Hancock Whitney
Corporation
2022 ANNUAL REPORT
Earnings Per Share – Diluted
$5.98
$5.22
Hancock Whitney Corporation
Financial Highlights
$3.72
$3.72
($0.54)
2018
2019
2020
2021
2022
PPNR(a)
(in millions)
$434.4 $455.2
$491.2
$501.7
2018
2019
2020
2021
2022
Total Loans
(in billions)
$21.2 $21.8 $21.1
$20.0
(Dollars in thousands, except per share amounts)
2022
2021
INCOME STATEMENT DATA
Net income
Net interest income (TE)*
$524,089
$463,215
$1,060,351
$944,414
Pre-provision net revenue (PPNR)(a)
$641,145
$501,741
COMMON SHARE DATA
Earnings per share – diluted
Book value per share (period-end)
Tangible book value per share (period-end)
$641.1
Cash dividends per share
Market data
High sales price
Low sales price
Period-end closing price
PERIOD-END BALANCE SHEET DATA
Securities
Loans
Earning assets
Total assets
Total deposits
Common stockholders’ equity
$23.1
PERFORMANCE RATIOS
Return on average assets
Return on average common equity
Net interest margin (TE)*
Efficiency ratio(b)
Allowance for loan losses as percent of period-end loans
Tangible common equity ratio(c)
Return on average tangible common equity
$5.98
$38.89
$28.29
$1.08
$59.82
$41.62
$48.39
$5.22
$42.31
$31.64
$1.08
$53.61
$32.52
$50.02
$8,408,536
$8,552,449
$23,114,046
$21,134,282
$31,873,027
$33,610,435
$35,183,825
$36,531,205
$29,070,349
$30,465,897
$3,342,628
$3,670,352
1.49%
15.39%
3.26%
52.93%
1.33%
7.09%
21.07%
9.53%
1.32%
13.07%
2.95%
57.29%
1.62%
7.71%
17.74%
8.25%
2018
2019
2020
2021
2022
Leverage (Tier 1) ratio
Total Deposits
(in billions)
$30.5
$29.1
$27.7
$23.2 $23.8
2018
2019
2020
2021
2022
*Taxable equivalent (TE) amounts are calculated using a federal income tax rate of 21%.
(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.
(b) The efficiency ratio is noninterest expense to total net interest income (TE) and noninterest income,
excluding amortization of purchased intangibles and nonoperating items.
(c) The tangible common equity ratio is common stockholders’ equity less intangible assets divided by total
assets less intangible assets.
6
5
4
3
2
1
0
-1
700
600
500
400
300
200
100
0
25
20
15
10
5
0
35
30
25
20
15
10
5
0
To Our Shareholders:
Celebrating 2022
Looking Forward
Guided by our mission, purpose, and core values, Hancock
Whitney achieved record earnings in 2022 and continued
building momentum towards a new set of strategic objectives. We
reinvested in our people, technology and marketing to succeed
in this uncertain economic environment. With a de-risked balance
sheet, strong capital, a solid allowance for credit losses, and proven
resilience in navigating nearly 125 years of economic expansions
and recessions, we believe we are well positioned to exhibit
strength, stability and commitment to service for our clients and
communities in any economy.
We are exceptionally proud of the Hancock Whitney team and
the company’s overall performance during a remarkable year of
volatility. The results reveal not only progress made in 2022, but
also the culmination of decisions made the last several years to
better position the company. With year-over-year earnings up $61
million, pre-provision net revenue (PPNR)(a) up $139 million, net
loan growth of $2.0 billion, net interest margin (NIM) up 31 basis
points and an efficiency ratio in the low 50s, we view 2022 as a
very successful year.
Financial Snapshot
(December 31, 2022)
• 177 financial centers
• 226 ATMs
• Total Assets: $35.2 Billion
• Total Deposits: $29.1 Billion
• Net Income: $524.1 Million
• Pre-provision net revenue (PPNR):
$641.1 Million(a)
• Full Time Equivalent associates:
Approximately 3,600
• Earned 228 Greenwich Excellence
Awards and Best Brands Awards for top
client service since 2005
• Recognized by J.D. Power with the
highest ranking for client satisfaction
in retail banking for the South Central
Region in the 2022 U.S. Retail Banking
Satisfaction Report
We see 2023 as another year of potential macro environment
challenges. As such, we have updated our three-year Corporate
Strategic Objectives (CSOs). These CSOs are our board-approved
targets for operating the company over the next three years.
They are key to every decision we make and are reviewed annually.
Current Corporate
Strategic Objectives
(CSOs)
3-Year
Objective
(4Q25)*
4Q22 Actual
2022 Actual
≥ 1.55%
1.65%
1.49%
ROA
TCE
≥ 8%
7.09%
(9.17%
excl AOCI)**
24.64%
(18.22%
excl AOCI)**
7.09%
(9.17% excl
AOCI)**
21.07%
(17.65%
excl AOCI)**
ROTCE
≥ 18%
Efficiency Ratio
≤ 50%
49.81%
52.93%
*Assumed Fed Funds Rate: 4Q23: 4.75%, 4Q24: 3.50%, 4Q25: 3.00%
Our guidance for 2023 takes into account the near-term economy,
and we believe it is similar to others in our industry. Loan growth
projections reflect the recognition of a likely slowdown in the
economy, and we are mindful of managing risk in such an
environment. We expect continued hurdles with funding loan
growth with deposits, and are reacting to an environment where
core deposit growth will be available but more rate-sensitive.
We plan to focus intensely on core relationship lending with
accompanying deposit relationships, which we believe will create
meaningful value in our balance sheet through the interest rate
cycle. This focus may lead to slower loan growth in 2023, but
should provide a better chance of funding lending with deposits.
In 2022, the rate environment, while beneficial to net interest
income, negatively impacted fee income, with secondary mortgage
being the hardest hit. We believe we can grow total noninterest
income in 2023, including the replacement of $10-$11 million
of decreased income from the elimination of certain consumer
NSF/OD fees. The financial industry has entered a new era when
it comes to consumer fees, which is why we made a strategic
decision early in 2022 to proactively eliminate consumer (retail)
non-sufficient funds (NSF) and certain overdraft (OD) fees by year-
end. These changes are in-line with an evolving retail banking
industry, as many banks have announced similar decisions
throughout the year. These changes were implemented in certain
consumer accounts on December 1, 2022.
Inflation pressures, pension expense and notable increases in
FDIC assessments are a few of the drivers leading us to anticipate
an increased level of noninterest expense in 2023. However, our
efforts over the past three years in reducing expenses have put
us in a position to better adjust to these increases and still maintain
an efficiency ratio in the very low 50s. In 2022, we achieved our
1
goal of a 55% or better efficiency ratio several quarters early,
ending the year with a 52.93% ratio and posting a fourth quarter
of 2022 measure slightly below 50%.
categories: Likelihood to Recommend, Relationship Manager
Proactively Provides Advice, Satisfaction, Overall Satisfaction
with Relationship Manager and Industry Understanding.
We believe our results for 2022 reflect a company positioned well
for today’s economic environment:
• Credit metrics are at or near historically low levels with a
solid reserve for credit losses
• Initiatives executed in 2020-2022 helped drive an efficiency
ratio below 50% in the fourth quarter of 2022
• New bankers hired over the past 18 months should help
attract and enhance relationships in growth markets
• We have proven our ability to proactively manage expenses
and are introducing technology focused on scalability and
effectiveness
• Capital remains solid
• Our balance sheet is de-risked and positioned well for
today’s rapidly changing rate environment
Recognitions and Accolades
Each day, our associates demonstrate the core values that guide
how the company does business. Their efforts to provide 5-star
service to clients and communities regularly earn the organization
national, regional and local recognition as a financially sound
institution and trusted financial and community partner.
We are continuously honored to be recognized by esteemed
organizations. These awards help distinguish us in our industry
and prove our commitment to remain a business that never knows
completion—always striving to be better for our shareholders,
clients and communities. In 2022, business and community
accolades for the company included:
In early 2023, Greenwich Associates also awarded Hancock
Whitney 11 awards for middle market and small business banking
excellence in 2022. Based on interviews with more than 20,000
executives across the country, a relatively small number of more
than 500 eligible providers stand out as differentiated across a
series of qualitative metrics measured by Coalition Greenwich.
In 2023, Hancock Whitney Corporation received the following
2022 Greenwich Excellence Awards for national and regional
performance:
Middle Market Banking
• Cash Management – Overall Satisfaction
• Cash Management – Overall Satisfaction (South)
• Likelihood to Recommend
• Likelihood to Recommend (South)
• Overall Satisfaction
• Overall Satisfaction (South)
Small Business Banking
• Cash Management – Overall Satisfaction (South)
• Likelihood to Recommend
• Likelihood to Recommend (South)
• Overall Satisfaction
• Overall Satisfaction (South)
Greenwich Associates selects winners in various categories
to recognize the best of the best among banks bringing quality
service to clients. Hancock Whitney has earned a grand total of
228 Greenwich Awards, with 24 Best Brand Awards since 2013
and 204 Excellence Awards since 2005.
Celebrating Milestones
• BauerFinancial, Inc., a leading national independent bank
rating and analysis firm, recommended Hancock Whitney
as one of America’s strongest, safest financial institutions
for 134 consecutive quarters, as of the quarter ending
December 31, 2022.
This year, we were given the chance to celebrate our associates
by participating in the Nasdaq Opening Bell ceremony. The
celebration was to acknowledge two corporate milestones—10
years since the merger of our two grand old banks and 30 years of
trading on the Nasdaq exchange.
• Forbes tapped Hancock Whitney as one of “America’s Best
Banks.”
• The J.D. Power 2022 U.S. Retail Banking Satisfaction
Survey ranked Hancock Whitney as the highest scoring
bank for the South Central Region for client satisfaction in
retail banking.
• In 2022, Greenwich Associates, the leading global provider
of data, analytics and insights to the financial services
industry, awarded Hancock Whitney Greenwich Excellence
Awards for U.S. Small Business Banking in 2021 for five
2
Diversity, Equity and Inclusion in Action
Commitment to Service
Diversity, Equity, and Inclusion (DEI) are fundamental to the spirit
of HWC’s mission, purpose and values. As a company that greatly
values differences—in thought, culture, ethnicity and experience—
we were excited to reopen our highly regarded summer Corporate
Internship Program (CIP) to in-person, on-site participation. Our
CIP is a key component of the company’s DEI strategy, focused
on championing and developing qualified and diverse talent. Over
12 weeks, our 2022 intern class worked with HWC associates
across a variety of corporate disciplines, gaining vital real-world
experience to complement the students’ already sterling academic,
professional, and extracurricular records.
The 2022 summer Corporate Internship Program (CIP) participants
The Corporate Governance and Nominating Committee, a
committee within the Board of Directors, oversees a broad ranges
of issues surrounding the composition and operation of the board
and champions the board’s focus on DEI. The committee and
the board believe the board should have directors from diverse
backgrounds with a diversified set of business skills, perspectives
and experience. The committee considers whether the board, as
a whole, reflects the diverse regions, the lines of business of our
markets and the clients we serve. Our board is currently comprised
of five women (one of whom self-identifies as African American and
one of whom self-identifies as Latina) and ten men.
Hancock Whitney Corporation Board of Directors
(Standing, from left) Constantine “Dean” S. Liollio, Sonya C. Little,
Thomas H. Olinde, H. Merritt Lane, III, John M. Hairston, Hardy B.
Fowler, Suzette K. Kent, C. Richard Wilkins (Seated, from left) Frank E.
Bertucci, Sonia A. Pérez, James H. Horne, Christine L. Pickering, Jerry
L. Levens, Joan C. Teofilo, Randall W. Hanna
3
This year, we are especially proud to recognize long-tenured
associates’ Commitment to Service, honoring associates serving
the company more than 40 years at the bank. Their colleagues
describe them as “team players,” “adaptable,” “dedicated” and
“trusted.”
These dedicated associates include:
Darryl Fricke (49)
Sharon Rider (47)
Elizabeth Phillips (47)
Cindy Jacobs (46)
Diane Hillebrandt (45)
William Staggers (45)
Joe Exnicios (45)
Susan Nolan (44)
Ginger McKay (43)
Peggy Sunseri (43)
Marybeth Castay (42)
Irving Delahoussaye, Jr. (42)
Mona Mount (41)
Gloria Mitchell (41)
Brenda Decker (41)
Carol Saxton (41)
Freddie Falconello (41)
Vikki Hebert (41)
Associate Volunteerism
Stacey Ruiz (41)
Lynne Bragg (41)
Tammy Robichaux (41)
Jodi Spence (40)
Jeffrey Cloutet (40)
Gwen Reulet (40)
Deborah Jaycox (40)
Chris Miller (40)
Kathleen Guillot (40)
Sherry Palmer (40)
Cherri Mason (40)
Beth Zeigler (40)
Glenda McKnight (40)
Barbara Fradella (40)
Mignonne Gratia Johnston (40)
Leigh Anne Broadus (40)
Brina Brown (40)
Giving back and paying it forward are important ideals we hold
dear—principles central to our company for more than 120 years.
We believe in volunteering our time, talent, energy and enthusiasm
to make a difference in the communities where we work and live.
Community Connection, our associate volunteer program,
offers associates one paid day each year to volunteer in their
communities. Whether at work or when they volunteer, associates
help people achieve their goals and dreams.
In 2022 employees contributed
• 4,300+ volunteer hours
• 530+ organizations served
• 300+ nonprofit board positions held by associates
With competitive grants managed through the company’s
Community Reinvestment Act (CRA) program, direct contributions,
and volunteerism, Hancock Whitney invests significantly in
organizations promoting affordable homeownership, housing
development, home rehabilitations, financial education and
economic mobility.
Affordable Homeownership Advocates. West 30’s Redemption in
Covington, Louisiana, is one of many nonprofits Hancock Whitney
supports to help create affordable homeownership opportunities.
Redemption builds new homes and renovates existing homes to help
people have homes of their own.
Honoring Our Founders
Hancock Whitney embraces a lifelong learning philosophy for
financial education, providing people the information they need
for more financial security. Each October, we celebrate Hancock
Whitney Founders Month to highlight our focus on financial
education for all ages and encourage associates to share their
expertise with community groups to help young people and adults
learn the value of good financial habits at every stage of life.
During National Financial Literacy Month in April, we encourage
associates to share their financial know-how with local schools
and organizations through special events and presentations.
During the 30-day period in 2022, associates volunteered for 166
financial education activities, supporting 25 different organizations
benefitting more than 4,700 people.
Growing Relationships
Today’s Hancock Whitney started as two banks serving neighboring
communities, the Mississippi Gulf Coast and Greater New Orleans.
Hancock Whitney now proudly serves the Gulf South region in a
world that looks different from the one in which our founders lived.
Yet, today we still base how we do business on the core values our
founders put in place to guide us. Each day, our associates embody
Honor and Integrity, Strength and Stability, Commitment to Service,
Teamwork and Personal Responsibility.
In 2022 and 2021, we continuously analyzed our footprint and the
impact we make on that region. By adding new bankers in key
markets, we have been able to expand our ability to help the
communities we serve.
**For additional information and non-GAAP reconcilations, please refer to the 4Q22
earnings release found on investors.hancockwhitney.com
Markets in which we have added bankers are
• San Antonio, Texas
• Baton Rouge, Louisiana
• Austin, Texas
• New Orleans, Louisiana
• Dallas, Texas
• Gulfport, Mississippi
• Houston, Texas
• Nashville, Tennessee
• Beaumont, Texas
• Tampa, Florida
• Lafayette, Louisiana
Looking Forward to a Successful
2023
With 2022 behind us, I reflect on the success we have had this past
year and, again, express appreciation to our clients, communities
and our team. On behalf of our associates, board of directors and
our executive team, I extend our gratitude to you, our shareholders,
for your confidence in Hancock Whitney Corporation.
With appreciation,
John M. Hairston
President & CEO
4
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
(cid:1409)(cid:1409)(cid:3)(cid:3) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2022
OR
(cid:1407)(cid:1407)(cid:3)(cid:3) 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)
Hancock Whitney Plaza, 2510 14th Street,
Gulfport, Mississippi
(Address of principal executive offices)
64-0693170
(I.R.S. Employer
Identification Number)
39501
(Zip Code)
(228) 868-4727
Registrant’s telephone number, including area code
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
Common Stock, par value $3.33 per share
6.25% Subordinated Notes
Trading Symbol
HWC
HWCPZ
Securities registered pursuant to Section 12(g) of the Act: NONE
Name of Exchange on Which Registered
The NASDAQ Stock Market, LLC
The NASDAQ Stock Market, LLC
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:
(cid:1409)
Large accelerated filer
Non-accelerated filer
(cid:1407)
Emerging growth company (cid:1407)
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)
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in
the filing reflect the correction of an error to previously issued financial statements. (cid:1407)
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation
received by any of the registrant's executive officers during the relevant recovery period pursuant to §240.10D-1(b). (cid:1407)
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, 2022. 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, 2023, the registrant had 85,983,593 shares of common stock outstanding.
Accelerated filer
Smaller reporting company
(cid:1407)
(cid:1407)
DOCUMENTS INCORPORATED BY REFERENCE
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.
Hancock Whitney Corporation
Form 10-K
Index
BUSINESS
RISK FACTORS
UNRESOLVED STAFF COMMENTS
PROPERTIES
LEGAL PROCEEDINGS
MINE SAFETY DISCLOSURES
MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS
AND ISSUER PURCHASES OF EQUITY SECURITIES
RESERVED
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
CONTROLS AND PROCEDURES
OTHER INFORMATION
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
EXECUTIVE COMPENSATION
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
PRINCIPAL ACCOUNTANT FEES AND SERVICES
EXHIBITS, FINANCIAL STATEMENT SCHEDULES
FORM 10-K SUMMARY
6
25
39
39
39
39
40
41
42
82
83
141
141
141
141
142
142
142
142
143
146
PART I
ITEM 1.
