income arising from taxable and tax-exempt sources.
We present certain additional non-GAAP financial measures to assist the reader with a better understanding of the Company’s
performance period over period, as well as to provide investors with assistance in understanding the success management has
experienced in executing its strategic initiatives. We use the term “operating” to describe a financial measure that excludes income or
expense considered to be nonoperating in nature. Items identified as nonoperating are those that, when excluded from a reported
financial measure, provide management or the reader with a measure that may be more indicative of forward-looking trends in the
Company’s business. However, these non-GAAP financial measures have inherent limitations and should not be considered in
isolation or as a substitute for analysis of results or capital position under U.S. GAAP.
We define Operating Revenue as net interest income (te) and noninterest income less nonoperating revenue. We define Operating
Pre-Provision Net Revenue as operating revenue (te) less noninterest expense, excluding nonoperating items. Management believes
that operating revenue and pre-provision net revenue are useful financial measures because it enables investors and others to assess the
Company’s performance period over period and management’s success in executing its strategic initiatives, as well as measuring the
ability to generate capital to cover credit losses through a credit cycle.
EXECUTIVE OVERVIEW
We are pleased to report that 2021 was a record year for our company despite the ongoing challenges of the pandemic. Our associates
were steadfast and resilient in in their service to clients and to each other as we worked to gain efficiency and build momentum
through the year. At December 31, 2021, our assets grew to $36.5 billion and our capital remained strong. We ended the year with
loans and deposits totaling $21.1 billion and $30.5 billion, respectively. Our credit metrics improved greatly and are now among the
best in class relative to our peers. The work we started pre-pandemic and continue today to improve technology, grow revenues and
control expenses, coupled with de-risking efforts from 2020, have helped us achieve strong operating results for 2021 and we believe
sets a path for a strong 2022.
Current Economic Environment
During the past year, the COVID-19 pandemic continued to have a profound effect upon the cycle of commerce, as individuals,
businesses and governments continue to grapple with economic disruption. While there were no widespread or pervasive restrictions
on social or business practices in place similar to those instituted in early 2020, the emergence of two notable variants of the virus,
Delta and Omicron, resulted in mid and late year surges in illness. These surges strained healthcare delivery in many areas in the
U.S. and prompted certain localized mandated mitigation measures and other voluntary responses, such as quarantines/new virus
containment protocols, leisure and business event cancellations and vaccine-for-entry requirements. Supply chain disruption and
labor shortages intensified during the period, leading to inflationary conditions, with the U.S. experiencing a 7% annual increase in
the consumer price index during 2021.
Following the largest contraction in nearly a century brought on by the pandemic, the U.S. economy experienced the strongest
annual growth in almost four decades in 2021. The efficacy of vaccines at preventing serious illness and death from the coronavirus
37
allowed for the return of many social/leisure and business practices, and, coupled with ongoing and new stimulus initiatives, spurred
meaningful growth in economic activity. According to the U.S. Bureau of Labor Statistics, the rate of unemployment fell to 3.9% at
December 31, 2021, from 6.7% a year earlier. Based on advanced estimates of the Bureau of Economic Analysis, Real Gross
Domestic Product (“GDP”) increased 5.7% in 2021, compared to a decrease of 3.4% in 2020. GDP increased at an annual rate of
6.9% in the fourth quarter of 2021, following an increase of 2.3% in the third quarter. The acceleration in the fourth quarter was led
by an upturn in exports as well as increases in inventory investment and consumer spending. However, surges in COVID-19 cases
resulting from variants created disruptions in the operations of establishments in some parts of the country, and government
assistance in the forms of forgivable loans to business, grants to state and local governments and social benefits to households have
decreased as provisions of several federal aid programs have expired or tapered off.
While we have seen promising signs of economic recovery, challenges, some unique to the financial services industry, remain.
Customer deposit balances remain elevated and with the cash inflows from the forgiveness of the Small Business Administration’s
Paycheck Protection Program (PPP) loans, excess liquidity remains on our balance sheet. Amid the prolonged low interest rate
environment, the deployment of excess liquidity into lower-yielding investments resulted in the compression of our net interest margin
in 2021. We saw improvement in demand in 2021 in our core loan portfolio, which excludes PPP loans, especially in the fourth
quarter. Although loan pricing pressure continued, core loan growth was across most regions and in our equipment finance and
healthcare specialty business lines.
Parts of our footprint were further affected by Hurricane Ida, a major hurricane that made landfall in late August in Southeast
Louisiana. Along with personal and commercial property damage in some hard-hit areas, extensive damage to the region’s energy grid
resulted in extended power outages for a portion of our market. The effects of the storm prompted temporary evacuation for many
residents and unplanned closures of businesses, schools, and other essential services. As a result, supply chain and labor constraints
already present were exacerbated, and many events that foster leisure and business tourism were canceled or postponed. Certain of our
fee income categories, such as ATM fees and secondary mortgage market operations, were temporarily impacted by Hurricane Ida’s
disruption. Our hurricane impacted markets generally experience increased economic activity as the communities rebuild and recover
from the damage.
Economic Outlook
We utilize economic forecasts produced by Moody’s Analytics (Moody’s) that provide various scenarios to assist in the
development of our economic outlook. This outlook discussion utilizes the December 2021 Moody’s forecast, the most current
available at December 31, 2021. 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 and have varying degrees of positive and negative severity of the outcome of the
economic downturn stemming from the coronavirus pandemic, as well as varying shapes and length of recovery. The outlook
reflected in the December 2021 economic scenarios has improved significantly from the comparable forecasts available at
December 31, 2020, attributable to widely available vaccines, the lifting of most restrictions on movement and improvement across
most economic variables.
The December 2021 baseline forecast is overall optimistic in its assumptions surrounding the drivers of economic growth, including
passage of the Build Back Better Act bill by the end of 2021 with meaningful effects seen in early 2022, coronavirus infection
abatement in February 2022, and that COVID-19 will become seasonal and endemic, with no explicit assumptions surrounding the
Omicron variant of the virus. The baseline scenarios has forecasted unemployment rate at 3.6% and 3.5% in 2022 and 2023,
respectively and forecasted GDP growth of 4.4% in 2022 and 2.9% 2023. This scenario assumes that the consumer price index is
near its peak and that the worst of the supply chain issues are behind us. The downside slower near-term growth scenario (S-2)
assumes a more subdued growth compared to the baseline, primarily as a result of lesser efficacy of vaccines against variants of the
coronavirus, a reduction or delay in stimulus, and more prolonged labor shortages and global supply chain disruption. The
forecasted unemployment rate under the S-2 scenario was 5.9% and 4.3% in 2022 and 2023, respectively and GDP growth of 2.6%
in 2022 and 2.0% in 2023. Management considers the assumptions provided for in the S-2 scenario to be somewhat more likely than
the baseline scenario, particularly within our footprint; as such, the baseline scenario and the S-2 scenario were given probability
weightings of 40% and 60%, respectively, in our allowance for credit losses calculation at December 31, 2021. The weighting of the
S-2 scenario reflects management’s view that the emergence of the Omicron variant could have a greater effect upon our portfolios,
with loan concentrations in industries such as hospitality, retail and nonessential healthcare services, and the delay of economic
stimulus and impacts from inflation, all of which may slow the economic recovery.
Excess liquidity from elevated customer deposit levels and from PPP loan forgiveness, coupled with nearly two years of a low
interest rate environment, have and are expected to continue to pressure net interest margin in the near term. In response to rising
inflation, in January 2022, the Federal Reserve signaled intentions to raise the target range for the Federal Funds rate in mid-March
2022. As a financial institution that is asset sensitive, we expect to see our net interest margin widen in the second half of the year.
We expect core loan demand to continue to increase, with forecasted growth of 6%-8% in 2022 and expect the majority of PPP
loans to be forgiven by the second quarter of 2022. Deposits are expected to remain elevated compared to pre-pandemic levels.
38
Given the economic volatility resulting from the pandemic, including supply chain constraints, labor shortages and the potential for
future mitigation measures intended to combat variants of the virus, it is not possible to accurately predict the extent, severity or
duration of these conditions or when typical operating conditions will fully resume. The continued success of government initiatives
to stimulate economic activity, societal response to virus containment measures and the efficacy of vaccines and/or treatments to
control the rate of serious illness are critical to the resolution of the crisis. We continuously monitor and anticipate developments, but
cannot predict all of the various adverse effects COVID-19 will have on our business, financial condition, liquidity and results of
operations.
Highlights of 2021 Financial Results
Net income for the year ended December 31, 2021 was $463.2 million, or $5.22 per diluted common share, compared to a net loss of
$45.2 million in 2020, or ($0.54) per diluted common share. The results for 2021 include $35.9 million (pre-tax), or $0.31 per share
after tax, of net nonoperating expenses items, including expense of $38.3 million related to efficiency initiatives, $4.4 million of
hurricane-related expenses and $4.2 million associated with subordinated debt redemption, partially offset by $11.0 million gains.
There were no nonoperating items in 2020. The following is an overview of financial results for the year ended December 31, 2021:
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
Record net income of $463.2 million, or $5.22 per diluted common share, includes $35.9 million (pre-tax), or $0.31 per
share after tax, of net nonoperating expense items, mostly attributable to efficiency initiatives
Operating pre-provision net revenue (PPNR) was $537.6 million, up $46.5 million, or 9%, compared to 2020
Negative provision for credit losses of $77.5 million in 2021 resulted from a reserve release of $108.7 million and net
charge-offs of $31.2 million, compared to a provision expense of $602.9 million in 2020, which included $160.1 million
related to the sale of a substantial portion of our energy loan portfolio and $442.8 million largely related to the expected
economic impact to borrowers as a result of the pandemic
Criticized commercial loans declined $105.4 million, or 27%, and total nonperforming loans declined by $84.8 million, or
59%, from December 31, 2020
Core loan growth of $818.5 million, or 4%, and a $1.5 billion of reduction of PPP loans due to forgiveness resulted in an
overall decrease in total loans of $655.6 million in 2021
Deposits of $30.5 billion at December 31, 2021 increased $2.8 billion, or 10%, primarily driven by stimulus funding and
Hurricane Ida insurance proceeds; noninterest bearing deposits comprised 47% of total deposits at December 31, 2021,
compared to 44% for the prior year end
Common stockholders’ equity totaled $3.7 billion at December 31, 2021, up $231.3 million or 7%; common tier 1 equity
ratio was 11.09%, up 48 basis points (bps); tangible common equity ratio totaled 7.71%
Net interest margin declined 32 bps to 2.95%, reflecting the continued impact of historic levels of excess liquidity and the
low interest rate environment
We are pleased to report record earnings in this ongoing challenging environment. The pandemic brought into focus the importance of
reassessing how we could meet the challenges 2020 presented to our Company and the banking industry as a whole, resulting in a
phased-in plan to streamline and strengthen our operational framework according to our clients' changing needs and habits in a
recovering economy. In 2021, we completed a Voluntary Early Retirement Incentive Program (VERIP), under which approximately
260 associates retired in the second quarter of 2021. Further, in the third quarter of 2021, we completed an additional reduction in
force initiative that resulted in the net elimination of approximately 150 positions and, in the fourth quarter of 2021, we finalized the
consolidation of an additional 18 financial centers, bringing the total closed to 38 since 2020. We also utilized excess liquidity with
the early redemption of our 5.95% $150 million subordinated notes. We believe these cost reduction measures and revenue generating
initiatives are the building blocks for our path to an efficiency ratio target of 55% by fourth quarter of 2022. Our path to this target
considers the deployment of excess liquidity into loans through continued momentum in core loan growth and modest investment in
the bond portfolio, and maintaining our target level of expenses with additional efficiency initiatives, including strategic procurement.
Additional information related to our expectations is included in the discussions that follow.
39
TABLE 1. Consolidated Financial Results
(in thousands, except per share data)
Income Statement:
Interest income (a)
Interest income (te) (b)
Interest expense
Net interest income (te)
Provision for credit losses
Noninterest income
Noninterest expense
Income (loss) before income taxes
Income tax expense (benefit)
Net income (loss)
For informational purposes - included above, pre-tax:
Nonoperating item included in noninterest income:
Gain on sale of Hancock Horizon Funds
Gain on sale of Mastercard Class B common stock
Gain on hurricane-related insurance settlement
Nonoperating items included in noninterest expense:
Efficiency initiatives
Hurricane-related expenses
Loss on redemption of subordinated notes
Merger-related costs
Provision for credit loss associated with energy loan sale
Balance Sheet Data:
Period end balance sheet data
Loans
Earning assets
Total assets
Noninterest-bearing deposits
Total deposits
Stockholders' equity
Average balance sheet data
Loans
Earning assets
Total assets
Noninterest-bearing deposits
Total deposits
Stockholders' equity
Common Shares Data:
Earnings (loss) per share - basic
Earnings (loss) per share - diluted
Cash dividends per common share
Book value per share (period end)
Tangible book value per share (period end)
Weighted average number of shares - diluted
Period end number of shares
$
$
$
$
$
$
2021
Years Ended December 31,
2020
2019
982,258 $
993,437
49,023
944,414
(77,494)
364,334
807,007
568,056
104,841
463,215 $
4,576 $
2,800
3,600
38,296
4,412
4,165
—
—
21,134,282 $
33,610,435
36,531,205
14,392,808
30,465,897
3,670,352
21,207,942 $
32,060,863
35,075,392
13,323,978
29,093,709
3,545,255
5.23 $
5.22
1.08
42.31
31.64
87,027
86,749
1,057,981 $
1,070,981
115,458
955,523
602,904
324,428
788,792
(124,745)
(79,571)
(45,174) $
— $
—
—
—
—
—
—
$
160,101
21,789,931 $
30,616,277
33,638,602
12,199,750
27,697,877
3,439,025
22,166,523 $
29,235,313
32,390,967
10,779,570
26,212,317
3,433,099
(0.54) $
(0.54)
1.08
39.65
28.79
86,533
86,728
1,125,782
1,140,556
230,565
909,991
47,708
315,907
770,677
392,739
65,359
327,380
—
—
—
—
—
—
32,666
—
21,212,755
27,622,161
30,600,757
8,775,632
23,803,575
3,467,685
20,380,027
26,476,900
29,125,449
8,255,859
23,299,304
3,302,696
3.72
3.72
1.08
39.62
28.63
86,599
87,515
40
(dollars in thousands)
Performance and other data:
Return on average assets
Return on average common equity
Return on average tangible common equity
Tangible common equity (c)
Common equity tier 1 (CET1) ratio
Net interest margin (te)
Noninterest income as a percentage of total revenue (te)
Efficiency ratio (d)
Allowance for loan loss as a percentage of total loans
Allowance for credit loss as a percentage of total loans
Annualized net charge-offs to average loans
Nonperforming assets as a percentage of loans, ORE and
foreclosed assets
FTE headcount
Reconciliation of operating revenue and pre-provision net
revenue (te) (non GAAP measures) ( e)
Net interest income
Noninterest income
Total revenue
Taxable equivalent adjustment
Nonoperating revenue
Total operating revenue (te)
Noninterest expense
Nonoperating expense
Operating pre-provision net revenue (te)
2021
Years Ended December 31,
2020
2019
1.32%
13.07%
17.74%
7.71%
11.09%
2.95%
27.84%
57.29%
1.62%
1.76%
0.15%
0.32%
3,486
$
$
933,235 $
364,334
1,297,569
11,179
(10,976)
1,297,772
(807,007)
46,873
537,638 $
(0.14%)
(1.32%)
(1.82%)
7.64%
10.61%
3.27%
25.35%
60.07%
2.07%
2.20%
1.78%
0.71%
3,986
942,523 $
324,428
1,266,951
13,000
—
1,279,951
(788,792)
—
491,159 $
1.12%
9.91%
13.66%
8.45%
10.50%
3.44%
25.77%
58.50%
0.90%
0.92%
0.23%
1.59%
4,136
895,217
315,907
1,211,124
14,774
—
1,225,898
(770,677)
32,666
487,887
(a)
(b)
(c)
(d)
(e)
Interest income includes the net impact of discount accretion and premium amortization arising from business combinations totaling $8.6 million, $15.4 million
and $23.2 million for the years ended December 31, 2021, 2020 and 2019, respectively.
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 purc hased intangibles and nonoperating
items.
See non-GAAP financial measures section of this analysis for a discussion of these measures.
RESULTS OF OPERATIONS
The following is a discussion of results from operations for the year ended December 31, 2021 compared to the year ended December
31, 2020. Refer to previously filed Annual Reports on Form 10-K Item 7, “Management’s Discussion and Analysis of Financial
Condition and Results of Operations” for discussion of prior year variances.
Net Interest Income
Net interest income was $933.2 million, down $9.3 million from $942.5 million in 2020. Net interest income is the primary
component of our earnings and represents the difference, or spread, between revenue generated from interest-earning assets and the
interest expense related to funding those assets. For analytical purposes, net interest income is adjusted to a taxable equivalent basis
(te) using the statutory federal tax rate of 21% on tax exempt items (primarily interest on municipal securities and loans).
Net interest income (te) for 2021 totaled $944.4 million, an $11.1 million, or 1%, decrease from 2020. The decrease in net interest
income in 2021 was primarily due to a 56 bp compression in the earning asset yield, partially offset by a $2.8 billion increase in
average earning assets, including a $2.1 billion increase in average short-term investments resulting from excess liquidity. The
increase in average earning assets was largely driven by a $2.9 billion increase in average deposits, of which $2.5 billion were
noninterest-bearing. The deposit growth is attributable to a combination of customers’ government stimulus funds, PPP loan proceeds,
Hurricane Ida insurance proceeds, and a reduced level of consumer and business spending. The decrease in interest income was
partially offset by a decline in interest expense resulting from a 24 bp reduction in the cost of funds, primarily driven by a 40 bp
reduction in the cost of interest-bearing deposits.
41
The yield on earning assets was 3.10% in 2021, down 56 bps from 2020. The decrease was mainly attributable to the impact of the
lower interest rate environment on the loan and investment portfolios, a $6.8 million reduction in purchase accounting accretion and a
less favorable earning asset mix driven by liquidity in excess of current needs. The excess liquidity resulted in a higher percentage of
assets invested in lower yielding overnight funds. The loan yield was down 21 bps to 3.92%, reflecting a full year impact of the low
interest rate environment, with the variable rate loan portfolio repricing downward. Also impacted by the low rate environment were
the yields on new loans, which were originated at yields lower than portfolio averages. The loan yield was favorably impacted in 2021
by 6 bps due to higher net interest recoveries on nonaccrual loans. The yield on investment securities decreased 46 bps in 2021 to
1.92% as higher yielding fixed rate securities paid down and were replaced by securities purchased at lower yields in the current
environment.
The cost of funds decreased 24 bps to 0.15% in 2021, from 0.39% in 2020, primarily as a result of the full year impact of the low
interest rate environment. Average interest-bearing deposit costs decreased from 57 bps in 2020 to 17 bps in 2021. During 2021, we
continued to price downward interest-bearing transaction accounts and time deposit rates. Other short-term borrowing costs which
consist largely of Federal Home Loan Bank advances, decreased 13 bps to 0.49% in 2021 as excess liquidity was used to paydown
advances in 2020. Our remaining Federal Home Loan Bank advances are lower fixed-rate advances entered into in late 2019 and early
2020. The rate on long-term debt decreased 4 bps to 5.32%, largely due to the debt associated with our new market tax credit program.
The loan term debt rate also reflects the full year impact of the June 2020 issuance of $172.5 million in subordinated debt at 6.25%
and the June 2021 redemption of $150 million in subordinated debt at 5.95%.
The net interest margin is the ratio of net interest income (te) to average earning assets. The net interest margin decreased 32 bps to
2.95% in 2021 from 3.27% in 2020, due primarily to the reasons noted above. Discussions of Asset/Liability Management and Net
Interest Income at Risk later in this item provide additional information regarding our management of interest rate risk and the
potential impact from changes in interest rates, respectively.
We anticipate net interest margin to be relatively flat to slightly down during the first half of 2022 compared to the fourth quarter of
2021 level of 2.80%, due largely to the continued high levels of excess liquidity. We expect our net interest margin to begin to expand
around mid-year 2022 through the continued deployment of short-term liquid assets into higher yielding loans and investment
securities.
42
TABLE 2. Summary of Average Balances, Interest and Rates (te) (a)
($ in millions)
Assets
Interest-Earnings Assets:
Commercial & real estate loans (te)
(a)
Residential mortgage loans
Consumer loans
Loan fees & late charges
Loans (te) (b)
Loans held for sale
Investment securities:
U.S. Treasury and government
agency securities
Mortgage-backed securities and
collateralized mortgage
obligations
Municipals (te)
Other securities
Total investment
securities (te) (c)
Short-term investments
Total earning assets (te)
Nonearning assets:
Other assets
Allowance for loan losses
Total assets
Liabilities and Stockholders' Equity
Interest-bearing Liabilities:
Interest-bearing transaction and
savings deposits
Time deposits
Public funds
Total interest-bearing deposits
Repurchase agreements
Other short-term borrowings
Long-term debt
Average
Balance
2021
Interest
(d)
Rate
Years Ended December 31,
2020
Average
Balance
Interest
Average
Rate Balance
(d)
2019
Interest
(d)
Rate
$ 17,070.3 $ 606.1 3.55 % $ 17,270.9 $ 660.5 3.82 % $ 15,289.6 $ 739.0 4.83 %
2,445.6 90.6 3.70 2,857.6 112.1 3.92 2,974.1 121.7 4.09
1,692.1 81.6 4.82 2,038.0 101.5 4.98 2,116.3 121.5 5.74
(1.2 ) 0.0
21,208.0 832.0 3.92 22,166.5 915.1 4.13 20,380.0 981.0 4.81
1.9 4.50
90.2 2.5 2.82
— 53.7 0.0
41.0 0.0
2.6 3.02
86.8
41.7
—
—
330.6 5.4 1.64
153.5
3.2 2.09
134.1
3.1 2.30
6,833.1 122.3 1.79 5,345.0 121.8 2.28 4,821.6 122.3 2.54
28.2 3.12
0.1 3.79
928.4 27.2 2.93
13.7 0.5 3.66
26.9 3.02
0.4 4.28
891.9
8.4
904.4
4.1
8,105.8 155.4 1.92 6,398.8 152.3 2.38 5,864.2 153.7 2.62
2,656.9 3.5 0.13
4.0 2.07
32,060.9 993.4 3.10 % 29,235.3 1,071.0 3.66 % 26,476.9 1,140.6 4.31 %
1.0 0.17
583.2
191.0
3,420.6
(406.1 )
$ 35,075.4
3,547.4
(391.7 )
$ 32,391.0
2,844.6
(196.1 )
$ 29,125.4
$ 11,216.5 $ 9.1 0.08 % $ 9,558.1 $
1,413.0 6.5 0.46 2,642.5
3,140.2 10.6 0.34 3,232.1
15,769.7 26.2 0.17 15,432.7
600.2
1,103.8 5.4 0.49 1,378.0
320.3
314.9 16.8 5.32
559.4 0.6 0.10
60.1 0.73 %
25.6 0.27 % $ 8,274.6 $
73.7 2.00
37.1 1.40 3,690.8
25.6 0.79 3,078.0
54.2 1.76
88.3 0.57 15,043.4 188.0 1.25
2.6 0.52
28.6 1.98
11.4 4.87
1.4 0.24
493.3
8.6 0.62 1,448.9
233.5
17.2 5.36
Total interest-bearing liabilities
17,747.8 49.0 0.28 % 17,731.2 115.5 0.65 % 17,219.1 230.6 1.34 %
Noninterest-bearing:
Noninterest-bearing deposits
Other liabilities
Stockholders' equity
Total liabilities and stockholders'
equity
Net interest income (te) and margin
Net earning assets and spread
Interest cost of funding earning assets
13,324.0
458.3
3,545.3
10,779.6
447.1
3,433.1
8,255.9
347.8
3,302.6
$ 35,075.4
$ 32,391.0
$ 29,125.4
$ 944.4 2.95
$ 955.5 3.27
$ 14,313.1
2.82 $ 11,504.1
0.15 %
3.01 $ 9,257.8
0.39 %
$ 910.0 3.44
2.97
0.87 %
(a)
(b)
(c)
(d)
Taxable equivalent (te) amounts are calculated using federal income tax rate of 21%.
Includes nonaccrual loans.
Average securities do not include unrealized holding gains or losses on available for sale securities.
Included in interest income is net purchase accounting accretion of $8.6 million, $15.4 million and $23.2 million for the years December 31, 2021, 2020, and
2019, respectively.
43
TABLE 3. Summary of Changes in Net Interest Income (te) (a) (b)
2021 Compared to 2020
Due to
Change in
Total
Increase
2020 Compared to 2019
Due to
Change in
Total
Increase
(Decrease)
Volume
Rate
(Decrease) Volume
Rate
$ (7,579 ) $ (46,849 ) $ (54,428 ) $ 88,109 $ (166,601 ) $ (78,492 )
(9,628 )
(20,028 )
42,262
(65,886 )
746
(4,956 )
(15,816 )
42,262
(145,111 )
(774 )
(4,672 )
(4,212 )
—
79,225
1,520
(15,509 )
(16,849 )
—
(39,937 )
100
(6,007 )
(2,991 )
12,660
(43,187 )
(179 )
(21,516 )
(19,840 )
12,660
(83,124 )
(79 )
U.S. Treasury and government agency securities
Mortgage-backed securities and collateralized
mortgage obligations
Municipals
Other securities
Total investment in securities (te) (d)
2,708
(499 )
2,209
419
(297 )
122
29,730
1,084
200
33,722
2,762
(3,353 )
(29,220 )
(801 )
(58 )
(30,578 )
(246 )
(74,190 )
510
283
142
3,144
2,516
(77,543 )
13,480
(385 )
181
13,695
2,968
97,408
(14,012 )
(877 )
22
(15,164 )
(5,937 )
(166,986 )
(532 )
(1,262 )
203
(1,469 )
(2,969 )
(69,578 )
(in thousands)
Interest Income (te)
Commercial & real estate loans (te) (a)
Residential mortgage loans
Consumer loans
Loan fees & late charges
Loans (te) (c)
Loans held for sale
Investment securities:
Short-term investments
Total earning assets (te)
Interest-bearing transaction and
Savings deposits
Time deposits
Public funds
Total interest-bearing deposits
Repurchase agreements
Other short-term borrowings
Long-term debt
Total interest expense
Net interest income (te) variance
(3,813 )
12,499
706
9,392
92
1,541
287
11,312
(34,489 )
(36,661 )
(28,577 )
(99,727 )
(1,117 )
(20,038 )
5,773
(115,109 )
$ 7,959 $ (19,067 ) $ (11,108 ) $ 100,771 $ (55,240 ) $ 45,531
(42,646 )
(18,756 )
(31,164 )
(92,566 )
(1,588 )
(18,808 )
1,216
(111,746 )
8,157
(17,905 )
2,587
(7,161 )
471
(1,230 )
4,557
(3,363 )
20,268
18,070
14,285
52,623
777
1,617
106
55,123
16,455
30,569
14,991
62,015
869
3,158
393
66,435
(a)
(b)
(c)
(d)
Taxable equivalent (te) amounts are calculated using a federal income tax rate of 21%.
Amounts shown as due to changes in either volume or rate includes an allocation of the amount that reflects the interaction of volume and rate changes. This
allocation is based on the absolute dollar amounts of change due solely to changes in volume or rate.
Includes nonaccrual loans.
Average securities do not include unrealized holding gains or losses on available for sale securities.
Provision for Credit Losses
Our 2021 results include a negative provision for credit losses of $77.5 million in 2021 compared to a provision for credit loss expense
of $602.9 million in 2020. The 2021 negative provision includes a $108.1 million release of the allowance for funded loan losses and a
$0.6 million release of the reserve for unfunded lending commitments, offset by net charge-offs of $31.2 million, or 0.15% of average
loans outstanding. The negative provision for credit losses reflects improvement in macroeconomic forecasts and asset quality metrics,
as the economy continued to rebound in 2021 from the economic impacts of the pandemic. The provision for credit losses expense
recorded in 2020 included net charge-offs of $394.8 million, or 1.78% of average loans outstanding, and a $209.5 million build in the
allowance for funded loan losses, partially offset by a $1.4 million release of the reserve for unfunded lending commitments. The
provision expense in 2020 is primarily attributable to the impact of the widespread economic disruption from the pandemic upon our
estimate of expected lifetime credit losses and an additional $160.1 million provision related to the energy loan sale, which
significantly reduced our exposure in that sector.
As noted above, 2021 net charge-offs totaled $31.2 million, a decrease of $363.6 million from 2020. Net charge-offs in 2021 included
$25.5 million of commercial net charge-offs, $6.4 million of consumer net charge-offs, and a net recovery of $0.7 million in
residential mortgage. Net charge offs in 2020 included $242.6 million in net charges offs related to the energy loan sale, an additional
$65.8 million related to the energy portfolio, $51.6 million related to healthcare credits, $24.3 million of other commercial charges,
$11.6 million of consumer charges and a net recovery of $1.1 million in residential mortgage.
Future assumptions in economic forecasts will drive the level of reserves; however, management expects that our provision for credit
losses will continue to reflect modest reserve releases over the next several quarters.
44
Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Balance Sheet Analysis—
Allowance for Credit Losses” provides additional information on changes in the allowance for credit losses and general credit quality.
Noninterest Income
Noninterest income for 2021 totaled $364.3 million, a $39.9 million, or 12%, increase from 2020, and includes $11.0 million of
nonoperating income. Nonoperating income for 2021 is comprised of $4.6 million from the sale of the remaining Hancock Horizon
Funds, $3.6 million related to a hurricane-related insurance settlement and $2.8 million related to the sale of Mastercard stock.
Excluding nonoperating income, noninterest income was up $28.9 million, or 9%, with increases in most fee categories as economic
conditions improved and consumer activity rebounded from the recessionary market conditions present in much of 2020. Increases in
card fees, investment and annuity fees and insurance commissions, trust fees and service charges on deposit were partially offset by a
decrease in secondary mortgage activity, which began to slow during the second half of 2021.
Table 4 presents, for each of the three years ended December 31, 2021, 2020 and 2019, the components of noninterest income, along
with the percentage changes between years.
TABLE 4. Noninterest Income
($ in thousands)
Service charges on deposit accounts
Trust fees
Bank card and ATM fees
Investment and annuity fees and insurance commissions
Secondary mortgage market operations
Securities transactions
Income from bank-owned life insurance
Income from derivatives
Credit-related fees
Other miscellaneous income:
Gain on sale of Hancock Horizon Fund
Gain on sale of Mastercard Class B common stock
Gain on hurricane-related insurance settlement
Other operating miscellaneous income
Total noninterest income
n/m – not meaningful
% Change
2020
% Change
2019
2021
$ 81,032
62,898
79,074
29,502
36,694
333
18,330
13,477
11,001
6 % $ 76,659
58,191
8
68,131
16
24,330
21
40,244
(9 )
488
(32 )
18,179
1
12,814
5
11,255
(2 )
(11 ) % $ 86,364
61,609
(6 )
66,976
2
26,574
(8 )
19,853
103
—
100
14,946
22
12,958
(1 )
11,399
(1 )
4,576
2,800
3,600
21,017
$ 364,334
—
n/m
—
n/m
—
n/m
49
14,137
12 % $ 324,428
—
—
—
—
—
—
(7 )
15,228
3 % $ 315,907
Service charges on deposit accounts include consumer, business, and corporate deposit account servicing fees, as well as overdraft and
insufficient funds fees, overdraft protection fees, and other customer transaction-related fees. Service charges on deposit accounts
were $81.0 million, up $4.4 million, or 6%, from 2020. The increase over 2020 was primarily attributable to stronger corporate
customer activity as economic activity rebounded, lower earnings credit rate applied to excess deposit balances and business account
fee structure changes implemented at the beginning of 2021. Service charges continue to rebound from the impacts of the pandemic
but remain lower than pre-pandemic levels, due in part to higher account balances.
Trust fee income represents revenue generated from asset management services provided to individuals, businesses and institutions.
Trust fees totaled $62.9 million in 2021, a $4.7 million, or 8%, increase from 2020. The increase in trust fees is primarily due to both
the introduction of a new fee structure during the second quarter of 2021 and the improvement of market conditions in 2021 compared
to the volatile market conditions in 2020 caused by the pandemic. Trust assets under management increased to $9.8 billion at
December 31, 2021, compared to $9.5 billion at December 31, 2020.
Bank card and ATM fees include 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 $79.1 million in 2021, up $10.9 million, or 16%,
compared to 2020. The growth over 2020 is the result of an increase in debit card activity during 2021 following a decline in 2020 as a
result of the economic shutdown caused by the pandemic.
Investment and annuity fees and insurance commissions, which includes both fees earned from sales of annuity and insurance
products as well as managed account fees, totaled $29.5 million in 2021, compared to $24.3 million in 2020. The $5.2 million, or
21%, increase is primarily due to a higher level of investment and annuity sales and insurance fees as this business line was impacted
45
by pandemic-related disruption of financial center operations and market volatility during 2020, and also favorably impacted by an
increase in the number of managed accounts.
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 and mortgage loans generated through programs to support
customer relationships. Income from secondary mortgage market operations totaled $36.7 million in 2021, a decrease of $3.6 million,
or 9%, from 2020. Mortgage loan production decreased by approximately 7% in 2021 compared to 2020, and the percentage of loan
production sold in the secondary mortgage market was also down year-over-year. Mortgage loan production remained elevated during
2021, although levels began to decline during the second half of 2021 as demand for loan refinancing slowed. Loan production levels
for our secondary mortgage market operations will vary based on application volume and loan closure rates. We expect income from
the secondary mortgage market to continue to decline as interest rates rise and market conditions stabilize.
Income from bank-owned life insurance (“BOLI”) is generated through insurance benefit proceeds as well as the growth of the cash
surrender value of insurance contracts held. BOLI income increased $0.2 million, or 1%, to $18.3 million in 2021. The increase was
mainly due to $4.4 million in nonrecurring income received in connection with the purchase of policies in the first quarter of 2021,
partially offset by lower mortality benefits, which were down $4.2 million from 2020.
Income from derivatives is largely from our customer interest rate derivative program totaled $13.5 million in 2021, compared to
$12.8 million in 2020. The increase in income from derivatives was largely due to a $1.4 million negative valuation adjustment on a
company owned derivative in 2020 that was not present in 2021, partially offset by lower interest earned on derivative collateral and a
lower level of customer derivative income. Derivative income can be volatile and is dependent upon the composition of the portfolio,
customer sales activity and market value adjustments due to market interest rate movement.
Other miscellaneous income is comprised of various items, including income from small business investment companies, FHLB stock
dividends; gain/losses from sales of other assets, and syndication fees. Other miscellaneous income includes the previously disclosed
$11.0 million of gains considered nonoperating in nature. Other operating miscellaneous income was $21.0 million in 2021, up $6.9
million, or 49%, compared to 2020. The increase from the prior year is primarily due to a $4.1 million increase in net gains on sales of
other assets, a $2.1 million increase in teller fees and a $1.4 million increase in syndication fees, partially offset by a $0.9 million
decrease in FHLB stock dividends and a $0.3 million decrease in small business investment income.
We expect noninterest income to remain relatively flat in 2022, with improvements in most fee categories being offset by a lower level
of secondary mortgage market operations fees.
Noninterest Expense
Noninterest expense for 2021 totaled $807.0 million, up $18.2 million, or 2%, compared to 2020. There were $46.9 million of
nonoperating expenses in 2021, of which $38.3 million was related to initiatives put in place to improve overall efficiency and
operating performance. Such initiatives included the VERIP, under which approximately 260 associates retired, a reduction in force
initiative whereby a net of approximately 150 positions were eliminated, and the consolidation of 18 financial centers. Nonoperating
expense also includes $4.2 million related to the redemption of the $150 million 5.95% subordinated notes and $4.4 million in
expenses related to Hurricane Ida, which includes damage to facilities, recovery cost, charitable contributions to organizations
providing recovery assistance, temporary housing, and distribution of meals, ice, and fuel. There were no nonoperating expenses in
2020. Items identified as nonoperating are those that, when excluded from a reported financial measure, provide management or the
reader with a measure that may be more indicative of forward-looking trends in our business. Noninterest expense excluding
nonoperating items decreased $28.7 million, or 4%, in 2021. The largest individual components of the decrease in operating expense
were other real estate and foreclosed asset expense attributable to write downs of two assets in 2020, personnel expense attributable to
efficiency measures, and deposit insurance and regulatory fees due to the impact of excess liquidity and asset quality improvements.
Explanations of the variances are discussed below in more detail.
46
Table 5 presents, for each of the three years ended December 31, 2021, 2020 and 2019, noninterest expense, along with the percentage
changes between years. Table 6 presents nonoperating expense included in noninterest expense (Table 5) by component for the same
periods.
TABLE 5. Noninterest Expense
($ in thousands)
Compensation expense
Employee benefits
Personnel expense
Net occupancy expense
Equipment expense
Data processing expense
Professional services expense
Amortization of intangibles
Deposit insurance and regulatory fees
Other real estate and foreclosed assets expense (income)
Advertising
Corporate value, franchise taxes, and other non-income
taxes
Telecommunications and postage
Entertainment and contributions
Printing and supplies
Travel expenses
Tax credit investment amortization
Other retirement expense
Loss on facilities and equipment from consolidation
Loss on extinguishment of debt
Other miscellaneous expense
Total noninterest expense
TABLE 6. Nonoperating Expense
(in thousands)
Compensation expense
Employee benefits
Personnel expense
Net occupancy expense
Equipment expense
Data processing expense
Professional services expense
Other real estate (income) expense
Advertising
Printing and supplies
Entertainment and contributions
Travel expenses
Loss on facilities and equipment from consolidation
Loss on extinguishment of debt
Other miscellaneous expense
Total nonoperating expense
2021
$ 378,589
103,786
482,375
49,786
18,167
96,755
48,678
16,665
13,582
(210 )
12,441
14,478
12,646
7,867
3,728
2,697
4,436
(27,941 )
13,863
4,165
32,829
$ 807,007
% Change
2020
% Change
2019
(0 ) % $ 379,727
84,332
23
464,059
4
52,589
(5 )
19,212
(5 )
87,823
10
49,529
(2 )
19,916
(16 )
18,804
(28 )
9,555
n/m
13,011
(4 )
16,578
(13 )
14,991
(16 )
9,865
(20 )
5,063
(26 )
2,297
17
3,843
15
(25,133 )
11
3,012
360
—
100
38
23,778
2 % $ 788,792
5 % $ 362,083
77,796
8
439,879
5
50,936
3
18,393
4
82,981
6
45,007
10
20,844
(4 )
19,512
(4 )
671
n/m
15,251
(15 )
4
3
(8 )
2
(56 )
(22 )
52
100
—
(28 )
15,949
14,588
10,777
4,947
5,278
4,943
(16,561 )
—
—
37,282
2 % $ 770,677
2021
2020
2019
$
$
4,248 $
20,192
24,440
2
5
—
—
—
16
22
174
5
13,863
4,165
4,181
46,873
$
— $
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
$
6,826
680
7,506
789
675
1,092
7,075
130
2,581
538
—
—
—
—
12,280
32,666
Personnel expense consists of salaries, incentive compensation, long-term incentives, payroll taxes, and other employee benefits such
as 401(k), pension, and medical, life and disability insurance. Total personnel expense was up $18.3 million, or 4%, in 2021 compared
to 2020, and includes $24.4 million of nonoperating efficiency initiatives including the VERIP and reduction in force. Excluding the
nonoperating items, personnel expense was down $6.1 million, or 1%, mainly due to lower salary expense as full time equivalent
headcount decreased by approximately 500 from December 2020 as a result of the efficiency initiatives.
47
Occupancy and equipment expenses are primarily composed of lease expenses, depreciation, maintenance and repairs, rent, taxes, and
other equipment expenses. Total occupancy and equipment expenses decreased $3.8 million, or 5%, in 2021 compared to 2020. The
decrease was largely related to expense control measures, including the net reduction of 38 financial centers since the first quarter of
2020.
Data processing expense includes expenses related to third party technology processing and servicing costs, technology project costs
and fees associated with bank card and ATM transactions. Data processing expense in 2021 was up $8.9 million, or 10%, from 2020.
The increase is primarily related to increases of $5.8 million in costs associated with technology investments and $3.1 million in card
transaction processing costs as a result of increased bank card activity.
Professional services expense decreased $0.9 million, or 2%, from 2020, primarily due to approximately $2.2 million of lower legal
fees, largely related to lower problem loan expense, partially offset by $1.3 million in higher consulting and other professional fees,
which includes costs related to PPP consulting support.
Amortization of intangibles in 2021 totaled $16.7 million, a $3.3 million, or 16%, decrease from 2020 as a result of the accelerated
amortization methods used.
Deposit insurance and regulatory fees decreased $5.2 million, or 28%, from 2020 mainly due to a reduction in the risk-based deposit
insurance assessment fees that were favorably impacted by our increased liquidity position and improved asset quality metrics, largely
attributable to the improving economic environment and the energy loan sale.
Other real estate and foreclosed asset (income) expense was a net income of $0.2 million in 2021, compared to net expense of $9.6
million in 2020. The decrease is due to a $9.8 million write-down of equity interests in two energy-related companies received in
borrower bankruptcy restructurings in 2020.
Business development-related expenses (including advertising, travel, entertainment and contributions) were down $2.2 million, or
9%, from 2020. Excluding nonoperating items, business development-related expenses were down $2.4 million. The decline from
2020 was largely due to the impact of expense control measures on entertainment and donations and advertising, partially offset by an
increase in travel, which was limited in 2020 due to the pandemic.
Corporate value, franchise taxes, and other non-income taxes were down $2.1 million, or 13%, to $14.5 million in 2021, largely due to
lower bank share tax, which was favorably impacted by the net loss recorded in 2020.
Noninterest expense in both 2021 and 2020 was reduced by a net credit in other retirement expense. The net credit was $2.8 million,
or 11%, higher in 2021, based on better performance of pension plan assets.
All other expenses increased $21.0 million, or 41%, from 2020 primarily due to $22.2 million of nonoperating costs incurred in 2021
including $13.9 million of loss on facilities and equipment from consolidating branches, $4.2 million related to the redemption of
$150 million of subordinated notes, and $4.2 million related to Hurricane Ida. Excluding these nonoperating expenses, other expense
was down $1.3 million, or 2%, primarily due to expense control initiatives.
In 2022, we expect operating expense to be down approximately 2% from $760.1 million in 2021, reflecting our continued focus on
expense management. We expect our ongoing expense initiatives, including strategic procurement, combined with the full-year impact
of initiatives completed to-date, will support the strategy of using cost control measures to fund revenue enhancements, such as
additional investments in technology and additional bankers, and reduce the overall impact of wage inflation.
Income Taxes
We recorded income tax expense at an effective rate of 18.5% in 2021, compared to an income tax benefit at an effective rate of
63.8% in 2020. The comparability of the effective tax rate between 2021 and 2020 is impacted by the pre-tax loss year in 2020.
Additionally, our effective tax rate is lower in 2021 because we realized a $4.9 million income tax benefit that increased our 2020 net
operating loss (“NOL”). The aforementioned income tax benefit was generated because our 2020 NOL is being carried back to a 35%
statutory tax rate year under the CARES Act.
We expect the effective tax rate to return to a quarterly range of approximately 19% to 20% for 2022, absent any changes in tax laws.
Our effective tax rate has historically varied from the federal statutory rate primarily due to 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 contract program are the major components of tax-exempt income.
48
Table 7 reconciles reported income tax expense to that computed at the statutory tax rate of 21% for the years ended December 31,
2021, 2020 and 2019.
TABLE 7. Income Taxes
(in thousands)
Taxes computed at statutory rate
Tax credits:
QZAB/QSCB
NMTC - Federal and State
LIHTC and other tax credits
LIHTC amortization
Total tax credits
State income taxes, net of federal income tax benefit
Tax-exempt interest
Life insurance contracts
Employee share-based compensation
FDIC assessment disallowance
NOL carryback under CARES Act
Other, net
Income tax expense (benefit)
2021
Years Ended December 31,
2020
2019
$
119,292
$
(26,196 )
$
82,475
(1,633 )
(5,487 )
(1,936 )
1,167
(7,889 )
9,048
(9,100 )
(2,653 )
(1,671 )
1,609
(4,948 )
1,153
104,841
$
(2,289 )
(5,033 )
(750 )
-
(8,072 )
(1,269 )
(10,444 )
(4,857 )
1,351
2,094
(30,167 )
(2,011 )
(79,571 )
$
(2,840 )
(6,953 )
(500 )
-
(10,293 )
7,204
(10,435 )
(3,901 )
(842 )
1,895
—
(744 )
65,359
$
The main source of tax credits has been investments in tax-advantage securities and tax credit projects. These investments are made
primarily in the markets we serve and directed at tax credits issued under the Federal and State New Market Tax Credit (“NMTC”),
Low-Income Housing Tax Credit (“LIHTC”) and pre-2018 Qualified Zone Academy Bonds (“QZAB”) and Qualified School
Construction Bonds (“QSCB”) programs. The investments generate tax credits which reduce current and future taxes and are
recognized when earned as a benefit in the provision for income taxes. Additionally, the amortization of the LIHTC investment cost
will be recognized as a component of income tax expense in proportion to the tax credits recognized over the 10-year credit period of
each project.
We have invested in NMTC projects through investments in our own CDEs, 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.
Based only on tax credit investments that have been made through 2021, we expect to realize benefits from federal and state tax
credits over the next three years totaling $10.1 million, $10.0 million and $10.1 million for 2022, 2023 and 2024, 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.
At December 31, 2021, we had a net deferred tax liability of $19 million, which is comprised of $146 million of deferred tax liabilities
offset against $127 million in deferred tax assets (net of state valuation allowance). Several factors are considered in determining the
recoverability of the deferred tax asset components, such as the history of taxable earnings, reversal of taxable temporary differences,
future taxable income and tax planning strategies. Based on our review of these factors, we have established a $3.6 million valuation
allowance for state net operating losses.
BALANCE SHEET ANALYSIS
Short-Term Investments
At December 31, 2021, short-term liquidity investments, including interest-bearing bank deposits and federal funds sold, totaled $3.8
billion, an increase of $2.5 billion from December 31, 2020. Average short-term investments for 2021 totaled $2.7 billion, a $2.1
billion increase from $583 million in 2020. The increase in short-term investments is a result of excess liquidity due to increased
deposits, cash inflows from PPP loan forgiveness and other paydowns, and limited loan demand for much of the year. Short-term
liquidity assets are held to ensure funds are available to meet the cash flow needs of both borrowers and depositors. See further
discussion in the “Liquidity” section that follows.
49
Investment Securities
Our investment in securities was $8.6 billion at December 31, 2021, compared to $7.4 billion at December 31, 2020. The investment
securities portfolio is managed by ALCO to assist in the management of interest rate risk and liquidity while providing an acceptable
rate of return. At December 31, 2021, the amortized cost of securities available for sale totaled $7.0 billion and securities held to
maturity totaled $1.6 billion, compared to $5.8 billion and $1.4 billion, respectively, at December 31, 2020.
Our securities portfolio consists mainly of residential and commercial mortgage-backed securities that are issued or guaranteed by
U.S. government agencies. We invest only in high quality investment grade securities and manage the investment portfolio duration
generally between two and five and a half years. At December 31, 2021, the average expected maturity of the portfolio was 5.80 years
with an effective duration of 4.25 years and a nominal weighted-average yield of 1.87%. Under an immediate, parallel rate shock of
100 bps and 200 bps, the effective duration would be 4.55 years and 4.64 years, respectively. At December 31, 2020, the average
expected maturity of the portfolio was 5.70 years with an effective duration of 4.14 years and a nominal weighted-average yield of
2.07%. The change in expected maturity, effective duration, and nominal weighted-average yield is primarily attributable to
reinvestment of securities portfolio cash flow and growth during 2021.
During 2021, we invested approximately $800 million in fixed rate commercial mortgage backed securities and simultaneously
entered into last-of-layer swaps on these assets. As of December 31, 2021, we had approximately $1.8 billion in notional amount of
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 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 the end of each reporting period, we evaluate the securities portfolio for credit loss. Based on our assessments, expected credit loss
was negligible for all reporting periods in 2021 and 2020, and therefore no allowance for credit loss was recorded.
There were no investments in securities of a single issuer, other than U.S. Treasury and U.S. government agency securities and
mortgage-backed securities issued or guaranteed by U.S. government agencies that exceeded 10% of stockholders’ equity. We do not
invest in subprime or “Alt A” home mortgage-backed securities. Investments classified as available for sale are carried at fair value,
while held to maturity securities are carried at amortized cost. Unrealized holding gains (losses) on available for sale securities are
excluded from net income and are recognized, net of tax, in other comprehensive income and in accumulated other comprehensive
income, a separate component of stockholders’ equity.
The following table presents debt securities at amortized cost by type at December 31, 2021 and 2020:
TABLE 8. Debt Securities by Type
(in thousands)
Available for sale securities
U.S. Treasury and government agency securities
Municipal obligations
Residential mortgage-backed securities
Commercial mortgage-backed securities
Collateralized mortgage obligations
Corporate debt securities
Held to maturity securities
U.S. Treasury and government agency securities
Municipal obligations
Residential mortgage-backed securities
Commercial mortgage-backed securities
Collateralized mortgage obligations
December 31,
2021
2020
$
$
$
$
420,857 $
304,536
3,056,763
3,064,828
119,046
18,500
6,984,530 $
14,857 $
621,405
268,907
603,156
57,426
1,565,751 $
207,365
309,342
2,560,249
2,323,306
354,472
11,500
5,766,234
—
627,019
21,951
549,686
158,514
1,357,170
The amortized cost, fair value and yield of debt securities at December 31, 2021, by final contractual maturity, are presented in the
table below. Securities are classified according to their final contractual maturities without consideration of scheduled and
unscheduled principal amortization, potential prepayments or call options. Accordingly, actual maturities will differ from their
reported contractual maturities. The expected average maturity years presented in the table includes scheduled principal payments and
assumptions for prepayments.
50
TABLE 9. Debt Securities Maturities by Type
Over One
Year
Through
Five Years
Over Five
Years
Through
Ten Years
Over
Ten
Years
One Year
or Less
Total
Fair
Value
Weighted
Average
Yield (te)
Expected
Average
Maturity
Years
Contractual Maturity
$ — $
112
— $ 196,165 $ 224,692 $ 420,857 $ 419,298
91,882 304,536 314,158
— 212,542
1.57 %
2.73 %
7.2
5.1
775 49,161 383,232 2,623,595 3,056,763 3,035,798
1.58 %
4.7
— 617,926 2,179,685 267,217 3,064,828 3,077,859
1.93 %
7.5
8,763 110,283 119,046 120,883
—
—
1,500 2,000
18,702
$ 2,387 $ 669,087 $ 2,995,387 $ 3,317,669 $ 6,984,530 $ 6,986,698
$ 2,403 $ 696,513 $ 3,002,023 $ 3,285,759 $ 6,986,698
1.80 %
1.79 %
2.93 %
18,500
15,000
2.57 %
1.64 %
—
14,837
$ — $
11,225 117,691 196,482 296,007 621,405 659,140
14,857 $
14,857 $
— $
— $
2.13 %
3.43 %
1.80 %
2.0
3.5
6.1
1.40 %
3.08 %
6.8
4.0
—
—
31,930 236,977 268,907 268,090
1.40 %
4.7
— 241,519 361,637
— 603,156 631,166
2.56 %
5.6
13,651
— 2,202
58,249
$ 11,225 $ 361,412 $ 618,557 $ 574,557 $ 1,565,751 $ 1,631,482
$ 11,311 $ 377,422 $ 650,531 $ 592,218 $ 1,631,482
2.54 %
2.58 %
2.29 %
57,426
41,573
2.72 %
2.40 %
1.24 %
2.54 %
2.3
4.7
(in thousands)
Available for sale
U.S. Treasury and government
agency securities
Municipal obligations
Residential mortgage-backed
securities
Commercial mortgage-backed
securities
Collateralized mortgage
obligations
Other debt securities
Total debt securities
Fair Value
Weighted Average Yield (te)
Held to maturity
U.S. Treasury and government
agency securities
Municipal obligations
Residential mortgage-backed
securities
Commercial mortgage-backed
securities
Collateralized mortgage
obligations
Total debt securities
Fair Value
Weighted Average Yield (te)
Loan Portfolio
Total loans at December 31, 2021 were $21.1 billion, compared to $21.8 billion at December 31, 2020. The $0.7 billion, or 3%,
decrease is primarily attributable to $1.5 billion of net PPP loan forgiveness, partially offset by $0.8 billion of core loan growth
(excluding PPP loans), as demand for traditional loan products increased across most regions and in specialty lines when compared to
the prior year.
The composition of our loan portfolio at December 31, 2021 and 2020 was as follows:
TABLE 10. Loans Outstanding by Type
(in thousands)
Total loans:
Commercial non-real estate
Commercial real estate - owner occupied
Total commercial & industrial
Commercial real estate - income producing
Construction and land development
Residential mortgages
Consumer
Total loans
December 31,
2021
2020
$
$
9,612,460 $
2,821,246
12,433,706
3,464,626
1,228,670
2,423,890
1,583,390
21,134,282 $
9,986,983
2,857,445
12,844,428
3,357,939
1,065,057
2,665,212
1,857,295
21,789,931
51
The commercial and industrial (“C&I”) loan portfolio includes both commercial non-real estate and commercial real estate – owner
occupied loans. C&I loans totaled $12.4 billion, or 59% of the total loan portfolio, at December 31, 2021, a decrease of $0.4 billion
from December 31, 2020. The decrease is largely attributable to net PPP loan forgiveness of $1.5 billion, partially offset by core loan
growth of $1.1 billion.
Our commercial and industrial customer base is diversified over a range of industries, including wholesale and retail trade in various
durable and nondurable products and the manufacture of such products, financial and professional services, healthcare services,
energy, marine transportation and maritime construction, and agricultural production. We lend mainly to middle-market and smaller
commercial entities, although we do participate in larger shared-credit loan facilities generally with businesses/sponsors well known to
the relationship officers and operating in our market areas. Shared national credits that are funded at December 31, 2021 totaled
approximately $2.1 billion, or 10%, of total loans. Our shared national credit industry concentration at December 31, 2021 includes
approximately $429 million of health care-related facilities, $400 million in finance and insurance, $339 million in real estate, rental
and leasing, with the remaining to various other industries.
The following table provides detail of the more significant industry concentrations for our commercial and industrial loan portfolio,
which is based on NAICS codes for all industries, with the exceptions of energy, which is based on the borrower’s source of revenue
(i.e. manufacturer whose income is derived from energy-related business is reported as energy), and PPP loans, as those are expected
to be 100% SBA guaranteed and therefore have limited credit risk.
TABLE 11. Commercial & Industrial Loans by Industry Concentration
($ in thousands)
Commercial & industrial loans:
Real estate and rental and leasing
Health care and social assistance
Other
Retail trade
Construction
Manufacturing
Finance and insurance
Wholesale trade
Transportation and warehousing
Professional, scientific, and technical services
Public administration
Accommodation and food services
Other services (except public administration)
Energy
Educational services
Total commercial & industrial loans
PPP loans
Total commercial & industrial loans
December 31,
2021
2020
Balance
Pct of
Total
Balance
Pct of
Total
$ 1,311,241
1,284,578
1,118,230
1,086,204
923,040
919,830
896,105
823,295
780,934
621,739
596,301
595,698
424,090
266,235
255,127
$ 11,902,647
531,059
$ 12,433,706
11 % $ 1,260,084
1,152,713
10
725,948
9
1,084,810
9
688,676
7
929,737
7
690,354
7
708,640
7
800,034
6
500,219
5
650,595
5
633,869
5
436,665
4
305,867
2
270,980
2
96 % $ 10,839,191
2,005,237
100 % $ 12,844,428
4
10 %
9
6
9
5
7
5
6
6
4
5
5
3
2
2
84 %
16
100 %
Commercial real estate – income producing loans totaled $3.5 billion at December 31, 2021, an increase of $107 million, or 3%, from
December 31, 2020. The net increase reflects construction loans converting to permanent financing, as well as organic growth,
partially offset by approximately $875 million in paydowns.
Construction and land development loans totaled approximately $1.2 billion at December 31, 2021, compared to $1.1 billion at
December 31, 2020, an increase of $164 million, or 15%. The increase was primarily due to increased demand throughout our
footprint, with the funding of new and existing loans outpacing loans converting to permanent financing.
The following table details the end-of-period aggregated commercial real estate – income producing and construction loan balances by
property type. Loans reflected in 1-4 Family Residential Construction include both loans to construction builders as well as single-
family borrowers.
52
TABLE 12. Commercial Real Estate– Income Producing and construction by Property Type Concentration
($ in thousands)
Commercial real estate - Income Producing and Construction
loans
Retail
Healthcare related properties
Multifamily
Industrial
Office
1-4 family residential construction
Hotel/motel and restaurants
Other land loans
Other
Total commercial real estate - income producing and
construction loans
December 31,
2021
2020
Balance
Pct of
Total
Balance
Pct of
Total
$ 777,594
766,338
647,300
561,022
501,771
469,690
437,241
257,594
274,746
17 % $ 746,520
557,473
16
630,392
14
540,198
12
527,576
11
393,568
10
527,393
9
273,285
5
226,591
6
17 %
13
14
12
12
9
12
6
5
$ 4,693,296
100 % $ 4,422,996
100 %
Residential mortgages totaled $2.4 billion at December 31, 2021, down $241 million, or 9%, from December 31, 2020. The decrease
in mortgage loans is due primarily to a lower level of production, which was down 7% from 2020. Consumer loans totaled $1.6 billion
at December 31, 2021, a decrease of $274 million, or 15%, compared to December 31, 2020. The decline in the consumer loan
portfolio is due in part to a decrease of $197 million with the wind down of our indirect auto lending, as well as limited demand as a
result of the pandemic.
The following table shows average loans by category, the effective taxable equivalent yield and the percentage of total loans for each
of the preceding three years:
TABLE 13. Average Loans
($ in thousands)
Total loans:
Commercial & real estate loans
Residential mortgages
Consumer
Total loans
2021
Years Ended December 31,
2020
Balance
Yield
(te)
Pct of
Total
Balance
Yield Pct of
(te) Total
Balance
2019
Yield
(te)
Total
$ 17,070,252 3.55 % 80 % $ 17,270,894 3.82 % 78 % $ 15,289,645 4.83 % 75 %
2,445,602 3.70
1,692,088 4.82
$ 21,207,942 3.92 % 100 % $ 22,166,523 4.13 % 100 % $ 20,380,027 4.81 % 100 %
2,857,584 3.92
2,038,045 4.98
2,974,094 4.09
2,116,288 5.74
13
9
15
10
12
8
The following table sets forth the approximate contractual maturity by portfolio segment at December 31, 2021.
TABLE 14. Loan Maturities by Type
(in thousands)
Total loans:
Commercial non-real estate
Commercial real estate - owner occupied
Total commercial & industrial
Commercial real estate - income producing
Construction and land development
Residential mortgages
Consumer
Total loans
Within
One Year
After One
Through
Five Years
Maturity Range
After Five
Through
Fifteen Years
After Fifteen
Years
Total
$ 2,061,143 $ 5,749,321 $ 1,670,290 $ 131,706 $ 9,612,460
2,821,246
12,433,706
3,464,626
1,228,670
2,423,890
1,583,390
$ 3,125,817 $ 9,668,490 $ 5,113,035 $ 3,226,940 $ 21,134,282
1,733,383
80,393
3,403,673 212,099
954,339
34,121
210,181 261,597
450,626 1,849,731
94,216 869,392
187,285
2,248,428
511,244
251,392
55,134
59,619
820,185
6,569,506
1,964,922
505,500
68,399
560,163
53
The sensitivity to interest rate changes for the portion of our loan portfolio that matures after one year is shown below.
TABLE 15. Loan Sensitivity to Changes in Interest Rates
(in thousands)
Total loans:
Commercial non-real estate
Commercial real estate - owner occupied
Total commercial & industrial
Commercial real estate - income producing
Construction and land development
Residential mortgages
Consumer
Total loans
Fixed Rate
December 31, 2021
Floating Rate
Total
$ 4,144,956 $ 5,467,504 $ 9,612,460
2,821,246
12,433,706
3,464,626
1,228,670
2,423,890
1,583,390
$ 9,447,102 $ 11,687,180 $ 21,134,282
1,031,986
6,499,490
2,371,792
803,534
843,667
1,168,697
1,789,260
5,934,216
1,092,834
425,136
1,580,223
414,693
Management expects 6% to 8% end of period core loan growth (excluding PPP loans) for 2022, with quarterly results reflecting
normal seasonality. We expect the majority of our remaining PPP loans to be forgiven by the second quarter of 2022.
54
Asset Quality
The following table sets forth nonperforming assets by type for the periods indicated, consisting of nonaccrual loans, troubled debt
restructurings and other real estate owned (ORE) and foreclosed assets. Loans past due 90 days or more and still accruing are also
disclosed.
TABLE 16. Nonperforming Assets
(in thousands)
Loans accounted for on a nonaccrual basis:
Commercial non-real estate loans
Commercial non-real estate loans - restructured
Total commercial non-real estate loans
Commercial real estate - owner occupied
Commercial real estate - owner occupied -
restructured
Total commercial real estate - owner occupied loans
Commercial real estate - income producing loans
Commercial real estate - income producing loans -
restructured
Total commercial real estate - income producing
loans
Construction and land development loans
Construction and land development loans -
restructured
Total construction and land development loans
Residential mortgage loans
Residential mortgage loans - restructured
Total residential mortgage loans
Consumer loans
Consumer loans -restructured
Total consumer loans
Total nonaccrual loans
Restructured loans - still accruing:
Commercial non-real estate loans
Commercial real estate loans - owner occupied
Commercial real estate loans - income producing
Construction and land development loans
Residential mortgage loans
Consumer loans
Total restructured loans - still accruing
Total nonperforming loans
ORE and foreclosed assets
Total nonperforming assets (a)
Loans 90 days past due still accruing
Total restructured loans
Ratios:
Nonaccrual loans to total loans
Nonperforming assets to loans plus ORE and
foreclosed assets
Allowance for loan losses to nonaccrual loans
Allowance for loan losses to nonperforming loans
and accruing loans 90 days past due
Loans 90 days past due still accruing to loans
$
$
$
$
$
$
December 31,
2021
2020
4,058 $
2,915
6,973
3,104
1,817
4,921
5,377
34,200
18,636
52,836
13,514
342
13,856
6,650
81
93
5,458
837
6,743
2,475
7
844
23,483
1,956
25,439
11,888
—
11,888
55,523 $
515 $
—
—
118
2,169
986
3,788
59,311
7,533
66,844 $
5,524 $
10,564 $
11
2,486
38,075
2,498
40,573
23,385
—
23,385
139,879
549
—
349
122
2,217
1,025
4,262
144,141
11,648
155,789
3,361
25,842
0.26 %
0.64 %
0.32 %
616.08 %
0.71 %
321.83 %
527.59 %
0.03 %
305.20 %
0.02 %
(a)
Includes total nonaccrual loans, total restructured loans—still accruing and ORE and foreclosed assets.
55
Nonperforming assets were $66.8 million at December 31, 2021, a decrease of $88.9 million, or 57%, compared to $155.8 million at
December 31, 2020. The decrease in nonperforming assets was driven by an $84.8 million decrease in nonperforming loans, which
includes nonaccrual loans and loans modified in a troubled debt restructurings (TDRs) still accruing. The decline in nonperforming
loans was primarily attributable to repayments, upgrades and charge-offs exceeding downgrades due to improvement in economic
activity in 2021 and its positive impact on our asset quality metrics. ORE and foreclosed assets totaled $7.5 million at December 31,
2021, a decrease of $4.1 million from December 31, 2020, as property sales exceeded new additions.
Nonperforming loans totaled $59.3 million at December 31, 2021, compared to $144.1 million at December 31, 2020, and was
comprised of $18.8 million of commercial loans, $27.6 million of residential mortgage loans, and $12.9 million of consumer loans.
The commercial nonperforming loans are spread across various industries and geographies.
Loans modified in TDRs totaled $10.6 million at December 31, 2021, compared to $25.8 million at December 31, 2020, including
$6.8 million and $21.6 million, respectively, of loans reported in nonaccrual loans. The decrease from December 31, 2020 is primarily
related to charge-offs taken during the year and loan repayments, partially offset by new TDRs. TDRs arise when a borrower is
experiencing, or is expected to experience, financial difficulties in the near-term and, consequently, a modification that would
otherwise not be considered is granted to the borrower. Certain loans modified in a TDR may continue to accrue interest when the
individual facts and circumstances of the borrower indicate that we will collect all amounts due. Accruing TDRs totaled $3.8 million,
or 6% of nonperforming loans, at December 31, 2021, down from $4.3 million, or 3%, of nonperforming loans at December 31, 2020.
Our TDR disclosures do not include loans modified under Section 4013 of the Coronavirus Aid, Relief, and Economic Security Act,
which allows financial institutions to exclude eligible modifications from TDR assessment. Eligible modification must be (1) related
to COVID-19, (2) executed on a loan that was not more than 30 days past due as of December 31, 2019 and (3) executed between
March 1, 2020 and the earlier of 60 days after the date of the termination of the national emergency or January 1, 2022, as amended.
Criticized commercial loans totaled $287.2 million at December 31, 2021, down $105.4 million, or 27%, compared to December 31,
2020. The decrease in commercial criticized loans is largely attributable to both paydowns and upgrades, reflecting improved
economic activity and the favorable impact of economic stimulus for our borrowers. Criticized loans are defined as those having
potential weaknesses that deserve management’s close attention (risk-rated special mention, substandard and doubtful), including both
accruing and nonaccruing loans. Commercial criticized loans comprised 1.73% of that portfolio at December 31, 2021, excluding PPP
loans, down from 2.57% at December 31, 2020. Our commercial criticized loans at December 31, 2021 are diverse across many
industries. The industries having the largest concentration of criticized loans to total commercial criticized loans at December 31, 2021
are energy support services with 24%; hospitality, including hotels, restaurants and entertainment with 18%; manufacturing with 12%,
real estate rental and leasing with 11%, and transportation and warehousing with 10%.
Allowance for Credit Losses
At December 31, 2021, the allowance for credit losses was $371.4 million, consisting of $342.1 million in allowance for loan losses
and $29.3 million in the reserve for unfunded lending commitments. The allowance for credit losses decreased $108.7 million from
the December 31, 2020 balance of $480.1 million, which consisted of $450.2 million in allowance for loan losses and $29.9 million in
the reserve for unfunded lending commitments.
Compared to December 31, 2020, the decrease in the allowance for credit losses includes reductions of $95.5 million in collectively
evaluated reserves and $13.2 million in individually evaluated reserves (generally used for nonperforming loans and loans modified in
a troubled debt restructuring), reflecting improvements in asset quality. The Company probability-weighted two Moody’s
macroeconomic scenarios in the calculation of our collectively evaluated allowance for credit losses. The slower near-term growth S-2
scenario (anchored on the baseline) was weighted most heavily at 60% and the baseline scenario was weighted 40%, to incorporate
reasonably possible alternative economic outcomes. Both economic scenarios utilized reflect continued recovery from the economic
downturn in the first half of 2020; however, each scenario has varying degrees of severity of the COVID-19 pandemic, size and timing
of additional fiscal stimulus, and resolution of the coronavirus pandemic.
The December 2021 baseline forecast used in our analysis assumes that new cases of COVID-19 will abate in February 2022 with no
explicit assumption surrounding the Omicron variant; a $1.75 trillion social safety net and client spending bill implementing in early
2022; consumer prices reaching a peak in December 2021, with the worst of the supply chain issues behind us; and full employment
reached by the end of 2022. The slower near-term growth S-2 forecast reflects a slower economic recovery than the baseline forecast,
with new cases, hospitalizations and deaths from COVID-19 diminishing more slowly, and as a result, a slower return to spending on
air travel, retail and hotels than baseline. The S-2 scenario also assumes less effective stimulus and a slower return to full employment.
Additional information on the Moody’s forecast is provided in the “Economic Outlook” section of this document.
Our allowance for credit losses coverage to total loans remains strong at 1.76% at December 31, 2021, or 1.80% when excluding SBA
guaranteed PPP loans, compared to 2.20%, or 2.42% when excluding PPP loans, at December 31, 2020, and reflects improvement in
economic conditions in our markets.
56
The allowance for credit losses on the commercial portfolio decreased to $307.9 million, or 1.80% of that portfolio, at December 31,
2021 compared to December 31, 2020 of $383.5 million, or 2.22%. Our residential mortgage reserve for credit losses decreased to
$30.6 million, or 1.26%, at December 31, 2021, compared to $48.9 million, or 1.83%, at December 31, 2020. Our allowance for credit
losses on the consumer portfolio was $32.8 million, or 2.07 % at December 31, 2021, compared to $47.8 million, or 2.57% at
December 31, 2020. The decrease in the allowance across all portfolios reflects the strong economic recovery during 2021 with
improvements in asset quality and the overall economic outlook.
Net charge-offs during 2021 were $31.2 million, or 0.15% of average total loans, down from net charge-offs of $394.8 million, or
1.78% of average total loans, for the year ended December 31, 2020. Net charge-offs in 2020 included a $242.6 million charge related
to the sale of a significant portion of our energy loan portfolio as a part of a de-risking strategy. Commercial net charge-offs for 2021
totaled $25.5 million compared to $384.2 million (or $141.6 million when excluding the impact of the energy loan sale). Commercial
net charge-offs in 2021 includes $14.1 million of energy-related charge-offs, with $13.3 million associated with a single legacy credit.
Commercial net charge-offs in 2020 excluding the impact of the energy loan sale includes additional losses in energy, healthcare and
other industries that were financially impacted by the pandemic. The residential mortgage portfolio had a net recovery in 2021 of $0.7
million, compared to a net recovery of $1.1 million in 2020. Consumer net charge-offs were down $5.2 million in 2021 to $6.4
million, with lower losses across most portfolios, including the indirect auto portfolio that is in run-off.
57
The following table sets forth activity in the allowance for loan losses for the periods indicated
TABLE 17. Summary of Activity in the Allowance for Credit Losses
(in thousands)
Provision and Allowance for Credit Losses
Allowance for Loan Losses:
Allowance for loan losses at beginning of period
Loans charged-off:
Commercial non real estate
Commercial real estate - owner occupied
Total commercial & industrial
Commercial real estate - income producing
Construction and land development
Total Commercial
Residential mortgages
Consumer
Total charge-offs
Recoveries of loans previously charged-off:
Commercial non real estate
Commercial real estate - owner occupied
Total commercial & industrial
Commercial real estate - income producing
Construction and land development
Total commercial
Residential mortgages
Consumer
Total recoveries
Total net charge-offs
Provision for loan losses
Cumulative effect of change in accounting principle
Allowance for loan losses at end of period
Reserve for Unfunded Lending Commitments:
Reserve for unfunded lending commitments at beginning of period
Cumulative effect of change in accounting principle
Provision for losses on unfunded lending commitments
Reserve for unfunded lending commitments at end of period
Total Allowance for Credit Losses
Total Provision for Credit Losses
Coverage ratios:
Allowance for loan losses to period end loans
Allowance for credit loss to period end loans
Charge-offs ratios
Gross charge-offs to average loans
Recoveries to average loans
Net charge-offs to average loans
Net Charge-offs to average loans by portfolio:
Commercial non real estate
Commercial real estate - owner occupied
Total commercial & industrial
Commercial real estate - income producing
Construction and land development
Total Commercial
Residential mortgages
Consumer
58
2021
December 31,
2020
2019
$
450,177
$
191,251
$
194,514
33,523
3,179
36,702
425
274
37,401
713
12,722
50,836
8,985
642
9,627
105
2,172
11,904
1,459
6,282
19,645
31,191
(76,921 )
—
342,065
29,907
—
(573 )
29,334
371,399
(77,494 )
$
$
$
$
$
1.62 %
1.76 %
0.24 %
0.09 %
0.15 %
0.25 %
0.09 %
0.22 %
0.01 %
(0.16 ) %
0.15 %
(0.03 ) %
0.38 %
387,172
1,828
389,000
2,512
400
391,912
326
17,219
409,457
6,032
763
6,795
46
846
7,687
1,400
5,584
14,671
394,786
604,301
49,411
450,177 $
3,974 $
27,330
(1,397 )
29,907 $
480,084 $
602,904 $
2.07 %
2.20 %
1.85 %
0.07 %
1.78 %
3.77 %
0.04 %
2.97 %
0.08 %
(0.04 ) %
2.22 %
(0.04 ) %
0.57 %
39,600
137
39,737
32
7
39,776
846
18,455
59,077
6,940
306
7,246
569
140
7,955
480
3,645
12,080
46,997
43,734
—
191,251
—
—
3,974
3,974
195,225
47,708
0.90 %
0.92 %
0.29 %
0.06 %
0.23 %
0.38 %
(0.01 ) %
0.29 %
(0.02 ) %
(0.01 ) %
0.21 %
0.00 %
0.70 %
$
$
$
$
$
An allocation of the loan loss allowance by major loan category is set forth in the following table for the periods indicated.
TABLE 18. Allocation of Allowance for Loan Losses by Category
($ in thousands)
Commercial non-real estate
Commercial real estate - owner occupied
Total commercial & industrial
Commercial real estate - income producing
Construction and land development
Residential mortgages
Consumer
Total
Deposits
December 31,
2021
2020
Allowance
for Loan
Losses
% of Total
Allowance
Allowance
for Loan
Losses
% of Total
Allowance
$
$
95,888
53,433
149,321
108,058
22,102
30,623
31,961
342,065
28 % $
16
44
32
6
9
9
100 % $
149,693
69,134
218,827
109,474
26,462
48,842
46,572
450,177
33 %
15
48
24
6
11
11
100 %
Total deposits were $30.5 billion at December 31, 2021, up $2.8 billion, or 10%, from December 31, 2020. Average deposits of $29.1
billion for 2021 were up $2.9 billion, or 11%, over 2020. The increases from 2020 for both end of period and average deposits was
primarily pandemic-related, including increases from PPP loan proceeds and economic stimulus payments. During the latter half of
2021, deposit levels were also influenced by Hurricane Ida insurance proceeds.
TABLE 19. Deposits
(in thousands)
Noninterest-bearing deposits
Interest-bearing retail transaction and savings deposits
Interest-bearing public fund deposits
Public fund transaction and savings deposits
Public fund time deposits
Total interest-bearing public fund deposits
Retail time deposits
Brokered time deposits
Total interest-bearing deposits
Total deposits
$
December 31,
2021
14,392,808
11,677,333
$
2020
12,199,750
10,435,362
3,216,651
77,956
3,294,607
1,091,959
9,190
16,073,089
30,465,897
$
3,068,555
166,381
3,234,936
1,813,705
14,124
15,498,127
27,697,877
$
At December 31, 2021, noninterest-bearing demand deposits were $14.4 billion, up $2.2 billion, or 18%, from December 31, 2020.
Noninterest-bearing demand deposits comprised 47% of total deposits at December 31, 2021, up from 44% at December 31, 2020.
Interest-bearing transaction and savings accounts of $11.7 billion at December 31, 2021 increased $1.2 billion, or 12%, from
December 31, 2020.
Interest-bearing public fund deposits totaled $3.3 billion at December 31, 2021, up $60 million, or 2%, from December 31, 2020.
Year-end public fund account balances are subject to annual fluctuations dependent upon a number of factors, including the timing of
tax collections. Seasonal cash inflows from public entities in the fourth quarter of each year typically results in higher balances than at
other times during the year with subsequent reductions in the first quarter of the following year.
Time deposits other than public funds totaled $1.1 billion at December 31, 2021, down $727 million, or 40%, from December 31,
2020. The decrease was due in part to maturing retail and jumbo certificates of deposit which were not renewed, likely due to
prevailing rates that reflect management’s strategic approach to lowering the cost of funds.
59
Table 20 sets forth average balances and weighted-average rates paid on deposits for each year in the three-year period ended
December 31, 2021, as well as the percentage of total deposits for each category. Table 21 sets forth the maturities of time certificates
of deposit greater than $250,000 at December 31, 2021.
TABLE 20. Average Deposits
($ in millions)
Interest-bearing deposits:
Interest-bearing transaction
deposits
Money market deposits
Savings deposits
Time deposits
Public Funds
Total interest-bearing deposits
Noninterest bearing demand
deposits
Total deposits
2021
2020
2019
Balance
Rate
Mix
Balance
Rate
Mix
Balance
Rate
Mix
$ 2,425.2 0.09 % 8.3 % $ 2,166.4 0.20 % 8.3 % $ 1,999.5 0.62 % 8.6 %
6,212.0 0.11
2,598.2 0.01
1,394.1 0.47
3,140.2 0.34
21.4
8.9
4.8
10.8
15,769.7 0.17 % 54.2
20.3
5,311.0 0.39
8.0
2,092.4 0.02
10.0
2,630.8 1.41
12.3
3,232.1 0.79
15,432.7 0.57 % 58.9
19.3
4,487.8 1.05
7.7
1,796.1 0.02
15.8
3,682.0 2.00
13.2
3,078.1 1.76
15,043.5 1.25 % 64.6
13,324.0
$ 29,093.7
45.8
10,779.6
100.0 % $ 26,212.3
41.1
8,255.9
100.0 % $ 23,299.4
35.4
100.0 %
TABLE 21. Maturity of Time Certificates of Deposit greater than or equal to $250,000*
(in thousands)
Three months
Over three months through six months
Over six months through one year
Over one year
Total
* Includes public fund time deposits
December 31, 2021
$
$
145,283
73,658
117,746
41,875
378,562
We have estimated the Bank’s amount of uninsured assessable deposits to be approximately $15.6 billion, using the methodologies
and assumptions required for FDIC regulatory reporting.
Management expects the level of end of period total deposits to be relatively flat or slightly down during 2022.
Short-Term Borrowings
Short-term borrowings totaled $1.7 billion at December 31, 2021, virtually flat when compared to December 31, 2020. Average short-
term borrowings for 2021 totaled $1.7 billion, down $315 million, or 16%, compared to 2020. The decrease in average short-term
borrowings is the result of utilizing excess liquidity on the balance sheet to pay down higher-rate borrowings, mostly during the
second quarter of 2020. Short-term borrowings are a core portion of the Company’s funding strategy and can fluctuate depending on
our funding needs and the sources utilized.
60
Table 22 sets forth balances of short-term borrowings for each of the past three years. Short-term borrowings consist of federal funds
purchased, securities sold under agreements to repurchase and borrowings from the FHLB. Customer repurchase agreements are a
source of customer funding. These agreements are offered mainly to commercial customers to assist them with their ongoing cash
management strategies or to provide a temporary investment vehicle for their excess liquidity pending redeployment for corporate or
investment purposes. While customer repurchase agreements provide a recurring source of funds to the Bank, the amounts available
over time will vary.
TABLE 22. Short-Term Borrowings
($ in thousands)
Federal funds purchased:
Amount outstanding at period end
Average amount outstanding during period
Maximum amount at any month end during period
Weighted-average interest at period end
Weighted-average interest rate during period
Securities sold under agreements to repurchase:
Amount outstanding at period end
Average amount outstanding during period
Maximum amount at any month end during period
Weighted-average interest at period end
Weighted-average interest rate during period
FHLB borrowings:
Amount outstanding at period end
Average amount outstanding during period
Maximum amount at any month end during period
Weighted-average interest at period end
Weighted-average interest rate during period
2021
Years Ended December 31,
2020
2019
$
$
$
1,850
3,762
4,400
0.15 %
0.43 %
$
563,211
559,410
643,403
0.05 %
0.10 %
$
$
300
9,708
330,330
0.15 %
1.15 %
567,213
600,167
806,645
0.14 %
0.24 %
195,450
49,297
202,933
1.60 %
2.30 %
484,422
493,344
518,042
0.54 %
0.52 %
$ 1,100,000
1,100,000
1,100,000
$ 1,100,000
1,368,320
2,110,000
$ 2,035,000
1,399,503
1,941,774
0.49 %
0.49 %
0.49 %
0.62 %
1.17 %
1.96 %
The $1.1 billion of FHLB borrowings at December 31, 2021 consists of five fixed rate notes maturing between 2034 and 2035 that are
classified as short-term as the FHLB has the option to put (terminate) the advance prior to maturity.
Long-Term Debt
Long-term debt totaled $244.2 million at December 31, 2021, down $134.1 million compared to $378.3 million at December 31, 2020.
On June 15, 2021, the Company utilized excess liquidity to redeem in full its $150 million 5.95% fixed rate subordinated notes due in
2045, driving most of the variance compared to prior year. The notes were redeemed at 100% of principal plus accrued and unpaid
interest therein. Loss on extinguishment of debt included in other noninterest expense totaling $4.2 million represents the disposal of
unamortized loan costs associated with the original issuance of the notes. The remaining variance is largely due to activity associated
with tax credit fund activity.
On June 9, 2020, we completed the issuance of subordinated notes payable with an aggregate principal amount of $172.5 million and a
stated maturity of June 15, 2060. The notes accrue interest at a fixed rate of 6.25% per annum, with quarterly interest payments that
began September 15, 2020. Subject to prior approval by the Federal Reserve, the Company may redeem the notes in whole or in part
on any interest payment date on or after June 15, 2025. This debt qualifies as tier 2 capital in the calculation of certain regulatory
capital ratios and was issued as part of a de-risking strategy.
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.
Commitments to extend credit totaled $9.4 billion at December 31, 2021 and include revolving commercial credit lines, non-revolving
loan commitments issued mainly to finance the acquisition and development of 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, which may include the maintenance of
sufficient collateral coverage levels, payment and financial performance, and compliance with other contractual conditions. Loan
commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee by the borrower.