ITEM 1A.
ITEM 1B.
ITEM 2.
ITEM 3.
ITEM 4.
PART II
ITEM 5.
ITEM 6.
ITEM 7.
ITEM 7A.
ITEM 8.
ITEM 9.
ITEM 9A.
ITEM 9B.
PART III
ITEM 10.
ITEM 11.
ITEM 12.
ITEM 13.
ITEM 14.
PART IV
ITEM 15.
ITEM 16
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 Whitney Investment Services – a wholly owned subsidiary of Hancock Whitney Corporation, through which Hancock
Whitney Corporation conducts limited 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
CAMT – Corporate Alternative Minimum Tax
CARES Act- Coronavirus Aid Relief and Economic Security Act
CD – Certificate of deposit
CDE – Community development entity
CECL – Current Expected Credit Losses the term commonly used to refer to the methodology of estimating credit losses required by
ASC 326, “Financial Instruments – Credit Losses.” ASC 326 was adopted by the Company on January 1, 2020, superseding the
methodology prescribed by ASC 310.
CEO – Chief Executive Officer
CFPB– Consumer Financial Protection Bureau
CFO – Chief Financial Officer
CME - Chicago Mercantile Exchange
CMO – Collateralized mortgage obligation
Core loans – Loans excluding Paycheck Protection Program (PPP) loans
Coronavirus – The novel coronavirus declared a pandemic during the first quarter of 2020, resulting in prolonged market disruptions
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
1
DEI – Diversity, equity and inclusion
DIF – Deposit Insurance Fund
Dodd-Frank Act – The Dodd-Frank Wall Street Reform and Consumer Protection Act
ESG – Environmental, Social and Governance; term used in discussion of risks and corporate policies related to those items
Excess Liquidity - deposits held at the Federal Reserve above $200 million, plus excess investments in the securities portfolio above
normal cash flows
FASB – Financial Accounting Standards Board
FDIC – Federal Deposit Insurance Corporation
FDICIA – Federal Deposit Insurance Corporation Improvement Act of 1991
Federal Reserve Board – The 7-member Board of Governors that oversees the Federal Reserve System, establishes monetary policy
(interest rates, credit, etc.), and monitors the economic health of the country. Its members are appointed by the President, subject to
Senate confirmation, and serve 14-year terms.
Federal Reserve System – The 12 Federal Reserve Banks, with each one serving member banks in its own district. This system,
supervised by the Federal Reserve Board, has broad regulatory powers over the money supply and the credit structure. They implement
the policies of the Federal Reserve Board and also conduct economic research.
FFIEC – Federal Financial Institutions Examination Council
FHA – Federal Housing Administration
FHLB – Federal Home Loan Bank
GAAP – Generally Accepted Accounting Principles in the United States of America
HTM- Held to maturity securities
IRA – Inflation Reduction Act of 2022
IRS – Internal Revenue Service
LIBOR – London Interbank Offered Rate
LIHTC – Low income housing tax credit
LTIP – Long-term incentive plan
MBS – Mortgage-backed securities
MD&A – Management’s discussion and analysis of financial condition and results of operations
MDBCF – Mississippi Department of Banking and Consumer Finance
NAICS – North American Industry Classification System
NII– Net interest income
n/m – not meaningful
NOL – Net operating loss
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
PPNR – Pre-provision net revenue, a non-GAAP measure
PPP– Paycheck Protection Program, a loan program administered by the Small Business Administration designed to provide a direct
incentive for small business to keep workers on payroll during interruptions caused by the COVID-19 pandemic
Reference rate reform – Refers to the global transition away from LIBOR and other interbank offered rates toward new reference
rates that are more reliable and robust
Repos – Securities sold under agreements to repurchase
SBA – Small Business Administration
SBIC - Small Business Investment Company
SEC – U.S. Securities and Exchange Commission
Securities Act – Securities Act of 1933, as amended
Short-term Investments - the sum of Interest-bearing bank deposits and Federal funds sold
SOFR – Secured Overnight Financing Rate
TDR – Troubled debt restructuring (as defined in ASC 310-40)
2
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
3
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:
•
•
•
•
•
general economic and business conditions in our local markets, including conditions affecting employment levels, interest
rates, inflation, supply chains, the threat of recession, volatile equity capital markets, collateral values, customer income,
creditworthiness and confidence, spending and savings that may affect customer bankruptcies, defaults, charge-offs and
deposit activity; and the impact of the foregoing on customer and client behavior (including the velocity of loan repayment);
as well as any ongoing impact of the COVID-19 pandemic on the economy and our operations;
balance sheet and revenue growth expectations may differ from actual results;
the risk that our provision for 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;
changes in the cost and availability of funding due to changes in the deposit market and credit market;
success of revenue-generating and cost reducing initiatives;
future expense levels;
improvements in expense to revenue (efficiency ratio), including the risk that we may not realize and/or sustain the expected
benefits from our efficiency and growth initiatives or that we may not be able to realize these cost savings or revenue benefits
in the time period expected, which could negatively affect our future profitability;
the effectiveness of derivative financial instruments and hedging activities to manage risks;
risks related to our reliance on third parties to provide key components of our business infrastructure, including the risks
related to disruptions in services or financial difficulties of a third-party vendor;
risks related to potential claims, damages, penalties, fines and reputational damage resulting from pending or future litigation,
regulatory proceedings or enforcement actions;
risks related to the ability of our operational framework to manage risks associated with our business such as credit risk and
operation risk, including third-party vendors and other service providers, which could among other things, result in a breach
of operating or security systems as a result of a cyber-attack or similar act;
the extensive use, reliability, disruption, and accuracy of the models and data we rely on;
risks related to our implementation of new lines of business, new products and services, new technologies, and expansion of
our existing business opportunities;
projected tax rates;
future profitability;
purchase accounting impacts, such as accretion levels;
our ability to identify and address potential cybersecurity risks on our systems and/or third party vendors and service
providers on which we rely, heightened by increased use of our virtual private network platform, including data security
4
•
•
•
•
•
•
•
•
•
breaches, credential stuffing, malware, “denial-of-service” attacks, “hacking” and identity theft, a failure of which could
disrupt our business and result in the disclosure of and/or misuse or misappropriation of confidential or proprietary
information, disruption or damage to our systems, increased costs, losses, or adverse effects to our reputation;
our ability to receive dividends from Hancock Whitney Bank could affect our liquidity, including our ability to pay dividends
or take other capital actions;
the risk that we may be required to make substantial expenditures to keep pace with regulatory initiatives and the rapid
technology changes in the financial services market;
the impact on our financial results, reputation, and business if we are unable to comply with all applicable federal and state
regulations or other supervisory actions or directives and any necessary capital initiatives;
our ability to effectively compete with other traditional and non-traditional financial services companies, some of whom
possess greater financial resources than we do or are subject to different regulatory standards than we are;
our ability to maintain adequate internal controls over financial reporting;
the financial impact of future tax legislation;
the effects of war or other conflicts, including Russia's military action in Ukraine, acts of terrorism, climate change, natural
disasters such as hurricanes, freezes, flooding, man-made disasters, such as oil spills in the Gulf of Mexico, health
emergencies, epidemics or pandemics, or other catastrophic events that may affect general economic conditions;
risks related to environmental, social and governance ("ESG") legislation, rulemaking, activism and litigation, the scope and
pace of which could alter our reputation and shareholder, associate, customer and third-party affiliations; and
changes in laws and regulations affecting our businesses, including governmental monetary and fiscal policies, legislation
and regulations relating to bank products and services, the possibility that the U.S. could default on its debt obligations, 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.
5
ITEM 1. BUSINESS
ORGANIZATION
Hancock Whitney Corporation (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 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, 2022, our balance sheet totaled $35.2 billion, with loans of $23.1 billion and deposits of $29.1 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), letters of credit and similar financial guarantees. The Bank provides trust and investment
management services to retirement plans, corporations and individuals and provides its customers access to investment advisory and
brokerage products.
We offer other services through bank and nonbank subsidiaries. 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. Our holding company's nonbank subsidiary, Hancock Whitney
Investment Services, Inc., provides customers access to fixed annuity and life insurance products, investment advisory services and
also participates in select underwriting transactions, primarily for banking clients.
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 loan production
offices in Nashville, Tennessee and the metropolitan area of Atlanta, Georgia. At December 31, 2022, we had 177 banking locations
and 226 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.
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 from both new and existing
clients. We also continue to evaluate future acquisition opportunities that have the potential to increase shareholder value, provided
overall economic conditions and our capital levels would 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 and sectors 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 a consistent lending process
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.”
6
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, and 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, we also
employ enhanced due diligence on select customers, portfolios, industry sectors and concentrations as economic, weather or other risk
events occur to ensure alignment between credit 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, 2022 are as follows:
Portfolio Segment Concentrations
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
Commercial non-real estate — 457%
Commercial real estate - owner occupied — 90%
Commercial real estate-income producing — 106%
Construction and land development — 108%
Residential mortgage — 87%
Consumer — 99%
7
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, 2022:
Significant Industry Concentrations
(cid:120)
(cid:120)
(cid:120)
(cid:120)
Real estate and rental and leasing — 60%
Healthcare and social assistance — 53%
Construction — 52%
Manufacturing — 51%
(cid:120) Wholesale trade — 46%
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
Finance and insurance — 43%
Retail trade — 43%
Transportation and warehousing — 34%
Professional, scientific and technology services — 33%
Accommodation and food services — 17%
Government and public administration — 16%
Other services (except public administration) — 16%
Information — 14%
Mining, quarrying and oil and gas extraction — 13%
Education Services — 13%
Utilities — 10%
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 another member of the Executive Credit Officer group, 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, marine transportation and maritime construction, and energy, 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 for the purchase of equipment and machinery, including equipment leasing, among other items.
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 relatively small portfolio of corporate credit cards,
generally issued as a part of overall customer relationships. Asset-based loans, such as accounts receivables and business inventory
secured loans, may have limits on borrowing that are based on the collateral values. Our source of repayment for asset-based loans is
generally the conversion of those assets to cash and may be substantially dependent on the ability of the borrower to collect amounts
due from its customers.
8
Commercial non-real estate loans also include loans made under the Small Business Administration’s (SBA) Paycheck Protection
Program (PPP) to provide assistance to businesses impacted by the COVID-19 pandemic. The PPP loan program began in early 2020
and closed for new originations in 2021. 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. The PPP loans that we originated have been largely repaid as of December 31, 2022.
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, particularly during economic downturns, 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 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
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 generally sold in the secondary
mortgage market, depending on current strategies. The sale of fixed-rate mortgage loans allows the Bank to manage the interest rate
risks related to such lending operations.
9
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 continues to decline. Consumer loans also include a relatively 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 and whether the borrower is located in the Bank’s primary market areas
are also factors considered in making such loans.
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, including purchases, sales, classification as either available for sale or held to maturity, and
hedging activities. 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
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. Deposit levels have
also been influenced by other factors such as pandemic-driven inflows from government stimulus payments and PPP loan proceeds,
general changes in consumer and business spending behavior, including as a result of inflation and recessionary concerns, and inflows
from hurricane-related insurance proceeds, among other things. 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.
10
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 $5 million at December 31, 2022. 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. Given our funding
position, the Company has not renewed maturing brokered deposits and has held only limited balances in recent years. 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, 2022, the trust department of the Bank had approximately $29.9 billion of
assets under administration, comprised of investment management and investment advisory agency accounts of $5.2 billion and other
custody and safekeeping accounts of $9.1 billion, corporate trust accounts of $6.5 billion, and personal, employee benefit, estate and
other trust accounts totaling $9.1 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 inclusive 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 2022, the Company’s human
capital strategy continued to focus on evolving to meet the ever-changing needs of our associates, responding to a challenging labor
market with increased competition for talent and labor shortages, and supporting various initiatives to improve operations and overall
efficiency while maintaining our commitment to our clients, communities and shareholders.
A strong and impactful human capital program begins at the top. Our Board of Directors oversees our overall corporate strategy and
sets the tone for our culture, values and high ethical standards, and through its Committees, holds management accountable for results.
Beginning in 2021, the Board expanded the scope of our Compensation Committee beyond its traditional compensation-focused role
to include oversight of all human capital management efforts within Hancock Whitney. Since this expansion, the Compensation
Committee has been provided periodic updates on the Company's human capital management efforts including talent acquisition and
retention; talent and performance management; learning and development; total rewards; associate well-being; and diversity, equity
and inclusion. In 2022, the Compensation Committee further strengthened its oversight of these areas through the implementation of a
human capital management dashboard that it reviews periodically throughout the year. The dashboard includes a mixture of trending
and point-in-time metrics designed to provide information and analysis of workforce demographics; talent acquisition; workforce
stability; and total rewards and associate programs.
11
Workforce Demographics
As of December 31, 2022, the Company had 3,627 full-time equivalent associates, predominately located in our core footprint of
Mississippi, Louisiana, Alabama, Florida, Texas and Tennessee, compared to 3,486 associates as of December 31, 2021. Approximately
45% of associates were employed in Consumer Banking, 11% in Commercial Banking, 9% in Wealth Management, and 35% in
Treasury, Operations, and Other Corporate Business & Administration, respectively. As of December 31, 2022, approximately 68% of
our associates self-identified as a female and approximately 28% self-identified as a person of color. In 2022, approximately 74% of our
new hires self-identified as female and approximately 45% of new hires self-identified as people of color.
Diversity, Equity and Inclusion
Diversity, Equity and Inclusion (DEI) are fundamental to our purpose and essential to executing our mission. 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.
Our commitment to DEI starts at the top of our organization, supported through oversight by the Compensation Committee of the
Hancock Whitney Corporation Board of Directors. Underscoring our 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 the organization’s 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 foster a diverse and inclusive workplace that attracts, develops and retains 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.
Continuing on our efforts to build and attract a diverse workforce in 2022, we continued to cultivate new relationships, strengthened
existing partnerships, and enhanced diverse recruiting efforts with key organizations. We were intentional with our campus recruiting,
internship, and programming efforts across the footprint to expand our diverse talent pool. We continued efforts at historically black
colleges and universities through funding of scholarships and programs to support Black students. We revitalized the corporate internship
program providing an inclusive experience that uniquely incorporates mentorship, financial literacy, community connection, and
diversity learning opportunities across the organization and footprint. We proudly hosted the 2022 class of interns consisting of 56%
females and 56% people of color, expanding our diverse pool of future talent and campus advocates. Additionally, we partnered with
diverse external professional organizations such as Hispanic Chamber of Commerce, Gulf Coast Equality Council, and Families Helping
Families and leveraged our associates for candidate referrals to expand our candidate pipeline.
Further supporting, developing, 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 2022,
the Company enhanced its diversity-learning opportunities with new platforms designed to listen and learn directly from the voices and
experiences of our associates including Living Room Conversations, Cultural Tasting Series, Understanding Cultural Bias Training, and
Associate Spotlights featuring New Associates, Women of Excellence, Random Acts of Kindness, and Living Our Core Values to help
drive inclusive behaviors and inspire a growth mindset. Additionally, we continued our increased focus on associate volunteer activities
tied to strengthening DEI within our footprint.
Total Rewards
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, an outside benefits broker, and benefits consulting firms. These resources are used 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. In January 2022, we increased our minimum base pay for entry positions to $15.50 per hour and continue to monitor and
assess the competitiveness of our base pay through benchmarking of our base salaries to those of our peers. The Company rewards
12
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
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 lives and career journeys.
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
1,437 requisitions filled in 2022, 40% were filled by internal associates. Approximately 14% of our workforce received a promotion in
2022, consisting of 77% females and 33% people 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.
Health, Safety and Well-Being
At Hancock Whitney, supporting the overall health, safety, and well-being of our associates are top priorities for the Company and some
of the most valuable investments we make as a company. We are committed to providing robust, competitive benefits and programs that
support associates in all aspects and stages of life. We continually explore opportunities for new or enhanced benefits and other programs
to better support the overall well-being of our associates.
Our benefits and programs are designed around five key pillars of well-being:
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
Physical: Maintaining a healthy and safe lifestyle
Emotional: Reaching greater balance in mind and spirit
Financial: Achieving financial goals and dreams
Social: Connecting with others and community
Career: Growing and developing a meaningful career
Supplementing our various benefit plans and programs, 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.
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. Throughout the year, especially during hurricane season, we encourage associates to prepare for inclement weather and natural
13
disasters. We provide associates with resources to prepare and respond including the American Red Cross, Employee Assistance
Program, and Hancock Whitney Associate Assistance Fund. We periodically prompt associates to review and update contact information
and emergency contact information in our HR system to ensure that they receive Company communications and outreach during
emergency situations.
We remain committed to providing a safe, secure environment for our associates and clients. We continuously remind associates of their
critical role in maintaining a safe and secure working environment. Trainings and communications are provided to educate and reinforce
our safety and security protocols including safely accessing facilities and workspaces; safeguarding information and devices; and
preventing, detecting, and reporting crimes and suspicious activities.
Engagement
We strive to create a culture of engagement where each associate knows they are important, valued, and can grow. We engage our
associates through various channels including written, digital and face-to-face communications with targeted audiences ranging from
all associates to core leaders, teams and one-on-ones. We encourage continuous open communication with our associates and leaders
where input is welcomed through an environment of mutual respect and trust. We promote a workplace focused on gratitude and
appreciation through our Value of You recognition program, Community Connection volunteer program as well as other associate
campaigns throughout the year.
We periodically conduct associate engagement surveys to measure our associates' connection and commitment to the Company and its
goals. In 2022, we conducted an anonymous online associate engagement survey to measure associate engagement and collect associate
feedback. During the survey, associates answered questions and provided comments to capture their feelings about the Company,
leadership, and their team. The survey results indicated overall associate engagement compared favorably to peer benchmark
comparisons for the financial services industry and our regional footprint. Using the results of the engagement survey, leaders are able
to identify strengths and opportunities for growth within their teams as well as the overall organization to further strengthen our culture
and better meet the needs of our associates.