61
Credit card and personal credit lines are generally subject to adjustment or 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.
Letters of credit totaled $397 million at December 31, 2021. 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 customers’ other commercial or public financing arrangements and
to help them demonstrate financial capacity to vendors of essential goods and services.
The contract amounts of these instruments reflect 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. As of December 31, 2021, the Company has a reserve for unfunded lending commitments of $29.3 million.
The following table shows the commitments to extend credit and letters of credit at December 31, 2021 and 2020 according to
expiration date.
TABLE 23. Loan Commitments and Letters of Credit
(in thousands)
December 31, 2021
Commitments to extend credit
Letters of credit
Total
(in thousands)
December 31, 2020
Commitments to extend credit
Letters of credit
Total
ENTERPRISE RISK MANAGEMENT
Total
Less Than
1 Year
1-3
Years
3-5
Years
More Than
5 Years
Expiration Date
$ 9,444,803 $ 4,171,685 $ 2,388,752 $ 2,071,055 $ 813,311
—
$ 9,841,759 $ 4,458,915 $ 2,486,692 $ 2,082,841 $ 813,311
287,230
396,956
11,786
97,940
Total
Less Than
1 Year
1-3
Years
3-5
Years
More Than
5 Years
Expiration Date
$ 8,106,223 $ 3,926,618 $ 1,877,640 $ 1,432,019 $ 869,946
—
$ 8,471,733 $ 4,199,250 $ 1,957,988 $ 1,444,549 $ 869,946
272,632
365,510
12,530
80,348
We proactively manage risks to capture opportunities and maximize shareholder value. We balance revenue generation and
profitability with the inherent risks of our business activities. Enterprise risk management helps protect shareholder value by
assessing, monitoring, and managing the risks associated with our businesses. Strong risk management practices enhance decision-
making, facilitate successful implementation of new initiatives, and where appropriate, support undertaking greater levels of well-
managed risk to drive growth and achieve strategic objectives. Our risk management culture integrates a board-approved risk appetite
with senior management direction and governance to facilitate the execution of the Company’s strategic plan. This integration ensures
the daily management of risks by product types and continuous corporate monitoring of the levels of risk across the Company. We
make changes to our enterprise risk management program and risk governance framework as described here at the direction of senior
management and the Board of Directors to capture opportunities and to respond to changes in strategic, business, and operational
environments.
Risk Categories and Definitions
Consistent with other participants in the financial services industry, the primary risk exposures of the Company are credit, market,
liquidity, operational, legal, reputational, and strategic. We have adopted these seven risk categories as outlined by the Federal
Reserve Board and other bank regulators to govern the risk management of banks and bank holding companies. Oversight
responsibility for these categories is assigned within our risk committee governance structure:
(cid:120)
(cid:120)
(cid:120)
Credit risk arises from the potential that a borrower or counterparty will fail to perform on an obligation.
Market risk is a financial institution’s condition resulting from adverse movements in market rates or prices, such as
interest rates, foreign exchange rates, or equity prices.
Liquidity risk is the potential that an institution will be unable to meet its obligations as they come due because of an
inability to liquidate assets or obtain adequate funding (referred to as “funding liquidity risk”) or that it cannot easily
unwind or offset specific exposures without significantly lowering market prices because of inadequate market depth or
market disruptions (“market liquidity risk”).
62
(cid:120)
(cid:120)
(cid:120)
(cid:120)
Operational risk is the potential that inadequate information systems, operational problems, breaches in internal controls,
breaches in customer data, fraud, or unforeseen catastrophes will result in unexpected losses. Consistently and
interchangeably for the Company, Basel II defines this risk as the risk of loss resulting from inadequate or failed internal
processes, people and systems, or from external events. The Company assesses compliance risk, the risk to current or
anticipated earnings or capital arising from violations of laws, rules or regulations, or from non-conformance with
prescribed practices, internal policies and procedures or ethical standards, as a subcategory of operational risk.
Legal risk is the potential that unenforceable contracts, lawsuits, or adverse judgments can disrupt or otherwise negatively
affect the operations or condition of a banking organization.
Reputational risk is the potential that negative publicity regarding an institution’s business practices, whether true or not,
will cause a decline in the customer base, costly litigation, or revenue reductions. The Company also recognizes its
reputation with shareholders and associates is an important factor of reputational risk.
Strategic risk is the risk to current or anticipated earnings, capital, or franchise or enterprise value arising from adverse
business decisions, poor implementation of business decisions, or lack of responsiveness to changes in the competitive
landscape of banking and financial services industries and operating environment.
Risk Committee Governance Structure
Effective risk management governance requires active oversight, participation, and interaction by senior management and the Board of
Directors. Our enterprise risk management framework uses a tiered risk/reward committee structure to facilitate the timely discussion
of significant risks, issues and risk mitigation strategies to inform management and the Board’s decision making. Additionally, the
committee structure provides ongoing oversight and facilitates escalation within assigned risk committees. Following is a summary of
our risk governance structure and related responsibilities:
(cid:120)
(cid:120)
(cid:120)
Board risk committees. The Company’s Board of Directors has established a Board Risk Committee and Credit Risk
Management Subcommittee of the Board Risk Committee to oversee the effective establishment of a risk governance
framework, provide for an independent Credit Review assurance function, ensure the overall corporate risk profile is
within its risk appetite, and direct changes or make recommendations to the Board of Directors when determined
necessary. Additionally, the Board of Directors has established an Audit Committee to provide independent oversight on
the effectiveness of these matters and the Company’s internal control environment. The Board Risk Committee is chaired
by an independent director. The Board has designated Ms. Joan Teofilo and Ms. Suzette Kent, independent directors who
serve on the Board Risk Committee, as risk management experts.
Governance committees. The Capital Committee (CAPCO) of the Company serves as the senior level management
risk/reward committee and oversees the business strategy, organizational structure, capital planning, and liquidity
strategies for the Company. CAPCO directly oversees the strategic and reputation risk categories, which include litigation
strategy and the development of capital stress testing within the Company’s risk governance framework. CAPCO drives
business strategy development and execution, provides corporate financial oversight, and is responsible for portfolio risk
committee oversight. CAPCO provides oversight of the portfolio risk/reward committees to ensure tactics to address
business strategy changes are properly vetted and adopted, and protect the Company’s reputation.
Portfolio committees. The Company has three portfolio risk/reward committees focusing on credit (CREDCO), market
and liquidity through asset/liability management (ALCO), and operational, legal and compliance (OPCO) risk categories.
These committees review and monitor the risk categories in a portfolio context ensuring risk assessment and management
processes are being effectively executed to identify and manage risk and direct changes and escalate issues to CAPCO and
Board Risk Committees when needed. The committees also monitor the risk portfolios for changes to the Company’s risk
profile as well as ensure the risk portfolio is performing within the board-approved risk appetite. Portfolio committees
report to CAPCO.
Risk Leadership and Organization
The risk management function of the Company, which includes the Chief Risk Officer, is led by the President of Hancock Whitney
Bank. The Chief Risk Officer provides overall vision, direction and leadership regarding our enterprise risk management program.
The Chief Risk Officer exercises independent judgment and reporting of risk through a direct working relationship with the Board
Risk Committee, and the Chief Credit Officer has the same role with the Credit Risk Management Subcommittee. The functional areas
reporting to the Chief Risk Officer are the enterprise risk management program office, operational risk management, model validation,
data governance, regulatory relations, corporate insurance, credit review (administrative only) and the enterprise-wide compliance
program. The Chief Risk Officer also works closely with the Chief Internal Auditor to provide assurance to the Board and senior
management regarding risk management controls and their effectiveness. The Chief Internal Auditor reports to the Board’s Audit
Committee to assure independence of the internal audit function. Other risk management functions reporting to the President include
the Chief Credit Officer and Bank Secrecy Act (BSA) Officer.
63
Credit Risk
The Bank’s primary lending focus is to provide commercial, consumer, and real estate loans to consumers, to small and middle market
businesses, to larger corporate clients in their respective market areas, and to state, county, and municipal government entities.
Diversification in the loan portfolio is a means to reduce the risks associated with economic fluctuations. The Bank has no significant
concentrations of loans to individual borrowers or foreign entities.
Our commercial and industrial portfolio, which includes commercial non-real estate and owner occupied commercial real estate
lending is diverse across various industries. We continuously manage our exposure to improve our cross industry diversification, and
proactively manage potential impacts to earnings.
Real estate loan levels are monitored throughout the year and the bank currently does not have a commercial real estate concentration
as defined by interagency guidelines.
Managing collateral is also an essential component of managing the Bank’s real estate-and non-real estate related credit risk exposure.
For real estate-secured loans, third party valuations are obtained at the time of origination, and updated if it is determined that the
collateral value has deteriorated or if the loan is deemed to be a problem loan. Property valuations are ordered through, and reviewed
by, the Bank’s appraisal department. When deemed necessary, third party valuations may also be obtained for non-real estate
collateral based on the same criteria as real estate secured loans. Such valuations, along with anticipated selling costs, are used to
determine if there is loan impairment, leading to a recommendation for partial charge off or appropriate allowance allocation.
The Bank maintains an active Credit Review function, whose Credit Review Manager reports to the Credit Risk Management
Subcommittee, a subcommittee of the Board Risk Committee, to help ensure that developing credit concerns are identified and
addressed in a timely manner. Further, an active watch list review process is in place as part of the Bank’s problem loan management
strategy, and a list of loans 90 days past due and still accruing is reviewed with management (including the Chief Credit Officer) at
least monthly. Recommendations flow from all of the above activities with the goal of recognizing nonperforming loans and
determining the appropriate accrual status.
Asset/Liability Management
Asset/liability management consists of quantifying, analyzing and controlling interest rate risk (IRR) to maintain stability in net
interest income under varying interest rate environments. The principal objective of asset/liability management is to maximize net
interest income while operating within acceptable risk limits established for interest rate risk and maintaining adequate levels of
liquidity. Our net earnings are materially dependent on our net interest income.
IRR on the Company’s balance sheet consists of reprice, option, yield curve, and basis risks. Reprice risk results from differences in
the maturity or repricing of asset and liability portfolios. Option risk arises from “embedded options” present in many financial
instruments such as loan prepayment options, deposit early withdrawal options and interest rate options. These options allow
customers opportunities to benefit when market interest rates change, which typically results in higher costs or lower revenue for the
Company. Yield curve risk refers to the risk resulting from unequal changes in the spread between two or more rates for different
maturities for the same instrument. Basis risk refers to the potential for changes in the underlying relationship between market rates
and indices, which subsequently result in changes to the profit spread on an earning asset or liability. Basis risk is also present in
administered rate liabilities, such as savings accounts, negotiable order of withdrawal accounts, and money market accounts where
historical pricing relationships to market rates may change due to the level or directional change in market interest rates.
ALCO manages our IRR exposures through pro-active measurement, monitoring, and management actions. ALCO is responsible for
maintaining levels of IRR within limits approved by the Board of Directors through a risk management policy that is designed to
promote a stable net interest margin in periods of interest rate fluctuation. Accordingly, the Company’s interest rate sensitivity and
liquidity are monitored on an ongoing basis by its ALCO, which oversees market risk management and establishes risk measures,
limits and policy guidelines for managing the amount of interest rate risk and its effect on net interest income and capital. A variety of
measures are used to provide for a comprehensive view of the magnitude of interest rate risk, the distribution of risk, the level of risk
over time and the exposure to changes in certain interest rate relationships.
The Company utilizes an asset/liability model as the primary quantitative tool in measuring the amount of IRR associated with
changing market rates. The model is used to perform net interest income, economic value of equity, Monte Carlo, and gap analyses.
The model quantifies the effects of various interest rate scenarios on projected net interest income and net income over the next
twelve-month and 24-month periods. The model measures the impact on net interest income relative to a base case scenario of
hypothetical fluctuations in interest rates over the next 24 months. These simulations incorporate assumptions regarding balance sheet
growth and mix, pricing and the repricing and maturity characteristics of the existing and projected balance sheet. The impact of
interest rate derivatives, such as interest rate swaps, caps and floors, is also included in the model. Other interest rate-related risks such
as prepayment, basis and option risk are also considered.
64
Net Interest Income at 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,
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.
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 December 31, 2021. Shifts are measured in 100 basis point increments in
a range from -500 to +500 basis points from base case, with +100 through +300 basis points presented in Table 24. 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.
TABLE 24. Net Interest Income (te) at Risk
Change in Interest Rates
(basis points)
+ 100
+ 200
+ 300
Estimated Increase
in NII
Year 1
Year 2
7.31 %
15.67 %
24.13 %
10.89 %
22.66 %
34.61 %
The results indicate a general asset sensitivity across most scenarios driven primarily by repricing in variable rate loans, balances at
the Federal Reserve Bank and a funding mix which is composed of material volumes of non-interest bearing and lower rate sensitive
deposits. Elevated levels of short-term investments driven by deposit inflows are contributing to an increase in asset sensitivity over
the past year. 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.
In 2017, the United Kingdom’s Financial Conduct Authority announced that after 2021 it would no longer compel banks to submit the
rates required to calculate the London Interbank Offered Rate (“LIBOR”). In November 2020, the administrator of LIBOR announced
it will consult on its intention to extend the retirement date of certain offered rates whereby the publication of the one week and two
month LIBOR offered rates will cease after December 31, 2021; but, the publication of the remaining LIBOR offered rates will
continue until June 30, 2023. Given consumer protection, litigation, and reputation risks, the bank regulatory agencies have indicated
that entering into new contracts that use LIBOR as a reference rate after December 31, 2021, would create safety and soundness risks
and that they will examine bank practices accordingly. Therefore, the agencies encouraged banks to cease entering into new contracts
that use LIBOR as a reference rate as soon as practicable and in any event by December 31, 2021.
Uncertainty remains over what rate or rates may become accepted alternatives to LIBOR, or what the effect of any such changes in
views or alternatives may be on the markets for LIBOR-indexed financial instruments. In particular, regulators, industry groups and
certain committees (e.g., the Alternative Reference Rates Committee (ARRC)) have, among other things, published recommended
fallback language for LIBOR-linked financial instruments, identified recommended alternatives for certain LIBOR rates (e.g.,
AMERIBOR or the Secured Overnight Financing Rate (SOFR) as the recommended alternative to U.S. Dollar LIBOR), and proposed
implementations of the recommended alternatives in floating rate instruments.
65
We have a significant number of loans, derivative contracts, borrowings and other financial instruments with attributes that are either
directly or indirectly dependent on LIBOR. The transition from LIBOR has resulted in and could continue to result in added costs and
employee efforts and could present additional risk. Since proposed alternative rates are calculated differently, payments under
contracts referencing new rates will differ from those referencing LIBOR. The transition will change our market risk profiles,
requiring changes to risk and pricing models, valuation tools, product design and hedging strategies.
Management has established a LIBOR Transition Working Group (the “Group”) whose purpose is to direct the overall transition
process for the Company. The Group is an internal, cross-functional team with representatives from business lines, support and control
functions and legal counsel. Beginning in the third quarter of 2019, key provisions in our loan documents were modified to ensure
new and renewed loans include appropriate pre-cessation trigger language and LIBOR fallback language for transition from LIBOR to
the new benchmark when such transition occurs. All direct exposures resulting from existing financial contracts that mature after 2021
have been inventoried and are monitored on an ongoing basis. Remediation of these exposures will be consistent with industry timing.
The Group has also inventoried indirect LIBOR exposures within the Company's systems, models and processes. The results of this
assessment will drive development and prioritization of remediation plans, and the Group is continuing to monitor developments and
taking steps to ensure readiness when the LIBOR benchmark rate is discontinued. Although we are currently unable to assess what the
ultimate impact of the transition from LIBOR will be, failure to adequately manage the transition could have a material adverse effect
on our business, financial condition and results of operations.
The Bank has adopted several replacement benchmarks to use in place of LIBOR benchmark rates, with AMERIBOR along with
FRB-NY SOFR as the primary rates. The replacement benchmarks rates adopted by the Bank have been affirmed to comply with the
19 principles set forth by the International Organization of Securities Commissions (IOSCO) for Financial Benchmarks, and it further
provides the Bank confidence these replacement benchmarks are based on transparent, market-based transactions. The Bank began
using these replacement benchmarks towards the end of the third quarter of 2021.
At December 31, 2021, approximately 34% of our loan portfolio consisted of variable rate loans tied to LIBOR, along with related
derivatives and other financial instruments.
Operational Risk Management
Operational risk is the risk of loss resulting from inadequate or failed internal controls and processes, people and systems, or from
external events, including fraud, litigation and breaches in data security. We depend on the ability of our employees and systems to
process, record and monitor a large number of transactions on an on-going basis. As operational risk remains elevated and as
customer and regulatory expectations regarding information security have increased, the Company continues to enhance its controls,
processes and systems in order to protect the Company’s networks, computers, software and data from attack, damage or unauthorized
access.
Cybersecurity is a significant operational risk for financial institutions as a result of increases in the number of incidents and the
sophistication of cyber-attacks. Cyber-attacks include computer hacking, acts of vandalism or theft, ransomware and other forms of
malware, credential theft, denial of service, phishing, and employee malfeasance, each utilized to disrupt the operations of a financial
institution, which in certain instances have resulted in unauthorized access to confidential, proprietary or other information, including
customer account information.
The Board Risk Committee has primary responsibility for the oversight of operational risk. In this capacity, the Board Risk
Committee oversees the Company’s processes for identifying, assessing, monitoring and managing cybersecurity risk. The Chief
Information Security Officer (CISO), a member of management, supports the information security risk oversight responsibilities of the
Board and its committees and involves the appropriate personnel in information risk management. The CISO regularly attends Board
Risk Committee meetings and sits in executive session with the Board Risk Committee members at least once annually. The CISO
annually provides an Information Security Program Summary report to the Board, outlining the overall status of our Information
Security Program and the Company’s compliance with regulatory guidelines. In addition, individual business lines have direct and
primary responsibility and accountability for identifying, controlling, and monitoring operational risks embedded in their business
activities.
The CISO is also responsible for managing the day-to-day cybersecurity operations and leads the IT Risk Governance Subcommittee,
a management level committee, whose objective is to protect the integrity, security, safety and resiliency of our corporate information
systems and assets. This committee meets regularly to review the development of our Information Security Program. Our
Information Security Program is comprised of a collection of policies, guidelines and procedures, which are regularly updated and
approved by appropriate management committees. As part of our Information Security Program, we have adopted a Comprehensive
Information Security Policy and an Incident Response Plan. The Incident Response Plan is intended to proceed on parallel paths in
the event of an incident, including implementation of (i) a forensic and containment, eradication and remediation plan, and (ii) a line
of business response plan (including legal, compliance, business, insurance and communications).
66
We contract with outside vendors on an annual basis to conduct vulnerability/penetration tests against the Company’s network. We
have also contracted with third parties to assist in cyber incident response, forensics and communications. Any third party service
provider or vendor utilized as part of the Company’s cybersecurity framework is required to comply with the Company’s policies
regarding non-public personal information and information security. In addition, information security training programs are in place
for all new associates, as well as required annual training for all associates. Internal policies and procedures have been adopted to
encourage the reporting of potential security attacks or risks.
To date, the Company has not experienced an attack that has significantly impacted its results of operations, financial condition and
cash flows. Addressing cybersecurity risks is a priority for the Company, and the Company is committed to enhancing its systems of
internal controls and business continuity and disaster recovery plans. See Item 1A. “Risk Factors” for further discussion of the risks
associated with an interruption or breach in our information systems or infrastructure
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. At December 31, 2021, we had $21.4 billion in net available sources of funds, summarized as follows:
TABLE 25. Net Available Sources of Funds
($ in thousands)
Internal Sources
Free securities, cash and other
External Sources
Federal Home Loan Bank
Federal Reserve Bank
Brokered time deposits
Other
Total Liquidity
TABLE 26. Liquidity Metrics
Free securities / total securities
Core deposits / total deposits
Wholesale funds / core deposits
Average loans / average deposits
Total
Available
December 31, 2021
Amount
Used
Net
Availability
$
8,475,515
$
— $
8,475,515
5,817,081
3,300,588
4,569,885
1,294,000
23,457,069
$
2,058,551
—
9,190
—
2,067,741 $
3,758,530
3,300,588
4,560,695
1,294,000
21,389,328
$
2021
2020
2019
53.95 %
98.66 %
6.45 %
72.90 %
54.21 %
97.14 %
7.85 %
84.57 %
47.27 %
93.54 %
13.99 %
87.47 %
The asset portion of the balance sheet provides liquidity primarily through loan principal repayments, maturities and repayments of
investment securities and occasional sales of various assets. Short-term investments such as federal funds sold, securities purchased
under agreements to resell and interest-bearing deposits with the Federal Reserve Bank or with other commercial banks are additional
sources of liquidity to meet cash flow requirements. Free securities represent unpledged securities that can be sold or used as collateral
for borrowings, and include unpledged securities assigned to short-term dealer repurchase agreements or to the Federal Reserve Bank
discount window. Management has established an internal target for the ratio of free securities to total securities to be 20% or greater.
As shown in Table 26 above, our ratios of free securities to total securities were 53.95% and 54.21%, respectively, at December 31,
2021 and 2020. Securities and FHLB letters of credit are pledged as collateral related to public funds and repurchase agreements. The
total pledged securities of $4.0 billion at December 31, 2021 were up $545.8 million compared to December 31, 2020. The increase
in pledged securities, as well as the decrease in the ratio of free securities to total securities, was the result of utilizing securities to
replace $550 million in maturing FHLB letters of credit as pledged collateral.
The liability portion of the balance sheet provides liquidity mainly through the ability to use cash sourced from various customers’
interest-bearing and noninterest-bearing deposit accounts and sweep accounts. At December 31, 2021, deposits totaled $30.5 billion,
an increase of $2.8 billion, or 10%, from December 31, 2020. This increase was primarily attributable to pandemic-related conditions,
such as overall slowdown in consumer and business spending; coupled with government stimulus, as well as increased hurricane-
related deposits generally from insurance proceeds. Core deposits represent total deposits excluding certificates of deposits (“CDs”) of
67
$250,000 or more and brokered deposits. The ratio of core deposits to total deposits was 98.66% at December 31, 2021, compared to
97.14% at December 31, 2020. Core deposits totaled $30.1 billion at December 31, 2021, an increase of $3.2 billion from December
31, 2020. Brokered deposits totaled $30 million as of December 31, 2021 compared to $66 million at December 31, 2020. Brokered
deposits declined as brokered certificates that matured were not reissued as part of our effort to utilize excess liquidity. The use of
brokered deposits as a funding source is subject to certain policies regarding the amount, term and interest rate.
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. In addition to 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 December 31, 2021, the Bank had
borrowed $1.1 billion from the FHLB and had approximately $3.8 billion remaining available under this line. The Bank also has
unused borrowing capacity at the Federal Reserve’s discount window of approximately $3.3 billion. There were no outstanding
borrowings with the Federal Reserve at December 31, 2021 and December 31, 2020, or at any point during the years then ended.
Wholesale funds, comprised of short-term borrowings, long-term debt and brokered deposits were 6.45% of core deposits at
December 31, 2021 and 7.85% at December 31, 2020. Wholesale funds totaled $1.9 billion at December 31, 2021, a decrease of $173
million from December 31, 2020. The decrease was primarily due to redemption of our 2015 subordinated debt in the second quarter
of 2021. The Company has established an internal target for wholesale funds to be less than 25% of core deposits.
Another key measure the Company uses to monitor its liquidity position is the loan to deposit ratio (average loans outstanding during
the reporting period divided by average deposits outstanding). The loan-to-deposit ratio measures the amount of funds the Company
lends for each dollar of deposits on hand. Our average loan-to-deposit ratio was 72.90% for 2021 compared to 84.57% in 2020.
Management has established a target range for the loan to deposit ratio of 87% to 89%, but may operate outside that range under
certain circumstances. The average loan to deposit ratio began to decline during the second quarter of 2020, and continued throughout
2021, as growth of average deposits continued to outpace average loans, largely due to pandemic-related economic conditions.
Average loans outstanding for 2021 and 2020, included approximately $1.5 billion and $1.6 billion, respectively of low-risk SBA
guaranteed PPP loans that are expected to be largely repaid through the forgiveness process by the end of the second quarter of 2022.
Dividends received from the Bank have been the primary source of funds available to the Parent Company 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 that the Bank can distribute to the Parent Company, as described in Note 12 to the
consolidated financial statements, “Stockholders’ Equity.” The Parent targets cash and other liquid assets to provide liquidity in an
amount sufficient to fund approximately four quarters of ongoing cash or liquid asset needs, consisting primarily of common
stockholder dividends, debt service requirements, and any expected share repurchase or early extinguishment of debt. The Parent may
temporarily operate below that level if a return to the target can be achieved in the near-term, generally not to exceed four quarters.
On June 9, 2020, the Parent completed the issuance of subordinated notes payable with an aggregate principal amount of $172.5
million, providing additional liquidity that can be used by the Parent or to provide capital to the Bank, if deemed appropriate. On June
15, 2021, the Parent utilized excess liquidity to redeem all of its issued and outstanding 5.95% Subordinated Notes due with an
aggregate principal amount of $150 million.
Material Cash Requirements
The company has sufficient access to liquidity for operations. The following table summarizes select significant contractual
obligations as of December 31, 2021, according to payments due by period. The table excludes obligations under deposit contracts and
short-term borrowings discussed previously in this analysis. The maturities of time deposits in amounts greater than $250,000 are
presented in Table 20. Purchase obligations represent material legal and binding contracts to purchase services and goods that cannot
be settled or terminated without paying substantially all of the contractual amounts.
TABLE 27. Contractual Cash Obligations
(in thousands)
Long-term debt obligations
Operating lease obligations
Purchase obligations
Commitments to fund low income housing and small business
investment company
Total
Total
Less Than
1 Year
Payment due by period
1-3
Years
$ 670,245 $ 19,731 $ 30,051 $ 64,596 $ 555,867
84,929
—
153,889
124,529
23,845
9,783
28,389
28,815
16,726
85,931
More Than
5 Years
3-5
Years
18,244
—
$ 966,907 $ 140,632 $ 87,255 $ 98,224 $ 640,796
18,244
—
—
68
Capital Resources
The Company currently has a strong capital position which is vital to continued profitability, promotes depositor and investor
confidence, and provides a solid foundation for economic downturns, future growth and flexibility in addressing strategic
opportunities. Stockholders’ equity totaled $3.7 billion at December 31, 2021 compared to $3.4 billion at December 31, 2020. The
$231.3 million increase is attributable to 2021 earnings of $463.2 million and $19.8 million of long-term incentive and dividend
reinvestment activity, partially offset by a loss of $134.0 million in accumulated other comprehensive income largely related to the
market adjustment on the available for sale securities portfolio and cash flow hedges, $95.9 million of dividends, and $21.8 million of
stock repurchase activity.
At December 31, 2021, the Company’s tangible common equity ratio was 7.71%, compared to 7.64% at December 31, 2020. The
increase from 2020 is primarily attributable to a $248 million increase in tangible equity offset by the impact of a $2.9 billion growth
in tangible assets, which was largely driven by a $2.5 billion increase in low-risk short term investments (primarily Federal Funds)
resulting from the excess liquidity due to the increase in deposits.
The primary quantitative measures that regulators use to gauge capital adequacy are the ratios of Total, Tier 1 and Common Equity
Tier 1 regulatory capital to risk-weighted assets (risk-based capital ratios) and the ratio of Tier 1 capital to average total assets
(Leverage ratio). The Federal Reserve Board’s final rule implementing the Basel III regulatory capital framework and related changes
per the Dodd-Frank Act established the Basel III minimum regulatory capital requirements for all organizations for Total, Tier 1 and
Common Equity Tier 1 risk-based capital ratios equal to 8.00%, 6.00%, and 4.5%, respectively, as well as set a conservation buffer of
2.5% and a Leverage ratio of 4.0%. Based on capital ratios as of December 31, 2021 using Basel III definitions, the Company and the
Bank exceeded all capital requirements of the rule. The Company and the Bank have established internal target ranges for Total, Tier
1 and Common Equity Tier 1 risk-based capital ratios and the leverage ratio. At December 31, 2021, each of these capital ratios fell
within, or above, their respective target range.
At December 31, 2021, our regulatory capital ratios were well in excess of current regulatory minimum requirements, including the
conservatism buffers, by at least $475 million. Additionally, both the Company and the Bank were considered “well capitalized” by
regulatory agencies. Note 11 – Stockholders’ Equity to the consolidated financial statements provides additional information about the
Bank’s regulatory capital ratios.
The following table shows the Company’s regulatory capital ratios as calculated under current rules for the indicated periods. The
capital ratios at December 31, 2021 reflect the election to use the interim final five-year transition rule issued on March 27, 2020
available for institutions required to adopt CECL as of January 1, 2020. The CECL transition rule allows for the option to delay for
two years the estimated impact of CECL on regulatory capital (0%), followed by a three-year transition (25% in 2022, 50% in 2023,
75% in 2024, and 100% thereafter). In addition, the two-year delay also includes 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, balance (modified
transition amount). The modified transition amount is recalculated quarterly, with the December 31, 2021 impact of $24.9 million plus
the day one impact of $44.1 million carrying through remaining three-year transition. The election to use the revised final CECL
transition rules favorably impacted our leverage ratio upon adoption by 19 bps and our Total, Tier 1 and Common Equity Tier 1 risk-
based capital ratios by 22 bps.
TABLE 28. Risk-Based Capital and Capital Ratios
(in thousands)
Common equity tier 1 capital
Additional tier 1 capital
Tier 1 capital
Tier 2 capital
Total capital
Risk-weighted assets
Ratios
Leverage (Tier 1 capital to average assets)
Common equity tier 1 capital to risk-weighted assets *
Tier 1 capital to risk-weighted assets
Total capital to risk-weighted assets
Common stockholders' equity to total assets
Tangible common equity to total assets
*applies to Bank only
69
$
2021
2,890,770 $
2020
2,534,049
—
2,534,049
621,643
3,155,692
$ 26,056,958 $ 23,872,707
—
2,890,770
454,617
3,345,387 $
$
8.25 %
11.09 %
11.09 %
12.84 %
10.05 %
7.71 %
7.88 %
10.61 %
10.61 %
13.22 %
10.22 %
7.64 %
Total capital to risk weighted assets ratios at December 31, 2021 reflects the impact of the June 15, 2021 redemption of $150 million
of subordinated notes of the Parent that qualified as tier 2 capital in the calculation of certain regulatory capital ratios, reducing total
capital to risk weighted assets ratio by approximately 58 bps. Our regulatory ratios also reflect the impact of changing levels of PPP
loans, which are guaranteed by the SBA and, when meeting certain criteria, are subject to forgiveness to the debtor by the SBA. These
loans carry a 0% risk-weighting in the tier 1 and total capital regulatory ratios due to the full guarantee by the SBA. However, these
loans are reflected in average assets used to compute tier 1 leverage. As of December 31, 2021 and 2020, PPP loans totaled $531
million and 2.0 billion, respectively.
On June 9, 2020, the Parent completed the issuance of subordinated notes with an aggregate principal amount of $172.5 million and a
stated maturity of June 15, 2060, that qualify as tier 2 capital in the calculation of certain regulatory capital ratios.
Throughout both 2021 and 2020, the Company paid quarterly dividends of $0.27 per share, for an annual cash dividend rate of $1.08
per share. The Company has paid uninterrupted quarterly dividends to shareholders since 1967.
STOCK REPURCHASE PROGRAM
On April 22, 2021, the Company’s board of directors approved a stock buyback program whereby the Company is authorized to
repurchase up to 4.3 million shares of its common stock through the program’s expiration date of December 31, 2022. The program
allows the Company to repurchase its common shares in the open market, by block purchase, through accelerated share repurchase
programs, in privately negotiated transactions, or otherwise, in one or more transactions. The Company is not obligated to purchase
any shares under this program, and the board of directors has the ability to terminate or amend the program at any time prior to the
expiration date. During the year ended December 31, 2021, the Company repurchased 449,876 shares of its common stock at an
average cost of $48.45 per share, inclusive of commissions.
Prior to its expiration date of December 31, 2020, the Company had in place a stock buyback program that authorized the repurchase
of up to 5.5 million shares of its common stock. The program, as amended, allowed the Company to repurchase its common shares on
the open market, by block purchase, through accelerated share repurchase programs, in privately negotiated transactions, or as
otherwise determined by the Company, in one or more transactions. The Company was not obligated to purchase any shares under this
program, and the board of directors had the ability to terminate or amend the program at any time prior to the expiration date. In total,
the Company repurchased 4.9 million of the 5.5 million authorized shares under this buyback program at an average cost of $37.65 per
share, inclusive of commissions, with 4.6 million shares acquired through an accelerated share repurchase agreement and 0.3 million
acquired in a privately negotiated transaction.
70
FOURTH QUARTER RESULTS
Net income for the fourth quarter of 2021 was $137.7 million, or $1.55 per diluted common share, compared to $129.6 million, or
$1.46, in the third quarter of 2021 and $103.6 million, or $1.17, in the fourth quarter of 2020. The fourth quarter of 2021 included $4.9
million ($.04 per share after-tax impact) of net nonoperating income items, mostly attributable to hurricane-related insurance
proceeds. The third quarter of 2021 included $1.4 million, or $0.01 per share after-tax of net nonoperating income items related to a
gain from the sale of the remaining Hancock Horizon Funds and a severance reversal, partially offset by Hurricane Ida expenses.
There were no nonoperating items in the fourth quarter of 2020.
Highlights of our fourth quarter of 2021 results (compared to third quarter of 2021):
•
•
•
•
•
•
•
•
•
Net income of $137.7 million, or $1.55 per diluted share, was up $8.2 million, or $0.10 per diluted share; excluding the
impact of nonoperating items, earnings per diluted share was up $0.06
Pre-tax pre-provision net revenue of $134.2 million was down slightly from the prior quarter
Core loan growth of $652.5 million, more than offset the impact of $404.3 million in PPP loan forgiveness, leading to an
overall increase in total loans of $248.3 million
Deposits increased $1.3 billion, with noninterest-bearing demand deposits up $739.4 million and interest-bearing accounts
up $518.3 million
Negative provision for credit losses of $28.4 million, comprised of a $29.1 million reserve release and $0.7 million in net
charge-offs
Allowance for credit losses coverage remained strong at 1.76%, or 1.80% excluding PPP loans
Continued improvement in asset quality with nonperforming loans down 6%, and criticized commercial loans down 2%
The impact of excess liquidity, driven mainly by PPP loan forgiveness and Hurricane Ida related deposits, led to a 14 bps
compression in the net interest margin
Tangible common equity ratio of 7.71% was down 14 bps, impacted by accumulated other comprehensive income and
excess liquidity
Total loans at December 31, 2021 were $21.1 billion, an increase of $248 million, or 1%, from September 30, 2021. Core loans
increased $653 million, offsetting the impact of $404 million in PPP loan forgiveness. Loan growth was reflected in markets across
the footprint and in specialty lines.
Total deposits at December 31, 2021 were $30.5 billion, up $1.3 billion, or 4%, from September 30, 2021. The increase was driven by
seasonality, excess liquidity related to stimulus and other pandemic-related client funds, and hurricane-related proceeds.
Noninterest-bearing deposits totaled $14.4 billion at December 31, 2021, up $739 million, or 5%, from September 30, 2021 and
comprised 47% of total deposits at December 31, 2021. Interest-bearing transaction and savings deposits totaled $11.6 billion at
December 31, 2021, up $358.0 million, or 3%, compared to September 30, 2021. Interest-bearing public fund deposits increased
$239.2 million, or 8%, to $3.3 billion at December 31, 2021. The increase in public funds is seasonal and primarily related to year-end
tax collections by local municipalities. Typically, these balances begin to runoff in the first quarter of each year. Time deposits of $1.1
billion decreased $78.9 million, or 7%, from September 30, 2021.
Net interest income (te) for the fourth quarter of 2021 was $231.9 million, down $5.5 million, or 2% from the third quarter of 2021,
primarily driven by the decline in PPP loans and the impact of excess liquidity on our earning assets. The net interest margin declined
14 bps to 2.80%, in the fourth quarter due to the impact of additional excess liquidity (-10 bps), a change in the earning asset yield (-4
bps), and over $400 million of PPP loan forgiveness (-2 bps), partially offset by lower deposit costs (+1 bp) and other (+1 bp).
The provision for loan losses recorded in the fourth quarter of 2021 was a negative $28.4 million, compared to a negative provision of
$27.0 million in the third quarter of 2021. Net charge-offs were $0.7 million, or 0.01% of average total loans on an annualized basis in
the fourth quarter of 2021, down from $1.8 million, or 0.03% of average total loans, for the third quarter of 2021. Our allowance for
credit loss reserves were $371.4 million at December 31, 2021, down $29.1 million from the prior quarter.
Noninterest income totaled $89.6 million for the fourth quarter of 2021, down $3.7 million, or 4%, from the third quarter of 2021. The
fourth quarter of 2021 included a $3.6 million gain from storm-related insurance proceeds, and the third quarter of 2021 included a
$4.6 million gain from the sale of the remaining Hancock Horizon Funds, both of which are considered nonoperating. Excluding these
nonoperating items, noninterest income for the fourth quarter totaled $86.0 million, down $2.8 million, or 3%, from the third quarter.
Improvement compared to prior quarter was noted in many fee categories with increased economic activity and consumer spending.
Service charges were up $0.2 million, or 1%. Bank card and ATM fees were up $0.8 million or 4%. Investment and annuity income
and insurance fees were up $0.4 million, or 5%. Trust fees were down $0.5 million, or 3%. Income from secondary mortgage
71
operations totaled $5.5 million, down $1.5 million as refinancing activity slowed. Other operating noninterest income was down $2.1
million primarily due to lower specialty income.
Noninterest expense of $182.5 million, declined $12.2 million, or 6%, from the third quarter of 2021, and included a net credit of $1.3
million of nonoperating items, primarily related to partial reversals of accruals for both Hurricane Ida expense and closed branch
writedowns. The third quarter of 2021 included $3.2 million of nonoperating expense primarily related to Hurricane Ida. Excluding
these items, operating expense totaled $183.8 million, down $7.7 million, or 4%, from the third quarter of 2021. The primary driver of
the decrease was personnel expense, which was down $6.7 million, or 6%, related to recent efficiency initiatives. Also contributing to
the decrease was lower occupancy and equipment expense, down $0.8 million, or 5%, from the third quarter of 2021.
The effective income tax rate for fourth quarter 2021 was 16.4%. The lower than normal rate was related to the Company revising its
tax elections in anticipation of potential tax reform to a higher statutory rate. The company expects the effective tax rate to return to a
normal quarterly range of 19-20% in 2022, absent any changes in tax laws. The effective income tax rate continues to be less than the
statutory rate primarily due to tax-exempt income and income tax credits.
72
The following table provides selected comparative financial information for the five quarters ending with December 31, 2021.
TABLE 29. Quarterly Consolidated Financial Results
(in thousands, except per share data)
Income Statement Data:
Interest income
Interest income (te) (a)
Interest expense
Net interest income (te)
Provision for credit losses
Noninterest income
Noninterest expense
Income (loss) before income taxes
Income tax expense (benefit)
Net income (loss)
For informational purposes - included above, pre-tax
Nonoperating item included in noninterest income:
Gain on hurricane-related insurance settlement
Gain on sale of Hancock Horizon Funds
Gain on sale of Mastercard Class B common stock
Nonoperating items included in noninterest expense:
Efficiency initiatives
Hurricane related expenses
Loss on redemption of subordinated notes
Balance Sheet Data:
Period end balance sheet data
Loans
Earning assets
Total assets
Noninterest-bearing deposits
Total deposits
Stockholders' equity
Average balance sheet data
Loans
Earning assets
Total assets
Noninterest-bearing deposits
Total deposits
Stockholders' equity
Common Shares Data:
Earnings (loss) per share:
Basic
Diluted
Cash dividends per common share
Performance Ratios:
Return on average assets
Return on average common equity
Efficiency (b)
Net interest margin (te)
Reconciliation of operating revenue and operating pre-
provision net revenue (non-GAAP measure) (te) (c)
Net interest income
Noninterest income
Total revenue
Taxable equivalent adjustment
Nonoperating revenue
Total revenue (te)
Noninterest expense
Nonoperating expense
Operating pre-provision net revenue (te)
December 31, 2021 September 30, 2021
June 30, 2021
March 31, 2021
December 31, 2020
Three Months Ended
$
$
$
$
$
$
$
$
$
238,756 $
241,391
9,460
231,931
(28,399)
89,612
182,462
164,845
27,102
137,743 $
3,600 $
—
—
(649)
(680)
—
21,134,282 $
33,610,435
36,531,205
14,392,808
30,465,897
3,670,352
20,770,130 $
32,913,659
35,829,027
14,126,335
29,750,665
3,642,003
1.56 $
1.55
0.27
1.53%
15.00%
56.57%
2.80%
$
$
$
$
$
244,417 $
247,185
9,708
237,477
(26,955)
93,361
194,703
160,322
30,740
129,582 $
$
—
4,576
—
(1,867)
5,092
—
248,300
251,154
13,657
237,497
(17,229)
94,272
236,770
109,374
20,656
88,718
—
—
2,800
40,812
—
4,165
20,886,015 $
32,348,036
35,318,308
13,653,376
29,208,157
3,629,766
20,941,173 $
32,097,381
35,207,960
13,535,961
29,237,306
3,606,087
21,148,530
32,075,450
35,098,709
13,406,385
29,273,107
3,562,901
21,388,814
32,195,515
35,165,684
13,237,796
29,228,809
3,488,592
1.46 $
1.46
0.27
1.46%
14.26%
57.44%
2.94%
$
1.00
1.00
0.27
1.01%
10.20%
57.01%
2.96%
250,785 $
253,707
16,198
237,509
(4,911)
87,089
193,072
133,515
26,343
107,172 $
— $
—
—
—
—
—
21,664,859 $
32,134,637
35,072,643
13,174,911
29,210,520
3,416,903
21,745,298 $
31,015,637
34,078,200
12,374,235
28,138,763
3,441,466
1.21 $
1.21
0.27
1.28%
12.63%
58.12%
3.09%
229,296
89,612
318,908
2,635
(3,600)
317,943
(182,462)
(1,329)
134,152
$
$
$
234,709
93,361
328,070
2,768
(4,576)
326,262
(194,703)
3,225
134,784
$
$
$
234,643
94,272
328,915
2,854
(2,800)
328,969
(236,770)
44,977
137,176
$
$
$
234,587 $
87,089
321,676
2,922
—
324,598 $
(193,072)
—
131,526 $
257,253
260,368
18,967
241,401
24,214
82,350
193,144
103,278
(297)
103,575
—
—
—
—
—
—
21,789,931
30,616,277
33,638,602
12,199,750
27,697,877
3,439,025
22,065,672
29,875,531
33,067,462
11,759,755
27,040,447
3,406,646
1.17
1.17
0.27
1.25%
12.10%
58.23%
3.22%
238,286
82,350
320,636
3,115
—
323,751
(193,144)
—
130,607
(a) Taxable equivalent basis (te). For analytical purposes, management adjusts interest income and net interest income for tax-exempt items to a taxable equivalent basis
using a federal income tax rate of 21%
(b) The efficiency ratio is noninterest expense to total net interest (te) and noninterest income, excluding amortization of purchased intangibles and nonoperating items.
(c) Refer to the Non-GAAP Financial Measures section of this analysis for a discussion of these measures.
73
CRITICAL ACCOUNTING POLICIES AND SIGNIFICANT ESTIMATES
The accounting principles we follow and the methods for applying these principles conform to accounting principles generally
accepted in the United States of America and general practices followed by the banking industry. The significant accounting principles
and practices we follow are described in Note 1 to the consolidated financial statements. These principles and practices require
management to make estimates and assumptions about future events that affect the amounts reported in the consolidated financial
statements and accompanying notes. Management evaluates the estimates and assumptions made on an ongoing basis to help ensure
the resulting reported amounts reflect management’s best estimates and judgments given current facts and circumstances. The
following discusses certain critical accounting policies that involve a higher degree of management judgment and complexity in
producing estimates that may significantly affect amounts reported in the consolidated financial statements and notes thereto.
Allowance for Credit Losses
On January 1, 2020, we adopted Accounting Standards Codification (“ASC”) Topic 326, “Financial Instruments – Credit Losses,”
commonly referred to as Current Expected Credit Losses or CECL, on a modified retrospective basis. The provisions of this guidance
required a material change to the manner in which the Company estimates and reports losses on financial instruments, including loans
and unfunded lending commitments, select investment securities, and other assets carried at amortized cost. For reporting periods
beginning on or subsequent to January 1, 2020, accounting for credit losses and related disclosures are presented under ASC 326,
while prior period results continue to be reported in accordance with previously effective guidance under ASC 310 - Receivables.
The allowance for credit losses (ACL) is comprised of the allowance for loan and lease losses (ALLL), a valuation account available
to absorb losses on loans and leases held for investment, and the reserve for unfunded lending commitments, a liability established to
absorb credit losses for the expected life of the contractual term of on and off-balance sheet exposures as of the date of the
determination. The standard requires that management incorporate an economic forecast for a reasonable and supportable period,
which is two years based on our current policy. We utilize third party forecasts that consist of multiple economic scenarios, including
a baseline, with a probability distribution of 50% better or worse economic performance and various upside and downside scenarios
utilized at an aggregated state (or regional) levels across our footprint or national level, depending on the portfolio. The economic
forecasts are generally lagging and may not incorporate all events and circumstances through the financial statement date. The
Company’s management considers available forecasts, current events not captured and our specific portfolio characteristics and
applies weights to the scenario output based on a best estimate of likely outcomes. Since 2020, the United States and global financial
markets experienced unprecedented volatility, with significant uncertainty surrounding the COVID-19 pandemic. Changing economic
conditions and resulting government response in the form of interest rate adjustments and stimulus packages have introduced
enhanced estimation uncertainty in the forecasts used to estimate expected credit loss. Our credit loss models were built using
historical data that may not correlate to economic conditions stemming from the pandemic. The estimate of the life of a loan considers
both contractual cash flows as well as estimated prepayments and forecasted draws on unfunded loan commitments that were also
built on historical data that may react differently given the current environment. Such forecasted information is inherently uncertain,
particularly in the environment resulting from the pandemic. Forecast uncertainty includes the severity of the impact to local and
global economic conditions as well as the timing of recovery, among other things. Therefore, actual results may differ significantly
from management’s estimates.
Management applies significant judgment when weighting the macroeconomic scenarios for the reasonable and supportable period.
Our assessment considers the scenario description compared to our portfolio performance and benchmarking select variables to other
third party forecasts. At December 31, 2021, the Company weighted the Moody’s baseline scenario at 40% and the slower growth S-2
scenario at 60%. Results by scenario can vary significantly from period to period as both the scenario assumptions and the portfolio
composition are changing, therefore comparison of scenario weighting from period to period may not be meaningful. For example,
holding all other assumptions constant, the slower growth S-2 scenario produced expected credit losses 21% higher than utilization of
the baseline scenario at December 31, 2021. In contrast, for the year ended December 31, 2020, the slower growth S-2 scenario
produced results only 8% greater than the baseline scenario. In addition, these quantitative results are adjusted, sometimes materially,
by the qualitative assessment described below.
The quantitative loss rate analysis is supplemented by a review of qualitative factors that considers whether conditions differ from
those existing during the historical periods used in the development of the credit loss models. Such factors include, but are not limited
to, problem loan trends, changes in loan profiles and volumes, changes in lending policies and procedures, current or expected
economic trends, business conditions, credit concentrations, model limitations and other relevant factors not captured by our models.
While quantitative data for these factors is used where available, there is significant judgment applied in these processes.
For credits that are individually evaluated, a specific allowance is calculated as the shortfall between the credit’s value and the bank’s
exposure. The loan’s value is measured by either the loan’s observable market price, the fair value of the collateral of the loan (less
liquidation costs) if it is collateral dependent, or by the present value of expected future cash flows discounted at the loan’s effective
interest rate. Collateral on impaired loans includes, but is not limited to, commercial and residential real estate, accounts receivable
and other corporate assets. Values for impaired credits are highly subjective and based on information available at the time of
74
valuation and the current resolution strategy. These values are difficult to assess and have heightened uncertainty resulting from the
impact of the pandemic on market conditions. Actual results could differ from these estimates.
Management considers the appropriateness of these critical assumptions as part of its allowance review and believes the ACL level is
appropriate based on information available through the financial statement date. Refer to Note 3 – Loans and Allowance for Credit
Losses for further discussion of significant assumptions used in the current allowance calculation.
Accounting for Retirement Benefits
Management makes a variety of assumptions in applying principles that govern the accounting for benefits under the Company’s
defined benefit pension plans and other postretirement benefit plans. These assumptions are essential to the actuarial valuation that
determines the amounts recognized and certain disclosures it makes in the consolidated financial statements related to the operation of
these plans. Two of the more significant assumptions concern the expected long-term rate of return on plan assets and the rate needed
to discount projected benefits to their present value. Changes in these assumptions impact the cost of retirement benefits recognized in
net income and comprehensive income. Certain assumptions are closely tied to current conditions and are generally revised at each
measurement date. For example, the discount rate is reset annually with reference to market yields on high quality fixed-income
investments. Other assumptions, such as the rate of return on assets, are determined, in part, with reference to historical and expected
conditions over time and are not as susceptible to frequent revision. Holding other factors constant, the cost of retirement benefits will
move opposite to changes in either the discount rate or the rate of return on assets. Note 17 – Retirement Plans. provides further
discussion on the accounting for retirement and employee benefit plans and the estimates used in determining the actuarial present
value of the benefit obligations and the net periodic benefit expense.
RECENT ACCOUNTING PRONOUNCEMENTS
See Note 1 to our consolidated financial statements that appears in Item 8. “Financial Statements and Supplementary Data.”
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information required for this item is included in the sections entitled “Asset/Liability Management” and “Net Interest Income at
Risk” that appear in Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and is
incorporated here by reference.
75
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
The management of Hancock Whitney Corporation has prepared the consolidated financial statements and other information in our
Annual Report in accordance with accounting principles generally accepted in the United States of America and is responsible for its
accuracy. The financial statements necessarily include amounts that are based on management’s best estimates and judgments.
In meeting its responsibility, management relies on internal accounting and related control systems. The internal control systems are
designed to ensure that transactions are properly authorized and recorded in the Company’s financial records and to safeguard the
Company’s assets from material loss or misuse. Such assurance cannot be absolute because of inherent limitations in any internal
control system.
The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting, as such
term is defined in the Rule 13(a)–15(f) under the Securities Exchange Act of 1934. Under the supervision and with the participation of
management, including the Company’s principal executive officer and principal financial officer, the Company conducted an
evaluation of the effectiveness of internal control over financial reporting based on the framework in Internal Control – Integrated
Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Management also conducted
an assessment of requirements pertaining to Section 112 of the Federal Deposit Insurance Corporation Improvement Act. This section
relates to management’s evaluation of internal control over financial reporting, including controls over the preparation of financial
statements in accordance with the instructions to the Consolidated Financial Statements for Bank Holding Companies (Form FR Y-
9C) and in compliance with laws and regulations. Our evaluation included a review of the documentation of controls, evaluations of
the design of the internal control system and tests of the effectiveness of internal controls.
The Company’s internal control over financial reporting as of December 31, 2021 was audited by PricewaterhouseCoopers, LLP, an
independent registered public accounting firm, as stated in their accompanying report which expresses an unqualified opinion on the
effectiveness of the Company’s internal control over financial reporting as of December 31, 2021.
Based on the Company’s evaluation under the framework in Internal Control – Integrated Framework (2013), management concluded
that internal control over financial reporting was effective as of December 31, 2021.
/s/ John M. Hairston
John M. Hairston
President & Chief Executive Officer
(Principal Executive Officer)
February 25, 2022
/s/ Michael M. Achary
Michael M. Achary
Senior Executive Vice President & Chief Financial Officer
(Principal Financial Officer)
February 25, 2022
76
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of Hancock Whitney Corporation
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of Hancock Whitney Corporation and its subsidiaries (the
“Company”) as of December 31, 2021 and 2020, and the related consolidated statements of income, of comprehensive income, of
changes in stockholders’ equity and of cash flows for each of the three years in the period ended December 31, 2021, including the
related notes (collectively referred to as the “consolidated financial statements”). We also have audited the Company's internal control
over financial reporting as of December 31, 2021, based on criteria established in Internal Control - Integrated Framework (2013)
issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of
the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the
period ended December 31, 2021 in conformity with accounting principles generally accepted in the United States of America. Also in
our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31,
2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.
Change in Accounting Principle
As discussed in Note 1 to the consolidated financial statements, the Company changed the manner in which it accounts for credit
losses on certain financial instruments in 2020.
Basis for Opinions
The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over
financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the
accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express opinions on the
Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We
are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules
and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits
to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to
error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the
consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such
procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial
statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well
as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting
included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and
testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included
performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable
basis for our opinions.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed 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. Management's assessment and our audit of the Company's internal control over financial reporting also included controls
over the preparation of financial statements in accordance with the instructions to the Consolidated Financial Statements for Bank
Holding Companies (Form FR Y-9C) to comply with the reporting requirements of Section 112 of the Federal Deposit Insurance
Corporation Improvement Act (FDICIA). A company’s internal control over financial reporting includes those policies and
77
procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of
the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide
reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets
that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections
of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in
conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements
that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are
material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The
communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a
whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or
on the accounts or disclosures to which it relates.
Allowance for Credit Losses for the Collectively Evaluated Portfolios
As described in Notes 1 and 3 to the consolidated financial statements, the allowance for credit losses (“ACL”) is comprised of the
allowance for loan and lease losses, a valuation account available to absorb losses on loans and leases held for investment, and the
reserve for unfunded lending commitments, a liability established to absorb credit losses for the expected life of the contractual term
of on and off-balance sheet exposures. As of December 31, 2021, the total allowance for credit losses was $371 million on total loans
of $21.1 billion. The analysis and methodology for estimating the ACL includes two primary elements: a collective approach for pools
of loans that have similar risk characteristics using a loss rate analysis, and a specific reserve analysis for credits individually
evaluated for credit loss. Management utilizes internally developed credit models and third party economic forecasts for the
calculation of expected credit loss for the collectively evaluated portfolios. Management calculates a collective allowance for a two-
year reasonable and supportable forecast period utilizing probability weighted multiple macroeconomic scenarios, and then reverts on
a linear basis over four quarters to an average historical loss rate for the remaining term. Qualitative adjustments to the output of
quantitative calculations are made when management deems it necessary to reflect differences in current and forecasted conditions as
compared to those during the historical loss period used in model development.
The principal considerations for our determination that performing procedures relating to the allowance for credit losses for the
collectively evaluated portfolios is a critical audit matter are (i) the significant judgment by management in estimating the allowance
for credit losses, which in turn led to a high degree of auditor judgment, subjectivity and effort in performing procedures and
evaluating audit evidence relating to the application of probability weighted multiple macroeconomic scenarios and the qualitative
adjustments used in estimating the allowance for credit losses and (ii) the audit effort involved the use of professionals with
specialized skill and knowledge.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion
on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to management’s
process for estimating the allowance for credit losses for the collectively evaluated portfolios, including controls over the application
of probability weighted multiple macroeconomic scenarios and qualitative adjustments. These procedures also included, among
others, testing management’s process for estimating the allowance for credit losses by (i) evaluating the appropriateness of
management’s methodology, (ii) testing certain data used in the estimate, and (iii) evaluating the reasonableness of the application of
probability weighted multiple macroeconomic scenarios and the qualitative adjustments; professionals with specialized skill and
knowledge were used to assist in performing these procedures to test management’s process.
/s/ PricewaterhouseCoopers LLP
New Orleans, Louisiana
February 25, 2022
We have served as the Company’s auditor since 2009.
78
Hancock Whitney Corporation and Subsidiaries
Consolidated Balance Sheets
(in thousands, except per share data)
Assets:
Cash and due from banks
Interest-bearing bank deposits
Federal funds sold
Securities available for sale, at fair value (amortized cost of $6,984,530
and $5,766,234)
Securities held to maturity (fair value of $1,631,482 and $1,467,581)
Loans held for sale (includes $41,022 and $0 measured at fair value)
Loans
Less: allowance for loan losses
Loans, net
Property and equipment, net of accumulated depreciation of $280,065 and $271,801
Right of use assets, net of accumulated amortization of $34,425 and $23,330
Prepaid expense
Other real estate and foreclosed assets, net
Accrued interest receivable
Goodwill
Other intangible assets, net
Life insurance contracts
Funded pension assets, net
Other assets
Total assets
Liabilities and Stockholders' Equity:
Deposits:
Noninterest-bearing
Interest-bearing
Total deposits
Short-term borrowings
Long-term debt
Accrued interest payable
Lease liabilities
Deferred tax liability, net
Other liabilities
Total liabilities
Stockholders' equity:
Common stock
Capital surplus
Retained earnings
Accumulated other comprehensive income (loss), net
Total stockholders' equity
Total liabilities and stockholders' equity
Preferred shares authorized (par value of $20.00 per share)
Preferred shares issued and outstanding
Common shares authorized (par value of $3.33 per share)
Common shares issued
Common shares outstanding
See accompanying notes to consolidated financial statements.
December 31,
2021
2020
$
401,201 $
3,830,177
458
526,306
1,333,352
434
6,986,698
1,565,751
93,069
21,134,282
(342,065 )
20,792,217
350,309
102,239
38,793
7,533
96,938
855,453
70,226
664,535
227,870
447,738
36,531,205 $
14,392,808 $
16,073,089
30,465,897
1,665,061
244,220
3,103
122,079
19,434
341,059
32,860,853
309,513
1,755,701
1,659,073
(53,935 )
3,670,352
36,531,205 $
50,000
—
350,000
92,947
86,749
5,999,327
1,357,170
136,063
21,789,931
(450,177 )
21,339,754
380,516
110,691
41,443
11,648
104,268
855,453
86,892
615,780
171,175
568,330
33,638,602
12,199,750
15,498,127
27,697,877
1,667,513
378,322
4,315
130,627
49,406
271,517
30,199,577
309,513
1,757,937
1,291,506
80,069
3,439,025
33,638,602
50,000
—
350,000
92,947
86,728
$
$
$
79
Hancock Whitney Corporation and Subsidiaries
Consolidated Statements of Income
2021
Years Ended December 31,
2020
2019
$
$
825,862
2,543
131,382
18,969
3,502
982,258
907,290
2,622
$
127,629
19,454
986
1,057,981
971,735
1,876
127,459
20,757
3,955
1,125,782
(in thousands, except per share data)
Interest income:
Loans, including fees
Loans held for sale
Securities-taxable
Securities-tax exempt
Short-term investments
Total interest income
Interest expense:
Deposits
Short-term borrowings
Long-term debt
Total interest expense
Net interest income
Provision for credit losses
Net interest income after provision for credit losses
Noninterest income:
Service charges on deposit accounts
Trust fees
Bank card and ATM fees
Investment and annuity fees and insurance commissions
Secondary mortgage market operations
Securities transactions, net
Other income
Total noninterest income
Noninterest expense:
Compensation expense
Employee benefits
Personnel expense
Net occupancy expense
Equipment expense
Data processing expense
Professional services expense
Amortization of intangibles
Deposit insurance and regulatory fees
Other real estate and foreclosed assets expense (income)
Other expense
Total noninterest expense
Income (loss) before income taxes
Income tax expense (benefit)
Net income (loss)
Earnings (loss) per common share - basic
Earnings (loss) per common share - diluted
Dividends paid per share
Weighted average shares outstanding - basic
Weighted average shares outstanding - diluted
See accompanying notes to consolidated financial statements.
$
$
$
$
80
26,246
6,015
16,762
49,023
933,235
(77,494 )
1,010,729
81,032
62,898
79,074
29,502
36,694
333
74,801
364,334
378,589
103,786
482,375
49,786
18,167
96,755
48,678
16,665
13,582
(210 )
81,209
807,007
568,056
104,841
463,215 $
5.23 $
5.22 $
1.08 $
86,823
87,027
88,261
10,042
17,155
115,458
942,523
602,904
339,619
76,659
58,191
68,131
24,330
40,244
488
56,385
324,428
379,727
84,332
464,059
52,589
19,212
87,823
49,529
19,916
18,804
9,555
67,305
788,792
(124,745 )
(79,571 )
(45,174 ) $
(0.54 ) $
(0.54 ) $
1.08 $
86,533
86,533
187,988
30,766
11,811
230,565
895,217
47,708
847,509
86,364
61,609
66,976
26,574
19,853
—
54,531
315,907
362,083
77,796
439,879
50,936
18,393
82,981
45,007
20,844
19,512
671
92,454
770,677
392,739
65,359
327,380
3.72
3.72
1.08
86,488
86,599
Hancock Whitney Corporation and Subsidiaries
Consolidated Statements of Comprehensive Income
(in thousands)
Net income (loss)
Other comprehensive income (loss) before income taxes:
Net change in unrealized gain/loss on available for sale securities and cash
flow hedges
Reclassification of net gains (losses) realized and included in earnings
Valuation adjustments for employee benefit plans
Voluntary Early Retirement Incentive Program (VERIP) and curtailment
Amortization of unrealized net loss on securities transferred to held to
maturity
$
Other comprehensive income (loss) before income taxes
Income tax expense (benefit)
Other comprehensive income (loss) net of income taxes
Comprehensive income
$
See accompanying notes to consolidated financial statements.
2021
Years Ended December 31,
2020
2019
463,215 $
(45,174 ) $
327,380
(211,580 )
(15,485 )
(6,735 )
59,606
(158 )
(174,352 )
(40,348 )
(134,004 )
329,211 $
224,337
(10,983 )
(37,451 )
—
(470 )
175,433
40,640
134,793
89,619 $
143,922
13,429
2,398
—
3,153
162,902
36,917
125,985
453,365
81
Hancock Whitney Corporation and Subsidiaries
Consolidated Statements of Changes in Stockholders’ Equity
Accumulated
(in thousands, except parenthetical share data)
Balance, December 31, 2018
Net income
Other comprehensive income
Comprehensive income
Cash dividends declared ($1.08 per common share)
Common stock issued as consideration in business
combination
Common stock activity, long-term incentive plans
Issuance of stock from dividend reinvestment and
stock purchase plans
Initial delivery of shares under accelerated share
repurchase agreement (3,611,870 shares)
Forward contract for accelerated share repurchase
agreement
Balance, December 31, 2019
Net loss
Other comprehensive income
Comprehensive income
Cash dividends declared ($1.08 per common share)
Cumulative effect of change in accounting principle
Common stock activity, long-term incentive plans
Issuance of stock from dividend reinvestment
and stock purchase plans
Net settlement of accelerated share repurchase
agreement (1,001,472 shares)
Repurchase of common stock (315,851 shares)
Balance, December 31, 2020
Net income
Other comprehensive loss
Comprehensive income
Cash dividends declared ($1.08 per common share)
Common stock activity, long-term incentive plans
Issuance of stock from dividend reinvestment and
stock purchase plans
Repurchase of common stock (449,876 shares)
Balance, December 31, 2021
Other
Comprehensive
Income (Loss),
Retained
Earnings
Common Stock
Capital
Shares Amount Surplus
87,903 $ 292,716 $ 1,725,741 $ 1,243,592 $
— 327,380
—
—
—
—
— 327,380
—
(94,871 )
—
—
—
—
—
—
Net
Total
(180,709 ) $ 3,081,340
— 327,380
125,985 125,985
125,985 453,365
(94,871 )
—
5,044 16,797 177,052
15,257
—
—
—
131
— 193,849
15,388
—
—
—
3,614
—
—
3,614
—
— (138,768 )
—
— (138,768 )
—
(46,232 )
—
—
92,947 $ 309,513 $ 1,736,664 $ 1,476,232 $
(45,174 )
—
—
—
(45,174 )
—
(95,605 )
—
(44,087 )
—
140
—
—
—
—
—
—
17,715
—
—
—
—
—
—
—
—
(46,232 )
(54,724 ) $ 3,467,685
(45,174 )
134,793 134,793
89,619
134,793
(95,605 )
—
(44,087 )
—
17,855
—
—
—
4,164
—
—
4,164
—
—
12,110
(12,716 )
—
—
—
—
92,947 $ 309,513 $ 1,757,937 $ 1,291,506 $
— 463,215
—
—
—
—
— 463,215
—
(95,927 )
—
—
279
15,688
—
—
—
—
—
—
—
—
12,110
(12,716 )
80,069 $ 3,439,025
— 463,215
(134,004 ) (134,004 )
(134,004 ) 329,211
(95,927 )
15,967
—
—
—
—
—
—
92,947 $ 309,513 $ 1,755,701 $ 1,659,073 $
3,872
(21,796 )
—
—
—
—
3,872
(21,796 )
(53,935 ) $ 3,670,352
See accompanying notes to consolidated financial statements.
82
Hancock Whitney Corporation and Subsidiaries
Consolidated Statements of Cash Flows
(in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization
Provision for credit losses
(Gain) loss on other real estate and foreclosed assets
Deferred tax expense (benefit)
Increase in cash surrender value of life insurance contracts
Impairment of or loss on disposal of assets
Loss on extinguishment of debt
Gain on sale of securities available for sale
Gain on the sale of loans and leases
Net (increase) decrease in loans held for sale
Net amortization of securities premium/discount
Amortization of intangible assets
Stock-based compensation expense
Net change in liability from variation margin collateral
Contribution to pension plan
Increase in interest payable and other liabilities
Increase in other assets
Other, net
Net cash provided by operating activities
2021
Years Ended December 31,
2020
2019
$
463,215 $
(45,174 ) $
327,380
29,113
(77,494 )
(2,280 )
10,376
(23,505 )
14,354
4,165
(333 )
(1,208 )
41,157
50,311
16,665
22,442
62,670
—
20,869
(21,050 )
(23,777 )
585,690
30,128
602,904
9,581
(20,716 )
(19,244 )
3,159
—
(488 )
(1,203 )
(77,544 )
43,226
19,916
21,107
(80,290 )
—
4,687
(111,094 )
(23,764 )
355,191
30,902
47,708
626
47,100
(16,158 )
1,109
—
—
(619 )
(27,773 )
32,166
20,844
20,902
(21,326 )
(100,000 )
19,573
(22,556 )
(7,929 )
351,949
83
Hancock Whitney Corporation and Subsidiaries
Consolidated Statements of Cash Flows—(Continued)
$
198,681 $
2021
Years Ended December 31,
2020
2019
1,073,133
(2,527,272 )
116,536
(338,089 )
52,535
(2,496,849 )
22,485
670,958
(75,000 )
44,045
(23,541 )
15,527
—
—
42,267
(3,224,584 )
2,768,020
(2,452 )
(153,444 )
22,388
(95,927 )
(7,364 )
—
(21,796 )
492
3,872
2,513,789
(125,105 )
526,306
401,201 $
211,919 $
1,001,720
(2,371,954 )
218,205
(20,884 )
(12,868 )
(1,223,557 )
328,958
(1,296,136 )
—
—
(37,869 )
17,923
—
—
7,071
(3,177,472 )
3,894,302
(1,047,359 )
(308 )
166,425
(95,605 )
(4,530 )
12,110
(12,716 )
—
4,164
2,916,483
94,202
432,104
526,306 $
268,413
294,681
(1,010,805 )
417,520
(183,626 )
(35,151 )
281,251
112,048
(555,008 )
(32,788 )
—
(42,716 )
30,658
28,059
(1,112 )
(30,446 )
(459,022 )
(627,557 )
1,058,748
(14,222 )
20,846
(94,871 )
(6,295 )
(185,000 )
—
542
3,614
155,805
48,732
383,372
432,104
122,594 $
49,995
17,465 $
121,343
28,288
232,456
$
$
$
2,806 $
6,420 $
21,285
(in thousands)
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of securities available for sale
Proceeds from maturities of securities available for sale
Purchases of securities available for sale
Proceeds from maturities of securities held to maturity
Purchases of securities held to maturity
Net redemptions (purchases) of Federal Home Loan Bank stock
Net (increase) decrease in short-term investments
Proceeds from sale of loans and leases
Net (increase) decrease in loans
Purchases of life insurance contracts
Proceeds from surrender of life insurance contracts
Purchases of property and equipment
Proceeds from sales of other real estate
Cash acquired in stock-based business combination
Consideration paid in business combination
Other, net
Net cash used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in deposits
Net increase (decrease) in short-term borrowings
Repayments of long-term debt
Issuance of long-term debt, net of issuance costs
Dividends paid
Payroll tax remitted on net share settlement of equity awards
Cash (received) paid under accelerated share repurchase agreement
Other repurchases of common stock
Proceeds from exercise of stock options
Proceeds from dividend reinvestment and stock purchase plan
Net cash provided by financing activities
NET INCREASE (DECREASE) IN CASH AND DUE FROM BANKS
CASH AND DUE FROM BANKS, BEGINNING
CASH AND DUE FROM BANKS, ENDING
SUPPLEMENTAL INFORMATION
Income taxes paid
Interest paid
SUPPLEMENTAL INFORMATION FOR NON-CASH
INVESTING AND FINANCING ACTIVITIES
Assets acquired in settlement of loans
See accompanying notes to consolidated financial statements.
84
Note 1. Summary of Significant Accounting Policies and Recent Accounting Pronouncements
DESCRIPTION OF BUSINESS
Hancock Whitney Corporation (the “Company”) is a financial services company headquartered in Gulfport, Mississippi that is both a
financial holding company and a bank holding company registered under the Bank Holding Company Act of 1956, as amended. The
Company provides a comprehensive network of full-service financial choices to customers primarily in the Gulf South region through
its bank subsidiary, Hancock Whitney Bank (the “Bank”), a Mississippi state bank. The Bank offers a broad range of traditional and
online banking services to commercial, small business and retail customers, providing a variety of transaction and savings deposit
products, treasury management services, secured and unsecured loan products (including revolving credit facilities), and letters of
credit and similar financial guarantees. The Bank also provides trust and investment management services to retirement plans,
corporations and individuals. The Company also offers investment brokerage services through its broker-dealer subsidiary, Hancock
Whitney Investment Services, Inc., a nonbank subsidiary of the holding company. The Company primarily operates across the Gulf
South region, including southern and central Mississippi; southern and central Alabama; southern, central and northwest Louisiana;
the northern, central, and panhandle regions of Florida; and the certain areas of east and northeast Texas including Houston,
Beaumont, Dallas and San Antonio, among others. In addition, the Company operates a loan production office in Nashville,
Tennessee.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the U.S.
(U.S. GAAP) and those generally practiced within the banking industry. Following is a summary of the more significant accounting
policies.
On January 1, 2020, the Company adopted Accounting Standards Codification (“ASC”) Topic 326, “Financial Instruments – Credit
Losses,” commonly referred to as Current Expected Credit Losses or CECL, on a modified retrospective basis. The provisions of this
guidance required a material change to the manner in which the Company estimates and reports losses on financial instruments,
including loans and unfunded lending commitments, select investment securities, and other assets carried at amortized cost. For
reporting periods beginning on or subsequent to January 1, 2020, accounting for credit losses and related disclosures are presented
under ASC 326, while prior period results continue to be reported in accordance with previously effective guidance under ASC 310 -
Receivables.
Basis of Presentation
The consolidated financial statements include the accounts of the Company and all other entities in which the Company has a
controlling interest. Variable interest entities for which the Company has been deemed the primary beneficiary are also consolidated.
Significant intercompany transactions and balances have been eliminated in consolidation. Certain prior period amounts have been
reclassified to conform to the current period presentation.
Use of Estimates
The accounting principles the Company follows and the methods for applying these principles conform to U.S. GAAP and general
practices followed by the banking industry. These accounting principles and practices 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.
Fair Value Accounting
U.S. GAAP requires the use of fair values in determining the carrying values of certain assets and liabilities in the financial
statements, as well as for specific disclosures about certain assets and liabilities.
Accounting guidance 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 (level 1) and the lowest priority to unobservable inputs such as a reporting
entity’s own data or information or assumptions developed from this 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.
85
Business Combinations
Business combinations are accounted for under the purchase method of accounting. Purchased assets, including identifiable
intangibles, and assumed liabilities are recorded at their respective acquisition date fair values. If the fair value of net assets purchased
exceeds the consideration given, a bargain purchase gain is recognized. If the consideration given exceeds the fair value of the net
assets received or if the fair value of the net liabilities assumed exceeds the consideration received, goodwill is recognized. Fair values
are subject to refinement for up to one year after the closing date of an acquisition as information relative to closing date fair values
becomes available. Acquisition costs are expensed as incurred.
All identifiable intangible assets that are acquired in a business combination are recognized at the acquisition date fair value.
Identifiable intangible assets are recognized separately if they arise from contractual or other legal rights or if they are separable (i.e.,
capable of being sold, transferred, licensed, rented, or exchanged separately from the entity).
Cash and Due from Banks
The Company considers only cash on hand, cash items in process of collection and balances due from financial institutions as cash and
cash equivalents.
Securities
Securities are classified as trading, held to maturity or available for sale. Management determines the appropriate classification of debt
and equity securities at the time of purchase and reevaluates this classification periodically as conditions change that could require
reclassification.
Available for sale securities are stated at fair value. Unrealized holding gains and unrealized holding losses, are reported net of tax in
other comprehensive income and in accumulated other comprehensive income (“AOCI”) until realized.
Securities that the Company both positively intends and has the ability to hold to maturity are classified as securities held to maturity
and are carried at amortized cost. The intent and ability to hold are not considered satisfied when a security is available to be sold in
response to changes in interest rates, prepayment rates, liquidity needs or other reasons as part of an overall asset/liability management
strategy.
Premiums and discounts on securities, both those held to maturity and those available for sale, are amortized and accreted to income
as an adjustment to the securities’ yields using the effective interest method. Realized gains and losses on the sale of securities are
reported net as a component of noninterest income. The cost of securities sold is specifically identified for use in calculating realized
gains and losses.
Credit Losses on Securities
As noted, the Company adopted the provisions of ASC 326, or CECL, on January 1, 2020. The provisions of ASC 326 require an
assessment of held to maturity debt securities for expected credit losses and the available for sale debt securities for credit-related
impairment, resulting in an allowance for credit losses, if applicable. The Company applies the practical expedient to exclude the
accrued interest receivable balance from amortized cost basis of financing receivables. The allowance for credit losses on held to
maturity debt securities is estimated at the individual security level when there is a more than inconsequential risk of default. The
assessment uses probability of default and loss given default models based on public ratings, where available, or mapped internally
developed risk grades to public ratings and forecasted cash flows using the same economic forecasts and probability weighting as used
for the Company’s evaluation of the loan portfolio. Qualitative adjustments to the output of the quantitative calculation are made when
management deems it necessary to reflect differences in current and forecasted conditions as compared to those during the historical
loss period used in model development. The Company evaluates credit impairment on available for sale debt securities at an individual
security level. This evaluation is done for securities whose fair value is below amortized cost with a more than inconsequential risk of
default and where the Company has assessed the decline in fair value is significant enough to suggest a credit event occurred. Credit
events are generally assessed based on adverse conditions specifically related to the security, an industry, or geographic area, changes
in the financial condition of the issuer of the security, or in the case of an asset-backed debt security, changes in the financial condition
of the underlying loan obligors. The allowance for credit losses for such securities is measured using a discounted cash flow
methodology, through which management compares the present value of expected cash flows with the amortized cost basis of the
security. The allowance for credit loss is limited to the amount by which the fair value is less than the amortized cost basis.
The Company reassesses the potential for credit losses at each reporting period and records subsequent changes in the allowance for
credit losses on securities with a corresponding adjustment recorded in the provision for credit loss expense. If the Company intends to
sell the debt security, or more likely than not will be required to sell the security before recovery of its amortized cost basis, the
security is charged down to fair value against the allowance for credit losses, with any incremental impairment reported in earnings.
Prior to the adoption of CECL on January 1, 2020, declines in value judged to be other than temporary were reported net as a
component of noninterest income. There were no such losses 2019.
86
Loans
Loans Held for Sale
Residential mortgage loans originated for sale are classified as loans held for sale in the consolidated balance sheets. Beginning in the
second quarter of 2021, the Company generally elects the fair value option on funded residential mortgage loans originated for sale
that are associated with forward sales contracts. For mortgage loans for which the Company has elected the fair value option, gains
and losses are included in noninterest income within secondary mortgage market operations.
Held for sale loans also includes residential construction loans that are anticipated to be sold upon completion of the construction
term. At times, management may originate other types of loans with the intent to sell or decide to sell loans that were not originated
for that purpose. Such loans are reclassified as held for sale at the lower of cost or market when that decision is made.
Loans Held for Investment
Loans that the Company has the intent and ability to hold for the foreseeable future or until maturity or payoff are considered loans
held for investment and reported as “Loans” in the Consolidated Balance Sheets and in the related footnote disclosures. Loans held
for investment include loans originated for investment and loans acquired in purchase transactions.
Loans are reported at the principal balance outstanding net of unearned income. Interest on loans and accretion of unearned income,
including net deferred loan fees and costs, are computed in a manner that approximates a level yield on recorded principal. Interest on
loans is recognized in income as earned.
The accrual of interest is discontinued (“nonaccrual status”) when, in management’s opinion, it is probable that the borrower will be
unable to meet payment obligations as they become due, as well as when required by regulatory provisions. When accrual of interest
is discontinued on a loan, all unpaid accrued interest is reversed and payments subsequently received are applied first to recover
principal. Interest income is recognized for payments received after contractual principal has been satisfied. Loans are returned to
accrual status when all the principal and interest contractually due are brought current and future payment performance is reasonably
assured.
Acquired Loans
Subsequent to the adoption of CECL, acquired loans are segregated between those purchased with credit deterioration (“PCD”) and
those that are not (“non-PCD”). Loans considered PCD include those individual loans (or groups of loans with similar risk
characteristics) that as of the date of acquisition are assessed as having experienced a more-than-insignificant deterioration in credit
quality since origination. The assessment of what is more-than-insignificant credit deterioration since origination considers
information including, but not limited to, financial assets that are delinquent, on nonaccrual and/or otherwise adversely risk rated as of
the acquisition date, those that have been downgraded since origination, and those for which, after origination, credit spreads have
widened beyond the threshold specified in policy. The Company bifurcates the fair value discount between the credit and noncredit
components and records an allowance for credit losses for PCD loans by adding the credit portion of the fair value discount to the
initial amortized cost basis and increasing the allowance for credit losses at the date of acquisition. Any noncredit discount or
premium resulting from acquiring loans with credit deterioration is allocated to each individual asset. All non-PCD loans acquired are
recorded at the estimated fair value of the loan at acquisition, with the estimated allowance for credit loss recorded as a provision for
credit losses through earnings in the period in which the acquisition has occurred. The noncredit discount or premium for PCD loans
and full discount for non-PCD loans will be accreted to interest income using the interest method based on the effective interest rate at
the acquisition date.
Under the transition provisions for application of CECL, the Company has classified all purchased credit impaired loans (“PCI”)
previously accounted for under Financial Accounting Standard Subtopic 310-30 to be classified as PCD, without reassessing whether
the financial assets meet the criteria of PCD as of the date of adoption. The application of these provisions resulted in an adjustment to
the amortized cost basis of the financial asset to reflect the addition of the allowance for credit losses at the date of adoption. The
Company elected not to maintain pools of loans accounted for under Subtopic 310-30 at adoption. The Company was also not required
to reassess whether modifications to individual acquired financial assets accounted for in pools were troubled debt restructurings as of
the date of adoption. The noncredit discount, after the adjustment for the allowance for credit losses, is accreted to interest income
using the interest method based on the effective interest rate determined at the adoption date.
87
Prior to the adoption of CECL and under the provisions of ASC 310, acquired loans were segregated between those considered to be
performing (“purchased credit performing”) and those with evidence of credit deterioration or PCI. The acquired loans were generally
segregated into loan pools and expected cash flows, both principal and interest, were estimated based by pool on key assumptions
covering such factors as prepayments, default rates, and severity of loss given a default. The fair value estimate for each pool was
based on the estimate of expected cash flows from the pool discounted at prevailing market rates. The difference at the acquisition
date between the fair value and the contractual amounts due for each purchased credit performing loan pool (the “fair value discount”)
was accreted into income over the estimated life of the pool. Purchased credit performing loans were placed on nonaccrual status and
reported as nonperforming or past due using the same criteria applied to the originated portfolio. The excess of estimated cash flows
expected to be collected from each PCI loan pool over the pool’s carrying value is referred to as the accretable yield and was
recognized in interest income using an effective yield method over the expected life of the pool. Each pool of PCI loans were
accounted for as a single asset with a single composite interest rate and an aggregate expectation of cash flows. PCI loans in pools
with an accretable yield and expected cash flows that were reasonably estimable were considered to be accruing and performing even
though collection of contractual payments on loans within the pool may be in doubt. PCI loans accounted for in pools were generally
not subject to individual evaluation for impairment and were not reported with impaired loans or troubled debt restructurings even if
they would otherwise qualify for such treatment.
Troubled Debt Restructurings
Troubled debt restructurings (TDRs) occur when a borrower is experiencing, or is expected to experience, financial difficulties in the
near-term and a modification in loan terms is granted that would otherwise not have been considered.
Troubled debt restructurings can result in loans remaining on nonaccrual, moving to nonaccrual, or continuing to accrue, depending on
the individual facts and circumstances of the borrower. When establishing credit reserves on a loan modified in a TDR, the loan’s
value is determined by either the present value of expected cash flows calculated using the loan’s effective interest rate before the
restructuring, or the loan’s observable market price or the fair value of the collateral if the loan is collateral dependent. If the value as
determined is less than the recorded investment in the loan, the difference is charged off through the allowance for loan and lease
losses.