Open Communication
Our Open Communication Policy cultivates a culture of open and honest communication between managers and associates as a day-to-
day business practice. Managers set the tone of the workplace by welcoming input from associates in an environment of mutual respect
and trust. We believe this process helps to define any issue and work toward resolving it in an informal manner.
We encourage associates to work with their immediate managers to resolve questions, conflicts and disputes. If concerns involve the
immediate manager, or if the issue has not been resolved appropriately, associates may escalate the issue to the next-level manager and
ultimately Human Resources.
Integrity in Action
Upholding the core values of Honor & Integrity, Strength & Stability and Personal Responsibility and further protecting our clients,
associates, and Company’s financial safety and soundness, our associates are expected to conduct business in a lawful, ethical and fair
manner. All associates are strongly encouraged to report ethical concerns related to matters such as accounting, internal controls,
auditing, discrimination, and harassment and/or violations or suspected violations of laws or regulations, the Code of Conduct, or
other Company policies and procedures by clients, associates, or vendors. Integrity in Action, our whistleblower policy, provides our
associates and others with a confidential method of reporting illegal, unethical, or unsafe activity. Administered through a third-party
provider, the independent reporting service allows individuals to make reports confidentially by telephone or online 24 hours a day,
seven days a week and allows for anonymous reports, if desired. All reports are investigated by Human Resources and/or Internal
Audit and monitored through final disposition. Updates are provided to the Audit Committee on a quarterly basis. A copy of our
Integrity in Action Whistleblower Policy is available under Governance Documents on our website, www.hancockwhitney.com.
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 addition of
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
14
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
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 investors.hancockwhitney.com, 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 our 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 shareholder 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.
15
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.
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, if issued.
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 any class of 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 domestic 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 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, 2022, and the Bank has a rating of “Satisfactory” in its most recent CRA evaluation.
16
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 any class 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 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 any class 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.
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.
17
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
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, 2022,
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)
5.0% leverage ratio.
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
The Federal Reserve has different requirements than those 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, 2022 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.
18
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 2022, 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 2023. Risk-based
capital ratios and the leverage capital ratio at December 31, 2022 for the Company and the Bank were as follows:
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.
Well-Capitalized
Under Prompt
Minimum
Corrective Action*
Minimum Capital
Plus Capital
Conservation
Buffer
Company
Bank
4.00 %
4.50 %
6.00 %
8.00 %
5.00 %
6.50 %
8.00 %
N/A
9.53 %
9.54 %
7.00 %
8.50 %
11.41 %
11.41 %
11.43 %
11.43 %
10.00 %
10.50 %
12.97 %
12.39 %
The Company and Bank elected to utilize 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 provided a full delay of the estimated impact of
CECL on regulatory capital transition (0%) for the first two years, followed by a three-year transition (25% of the impact included in
2022, 50% in 2023, 75% in 2024 and 100% thereafter). The first two-years 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 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
(2022, 2023, and 2024).
19
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.
20
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. In October of 2022, the FDIC adopted a final rule to
increase the initial base deposit insurance assessment rate by 2 basis points, applicable to all insured depository institutions, which will
begin with the first quarterly assessment period in 2023 and will remain in effect until the level of the DIF reserve ratios to insured
deposits meets the FDIC's long-term goals.
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
21
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.
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. Most recently, on June 30, 2021, FinCEN
published the first set of “national AML priorities,” as required by the Bank Secrecy Act, which include, but are not limited to,
cybercrime, terrorist financing, fraud, and drug/human trafficking. FinCEN is required to implement regulations to specify how
covered financial institutions, such as the Company, should incorporate these national priorities into their AML programs. As of
December 31, 2022, no such regulations have been proposed.
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 commercial real estate ("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 Community Reinvestment Act (“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.
On May 5, 2022, the OCC, FRB, and FDIC issued a notice of proposed rulemaking to provide for a coordinated approach to
modernize their respective CRA regulations, such that all banks will be subject to the same set of CRA rules. Key elements are
expected to include (i) expanding access to credit, investment, and basic banking services in low- and moderate-income communities;
(ii) updating CRA assessment areas by including activities associated with online and mobile banking, branchless banking, and hybrid
models; and (iii) better tailoring CRA evaluations and data collection requirements by bank size and type. No final rule has been
issued, but the rulemaking may affect the Bank’s CRA compliance obligations in the future.
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)
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;
22
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
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 under the CARES Act continued during the COVID 19 pandemic
emergency, and while most of these protections expired in 2022, on January 18, 2023, in its revised Mortgage Servicing Examination
Procedures, the CFPB stated it expected servicers to continue to utilize these safeguards, regardless of their expiration.
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 implemented 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.
Interest rates based on LIBOR. On March 15, 2022, Congress enacted the Adjustable Interest Rate (LIBOR) Act (the “LIBOR Act”)
to address references to LIBOR in contracts that (i) are governed by U.S. law; (ii) will not mature before June 30, 2023; and (iii) lack
23
fallback provisions providing for a clearly defined and practicable replacement for LIBOR. On December 16, 2022, the FRB adopted
a final rule to implement the LIBOR Act by identifying benchmark rates based on SOFR (Secured Overnight Financing Rate) that will
replace LIBOR in certain financial contracts after June 30, 2023. The final rule identifies replacement benchmark rates based on
SOFR to replace overnight, one-month, three-month, six-month, and 12-month LIBOR in contracts subject to the LIBOR Act.
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, 2022, 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
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, 2022 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 to promote
maximum employment, stable prices, and moderate long-term interest rates. 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.
24
INFORMATION ABOUT OUR EXECUTIVE OFFICERS
The names, ages, positions and business experience of our executive officers as of February 24, 2023 are as follows:
Name
John M. Hairston
Michael M. Achary
Joseph S. Exnicios
D. Shane Loper
Joy Lambert Phillips
Cecil W. Knight, Jr.
Michael Otero
Ruena H. Thompson
Christopher S. Ziluca
Age
59
62
67
57
67
59
56
61
61
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; Principal Accounting Officer since 2022.
Senior Executive Vice President since 2017; Executive Vice President from 2011 to 2016;
President of 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;
Chief Legal Officer since 2022; Corporate Secretary since 2011; General Counsel from 1999 to
2022.
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.
While we describe each risk separately, some of these risks are interrelated and certain risks could trigger the applicability 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 currently do not consider significant, could also potentially impair, and have a
material adverse effect on our business, results of operations, and financial condition.
Risks Related to Economic and Market Conditions
Current uncertain economic conditions pose challenges, and could adversely affect our business, financial condition and results of
operations.
We are operating in an uncertain economic environment. The pandemic caused a global economic slowdown, and while we have seen
economic recovery, continuing supply chain issues, labor shortages and inflation risk are affecting the continued recovery. Our
business and operations, which primarily consist of lending money to customers in the form of loans, borrowing money from
customers in the form of deposits and investing in securities, are sensitive to general business and economic conditions in the U.S.
Continued economic uncertainty and a recessionary or stagnant economy could result in financial stress on our borrowers, which
could adversely affect our business, financial condition and results of operations. Deteriorating conditions in the regional economies
we serve, or in certain sectors of those economies, could drive losses beyond that which is provided for in our allowance for credit
losses. We could also face the following risks in connection with the following events:
(cid:120)
(cid:120)
market developments and economic stagnation or slowdown may affect consumer confidence levels and may cause
adverse changes in payment patterns, resulting in increased delinquencies and default rates on loans and other credit
facilities;
the processes we use to estimate the allowance for credit losses and other reserves may prove to be unreliable. Such
estimates rely upon complex modeling inputs and judgments, including forecasts of economic conditions, which may be
rendered inaccurate and/or no longer subject to accurate forecasting;
25
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
our ability to assess the creditworthiness of our borrowers may be impaired if the models and approaches we use to select,
manage, and underwrite loans become less predictive of future charge-offs;
regulatory scrutiny of the industry could increase, leading to increased regulation of the industry that could lead to a
higher cost of compliance, limit our ability to pursue business opportunities and increase our exposure to litigation or
fines;
ineffective monetary policy or other market conditions could cause rapid changes in interest rates and asset values that
would have a materially adverse impact on our profitability and overall financial condition;
further erosion in the fiscal condition of the U.S. Treasury could lead to new taxes that would limit our ability to pursue
growth and return profits to shareholders; and
the U.S. government's decisions regarding its debt ceiling and the possibility that the U.S. could default on its debt
obligations may cause further interest rate increases, disrupt access to capital markets and deepen recessionary conditions.
If these conditions or similar ones continue to exist or worsen, we could experience continuing or increased adverse effects on our
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 our outstanding loans. Such factors have and may continue to be caused
by events that are difficult to predict in respect to nature, timing, duration and severity.
Volatility in global financial markets, including, but not limited to the lingering effects from the COVID-19 pandemic, inflation and
governmental responses thereto, recessionary concerns and the conflict in Ukraine, may continue to have a spillover effect that could
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, and leveraged loans. Due to the exposure in these concentrations,
disruptions in markets, economic conditions, including those resulting from the global response to COVID-19, inflation, supply chain
disruptions, changes in laws or regulations or other events could significantly impact the ability of our borrowers to repay their loans
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/or could be impacted by unforeseen events, such as pandemics,
weather events, environmental contamination, among others, and additional provisions for the allowance for credit losses could be
necessitated should actual and/or forecasted losses be in excess of our expectations. Our desire to foreclose on these properties given
each circumstance and/or the 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, loan 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 and/or our customers' 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 and/or significant
26
movement in interest rates markedly changing the slope of the current yield curve could cause our and our customers’ 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 us 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.
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. Changes in market values of investment securities classified as available for sale can negatively impact
our other comprehensive income and equity levels through accumulated other comprehensive income, which includes net unrealized
gains and losses on those securities. Further, such losses could be realized into earnings should liquidity and/or business strategy
necessitate the sales of securities in a loss position.
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 risks 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.
Interest rate changes are dependent on the Federal Reserve’s assessment of economic data as it becomes available. The Federal
Reserve reduced interest rates to near zero in March 2020 in response to economic disruption that occurred at the outset of the
COVID-19 pandemic, which continued into early 2022, at which time interest rates were raised aggressively to combat inflation. As a
result of the rising interest rate environment, in 2022, which is expected to continue into 2023, we have and are expected to continue
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 results 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.
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 customers' margins, and adversely impact their revenues, financial
results and ability to service debt. Trade restrictions on products include export and import restrictions recently levied against Russia.
27
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
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 would stop
compelling banks to submit rates for the calculation of LIBOR after 2021. In November 2020, the administrator of LIBOR announced
it would 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 would
continue until June 30, 2023. Regardless, the federal banking agencies also issued guidance on November 30, 2020, encouraging
banks to (i) stop using LIBOR in new financial contracts no later than December 31, 2021; and (ii) either use a rate other than LIBOR
or include clear language defining the alternative rate that will be applicable after LIBOR’s discontinuation.
To address the problem created by legacy financial contracts that incorporate LIBOR as their reference interest rate, but extend
beyond the date after which LIBOR will be published, on March 15, 2022, Congress enacted the Adjustable Interest Rate (LIBOR)
Act (the “LIBOR Act”). On December 16, 2022, the Federal Reserve adopted a final rule implementing the LIBOR Act by adopting
benchmark rates based on the Secured Overnight Financing Rate (“SOFR”) that will replace LIBOR in certain financial contracts after
June 30, 2023.
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, the associated revenue and expenses, and their value may be adversely affected.
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, and therefore, would
default to the statutory provisions of the Federal Reserve. 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 and the implementation of the Inflation Reduction
Act of 2022, 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, future
regulatory 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 or additional taxes on share repurchases and dividends, could increase our costs and impact our
business.
On August 16, 2022, the Inflation Reduction Act was signed into law in the United States. The Inflation Reduction Act includes
various tax provisions, including an excise tax on stock repurchases, and a corporate alternative minimum tax that generally applies to
U.S. corporations with average adjusted financial statement income over a three-year period in excess of $1 billion. While we do not
28
currently expect the Inflation Reduction Act to have a material impact on our financial results, including on our annual estimated
effective tax rate or on our liquidity, the effects of the measures are unknown at this time.
Governmental responses to market disruptions and other events may be inadequate and may have unintended consequences.
Congress and financial regulators have and may continue to implement measures designed to stabilize financial markets, 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 additional 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
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 other 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 operating results may also be negatively impacted by the value of our securities portfolio, if liquidity and/or business
strategy necessitate the sales of securities in a loss position, and/or access to select sources of liquidity could be limited should
unrealized losses continue to grow to exceed certain levels. 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 operations.
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
29
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 depends 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
credit 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.
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, 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.
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 the sale of any loans.
From time to time we may sell all or a portion of one or 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 were 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
30
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,
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,
31
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 since the COVID-19 pandemic 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, have in the past been, and in the future may
be alleged to have infringed upon intellectual property rights owned by others.
Competitors or other third parties have in the past alleged, and in the future 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 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.
32
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. Effective
December 1, 2022, the Company also eliminated consumer (retail) non-sufficient funds fees and certain overdraft fees, which is
expected to reduce noninterest income. If our fee structure is deemed less favorable than other financial services providers, we may be
at a competitive disadvantage in attracting customers for certain fee producing products. Further, we may choose to implement
additional changes to remain competitive that could adversely affect our operating results.
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.
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.
33
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 to 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
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
34
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. Such advances may also 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. Such actions in the future could lead to 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.”
35
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. Further,
implementation of new rules, such as the Commission's proposed climate related disclosures, could require additional cost and
negatively impact operating results.
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 are 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.
36
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 articles of incorporation and bylaws could make a third-party acquisition of us
difficult and may adversely affect share value.
Our 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.
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.
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 have and may continue to restrict
our ability to attract and retain personnel and increase related costs.
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 and our customers 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.
37
Societal, legislative and regulatory responses to environmental, social and governance ("ESG") concerns, including climate
change and "anti ESG" concerns, could adversely affect our business and performance, including indirectly through impacts on
our customers.
Our business faces increasing public, investor, activist, legislative and regulatory scrutiny related to ESG and “anti-ESG”
developments. We risk damage to our brand and reputation in certain sectors if we fail to act in response to ESG concerns, such as
diversity, equity and inclusion, environmental stewardship, human capital management, support for our local communities, corporate
governance and transparency, or fail to consider ESG factors in our business operations.
Concerns over the long-term impacts of climate change have led and will continue to lead to global governmental efforts to mitigate
those impacts. Consumers and businesses also may change their behavior and operations 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 circumstances, including a significant presence in areas that are
vulnerable to natural and man-made disasters that may be exacerbated by climate change, or reliance upon or a 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.
Furthermore, as a result of our diverse base of clients and business partners, we may face potential negative publicity based on the
identity of our clients or business partners and the public's (or certain segments of the public's) view of those entities. Such publicity
may arise from traditional media sources or from social media and may increase rapidly in size and scope. If our client or business
partner relationships were exposed to negative publicity, our ability to attract and retain clients, business partners, and employees may
be negatively impacted, and our stock price may also be negatively impacted. Additionally, we may face pressure to not do business in
certain industries that are viewed as harmful to the environment or are otherwise negatively perceived, which could impact our
growth.
Certain investors and shareholder advocates are placing increasing emphasis on how corporations address ESG issues in their business
strategy when making investment decisions and when developing their investment strategies and proxy recommendations. We may
incur increased costs with respect to our ESG efforts and if such efforts are negatively perceived, our reputation and stock price may
suffer.
In response to ESG developments, there are increasing instances of “anti-ESG” legislation, regulation, and litigation that could have
unintended impacts on ordinary banking operations and increase litigation risk related to actions we choose to take. If legislatures in
the states in which we operate adopt legislation intended to protect certain industries by limiting or prohibiting consideration of
business and industry factors in lending activities, certain portions of our lending operations may be impacted.
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
38
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 226 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 loan production offices in Nashville,
Tennessee and the metropolitan area of Atlanta, Georgia, and a trust and asset management office in Marshall, Texas. The Company
owns approximately 72% 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 $0.1 million in our 2022 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.
39
ITEM 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES
PART II
Market Information
The Company’s common stock trades on the Nasdaq Global Select Market under the ticker symbol “HWC.” There were 7,448 active
holders of record of the Company’s common stock at January 31, 2023 and 85,983,593 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, 2017 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.
40
Equity Compensation Plan Information
The following table provides information as of December 31, 2022 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)
951,691 (1) $
1,476 (3)
953,167
N/A (2)
53.73 (3)
2,602,985
—
2,602,985
(1)
Includes 63,126 shares potentially issuable upon the vesting of outstanding restricted share units and 81,548 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 395,838
performance share awards. Performance share awards and units are stated in amounts that would be issuable if the highest level of performance conditions is
met.
(2)
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 was 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
allowed 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 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. During the year ended December 31, 2022, the Company repurchased 1,204,368 shares of its common stock at an
average cost of $48.90 per share, inclusive of commissions. Total shares purchased under this program were 1,654,244 at an average
cost of $48.77 per share, inclusive of commissions. This program expired on December 31, 2022.
Common stock repurchase activity during the fourth quarter of 2022 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
— $
— $
— $
— $
—
—
—
—
—
—
—
—
2,645,756
2,645,756
—
—
Oct 1, 2022 - Oct 31, 2022
Nov 1, 2022 - Nov 30, 2022
Dec 1, 2022 - Dec 31, 2022
Total
ITEM 6.
Reserved.
41
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, 2022 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 29 “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 they enable 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.
As of January 1, 2022, the Company has determined that it will no longer include any immaterial results from storm-related expenses
and income in nonoperating items.
EXECUTIVE OVERVIEW
We are pleased to report that 2022 was another outstanding year for our company. The financial results reflect not only progress
made during the year, but also the culmination of decisions made during the last several years to better position the company for
today’s rapidly changing economic environment. The following financial review provides a discussion of our financial
condition, changes in financial condition and results of operations.