The Consolidated Appropriations Act, 2021 extended to January 1, 2022 the relief provided by Section 4013 of the Coronavirus Aid,
Relief, and Economic Security (CARES) Act from the accounting and disclosure requirements of ASC 310-40 for loan modifications
that are made by financial institutions in response to the COVID-19 pandemic if the borrower was not more than 30 days past due as
of December 31, 2019, and the modifications are related to arrangements that defer or delay the payment of principal or interest, or
change the interest rate on the loan.
Allowance for Credit Losses
The Company adopted the provisions of ASC Topic 326, or CECL, on January 1, 2020. For reporting periods prior to January 1, 2020,
credit loss accounting was in accordance with guidance under ASC Topic 310.
The allowance for credit losses (ACL) is comprised of the allowance for loan and lease losses (ALLL), a valuation account available
to absorb losses on loans and leases held for investment, and the reserve for unfunded lending commitments, a liability established to
absorb credit losses for the expected life of the contractual term of on and off-balance sheet exposures as of the date of the
determination. Quarterly, management estimates losses in the portfolio and unfunded exposures based on a number of factors,
including the Company’s past loan loss experience, known and potential risks in the portfolio, adverse situations that may affect the
borrowers’ ability to repay, the estimated value of any underlying collateral, and current and forecasted economic conditions.
The analysis and methodology for estimating the ACL includes two primary elements: a collective approach for pools of loans that
have similar risk characteristics using a loss rate analysis, and a specific reserve analysis for credits individually evaluated for credit
loss. For the collective approach, the Company segments loans into commercial non-real estate, commercial real estate – owner
occupied, commercial real estate – income producing, construction and land development, residential mortgage and consumer, with
further segmentation by region and sub-portfolio, as deemed appropriate. Both quantitative and qualitative factors are applied at the
portfolio segment levels. The Company applies the practical expedient that permits the exclusion of the accrued interest receivable
balance from amortized cost basis of financing receivables for all classes of loans as our nonaccrual policy results in the timely write-
off of interest accrued but uncollected.
For the collectively evaluated portfolios, the Company utilizes internally developed credit models and third party economic forecasts
for the calculation of expected credit loss over the reasonable and supportable forecast period for the majority of the portfolio and
other methods, generally historical loss based, for select portfolios. The Company calculates a collective allowance for a two-year
reasonable and supportable forecast period utilizing probability weighted multiple macroeconomic scenarios, and then reverts on a
linear basis over four quarters to an average historical loss rate for the remaining term. The credit models consist primarily of
multivariate regression and autoregressive models that correlate our historical net charge-off rates to select macroeconomic variables
at a collective level. Forward-looking macroeconomic forecasts are applied as inputs to the regression equations to estimate quarterly
collective net charge-off rates over the reasonable and supportable period. The net charge-off rates from the credit models for the
88
reasonable and supportable period, the linear reversion rates, and the average loss rates for the post reasonable and supportable periods
are applied to forecasted balance runoff for the estimated remaining term. The balance runoff incorporates prepayment assumptions
developed from historical experience that are applied to the multiple macroeconomic forecasts. Forecasted net charge-off rates are also
applied to forecasted draws and subsequent runoff of unfunded commitments in the calculation of the reserve for unfunded lending
commitments. Qualitative adjustments to the output of quantitative calculations are made when management deems it necessary to
reflect differences in current and forecasted conditions as compared to those during the historical loss period used in model
development. Conditions to be considered include, but are not limited to, problem loan trends, current business and economic
conditions, credit concentrations, lending policies and procedures, lending staff, collateral values, loan profiles and volumes, loan
review quality, changes in competition and regulations, and other adjustments for model limitations or other variables not specifically
captured.
The Company establishes specific reserves using an individually evaluated approach for nonaccrual loans, loans modified in troubled
debt restructures, loans for which a troubled debt restructure is reasonably expected, and other financial instruments that are deemed to
not share risk characteristics with other collectively evaluated financial assets. For loans individually evaluated, a specific allowance is
recognized for any shortfall between the loan’s value and its recorded investment. The loan’s value is measured by either the loan’s
observable market price, the fair value of the collateral of the loan (less liquidation costs) if it is collateral dependent, or by the present
value of expected future cash flows discounted at the loan’s effective interest rate. The Company applies the practical expedient and
defines collateral dependent loans as those where the borrower is experiencing financial difficulty and on which repayment is expected
to be provided substantially through the operation or sale of the collateral. Loans individually analyzed are not incorporated into the
pool analysis to avoid double counting. The Company limits the individually evaluated specific reserve analysis to include commercial
and residential mortgage loans with relationship balances of $1 million or greater and all loans classified as troubled debt
restructurings.
Prior to the adoption of CECL and under the provisions of ASC 310, the ACL was established and maintained at an amount sufficient
to cover estimated credit losses inherent in the loan and lease portfolios and off balance sheet exposures of the Company as of the date
of the determination. The previous analysis and methodology for estimating the ACL included two primary elements: a historical loss
rate analysis used for credits collectively evaluated for impairment; and a specific reserve analysis is used for credits individually
evaluated for impairment. Segmentation for the collective evaluation was similar to those used under CECL (described above), and
further subdivided by select credit quality indicators. The incurred loss methodology used loss emergence periods developed from
historical experience of 24 months for commercial loans and twelve to eighteen months for retail and residential mortgage loans.
Historical loss rates were calculated using a weighted average of loss rates over the loss emergence periods in the historical look back
period. As circumstances dictated, management made qualitative adjustments to the overall loss rate to reflect differences in current
conditions as compared to those during the historical loss period. Both quantitative and qualitative factors were applied at the detailed
portfolio segments. The specific reserve analysis for credits individual evaluated for impairment was largely unchanged.
It is the policy of the Company to promptly charge off all commercial and residential mortgage loans, or portions of loans, when
available information reasonably confirms that they are wholly or partially uncollectible. Prior to recording a charge, the loan’s value
is established based on an assessment of the value of the collateral securing the loan, the borrower’s and the guarantor’s ability and
willingness to pay and the status of the account in bankruptcy court, if applicable. Consumer loans are generally charged down when
the loan is 120 days past due for most secured and unsecured loans and 150 days past due for consumer credit card loans, unless the
loan is clearly both well secured and in the process of collection. Loans are charged down to the fair value of the collateral, if any, less
estimated selling costs. Loans are charged off against the allowance for loan losses, with subsequent recoveries added back to the
allowance.
Property and Equipment
Property and equipment are recorded at cost, less accumulated depreciation and amortization. Depreciation is charged to expense
using the straight-line method over the estimated useful lives of the assets, which are up to 30 years for buildings and three to ten
years for most furniture and equipment. Amortization expense for software is generally charged over three years, or seven years for
core systems. Leasehold improvements are amortized over the terms of the respective leases or the estimated useful lives of the
improvements, whichever is shorter. The Company evaluates whether events and circumstances have occurred that indicate that such
long-lived assets have been impaired. Measurement of any impairment of such long-lived assets is based on their fair values.
Property and equipment used in operations is considered held for sale when certain criteria are met, including when management has
committed to a plan to sell the asset, the asset is available for sale in its immediate condition, and the sale is probable within one year
of the reporting date. Assets held for sale are reported at the lower of cost or fair value less costs to sell. Gains and losses related to
retirement or disposition of property and equipment are recorded in other income under noninterest income on the consolidated
statements of income as realized.
89
Operating Leases
The Company recognizes a liability representing the present value of future lease payments (the lease liability) and a right-of-use asset
representing its right to use the underlying asset over the lease term in the statement of financial position.
The Company determines if an arrangement is a lease at inception of the contract and assesses the appropriate classification as finance
or operating. Operating leases with terms greater than one year are included in right-of-use lease assets and lease obligations on the
Company’s Consolidated Balance Sheets. The lease term includes payments to be made in optional or renewal periods only if the
lessee is reasonably certain to exercise an option to extend the lease or not to exercise an option to terminate the lease. Operating lease
right-of-use assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease
term using the interest rate implicit in the contract, when available, or the Company’s incremental collateralized borrowing rate with
similar terms. Agreements with both lease and non-lease components are accounted for separately, with only the lease component
capitalized. The right-of-use asset is the amount of the lease liability adjusted for prepaid or accrued lease payments, remaining
balance of any lease incentives received, unamortized initial direct costs, and impairment. Lease expense is recorded on a straight-line
basis over the lease term through amortization of the right-of-use asset plus implicit interest accreted on the operating lease liability
obligation, and is reflected in net occupancy expense in the Consolidated Statements of Income.
The Company evaluates whether events and circumstances have occurred that indicate right-of-use assets have been impaired.
Measurement of any impairment of such assets is based on their fair values. Once a right-of-use asset for an operating lease is
impaired, the carrying amount of the right-of-use asset is reduced through expense and the remaining balance is subsequently
amortized on a straight-line basis.
Certain of the Company’s leases contain variable components, such as annual changes to rent based on the consumer price index.
Operating lease liabilities are not re-measured as a result of changes to variable components unless the lease must be re-measured for
some other reason such as a renewal that was not reasonably certain of being exercised. Changes to the variable components are
treated as variable lease payments and recognized in the period in which the obligation for those payments was incurred.
The Company elected to use the standard’s “package of practical expedients,” which allows the use of previous conclusions about
lease identification, lease classification and the accounting treatment for initial direct costs. The Company also elected the short-term
lease recognition exemption for all leases with lease terms of one year or less; as such, the Company will not recognize right-of-use
assets or lease liabilities on the consolidated balance sheet for such leases.
Other Real Estate and Foreclosed Assets
Other real estate and foreclosed assets includes real property and other assets that have been acquired in satisfaction of loans and
leases, and real property no longer used in the Bank’s business. These assets are recorded at the estimated fair value less the estimated
cost of disposition and carried at the lower of either cost or market. Fair value is based on independent appraisals and other relevant
factors. Any initial reduction in the carrying amount of a loan to the fair value of the collateral received less selling costs is charged to
the allowance for loan losses. Each asset is revalued on an annual basis, or more often if market conditions necessitate. Subsequent
losses on the periodic revaluation of these assets and gains or losses recognized on disposition are charged to current earnings, as are
revenues from and costs of operating and maintaining real property; with the resulting net (income) expense reflected in noninterest
expense in the Consolidated Statements of Income. Improvements made to real property are capitalized if the expenditures are
expected to be recovered upon the sale of the property.
Goodwill and Other Intangible Assets
Goodwill represents the excess of consideration paid over the fair value of net assets acquired or the excess of the fair value liabilities
assumed over consideration received in a business combination. Goodwill is not amortized but assessed for impairment on an annual
basis, or more often if events or circumstances indicate there may be impairment. The impairment test compares the estimated fair
value of a reporting unit with its net book value. The Company has assigned all goodwill to one reporting unit that represents overall
banking operations. The fair value of the reporting unit is based on valuation techniques that market participants would use in an
acquisition of the whole unit, and may include analysis such as estimated discounted cash flows, the quoted market price of the
Company’s stock adjusted for a control premium, and observable average price-to-earnings and price-to-book multiples of
competitors. If the unit’s fair value is less than its carrying value, an estimate of the implied fair value of the goodwill is compared to
the goodwill’s carrying value, and any impairment recognized.
Other identifiable intangible assets with finite lives, such as core deposit intangibles, customer lists and trade name, are initially
recorded at fair value and are generally amortized over the periods benefited. These assets are evaluated for impairment in a similar
manner to long-lived assets.
90
Life Insurance Contracts
Bank-owned life insurance contracts (BOLI) are comprised of long-term life insurance contracts on the lives of certain current and
past employees where the insurance policy benefits and ownership are retained by the employer. Its cash surrender value is an asset
that the Company uses to partially offset the future cost of employee benefits. The cash value accumulation on BOLI is permanently
tax deferred if the policy is held to the insured person’s death and certain other conditions are met.
Federal Home Loan Bank Stock
As a member of the Federal Home Loan Bank (FHLB), the Company is required to purchase and hold shares of capital stock in the
FHLB in an amount equal to a membership investment plus an activity-based investment determined according to the level of
outstanding FHLB advances. The shares are recorded at amortized cost, which approximates fair value, and is reflected in Other
Assets in the consolidated balance sheets.
Derivative Instruments and Hedging Activities
The Company records all derivatives on the balance sheet at fair value as components of other assets and other liabilities. The
accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether the Company has elected
to designate a derivative in a hedging relationship and apply hedge accounting and whether the hedging relationship has satisfied the
criteria necessary to apply hedge accounting. Derivatives designated and qualifying as a hedge of the exposure to changes in the fair
value of an asset, liability, or firm commitment attributable to a particular risk, such as interest rate risk, are considered fair value
hedges. Derivatives designated and qualifying as a hedge of the exposure to variability in expected future cash flows, or other types of
forecasted transactions, are considered cash flow hedges. Hedge accounting generally provides for the matching of the timing of gain
or loss recognition on the hedging instrument with the recognition of the changes in the fair value of the hedged asset or liability that
are attributable to the hedged risk in a fair value hedge or the earnings effect of the hedged forecasted transactions in a cash flow
hedge.
For derivatives designated as hedging the exposure to changes in the fair value of an asset or liability (fair value hedge), the gain or
loss is recognized in earnings in the period of the fair value change together with the offsetting loss or gain on the hedged item
attributable to the risk being hedged. Derivatives designated as hedging exposure to variable cash flows of a forecasted transaction
(cash flow hedge), are reported as a component of other comprehensive income and subsequently reclassified into earnings when the
forecasted transaction affects earnings or in certain circumstances, when the hedge is terminated, with the full impact of hedge gains
and losses recognized in the period in which the hedged transaction impacts the entity’s earnings. For derivatives that are not
designated as hedging instruments, changes in the fair value of the derivatives are recognized in earnings immediately. Note 11 -
Derivatives describes the derivative instruments currently used by the Company and discloses how these derivatives impact the
Company’s financial condition and results of operations.
Stockholders’ Equity
Common stock reflects shares issued at par value. Repurchase of the Company’s common stock (treasury stock) is recorded at cost as
a reduction of stockholders’ equity within capital surplus in the accompanying Consolidated Balance Sheets and the Statements of
Changes in Stockholders’ Equity. When treasury shares are subsequently reissued, treasury stock is reduced by the cost of such stock
using the first-in-first-out method, with the difference recorded in capital surplus or retained earnings, as applicable.
Revenue Recognition
Interest Income
Interest income is recognized on an accrual basis driven by written contracts, such as loan agreements or securities contracts. Loan
origination fees and costs are recognized over the life of the loan as an adjustment to yield.
Service Charges on Deposit Accounts
Service charges on deposit accounts include transaction based fees for non-sufficient funds, account analysis fees, and other service
charges on deposits, including monthly account service fees. Non-sufficient funds fees are recognized at the time when the account
overdraft occurs in accordance with regulatory guidelines. Account analysis fees consist of fees charged on certain business deposit
accounts based upon account activity as well as other monthly account fees, and are recorded under the accrual method of accounting
as services are performed.
Other service charges are earned by providing depositors safeguard and remittance of funds as well as by providing other elective
services for depositors that are performed upon the depositor’s request. Charges for deposit services for the safeguard and remittance
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of funds are recognized at the end of the statement cycle, after services are provided, as the customer retains funds in the account.
Revenue for other elective services is earned at the point in time the customer uses the service.
Trust Fees
Trust fee income represents revenue generated from asset management services provided to individuals, businesses, and institutions.
The Company has a fiduciary responsibility to the beneficiary of the trust to perform agreed upon services which can include investing
assets, periodic reporting, and providing tax information regarding the trust. In exchange for these trust and custodial services, the
Company collects fee income from beneficiaries as contractually determined via fee schedules. The Company’s performance
obligation is primarily satisfied over time as the services are performed and provided to the customer. These fees are recorded under
the accrual method of accounting as the services are performed. The Company generally acts as the principal in these transactions and
records revenue and expenses on a gross basis.
Bank Card and Automated Teller Machine (“ATM”) Fees
Bank card and ATM fees include credit card, debit card and ATM transaction revenue. The majority of this revenue is card
interchange fees earned through a third party network. Performance obligations are satisfied for each transaction when the card is used
and the funds are remitted. The network establishes interchange fees that the merchant remits for each transaction, and costs are
incurred from the network for facilitating the interchange with the merchant. Card fees also include merchant services fees earned for
providing merchants with card processing capabilities.
ATM income is generated from allowing customers to withdraw funds from other banks’ machines and from allowing a non-customer
cardholder to withdraw funds from the Company’s machines. The Company satisfies its performance obligations for each transaction
at the point in time that the withdrawal is processed.
Bank card and ATM fee income is recorded on accrual basis as services are provided with the related expense reflected in data
processing expense.
Investment and Annuity Fees and Insurance Commissions
Investment and annuity services fee income represents income earned from investment and advisory services. The Company provides
its customers with access to investment products through the use of third party carriers to meet their financial needs and investment
objectives. Upon selection of an investment product, the customer enters into a policy with the carrier. The performance obligation is
satisfied by fulfilling its responsibility to acquire the investment for which a commission fee is earned from the carrier based on
agreed-upon fee percentages on a trade date basis. The Company has a contractual relationship with a third party broker dealer to
provide full service brokerage and investment advisory activities. As the agent in the arrangement, the Company recognizes the
investment services commissions on a net basis. Investment revenue also includes portfolio management fees, which represent
monthly fees charged on a contractual basis to customers for the management of their investment portfolios and are recorded under the
accrual method of accounting on a gross basis, with expenses recorded in the appropriate expense line item.
This revenue line item includes investment banking income, which includes fees for services arising from securities offerings or
placements in which the Company acts as a principal. Revenue is recognized at the time the underwriting is completed and the
revenue is reasonably determinable. Any costs associated with these transactions are reflected in the appropriate expense line item.
Insurance commission revenue is recognized on a gross basis as of the effective date of the insurance policy as the Company’s
performance obligation is connecting the customer to the insurance products. The Company also receives contingent commissions
from insurance companies as additional incentive for achieving specified premium volume goals and/or the loss experience of the
insurance placed. Contingent commissions from insurance companies are recognized when determinable, which is generally when
such commissions are received or when we receive data from the insurance companies that allows the reasonable estimation of these
amounts. Any costs associated with these transactions are reflected in the appropriate expense line item.
Secondary Mortgage Market Operations
Secondary mortgage market operations revenue is primarily comprised of service release premiums earned on the sale of closed-end
mortgage loans to other financial institutions or government agencies that are recognized in revenue as each sales transaction occurs.
This revenue line item also includes derivative income associated with our mortgage banking operations. Refer to Note 11 –
Derivatives for a discussion of these derivative instruments.
92
Securities Transactions
Securities transactions includes net realized gain (losses) on securities sold reflecting the excess (deficiency) of proceeds received over
the specifically identified carrying amount of the assets being sold plus cost to sell. Securities sales are recorded as each transaction
occurs on a trade-date basis.
Income from Bank-Owned Life Insurance
Bank-owned life insurance income primarily represents income earned from the appreciation of the cash surrender value of insurance
contracts held and the proceeds of insurance benefits. Revenue from the proceeds of insurance benefits is recognized at the time a
claim is confirmed.
Credit Related Fees
Credit-related fee income includes letters of credit fees and unused commercial commitment fees. Revenue for letters of credit fees is
recognized over time. Revenue for unused commercial commitment fees are recognized based on contractual terms, generally when
collected.
Income from Derivatives
Income from derivatives consists primarily of income from interest rate swaps, net of fair value adjustments for customer derivatives
and the related offsetting agreements with unrelated financial institutions for which the derivative instruments are not designated as
hedges.
Other Miscellaneous Income
Other miscellaneous income represents a variety of revenue streams, including safe deposit box income, wire transfer fees, syndication
fees, gains or losses on sales of assets, and any other income not reflected above. Income is recorded once the performance obligation
is satisfied, generally on the accrual basis or on a cash basis if not material and/or considered constrained.
Advertising Costs
Advertising costs are expensed as incurred and recorded as a component of noninterest expense.
Income Taxes
Income taxes are accounted for using the asset and liability method. Current tax liabilities or assets are recognized for the estimated
income taxes payable or refundable on tax returns to be filed with respect to the current year. Deferred tax assets and liabilities are
based on temporary differences between the financial statement carrying amounts and the tax bases of the Company’s assets and
liabilities. Deferred tax assets and liabilities are measured using the enacted tax rates expected to apply to taxable income in the years
in which those temporary differences are expected to be realized or settled. Valuation allowances are established against deferred tax
assets if, based on all available evidence, it is more likely than not that some or all of the assets will not be realized. The benefit of a
position taken or expected to be taken in a tax return is recognized when it is more likely than not that the position will be sustained on
its technical merits. The effects of changes in tax rates and laws upon deferred tax balances are recognized in the period in which the
legislation is enacted.
The Company makes investments that generate investment tax credits (ITC). The Company uses the deferral method of accounting
whereby the tax benefit from the investment tax credits is recognized as a reduction of the book basis of the related asset and is
amortized into income over the tax life of the underlying investment.
The Company also made investments in projects that yield tax credits issued under the Qualified Zone Academy Bonds (QZAB) and
Qualified School Construction Bonds (QSCB) prior to December 31, 2017, as well as Federal and state New Market Tax Credit
(NMTC) programs. Returns on these investments are generated through the receipt of federal and state tax credits. The tax credits are
recorded as a reduction to the income tax provision in the year that they are earned. Tax credits from QZAB and QSCB bonds are
generally earned over the life of the bonds in lieu of interest income. Credits on Federal NMTC investments are earned over the seven-
year compliance period beginning with the year of investment. Credits on State NMTC investments are generally earned over a three
to five-year period depending upon the specific state program. For investments where the return of the principal is not expected, the
equity investment is amortized over the life of the tax compliance period as a component of noninterest expense.
The Company also invests in affordable housing projects that generate low-income tax credits (LIHTC) 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, over the 10 year tax credit period.
93
With the exception of QZAB and QSCB tax credits, all of the tax credits described above can be carried back one-year and carried
forward 20 years if the credit cannot be fully used in the year the credits first become available for use. QZAB and QSCB tax credits
generally can be carried forward indefinitely if they cannot be fully used in the year the credits are generated.
Retirement Benefits
The Company sponsors defined benefit pension plans and certain other defined benefit postretirement plans for eligible employees.
The amounts reported in the consolidated financial statements with respect to these plans are based on actuarial valuations that
incorporate various assumptions regarding future experience under the plans. Note 17 – Retirement Benefit Plans discusses the
actuarial assumptions and provides information about the liabilities or assets recognized for the funded status of the Company’s
obligations under these plans, the net benefit expense charged to current operations, and the amounts recognized as a component of
other comprehensive income loss and AOCI.
Share-Based Payment Arrangements
The grant date fair value of equity instruments awarded to employees and directors establishes the cost of the services received in
exchange, and the cost associated with awards that are expected to vest is recognized over the requisite service period. Share-based
compensation for service-based awards that contain a graded vesting schedule is recognized on a straight-line basis over the requisite
service period for the entire award. Forfeitures of unvested awards are recognized in earnings in the period in which they occur. Refer
to Note 18 – Share-Based Payment Arrangements for additional information.
Earnings (Loss) per Common Share
The Company computes earnings (loss) per share using the two-class method. The two-class method allocates net income to each class
of common stock and participating security according to the common dividends declared and participation rights in undistributed
earnings. For reporting periods in which a net loss is recorded, net loss is not allocated to participating securities because the holders
of such securities bear no contractual obligation to fund or otherwise share in the loss. Participating securities currently consist of
unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents.
Basic earnings (loss) per common share is computed by dividing income or loss available to common shareholders by the weighted-
average number of common shares outstanding for the applicable period. Shares outstanding exclude treasury shares and unvested
share-based payment awards under long-term incentive compensation plans and directors’ compensation plans. Diluted earnings per
common share is computed using the weighted-average number of common shares outstanding increased by the number of shares in
which employees would vest under performance-based stock awards and stock unit awards based on expected performance factors and
by the number of additional shares that would have been issued if potentially dilutive stock options were exercised, each as
determined using the treasury stock method. For reporting periods in which a net loss is recorded, no effect is given to potentially
dilutive shares as the impact of such shares would be anti-dilutive.
Reportable Segment Disclosures
U.S. GAAP require that information be reported about a company’s operating segments using a “management approach.” Reportable
segments are identified in these standards as those revenue-producing components for which discrete financial information is
produced internally and which are subject to evaluation by the chief operating decision maker in deciding how to allocate resources to
segments. The Company’s stated strategy is to provide a consistent package of banking products and services throughout a coherent
market area; as such, the Company has identified its overall banking operations as its only reportable segment. Because the overall
banking operations comprise substantially all of the Company’s consolidated operations, no separate segment disclosures are
presented.
Other
Assets held by the Bank in a fiduciary capacity are not assets of the Bank and are not included in the Consolidated Balance Sheets.
RECENT ACCOUNTING PRONOUNCEMENTS
Accounting Standards Adopted in 2021
In August 2021, the FASB issued Accounting Standards Update (“ASU”) 2021-06, “Presentation of Financial Statements (Topic
205), Financial Services – Depository and Lending (Topic 942) and Financial Services – Investment Companies (Topic 946),” to
reflect the issuance of SEC Release No. 33-10786, Amendments to Financial Disclosures about Acquired and Disposed Businesses,
and No. 33-10835, Update of Statistical Disclosures for Bank and Savings and Loan Registrants. The Company is required to
comply with the rules set forth in SEC Release No. 33-10835 for fiscal years ending on or after December 31, 2021, with voluntary
early compliance permitted. The Company early adopted the rules set forth in SEC Release No. 33-10786 in its December 31, 2020
Form 10-K and, therefore, was in compliance with this ASU upon its issuance.
94
In January 2021, the FASB issued ASU 2021-01, “Reference Rate Reform (Topic 848),” to clarify that certain optional expedients
and exceptions in Topic 848 for contract modifications and hedge accounting apply to derivatives that are affected by the transition
to new reference rates. The amendments in the update do not apply to contract modifications made after December 31, 2022, new
hedging relationships entered into after December 31, 2022, and existing hedging relationships evaluated for effectiveness in periods
after December 31, 2022, except for hedging relationships existing as of December 31, 2022, that apply certain optional expedients
in which the accounting effects are recorded through the end of the hedging relationship (including periods after December 31,
2022). The provisions of this guidance were effective upon issuance for all entities. An entity may elect to apply the amendments in
this update on a full retrospective basis as of any date from the beginning of an interim period that includes or is subsequent to March
12, 2020, or on a prospective basis to new modifications from any date within an interim period that includes or is subsequent to the
date of the issuance of a final update, up to the date that financial statements are available to be issued. The Company adopted this
guidance on a full retrospective basis upon issuance. Adoption of this guidance did not have a material impact upon the Company’s
financial position and results of operations.
In October 2020, the FASB issued ASU 2020-08, “Codification Improvements to Subtopic 310-20, Receivables- Nonrefundable Fees
and Other Costs,” to clarify that an entity should reevaluate whether a callable debt security is within the scope of paragraph 310-20-
35-33 for each reporting period. Securities within the scope of this paragraph are those that have explicit, noncontingent call options
that are callable at fixed prices and on preset dates at prices less than the amortized cost basis of the security. Whether a security is
subject to this paragraph may change depending on the amortized cost basis of the security and the terms of the next call option. For
instruments that fall within the scope, the premium should be amortized to the next call date, which is defined as the first date at which
a call option at a specified price becomes exercisable. Once the next call date has passed, the next call date after that (if applicable) is
the date at which the next call option at a specified price becomes exercisable, and, if there is no remaining premium or if there are no
further call dates, the effective yield should be reset using the payment terms of the debt security. For public business entities, the
amendments in this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15,
2020, and entities should apply the amendments in the update on a prospective basis for existing and newly purchased callable debt
securities. The Company assessed its bond portfolio upon adoption and determined that there were no bonds with premium calls at
such dates. The Company evaluates its bond portfolio at each interim and annual reporting date to determine if any instruments fall
within the scope of paragraph 310-20-35-33.
In December 2019, the FASB issued ASU 2019-12, “Simplifying the Accounting for Income Taxes (Topic 740).” The amendments in
this update are meant to simplify the accounting for income taxes by removing certain exceptions to GAAP. The amendments also
improve consistent application of and simplify GAAP by modifying and/or revising the accounting for certain income tax transactions
and by clarifying certain existing codification. The amendments in the update are effective for public business entities for fiscal years
and interim periods within those fiscal years beginning after December 15, 2020. The Company adopted this guidance on January 1,
2021. Adoption of this guidance did not have a material impact upon the Company’s financial position and results of operations.
Significant Accounting Standard Adopted in 2020
In June 2016, the FASB issued ASU 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on
Financial Instruments.” The ASU, more commonly referred to as Current Expected Credit Losses, or CECL, along with several
subsequently issued related amendments, were codified as ASC 326. The provisions of ASC 326, which supersede the incurred loss
methodology prescribed by ASC 310, require the measurement of expected credit losses over the life of financial assets based on
historical experience, current conditions, and reasonable and supportable forecasts. As such, financial institutions and other
organizations are required to use forward-looking information to inform their credit loss estimates. Many of the loss estimation
techniques prescribed by previous guidance are still permitted, although the inputs to those techniques have changed to reflect the full
amount of expected credit losses for the estimated remaining life of the instrument. An entity uses judgment to determine which loss
estimation methods are appropriate for its circumstances. In addition, ASC 326 amends the accounting for credit losses on both held to
maturity and available for sale debt securities and purchased financial assets with credit deterioration.
The Company adopted the provisions of ASC 326 on January 1, 2020, with a cumulative-effect adjustment to retained earnings for
non-purchased credit impaired loans. For purchased credit impaired loans (as defined by ASC 310-30), there was no impact to
retained earnings upon adoption; rather, a portion of the purchase accounting fair value mark was reclassified to allowance for
credit losses. A more detailed discussion of the Company’s policy for accounting for credit losses under the provisions of ASC 326
is presented earlier in this note.
95
The following table reflects the impact of adoption reflected in the Company’s consolidated balance sheet. The increase in the
allowance for loan losses represents a reduction in total assets, while the reserve for unfunded lending commitments represents an
increase in total liabilities.
(in thousands)
Assets and Liabilities
Allowance for loan and lease losses
Reserve for unfunded lending commitments
Allowance for credit losses
Retained Earnings
Allowance for credit loss increase
Balance sheet reclassification
Total pretax impact
Income tax impact
Decrease to retained earnings
Note 2. Securities
December 31, 2019
January 1, 2020
CECL adoption
impact
$
$
191,251 $
3,974
195,225
$
240,662 $
31,304
271,966
$
$
$
49,411
27,330
76,741
76,741
(19,767 )
56,974
(12,887 )
44,087
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 December 31, 2021 and 2020. Amortized cost of securities does not include
accrued interest which is reflected in the accrued interest line item on the consolidated balance sheets totaling $25.5 million and $24.4
million at December 31, 2021 and December 31, 2020, respectively.
Securities Available for Sale
(in thousands)
U.S. Treasury and government agency
securities
Municipal obligations
Residential mortgage-backed securities
Commercial mortgage-backed securities
Collateralized mortgage obligations
Corporate debt securities
Securities Held to Maturity
(in thousands)
U.S. Treasury and government agency
securities
Municipal obligations
Residential mortgage-backed securities
Commercial mortgage-backed securities
Collateralized mortgage obligations
December 31, 2021
Gross
Gross
Unrealized Unrealized
Gains
Losses
Fair
Value
Amortized
Cost
December 31, 2020
Gross
Gross
Unrealized Unrealized
Gains
Losses
Fair
Value
Amortized
Cost
284 $ 213,370
$ 420,857 $ 3,781 $ 5,340 $ 419,298 $ 207,365 $ 6,289 $
153 326,725
304,536 13,184 3,562 314,158 309,342 17,536
3,056,763 29,158 50,123 3,035,798 2,560,249 69,570
8 2,629,811
3,064,828 61,645 48,614 3,077,859 2,323,306 135,516 3,288 2,455,534
7,651 — 362,123
— 120,883 354,472
119,046 1,837
11,764
11,500
210
$ 6,984,530 $ 109,815 $ 107,647 $ 6,986,698 $ 5,766,234 $ 236,826 $ 3,733 $ 5,999,327
264 —
18,500
18,702
8
December 31, 2021
December 31, 2020
Gross
Amortized Unrealized Unrealized
Gains
Losses
Gross
Cost
Fair
Value
Gross
Amortized Unrealized Unrealized
Gains
Losses
Gross
Cost
Fair
Value
$
14,857 $ — $
621,405 37,941
268,907
603,156 28,679
682 1,499 268,090
20 $
— $
14,837 $
— $ — $
205 659,141 627,019 51,408
-
2 678,425
23,420
669 631,166 549,686 54,587 — 604,273
58,248 158,514 2,949 — 161,463
2 $ 1,467,581
21,951 1,469 —
$ 1,565,751 $ 68,124 $ 2,393 $ 1,631,482 $ 1,357,170 $ 110,413 $
57,426
822 —
96
The Company held no securities classified as trading at December 31, 2021 or 2020.
The following tables present the amortized cost and fair value of debt securities at December 31, 2021 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.
(in thousands)
Debt Securities Available for Sale
Due in one year or less
Due after one year through five years
Due after five years through ten years
Due after ten years
Total available for sale debt securities
(in thousands)
Debt Securities Held to Maturity
Due in one year or less
Due after one year through five years
Due after five years through ten years
Due after ten years
Total held to maturity debt securities
Amortized
Cost
Fair
Value
$
$
$
$
2,387 $
669,087
2,995,387
3,317,669
6,984,530 $
2,403
696,513
3,002,023
3,285,759
6,986,698
Amortized
Cost
Fair
Value
11,225 $
361,412
618,557
574,557
1,565,751 $
11,311
377,421
650,531
592,219
1,631,482
The following table presents the proceeds from, gross gains on, and gross losses on sales of securities during the years ended
December 31, 2021, 2020 and 2019:
(in thousands)
Proceeds
Gross gains
Gross losses
2021
$
Years Ended December 31,
2020
2019
198,681 $
1,649
1,316
211,919 $
1,984
1,496
268,413
—
—
Securities with carrying values totaling approximately $4.0 billion at December 31, 2021 and $3.4 billion at December 31, 2020 were
pledged, primarily to secure public deposits or securities sold under agreements to repurchase.
Credit Quality
The Company’s policy is to invest only in securities of investment grade quality. These investments are largely limited to U.S. agency
securities and municipal securities. Management has concluded, based on the long history of no credit losses, that the expectation of
nonpayment of the held to maturity securities carried at amortized cost is zero for securities that are backed by the full faith and credit
of and/or guaranteed by the U.S. government. As such, no allowance for credit losses has been recorded for these securities. The
municipal portfolio is analyzed separately for allowance for credit loss in accordance with the applicable guidance for each portfolio
as noted below.
Effective January 1, 2020, in conjunction with the adoption of CECL, and again at the end of each reporting period, the Company
evaluated credit impairment for individual securities available for sale whose fair value was below amortized cost with a more than
inconsequential risk of default and where the Company had assessed the decline in fair value significant enough to suggest a credit
event occurred. There were no securities that met the criteria of a credit loss event and therefore, no allowance for credit loss was
recorded in any period.
97
The details for securities classified as available for sale with unrealized losses at December 31, 2021 follow.
Available for sale
(in thousands)
U.S. Treasury and government agency securities
Municipal obligations
Residential mortgage-backed securities
Commercial mortgage-backed securities
Collateralized mortgage obligations
Corporate debt securities
.
Losses < 12 Months
Fair
Value
Gross
Unrealized
Losses
Losses 12 Months or >
Gross
Unrealized
Losses
Fair
Value
Total
Fair
Value
Gross
Unrealized
Losses
$ 198,318 $ 2,305 $
43,021 2,372
63,534 $ 3,035 $ 261,852 $ 5,340
68,147 3,562
25,126 1,190
1,293,179 20,581 819,596 29,541 2,112,775 50,122
786,206 14,819 665,687 33,796 1,451,893 48,615
—
—
8
—
$ 2,327,716 $ 40,085 $ 1,573,943 $ 67,562 $ 3,901,659 $ 107,647
—
6,992
—
6,992
—
8
—
—
The details for securities classified as available for sale with unrealized losses at December 31, 2020 follow.
Available for sale
(in thousands)
U.S. Treasury and government agency securities
Municipal obligations
Residential mortgage-backed securities
Commercial mortgage-backed securities
Collateralized mortgage obligations
Corporate debt securities
Losses < 12 Months
Gross
Unrealized
Losses
Fair
Value
Losses 12 Months or >
Gross
Unrealized
Losses
Fair
Value
Fair
Value
Total
Gross
Unrealized
Losses
$ 35,845 $
30,170
530
446,190
70
2,000
$ 514,805 $
284 $
153
2
3,288
—
—
3,727 $
— $
—
760
—
—
—
760 $
6
— $ 35,845 $
— 30,170
1,290
— 446,190
70
—
2,000
—
6 $ 515,565 $
284
153
8
3,288
—
—
3,733
Effective January 1, 2020 and in conjunction with the adoption of CECL, and again at the end of 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 loss, 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 at December 31, 2021
follow.
Held to maturity
(in thousands)
U.S. Treasury and government agency securities
Municipal obligations
Residential mortgage-backed securities
Commercial mortgage-backed securities
Collateralized mortgage obligations
Losses < 12 Months
Gross
Unrealized
Losses
Fair
Value
Losses 12 Months or >
Gross
Unrealized
Losses
Fair
Value
Fair
Value
Total
Gross
Unrealized
Losses
20 $
205
1,499
— $
—
—
205 11,837
—
1,929 $ 11,837 $
—
— $ 14,837 $
—
7,795
— 253,661
464 68,203
—
—
464 $ 344,496 $
20
205
1,499
669
—
2,393
$ 14,837 $
7,795
253,661
56,366
—
$ 332,659 $
98
The fair value and gross unrealized losses for securities classified as held to maturity with unrealized losses at December 31, 2020
follow.
Held to maturity
Losses < 12 Months
(in thousands)
U.S. Treasury and government agency securities
Municipal obligations
Residential mortgage-backed securities
Commercial mortgage-backed securities
Collateralized mortgage obligations
Gross
Unrealized
Losses
Losses 12 Months or >
Gross
Unrealized
Losses
Fair
Value
Fair
Value
Total
Gross
Unrealized
Losses
Fair
Value
$
$
— $
—
—
—
—
— $
— $
—
—
—
—
— $
— $
2,381
—
—
—
2,381 $
— $
2
—
—
—
2 $
— $
2,381
—
—
—
2,381 $
—
2
—
—
—
2
At December 31, 2021 and 2020, the Company had 142 and 28 securities, respectively, with market values below their cost basis.
None of the unrealized losses relate to the marketability of the securities or the issuers’ abilities 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
been deemed to be non-credit related at December 31, 2021 and 2020. As noted above, no allowance for credit loss was recorded as of
December 31, 2021 or 2020. The Company has adequate liquidity and, therefore, does not plan to and, more likely than not, will not
be required to sell these securities before recovery of the indicated impairment.
Note 3. Loans and Allowance for Credit Losses
The Company generally makes loans in its market areas of south and central Mississippi; southern and central Alabama; northwest,
central and south Louisiana; the northern, central and panhandle regions of Florida; and certain areas of east and northeast Texas,
including Houston, Beaumont, Dallas and San Antonio; and Nashville, Tennessee.
Loans, net of unearned income by portfolio are presented at amortized cost basis in the table below. Amortized cost does not include
accrued interest, which is reflected in the accrued interest line item in the Consolidated Balance Sheets, totaling $67.8 million and
$76.2 million at December 31, 2021 and 2020, respectively. Included in commercial non-real estate loans at December 31, 2021 and
2020 was $531.1 million and $2.0 billion, respectively, of Paycheck Protection Program loans. The following table presents loans, net
of unearned income, by portfolio class at December 31, 2021 and 2020:
(in thousands)
Commercial non-real estate
Commercial real estate - owner occupied
Total commercial and industrial
Commercial real estate - income producing
Construction and land development
Residential mortgages
Consumer
Total loans
$
$
2021
9,612,460 $
2,821,246
12,433,706
3,464,626
1,228,670
2,423,890
1,583,390
21,134,282 $
2020
9,986,983
2,857,445
12,844,428
3,357,939
1,065,057
2,665,212
1,857,295
21,789,931
The following briefly describes the composition of each loan category and portfolio class.
Commercial and industrial
Commercial and industrial loans are made available to businesses for working capital (including financing of inventory and
receivables), business expansion, to facilitate the acquisition of a business, and the purchase of equipment and machinery, including
equipment leasing. These loans are primarily made based on the identified cash flows of the borrower and, when secured, have the
added strength of the underlying collateral.
Commercial non-real estate loans may be secured by the assets being financed or other tangible or intangible business assets such as
accounts receivable, inventory, ownership, enterprise value or commodity interests, and may incorporate a personal or corporate
guarantee; however, some short-term loans may be made on an unsecured basis, including a small portfolio of corporate credit cards,
generally issued as a part of overall customer relationships.
99
Commercial non-real estate loans also include loans made under the Small Business Administration’s (SBA) Paycheck Protection
Program (PPP). PPP loans are guaranteed by the SBA and are forgivable to the debtor upon satisfaction of certain criteria. The loans
bear interest at 1% per annum and have two or five year terms, depending on the date of origination. These loans also earn an
origination fee of 1%, 3%, or 5%, depending on the loan size, which is deferred and amortized over the estimated life of the loan using
the effective yield method.
Commercial real estate – owner occupied loans consist of commercial mortgages on properties where repayment is generally
dependent on the cash flow from the ongoing operations and activities of the borrower. Like commercial non-real estate, these loans
are primarily made based on the identified cash flows of the borrower, but also have the added strength of the value of underlying real
estate collateral.
Commercial real estate – income producing
Commercial real estate – income producing loans consist of loans secured by commercial mortgages on properties where the loan is
made to real estate developers or investors and repayment is dependent on the sale, refinance, or income generated from the operation
of the property. Properties financed include retail, office, multifamily, senior housing, hotel/motel, skilled nursing facilities and other
commercial properties.
Construction and land development
Construction and land development loans are made to facilitate the acquisition, development, improvement and construction of both
commercial and residential-purpose properties. Such loans are made to builders and investors where repayment is expected to be
made from the sale, refinance or operation of the property or to businesses to be used in their business operations. This portfolio also
includes residential construction loans and loans secured by raw land not yet under development.
Residential mortgages
Residential mortgages consist of closed-end loans secured by first liens on 1- 4 family residential properties. The portfolio includes
both fixed and adjustable rate loans, although most longer term, fixed rate loans originated are sold in the secondary mortgage
market.
Consumer
Consumer loans include second lien mortgage home loans, home equity lines of credit and nonresidential consumer purpose loans.
Nonresidential consumer loans include both direct and indirect loans. Direct nonresidential consumer loans are made to finance the
purchase of personal property, including automobiles, recreational vehicles and boats, and for other personal purposes (secured and
unsecured), and deposit account secured loans. Indirect nonresidential consumer loans include automobile financing provided to the
consumer through an agreement with automobile dealerships, though the Company is no longer engaged in this type of lending and
the remaining portfolio is in runoff. Consumer loans also include a small portfolio of credit card receivables issued on the basis of
applications received through referrals from the Bank’s branches, online and other marketing efforts.
The Bank makes loans in the normal course of business to directors and executive officers of the Company and the Bank and to their
associates. Loans to such related parties are made on substantially the same terms, including interest rates and collateral requirements,
as those prevailing at the time for comparable transactions with unrelated parties and do not involve more than normal risk of
collectability when originated. Balances of loans to the Company’s directors, executive officers and their associates at December 31,
2021 and 2020 were approximately $62.9 million and $11.6 million, respectively. Related party loan activity in 2021 reflect new loans
of $3.1 million, repayments of $3.0 million and the addition of an existing $51.0 million loan whose borrower is a director appointed
in 2021.
The Bank has a line of credit with the Federal Home Loan Bank of Dallas that is secured by blanket pledges of certain qualifying loan
types. The Bank had borrowings on this line of $1.1 billion at both December 31, 2021 and 2020.
100
The following schedules show activity in the allowance for credit losses by portfolio class for the years ended December 31, 2021 and
2020, as well as the corresponding recorded investment in loans at December 31, 2021 and 2020. Effective January 1, 2020, the
Company adopted the provisions of ASC 326 (CECL) using a modified retrospective basis. The difference between the December 31,
2019 incurred allowance and the CECL allowance is reflected as a cumulative effect of change in accounting principle in the table
below. For further discussion of the day one impact of the CECL adoption, refer to Note 1 – Summary of Significant Accounting
Policies and Recent Accounting Pronouncements.
(in thousands)
Allowance for credit losses
Allowance for loan losses:
Beginning balance
Charge-offs
Recoveries
Net provision for loan losses
Ending balance - allowance for loan losses
Reserve for unfunded lending commitments:
Beginning balance
Provision for losses on unfunded
commitments
Ending balance - reserve for unfunded
lending commitments
Total allowance for credit losses
Allowance for loan losses:
Individually evaluated
Collectively evaluated
Allowance for loan losses
Reserve for unfunded lending commitments:
Individually evaluated
Collectively evaluated
Reserve for unfunded lending commitments: $
Total allowance for credit losses
Loans:
Individually evaluated for impairment
Collectively evaluated for impairment
Total loans
Commercial
Non-Real
Estate
Commercial
Real Estate-
Owner
Occupied
Total
Commercial
and
Industrial
Commercial
Real Estate-
Income
Producing
Construction
and Land
Development
Year Ended December 31, 2021
Residential
Mortgages Consumer
Total
$ 149,693 $
(33,523 )
8,985
(29,267 )
95,888 $
$
69,134 $
(3,179 )
642
(13,164 )
53,433 $
218,827 $ 109,474 $
(425 )
(36,702 )
105
9,627
(1,096 )
(42,431 )
149,321 $ 108,058 $
26,462 $
(274 )
2,172
(6,258 )
22,102 $
48,842 $
(713 )
1,459
(18,965 )
30,623 $
46,572 $
(12,722 )
6,282
(8,171 )
31,961 $
450,177
(50,836 )
19,645
(76,921 )
342,065
$
4,529 $
381 $
4,910 $
1,099 $
22,694 $
19 $
1,185 $
29,907
(7 )
(58 )
(65 )
595
(787 )
3
(319 )
(573 )
$
4,522 $
$ 100,410 $
323 $
53,756 $
4,845 $
1,694 $
154,166 $ 109,752 $
21,907 $
44,009 $
22 $
30,645 $
866 $
32,827 $
29,334
371,399
$
$
177 $
95,711
95,888 $
94 $
53,339
53,433 $
271 $
20 $
149,050 108,038
149,321 $ 108,058 $
20 $
22,082
22,102 $
408 $
30,215
30,623 $
184 $
31,777
31,961 $
903
341,162
342,065
$
— $
4,522
4,522 $
$ 100,410 $
— $
323
323 $
53,756 $
— $
4,845
4,845 $
— $
1,694
1,694 $
154,166 $ 109,752 $
— $
21,907
21,907 $
44,009 $
— $
22
22 $
30,645 $
— $
866
866 $
32,827 $
—
29,334
29,334
371,399
3,431 $
$
17,882
9,609,029 2,818,700 12,427,729 3,459,338 1,228,545 2,418,630 1,582,158 21,116,400
$ 9,612,460 $ 2,821,246 $ 12,433,706 $ 3,464,626 $ 1,228,670 $ 2,423,890 $ 1,583,390 $ 21,134,282
5,288 $
5,260 $
2,546 $
5,977 $
1,232 $
125 $
101
(in thousands)
Allowance for credit losses
Allowance for loan losses:
Beginning balance
Commercial
Non-Real
Estate
Commercial
Real Estate-
Owner
Occupied
Total
Commercial
and
Industrial
Commercial
Real Estate-
Income
Producing
Construction
and Land
Development
Year Ended December 31, 2020
Residential
Mortgages
Consumer
Total
$
106,432 $
10,977 $
117,409 $
20,869 $
9,350 $
20,331 $
23,292 $
191,251
Cumulative effect of change in accounting
principle
Charge-offs
Recoveries
Net provision for loan losses
Ending balance - allowance for loan losses
Reserve for unfunded lending commitments:
Beginning balance
$
$
Cumulative effect of change in accounting
principle
Provision for losses on unfunded
commitments
Ending balance - reserve for unfunded lending
commitments
Total allowance for credit losses
Allowance for loan losses:
Individually evaluated
Collectively evaluated
Allowance for loan losses
Reserve for unfunded lending commitments:
Individually evaluated
Collectively evaluated
Reserve for unfunded lending commitments:
Total allowance for credit losses
Loans:
Individually evaluated for impairment
Collectively evaluated for impairment
Total loans
$
$
$
$
$
$
$
(244)
(387,172)
6,032
424,645
149,693 $
14,877
(1,828)
763
44,345
69,134 $
14,633
(389,000)
6,795
468,990
218,827 $
7,287
(2,512)
46
83,784
109,474 $
7,478
(400)
846
9,188
26,462 $
12,921
(326)
1,400
14,516
48,842 $
7,092
(17,219)
5,584
27,823
46,572 $
49,411
(409,457)
14,671
604,301
450,177
3,974 $
— $
3,974 $
— $
— $
— $
— $
3,974
5,772
288
6,060
449
15,658
17
5,146
27,330
(5,217)
93
(5,124)
650
7,036
2
(3,961)
(1,397)
4,529 $
381 $
4,910 $
1,099 $
22,694 $
19 $
1,185 $
29,907
154,222 $
69,515 $
223,737 $
110,573 $
49,156 $
48,861 $
47,757 $
480,084
11,517 $
138,176
149,693 $
1,236 $
67,898
69,134 $
12,753 $
206,074
218,827 $
44 $
109,430
109,474 $
22 $
26,440
26,462 $
546 $
48,296
48,842 $
515 $
46,057
46,572 $
13,880
436,297
450,177
241 $
4,288
4,529 $
154,222 $
— $
381
381 $
69,515 $
241 $
4,669
4,910 $
223,737 $
— $
1,099
1,099 $
110,573 $
— $
22,694
22,694 $
49,156 $
— $
19
19 $
48,861 $
— $
1,185
1,185 $
47,757 $
241
29,666
29,907
480,084
43,775 $
$
68,144
9,943,208 2,847,239 12,790,447 3,353,397 1,063,807 2,659,362 1,854,774 21,721,787
$ 9,986,983 $ 2,857,445 $ 12,844,428 $ 3,357,939 $ 1,065,057 $ 2,665,212 $ 1,857,295 $ 21,789,931
53,981 $
10,206 $
5,850 $
2,521 $
4,542 $
1,250 $
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 Analytics (“Moody’s”)
macroeconomic forecasts applied to internally developed credit models for a two year reasonable and supportable period. These
forecasts are anchored on a baseline economic forecast, which Moody’s defines as the “most likely outcome” based on current
conditions and its view of where the economy is headed. The baseline scenario is positioned at the 50th percentile of possible
outcomes. Several upside and downside alternative scenarios are also derived from that baseline scenario and considered when
assessing reasonably possible outcomes.
In arriving at the allowance for credit losses at December 31, 2021, the Company weighted Moody’s December 2021 baseline
economic forecast at 40% and the slower near-term growth S-2 scenario at 60%. The outlook reflected in the December 2021
economic scenarios have improved significantly compared to 2020, with widely available vaccines, lifting of most restrictions on
movement and general improvement across most economic variables. The S-2 scenario assumes a more subdued growth compared to
the baseline, primarily as a result of lesser efficacy of vaccines against variants of the coronavirus, prolonged labor shortages and
global supply chain disruption and reduction or delay stimulus due to disagreements in Congress. The weighting of the S-2 scenario
more heavily than the baseline scenario reflects the emergence of the Omicron variant of the coronavirus and the delay of the stimulus
bill, both of which were not reflected in the baseline scenario. The decrease in the allowance for credit loss was across all portfolios at
December 31, 2021 compared to December 31, 2020, and reflects the improvements in current and forecasted economic conditions
and in the Company’s credit quality metrics.
The increase in the allowance for credit losses at December 31, 2020 as compared to December 31, 2019 reflects both the $76.7
million cumulative effect adjustment recorded upon adoption of CECL, and the impact of the economic shutdown in response to the
COVID-19 pandemic and the sustained volatility of oil prices. In arriving at the allowance for credit losses at December 31, 2020, the
Company weighted the baseline economic forecast at 65%, the downside slower near-term growth scenario S-2 at 25%, and the
recessionary scenario S-3 at 10%.
102
The activity in the allowance for credit losses for the year ended December 31, 2020 also reflects the impact the sale of $497 million
of energy-related loans. The write-down to loans’ observable market values plus cost to sell resulted in charge-offs of $242.6 million
and a reserve release of $82.5 million, for a net provision for credit losses impact of $160.1 million, which is mostly reflected in the
commercial non-real estate portfolio.
Nonaccrual Loans and Loans Modified in Troubled Debt Restructurings
The following table shows the composition of nonaccrual loans and those without an allowance for loan loss, by portfolio class.
December 31,
2021
2020
(in thousands)
Commercial non-real estate
Commercial real estate - owner occupied
Total commercial and industrial
Commercial real estate - income producing
Construction and land development
Residential mortgages
Consumer
Total loans
$
Total
nonaccrual
6,974
4,921
11,895
5,458
844
25,439
11,887
55,523
$
Nonaccrual
without
allowance for
loan loss
$
$
1,264
729
1,993
5,207
—
1,997
48
9,245
Total
nonaccrual
$
52,836
13,856
66,692
6,743
2,486
40,573
23,385
$ 139,879
Nonaccrual
without
allowance for
loan loss
$
$
15,268
7,038
22,306
—
1,116
1,705
—
25,127
Nonaccrual loans include nonaccruing loans modified in troubled debt restructurings (TDRs) of $6.8 million and $21.6 million, at
December 31, 2021 and 2020, respectively. Total TDRs, both accruing and nonaccruing, were $10.6 million at December 31, 2021
and $25.8 million at December 31, 2020. All TDRs are individually evaluated for credit loss.
The table below presents detail by portfolio class TDRs that were modified during the years ended December 31, 2021, 2020 and
2019. All such loans are individually evaluated for credit loss.
($ in thousands)
Troubled Debt Restructurings:
Commercial non-real estate
Commercial real estate -
owner occupied
2021
Outstanding
Recorded Investment
Years Ended
2020
Outstanding
Recorded Investment
2018
Outstanding
Recorded Investment
Number
of
Contracts
Pre-
Modification
Post-
Modification
7,232
Number
of
Contracts
Pre-
Modification
Number
of
Contracts
Post-
Modification
745
Pre-
Modification
Post-
Modification
13 $ 64,051 $ 57,240
4 $
7,232 $
3 $
745 $
—
—
—
1
297
297
1
167
167
Total commercial
and industrial
Commercial real estate -
income producing
Construction and land
development
Residential mortgages
Consumer
Total loans
4
7,232
7,232
4
1,042
1,042
14 64,218 57,407
—
—
— —
—
—
1
123
123
—
6
4
14 $
—
1,489
86
8,807 $
—
1,512
86
8,830
1
15
6
26 $
15
3,424
89
4,570 $
15
3,424
89
4,570
323
323
3
3,286
3,286
21
10
168
168
49 $ 68,118 $ 61,307
The TDRs modified during the year ended December 31, 2021 reflected in the table above include $7.1 million of loans with extended
amortization terms or other payment concessions, $0.5 million with reduced interest rates, and $1.2 million with other modifications.
The TDRs modified during the year ended December 31, 2020 include $1.0 million of loans with extended amortization terms or other
payment concessions, $1.1 million with reduced interest rate, $0.4 million of loans with significant covenant waivers, and $2.1 million
with other modifications. The TDRs modified during the year ended December 31, 2019 include $18.7 million of loans with extended
terms or other payment concessions, $41.3 million of loans with significant covenant waivers, and $8.1 million of other modifications.
In addition, the Company received approximately $6.8 million of equity securities of one commercial non-real estate borrower in
satisfaction of a portion of its debt.
103
At December 31, 2021, the Company had no unfunded commitments to borrowers whose loan terms had been modified in TDRs and
approximately $4.6 million at December 31, 2020.
During the year ended December 31, 2021, one residential mortgage loan totaling $0.6 million that was defaulted upon had been
modified in a TDR in the preceding twelve months. During the year ended December 31, 2020, loans defaulted upon that had been
modified in a TDR in the preceding twelve months were as follows: two commercial non real estate loans totaling $13.4 million, two
residential mortgage loans totaling $0.8 million and one consumer loan totaling less than $0.1 million. During the year ended
December 31, 2019, there were no loans defaulted upon that had been modified in a TDR in the preceding twelve months.
The TDR disclosures above do not include loans eligible for exclusion from TDR assessment under Section 4013 of the Coronavirus
Aid, Relief, and Economic Security Act (“CARES Act”). Eligible modification must be related to COVID-19, executed on a loan that
was not more than 30 days past due as of December 31, 2019 and executed between March 1, 2020 and December 31, 2020. This
exclusion relief was extended to January 1, 2022 by the Consolidated Appropriations Act, 2021. These loans are reported in the aging
analysis that follows based on the modified terms.
Aging Analysis
The tables below present the aging analysis of past due loans by portfolio class at December 31, 2021 and 2020.
December 31, 2021
(in thousands)
Commercial non-real estate
Commercial real estate - owner occupied
Total commercial and industrial
Commercial real estate - income producing
Construction and land development
Residential mortgages
Consumer
Total loans
December 31, 2020
(in thousands)
30-59
Days
Past Due
60-89
Days
Past Due
Greater
Than
90 Days
past due
Total
Past Due
Current
Total
Loans
Recorded
Investment
> 90 Days
and
Accruing
$
2,920 2,818,326 2,821,246
8,381 $
704
9,085
281
2,624
23,306
6,806
7,041 $ 18,545 $ 9,593,915 $ 9,612,460 $ 2,818
1,563
142
8,604 21,465 12,412,241 12,433,706 2,960
—
5,307
83
587
310
7,447 17,058 1,566,332 1,583,390 2,171
$ 42,102 $ 12,348 $ 37,284 $ 91,734 $ 21,042,548 $ 21,134,282 $ 5,524
3,123 $
653
3,776
107
5,695 3,458,931 3,464,626
4,233 1,224,437 1,228,670
1,022
4,638 15,339 43,283 2,380,607 2,423,890
2,805
30-59
Days
Past Due
60-89
Days
Past Due
Greater
Than
90 Days
Past Due
Total
Past Due
Current
Total
Loans
Recorded
Investment
> 90 Days
and
Accruing
Commercial non-real estate
Commercial real estate - owner occupied
Total commercial and industrial
583
$ 7,963 $ 2,564 $ 39,530 $ 50,057 $ 9,936,926 $ 9,986,983 $
1,525
955
753 13,663 15,941 2,841,504 2,857,445
9,488 3,317 53,193 65,998 12,778,430 12,844,428 1,538
798 5,744 8,036 3,349,903 3,357,939
182
Commercial real estate - income producing 1,494
284 2,001 6,453 1,058,604 1,065,057 —
4,168
Construction and land development
912
29,319 9,858 27,886 67,063 2,598,149 2,665,212
Residential mortgages
729
12,215 5,012 11,714 28,941 1,828,354 1,857,295
Consumer
$ 56,684 $ 19,269 $ 100,538 $ 176,491 $ 21,613,440 $ 21,789,931 $ 3,361
Total loans
104
Credit Quality Indicators
The following tables present the credit quality indicators by segment and portfolio class of loans at December 31, 2021 and
December 31, 2020.
(in thousands)
Grade:
Pass
Pass-Watch
Special Mention
Substandard
Doubtful
Total
(in thousands)
Grade:
Pass
Pass-Watch
Special Mention
Substandard
Doubtful
Total
(in thousands)
Performing
Nonperforming
Total
December 31, 2021
Commercial
Real
Estate -
Owner
Occupied
Commercial
Non-
Real Estate
Total
Commercial
and Industrial
Commercial
Real
Estate -
Income
Producing
Construction
and
Land
Development
Total
Commercial
$ 9,279,719 $ 2,650,399 $ 11,930,118 $ 3,373,099 $ 1,216,177 $ 16,519,394
320,394
157,815 86,133
73,096
23,377
214,118
61,337
—
—
—
$ 9,612,460 $ 2,821,246 $ 12,433,706 $ 3,464,626 $ 1,228,670 $ 17,127,002
243,948 67,157
4,466
192,919 19,904
—
43,344
131,582
—
9,289
1,909
1,295
—
66,721
December 31, 2020
Commercial
Real
Estate -
Owner
Occupied
Commercial
Non-
Real Estate
Total
Commercial
and Industrial
Commercial
Real
Estate -
Income
Producing
Construction
and
Land
Development
Total
Commercial
$ 9,439,264 $ 2,641,423 $ 12,080,687 $ 3,219,155 $ 1,033,060 $ 16,332,902
541,885
314,739 114,358
137,592
46,239
255,045
55,425
—
—
—
$ 9,986,983 $ 2,857,445 $ 12,844,428 $ 3,357,939 $ 1,065,057 $ 17,267,424
429,097 89,968
125,852
5,989
208,792 42,827
—
79,613
153,367
—
22,820
5,751
3,426
—
December 31, 2021
December 31, 2020
Residential
Mortgage
Consumer
Total
Residential
Mortgage
Consumer
Total
$ 2,396,282 $ 1,570,516 $ 3,966,798 $ 2,622,422 $ 1,832,885 $ 4,455,307
67,200
$ 2,423,890 $ 1,583,390 $ 4,007,280 $ 2,665,212 $ 1,857,295 $ 4,522,507
24,410
27,608
42,790
12,874
40,482
The Company routinely assesses the ratings of loans in its portfolio through an established and comprehensive portfolio management
process. Below are the definitions of the Company’s internally assigned grades:
Commercial:
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
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 an 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.
105
Residential and Consumer:
(cid:120)
(cid:120)
Performing – accruing loans that have not been modified in a troubled debt restructuring.
Nonperforming – loans for which there are good reasons to doubt that payments will be made in full. All loans with
nonaccrual status and all loans that have been modified in a troubled debt restructuring are classified as nonperforming.
Vintage Analysis
The following tables present credit quality disclosures of amortized cost by segment and vintage for term loans and by revolving and
revolving converted to amortizing at December 31, 2021 and 2020. The Company defines vintage as the later of origination, renewal
or restructure date.
Term Loans
Amortized Cost Basis by Origination Year
Commercial Loans:
2021
2020
2019
2018
2017
Prior
Revolving
Loans
Converted
to Term
Loans
Total
Revolving
Loans
$4,946,459 $3,008,160 $2,035,849 $1,212,306
45,846
68,421
19,467
31,598
$937,639 $1,296,382 $3,002,064
52,850
69,310
27,188
$80,535 $16,519,394
320,394
5,714
2,683
43,494
—
10,296
36,763
—
12,410
14,664
—
10,669
28,337
—
3,656
16,125
—
9,603
20,358
—
6,243
10,482
—
73,096
214,118
—
$5,076,311 $3,073,804 $2,114,506 $1,285,226 $1,003,833 $1,385,473 $3,084,875 $102,974 $17,127,002
Pass
Pass-Watch
Special
Mention
Substandard
Doubtful
Total Commercial
Loans
Residential Mortgage and Consumer Loans:
17,536
43,895
—
Performing
Nonperforming
$580,813
565
$467,497
951
$355,833
2,018
$223,494
4,465
$320,344
4,719
$892,361 $1,120,461
1,432
24,365
$5,995 3,966,798
40,482
1,967
Total Consumer
Loans
$581,378
$468,448
$357,851
$227,959
$325,063
$916,726 $1,121,893
$7,962 $4,007,280
Term Loans
Amortized Cost Basis by Origination Year
2020
2019
2018
2017
2016
Prior
Revolving
Loans
Converted
to Term
Loans
Revolving
Loans
Total
Commercial Loans:
Pass
Pass-Watch
Special
Mention
Substandard
Doubtful
Total Commercial
Loans
Residential
Mortgage and
Consumer Loans:
Performing
Nonperforming
Total Consumer
Loans
$5,673,370 $2,819,696 $1,740,784 $1,391,140
42,877
115,555
96,473
50,475
$960,094 $1,231,913 $2,420,058
74,629
58,331
84,363
$95,847 $16,332,902
541,885
19,182
3,196
75,461
—
27,157
33,844
—
21,074
20,527
—
30,872
35,383
—
28,933
15,071
—
4,146
36,589
—
18,626
30,162
—
3,588
8,008
—
137,592
255,045
—
$5,867,582 $2,977,170 $1,832,860 $1,500,272 $1,062,429 $1,357,011 $2,543,475 $126,625 $17,267,424
$438,831
1,466
$504,124
3,781
$437,518
5,881
$560,347
8,380
$501,018
3,981
$816,567 $1,190,775
3,652
35,500
$6,127 4,455,307
67,200
4,559
$440,297
$507,905
$443,399
$568,727
$504,999
$852,067 $1,194,427
$10,686 $4,522,507
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 are $4.4 million and $17.2 million of consumer loans secured by single family
residential mortgage real estate that are in process of foreclosure as of December 31, 2021 and 2020, respectively. In addition to the
106
single family residential real estate loans in process of foreclosure, the Company also held $2.4 million and $3.4 million of foreclosed
single family residential properties in other real estate owned as of December 31, 2021 and 2020, respectively.
Loans Held for Sale
Loans held for sale totaled $93.1 million and $136.1 million, respectively, at December 31, 2021 and 2020. At December 31, 2021,
residential mortgage loans carried at the fair value option totaled $41.0 million with an unpaid principal balance of $40.1 million. All
other loans held for sale are carried at lower of cost or market.
Note 4. Property and Equipment
Property and equipment consisted of the following at December 31, 2021 and 2020:
(in thousands)
Land and land improvements
Buildings and leasehold improvements
Furniture, fixtures and equipment
Software
Assets under development
Accumulated depreciation and amortization
Property and equipment, net
December 31,
2021
2020
68,353
320,308
116,429
75,909
49,375
630,374
(280,065 )
350,309
$
$
77,334
341,542
118,027
76,113
39,301
652,317
(271,801 )
380,516
$
$
Assets under development is comprised primarily of software design and implementation costs.
Depreciation and amortization expense was $29.1 million, $30.1 million and $30.9 million for the years ended December 31, 2021,
2020, and 2019, respectively.
Property and Equipment Held for Sale
Certain of the Company’s property and equipment meet the criteria to be classified as assets held for sale. The carrying values of such
assets were $5.5 million and $1.6 million at December 31, 2021 and 2020, respectively, and were reported within Other Assets in the
consolidated balance sheets. For more information on the Company’s policy for accounting for assets held for sale, refer to Note 1 –
Summary of Significant Accounting Policies and Recent Accounting Pronouncements.
Note 5. Operating Leases
The Company has operating leases on a number of its branches, certain regional headquarters and other properties to limit its exposure
to ownership risks such as fluctuations in real estate prices and obsolescence. The Company leases real estate with lease terms
generally from five to 20 years, some of which have renewal options from one to 20 years. As these extension options are not
generally considered reasonably certain of renewal, they are not included in the lease term. The Company is not a lessee in any
contracts classified as finance leases.
The following tables present supplemental information pertaining to operating leases at and for the years ended December 31, 2021
and 2020.
(dollars in thousands)
Cash paid for amounts included in the measurement of lease liabilities for
operating leases
Right of use assets obtained in exchange for lease liabilities
Weighted average remaining lease term (in years)
Weighted average discount rate
Year ended December 31,
2020
2021
$
17,591
$
141
16,617
4,799
December 31,
2021
2020
12.56
3.37 %
12.90
3.44 %
107
The following table sets forth the maturities of the Company’s lease liabilities and the present value discount at December 31, 2021.
(dollars in thousands)
2022
2023
2024
2025
2026
Thereafter
Total
Present value discount
Lease liability
$
$
$
16,726
15,318
13,071
12,480
11,365
84,929
153,889
(31,810)
122,079
The following table sets forth the components of the Company’s lease expense for the years ended December 31, 2021 and 2020.
(in thousands)
Operating lease expense
Short-term lease expense
Variable lease expense
Sublease income
Total
Years ended December 31,
2020
2021
17,757
135
105
(320)
17,677
$
$
18,994
165
97
(138)
19,118
$
$
At December 31, 2021, the Company had not entered into any material leases that had not yet commenced.
Note 6. Goodwill and Other Intangible Assets
Goodwill represents the excess of the consideration paid over the fair value of the net assets acquired or the excess of the fair value of
the net liabilities assumed over the consideration received in a business combination. The carrying amount of goodwill was $855.5
million at both December 31, 2021 and 2020.
The Company completed its annual impairment test of goodwill as of September 30, 2021 by performing a qualitative (“Step Zero”)
assessment. The qualitative assessment involved the examination of changes in macroeconomic conditions, industry and market
conditions, overall financial performance, cost factors and other relevant entity-specific events, including changes in management and
other key personnel and changes in the share price of the Company’s common stock. As a result of the assessment, the Company
concluded that its goodwill was not impaired.
In the fourth quarter of 2020, the Company completed its annual test of impairment as of September 30, 2020 using multiple
approaches to measure the fair value of the reporting unit and concluded there was no impairment. These methods included an income
approach using the discounted net present value of estimated future cash flows and three market approaches using transaction or price-
to-forward earnings multiples, price to tangible book value methodologies using the actual price paid in recent acquisition transactions
for similar entities and a market capitalization approach using the Company’s stock price observed during the fourth quarter. The
results from each of the approaches were weighted equally, with the valuation of the reporting unit approximately 17% in excess of
net book value at September 30, 2020. Individually, no valuation method resulted in estimated fair value less than the Company’s
carrying value.
No goodwill impairment charges were recognized during the years ended December 31, 2021, 2020 or 2019.
Identifiable intangible assets with finite lives are amortized over the periods benefited and are evaluated for impairment similar to
other long-lived assets. The purchase and carrying values of intangible assets subject to amortization at December 31, 2021 and 2020
were as follows:
December 31, 2021
(in thousands)
Core deposit intangibles
Credit card and trust relationships
Purchase
Value
$
$
235,845
49,962
285,807
108
Accumulated
Amortization
$
188,135
27,446
215,581
$
Carrying
Value
$
$
47,710
22,516
70,226
(in thousands)
Core deposit intangibles
Credit card and trust relationships
Merchant processing relationships
Purchase
Value
$
$
235,845
49,962
10,000
295,807
December 31, 2020
Accumulated
Amortization
$
173,830
25,085
10,000
208,915
$
Carrying
Value
$
$
62,015
24,877
—
86,892
Aggregate amortization expense by category of finite lived intangible assets for the years ended December 31, 2021, 2020, and 2019
is as follows:
(in thousands)
Core deposit intangibles
Credit card and trust relationships
Merchant processing relationships
2021
Years Ended December 31,
2020
2019
$
$
14,304
2,361
—
16,665
$
$
16,864
2,637
415
19,916
$
$
17,132
2,883
829
20,844
At December 31, 2021, the weighted-average remaining life of core deposit intangibles was approximately 9 years, and the weighted-
average remaining life of other identifiable intangibles was approximately 14 years.
The following table shows estimated amortization expense of other intangible assets at December 31, 2021 for the five succeeding
years and all years thereafter, calculated based on current amortization schedules.
(in thousands)
2022
2023
2024
2025
2026
Thereafter
Note 7. Other Assets
$
$
14,033
11,557
9,413
7,985
5,322
21,916
70,226
Significant balances included in Other Assets in the Consolidated Balance Sheets at December 31, 2021 and 2020 are presented
below.
(in thousands)
Income tax receivable
Derivative assets
Derivative collateral
FHLB stock
Investments in Small Business Investment Companies and other
Investments in Low Income Housing Tax Credit entities
Other
Total
December 31,
2021
2020
$
128,092
75,867 $
66,207
52,743
46,500
36,297
42,032
$
447,738 $
101,301
150,180
90,311
104,708
42,475
37,464
41,891
568,330
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. The tax credits, when realized, will be reflected in the consolidated statements of income as a
reduction of income tax expense. Excluding accumulated amortization, the Company’s investments in affordable housing limited
partnerships totaled $37.5 million at both December 31, 2021 and 2020.
109
Note 8. Deposits
The following table presents a detail of deposits at December 31, 2021 and 2020:
(in thousands)
Noninterest-bearing deposits
Interest-bearing retail transaction and savings deposits
Interest-bearing public fund deposits
Public fund transaction and savings deposits
Public fund time deposits
Total interest-bearing public fund deposits
Retail time deposits
Brokered time deposits
Total interest-bearing deposits
Total deposits
The maturity of time deposits at December 31, 2021 follows.
(in thousands)
2022
2023
2024
2025
2026
Thereafter
Total time deposits
$
December 31,
2021
14,392,808
11,677,333
$
2020
12,199,750
10,435,362
3,216,651
77,956
3,294,607
1,091,959
9,190
16,073,089
30,465,897
$
3,068,555
166,381
3,234,936
1,813,705
14,124
15,498,127
27,697,877
$
$
$
1,003,610
120,786
33,277
8,012
8,371
5,049
1,179,105
Certificates of deposit in amounts greater than or equal to $250,000 totaled approximately $378.6 million at December 31, 2021.
Note 9. Short-Term Borrowings
The following table presents information concerning short-term borrowings at and for the years ended December 31, 2021 and 2020:
(in thousands)
Federal funds purchased:
Amount outstanding at period end
Average amount outstanding during period
Maximum amount at any month end during period
Weighted-average interest at period end
Weighted-average interest rate during period
Securities sold under agreements to repurchase:
Amount outstanding at period end
Average amount outstanding during period
Maximum amount at any month end during period
Weighted-average interest at period end
Weighted-average interest rate during period
FHLB borrowings:
Amount outstanding at period end
Average amount outstanding during period
Maximum amount at any month end during period
Weighted-average interest at period end
Weighted-average interest rate during period
$
$
December 31,
2021
2020
$
$
1,850
3,762
4,400
0.15 %
0.43 %
563,211
559,410
643,403
0.05 %
0.10 %
300
9,708
330,330
0.15 %
1.15 %
567,213
600,167
806,645
0.14 %
0.24 %
$
$
1,100,000
1,100,000
1,100,000
1,100,000
1,368,320
2,110,000
0.49 %
0.49 %
0.49 %
0.62 %
Federal funds purchased represent unsecured borrowings from other banks, generally on an overnight basis.
110
Securities sold under agreements to repurchase (“repurchase agreements”) are funds borrowed on a secured basis by selling securities
under agreements to repurchase, mainly in connection with treasury-management services offered to deposit customers. The customer
repurchase agreements mature daily and are secured by agency securities. As the Company maintains effective control over assets sold
under agreements to repurchase, the securities continue to be presented in the consolidated balance sheets. Because the Company acts
as a borrower transferring assets to the counterparty, and the agreements mature daily, the Company’s risk is limited.
The $1.1 billion of FHLB borrowings at December 31, 2021 consists of five fixed rate notes maturing between 2034 and 2035, that
are classified as short-term as the FHLB has the option to put (terminate) the advance prior to maturity.
Note 10. Long-Term Debt
At December 31, 2021 and 2020, long-term debt was comprised of the following:
(in thousands)
Subordinated notes payable, maturing June 2045
Subordinated notes payable, maturing June 2060
Other long-term debt
Less: unamortized debt issuance costs
Total long-term debt
December 31,
2021
2020
$
$
—
172,500
77,556
(5,836 )
244,220
$
$
150,000
172,500
66,062
(10,240 )
378,322
The following table sets forth unamortized debt issuance costs associated with the respective debt instruments at December 31, 2021:
(in thousands)
Subordinated notes payable, maturing June 2060
Other long-term debt
Total
Principal
172,500
77,556
250,056
$
$
Unamortized
Debt
Issuance
Costs
5,836
—
5,836
On June 15, 2021, the Company redeemed in full its 5.95% $150 million subordinated notes due 2045. The notes were redeemed at
100% of principal plus accrued and unpaid interest therein. Loss on extinguishment of debt included in other noninterest expense
totaling $4.2 million represents the disposal of unamortized loan costs associated with the original issuance of the notes.
On June 9, 2020, the Company completed the issuance of subordinated notes payable with an aggregate principal amount of $172.5
million, with a stated maturity of June 15, 2060. The notes accrue interest at a fixed rate of 6.25% per annum, with quarterly interest
payments that began September 15, 2020. Subject to prior approval by the Federal Reserve, the Company may redeem the notes in
whole or in part on any interest payment date on or after June 15, 2025. This debt qualifies as tier 2 capital in the calculation of certain
regulatory capital ratios.
Substantially all of the Company’s other long-term debt consists of borrowings associated with tax credit fund activities. Although
these borrowings have indicated maturities through 2050, each is expected to be satisfied at the end of the seven-year compliance
period for the related tax credit investments.
Note 11. 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 entered 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.
111
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 December 31, 2021 and 2020.
(in thousands)
Derivatives designated as hedging
instruments:
Interest rate swaps - variable rate
loans
Interest rate swaps - securities
December 31, 2021
December 31, 2020
Derivative (1)
Derivative (1)
Type of
Hedge
Notional or
Contractual
Amount
Assets
Liabilities
Notional or
Contractual
Amount
Assets
Liabilities
Cash Flow $ 1,125,000 $ 5,884 $ 4,421 $ 1,175,000 $ 50,962 $
—
Fair Value 1,837,650 22,138 10,690 1,158,150 6,686 18,920
$ 2,962,650 $ 28,022 $ 15,111 $ 2,333,150 $ 57,648 $ 18,920
Derivatives not designated as hedging
instruments:
Interest rate swaps
Risk participation agreements
N/A
N/A
$ 5,193,991 $ 75,819 $ 75,861 $ 4,806,258 $ 145,517 $ 148,778
108
217,437
35 216,511
35
11
Forward commitments to sell
residential mortgage loans
Interest rate-lock commitments
on residential mortgage loans
To Be Announced (TBA)
securities
Foreign exchange forward
contracts
Visa Class B derivative contract
Total derivatives
Less: netting adjustments (2)
Total derivate assets/liabilities
N/A
46,739
1
645 310,458
19
3,211
N/A
82,037 1,525
1 206,258 1,793
N/A
55,000
15
53
—
—
14
—
N/A
N/A
778
48,364
43,439
758
— 4,116
2,785
5,645
$ 5,687,007 $ 78,149 $ 81,469 $ 5,641,872 $ 150,180 $ 160,541
$ 8,649,657 $ 106,171 $ 96,580 $ 7,975,022 $ 207,828 $ 179,461
(57,648 ) (124,204 )
150,180 55,257
(30,304 ) (61,534 )
75,867 35,046
58,822 2,816
—
43,565
(1)
(2)
Derivative assets and liabilities are reported in other assets or 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. During the twelve months ended December 31, 2021, the Company terminated six cash flow hedges and
received approximately $23.7 million, which was recorded as accumulated other comprehensive income and will be accreted into
earnings through the original maturity dates of the respective contracts. The notional amounts of the swap agreements in place at
December 31, 2021 expire as follows: $475 million in 2022; $150 million in 2023; $250 million in 2026 and $250 million thereafter.
112
Fair Value Hedges of Interest Rate Risk
Interest rate swaps on securities available for sale
The Company is party to forward-starting fixed payer swaps that convert the latter portion of the term of certain available for sale
securities to a floating rate. These derivative instruments are designated as fair value hedges of interest rate risk. This strategy provides
the Company with a fixed rate coupon during the front-end unhedged tenor of the bonds and results in a floating rate security during
the back-end hedged tenor, with hedged start dates between August 2023 through August 2025, and maturity dates from December
2027 through March 2032. The fair value of the hedged item attributable to interest rate risk will be presented in interest income along
with the fair value of the hedging instrument.
The majority of the hedged available for sale securities is a closed portfolio of pre-payable commercial mortgage backed securities. In
accordance with ASC 815, prepayment risk may be excluded when measuring the change in fair value of such hedged items
attributable to interest rate risk under the last-of-layer approach. At December 31, 2021, the amortized cost basis of the closed
portfolio of pre-payable commercial mortgage backed securities totaled $2.0 billion. The amount that represents the hedged items was
$1.8 billion and the basis adjustment associated with the hedged items totaled $12.1 million.
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.
113
At the closing of the loan, the rate lock commitment derivative expires and the Company records a loan held for sale at fair value
under the election of fair value option.
Customer foreign exchange forward contract derivatives
The Company enters into foreign exchange forward derivative agreements, primarily forward foreign currency contracts, with
commercial banking customers to facilitate their risk management strategies. The Bank manages its risk exposure from such
transactions by entering into offsetting agreements with unrelated financial institutions. The Bank has not elected to designate these
foreign exchange forward contract derivatives as hedges; as such, changes in the fair value of both the customer derivatives and the
offsetting derivatives are recognized directly in earnings.
Visa Class B derivative contract
The Company is a member of Visa USA. During the fourth quarter of 2018, the Company sold the majority of its Visa Class B
holdings, at which time it entered into a derivative agreement with the purchaser whereby the Company will make or receive cash
payments whenever the conversion ratio of the Visa Class B shares into Visa Class A shares is adjusted. The conversion ratio changes
when Visa deposits funds to a litigation escrow established by Visa to pay settlements for certain litigation, for which Visa is
indemnified by Visa USA members. The Company is also required to make periodic financing payments to the purchaser until all of
Visa’s covered litigation matters are resolved. Thus, the derivative contract extends until the end of Visa’s covered litigation matters,
the timing of which is uncertain.