Current Economic Environment
During the year ended December 31, 2022, economic conditions were greatly influenced by a persistent high level of inflation and
the Federal Reserve's actions to curb it. Early COVID-19 pandemic response measures in the form of virus containment measures
and various forms of government stimulus created pervasive, lingering supply chain and labor market disruptions. Consumers shifted
spending towards goods and away from services, further placing stress on supply chains, and the supply of goods could not meet
consumer demands, resulting in price increases. These stresses have been exacerbated by the impact of recent geopolitical conflict
upon commodity supply, all of which have led to a steadily rising rate of inflation that reached a 40-year high in June 2022. In
response to escalating inflation, the Federal Reserve began quantitative tightening and has undertaken an aggressive approach in
setting the target Federal Funds Rate through the issuance of a series of seven interest rate increases between March 2022 and
December 2022 totaling 425 basis points.
42
Thus far, there have been mixed indications of whether the Federal Reserve's monetary policy has begun to effect change. The rate
of inflation remains elevated, but had declined to 6.5% on an annualized basis in December 2022, down from its peak of 9.1% in
June. However, Real Gross Domestic Product (“GDP”) increased 2.1% in 2022 (inclusive of growth of 3.2% and 2.9% in the third
and fourth quarters, respectively). Further, the U.S. economy reached a full-employment level in July 2022, defined as an
unemployment rate of 3.5% or lower and a prime-age employment-to-population ratio of 80%, and remained near that mark at year
end. Additional changes in interest rates are expected in the near-term; the extent of which, and the favorable or unfavorable impact
of these actions upon equity markets and economic conditions remains uncertain.
Despite persistent inflationary pressures, the market areas we serve continued to show indications of economic health during the year.
We experienced full-year core loan growth (excluding PPP) of approximately 12%, and our credit quality indicators remain strong.
The growth in the loan portfolio, largely funded by the remaining excess liquidity on our balance sheet, was across our geographic
footprint and diverse across most business lines. This shift in earning assets from excess liquidity into higher-yielding loans, along
with the net impact of the seven interest rate increases, contributed to a 31 basis point expansion of our net interest margin compared
to the prior year. Increased cost of living amid inflationary conditions, and heightened competition for deposits in the rising interest
rate environment has put pressure on our deposit base, which decreased 5% from the same time last year.
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 2022 Moody’s forecast, the most current
available at December 31, 2022. The forecasts are anchored on a baseline forecast scenario, which Moody’s defines as the “most
likely outcome” of where the economy is headed based on current conditions. Several upside and downside scenarios are produced
that are derived from the baseline scenario and incorporate varying degrees of favorable and unfavorable adjustments to economic
indicators and circumstances as compared to the baseline. The macroeconomic variables underlying the December 2022 economic
scenarios differ in certain respects from the comparable forecasts available at December 31, 2021, given the shift in economic
circumstances and risks.
The December 2022 baseline forecast maintains a generally optimistic outlook in its assumptions surrounding the drivers of
economic growth, including its expectations of the effectiveness of the Federal Reserve's monetary policy in easing inflationary
conditions. The baseline scenario assumes the Federal Reserve will continue quantitative tightening measures by means of runoff at
a rate of $100 billion in securities per month, and that it will issue 25-basis point interest rate increases at each of the January and
March meetings, with the expectation that interest rate cuts will begin in late 2023 and occur through 2024. The baseline scenario
also estimates a weaker pace of job growth in 2023 (as compared to 2022), which will lead to an increase in the unemployment rate
to 4.2% by the first quarter of 2024, declining to 4.0% by the end of 2024. Further, GDP growth is estimated to be 1.9% in 2022,
0.9% in 2023, and 2.0% in 2024.
The macroeconomic variables underlying the downside scenario (S-2) are less optimistic compared to those underlying the baseline.
Supply-chain issues worsen and increasing shortages of affected goods keep the inflation elevated longer than expected in the baseline
scenario. Additionally, higher wage increases than those forecasted in the baseline scenario further contribute to inflationary pressures.
In turn, the Federal Reserve responds by raising the target interest rate more than what is assumed in the baseline and the U.S. falls
into a recession in first quarter 2023 that spans three quarters. The S-2 forecast assumes unemployment rates of 5.7% and 5.4% in
2023 and 2024, respectively, and a 0.5% contraction of GDP in 2023, before returning to a positive rate of 1.3% in 2024. Management
has deemed the assumptions provided for in the S-2 scenario to be more likely than the baseline scenario, and as such, the baseline
scenario and the S-2 scenario were given probability weightings of 25% and 75%, respectively, in the calculation of our allowance for
credit losses calculation at December 31, 2022. The weighting of the S-2 scenario reflects management's view that the forecasted
economic circumstances and outcomes included the S-2 scenario, including a mild recession, to be more likely to occur in the near
term.
At December 31, 2022, the credit loss outlook on our portfolio as a whole was somewhat improved from the prior period end. Our
portfolio has grown and changed in composition to some extent with the paydown of substantially all of our PPP loans. Our asset
quality metrics have remained stable, with little change in commercial criticized loans, a decline in nonperforming loans and only
minimal credit losses. We continue to closely monitor our portfolio, particularly borrowers that are sensitive to prolonged inflation and
the rising interest rate environment. We expect loan growth could slow amid the current or further rising interest rate environment and
as we continue to focus on lending to resilient borrowers in light of current economic pressures.
The effects of inflation and the Federal Reserve's actions to counter those effects in the form of further interest rate increases and
quantitative tightening have and are likely to continue to reduce economic growth in the near term. The full extent of the impact of the
Federal Reserve’s actions to date to reduce inflation and the potential scope of additional Federal Reserve actions are uncertain and
may have a significant negative impact on the U.S. economy, including the possibility of an economic recession in the near or
midterm. While uncertainty over the consequences of these actions remains, we expect that the current interest rate environment will
continue to contribute favorably to our net interest income, net interest margin and overall operating results in the near term, although
not at the pace experienced in 2022, and will be dependent on our ability to manage funding costs.
43
Highlights of 2022 Financial Results
Net income for the year ended December 31, 2022 was $524.1 million, or $5.98 per diluted common share, compared to $463.2
million, or $5.22 per diluted common share in 2021. There were no nonoperating items in 2022. The results for 2021 included $35.9
million (pre-tax), or $0.31 per share after tax, of net nonoperating expense items, including $38.3 million of expense related to
efficiency initiatives, $4.4 million of hurricane-related expenses and $4.2 million loss on extinguishment of debt, partially offset by
$11.0 million of nonoperating income. The following is an overview of financial results for the year ended December 31, 2022:
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
(cid:120)
Net income of $524.1 million, or $5.98 per diluted common share
Operating pre-provision net revenue of $641.1 million, up $103.5 million, or 19%, from 2021
Negative provision for credit losses of $28.4 million in 2022 reflective of a reserve release of $30.3 million and net
charge-offs of $1.9 million, compared to a negative provision of $77.5 million in 2021 that reflected a reserve release of
$108.7 million and net charge-offs of $31.2 million
Core loan growth of $2.5 billion, or 12%, and a $492 million reduction of PPP loans due to forgiveness resulted in an
overall increase in total loans of $2.0 billion, or 9%, in 2022
Deposits of $29.1 billion at December 31, 2022 decreased $1.4 billion, or 5%; noninterest-bearing deposits comprised
47% of total deposits at both December 31, 2022 and 2021
Common equity tier 1 capital ratio of 11.41%, up 32 basis points (bps) from December 31, 2021
Criticized commercial loans and nonperforming loans remained near historically low levels throughout 2022
Net interest margin increased 31 bps to 3.26% during 2022, driven by rising interest rates and a favorable change in the
earning asset mix
Efficiency ratio improved to 52.93% during 2022, down from 57.29% in 2021
The results of the year ended December 31, 2022 were one of the best in our Company’s history. We experienced strong loan growth
reflecting robust loan demand across or geographic footprint and within specialty lines of business. Our loan growth combined with
the rising rate environment contributed to the expansion of our net interest margin and revenue growth. We remain in a solid capital
position with tangible common equity ratio of 7.09% and a common equity tier 1 ratio of 11.41%. We will continue to manage capital
in the best interests of the company and our shareholders. We beat our 55% efficiency ratio goal several quarters early, ending the year
with a 52.93% ratio. We were able to achieve our target by not only the thoughtful execution of expense management and efficiency
initiatives, but also a focus on revenue generation through new banker hires in growth markets. Despite the impact of the volatile
economic environment our markets and clients, our credit metrics remained strong. Criticized commercial loans and nonperforming
loans remained near historically low levels throughout 2022. We are pleased at how our portfolio has performed during these
unprecedented times but also mindful of current macroeconomic trends that could impact our clients or our business. We believe that
we remain well-positioned should a recessionary period begin.
44
Additional information related to our results and outlook are included in the discussions that follow.
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
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
$
$
$
$
$
$
2022
2021
2020
1,137,063 $
1,147,411
87,060
1,060,351
(28,399 )
331,486
750,692
659,196
135,107
524,089 $
— $
—
—
—
—
—
—
23,114,046 $
31,873,027
35,183,825
13,645,113
29,070,349
3,342,628
21,915,393 $
32,498,213
35,059,178
14,298,022
29,497,470
3,405,206
6.00 $
5.98
1.08
38.89
28.29
86,394
85,941
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
45
($ 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)
Tier 1 common equity
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)
2022
2021
2020
1.49 %
15.39 %
21.07 %
7.09 %
11.41 %
3.26 %
23.82 %
52.93 %
1.33 %
1.48 %
0.01 %
0.19 %
3,627
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
-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
$
$
1,050,003 $
331,486
1,381,489
10,348
—
1,391,837
(750,692 )
—
641,145 $
933,235 $
364,334
1,297,569
11,179
(10,976)
1,297,772
(807,007)
46,873
537,638 $
942,523
324,428
1,266,951
13,000
—
1,279,951
(788,792)
—
491,159
(a)
(b)
(c)
(d)
(e)
Interest income includes the net impact of discount accretion and premium amortization arising from business combinations totaling $4.7 million, $8.6 million,
and $15.4 million for the years ended December 31, 2022, 2021 and 2020, 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 purchased 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, 2022 compared to the year ended December
31, 2021. 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 $1.1 billion, up $116.8 million, or 13%, from $933.2 million in 2021. 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) was $1.1 billion in 2022, up $115.9 million, or 12%, from $944.4 million in 2021, and included an increase in
interest income (te) of $154.0 million partially offset by an increase of $38.0 million in interest expense. The increase in interest
income is largely attributable to the impact that the series of Federal Reserve interest rate increases during the year had upon new and
repricing earning assets, a favorable change in the mix of earning assets, and, to a lesser extent, a $14.8 million decrease in net
premium/discount amortization on the securities portfolio. These factors were partially offset by decreases of $48.5 million in PPP fee
income, $8.9 million in net nonaccrual interest recoveries, and $3.9 million in purchase accounting accretion. The increase in interest
expense is attributable to a higher cost of funds, driven by interest rate increases, the impact of which was partially offset by an
improved funding mix with an increase in average noninterest-bearing deposits and decreases in average interest-bearing deposits.
46
The yield on earning assets (te) was 3.53% in 2022, up 43 bps from 2021. The increase was mainly attributable to the impact of the
rising interest rate environment upon the loan and investment portfolios, and a favorable change in the mix of average earning assets,
with loans up $707 million, investment securities up $907 million, and short-term investments down $1.1 billion. The loan yield was
up 40 bps to 4.32%, reflecting the impact of the rise in interest rates on new and repricing loans. During 2022, the proportion of our
loan portfolio tied to variable rates, including hybrid adjustable rate mortgages (ARMs), averaged approximately 57%. The yield on
investment securities increased 19 bps in 2022 to 2.11% as new investments were made at higher yields amid the rising interest rate
environment, along with yield enhancements from the termination of certain fair value hedges on available for sale securities.
The cost of funds increased 12 bps to 0.27% in 2022 from 0.15% in 2021, primarily as a result of the rising interest rate environment.
Average interest-bearing deposit costs increased 21 bps in 2022 to 38 bps from 17 bps in 2021. Other short-term borrowing costs,
which consist largely of Federal Home Loan Bank advances, increased to 1.83% in 2022 from 0.49% in 2021, as $1.1 billion of low
fixed-rate Federal Home Loan Bank advances entered into in late 2019 and early 2020 were called in mid-2022 and subsequently
replaced with borrowings at current market rates. The rate on long-term debt decreased 13 bps to 5.19%, largely due to a shift in mix
of the debt resulting from the redemption of $150 million of subordinated notes in June of 2021.
The net interest margin is the ratio of net interest income (te) to average earning assets. The net interest margin increased 31 bps to
3.26% in 2022 from 2.95% in 2021, due primarily to the factors outlined above.
While we remain asset sensitive, we expect further shifts in deposit mix to higher-cost products could offset the benefits of expected
interest rate increases in the near-term. Managing funding costs will be a key element in our future performance.
Discussions of Asset/Liability Management and Net Interest Income at Risk later in this item provide additional information regarding
our management of interest rate risk and the potential impact from changes in interest rates, respectively.
47
TABLE 2. Summary of Average Balances, Interest and Rates (te) (a)
($ 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:
Average
Balance
2022
Interest
(d)
Rate
Years Ended December 31,
2021
Interest
(d)
Average
Balance
Rate
Average
Balance
2020
Interest
(d)
Rate
$ 17,682.3 $
2,666.1
1,567.0
—
21,915.4
43.0
759.9
90.3
88.4
7.4
946.0
1.8
4.30 % $ 17,070.3 $
2,445.6
3.39
1,692.1
5.64
—
—
21,208.0
4.32
90.2
4.22
606.1
90.6
81.6
53.7
832.0
2.5
3.55 % $ 17,270.9 $
2,857.6
3.70
2,038.0
4.82
—
0.0
22,166.5
3.92
86.8
2.82
660.5
112.1
101.5
41.0
915.1
2.6
3.82 %
3.92
4.98
0.0
4.13
3.02
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
Total interest-bearing liabilities
Noninterest-bearing:
Noninterest-bearing deposits
Other liabilities
Stockholders' equity
426.7
8.3
1.95
330.6
5.4
1.64
153.5
3.2
2.09
7,652.1
912.0
22.3
154.5
27.0
0.8
2.02
2.96
3.42
6,833.1
928.4
13.7
190.6
9,013.1
1,526.7
9.0
32,498.2 1,147.4
2.11
0.59
3.53 %
8,105.8
2,656.9
32,060.9
122.3
27.2
0.5
155.4
3.5
993.4
1.79
2.93
3.66
5,345.0
891.9
8.4
121.8
26.9
0.4
2.28
3.02
4.28
1.92
0.13
3.10 %
6,398.8
583.2
152.3
1.0
29,235.3 1,071.0
2.38
0.17
3.66 %
2,878.4
(317.4 )
$ 35,059.2
3,420.6
(406.1 )
$ 35,075.4
3,547.4
(391.7 )
$ 32,391.0
$ 11,201.1 $
1,056.4
2,941.9
15,199.4
536.7
822.0
239.3
16,797.4
21.2
4.7
32.5
58.4
1.1
15.1
12.4
87.0
0.19 % $ 11,216.5 $
1,413.0
0.44
3,140.2
1.10
15,769.7
0.38
559.4
0.21
1,103.8
1.83
314.9
5.19
17,747.8
0.52 %
9.1
6.5
10.6
26.2
0.6
5.4
16.8
49.0
0.08 % $
0.46
0.34
0.17
0.10
0.49
5.32
0.28 %
9,558.1 $
2,642.5
3,232.1
15,432.7
600.2
1,378.0
320.3
17,731.2
25.6
37.1
25.6
88.3
1.4
8.6
17.2
115.5
0.27 %
1.40
0.79
0.57
0.24
0.62
5.36
0.65 %
14,298.0
558.6
3,405.2
Total liabilities and stockholders'
equity
$ 35,059.2
Net interest income (te) and margin
Net earning assets and spread
Interest cost of funding earning assets
$ 1,060.4
$ 15,700.8
13,324.0
458.3
3,545.3
10,779.6
447.1
3,433.1
$ 35,075.4
$ 32,391.0
3.26
3.01
0.27 %
$
944.4
$
955.5
$ 14,313.1
$ 11,504.1
2.95
2.82
0.15 %
3.27
3.01
0.39 %
(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 $4.7 million, $8.6 million and $15.4 million for the years December 31, 2022, 2021, and
2020, respectively.