The contract includes a contingent accelerated termination clause based on the credit ratings of the Company. At December 31, 2021
and 2020, the fair value of the liability associated with this contract was $4.1 million and $5.6 million respectively. Refer to Note 20 –
Fair Value of Financial Instruments for discussion of the valuation inputs and process for this derivative liability.
Effect of Derivative Instruments on the Statements of Income
The effects of derivative instruments on the consolidated statements of income for the years ended December 31, 2021, 2020, and
2019 are presented in the table below.
Derivative Instruments:
Cash flow hedges:
Variable rate loans
Fair value hedges:
Securities
Securities – termination
Brokered deposits
Derivatives not designated as hedging:
Residential mortgage banking
Customer and all other instruments
Total gain
Credit Risk-Related Contingent Features
Location of Gain (Loss)
Recognized in the
Statements of Income:
Years Ended December 31,
2021
2020
2019
Interest income - loans
$
26,674 $
17,351 $
(4,255)
Interest income - securities -
taxable
Noninterest income - securities
transactions, net
Interest expense - deposits
Noninterest income - secondary
mortgage market operations
Noninterest income - other
noninterest income
$
(640)
2,499
—
1,568
8
—
46
—
13,477
43,578 $
12,814
30,219 $
1
—
(1,752)
—
12,958
6,952
Certain of the Bank’s derivative instruments contain provisions allowing the financial institution counterparty to terminate the
contracts in certain circumstances, such as the 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. The
Company is 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 December 31, 2021 and 2020 was $49.4 million and $109.7 million,
respectively, for which the Company had posted collateral of $15.0 million and $44.7 million, respectively.
114
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 December 31, 2021 and 2020 is presented in the following tables:
As of December 31, 2021
(in thousands)
Derivative Assets
Derivative Liabilities
As of December 31, 2020
(in thousands)
Derivative Assets
Derivative Liabilities
Gross
Amounts
Recognized
36,790
85,448
$
$
Gross
Amounts
Recognized
61,529
$
$ 171,275
Gross
Amounts
Offset in the
Statement of
Financial
Position
Net Amounts
Presented in
the
Statement of
Financial
Position
$
$
(29,882 ) $
(63,204 ) $
Gross Amounts Not Offset in the
Statement of Financial Position
Financial
Instruments
6,908
$
6,908
22,244 $
6,908
Cash
Collateral
Net
Amount
$
$
—
66,207
$
$
—
(50,871 )
Gross
Amounts
Offset in the
Statement of
Financial
Position
Net Amounts
Presented in
the
Statement of
Financial
Position
(58,660 ) $
$
$ (126,434 ) $
2,869 $
44,841 $
Gross Amounts Not Offset in the
Statement of Financial Position
Financial
Instruments
2,869
2,869
Cash
Collateral
Net
Amount
$
$
$
—
90,312 $
—
(48,340 )
The Company has excess posted collateral compared to total exposure due to initial margin requirements for day-to-day rate volatility.
Note 12. Stockholders’ Equity
Common Shares Outstanding
Common shares outstanding exclude treasury shares of 5.1 million and 4.5 million with a first-in-first-out cost basis of $175.8 million
and $150.7 million at December 31, 2021 and 2020, respectively. Shares outstanding also exclude unvested restricted share awards of
1.1 million and 1.7 million at December 31, 2021 and 2020, respectively.
Stock Buyback Programs
On April 22, 2021, the Company’s board of directors approved a stock buyback program whereby the Company is authorized to
repurchase up to 4.3 million shares of its common stock through the program’s expiration date of December 31, 2022. The program
allows the Company to repurchase its common shares in the open market, by block purchase, through accelerated share repurchase
programs, in privately negotiated transactions, or otherwise, in one or more transactions. The Company is not obligated to purchase
any shares under this program, and the board of directors has the ability to terminate or amend the program at any time prior to the
expiration date. During the year ended December 31, 2021, the Company repurchased 449,876 shares of its common stock at an
average cost of $48.45 per share, inclusive of commissions.
Prior to its expiration date of December 31, 2020, the Company had in place a stock buyback program that authorized the repurchase
of up to 5.5 million shares of its common stock. The program, as amended, allowed the Company to repurchase its common shares on
the open market, by block purchase, through accelerated share repurchase programs, in privately negotiated transactions, or as
otherwise determined by the Company, in one or more transactions. The Company was not obligated to purchase any shares under this
program, and the board of directors had the ability to terminate or amend the program at any time prior to the expiration date. In total,
the Company repurchased 4.9 million of the 5.5 million authorized shares under this buyback program at an average cost of $37.65 per
share, inclusive of commissions.
115
Accumulated Other Comprehensive Income (Loss)
A roll forward of the components of AOCI is included as follows:
(in thousands)
Balance, December 31, 2018
Net change in unrealized gain (loss)
Reclassification of net gain (loss) realized and
included in earnings
Valuation adjustments for employee benefit plans
Unrealized loss on securities transferred to available
for sale
Amortization of unrealized net loss on securities
transferred to held to maturity
Income tax expense
Balance, December 31, 2019
Net change in unrealized gain (loss)
Reclassification of net gain (loss) realized and
included in earnings
Valuation adjustments for employee benefit plans
Amortization of unrealized net gain on securities
transferred to held to maturity
Income tax expense (benefit)
Balance, December 31, 2020
Net change in unrealized gain (loss)
Reclassification of net gain (loss) realized and
included in earnings
Valuation adjustments to pension plan attributable
to VERIP and curtailment
Other valuation adjustments for employee benefit
plans
Amortization of unrealized net gain on securities
transferred to held to maturity
Income tax expense (benefit)
Balance, December 31, 2021
Available
for Sale
Securities
HTM
Securities
Transferred
from AFS
Employee
Benefit
Plans
Cash Flow
Hedges
Equity
Method
Investment
Total
$ (50,125 ) $ (12,044 ) $ (110,247 ) $ (8,293 ) $
— 28,943
115,413
—
— $ (180,709 )
(434 ) 143,922
—
—
—
—
9,174 4,255
—
2,398
— 13,429
2,398
—
(13,236 ) 13,236
—
—
—
—
— 3,153
23,102 3,706
$ 28,950 $
183,441
—
—
—
2,603 7,506
639 $ (101,278 ) $ 17,399 $
— 45,831
—
3,153
— 36,917
(434 ) $ (54,724 )
(4,935 ) 224,337
—
—
—
— (37,451 )
6,368 (17,351 )
—
— (10,983 )
— (37,451 )
—
41,167
$ 171,224 $
(208,760 )
—
(470 )
(107 )
276 $ (125,573 ) $ 39,511 $
—
(6,788 ) 6,368
—
— (3,258 )
(470 )
—
— 40,640
(5,369 ) $ 80,069
438 (211,580 )
2,166
—
4,555 (26,674 )
4,468 (15,485 )
—
— 59,606
—
— 59,606
—
(6,735 )
—
—
(6,735 )
—
(46,407 )
$ 11,037 $
(158 )
—
—
(35 ) 12,799 (6,705 )
153 $ (80,946 ) $ 16,284 $
—
(158 )
— (40,348 )
(463 ) $ (53,935 )
Accumulated Other Comprehensive Income or Loss (“AOCI”) is reported as a component of stockholders’ equity. AOCI can include,
among other items, unrealized holding gains and losses on securities available for sale (“AFS”), including the Company’s share of
unrealized gains and losses reported by a partnership accounted for under the equity method, gains and losses associated with pension
or other post-retirement benefits that are not recognized immediately as a component of net periodic benefit cost, and gains and losses
on derivative instruments that are designated as, and qualify as, cash flow hedges. Net unrealized gains and losses on AFS securities
reclassified as securities held to maturity (“HTM”) also continue to be reported as a component of AOCI and will be amortized over
the estimated remaining life of the securities as an adjustment to interest income. Subject to certain thresholds, unrealized losses on
employee benefit plans will be reclassified into income as pension and post-retirement costs are recognized over the remaining service
period of plan participants. Accumulated gains or losses on the cash flow hedge of the variable rate loans described in Note 11 will be
reclassified into income over the life of the hedge. Accumulated other comprehensive loss resulting from the terminated interest rate
swaps will be amortized over the remaining maturities of the designated instruments. Gains and losses within AOCI are net of
deferred income taxes, where applicable.
116
The following table shows the line items in the consolidated statements of income affected by amounts reclassified from AOCI:
Amount reclassified from AOCI (a)
(in thousands)
Amortization of unrealized net gain (loss) on securities
transferred to HTM
Tax effect
Net of tax
Loss on sale of AFS securities
Tax effect
Net of tax
Amortization of defined benefit pension and post-retirement
items
Tax effect
Net of tax
Reclassification of unrealized gain or loss on cash flow hedges
Tax effect
Net of tax
Amortization of gain (loss) on terminated cash flow hedges
Tax effect
Net of tax
Reclassification of unrealized loss on equity method investment
Tax effect
Net of tax
Total reclassifications, net of tax
$
Year Ended December 31,
2021
2020
Increase (decrease) in affected line
item in the income statement
158
$
(35 )
123
(2,166 )
487
(1,679 )
(4,555 )
1,015
(3,540 )
22,561
(5,054 )
17,507
4,113
(921 )
3,192
(4,468 )
—
(4,468 )
$
11,135
Interest income
470
(105 ) Income taxes
365 Net income
488 Securities transactions, net
(109 ) Income taxes
379 Net income
(6,368 ) Other noninterest expense
1,390 Income taxes
(4,978 ) Net income
18,704 Interest income
(4,182 ) Income taxes
14,522 Net income
(1,353 ) Interest income
303 Income taxes
(1,050 ) Net income
— Noninterest income
— Income taxes
— Net income
9,238 Net income
$
(a)
Amounts in parentheses indicate reduction in net income.
Regulatory Capital
Measures of regulatory capital are an important tool used by regulators to monitor the financial health of financial institutions. The
primary quantitative measures used to gauge capital adequacy are Common equity tier 1, Tier 1 and Total regulatory capital to risk-
weighted assets (risk-based capital ratios) and the Tier 1 capital to average total assets (leverage ratio). Both the Company and the
Bank subsidiary are required to maintain minimum risk-based capital ratios of 8.0% total capital, 4.5% Tier 1 Common Equity, and
6.0% Tier 1 capital. The minimum leverage ratio is 3.0% for bank holding companies and banks that meet certain specified criteria,
including having the highest supervisory rating. All others are required to maintain a leverage ratio of at least 4.0%.
To evaluate capital adequacy, regulators compare an institution’s regulatory capital ratios with their agency guidelines, as well as with
the guidelines established as part of the uniform regulatory framework for prompt corrective supervisory action toward financial
institutions. The framework for prompt corrective action categorizes capital levels into one of five classifications rating from well-
capitalized to critically under-capitalized. For an institution to be eligible to be classified as well capitalized its total risk-based capital
ratios must be at least 10.0% for total capital, 6.5% for Tier 1 Common Equity and 8.0% for Tier 1 capital, and its leverage ratio must
be at least 5.0%. In reaching an overall conclusion on capital adequacy or assigning a classification under the uniform framework,
regulators also consider other subjective and quantitative measures of risk associated with an institution. The Company and the Bank
were deemed to be well capitalized based upon the most recent notifications from their regulators. There are no conditions or events
since those notifications that management believes would change the classifications. At December 31, 2021 and 2020, the Company
and the Bank were in compliance with all of their respective minimum regulatory capital requirements.
117
5.00
5.00
6.50
6.50
8.00
8.00
5.00
5.00
6.50
6.50
8.00
8.00
Following is a summary of the actual regulatory capital amounts and ratios for the Company and the Bank together with
corresponding regulatory capital requirements at December 31, 2021 and 2020.
($ in thousands)
At December 31, 2021
Tier 1 leverage capital
Actual
Required for
Minimum Capital
Adequacy
Required
To Be Well
Capitalized
Amount
Ratio %
Amount
Ratio %
Amount
Ratio %
Hancock Whitney Corporation
Hancock Whitney Bank
$ 2,890,770
2,926,874
8.25 $ 1,402,223
8.36 1,401,157
4.00 $ 1,752,779
4.00 1,751,447
Common equity tier 1 (to risk weighted assets)
Hancock Whitney Corporation
Hancock Whitney Bank
Tier 1 capital (to risk weighted assets)
Hancock Whitney Corporation
Hancock Whitney Bank
Total capital (to risk weighted assets)
Hancock Whitney Corporation
Hancock Whitney Bank
At December 31, 2020
Tier 1 leverage capital
$ 2,890,770
2,926,874
11.09 $ 1,172,563
11.24 1,171,341
4.50 $ 1,693,702
4.50 1,691,937
$ 2,890,770
2,926,874
11.09 $ 1,563,417
11.24 1,561,788
6.00 $ 2,084,557
6.00 2,082,384
$ 3,345,387
3,208,991
12.84 $ 2,084,557
12.33 2,082,384
8.00 $ 2,605,696
8.00 2,602,980
10.00
10.00
Hancock Whitney Corporation
Hancock Whitney Bank
$ 2,534,049
2,607,215
7.88 $ 1,287,103
8.11 1,286,059
4.00 $ 1,608,878
4.00 1,607,573
Common equity tier 1 (to risk weighted assets)
Hancock Whitney Corporation
Hancock Whitney Bank
Tier 1 capital (to risk weighted assets)
Hancock Whitney Corporation
Hancock Whitney Bank
Total capital (to risk weighted assets)
Hancock Whitney Corporation
Hancock Whitney Bank
$ 2,534,049
2,607,215
10.61 $ 1,074,272
10.94 1,072,924
4.50 $ 1,551,726
4.50 1,549,778
$ 2,534,049
2,607,215
10.61 $ 1,432,362
10.94 1,430,565
6.00 $ 1,909,817
6.00 1,907,420
$ 3,155,692
2,905,988
13.22 $ 1,909,817
12.19 1,907,420
8.00 $ 2,387,271
8.00 2,384,275
10.00
10.00
The Company elected the five-year rule that provides a full delay of the estimated impact of CECL on regulatory capital transition
(0%) for 2020 and 2021, followed by a three-year transition (25% of the impact included in 2022, 50% in 2023, 75% in 2024 and
100% thereafter). The two-year delay included the full impact of day one CECL plus the estimated impact of current CECL activity
calculated quarterly as 25% of the current ACL over the day one balance (“modified transition amount”). The modified transition
amounts were recalculated each quarter in 2020 and 2021, with the December 31, 2021 impact of $24.9 million, plus the day one
impact of $44.1 million (net of tax) carrying through the remaining three years of the transition.
Regulatory Restrictions on Dividends
Regulatory policy statements provide that generally, bank holding companies should pay dividends only out of current operating
earnings and that the level of dividends must be consistent with current and expected capital requirements. Dividends received from
the Bank have been the primary source of funds available to the Company for the payment of dividends to its stockholders. Federal
and state banking laws and regulations restrict the amount of dividends the Bank may distribute to the Company without prior
regulatory approval, as well as the amount of loans it may make to the Company. Dividends paid by the Bank are subject to approval
by the Commissioner of Banking and Consumer Finance of the State of Mississippi. Further, a capital conservation buffer of 2.5%
above each of the minimum capital ratio requirements (common equity tier 1, Tier 1, and total risk-based capital) must be met for a
bank or bank holding company to be able to pay dividends.
118
Note 13. Noninterest Income and Noninterest Expense
The components of other noninterest income and other noninterest expense are as follows:
(in thousands)
Other noninterest income:
Income from bank-owned life insurance
Credit-related fees
Income from derivatives
Other miscellaneous income
Total other noninterest income
Other noninterest expense:
Advertising
Corporate value and franchise taxes
Entertainment and contributions
Telecommunication and postage
Printing and supplies
Travel expenses
Tax credit investment amortization
Other retirement expense
Loss on facilities and equipment from consolidation
Loss on extinguishment of debt
Other miscellaneous expense
Total other noninterest expense
Note 14. Income Taxes
2021
Years Ended December 31,
2020
2019
$
$
$
$
18,330
11,001
13,477
31,993
74,801
12,441
14,478
7,867
12,646
3,728
2,697
4,436
(27,941 )
13,863
4,165
32,829
81,209
$
$
$
$
18,179
11,255
12,814
14,137
56,385
13,011
16,578
9,865
14,991
5,063
2,297
3,843
(25,133 )
3,012
—
23,778
67,305
$
$
$
$
14,946
11,399
12,958
15,228
54,531
15,251
15,949
10,777
14,588
4,947
5,278
4,943
(16,561 )
—
—
37,282
92,454
Income tax expense (benefit) included in net income consisted of the following components:
(in thousands)
Included in net income
Current federal
Current state
Total current provision
Deferred federal
Deferred state
Total deferred provision
Total expense (benefit) included in net income
2021
Years Ended December 31,
2020
2019
$
$
86,858 $
7,607
94,465
7,035
3,341
10,376
104,841 $
(58,723 )
(132 )
(58,855 )
(17,000 )
(3,716 )
(20,716 )
(79,571 )
$
$
12,172
6,087
18,259
46,290
810
47,100
65,359
Income tax expense (benefit) does not reflect the tax effects of amounts recognized in other comprehensive income and in AOCI, a
separate component of stockholders’ equity. These amounts include unrealized gains and losses on securities available for sale or
transferred to held to maturity, unrealized gains and losses on derivatives and hedging transactions, and valuation adjustments of
defined benefit and other post-retirement benefit plans. Refer to Note 12 – Stockholders’ Equity for additional information.
Temporary differences arise between the tax bases of assets or liabilities and their carrying amounts for financial reporting purposes.
The expected tax effects from when these differences are resolved are recorded currently as deferred tax assets or liabilities.
119
Significant components of the Company’s deferred tax assets and liabilities were as follows:
(in thousands)
Deferred tax assets:
Allowance for loan losses
Loan purchase accounting adjustments
Tax credit carryforward
Federal/state net operating loss
Lease liability
Other
Gross deferred tax assets
State valuation allowance
Net deferred tax assets
Deferred tax liabilities:
Employee compensation and benefits
Securities
Fixed assets & intangibles
Lease Financing
Right-of-use Asset
Other
Gross deferred tax liabilities
Net deferred tax liability
December 31,
2021
2020
85,118 $
1,838
2,326
3,646
27,553
9,704
130,185
(3,646 )
126,539 $
(11,137 ) $
(5,389 )
(34,475 )
(54,127 )
(23,075 )
(17,770 )
(145,973 ) $
(19,434 ) $
111,170
1,681
5,700
4,462
29,352
17,801
170,166
(3,635 )
166,531
(10,044 )
(51,036 )
(46,762 )
(54,581 )
(24,872 )
(28,642 )
(215,937 )
(49,406 )
$
$
$
$
$
Reported income tax expense (benefit) differed from amounts computed by applying the statutory income tax rate of 21% for the years
ended December 31, 2021, 2020 and 2019 to earnings or loss before income taxes. Historically, the primary differences have been due
to tax-exempt income, federal and state tax credits and excess tax benefits from stock-based compensation. The year ended December
31, 2020 includes an incremental 14% tax benefit totaling $30.2 million associated with the five-year carryback of both the 2020 net
operating loss (“NOL”) and the NOL attribute inherited from an acquired entity to a 35% statutory rate tax year, as allowed by
provisions of the CARES Act. In addition, the 2021 effective tax rate was favorably impacted by a $4.9 million benefit associated with
changing certain fixed asset tax elections that resulted in an increase in the 2020 NOL. The main source of tax credits has been
investments in tax-advantaged securities and tax credit projects. These investments are made primarily in the markets we serve and
directed at tax credits issued under the Qualified Zone Academy Bonds (“QZAB”), Qualified School Construction Bonds (“QSCB”),
as well as Federal and State New Market Tax Credit (“NMTC”) and Low-Income Housing Tax Credit (“LIHTC”) programs. A
summary of the factors that impacted income tax expense follows.
($ in thousands)
Taxes computed at statutory rate
Increases (decreases) in taxes resulting
from:
State income taxes, net of federal
income tax benefit
Tax-exempt interest
Life insurance contracts
Tax credits
Employee share-based compensation
FDIC assessment disallowance
Net operating loss carryback under
CARES act
Other, net
Income tax expense (benefit)
2021
%
Amount
$ 119,292
Years Ended December 31,
2020
2019
Amount
%
Amount
%
21.0 % $
(26,196 )
21.0 % $
82,475
21.0 %
9,048
(9,100 )
(2,653 )
(7,889 )
(1,671 )
1,609
1.6
(1.6 )
(0.5 )
(1.4 )
(0.3 )
0.3
(1,269 )
(10,444 )
(4,857 )
(8,072 )
1,351
2,094
(4,948 )
1,153
$ 104,841
(0.9 )
0.3
18.5 % $
(30,167 )
(2,011 )
(79,571 )
1.0
8.4
3.9
6.5
(1.1 )
(1.7 )
24.2
1.6
63.8 % $
7,204
(10,435 )
(3,901 )
(10,293 )
(842 )
1,895
1.8
(2.7 )
(1.0 )
(2.6 )
(0.2 )
0.5
—
(744 )
65,359
—
(0.2 )
16.6 %
At December 31, 2021, the Company had approximately $2.3 million in federal and state tax credit carryforwards that originated in
the tax years from 2018 through 2021 and begin expiring in 2025. These carryforwards are primarily from investments in federal and
state NMTC projects. The Company expects to fully utilize these tax credit carryforwards prior to their respective expiration dates.
120
The Company had approximately $58.4 million in state net operating loss carryforwards that originated in the tax years 2003 through
2020 and begin expiring in 2023. A $58.4 million gross state valuation allowance has been established for all non-bank entity level
state NOL carryforwards, which translates to a net $3.6 million valuation allowance in the Company’s deferred tax inventory. The
impact of this valuation allowance is not material to the financial statements.
The tax benefit of a position taken or expected to be taken in a tax return should be recognized when it is more likely than not that the
position will be sustained on its technical merits. The liability for unrecognized tax benefits was immaterial as of December 31, 2021,
2020 and 2019. The Company does not expect the liability for unrecognized tax benefits to change significantly during 2022. The
Company recognizes interest and penalties, if any, related to income tax matters in income tax expense, and the amounts recognized
during 2021, 2020 and 2019 were insignificant.
The Company and its subsidiaries file a consolidated U.S. federal income tax return, as well as filing various state returns. Generally,
the returns for years prior to 2018 are no longer subject to examination by taxing authorities.
Note 15. Earnings (Loss) Per Share
The Company calculates earnings (loss) per share using the two-class method. The two-class method allocates net income or loss to
each class of common stock and participating security according to common dividends declared and participation rights in
undistributed earnings. For reporting periods in which a net loss is recorded, net loss is not allocated to participating securities because
the holders of such securities bear no contractual obligation to fund or otherwise share in the loss. Participating securities consist of
nonvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents
A summary of the information used in the computation of earnings (loss) per common share follows.
($ in thousands, except per share data)
Numerator:
Net income (loss) to common shareholders
Net income or dividends allocated to participating securities - basic
and diluted
Net income (loss) allocated to common shareholders - basic and diluted
Denominator:
Weighted-average common shares - basic
Dilutive potential common shares
Weighted average common shares - diluted
Earnings (loss) per common share:
Basic
Diluted
2021
Years Ended December 31,
2020
2019
$
463,215 $
(45,174 ) $
327,380
$
9,134
454,081 $
1,756
(46,930 ) $
5,546
321,834
86,823
204
87,027
86,533
—
86,533
$
$
5.23 $
5.22 $
(0.54 ) $
(0.54 ) $
86,488
111
86,599
3.72
3.72
Potential common shares consist of stock options, nonvested performance-based awards, and nonvested restricted share awards
deferred under the Company’s nonqualified deferred compensation plan. These potential common shares do not enter into the
calculation of diluted earnings per share if the impact would be antidilutive, i.e., increase earnings per share or reduce a loss per share.
For reporting periods in which a net loss is reported, such as the year ended December 31, 2020, no effect is given to potentially
dilutive common shares in the computation of loss per common share as any impact from such shares would be antidilutive. The
weighted average of potentially dilutive common shares that were anti-dilutive totaled 1,079 for the year ended December 31, 2021
and 15,815 for the year ended December 31, 2019 and, as such were excluded from the calculation of diluted earnings per common
diluted share for the respective periods.
The diluted earnings per share computation for the year ended December 31, 2019 also excludes the impact of the forward contract
related to the October 21, 2019 accelerated share repurchase transaction. Based upon the average daily volume weighted-average price
of the Company’s common stock at December 31, 2019, the counterparty to the transaction was expected to deliver additional shares
for the settlement of the forward contract upon settlement; as such, the impact of the forward contract related to the accelerated share
repurchase transaction would have been anti-dilutive to earnings per share.
Note 16. Segment Reporting
Accounting standards require that information be reported about a company’s operating segments using a “management approach.”
Reportable segments are identified in these standards as those revenue-producing components for which discrete financial information
is produced internally and which are subject to evaluation by the chief operating decision maker in deciding how to allocate resources
to segments. Consistent with the Company’s strategy that is focused on providing a consistent package of banking products and
121
services across all markets, the Company has identified its overall banking operations as its only reportable segment. Because the
overall banking operations comprise substantially all of the consolidated operations, no separate segment disclosures are presented.
Note 17. Retirement Benefit 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. In 2017,
the Pension Plan was amended to exclude any individual hired or rehired by the Company after June 30, 2017 from eligibility to
participate. The Pension Plan amendment further provided that the accrued benefits of each participant in the Pension Plan whose
combined age plus years of service as of January 1, 2018 totaled less than 55 were to be frozen as of January 1, 2018 and not
thereafter increase.
The Company makes contributions to this 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 was not required
to make a contribution to the Pension Plan during 2021 or 2020. The Company made a $100 million discretionary contribution to the
Pension Plan in 2019, the timing and amount of which was determined with the intent to optimize investment return. The Company
does not anticipate being required to make a contribution, nor does it anticipate making a discretionary contribution to the Pension
Plan in 2022.
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. The 401(k) Plan was also amended during the
second quarter of 2017 for participants whose benefits are frozen under the Pension Plan to add an enhanced Company contribution
beginning January 1, 2018, in the amount of 2%, 4% or 6% of such participant’s eligible compensation, based on the participant’s age
and years of service with the Company. The 401(k) Plan’s amendment further provided that the Company will contribute to the
benefit of those associates of the Company hired or rehired after June 30, 2017 and those associates of the Company never enrolled in
the Pension Plan an additional basic contribution in an amount equal to 2% of the associate’s eligible compensation beginning January
1, 2018. Participants vest in the new basic and enhanced Company contributions upon completion of three years of service.
The Company’s 401(k) plan matching expense totaled $16.6 million, $17.4 million and $15.7 million for the years ended December
31, 2021, 2020, and 2019, respectively.
Certain associates who were designated executive officers of Whitney Holding Corporation and/or Whitney National Bank before the
acquisition by the Company are also covered by an unfunded nonqualified defined benefit pension plan. The benefits under this
nonqualified plan were designed to supplement amounts to be paid under the defined benefit plan previously maintained for
employees of Whitney Holding Corporation and/or Whitney National Bank (the “Whitney Pension Plan”), and are calculated using the
Whitney Pension Plan’s formula, but without applying the restrictions imposed on qualified plans by certain provisions of the Internal
Revenue Code. Accrued benefits under this plan were frozen as of December 31, 2012 in connection with the merger of the Whitney
Pension Plan into the Company’s qualified defined benefit pension plan, and no future benefits will be accrued under this plan.
The Company also sponsors defined benefit postretirement plans for certain associates. The Hancock postretirement plans are
available only to associates hired by the Company prior to January 1, 2000. The Hancock plans provide health care and life insurance
benefits to retiring associates who participate in medical and/or group life insurance benefit plans for active associates and have
reached 55 years of age with ten years of service, at the time of retirement. The postretirement health care plan is contributory, with
retiree contributions adjusted annually and subject to certain employer contribution maximums.
The Whitney postretirement plans are available only to former employees of Whitney Holding Corporation and/or Whitney National
Bank who meet the eligibility requirements, and offer health care and life insurance benefits for eligible retirees and their eligible
dependents. Participant contributions are required under the health plan. These plans restrict eligibility for postretirement health
benefits to retirees already receiving benefits as of the date of the plan amendments in 2007 and to those active participants who were
eligible to receive benefits as of December 31, 2007 (i.e., were age 55 with ten years of credited service). Life insurance benefits are
currently only available to associates who retired before December 31, 2007.
The Company assumed certain trends in health care costs in the determination of the benefit obligations. The plans assumed a 6.25%
increase in health costs, declining to 5.5% uniformly over a three year period, and then following the Getzen model thereafter. At
December 31, 2021, the mortality assumption was based on Revised RP-2014 Employee and Healthy Annuitants Bottom Quartile
Generational Mortality Table for Males and Females - Projected with Improvement Scale MP-2021.
122
The following tables detail the changes in the benefit obligations and plan assets of the defined benefit plans for the years ended
December 31, 2021 and 2020, as well as the funded status of the plans at each year end and the amounts recognized in the Company’s
consolidated balance sheets. The Company uses a December 31 measurement date for all defined benefit pension plans and other
postretirement benefit plans.
(in thousands)
Change in benefit obligation
Benefit obligation at beginning of year
$
Service cost
Interest cost
Plan participants' contributions
Net actuarial gain (loss)
Special termination benefits
Benefits paid
Benefit obligation, end of year
Change in plan assets
Fair value of plan assets at beginning of year
Actual return on plan assets
Employer contributions
Plan participants' contributions
Benefit payments
Expenses
Fair value of plan assets, end of year
Funded status at end of year - net asset (liability)
Amounts recognized in accumulated other
comprehensive loss
Unrecognized loss at beginning of year
Net actuarial loss (gain)
Unrecognized gain (loss) at end of year
Projected benefit obligation
Accumulated benefit obligation
Fair value of plan assets
$
$
$
$
2021
2020
2021
2020
Pension Benefits
Other Post-
Retirement Benefits
660,309 $
11,616
13,476
—
(16,000 )
16,052
(38,621 )
646,832
815,304
83,939
1,181
—
(38,621 )
(1,920 )
859,883
213,051 $
581,866 $
12,898
16,207
—
70,777
—
(21,439 )
660,309
752,138
84,810
1,178
—
(21,439 )
(1,383 )
815,304
154,995 $
18,330 $
93
348
778
(1,506 )
4,173
(1,934 )
20,282
—
—
1,156
778
(1,934 )
—
—
(20,282 ) $
16,713
105
484
538
1,910
—
(1,420 )
18,330
—
—
882
538
(1,420 )
—
—
(18,330 )
164,770 $
(56,649 )
108,121 $
646,832 $
607,408
859,883
136,252 $
28,518
164,770 $
660,309
624,999
815,304
(2,804 ) $
(777 )
(3,581 ) $
(5,369 )
2,565
(2,804 )
The net funded status of $213.1 million for pension benefits plans includes an excess of plan assets over the benefit obligation of
$228.1 million on the defined benefit pension plan, offset by an unfunded benefit obligation of $15.1 million for the nonqualified
retirement plan.
Net actuarial loss is a significant component of the change in the projected benefit obligation of the Pension Plan for the year ended
December 31, 2021. The actuarial loss was primarily driven by a change in the discount rate used in computing the projected benefit
obligation at December 31, 2021.
During the twelve months ended December 31, 2021, the Company completed a Voluntary Early Retirement Incentive Program
(VERIP), which was accepted by approximately 260 eligible Pension Plan participants. The event constituted a curtailment of the
Pension Plan and resulted in a re-measurement of the projected benefit obligation. The program had two components: a supplemental
cash incentive, substantially all of which was paid through the Pension Plan with existing plan assets, and coverage in a post-
retirement medical plan, with each component having specific age and years of service requirements. The impact of offering these
incentives is classified as special termination benefits in the table above. As of the re-measurement date of April 30, 2021, Pension
Plan assets totaled $808 million and the benefit obligation totaled $597 million.
123
The following table shows net periodic benefit cost included in expense and the changes in the amounts recognized in AOCI during
2021, 2020, and 2019.
Years Ended December 31,
($ in thousands)
Net periodic benefit cost
Service cost
Interest cost
Expected return on plan assets
Special termination benefits
Amortization of net (gain) loss/ prior service cost
Net periodic benefit cost/benefit
Other changes in plan assets and benefit
obligations recognized in other
comprehensive income, before taxes
Net (loss) gain recognized during the year
Net actuarial loss (gain)
Total recognized in other comprehensive
Income/loss
Total recognized in net periodic benefit
cost and other comprehensive income/loss
Discount rate for benefit obligations
Discount rate for net periodic benefit cost
Expected long-term return on plan assets
Rate of compensation increase
2021
2020
Pension Benefits
2019
2021
2020
Other Post-Retirement Benefits
2019
$ 11,616 $ 12,898 $ 10,981 $
13,476 16,207 18,843
(46,654 ) (48,191 ) (45,199 )
16,052
5,284 7,021 10,087
93 $
348
—
— 4,173
(729 )
(226 ) (12,065 ) (5,288 ) 3,885
—
105 $
484
—
95
621
—
(653 )
(64 )
(913 )
(197 )
(5,284 ) (7,021 ) (10,087 )
653
(51,365 ) 35,539 (3,131 ) (1,506 ) 1,912
729
913
733
(56,649 ) 28,518 (13,218 )
(777 ) 2,565 1,646
$ (56,875 )
$ 16,453 $ (18,506 )
$ 3,108
$ 2,501 $ 1,449
2.77 %
2.40 %
5.75 %
2.40 %
3.14 %
6.50 %
scaled **
scaled *
3.14 %
4.14 %
7.25 %
scaled *
2.32 %
2.31 %
n/a
n/a
2.31 %
3.11 %
n/a
n/a
3.11 %
4.10 %
n/a
n/a
*
**
Graded scale, declining from 7.25% at age 20 to 2.25% at age 60
Graded scale, declining from 7.25% at age 20 to 2.25% at age 65
The long term rate of return on plan assets is determined by using the weighted-average of historical real returns for major asset
classes based on target asset allocations. For all periods presented, the discount rate for the benefit obligation was calculated by
matching expected future cash flows to the USI Consulting Group Pension Discount Curve (AA).
The following table presents expected plan benefit payments over the ten years succeeding December 31, 2021:
(in thousands)
2022
2023
2024
2025
2026
2027-2031
.
Pension
Post-Retirement
Total
$ 25,683 $ 1,950 $
1,889
1,555
1,251
997
4,680
12,322 $
26,386
27,566
28,945
30,336
168,868
307,784 $
$
27,633
28,275
29,121
30,196
31,333
173,548
320,106
The expected benefit payments are estimated based on the same assumptions used to measure the Company’s benefit obligations at
December 31, 2021.
The fair values of pension plan assets at December 31, 2021 and 2020, by asset category, are shown in the following tables. The fair
value is presented based on the Financial Accounting Standards Board’s fair value hierarchy that prioritizes inputs into the valuation
techniques used to measure fair value. Level 1 uses quoted prices in active markets for identical assets, Level 2 uses significant
observable inputs, and Level 3 uses significant unobservable inputs. In accordance with Subtopic 820-10 common trust funds are
reported at fair value using net asset value per share (or its equivalent) as a practical expedient and are not classified in the fair value
hierarchy.
124
For all investments, the plan attempts to use quoted market prices of identical assets on active exchanges, or Level 1 measurements.
Where such quoted market prices are not available, the plan will use quoted prices for similar instruments or discounted cash flows to
estimate the value, reported as Level 2.
Fair Value Measurements by Asset Category / Fund
(in thousands)
Cash and equivalents
Total cash and cash equivalents
Fixed income securities
Mutual fund-fixed income
Exchange Traded Fund (ETF)-Fixed income
Total fixed income
Domestic and foreign stock
Mutual funds-equity
Total equity
Total assets at fair value
Common trust funds (fixed income)
Common trust fund (real assets)
Total
Fair Value Measurements by Asset Category / Fund
(in thousands)
Cash and equivalents
Total cash and cash equivalents
Fixed income securities
Mutual fund-fixed income
Exchange Traded Fund (ETF)-Fixed income
Total fixed income
Domestic and foreign stock
Mutual funds-equity
Total equity
Total assets at fair value
Common trust funds (fixed income)
Common trust fund (real assets)
Total
Level 1
Level 2
Level 3
Total
December 31, 2021
21,280 $
21,280
29,687
20,428
4,049
54,164
109,610
270,863
380,473
455,917
—
—
455,917 $
— $
—
40,254
—
—
40,254
—
—
40,254
—
—
40,254 $
— $
—
—
—
—
—
—
—
—
—
—
—
— $
21,280
21,280
69,941
20,428
4,049
94,418
109,610
270,863
380,473
496,171
294,112
69,600
859,883
Level 1
Level 2
Level 3
Total
December 31, 2020
3,778 $
3,778
29,527
22,087
3,750
55,364
97,966
260,019
357,985
417,127
—
—
417,127 $
— $
—
43,076
—
—
43,076
—
—
43,076
—
—
43,076 $
— $
—
—
—
—
—
—
—
—
—
—
—
— $
3,778
3,778
72,603
22,087
3,750
98,440
97,966
260,019
357,985
460,203
298,694
56,407
815,304
$
$
$
$
The following table presents the percentage allocation of the plan assets by asset category and corresponding target allocations at
December 31, 2021 and 2020.
Asset category
Cash and equivalents
Fixed income securities
Equity securities
Real assets
Plan Assets
at December 31,
Target Allocation
at December 31,
2021
2020
2021
2020
3 %
45
44
8
100 %
0 %
49
44
7
100 %
0 - 5%
41-47%
35-51%
0-12%
0 - 5%
41-57%
35 - 51%
0 - 12%
125
Plan assets are invested in long-term strategies and evaluated within the context of a long-term investment horizon. Plan assets will be
diversified across multiple asset classes so as to minimize the risk of large losses. Short-term fluctuations in value will be considered
secondary to long-term results. The Company employs a total return approach whereby a diversified mix of asset class investments are
used to maximize the long-term return of plan assets for an acceptable level of risk. Risk tolerance is established through careful
consideration of the plan liabilities, plan funded status and the Company’s financial condition. The investment performance of the plan
is regularly monitored to ensure that appropriate risk levels are being taken and to evaluate returns versus a suitable market
benchmark. The benefits investment committee meets periodically to review the policy, strategy, and performance of the plans.
Note 18. Share-Based Payment Arrangements
The Company maintains incentive compensation plans that incorporate share-based payment arrangements for associates and
directors. The current plan under which share-based awards may be granted, the 2020 Long Term Incentive Plan (the “2020 Plan”),
was approved by the Company’s stockholders at the 2020 annual meeting as a successor to the Company’s 2014 Long-Term Incentive
Plan (the “2014 Plan”). Certain share-based awards remain outstanding under the 2014 Plan and prior equity incentive compensation
plans, but no future awards may be granted thereunder.
The Compensation Committee of the Company’s Board of Directors administers the equity incentive plans, makes determinations
with respect to participation by employees or directors and authorizes the share-based awards. Under the 2020 Plan, participants may
be awarded stock options (including incentive stock options for associates), restricted shares, performance stock awards and stock
appreciation rights, all on a stand-alone, combination or tandem basis. To date, the Committee has awarded stock options, tenure-
based restricted shares and performance stock awards under the 2020 Plan and the prior equity incentive plans.
Under the 2020 Plan, future awards may be granted for the issuance of an aggregate of 2,500,000 shares of the Company’s common
stock, plus a number of additional shares of the Company’s common stock (not to exceed 1,000,000) for which awards under the 2014
Plan are cancelled, expired, forfeited or otherwise not issued, or settled in cash. The 2020 Plan limits the number of shares for which
awards may be granted to any participant during any calendar year to 250,000 shares. The Company may use authorized unissued
shares or shares held in treasury to satisfy awards under the 2020 Plan.
As of December 31, 2021 there were 1.7 million shares available for future issuance under the 2020 equity compensation plan.
For the years ended December 31, 2021, 2020, and 2019, total share-based compensation expense recognized in income was
$22.4 million, $21.1 million and $20.9 million, respectively. The total recognized tax benefit related to the share-based compensation
was $9.9 million, $4.9 million and $5.5 million for 2021, 2020, and 2019, respectively.
At December 31, 2021, the Company had 9,106 outstanding and exercisable stock options, with a weighted average exercise price of
$33.62, weighted average remaining contractual term of less than 1 year, and an aggregate intrinsic value of $ 0.2 million.
The total intrinsic value of options exercised during the year ended December 31, 2021 was $0.2 million. There were no exercises of
stock options during the year ended December 31, 2020.
A summary of the Company’s nonvested restricted and performance shares for the year ended December 31, 2021 is presented below:
Nonvested at January 1, 2021
Granted
Vested
Cancelled/Forfeited
Nonvested at December 31, 2021
Number of
Shares
1,886,853 $
248,470
(498,829 )
(183,409 )
1,453,085 $
Weighted-
Average
Grant-Date
Fair Value ($)
34.77
37.26
36.47
35.01
34.58
At December 31, 2021, there was $41.8 million of total unrecognized compensation expense related to nonvested restricted and
performance shares expected to vest in future periods. This compensation is expected to be recognized in expense over a weighted-
average period of 2.8 years. The fair value of shares vested totaled $18.7 million and $20.1 million during the years ended December
31, 2021 and 2020, respectively.