48
TABLE 3. Summary of Changes in Net Interest Income (te) (a) (b)
($ 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:
U.S. Treasury and government agency securities
Mortgage-backed securities and collateralized mortgage
obligations
Municipals
Other securities
Total investment in securities (te) (d)
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
2022 Compared to 2021
Due to
Change in
Total
Increase
(Decrease)
2021 Compared to 2020
Due to
Change in
Volume
Rate
Total
Increase
(Decrease)
Volume
Rate
$ 22,399 $ 131,363 $ 153,762 $ (7,579) $ (46,849 ) $ (54,428)
(6,007 ) (21,516)
(2,991 ) (19,840)
12,660
(39,937) (43,187 ) (83,124)
(79)
7,809
(6,180 )
—
24,028
(1,672 )
(8,049)
12,940
(46,301)
89,953
944
(240 )
6,760
(46,301 )
113,981
(728 )
(15,509)
(16,849)
— 12,660
(179 )
100
1,739
1,153
2,892
2,708
(499 )
2,209
15,284
(485 )
297
16,835
(1,976 )
37,215
16,952
275
(34)
18,346
7,516
116,759
32,236
(210 )
263
35,181
5,540
153,974
29,730 (29,220 )
510
(801 )
1,084
283
(58 )
200
142
33,722 (30,578 )
3,144
2,516
(246 )
2,762
(3,353) (74,190 ) (77,543)
13
1,589
710
2,312
25
1,669
3,938
7,944
$ 45,159 $
16,455
(12,163)
30,569
262
14,991
(22,604)
62,015
(34,505)
869
(577)
3,158
(11,293)
393
394
(45,981)
66,435
70,778 $ 115,937 $ 7,959 $ (19,067 ) $ (11,108)
(3,813) 20,268
12,499 18,070
706 14,285
9,392 52,623
777
1,617
106
11,312 55,123
(12,150 )
1,851
(21,894 )
(32,193 )
(552 )
(9,624 )
4,332
(38,037 )
92
1,541
287
(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
During the twelve months ended December 31, 2022, we recorded a negative provision for credit losses of $28.4 million, compared to
a negative provision for credit loss of $77.5 million in 2021. Following the significant reserve build in 2020 in response to the
economic impact of the COVID-19 pandemic, improvement in overall credit performance and in economic indicators within our
footprint in 2021 and 2022 allowed for the gradual release of certain of those reserves. The negative provision for credit losses
recorded in 2022 included a $34.3 million release of allowance for funded loan losses, partially offset by a $4.0 million build in the
reserve for unfunded lending commitments and net charge-offs of $1.9 million, or 0.01% of average loans outstanding. The negative
provision for credit losses recorded in 2021 includes a $108.1 million release of 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.
As noted above, 2022 net charge-offs totaled $1.9 million, a decrease of $29.3 million from 2021. Net charge-offs in 2022 included
$7.4 million of consumer net charge-offs, partially offset by net recoveries of $3.9 million in the commercial portfolio and $1.6
million in the residential mortgage portfolio. Net charge-offs in 2021 included $25.5 million of commercial net charge-offs, of which
$13.3 million related to a single legacy energy credit, and $6.4 million of consumer net charge-offs, partially offset by net recoveries
of $0.7 million in the residential mortgage portfolio.
Loan growth, portfolio composition, credit quality metrics and assumptions in economic forecasts will drive the level of credit loss
reserves. At present, we expect low to modest charge-offs and provision in the first quarter of 2023.
49
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 the twelve months ended December 31, 2022 totaled $331.5 million, a $32.8 million, or 9%, decrease from
2021. There were no nonoperating items reported in noninterest income in 2022. Nonoperating items totaled $11.0 million in 2021,
comprised of a $4.6 million gain on the sale of the remaining Hancock Horizon Funds, $3.6 million related to a hurricane-related
insurance settlement and $2.8 million gain on the sale of Mastercard stock. From January 1, 2022 forward, the Company will not
include immaterial results from storm-related income or expense as nonoperating items. 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. Excluding nonoperating items in 2021, noninterest income in 2022 was down $21.9 million,
or 6%, largely driven by a decrease in secondary mortgage market income, primarily the result of the rising interest rate environment,
and decreases in other specialty fee categories, partially offset by increases in service charges, bank card and ATM fees, and trust fees.
Table 4 presents, for each of the three years ended December 31, 2022, 2021 and 2020, the components of noninterest income, along
with the percentage changes between years.
TABLE 4. Noninterest Income
($ 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
2022
$ 87,663
65,132
84,591
28,752
11,524
(87 )
15,881
5,832
10,483
—
—
—
21,715
$ 331,486
% Change
2021
% Change
2020
8 % $ 81,032
62,898
4
79,074
7
29,502
(3 )
36,694
(69 )
333
(126 )
18,330
(13 )
13,477
(57 )
11,001
(5 )
4,576
2,800
3,600
n/m
n/m
n/m
3
21,017
(9 ) % $ 364,334
6 % $ 76,659
58,191
8
68,131
16
24,330
21
40,244
(9)
(32)
488
18,179
1
12,814
5
11,255
(2)
—
n/m
—
n/m
—
n/m
49
14,137
12 % $ 324,428
Service charges on deposit accounts include consumer, business, and corporate deposit account servicing fees, as well as overdraft and
nonsufficient funds fees, overdraft protection fees, and other customer transaction-related fees. Service charges on deposit accounts
were $87.7 million, up $6.6 million, or 8%, from 2021. The increase from 2021 was largely attributable to an increase in non-
sufficient funds and overdraft fees, as instances of overdrafts increased as the elevated balances began to run down amid deposit
balance runoff. In December 2022, we eliminated consumer (retail) nonsufficient funds fees and certain overdraft fees. As a result, we
expect these fees will decrease by approximately $10 million to $11 million annually. We believe these changes are in line with the
evolving retail banking industry, as traditional banks adjust products to meet consumer needs and provide them with the tools needed
to help manage their overall finances. We expect to see improving account acquisition rates in 2023 with this change and as we launch
additional retail products and features.
Trust fee income represents revenue generated from asset management services provided to individuals, businesses and institutions.
Trust fees totaled $65.1 million in 2022, a $2.2 million, or 4%, increase from 2021, primarily attributable to an increase of $5.7
million in corporate and institutional trust fees and a decrease of $3.3 million in employee benefit trust and external distribution fees.
The increase in corporate and institutional trust fees is largely interest rate driven, as the rising interest rate environment allowed for
the resumption of certain fee assessments that are generally waived in a lower interest rate environment. Trust assets under
management decreased to $9.1 billion at December 31, 2022, compared to $9.8 billion at December 31, 2021.
50
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 $84.6 million in 2022, up $5.5 million, or 7%,
compared to 2021. The growth from 2021 is the result of an increase in card activity during the year as spending remained strong. In
addition, card revenue in 2021 was unfavorably impacted by disruption from Hurricane Ida.
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 $28.8 million in 2022, compared to $29.5 million in 2021. The $0.8 million, or 3%,
decrease is partly attributable to a temporary business disruption as a result of conversion to an outsourced sales and service
platform.
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 $11.5 million in 2022, a decrease of $25.2 million,
or 69%, from 2021. The decline is largely attributable to both a decline in refinancing activity, driven by the rising interest
environment, and a lower percentage of originated loans sold in the secondary market, as we are retaining a higher volume of
mortgage loans in our held for investment portfolio. The number of mortgage applications received in 2022 was down 30% compared
to those received in 2021. The percentage of mortgage loans sold in the secondary market to total originations (as opposed to those
held in our portfolio), was 22% in 2022, down from 48% in 2021. Secondary mortgage market operations income will vary based on
application volume and the number of loans ultimately closed and sold.
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 decreased $2.4 million, or 13%, to $15.9 million in 2022. The decrease
when compared to 2021 is largely attributable to $4.4 million of income received in connection with the purchase of policies in the
first quarter of 2021.
Income from derivatives, largely derived from our customer interest rate derivative program, totaled $5.8 million in 2022, compared to
$13.5 million in 2021. The decrease from 2021 is primarily attributable to a decrease in customer demand to execute interest rate
swaps as a result of an increase in the overall interest rate environment when compared to the prior year. Derivative income can be
volatile and is dependent upon the composition of the portfolio, volume and mix of sales activity and market value adjustments due to
market interest rate movement.
Other miscellaneous income is comprised of various items, including income from small business investment companies, FHLB stock
dividends, gain/losses from sales of other assets, and syndication fees. Other miscellaneous income for the year ended December 31,
2022 was $21.7 million, down $10.3 million from the previous year. Excluding the nonoperating items from 2021, comprised of the
$4.6 million gain on the sale of Hancock Horizon Funds, the $3.6 million gain on hurricane-related insurance settlement and the $2.8
million gain on the sale of MasterCard stock, other miscellaneous income in 2022 was relatively flat when compared to 2021.
We expect noninterest income to increase 3% to 4% in 2023, inclusive of the estimated $10 million to $11 million decrease in certain
consumer nonsufficient funds and overdraft fees.
Noninterest Expense
Noninterest expense for the twelve months ended December 31, 2022 totaled $750.7 million, down $56.3 million, or 7%, compared to
2021. There were no nonoperating expenses in 2022 compared to $46.9 million 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 Voluntary Early
Retirement Incentive Program (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 in 2021 also
includes $4.2 million of loss on extinguishment of debt attributable 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. Excluding nonoperating items
in 2021, noninterest expense decreased $9.4 million, or 1%, in 2022. The largest individual components of the decrease in operating
expense were professional fees and other real estate and foreclosed asset expense. Explanations of the variances are discussed below
in more detail.
51
Table 5 presents, for each of the three years ended December 31, 2022, 2021 and 2020, noninterest expense, along with the percentage
changes between years. Table 6 presents nonoperating expense included in noninterest expense (Table 5) by component for the same
periods.
TABLE 5. Noninterest Expense
($ 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
n/m - not meaningful
TABLE 6. Nonoperating Expense
($ in thousands)
Compensation expense
Employee benefits
Personnel expense
Net occupancy expense
Equipment 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
2022
$ 378,482
82,153
460,635
48,767
18,573
103,942
36,065
14,033
14,889
(4,407 )
13,783
16,744
11,870
10,336
3,795
4,336
4,768
(29,693 )
—
—
22,256
$ 750,692
% Change
2021
% Change
2020
(21 )
(5 )
(2 )
2
7
(26 )
(16 )
10
n/m
11
16
(6 )
31
2
61
7
6
n/m
n/m
(32 )
(0 ) % $ 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
(7 ) % $ 807,007
(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
2022
2021
2020
$
$
— $
—
—
—
—
—
—
—
—
—
—
—
— $
4,248 $
20,192
24,440
2
5
16
22
174
5
13,863
4,165
4,181
46,873 $
—
—
—
—
—
—
—
—
—
—
—
—
—
Personnel expense consists of salaries, incentive compensation, long-term incentives, payroll taxes, and other employee benefits such
as 401(k), pension, and medical, life and disability insurance. Personnel expense totaled $460.6 million, a decrease of $21.7 million,
or 5%, compared to 2021. The prior year includes $24.4 million of nonoperating expense attributable to efficiency initiatives,
including the VERIP and reduction in force. Excluding the nonoperating items, personnel expense was up $2.7 million, or 1%, as the
impact of annual merit increases was largely offset by a decrease in the average full-time equivalent headcount following the VERIP
and reduction in force initiatives.
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 of $67.3 million decreased $0.6 million, or 1%, in 2022
52
compared to 2021. The decrease was largely related to expense control measures, including the consolidation of 18 financial centers in
2021.
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 totaling $103.9 million was up $7.2 million, or
7%, from 2021, reflective of increases in data processing software amortization and third party processing expense that are linked to
technology enhancement initiatives, and an increase in card transaction-related processing expense that is linked to bank card and
ATM card activity.
Professional services expense totaling $36.1 million decreased $12.6 million, or 26%, from 2021, primarily due to decreases of $10.2
million in consulting and other professional services, largely the result of PPP-related consulting and legal fees incurred in 2021, and
$2.0 million in lending-related legal expense.
Amortization of intangibles in 2022 totaled $14.0 million, a $2.6 million, or 16%, decrease from 2021 as a result of the accelerated
amortization methods used.
Deposit insurance and regulatory fees totaling $14.9 million increased $1.3 million, or 10%, from 2021, reflective of current period
growth in the core loan portfolio, a substantial reduction in no/low risk PPP loans, and the decline in excess liquidity present in 2021.
In October 2022, the FDIC adopted a final rule to increase the initial base deposit insurance assessment schedules uniformly by 2 bps
beginning with the first quarterly assessment period of 2023. The increased assessment is expected to remain in effect until the
Deposit Insurance Fund reserve ratio to insured deposits meets the FDIC’s long-term goal for reserve ratios of the Deposit Insurance
Fund. We anticipate this change will increase our quarterly deposit insurance expense by approximately $1 million to $2 million, but
could vary depending upon our assessment base.
Other real estate and foreclosed assets expense reflected net gains of $4.4 million in 2022, compared to net gains of $0.2 million in
2021. The twelve months ended December 31, 2022 includes a $1.8 million gain on the sale of stock in a former borrower received in
satisfaction of debt. Gains or losses on the sale of other real estate and foreclosed assets may occur periodically and are dependent on
the number and type of assets for sale and current market conditions.
Business development-related expenses (including advertising, travel, entertainment and contributions) totaling $28.5 million were up
$5.5 million, or 24%, from 2021 and is reflective of increases in marketing-related efforts, sponsorships and direct mail campaigns.
Corporate value, franchise taxes, and other non-income taxes totaled $16.7 million, an increase of $2.3 million, or 16%, from 2021,
largely attributable to bank share tax, which was favorably impacted in 2021 as a result of the net loss recorded in 2020.
Noninterest expense in both 2022 and 2021 was reduced by a net credit in other retirement expense. The net credit in 2022 of $29.7
million was $1.8 million, or 6%, greater than 2021, based on certain actuarial assumptions and performance of pension plan assets.
We expect the net credit in other retirement expense related to the pension plan will decrease in 2023 by approximately $2.8 million
per quarter.
All other expenses totaling $42.7 million decreased $29.0 million, or 40%, from 2021 primarily due to $22.2 million of nonoperating
expenses incurred in 2021, including $13.9 million of loss on facilities and equipment due to the consolidation of 18 financial centers,
$4.2 million of loss on extinguishment of debt, and $4.2 million of expense related to Hurricane Ida. Excluding these nonoperating
expenses, other expense was down $6.7 million, or 14%, including $4.6 million of insurance other property related gains in 2022 and
various smaller items.
We expect noninterest expense for the year 2023 to increase approximately 6% to 7% compared to 2022. The anticipated year-over-
year increase includes increases in retirement (pension) expense and the FDIC assessment as described above. Excluding these items,
noninterest expense is expected to increase approximately 4% to 5%.
Income Taxes
We recorded income tax expense at an effective rate of 20.5% in 2022, compared to 18.5% in 2021. The comparability of the effective
tax rate between 2022 and 2021 is affected by higher pre-tax book income in 2022 that diluted the relative impact of net tax benefits
related to tax credit investments, tax-exempt interest income and bank-owned life insurance. Additionally, the 2021 effective tax rate
included a $4.9 million income tax benefit that increased the 2020 net operating loss, which was carried back to a 35% statutory tax
rate year under the CARES Act. Based on the current forecast, management expects the effective tax rate to be approximately 21% in
2023.
53
Our effective tax rate has historically varied from the federal statutory rate primarily due to tax-exempt income and tax credits.
Interest income on bonds issued by or loans to state and municipal governments and authorities, and earnings from the bank-owned
life insurance contract program are the major components of tax-exempt income.
Table 7 reconciles reported income tax expense to that computed at the statutory tax rate of 21% for the years ended December 31,
2022, 2021 and 2020.
TABLE 7. Income Taxes
($ 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)
2022
138,431 $
2021
119,292 $
$
2020
(26,196)
(1,391 )
(5,745 )
(4,232 )
3,329
(8,039 )
13,272
(8,612 )
(1,812 )
(2,084 )
1,836
238
1,877
135,107 $
(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)
$
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 2022, we expect to realize benefits from federal and state tax
credits over the next three years totaling $11.6 million, $11.7 million and $9.1 million for 2023, 2024 and 2025, respectively. We
intend to continue making investments in tax credit projects. However, our ability to access new credits will depend upon, among
other factors, federal and state tax policies and the level of competition for such credits.
At December 31, 2022, we had a net deferred tax asset of $211 million, which is comprised of $347 million in deferred tax assets (net
of state valuation allowance), offset by $136 million of deferred tax liabilities. 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.
In August 2022, the Inflation Reduction Act of 2022 (IRA) was signed into law to address inflation, healthcare costs, climate change
and renewal energy incentives, among other things. Included in the IRA are provisions for the creation of a 15% corporate alternative
minimum tax (CAMT) that is effective for tax years beginning January 1, 2023 for corporations with an average annual adjusted
financial statement income in excess of $1 billion. Based on information available to date, we do not anticipate our consolidated
corporate group to be subject to the 15% CAMT, absent any further changes in law.
54
BALANCE SHEET ANALYSIS
Short-Term Investments
At December 31, 2022, short-term liquidity investments, including interest-bearing bank deposits and federal funds sold, totaled
$324.1 million, a decrease of $3.5 billion from December 31, 2021. Average short-term investments for 2022 totaled $1.5 billion, a
$1.1 billion decrease from $2.7 billion in 2021. Typically, these balances will change on a daily basis depending upon movement in
customer loan and deposit accounts. The decline from December 31, 2021 is the result of the redeployment of excess liquidity that had
been present on our balance sheet for the better part of two years attributable to pandemic-related factors. 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.
Investment Securities
Our investment in securities was $8.4 billion at December 31, 2022, compared to $8.6 billion at December 31, 2021. 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, 2022, the amortized cost of securities available for sale totaled $6.3 billion and securities held to
maturity totaled $2.9 billion, compared to $7.0 billion and $1.6 billion, respectively, at December 31, 2021. To provide some
protection from the impact of future interest rate changes upon accumulated other comprehensive income, we reclassified securities
available for sale with an aggregate fair value of $561.8 million to the securities held to maturity portfolio during the first quarter of
2022.
Our securities portfolio consists mainly of residential and commercial mortgage-backed securities 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, 2022, the average expected maturity of the portfolio was 6.02 years
with an effective duration of 4.87 years and a nominal weighted-average yield of 2.27%. Under an immediate, parallel rate shock of
100 bps and 200 bps, the effective duration would be 4.83 years and 4.77 years, respectively. 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%. The change in expected maturity, effective duration, and nominal weighted-average yield is attributable to reinvestment of
securities portfolio cash flow, portfolio growth, and the impact of cash flows from the termination of 25 fair value hedge instruments
during the year.
We have in place last-of-layer swaps on certain fixed-rate commercial mortgage backed securities. As of December 31, 2022, we had
approximately $716 million in notional amount of forward-starting fixed payer swaps that convert the latter portion of the term of
these available for sale securities to a floating rate. These derivative instruments are designated as fair value hedges of interest rate
risk. This strategy provides a fixed-rate coupon during the front-end unhedged tenor of the bonds and results in a floating-rate security
during the back-end hedged tenor.
At the end of each reporting period, we evaluate the securities portfolio for credit loss. Based on our assessments, expected credit loss
was negligible for all reporting periods in 2022 and 2021, and therefore no allowance for credit loss was recorded.
There were no investments in securities of a single issuer, other than U.S. Treasury and U.S. government agency securities and
mortgage-backed securities issued or guaranteed by U.S. government agencies that exceeded 10% of stockholders’ equity. We do not
invest in subprime or “Alt A” home mortgage-backed securities. Investments classified as available for sale are carried at fair value,
while held to maturity securities are carried at amortized cost. Unrealized holding gains (losses) on available for sale securities are
excluded from net income and are recognized, net of tax, in other comprehensive income and in accumulated other comprehensive
income, a separate component of stockholders’ equity.
55
The following table presents debt securities at amortized cost by type at December 31, 2022 and 2021:
TABLE 8. Debt Securities by Type
($ 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
2022
2021
113,211 $
207,014
2,655,381
3,234,278
76,830
23,500
6,310,214 $
426,454 $
698,908
734,478
948,691
43,964
2,852,495 $
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
$
$
$
$
The amortized cost, fair value and yield of debt securities at December 31, 2022, 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. The yield calculation does not include adjustments to amortized cost of available for sale securities for
active fair value hedges.
56
TABLE 9. Debt Securities Maturities by Type
Over One
Year
Through
Five Years
Over Five
Years
Through
Ten Years
One Year
or Less
Over
Ten
Years
Total
Fair
Value
Weighted
Average
Yield (te)
Expected
Average
Maturity
Years
$
— $
—
103,361 $
2,355
— $
189,111
9,850 $
15,548
113,211 $
207,014
110,865
203,092
3.85 %
3.09 %
112
—
—
—
112 $
111 $
5.07 %
$
$
48,284
345,100
2,261,885
2,655,381
2,256,986
1.76 %
762,139
2,400,663
71,476
3,234,278
2,893,430
2.45 %
—
3,500
919,639 $
871,760 $
2.76 %
27,675
20,000
2,982,549 $
2,665,232 $
2.37%
49,155
—
2,407,914 $
2,018,938 $
1.78 %
76,830
23,500
6,310,214 $
5,556,041
2.20 %
70,588
21,080
5,556,041
1.92 %
3.51 %
2.20 %
$
— $
— $
10,000
154,153
132,949 $
310,031
293,505 $
224,724
426,454 $
698,908
377,431
673,103
2.36 %
3.03 %
—
—
—
$ 10,000 $
9,924 $
$
2.33 %
—
27,488
706,990
734,478
661,946
2.34 %
389,933
412,553
146,205
948,691
861,480
2.60 %
60
544,146 $
522,347 $
2.83 %
10,541
893,562 $
813,726 $
2.49%
33,363
1,404,787 $
1,269,401 $
2.59 %
43,964
2,852,495 $
2,615,398
2.60 %
41,438
2,615,398
2.47 %
2.60 %
7.2
3.2
6.2
6.9
2.8
3.0
6.3
6.7
4.0
5.7
5.6
2.4
5.3
($ 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, 2022 were $23.1 billion, compared to $21.1 billion at December 31, 2021. The $2.0 billion, or 9%,
increase is primarily attributable to $2.5 billion of core loan growth (excluding PPP loans) as loan demand increased across our
geographic footprint and within specialty lines of business, partially offset by $492 million of PPP loan forgiveness.
The composition of our loan portfolio at December 31, 2022 and 2021 was as follows:
TABLE 10. Loans Outstanding by Type
($ 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
2022
2021
$
$
10,146,453 $
3,033,058
13,179,511
3,560,991
1,703,592
3,092,605
1,577,347
23,114,046 $
9,612,460
2,821,246
12,433,706
3,464,626
1,228,670
2,423,890
1,583,390
21,134,282
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 $13.2 billion, or 57% of the total loan portfolio, at December 31, 2022, an increase of $746 million
from December 31, 2021. The increase is largely attributable to core loan growth of $1.2 billion, partially offset by PPP loan
forgiveness of $492 million.
57
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 operating in
our market areas that are well known to the relationship officers. Shared national credits funded at December 31, 2022 totaled
approximately $2.7 billion, or 12% of total loans, compared to $2.1 million, or 10% of total loans at December 31, 2021. Our shared
national credit industry concentration at December 31, 2022 includes approximately $509 million of health care-related facilities, $513
million in finance and insurance and $426 million in real estate, rental and leasing, with the remaining to various other industries.
The following table provides detail of the more significant industry concentrations for our commercial and industrial loan portfolio,
which is based on NAICS codes for all industries, with the exceptions of energy, which is based on the borrower’s source of revenue
(i.e. manufacturer whose income is derived from energy-related business is reported as energy), and PPP loans, as those are expected
to be 100% SBA guaranteed and therefore have limited credit risk.
TABLE 11. Commercial & Industrial Loans by Industry Concentration
($ in thousands)
Commercial & industrial loans:
Real estate and rental and leasing
Health care and social assistance
Retail trade
Manufacturing
Construction
Wholesale trade
Finance and insurance
Transportation and warehousing
Professional, scientific, and technical services
Accommodation, food services and entertainment
Public administration
Other services (except public administration)
Information
Admin, Support, Waste Mgmt, Remediation Services
Energy
Educational services
Other
Total commercial & industrial loans, excluding PPP
PPP loans
2022
Pct of
Total
Balance
2021
Pct of
Total
Balance
$ 1,520,693
1,406,480
1,218,618
1,142,279
1,029,890
994,153
966,484
871,938
705,264
629,649
542,692
396,429
381,967
312,374
241,876
298,091
481,882
13,140,759
38,752
12 % $ 1,311,241
1,284,578
11
1,086,204
9
919,830
9
923,040
8
823,295
7
896,105
7
780,934
7
621,739
5
595,698
5
596,301
4
424,087
3
280,019
3
238,589
2
266,235
2
255,127
2
599,625
4
11,902,647
100
531,059
0
11 %
10
9
7
7
7
7
6
5
5
5
4
2
2
2
2
5
96
4
Total commercial & industrial loans
$ 13,179,511
100
% $ 12,433,706
100
%
Commercial real estate – income producing loans totaled $3.6 billion at December 31, 2022, an increase of $96 million, or 3%, from
December 31, 2021. The net increase reflects organic growth as well as construction loans converting to permanent financing,
partially offset by approximately $684 million in paydowns.
Construction and land development loans totaled approximately $1.7 billion at December 31, 2022, compared to $1.2 billion at
December 31, 2021, an increase of $475 million, or 39%. The increase was primarily due to demand throughout our footprint, with the
funding of new and existing loans outpacing loans converting to permanent financing.
The following table details the end-of-period aggregated commercial real estate – income producing and construction loan balances by
property type. Loans reflected in 1-4 Family Residential Construction include both loans to construction builders as well as single-
family borrowers.
58
TABLE 12. Commercial Real Estate– Income Producing and Construction by Property Type Concentration
($ in thousands)
Commercial real estate - income producing and construction loans
Multifamily
Healthcare related properties
Retail
Industrial
1-4 family residential construction
Office
Hotel, motel and restaurants
Other land loans
Other
Total commercial real estate - income producing and construction
loans
2022
Pct of
Total
Balance
2021
Pct of
Total
Balance
$ 870,869
854,563
811,990
613,149
602,867
569,452
485,865
213,159
242,669
17 % $ 647,300
766,338
16
777,594
15
561,022
12
469,690
11
501,771
11
437,241
9
257,594
4
274,746
5
14 %
16
17
12
10
11
9
5
6
$5,264,583
100 % $ 4,693,296
100 %
Residential mortgages totaled $3.1 billion at December 31, 2022, up $669 million, or 28%, from December 31, 2021. The increase in
mortgage loans is due primarily to a lower level of originated loans sold in the secondary mortgage market, which was down to 22%
for 2022 compared to 48% in 2021, partially offset by a $311 million, or 16%, decrease in overall production. Consumer loans totaled
$1.6 billion at December 31, 2022, slightly down compared to December 31, 2021. The small decline in the consumer loan portfolio is
due in part to a decrease of $108 million attributable to the wind down of our indirect auto lending portfolio, a business line that we
have exited, largely offset by an increase in demand for other consumer products.
The following table shows average loans by category, the effective taxable equivalent yield and the percentage of total loans for each
of the preceding three years:
TABLE 13. Average Loans
($ in thousands)
Total loans:
Commercial & real estate loans
Residential mortgages
Consumer
Total loans
2022
Yield Pct of
Total
(te)
Balance
2021
Yield Pct of
Total
(te)
2020
Yield Pct of
Total
(te)
Balance
Balance
$17,682,332 4.30 %
2,666,134 3.39
1,566,927 5.64
$21,915,393 4.32 %
81 % $17,070,252 3.55 %
12
7
2,445,602 3.70
1,692,088 4.82
80 % $17,270,894 3.82 %
12
8
2,857,584 3.92
2,038,045 4.98
100 % $21,207,942 3.92 %
100 % $22,166,523 4.13 %
78 %
13
9
100 %
The following table sets forth the contractual maturity by portfolio segment at December 31, 2022.
TABLE 14. Loan Maturities by Type
December 31, 2022
($ 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
After One
Through
Five Years
Maturity Range
After Five
Through
Fifteen Years
Within
One Year
After Fifteen
Years
Total
146,043 1,013,603 1,817,015
2,235,678 7,257,446 3,504,398
14,687
972,021
410,083
188,987
425,543 2,588,353
942,233
$ 2,089,635 $ 6,243,843 $ 1,687,383 $ 125,592 $ 10,146,453
3,033,058
181,989 13,179,511
3,560,991
1,703,592
3,092,605
1,577,347
$ 3,155,300 $ 10,661,393 $ 5,160,008 $ 4,137,345 $ 23,114,046
480,690 2,093,593
782,044
322,478
31,588
47,121
496,722
69,333
69,059
56,397
59
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, 2022
Floating Rate
Total
$ 3,425,363 $
8,056,818
2,887,015
10,943,833
3,080,301
1,381,114
3,045,484
1,508,014
$ 8,779,434 $ 11,179,312 $ 19,958,746
4,631,455 $
1,033,402
5,664,857
2,014,352
1,050,016
1,241,462
1,208,625
1,853,613
5,278,976
1,065,949
331,098
1,804,022
299,389
Management expects end of period loan growth in 2023 to be in the low-to mid-single digits from the December 31, 2022 balance of
$23.1 billion.
60
Asset Quality
The following table sets forth nonperforming assets by type for the periods indicated, consisting of nonaccrual loans, troubled debt
restructurings and other real estate owned (ORE) and foreclosed assets. Loans past due 90 days or more and still accruing are also
disclosed.
TABLE 16. Nonperforming Assets
($ 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
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 total loans
$
$
$
$
$
$
$
$
December 31,
2022
2021
3,078 $
942
4,020
1,233
228
1,461
1,174
66
1,240
306
3
309
23,946
1,323
25,269
6,646
46
6,692
38,991 $
307 $
—
—
113
1,018
469
1,907 $
40,898 $
2,017
42,915 $
4,585 $
4,515 $
0.17 %
0.19 %
789.38 %
676.71 %
0.02 %
4,058
2,915
6,973
3,104
1,817
4,921
5,377
81
5,458
837
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
0.26 %
0.32 %
616.08 %
527.59 %
0.03 %
Nonperforming assets were $42.9 million at December 31, 2022, a decrease of $23.9 million, or 36%, compared to $66.8 million at
December 31, 2021. The decrease in nonperforming assets was driven by an $18.4 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, return to accrual status after an appropriate re-performance period, and charge-offs.
ORE and foreclosed assets totaled $2.0 million at December 31, 2022, a decrease of $5.5 million from December 31, 2021, as asset
sales outpaced foreclosures.
61
Our level of nonperforming loans continued to improve in 2022, are near historic lows and compare favorably within our peer group.
Nonperforming loans totaled $40.9 million at December 31, 2022, compared to $59.3 million at December 31, 2021, and was
comprised of $7.5 million of commercial loans, $26.3 million of residential mortgage loans and $7.2 million of consumer loans.
Loans modified in TDRs totaled $4.5 million at December 31, 2022, compared to $10.6 million at December 31, 2021, including $2.6
million and $6.8 million, respectively, of loans reported as nonaccrual loans. 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 $1.9 million at December 31,
2022, down from $3.8 million at December 31, 2021.
Criticized commercial loans totaled $301.9 million at December 31, 2022, up $14.7 million, or 5%, compared to December 31, 2021.
The increase in criticized commercial loans includes a $45.6 million increase in the commercial non real estate portfolio, partially
offset by declines in all other commercial portfolios. Criticized loans are defined as those having potential or well-defined weaknesses
that deserve management’s close attention (risk-rated special mention, substandard and doubtful), including both accruing and
nonaccruing loans. Criticized commercial loans comprised 1.64% of that portfolio at December 31, 2022, down from 1.68% at
December 31, 2021 and remain near historically low levels. Our commercial criticized loans at December 31, 2022 are spread across
many industries, with the largest concentrations being construction, totaling $75.7 million; manufacturing, totaling $43.7 million;
transportation and warehousing, totaling $43.4 million; and energy support services, totaling $36.0 million. Commercial loans risk
rated pass-watch totaled $457.6 million at December 31, 2022, compared to $320.4 million at December 31, 2021. The pass-watch
risk rating includes credits with negative performance trends that reflect sufficient risk to cause concern, but have not risen to the level
of criticized. The increase in the pass-watch portfolio reflects the impact of the end of economic stimulus and COVID-related
modifications, along with the challenging economic environment, including prolonged inflation and labor shortages, among other
things.
Allowance for Credit Losses
At December 31, 2022, the allowance for credit losses was $341.1 million, comprised of $307.8 million in allowance for loan losses
and $33.3 million in the reserve for unfunded lending commitments. The allowance for credit losses decreased $30.3 million from
$371.4 million at December 31, 2021, which was comprised of $342.1 million in allowance for loan losses and $29.3 million in the
reserve for unfunded lending commitments. Our allowance for credit losses coverage to total loans was 1.48% at December 31, 2022
compared to 1.76% at December 31, 2021, and reflects improvement in economic conditions in our markets since last year end. While
coverage is down year-over-year, it remains elevated compared to pre-pandemic levels as uncertainty remains in our economic
outlook.
The decrease in the allowance for credit losses from December 31, 2021 includes reductions of $29.9 million in collectively evaluated
reserves and $0.4 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 downside recessionary S-2 scenario
(anchored on the baseline) was weighted more heavily at 75% and the baseline scenario was weighted 25% as management deemed
the forecasted economic circumstances and outcomes included the S-2 scenario to be more likely to occur in the near term.
The December 2022 baseline forecast used in our analysis maintains a generally optimistic outlook in its assumptions, including the
following: Current global oil prices hold at the current level and begins to decline slowly mid-2023, reaching the estimated long-run
equilibrium of $70 per barrel by 2024; full-employment defined as unemployment at 3.5% and labor force participation of 62.5% is
already achieved; the Federal Reserve issues two additional 25-basis point interest rate increases in early 2023 before rate reductions
begin in late 2023 and continue throughout 2024; and reflects positive GDP growth throughout the forecast period, with annual growth
of 0.9% in 2023 and 2.0% in 2024. The S-2 scenario assumes that supply chain issues worsen, increasing shortages of affected goods
and keeping inflation elevated longer than expected in the baseline scenario. The Federal Reserve in turn reacts by raising interest
rates more than assumed in the baseline scenario, causing the economy to fall into recession in the first quarter of 2023, lasting for
three quarters with a peak to trough decline of 1.4%, resulting in a full year GDP reduction of 0.5% in 2023 and a return to growth of
1.3% in 2024. Further, the S-2 scenario assumes that the weakening economy causes unemployment to rise in the 2023, reaching a
peak of 6.4% and a return to full employment not achieved until the first quarter of 2025. Additional information on the Moody’s
forecast is provided in the “Economic Outlook” section of this document.
Loan growth, portfolio composition, asset quality metrics and future assumptions in economic forecasts drive the level of credit loss
reserves. The allowance for credit losses on commercial loans decreased to $279.0 million, or 1.51% of that portfolio, at December 31,
2022, compared to $307.9 million, or 1.80% at December 31, 2021. The allowance for credit losses on residential mortgage loans
increased to $32.5 million, or 1.05%, at December 31, 2022, compared to $30.6 million, or 1.26%, at December 31, 2021, mainly
62
reflective of growth in the portfolio, combined with improved economics. Our allowance for credit losses on consumer loans was
$29.6 million, or 1.88 % at December 31, 2022, compared to $32.8 million, or 2.07% at December 31, 2021.
Net charge-offs during 2022 were $1.9 million, or 0.01% of average total loans, down from $31.2 million, or 0.15% of average total
loans, for the year ended December 31, 2021. In 2022, the commercial portfolio had net recoveries $3.9 million, compared to net
charge-offs of $25.5 million in 2021. Commercial net charge-offs in 2021 included $14.1 million of energy-related charge-offs, with
$13.3 million associated with a single legacy credit. Residential mortgage loans had net recoveries of $1.6 million in 2022, compared
to $0.7 million in 2021. Net charge-offs of consumer loans totaled $7.4 million in 2022, compared to $6.4 million in 2021.
Loan growth, portfolio composition, credit quality metrics and assumptions in economic forecasts will drive the level of credit loss
reserves. At present, we expect low to modest charge-offs and provision in the first quarter of 2023.
63
The following table sets forth activity in the allowance for loan losses for the periods indicated.