During the year ended December 31, 2021, the Company granted 60,996 performance shares subject to a total shareholder return
(“TSR”) performance metric with a grant date fair value of $38.49 per share and 60,996 performance shares subject to an operating
earnings per share performance metric with a grant date fair value of $32.17 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 48 regional banks. The fair value of the
126
performance shares subject to TSR at the grant date was determined using a Monte Carlo simulation method. The number of
performance shares subject to operating earnings per share that ultimately vest will be based on the Company’s attainment of certain
operating earnings per share goals over the two-year performance period. The maximum number of performance shares that could vest
is 200% of the target award. Compensation expense for these performance shares is recognized on a straight-line basis over the three-
year service period.
Note 19. Commitments and Contingencies
Credit Related
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.
Commitments to extend credit include revolving commercial credit lines, nonrevolving loan commitments issued mainly to finance
the acquisition and development or construction of real property or equipment, and credit card and personal credit lines. The
availability of funds under commercial credit lines and loan commitments generally depends on whether the borrower continues to
meet credit standards established in the underlying contract and has not violated other contractual conditions. Loan commitments
generally have fixed expiration dates or other termination clauses and may require payment of a fee by the borrower. Credit card and
personal credit lines are generally subject to cancellation if the borrower’s credit quality deteriorates. A number of commercial and
personal credit lines are used only partially or, in some cases, not at all before they expire, and the total commitment amounts do not
necessarily represent future cash requirements of the Company.
A substantial majority of the letters of credit are standby agreements that obligate the Bank to fulfill a customer’s financial
commitments to a third party if the customer is unable to perform. The Bank issues standby letters of credit primarily to provide credit
enhancement to its customers’ other commercial or public financing arrangements and to help them demonstrate financial capacity to
vendors of essential goods and services.
The contract amounts of these instruments reflect the Company’s exposure to credit risk. The Company undertakes the same credit
evaluation in making loan commitments and assuming conditional obligations as it does for on-balance sheet instruments and may
require collateral or other credit support. At December 31, 2021 and 2020 the Company had a reserve for unfunded lending
commitments totaling $29.3 million and $29.9 million, respectively. The Company’s off-balance sheet financial instruments are
summarized below:
(in thousands)
Commitments to extend credit
Letters of credit
Legal Proceedings
December 31,
2021
2020
$
9,444,803 $
396,956
8,106,223
365,510
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.
Note 20. Fair Value Measurements
The FASB defines fair value as the exchange price that would be received to sell an asset or paid to transfer a liability in the principal
or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.
The FASB’s guidance also establishes a fair value hierarchy that prioritizes the inputs to these valuation techniques used to measure
fair value, giving preference to quoted prices in active markets for identical assets or liabilities (level 1) and the lowest priority to
unobservable inputs such as a reporting entity’s own data (level 3). Level 2 inputs include quoted prices for similar assets or liabilities
in active markets, quoted prices for identical assets or liabilities in markets that are not active, observable inputs other than quoted
prices, such as interest rates and yield curves, and inputs that are derived principally from or corroborated by observable market data
by correlation or other means.
127
Fair Value of Assets and Liabilities Measured on a Recurring Basis
The following tables present for each of the fair value hierarchy levels the Company’s financial assets and liabilities that are measured
at fair value on a recurring basis in the consolidated balance sheets.
Total recurring fair value measurements - liabilities
(1)
For further disaggregation of derivative assets and liabilities, see Note 11 – Derivatives.
(in thousands)
Assets
Available for sale debt securities:
U.S. Treasury and government agency securities
Municipal obligations
Corporate debt securities
Residential mortgage-backed securities
Commercial mortgage-backed securities
Collateralized mortgage obligations
Total available for sale securities
Mortgage loans held for sale
Derivative assets (1)
Total recurring fair value measurements - assets
Liabilities
Derivative liabilities (1)
(in thousands)
Assets
Available for sale debt securities:
U.S. Treasury and government agency securities
Municipal obligations
Corporate debt securities
Residential mortgage-backed securities
Commercial mortgage-backed securities
Collateralized mortgage obligations
Total available for sale securities
Derivative assets (1)
Total recurring fair value measurements - assets
Liabilities
Derivative liabilities (1)
Total recurring fair value measurements - liabilities
(1)
Level 1
Level 2
Level 3
Total
December 31, 2021
$
$
$
$
419,298 $
— $
314,158
—
—
18,702
— 3,035,798
— 3,077,859
120,883
—
— 6,986,698
41,022
—
75,867
— $ 7,103,587 $
419,298
— $
314,158
—
—
18,702
— 3,035,798
— 3,077,859
120,883
—
— 6,986,698
41,022
—
75,867
— $ 7,103,587
— $
— $
30,930 $
30,930 $
4,116 $
4,116 $
35,046
35,046
Level 1
Level 2
Level 3
Total
December 31, 2020
$
$
$
$
213,370 $
— $
326,725
—
—
11,764
— 2,629,811
— 2,455,534
—
362,123
— 5,999,327
150,180
—
— $ 6,149,507 $
213,370
— $
326,725
—
—
11,764
— 2,629,811
— 2,455,534
—
362,123
— 5,999,327
150,180
—
— $ 6,149,507
— $
— $
49,612 $
49,612 $
5,645 $
5,645 $
55,257
55,257
For further disaggregation of derivative assets and liabilities, see Note 11 – Derivatives.
Securities classified as level 2 include obligations of U.S. Government agencies and U.S. Government-sponsored agencies, including
“off-the-run” U.S. Treasury securities, residential and commercial mortgage-backed securities and collateralized mortgage obligations
that are issued or guaranteed by U.S. government agencies, and state and municipal bonds. The level 2 fair value measurements for
investment securities are obtained quarterly from a third-party pricing service that uses industry-standard pricing models. Substantially
all of the model inputs are observable in the marketplace or can be supported by observable data. The Company invests only in
securities of investment grade quality with a targeted duration, for the overall portfolio, generally between two and five and a half
years. Company policies generally limit U.S. investments to agency securities and municipal securities determined to be investment
grade according to an internally generated score which generally includes a rating of not less than “Baa” or its equivalent by a
nationally recognized statistical rating agency.
Loans held for sale consist of residential mortgage loans carried under the fair value option. The fair value for these instruments is
classified as level 2 based on market prices obtained from potential buyers.
For the Company’s derivative financial instruments designated as hedges and those under the customer interest rate program, the fair
value is obtained from a third-party pricing service that uses an industry-standard discounted cash flow model that relies on inputs,
LIBOR swap curves, Overnight Index swap rate curves, all observable in the marketplace. To comply with the accounting guidance,
credit valuation adjustments are incorporated in the fair values to appropriately reflect nonperformance risk for both the Company and
128
the counterparties. Although the Company has determined that the majority of the inputs used to value these derivative instruments
fall within level 2 of the fair value hierarchy, the credit value adjustments utilize level 3 inputs, such as estimates of current credit
spreads. The Company has determined that the impact of the credit valuation adjustments is not significant to the overall valuation of
these derivatives. As a result, the Company has classified its derivative valuations for these instruments in level 2 of the fair value
hierarchy. The Company’s policy is to measure counterparty credit risk quarterly for all derivative instruments subject to master
netting arrangements consistent with how market participants would price the net risk exposure at the measurement date.
The Company also has certain derivative instruments associated with the Bank’s mortgage-banking activities. These derivative
instruments include interest rate lock commitments on prospective residential mortgage loans and forward commitments to sell these
loans to investors on a best efforts delivery basis and To Be Announced securities for mandatory delivery contracts. The fair value of
these derivative instruments is measured using observable market prices for similar instruments and is classified as a level 2
measurement.
The Company’s Level 3 liability consists of a derivative contract with the purchaser of 192,163 shares of Visa Class B common stock.
Pursuant to the agreement, the Company retains the risks associated with the ultimate conversion of the Visa Class B common shares
into shares of Visa Class A common stock, such that the counterparty will be compensated for any dilutive adjustments to the
conversion ratio and the Company will be compensated for any anti-dilutive adjustments to the ratio. The agreement also requires
periodic payments by the Company to the counterparty calculated by reference to the market price of Visa Class A common shares at
the time of sale and a fixed rate of interest that steps up once after the eighth scheduled quarterly payment. The fair value of the
liability is determined using a discounted cash flow methodology. The significant unobservable inputs used in the fair value
measurement are the Company’s own assumptions about estimated changes in the conversion rate of the Visa Class B common shares
into Visa Class A common shares, the date on which such conversion is expected to occur and the estimated growth rate of the Visa
Class A common share price. Refer to Note 11 – 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 sheet for the years ended December 31, 2021 and
2020 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, 2019
Cash settlement
Losses included in earnings
Balance at December 31, 2020
Cash settlement
Losses included in earnings
Balance at December 31, 2021
$
$
5,704
(1,656 )
1,597
5,645
(1,767 )
238
4,116
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.
Level 3 Class
Derivative liability
Valuation technique
Unobservable inputs:
Visa Class A appreciation - terminal range
Visa Class A appreciation - at end of reporting period
Conversion rate - range
Conversion rate - at end of reporting period
Time until resolution
$
December 31, 2021
4,116
Discounted cash flow
$
December 31, 2020
5,645
Discounted cash flow
6%-12%
9%
1.62x-1.60x
1.6091x
3-24 months
6%-12%
9%
1.62x-1.60x
1.6114x
3-36 months
The Company’s policy is to recognize transfers between valuation hierarchy levels as of the end of a reporting period.
129
Fair Value of Assets Measured on a Nonrecurring Basis
Certain assets and liabilities are measured at fair value on a nonrecurring basis. Collateral-dependent loans individually evaluated for
credit loss loans are level 2 assets measured at the fair value of the underlying collateral based on independent third-party appraisals
that take into consideration market-based information such as recent sales activity for similar assets in the property’s market.
Other real estate owned and foreclosed assets, including both foreclosed property and surplus banking property, are level 3 assets that
are adjusted to fair value, less estimated selling costs, upon transfer from loans or property and equipment. Subsequently, other real
estate owned and foreclosed assets is carried at the lower of carrying value or fair value less estimated selling costs. Fair values are
determined by sales agreement or third-party appraisals as discounted for estimated selling costs, information from comparable sales,
and marketability of the assets.
The fair value information presented below is not as of the period end, rather it was as of the date the fair value adjustment was
recorded during the twelve months for each of the dates presented below, and excludes nonrecurring fair value measurements of assets
no longer on the balance sheet.
The following table presents the Company’s financial assets that are measured at fair value on a nonrecurring basis for each of the fair
value hierarchy levels:
(in thousands)
Collateral dependent impaired loans
Other real estate owned and foreclosed assets
Total nonrecurring fair value measurements
(in thousands)
Collateral dependent impaired loans
Other real estate owned and foreclosed assets
Total nonrecurring fair value measurements
Level 1
December 31, 2021
Level 2
Level 3
Total
— $
—
— $
13,253 $
—
13,253 $
— $
7,533
7,533 $
13,253
7,533
20,786
Level 1
December 31, 2020
Level 2
Level 3
Total
— $
—
— $
60,451 $
—
60,451 $
— $
11,648
11,648 $
60,451
11,648
72,099
$
$
$
$
Accounting guidance from the FASB requires the disclosure of estimated fair value information about certain on- and off-balance
sheet financial instruments, including those financial instruments that are not measured and reported at fair value on a recurring basis.
The significant methods and assumptions used by the Company to estimate the fair value of financial instruments are discussed below.
Cash, Short-Term Investments and Federal Funds Sold – For these short-term instruments, the carrying amount is a reasonable
estimate of fair value.
Securities – The fair value measurement for securities available for sale was discussed earlier in the note. The same measurement
techniques were applied to the valuation of securities held to maturity.
Loans, Net – The fair value measurement for certain impaired loans was discussed earlier in the note. For the remaining portfolio, fair
values were generally determined by discounting scheduled cash flows using discount rates determined with reference to current
market rates at which loans with similar terms would be made to borrowers with 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 and 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.
Securities Sold under Agreements to Repurchase and Federal Funds Purchased– For these short-term liabilities, the carrying
amount is a reasonable estimate of fair value.
Short-Term FHLB Borrowings – The fair value is estimated by discounting the future contractual cash flows using current market
rates at which borrowings with similar terms and options could be obtained.
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.
130
Derivative Financial Instruments – The fair value measurements for derivative financial instruments was discussed earlier in the
note.
The following tables present the estimated fair values of the Company’s financial instruments by fair value hierarchy levels and the
corresponding carrying amount at December 31, 2021 and 2020.
(in thousands)
Financial assets:
Cash, interest-bearing bank deposits, and federal
funds sold
Available for sale securities
Held to maturity securities
Loans, net
Loans held for sale
Derivative financial instruments
Financial liabilities:
Deposits
Federal funds purchased
Securities sold under agreements to repurchase
Short-term FHLB Borrowings
Long-term debt
Derivative financial instruments
(in thousands)
Financial assets:
Cash, interest-bearing bank deposits, and federal funds
sold
Available for sale securities
Held to maturity securities
Loans, net
Loans held for sale
Derivative financial instruments
Financial liabilities:
Deposits
Federal funds purchased
Securities sold under agreements to repurchase
FHLB short-term borrowings
Long-term debt
Derivative financial instruments
Level 1
Level 2
Level 3
Fair Value
December 31, 2021
Total
Carrying
Amount
$ 4,231,836 $
— $
— 6,986,698
— 1,631,482
—
—
—
— $ 4,231,836 $ 4,231,836
— 6,986,698 6,986,698
— 1,631,482 1,565,751
13,253 20,720,568 20,733,821 20,792,217
93,069
93,069
75,867
75,867
93,069
75,867
—
—
$
— $
1,850
563,211
— $ 30,432,646 $ 30,432,646 $ 30,465,897
1,850
—
1,850
—
—
563,211
—
563,211
— 1,119,026 1,100,000
— 1,119,026
244,220
253,677
—
— 253,677
35,046
35,046
4,116
30,930
—
Level 1
Level 2
Level 3
Fair Value
December 31, 2020
Total
Carrying
Amount
$ 1,860,092 $
— $
— 5,999,327
— 1,467,581
—
— 136,063
— 150,180
— $ 1,860,092 $ 1,860,092
— 5,999,327 5,999,327
— 1,467,581 1,357,170
60,451 21,472,933 21,533,384 21,339,754
136,063
150,180
136,063
150,180
—
—
$
— $
300
567,213
— $ 27,679,321 $ 27,679,321 $ 27,697,877
300
300
—
—
567,213
567,213
—
—
— 1,147,335 1,100,000
— 1,147,335
378,322
404,880
— 404,880
—
55,257
55,257
5,645
49,612
—
131
Note 21. Condensed Parent Company Information
The following condensed financial statements reflect the accounts and transactions of Hancock Whitney Corporation only:
Condensed Balance Sheets
(in thousands)
Assets:
Cash
Investment in bank subsidiaries
Investment in non-bank subsidiaries
Due from subsidiaries and other assets
Total assets
Liabilities and Stockholders' Equity:
Long term debt
Other liabilities
Stockholders' equity
Total liabilities and stockholders' equity
December 31,
2021
2020
$
$
$
$
90,277 $
3,706,046
24,726
17,323
3,838,372 $
166,664 $
1,356
3,670,352
3,838,372 $
199,995
3,511,693
25,134
15,464
3,752,286
312,260
1,001
3,439,025
3,752,286
Condensed Statements of Income
(in thousands)
Operating income
From subsidiaries
Cash dividends received from bank subsidiaries
Cash dividend from nonbank Subsidiary
Equity in earnings (loss) of subsidiaries greater than dividends received
$
Total operating income
Other expense, net
Income tax benefit
Net income (loss)
Other comprehensive income (loss), net of tax
Comprehensive income
$
$
2021
Years Ended December 31,
2020
2019
150,000 $
5,000
327,950
482,950
25,814
(6,079 )
463,215 $
(134,004 )
329,211 $
70,000 $
—
(101,406 )
(31,406 )
22,307
(8,539 )
(45,174 ) $
134,793
89,619 $
240,000
5,000
94,185
339,185
15,635
(3,830 )
327,380
125,985
453,365
132
Condensed Statements of Cash Flows
2021
Years Ended December 31,
2020
2019
$
160,887 $
160,887
71,067 $
71,067
255,322
255,322
—
—
—
—
—
(150,000 )
(95,927 )
(21,796 )
4,482
(7,364 )
—
—
(270,605 )
(109,718 )
199,995
90,277 $
—
—
—
—
166,425
—
(95,605 )
(12,716 )
5,301
(4,530 )
12,110
—
70,985
142,052
57,943
199,995 $
(50,000 )
38,505
(1,874 )
(13,369 )
—
(13,919 )
(94,871 )
—
4,265
(6,295 )
(185,000 )
(42,129 )
(337,949 )
(95,996 )
153,939
57,943
(in thousands)
Cash flows from operating activities - principally
dividends received from subsidiaries
Net cash provided by operating activities
Cash flows from investing activities:
Contribution of capital to subsidiary
Net cash received in acquisition
Other, net
Net cash (used in) investing activities
Cash flows from financing activities:
Proceeds from issuance of long term debt
Repayment of long term debt
Dividends paid to stockholders
Repurchase of common stock
Proceeds from dividend reinvestment and other incentive plans
Payroll tax remitted on net share settlement of equity awards
Cash received(paid) under accelerated share repurchase agreement
Other, net
Net cash provided by (used in) financing activities
Net increase (decrease) in cash
Cash, beginning of year
Cash, end of year
$
133
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
The term “disclosure controls and procedures” is defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as
amended (the Exchange Act). The rules refer to our controls and other procedures that are designed to ensure that information required
to be disclosed in reports that we file or submit under the Exchange Act is (1) recorded, processed, summarized and reported within
the time periods specified in the Securities and Exchange Commission’s rules and forms and (2) accumulated and communicated to
our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions
regarding required disclosure.
Management, including our principal executive officer and principal financial officer, has performed an evaluation of the effectiveness
of our disclosure controls and procedures and based on that evaluation, our principal executive officer and principal financial officer
have concluded that our disclosure controls and procedures were effective as of December 31, 2021.
Internal Control Over Financial Reporting
The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting, as such
term is defined in Rule 13a-15(f) under the Exchange Act, designed 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. The Company’s management, with the participation of its principal executive and principal financial officers, evaluated the
effectiveness of the Company’s internal control over financial reporting as of December 31, 2020 based on the framework set forth in
Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
Management also conducted an assessment of requirements pertaining to Section 112 of the Federal Deposit Insurance Corporation
Improvement Act. This section relates to management’s evaluation of internal control over financial reporting, including controls over
the preparation of the schedules equivalent to the basic financial statements in accordance with the instructions to the Consolidated
Financial Statements for Bank Holding Companies (Form Y-9 C) and compliance with specific laws and regulations. Our evaluation
included a review of the documentation of controls, evaluations of the design of the internal control system and tests of the
effectiveness of internal controls.
PricewaterhouseCoopers LLP, the independent registered public accounting firm that audited the Company’s financial statements
included in Item 8. “Financial Statements and Supplementary Data,” has issued an attestation report on the Company’s internal control
over financial reporting, which is also included in Item 8.
Based on the foregoing evaluation, management concluded that the Company’s internal control over financial reporting was effective
as of December 31, 2021.
There was no change in the Company’s internal control over financial reporting that occurred during the fourth quarter of 2021 that
has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
ITEM 9B. OTHER INFORMATION
Hancock Whitney Corporation will hold its Annual Meeting of Shareholders of common stock on Wednesday, April 27, 2022, at
10:30 a.m. Central Daylight Time. The meeting will be held virtually and can be accessed online. Additional information about the
Annual Meeting, including the matters to be considered, will be set forth in the Company’s definitive proxy statement for the 2022
Annual Meeting to be filed in due course with the SEC.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Information concerning our directors will appear in our definitive proxy statement to be filed with the Securities and Exchange
Commission for our 2022 annual meeting of the shareholders under the caption, “Information about Our Directors.” Information
concerning compliance with Section 16(a) of the Exchange Act will appear in our proxy statement under the caption, “Delinquent
Section 16(a) Reports.” Information concerning our code of business ethics for officers and associates, our code of ethics for financial
officers, and our code of ethics for directors will appear in our proxy statement under the caption “Transactions with Related Persons.”
Information concerning our audit committee will appear in our proxy statement under the caption “Board of Directors and Corporate
134
Governance – Board Committees – Audit Committee.” The information set forth under each such caption is incorporated herein by
reference. The information required by Item 10 of this Report regarding our executive officers appears in a separately captioned
heading in Item 1 of this Report.
ITEM 11. EXECUTIVE COMPENSATION
Information concerning our executive and director compensation will appear in our definitive proxy statement relating to our 2021
annual meeting of shareholders under the caption “Executive Compensation,” “Compensation of Directors,” “Compensation
Discussion and Analysis,” “Compensation Committee Report,” “Potential Payments Upon Termination or Change in Control” and
“Shareholder Proposals for the 2022 Annual Meeting.” Information concerning our compensation committee interlocks and insider
participation and our compensation committee report will appear in our proxy statement under the caption “Compensation Committee
Interlocks and Insider Participation” and “Compensation Committee Report,” respectively. Such information is incorporated herein by
reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
Information concerning ownership of certain beneficial owners and management will appear in our definitive proxy statement relating
to our 2022 annual meeting of shareholders under the caption “Security Ownership of Certain Beneficial Owners and Management.”
The information set forth under each such caption is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Information concerning certain relationships and related transactions will appear in our definitive proxy statement relating to our 2021
annual meeting of shareholders under the caption “Transactions with Related Persons.” Information concerning director independence
will appear in our proxy statement under the caption “Board of Directors and Corporate Governance.” The information set forth under
each such caption is incorporated herein by reference.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The Company’s independent registered public accounting firm is PricewaterhouseCoopers LLP, New Orleans, LA, Auditor Firm ID
238.
Information concerning principal accountant fees and services will appear in our definitive proxy statement relating to our 2022
annual meeting of shareholders under the caption “Independent Registered Public Accounting Firm.” Such information is incorporated
herein by reference.
135
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) The following documents are filed as part of this Report:
1.
The following consolidated financial statements of Hancock Whitney Corporation and subsidiaries are filed as part of this
Report under Item 8. “Financial Statements and Supplementary Data”:
Consolidated Balance Sheets – December 31, 2021 and 2020
Consolidated Statements of Income – Years ended December 31, 2021, 2020 and 2019
Consolidated Statements of Other Comprehensive Income – Years ended December 31, 2021, 2020, and 2019
Consolidated Statements of Changes in Stockholders’ Equity– Years ended December 31, 2021, 2020, and 2019
Consolidated Statements of Cash Flows –Years ended December 31, 2021, 2020, and 2019
Notes to Consolidated Financial Statements – December 31, 2021
2.
Financial schedules required to be filed by Item 8 of this Report, and by Item 15(d) below:
The schedules to the consolidated financial statements set forth by Article 9 of Regulation S-X are not required under the related
instructions or are inapplicable and, therefore, have been omitted.
3.
Exhibits required to be filed by Item 601 of Regulation S-K, and by Item 15(b) below.
All other financial statements and schedules are omitted as the required information is inapplicable or the required information is
presented in the consolidated financial statements or related notes.
136
Exhibit
Number
2.1
3.1
3.2
4.1
4.2
4.3
4.4
*10.1
*10.2
*10.3
*10.4
*10.5
*10.6
*10.7
*10.8
*10.9
*10.10
*10.11
EXHIBIT INDEX
Description
Master Purchase Agreement by and among Hancock Whitney Bank, OCM Engy Holdings, LLC, et al., dated as of July
17, 2020 (filed as Exhibit 2.1 to the Company’s Form 10-Q (File No. 001-36872) filed with the Commission on
November 4, 2020 and incorporated herein by reference).
Second Amended and Restated Articles of Incorporation of the Company (filed as Exhibit 3.1 to the Company’s 8-K
(File No. 001-36872) filed with the Commission on May 1, 2020 and incorporated herein by reference).
Second Amended and Restated Bylaws of the Company (filed as Exhibit 3.2 to the Company’s 8-K (File No. 001-
36872) filed with the Commission on May 1, 2020 and incorporated herein by reference).
Specimen stock certificate of the Company (reflecting change in par value from $10.00 to $3.33, effective March 6,
1989) (filed as Exhibit 4 to the Company’s registration statement on Form S-8 (File No. 333-11831) filed with the
Commission on September 12, 1996 and incorporated herein by reference).
Indenture, dated as of March 9, 2015, between Hancock Holding Company and The Bank of New York Mellon Trust
Company, N.A. (incorporated by reference to Exhibit 4.1 to Hancock Whitney Corporation’s Current Report on Form
8-Kfiled with the Securities and Exchange Commission on March 9, 2015).
Supplemental Indenture, dated as of June 2, 2020, between Hancock Whitney Corporation and The Bank of New York
Mellon Trust Company, N.A. (filed as Exhibit 4.2 to the Company’s Form 8-K (File No. 001-36872) filed with the
Commission on June 2, 2020).
Form of Global Note representing the 6.25% Subordinated Notes due 2060 (filed as Exhibit 4.3 to the Company’s Form
8-K (File No. 001-36872) filed with the Commission on June 2, 2020).
2014 Long Term Incentive Plan (filed as Exhibit 10.1 to the Company’s Form 8-K (File No. 0-13089) filed with the
Commission on April 21, 2014 and incorporated herein by reference).
Amendment to the Hancock Holding Company 2014 Long Term Incentive Plan (filed as Appendix A of the Company’s
definitive Proxy Statement on Schedule 14A (filed with the Commission on March 17, 2017 (File Number 001-36872)
and incorporated herein by reference).
Hancock Whitney Corporation 2020 Long Term Incentive Plan (filed as Exhibit 10.1 to the Company’s Form 8-K (File
Number 001-36872) filed with the Commission on May 1, 2020 and incorporated herein by reference).
Nonqualified Deferred Compensation Plan, amended and restated effective January 1, 2015 (filed as Exhibit 10.11 to
the Company’s Form 10-K for the year ended December 31, 2014 (File No. 0-13089) filed with the Commission on
February 27, 2015 and incorporated herein by reference).
Addendum to Nonqualified Deferred Compensation Plan describing SERP benefit (filed as Exhibit 10.3 to the
Company’s Form 10-Q (File No. 001-36827) filed with the Commission on August 8, 2014 and incorporated herein by
reference).
Amended and Restated Hancock Whitney Corporation 2010 Employee Stock Purchase Plan, effective July 1, 2018
(filed as Exhibit 10.1 to the Company’s Form 10-Q filed with the Commission on November 2, 2018 (File No.001-
36872) and incorporated herein by reference).
Amendment to 2010 Employee Stock Purchase Plan, dated December 15, 2011 and effective January 1, 2011 (filed as
Exhibit 10.15 to the Company’s Form 10-K for the year ended December 31, 2012 (File No. 0-13089) filed with the
Commission and incorporated herein by reference).
Form of Change in Control Employment Agreement between the Company and certain named executive officers
effective June 16, 2014 (filed as Exhibit 10.1 to the Company’s Form 8-K (File No. 0-13089) filed with the
Commission on June 20, 2014 and incorporated herein by reference).
Insurance Plan and Summary Plan Description, adopted by the Company effective July 1, 2014 (filed as Exhibit 10.20
to the Company’s Form 10-K for the year ended December 31, 2014 (File No. 0-13089) filed with the Commission on
February 27, 2015 and incorporated herein by reference).
Form of Restricted Stock Award Agreement (approved in 2015) (filed as Exhibit 10.24 to the Company’s Form 10-K
(File No. 0-13089) filed with the Commission on February 26, 2016 and incorporated herein by reference).
Form of Amended Restricted Stock Award Agreement (amending awards approved in 2016) (filed as Exhibit 10.2 to
the Company’s Form 10-Q (File No. 001-36827) filed with the Commission on May 9, 2016 and incorporated herein by
reference).
*10.12
Form of Performance Stock Award Agreement (TSR) (approved in 2015) (filed as Exhibit 10.25 to the Company’s
Form 10-K (File No. 0-13089, filed with the Commission on February 26, 2016 and incorporated herein by reference).
137
*10.13
*10.14
Form of Performance Stock Award Agreement (EPS) (approved in 2015) (filed as Exhibit 10.25 to the Company’s
Form 10-K (File No. 0-13089, filed with the Commission on February 26, 2016 and incorporated herein by reference).
Executive Incentive Plan (2016) (filed as Exhibit 10.3 to the Company’s Form 10-Q (File No. 001-36827) filed with the
commission on May 9, 2016 and incorporated herein by reference).
**21.1
Subsidiaries of the Company.
**23.1
Consent of PricewaterhouseCoopers, LLP.
**31.1
**31.2
**32.1
**32.2
101
Certification of Principal Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange
Act of 1934, as amended.
Certification of Principal Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange
Act of 1934, as amended.
Certification of Principal Executive Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
Certification of Principal Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
The following financial information from Hancock Whitney Corporation's Annual Report on Form 10-K for the year
ended December 31, 2019, formatted in iXBRL (Inline Extensible Business Reporting Language) includes: (i) the
Cover Page (ii) the Consolidated Balance Sheets, (iii) the Consolidated Statements of Income, (iv) the Consolidated
Statements of Comprehensive Income, (v) the Consolidated Statements of Changes in Stockholders’ Equity, (vi) the
Consolidated Statements of Cash Flows, and (vii) the Notes to Consolidated Financial Statements, tagged in summary
and detail.
104
Cover Page Interactive Data File (formatted as iXBRL and contained in Exhibit 101).
*
**
Compensatory plan or arrangement.
Filed with this Form 10-K.
138
ITEM 16. FORM 10-K SUMMARY
Not applicable.
139
Pursuant to the requirements of Section 13 or 15(d) 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.
SIGNATURES
HANCOCK WHITNEY CORPORATION
Registrant
February 25, 2022
Date
By: /s/ John M. Hairston
John M. Hairston
President & Chief Executive Officer
(Principal Executive Officer)
February 25, 2022
Date
By: /s/ Michael M. Achary
Michael M. Achary
Senior Executive Vice President & Chief Financial Officer
(Principal Financial Officer)
140
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on
behalf of the Registrant and in the capacities and on the dates indicated.
/s/ Jerry L. Levens
Jerry L. Levens
/s/ Frank E. Bertucci
Frank E. Bertucci
/s/ Hardy B. Fowler
Hardy B. Fowler
/s/ Randall W. Hanna
Randall W. Hanna
/s/ James H. Horne
James H. Horne
/s/ Suzette K. Kent
Suzette K. Kent
/s/ H. Merritt Lane III
H. Merritt Lane III
/s/ Constantine S. Liollio
Constantine S. Liollio
/s/ Sonya C. Little
Sonya C. Little
/s/ Thomas H. Olinde
Thomas H. Olinde
/s/ Sonia A. Pérez
Sonia A. Pérez
/s/ Christine L. Pickering
Christine L. Pickering
/s/ Robert W. Roseberry
Robert W. Roseberry
/s/ Joan C. Teofilo
Joan C. Teofilo
/s/ C. Richard Wilkins
C. Richard Wilkins
Chairman of the Board, Director
February 25, 2022
February 25, 2022
February 25, 2022
February 25, 2022
February 25, 2022
February 25, 2022
February 25, 2022
February 25, 2022
February 25, 2022
February 25, 2022
February 25, 2022
February 25, 2022
February 25, 2022
February 25, 2022
February 25, 2022
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
141
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Earnings Per Share – Diluted
$5.22
$3.72 $3.72
$2.48
Hancock Whitney Corporation
PPNR(a)
Financial Highlights
(in millions)
$491.2 $501.7
$434.4
$455.2
$401.8
INCOME STATEMENT DATA
Net income (loss)
Net interest income (TE)*
Pre-provision net revenue (PPNR)(a)
2017
2018
2019
2020
2021
2017
COMMON SHARE DATA
2018
2019
2020
2021
Corporate Information
Annual Meeting
The annual meeting of stockholders will be held at 10:30 a.m. Central Time,
(Dollars in thousands, except per share amounts)
2021
2020
$463,215
($45,174)
$944,414
$955,523
PPNR(TE)
$537,638
(in millions)
$491,159
$434.4
$401.8
Wednesday, April 27, 2022, virtually.
Corporate Offices
Hancock Whitney Plaza
2510 14th Street
Gulfport, MS 39501
228-868-4000
800-522-6542
Financial Information
Copies of Hancock Whitney Corporation financial reports, including its
Annual Report on Form 10-K filed with the Securities and Exchange
Commission, are available without charge upon request to:
Trisha Voltz Carlson
Executive Vice President
Investor Relations Manager
Hancock Whitney Corporation
P.O. Box 4019
Gulfport, MS 39502-4019
Earnings per share – diluted
Book value per share (period-end)
Tangible book value per share (period-end)
Total Deposits
PPNR(a)
Cash dividends per share
(in millions)
(in billions)
$5.22
$323.4
($0.54)
$286.7
$42.31
$256.4
$31.64
$1.08
$39.65
$28.79
$1.08
Subsidiaries of Hancock Whitney Corporation
Hancock Whitney Bank
Hancock Whitney Investment Services, Inc.
Hancock Whitney Equipment Finance, LLC
Hancock Whitney Equipment Finance and Leasing, LLC
InvestorRelations@hancockwhitney.com
Earnings releases and other financial information about the company are
available on the company’s Investor Relations website:
investors.hancockwhitney.com
2014
$53.61
2015
$44.24
2016
2017
2018
Hancock Whitney New Markets Fund, LLC
Common Stock
The company’s common stock is traded on the Nasdaq Global Select Market
under the symbol HWC.
Stockholder Information
Stockholders seeking information may call the transfer agent at
888-490-1239, email help@astfinancial.com, access the website at
www.astfinancial.com, or write:
American Stock Transfer & Trust Company, LLC
6201 15th Avenue
Brooklyn, NY 11219
Board of Directors
Jerry L. Levens*
Frank E. Bertucci
Hardy B. Fowler
John M. Hairston
Randall W. Hanna
James H. Horne
Suzette K. Kent
H. Merritt Lane, III
Constantine “Dean” S. Liollio
Sonya C. Little
Thomas H. Olinde
Sonia A. Pérez
Christine L. Pickering
Robert W. Roseberry
Joan C. Teofilo
C. Richard Wilkins
Stockholders may also contact the company directly by emailing
shareholderservices@hancockwhitney.com.
Corporate & Affiliate Bank Officers
Dividend Reinvestment and Stock Purchase Plan
Stockholders seeking full details about the plan may call 888-490-1239,
email help@astfinancial.com, access the website at www.astfinancial.com,
or write:
John M. Hairston
President & CEO
Michael M. Achary
Chief Financial Officer
Cindy S. Collins
Chief Compliance Officer
Alan M. Ganucheau
Treasurer
American Stock Transfer & Trust Company, LLC
6201 15th Avenue
Brooklyn, NY 11219
Joseph S. Exnicios
President, Hancock Whitney Bank
Cecil “Chip” W. Knight, Jr.
Chief Banking Officer
Cash Dividend Direct Deposit
Stockholders may elect to have their Hancock Whitney Corporation dividends
directly deposited into a checking, savings, or money market account. This
service provides a safe, convenient method of receiving dividends and
is offered at no cost to stockholders. To obtain more information and an
enrollment form, call 888-490-1239, email help@astfinancial.com, access
the website at www.astfinancial.com, or write:
American Stock Transfer & Trust Company, LLC
6201 15th Avenue
Brooklyn, NY 11219
D. Shane Loper
Chief Operating Officer
Joy Lambert Phillips
General Counsel &
Corporate Secretary
Stephen E. Barker
Sr. Accounting &
Finance Executive
Joshua R. Caldwell
Chief Internal Auditor
Miles S. Milton
Chief Wealth Management Officer
Michael Otero
Chief Risk Officer
Rudi Hall Wetzel
Chief Human Resources Officer
Christopher S. Ziluca
Chief Credit Officer
*Independent Chairman of the Board
2021
2017
2017
2017
2018
2018
2018
2019
2019
2019
2020
2020
2020
2021
2021
2021
2017
2017
2018
2018
2019
2019
2020
2020
2021
2021
$401.8
600
500
400
300
200
100
0
600
35
30
25
20
15
10
5
0
500
400
300
200
100
0
35
30
25
20
15
10
5
0
$5.22
Earnings Per Share – Diluted
Total Loans
PPNR(a)
(in billions)
(in millions)
$21.2 $21.8 $21.1
$5.22
$491.2 $501.7
$19.0
$401.8
$20.0
$434.4
$455.2
$3.72 $3.72
$2.48
($0.54)
($0.54)
Total Loans
Total Deposits
PPNR(a)
(in millions)
(in billions)
(in billions)
$21.1
600
25
35
500
30
$21.2 $21.8 $21.1
$491.2 $501.7
$30.5
$27.7
$19.0
$434.4
$20.0
$455.2
$401.8
25
$22.3 $23.2 $23.8
2021
2017
2017
2017
2018
2018
2019
2019
2020
2020
2021
2021
2020
2021
2018
2019
Total Deposits
(in billions)
$30.5
$27.7
6
5
4
3
2
1
0
-1
25
600
6
500
5
20
4
400
15
3
300
2
10
200
1
5
0
100
0
-1
0
35
30
25
20
15
10
5
0
20
15
400
300
10
200
100
5
0
0
20
15
10
5
0
500
400
300
200
100
0
500
$434.4
400
300
200
100
0
1.3
1.2
1.1
1.0
0.9
0.8
0.7
0.6
0.5
0.4
1.3
1.2
1.1
1.0
0.9
0.8
0.7
0.6
0.5
0.4
Market data
High sales price
$455.2
$434.4
$401.8
$22.3 $23.2 $23.8
Low sales price
$30.5
$491.2 $501.7
$27.7
Period-end closing price
PERIOD-END BALANCE SHEET DATA
Securities
Loans
500
Earning assets
400
Total assets
PPNR(TE)
(in millions)
$323.4
200
100
0
Total deposits
$286.7
300
$256.4
Common stockholders’ equity
Total Deposits
PERFORMANCE RATIOS
(in billions)
Return on average assets
$30.5
Return on average common equity
$27.7
2014
2015
2016
$22.3 $23.2 $23.8
Net interest margin (TE)*
Efficiency ratio(b)
$32.52
$50.02
$14.32
$34.02
Return on Average Assets
(Operating)*
$8,552,449
$7,356,497
1.25%
$21,134,282 $21,789,931
PPNR(TE)
(in millions)
$33,610,435 $30,616,277
$36,531,205 $33,638,602
0.96%
$401.8
$323.4
$286.7
$30,465,897 $27,697,877
+54 bps
$256.4
0.67%
$3,670,352
0.66%
$3,439,025
1.21%
$434.4
2017
2018
2015
13.07%
2016
2017
(1.32)%
2018
2019
2014
2015
2016
2017
2018
1.32%
(0.14)%
2.95%
57.29%
3.27%
60.07%
Allowance for loan losses as percent of period-end loans
Return on Average Assets
Return on Average Assets
1.62%
2.07%
Tangible common equity ratio(c)
(Operating)*
Return on average tangible common equity
1.21%
PPNR(TE)
(in millions)
1.25%
500
Leverage (Tier 1) ratio
$434.4
$401.8
2017
400
2018
1.0
2019
2020
0.96%
2021
0.9
$286.7
$256.4
0.67%
0.66%
$323.4
+54 bps
1.3
1.2
1.1
0.8
0.7
0.6
0.5
0.4
300
200
100
0
7.71%
(Operating)*
7.64%
17.74
8.25%
1.25%
(1.82)%
7.88%
1.21%
0.96%
+54 bps
0.67%
0.66%
(a) Pre-provision net revenue (PPNR) is net interest income (TE) and noninterest income less noninterest
expense. Management believes that PPNR is a useful financial measure because it enables investors to
assess the company’s ability to generate capital to cover credit losses through a credit cycle.
Return on Average Assets
(Operating)*
(b) The efficiency ratio is noninterest expense to total net interest income (TE) and noninterest income,
1.25%
excluding amortization of purchased intangibles and nonoperating items.
1.21%
(c) The tangible common equity ratio is common stockholders’ equity less intangible assets divided by total
1.3
1.2
1.1
1.0
0.9
0.8
0.7
0.67%
0.66%
+54 bps
$22.3 $23.2 $23.8
December 31, 2017 and 21% for all other years presented.
*Taxable equivalent (TE) amounts are calculated using a federal income tax rate of 35% for the year ended
2018
2015
2014
2017
2016
2018
2017
2019
2015
2016
2017
2018
2019
2015
2016
2017
2018
2019
2020
2021
assets less intangible assets.
0.96%
Your Dream. Our Mission.
hancockwhitney.com
We conduct business in accordance with
these core values:
Honor & Integrity
Strength & Stability
Commitment to Service
Teamwork
Personal Responsibility
Hancock Whitney Corporation
2021 Annual Report
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