TABLE 17. Summary of Activity in the Allowance for Credit Losses
($ 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
64
2022
December 31,
2021
2020
$
342,065 $
450,177 $
191,251
7,637
948
8,585
1,073
3
9,661
137
12,792
22,590
11,812
733
12,545
878
134
13,557
1,749
5,382
20,688
1,902
(32,374 )
—
307,789 $
29,334
—
3,975
33,309 $
341,098 $
(28,399 ) $
1.33 %
1.48 %
0.10 %
0.09 %
0.01 %
(0.04 )%
0.01 %
(0.03 )%
0.01 %
(0.01 )%
(0.02 )%
(0.06 )%
0.47 %
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 %
$
$
$
$
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,
2022
2021
Allowance
for Loan
Losses
% of Total
Allowance
Allowance
for Loan
Losses
% of Total
Allowance
$
$
96,461
48,284
144,745
71,961
30,498
32,464
28,121
307,789
31 % $
16
47
23
10
11
9
100 % $
95,888
53,433
149,321
108,058
22,102
30,623
31,961
342,065
28 %
16
44
32
6
9
9
100 %
Total deposits were $29.1 billion at December 31, 2022, down $1.4 billion, or 5%, from December 31, 2021. Average deposits of
$29.5 billion for 2022 were up $0.4 billion, or 1%, over 2021. Since early 2020, deposit levels have been influenced by pandemic-
driven factors, such as inflows from government stimulus payments, deposits related to funding PPP loans into business checking
accounts and a slowdown in customer spending during the height of the pandemic. In 2022, we began to see gradual outflows of some
of the deposit bases built over the preceding two years, as spending levels have increased amid inflationary conditions, and increased
competition for deposits.
The composition of deposits at December 31, 2022 and 2021 is as follows:
TABLE 19. Deposits
($ 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,
2022
13,645,113 $
10,757,495
2021
14,392,808
11,677,333
3,132,828
111,397
3,244,225
1,418,596
4,920
15,425,236
29,070,349 $
3,216,651
77,956
3,294,607
1,091,959
9,190
16,073,089
30,465,897
$
$
At December 31, 2022, noninterest-bearing demand deposits were $13.6 billion, down $0.7 billion, or 5%, from December 31, 2021.
Noninterest-bearing demand deposits comprised 47% of total deposits at both December 31, 2022 and 2021.
Interest-bearing transaction and savings accounts of $10.7 billion at December 31, 2022 decreased $0.9 billion, or 8%, from December
31, 2021. Interest-bearing public fund deposits totaled $3.2 billion at December 31, 2022, down $50.4 million, or 2%, from December
31, 2021. 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 $1.5 billion at December 31, 2022, up $326 million, or 29%, from December 31, 2021.
65
Table 20 sets forth average balances and weighted-average rates paid on deposits for each year in the three-year period ended
December 31, 2022, as well as the percentage of total deposits for each category. Table 21 sets forth the maturities of time certificates
of deposit greater than $250,000 at December 31, 2022.
TABLE 20. Average Deposits
($ 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
2022
Balance
Rate Mix
Balance
2021
Rate Mix
Balance
2020
Rate Mix
$ 2,630.3 0.15 %
5,679.8 0.30
19.3
2,917.4 0.01
9.9
1,030.1 0.45
3.5
10.0
2,941.9 1.10
15,199.5 0.38 % 51.6
8.9 % $ 2,425.2 0.09 %
8.3 % $ 2,166.4 0.20 %
8.3 %
6,212.0 0.11
21.4
2,598.2 0.01
8.9
1,394.1 0.47
4.8
10.8
3,140.2 0.34
15,769.7 0.17 % 54.2
5,311.0 0.39
20.3
2,092.4 0.02
8.0
2,630.8 1.41
10.0
12.3
3,232.1 0.79
15,432.7 0.57 % 58.9
14,298.0
$ 29,497.5
48.4
13,324.0
100.0 % $ 29,093.7
45.8
10,779.6
100.0 % $ 26,212.3
41.1
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,
2022
115,995
71,956
323,837
28,929
540,717
$
$
We have estimated the Bank’s amount of uninsured deposits to be approximately $14.7 billion, using the methodologies and
assumptions required for FDIC regulatory reporting.
Management expects the level of customer deposits at December 31, 2023 be relatively flat or slightly up compared to December 31,
2022.
Short-Term Borrowings
Short-term borrowings totaled $1.9 billion at December 31, 2022, up $206 million, or 12% from December 31, 2021. Average short-
term borrowings for 2022 totaled $1.4 billion, down $304 million, or 18%, compared to 2021. The variance compared to December
31, 2021 reflects the repayment of $1.1 billion of low fixed-rate FHLB borrowings that were called at the option of the FHLB, and the
addition of $1.43 billion in a new FHLB borrowing that bears interest at current market interest rates. Short-term borrowings are a
core portion of the Company’s funding strategy, the balance of which can fluctuate depending on our funding needs and the sources
utilized.
66
Table 22 sets forth balances of short-term borrowings for each of the past three years. Short-term borrowings consist of federal funds
purchased, securities sold under agreements to repurchase and borrowings from the FHLB. Customer repurchase agreements are a
source of customer funding. These agreements are offered mainly to commercial customers to assist them with their ongoing cash
management strategies or to provide a temporary investment vehicle for their excess liquidity pending redeployment for corporate or
investment purposes. While customer repurchase agreements provide a recurring source of funds to the Bank, the amounts available
over time will vary.
TABLE 22. Short-Term Borrowings
($ 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
2022
2021
2020
$
$
$
1,850
13,176
2,350
3.90 %
2.82 %
$
1,850
3,762
4,400
0.15%
0.43%
$
444,421
536,727
640,592
0.53 %
0.21 %
$
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 %
$ 1,425,000
808,784
1,425,000
$ 1,100,000
1,100,000
1,100,000
$ 1,100,000
1,368,320
2,110,000
4.70 %
1.82 %
0.49%
0.49%
0.49 %
0.62 %
The $1.4 billion of FHLB short-term borrowings at December 31, 2022 consists of one short-term fixed rate advance purchased on
December 30, 2022 and maturing on January 3, 2023.
Long-Term Debt
Long-term debt totaled $242.1 million at December 31, 2022, down $2.1 million from December 31, 2021, largely due to activity
associated with tax credit fund activity.
Long-term debt at December 31, 2022 includes 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.
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 $10.2 billion at December 31, 2022 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. Credit card and personal credit lines are generally subject to adjustment or cancellation if the borrower’s credit quality
67
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 $401 million at December 31, 2022. 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. At December 31, 2022, the Company had a reserve for unfunded lending commitments of $33.3 million.
The following table shows the commitments to extend credit and letters of credit at December 31, 2022 and 2021 according to
expiration date.
TABLE 23. Loan Commitments and Letters of Credit
($ in thousands)
December 31, 2022
Commitments to extend credit
Letters of credit
Total
($ in thousands)
December 31, 2021
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
$ 10,202,464 $ 3,997,036 $ 2,557,813 $ 2,819,663 $
400,505
343,375
56,995
135
$ 10,602,969 $ 4,340,411 $ 2,614,808 $ 2,819,798 $
827,952
—
827,952
Expiration Date
Less Than
1 Year
1-3
Years
3-5
Years
More Than
5 Years
$
$
9,444,803 $ 4,171,685 $ 2,388,752 $ 2,071,055 $
396,956
287,230
97,940
11,786
9,841,759 $ 4,458,915 $ 2,486,692 $ 2,082,841 $
813,311
—
813,311
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
68
(cid:120)
(cid:120)
(cid:120)
(cid:120)
unwind or offset specific exposures without significantly lowering market prices because of inadequate market depth or
market disruptions (“market liquidity risk”).
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 and regulatory 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. Other committees of the
Board of the Directors oversee certain risks that overlap with the Board Risk Committee's enterprise risk management
oversight, including the Compensation Committee, which evaluates and manages any risk posed by compensation and
benefits programs and oversees diversity, equity and inclusion efforts, and the Corporate Governance and Nominating
Committee, which oversees all ESG related activities.
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. In addition, the Company has established a Sustainability Committee, which is a
management committee that develops, monitors and assesses the strategies related to the environment, social
responsibility and sustainable growth.
69
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.
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.
70
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.
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, 2022. Shifts are measured in 100 basis point increments in
a range from -500 to +500 basis points from base case, with -200 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)
- 200
- 100
+100
+200
+300
Estimated Increase
in NII
Year 1
Year 2
(8.33 )%
(3.74 )%
3.42 %
6.75 %
10.07 %
(13.09 )%
(6.03 )%
5.57 %
10.98 %
16.40 %
The results indicate a general asset sensitivity across most scenarios driven primarily by repricing in variable rate loans and a funding
mix composed of material volumes of non-interest bearing and lower rate sensitive deposits. Deployment of short-term funds into
assets with longer durations combined with additional interest rate swaps and an increase in rate sensitive funding contributed to a
decrease in reported 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
71
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.
LIBOR Transition
In 2017, the United Kingdom’s Financial Conduct Authority announced that after 2021 it would no longer compel banks to submit the
rates required to calculate the London Interbank Offered Rate (LIBOR). In November 2020, the administrator of LIBOR announced it
will consult on its intention to extend the retirement date of certain offered rates whereby the publication of the one week and two
month LIBOR offered rates will cease after December 31, 2021; but, the publication of the remaining LIBOR offered rates will
continue until June 30, 2023. Given consumer protection, litigation, and reputation risks, the bank regulatory agencies have indicated
that entering into new contracts that use LIBOR as a reference rate after December 31, 2021, would create safety and soundness risks
and that they will examine bank practices accordingly. Therefore, the agencies encouraged banks to cease entering into new contracts
that use LIBOR as a reference rate as soon as practicable and in any event by December 31, 2021. The Company discontinued the use
of LIBOR for new contracts after December, 31, 2021, with limited exceptions as permitted by regulatory guidance and internal
policy.
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. Further, the Adjustable
Interest Rate (LIBOR) Act, enacted in March 2022, provides a statutory framework to replace U.S. dollar LIBOR with a benchmark
rate based on the SOFR for contracts governed by U.S. law that have no or ineffective fallbacks, and in December 2022, the Federal
Reserve Board adopted related implementing rules. In addition, where fallback language allows the Bank to select a benchmark rate,
the statutory framework grants the authority to select the Board-selected benchmark replacement as the benchmark replacement,
including the safe harbor provisions that, among other things, generally provide that such selection or use will not discharge or excuse
performance under, give any person the right to unilaterally terminate or suspend performance under, or constitute a breach, of the
contract.
Our LIBOR Transition Working Group (the “Group”), whose purpose is to direct the overall transition process for the Company, 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. The Group has also inventoried indirect LIBOR exposures within the Company's systems, models and processes.
Management has developed and prioritized remediation plans, and the Group is continuing to monitor developments and taking steps
to ensure readiness when the LIBOR benchmark rate is discontinued. The Group expects that the majority of our existing LIBOR
contracts will transition in accordance with the statutory framework established by the Federal Reserve.
The Bank has adopted several replacement benchmarks to use in place of LIBOR benchmark rates, including Chicago Mercantile
Exchange Inc. (CME) Term SOFR, FRB-NY SOFR and AMERIBOR as the primary rates. The replacement benchmark rates adopted
by the Bank have been affirmed to comply with the 19 principles set forth by the International Organization of Securities
Commissions (IOSCO) for Financial Benchmarks, and it further provides the Bank confidence these replacement benchmarks are
based on transparent, market-based transactions. The Bank began using these replacement benchmarks towards the end of the third
quarter of 2021.
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 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. 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 and loss of customers
72
At December 31, 2022, approximately 19% 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).
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, 2022, we had $17.9 billion in net available sources of funds, summarized as follows:
73
TABLE 25. Net Available Sources of Funds
($ in thousands)
Internal Sources
Free securities, cash and other
External Sources
Federal Home Loan Bank
Federal Reserve Bank
Brokered 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, 2022
Amount
Used
Net
Availability
$
3,751,173 $
— $
3,751,173
6,414,130
3,400,427
4,360,552
1,459,000
1,525,034
—
9,190
—
$
19,385,282 $
1,534,224 $
4,889,096
3,400,427
4,351,362
1,459,000
17,851,058
2022
2021
2020
41.59 %
98.12 %
7.43 %
74.30 %
53.95 %
98.66 %
6.45 %
72.90 %
54.21 %
97.14 %
7.85 %
84.57 %
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 41.59% and 53.95%, respectively, at December 31,
2022 and 2021. Securities and FHLB letters of credit are pledged as collateral related to public funds and repurchase agreements. The
carry value of total pledged securities was $4.9 billion at December 31, 2022, an increase of $987.4 million from December 31, 2021.
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 $850 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, 2022, deposits totaled $29.1 billion, a
decrease of $1.4 billion, or 5%, from December 31, 2021. This decrease was primarily attributable to increased consumer and business
spending related to economic-related conditions, partially offset by an increase in time deposits due to higher competitive rate
offerings. Core deposits represent total deposits excluding certificates of deposits (“CDs”) of $250,000 or more and brokered deposits.
The ratio of core deposits to total deposits was 98.12% at December 31, 2022, compared to 98.66% at December 31, 2021. Core
deposits totaled $28.5 billion at December 31, 2022, an decrease of $1.5 billion from December 31, 2021. Brokered deposits totaled
$4.9 million as of December 31, 2022 compared to $30.2 million at December 31, 2021. 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, 2022, the Bank had
borrowed $1.4 billion from the FHLB and had approximately $4.9 billion remaining available under this line. The Bank also has
unused borrowing capacity at the Federal Reserve’s discount window of approximately $3.4 billion. There were no outstanding
borrowings with the Federal Reserve at December 31, 2022 and December 31, 2021, or at any point during the years then ended.
Wholesale funds, comprised of short-term borrowings, long-term debt and brokered deposits were 7.43% of core deposits at
December 31, 2022 and 6.45% at December 31, 2021. Wholesale funds totaled $2.1 billion at December 31, 2022, an increase of
$178.8 million from December 31, 2021. The increase was primarily due to an increase in FHLB borrowings, partially offset by
decrease in customer repo agreements. 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
74
lends for each dollar of deposits on hand. Our average loan-to-deposit ratio was 74.30% for 2022 compared to 72.90% in 2021.
Management has established a target range for the loan to deposit ratio of 87% to 89%, but will operate outside that range under
certain circumstances, such as those caused by the continuing impact of the pandemic on loan and deposit levels. Average loans
outstanding for 2022 and 2021, included approximately $204.8 million and $1.5 billion, respectively of low-risk SBA guaranteed PPP
loans were largely repaid through the forgiveness process by the end 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 –
Stockholder's Equity to the consolidated financial statements. 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 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, 2022, 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
Capital Resources
Total
Less Than
1 Year
Payment due by period
1-3
Years
$ 656,572 $ 18,055 $ 44,691 $ 43,243 $ 550,583
77,982
145,557
—
157,577
23,394
23,424
27,870
40,827
16,311
93,326
More Than
5 Years
3-5
Years
22,262
—
$ 981,968 $ 149,954 $ 113,388 $ 90,061 $ 628,565
22,262
—
—
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 $3.3 billion at December 31, 2022 compared to $3.7 billion at December 31, 2021. The
$327.7 million decrease from December 31, 2021 is attributable to $718.2 million of other comprehensive loss, net of tax, largely due
to fair value adjustments on securities available for sale and cash flow hedges amid the rising interest rate environment, along with
dividends of $94.9 million and the repurchase of $58.9 million of common stock. These factors were partially offset by net income of
$524.1 million and $20.2 million of long-term incentive and dividend reinvestment activity.
At December 31, 2022, our tangible common equity ratio was 7.09%, compared to 7.71% at December 31, 2021. The 62 bps decline
from December 31, 2021 is attributable to declines of 202 bps due to other comprehensive loss, 27 bps from dividends and 17 bps
from common stock repurchase activity, partially offset by increases of 151 bps for tangible net income, 27 bps from tangible asset
contraction, and 6 bps related to stock based compensation and other activity. The Company has adequate liquidity and, therefore,
does not plan to and, more likely than not, will not be required to sell available for sale securities before the recovery of the losses
reflected in other comprehensive loss.
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
75
2.5% and a Leverage ratio of 4.0%. Based on capital ratios as of December 31, 2022 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, 2022, each of these capital ratios fell
within, or above, their respective target range.
At December 31, 2022, our regulatory capital ratios were well in excess of current regulatory minimum requirements, including the
conservatism buffers, by at least $540 million. Additionally, both the Company and the Bank were considered “well capitalized” by
regulatory agencies. Note 12 – 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 in the table below 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 allowed 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 included the full impact of January 1, 2020 cumulative effect impact
plus an estimated impact of CECL calculated quarterly as 25% of the current ACL over the January 1, balance (modified transition
amount). The modified transition amount was recalculated quarterly, with the December 31, 2021 impact of $24.9 million plus the day
one impact of $44.1 million carrying through remaining three-year transition.
TABLE 28. Risk-Based Capital and Capital Ratios
($ 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
2022
3,279,419 $
—
3,279,419
447,415
3,726,834 $
28,734,106 $
$
$
$
2021
2,890,770
—
2,890,770
454,617
3,345,387
26,056,958
9.53 %
11.41 %
11.41 %
12.97 %
9.50 %
7.09 %
8.25 %
11.09 %
11.09 %
12.84 %
10.05 %
7.71 %
Throughout 2022 and 2021, 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. In January 2023, the Company's board of
directors declared an 11% increase in the regular first quarter 2023 cash dividend to $0.30 per share. The increase is reflective of our
strong regulatory ratios, allowing for improved shareholder returns.
STOCK REPURCHASE PROGRAM
Prior to its expiration on December 31, 2022, we had in place a stock repurchase program that was authorized by the Company's board
of directors in April 2021 whereby the Company was authorized to repurchase up to 4.3 million shares of its common stock through
the program’s expiration date. The program allowed 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 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. During the year ended December 31, 2022, the Company
repurchased 1,204,368 shares of its common stock at an average cost of $48.90 per share, inclusive of commissions. In total, the
Company repurchased 1.7 million of the 4.3 million authorized shares under the buyback program at an average cost of $48.77 per
share.
Subsequent to year-end, in January 2023, the Company’s board of directors authorized a stock repurchase program pursuant to which
the Company may, from time to time, purchase up to 4.3 million shares of its outstanding common stock (approximately 5% of the
shares of common stock outstanding as of December 31, 2022). The shares may be repurchased in the open market, by block
purchase, through accelerated share repurchase plans, in privately negotiated transactions or otherwise, in one or more transactions,
from time to time, depending upon market conditions and other factors, and in accordance with applicable regulations of the Securities
and Exchange Commission. The program has an expiration date of December 31, 2024 and does not obligate the Company to
76
purchase any shares. The program may be terminated or amended by the Board at any time prior to the expiration date. This program
allows us to continue to opportunistically repurchase shares of our common stock when the market is advantageous.
The Inflation Reduction Act of 2022, signed into law in August 2022, includes a provision for an excise tax equal to 1% of the fair
market value of any stock repurchased by covered corporations during a taxable year, subject to certain limits and provisions. The
excise tax is effective beginning in fiscal year 2023. While we may complete transactions subject to the new excise tax, we do not
expect a material impact to our statement of condition or result of operations.
77
FOURTH QUARTER RESULTS
Net income for the fourth quarter of 2022 was $143.8 million, or $1.65 per diluted common share, compared to $135.4 million, or
$1.55 per diluted common share, in the third quarter of 2022 and $137.7 million, or $1.55 per diluted common share, in the fourth
quarter of 2021. 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.
Highlights of our fourth quarter of 2022 results (compared to third quarter of 2022):
•
•
•
•
•
•
•
•
•
Net income of $143.8 million, or $1.65 per diluted share, was up $8.4 million, or $0.10 per diluted share
Pre-provision net revenue of $185.0 million was up $10.3 million, or 6%
Loan growth of $528.5 million, or 9%, linked-quarter annualized, exceeded expectations
Criticized commercial loans and nonperforming loans decreased slightly and remain near historically low levels
Allowance for credit losses coverage remained strong at 1.48%
Deposits increased $119.1 million, or 2% linked-quarter annualized
Net interest margin improved 14 basis points (bps) to 3.68%
Common equity tier 1 ratio was 11.41%, up 31 bps; tangible common equity ratio of 7.09%, up 36 bps
Efficiency ratio improved to 49.81%
Total loans at December 31, 2022 were $23.1 billion, an increase of $528 million, or 2%, from September 30, 2022. Improved line
utilization contributed to growth in markets and lines of business. One-time close residential mortgage construction products drove the
increase in mortgage loans, while commercial real estate (CRE) declined as a result of today's uncertain economic environment.
Total deposits at December 31, 2022 were $29.1 billion, up $119 million, or less than 1%, from September 30, 2022.
Noninterest-bearing deposits totaled $13.6 billion at December 31, 2022, down $645.7 million, or 5%, from September 30, 2022 and
comprised 47% of total deposits at December 31, 2022. Interest-bearing transaction and savings deposits totaled $10.7 billion at
December 31, 2022, down $175.7 million, or 2%, compared to September 30, 2022. Commercial client demand deposits declined,
while competitive rates on certain deposit products led to a slight shift from no and low-cost deposits to higher rate money market and
time deposit products. Interest-bearing public fund deposits increased $447.9 million, or 16%, to $3.2 billion at December 31, 2022.
The increase in public funds is seasonal and primarily attributable to year-end tax collections by local municipalities. Typically, these
balances begin to runoff in the first quarter of each year. Time deposits of $1.5 billion increased $492.6 million, or 51%, from
September 30, 2022, largely attributable to promotional rate offerings in keeping with the rising interest rate environment.
Net interest income (te) for the fourth quarter of 2022 was $298.1 million, up $15.2 million, or 5%, from the third quarter of 2022,
primarily driven by the rising rate environment coupled with an increase in earning assets, partially offset by an increase in the cost of
funds. The net interest margin increased 14 bps to 3.68% in the fourth quarter as interest income increased as a result of the rising
interest rate environment and growth in earning assets (+52 bps), partially offset by higher cost of funds (-37 bps) and forgiveness of
PPP loans (-1 bp).
The provision for credit losses recorded in the fourth quarter of 2022 was $2.5 million, compared to $1.4 million in the third quarter of
2022. Net charge-offs were $1.0 million, or 0.02% of average total loans on an annualized basis in the fourth quarter of 2022, down
from $1.3 million, or 0.02% of average total loans, in the third quarter of 2022. Our allowance for credit loss reserves were $341.1
million at December 31, 2022, up $1.5 million from the prior quarter. While our asset quality metrics are stable, economic uncertainty
remains, resulting in an allowance level that is elevated when compared to pre-pandemic levels.
Noninterest income totaled $77.1 million for the fourth quarter of 2022, down $8.3 million, or 10%, from the third quarter of 2022,
with declines from the third quarter noted in most fee categories. Service charges were down $1.0 million, or 5%, partly attributable to
the discontinuance of certain consumer NSF and overdraft fees that began in December 2022. Bank card and ATM fees were down
$0.5 million, or 2%, from the third quarter of 2022. Income from secondary mortgage operations totaled $1.5 million, down $1.8
million, or 54%, as a result of declining demand for mortgage loans and refinancing, and a lower percentage of such loans sold in the
secondary market. Other noninterest income was down $5.7 million, primarily due to lower specialty fee income, including income
from bank-owned life insurance, derivatives and small business investment company income.
78
Noninterest expense totaled $190.2 million, down $3.3 million, or 2%, from the third quarter of 2022. The primary driver of the
decrease is attributable to storm-related insurance gains recorded in the fourth quarter, partially offset by a decrease in net gains on
ORE and foreclosed assets.
The effective income tax rate for fourth quarter 2022 was 20.1%. The effective income tax rate continues to be less than the statutory
rate primarily due to tax-exempt income and income tax credits.
79
The following table provides selected comparative financial information for the five quarters ending with December 31, 2022.
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 before income taxes
Income tax expense
Net income
For informational purposes - included above, pre-tax
Nonoperating item included in noninterest income:
Gain on hurricane-related insurance settlement
Nonoperating items included in noninterest expense:
Efficiency initiatives
Hurricane-related expenses
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 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 (te) and operating pre-
provision net revenue (non-GAAP measure) (te) (c)
Net interest income
Noninterest income
Total revenue
Taxable equivalent adjustment
Nonoperating revenue
Operating revenue (te)
Noninterest expense
Nonoperating expense
Operating pre-provision net revenue (te)
December 31, 2022
September 30, 2022 June 30, 2022
March 31, 2022 December 31, 2021
$
$
$
$
$
$
$
$
$
345,676 $
348,291
50,175
298,116
2,487
77,064
190,154
179,924
36,137
143,787 $
299,737 $
302,340
19,430
282,910
1,402
85,337
193,502
170,740
35,351
135,389 $
254,864 $
257,449
9,132
248,317
(9,761 )
85,653
187,097
154,049
32,614
121,435 $
236,786 $
239,331
8,323
231,008
(22,527 )
83,432
179,939
154,483
31,005
123,478 $
— $
— $
— $
— $
—
—
—
—
—
—
—
—
23,114,046 $
31,873,027
35,183,825
13,645,113
29,070,349
3,342,628
22,723,248 $
32,244,681
34,498,915
13,854,625
28,816,338
3,228,667
1.65 $
1.65
0.27
1.65 %
17.67 %
49.81 %
3.68 %
295,501 $
77,064
372,565
2,615
—
375,180 $
(190,154 )
—
185,026 $
22,585,585 $ 21,846,068 $ 21,323,341 $
31,213,449
34,567,242
14,290,817
28,951,274
3,180,439
32,997,323
36,317,291
14,976,670
30,499,709
3,450,951
31,292,910
34,637,525
14,676,342
29,866,432
3,349,723
22,138,709 $ 21,657,528 $ 21,122,038 $
31,783,801
34,377,773
14,323,646
29,180,626
3,405,463
33,201,926
36,003,803
14,363,324
30,029,793
3,607,061
32,780,813
35,380,247
14,655,800
29,979,940
3,383,789
1.56 $
1.55
0.27
1.56 %
15.77 %
51.62 %
3.54 %
1.39 $
1.38
0.27
1.38 %
14.39 %
54.95 %
3.04 %
1.40 $
1.40
0.27
1.39 %
13.88 %
56.03 %
2.81 %
280,307 $
85,337
365,644
2,603
—
368,247 $
(193,502 )
—
174,745 $
245,732 $
85,653
331,385
2,585
—
333,970 $
(187,097 )
—
146,873 $
228,463 $
83,432
311,895
2,545
—
314,440 $
(179,939 )
—
134,501 $
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 %
229,296
89,612
318,908
2,635
(3,600 )
317,943
(182,462 )
(1,329 )
134,152
(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.
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
80
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
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. Accounting standards require 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 followed by a
prolonged period of inflation, labor shortages and aggressive monetary policy actions, among other things. Changing economic
conditions 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 existing economic conditions. 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, 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, 2022, the Company weighted the Moody’s baseline scenario at 25% and the slower growth S-2
scenario at 75%. 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 44% higher than utilization of
the baseline scenario at December 31, 2022. In contrast, for the year ended December 31, 2021, the slower growth S-2 scenario
produced results 21% 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 may include, 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 valuation and the current resolution strategy. These values are difficult to assess and have heightened uncertainty resulting from
current 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.
81
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.
82
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, 2022 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, 2022.
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, 2022.
/s/ John M. Hairston
John M. Hairston
President & Chief Executive Officer
(Principal Executive Officer)
February 24, 2023
/s/ Michael M. Achary
Michael M. Achary
Senior Executive Vice President & Chief Financial Officer
(Principal Financial Officer)
February 24, 2023
83
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, 2022 and 2021, 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, 2022, 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, 2022, 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, 2022 and 2021, and the results of its operations and its cash flows for each of the
three years in the period ended December 31, 2022 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, 2022, 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 Hancock Whitney Corporation'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
84
of Section 112 of the Federal Deposit Insurance Corporation Improvement Act (FDICIA). A company’s internal control over
financial reporting includes those policies and 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, 2022, the total allowance for credit losses was $341
million on total loans of $23.1 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 24, 2023
We have served as the Company’s auditor since 2009.
85
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 $6,310,214
and $6,984,530)
Securities held to maturity (fair value of $2,615,398 and $1,631,482)
Loans held for sale (includes $10,843 and $41,022 measured at fair value)
Loans
Less: allowance for loan losses
Loans, net
Property and equipment, net of accumulated depreciation of $303,451 and $280,065
Right of use assets, net of accumulated amortization of $44,901 and $34,425
Prepaid expense
Other real estate and foreclosed assets, net
Accrued interest receivable
Goodwill
Other intangible assets, net
Life insurance contracts
Funded pension assets, net
Deferred tax asset, 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 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.
86
$
$
$
$
$
December 31,
2022
2021
564,459 $
323,332
728
401,201
3,830,177
458
5,556,041
2,852,495
26,385
23,114,046
(307,789 )
22,806,257 $
328,605
96,884
44,632
2,017
131,849
855,453
56,193
729,774
216,818
211,418
380,485
35,183,825 $
13,645,113 $
15,425,236
29,070,349
1,871,271
242,077
9,935
116,422
—
531,143
31,841,197
309,513
1,716,884
2,088,413
(772,182 )
3,342,628
35,183,825 $
50,000
—
350,000
92,947
85,941
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
Hancock Whitney Corporation and Subsidiaries
Consolidated Statements of Income
Years Ended December 31,
2021
2022
2020
$
$
$
$
$
940,629 $
1,814
166,731
18,847
9,042
1,137,063
58,439
16,191
12,430
87,060
1,050,003
(28,399 )
1,078,402
87,663
65,132
84,591
28,752
11,524
(87 )
53,911
331,486
378,482
82,153
460,635
48,767
18,573
103,942
36,065
14,033
14,889
(4,407 )
58,195
750,692
659,196
135,107
524,089 $
6.00 $
5.98 $
1.08 $
86,068
86,394
825,862 $
2,543
131,382
18,969
3,502
982,258
907,290
2,622
127,629
19,454
986
1,057,981
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
(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
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.
87
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 securities available for sale and cash flow
hedges
Reclassification of net losses realized and included in earnings
Valuation adjustments to pension plan attributable to the Voluntary Early
Retirement Program and curtailment
Other valuation adjustments to employee benefit plans
Amortization of unrealized net gain (loss) on securities transferred to held to
maturity
$
Other comprehensive income (loss) before income taxes
Income tax (benefit) expense
Other comprehensive income (loss) net of income taxes
Comprehensive income (loss)
$
See accompanying notes to consolidated financial statements.
2022
Years Ended December 31,
2021
2020
524,089 $
463,215 $
(45,174 )
(898,241 )
(5,947 )
(211,580 )
(15,485 )
—
(24,139 )
59,606
(6,735 )
1,355
(926,972 )
(208,725 )
(718,247 )
(194,158 ) $
(158 )
(174,352 )
(40,348 )
(134,004 )
329,211 $
224,337
(10,983 )
—
(37,451 )
(470 )
175,433
40,640
134,793
89,619
88
Hancock Whitney Corporation and Subsidiaries
Consolidated Statements of Changes in Stockholders’ Equity
Accumulated
Other
Comprehensive
Income (Loss),
Net
(in thousands, except parenthetical share data)
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
Net income
Other comprehensive loss
Comprehensive income (loss)
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 (1,204,368 shares)
Balance, December 31, 2022
Shares
Common Stock
Capital
Surplus
92,947 $ 309,513 $ 1,736,664 $ 1,476,232 $
Retained
Earnings
Amount
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
17,715
4,164
12,110
(12,716 )
(45,174 )
—
(45,174 )
(95,605 )
(44,087 )
140
—
—
—
92,947 $ 309,513 $ 1,757,937 $ 1,291,506 $
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
15,688
3,872
(21,796 )
463,215
—
463,215
(95,927 )
279
—
—
92,947 $ 309,513 $ 1,755,701 $ 1,659,073 $
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
16,498
3,577
(58,892 )
524,089
—
524,089
(94,891 )
142
—
—
92,947 $ 309,513 $ 1,716,884 $ 2,088,413 $
Total
(54,724 ) $ 3,467,685
(45,174 )
134,793
89,619
(95,605 )
(44,087 )
17,855
—
134,793
134,793
—
—
—
—
4,164
—
—
12,110
(12,716 )
80,069 $ 3,439,025
463,215
(134,004 )
329,211
(95,927 )
15,967
—
(134,004 )
(134,004 )
—
—
—
—
3,872
(21,796 )
(53,935 ) $ 3,670,352
524,089
(718,247 )
(194,158 )
(94,891 )
16,640
—
(718,247 )
(718,247 )
—
—
—
—
3,577
(58,892 )
(772,182 ) $ 3,342,628
See accompanying notes to consolidated financial statements.
89
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
Loss (gain) on sale of securities available for sale
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 derivative collateral liability
Increase in interest payable and other liabilities
(Increase) decrease in other assets
Other, net
Years Ended December 31,
2022
2021
2020
$
524,089 $
463,215 $
(45,174 )
31,582
(28,399 )
(4,382 )
(22,166 )
(7,010 )
259
—
87
61,031
35,490
14,033
23,489
64,867
6,838
176,354
(34,141 )
842,021 $
29,113
(77,494 )
(2,280 )
10,376
(23,505 )
14,354
4,165
(333 )
41,157
50,311
16,665
22,442
62,670
20,869
(21,050 )
(24,985 )
585,690 $
30,128
602,904
9,581
(20,716 )
(19,244 )
3,159
—
(488 )
(77,544 )
43,226
19,916
21,107
(80,290 )
4,687
(111,094 )
(24,967 )
355,191
Net cash provided by operating activities
$
90
Hancock Whitney Corporation and Subsidiaries
Consolidated Statements of Cash Flows—(Continued)
2022
Years Ended December 31,
2021
2020
$
73,219 $
198,681 $
502,628
(635,593 )
147,879
(884,427 )
90,601
(12,095 )
3,506,845
30,652
(2,088,836 )
(65,000 )
—
(29,145 )
14,081
11,549
662,358
(1,395,548 )
206,210
(480 )
5,629
(94,458 )
(7,386 )
—
(58,892 )
227
3,577
(1,341,121 )
163,258
401,201
564,459 $
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
$
$
135,193 $
80,076
122,594 $
49,995
17,465
121,343
596
2,806
6,420
($ 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
Proceeds received upon termination of fair value hedge instruments
Net redemptions (purchases) of Federal Home Loan Bank stock
Net (increase) decrease in short-term investments
Proceeds from sales 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 and foreclosed assets
Other, net
Net cash provided by (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 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 (used in) 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.
91
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 access to trust and investment management services to retirement
plans, corporations and individuals, as well as investment advisory and brokerage products. In addition, the Company offers its
customers access to fixed annuity and life insurance products and investment management and other services through its limited
purpose 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 loan
production offices in Nashville, Tennessee and the metropolitan area of Atlanta, Georgia.
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.
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
Fair value is generally defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an
orderly transaction between market participants at the measurement date under current market conditions. 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.
92
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 or loss and in accumulated other comprehensive income or loss (“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
At least quarterly, or more often when warranted, the Company performs an assessment of held to maturity debt securities for
expected credit losses and 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 records 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.
93
Loans
Loans Held for Sale
Residential mortgage loans originated for sale are classified as loans held for sale on 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 on 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 on January 1, 2020 of Accounting Standards Codification (“ASC”) Topic 326, “Financial Instruments –
Credit Losses,” commonly referred to as Current Expected Credit Losses or 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 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.
94
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 of 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 certain qualifying
loan modifications. Qualifying loan modifications are those that were made by financial institutions in response to the COVID-19
pandemic, where the borrower was not more than 30 days past due as of December 31, 2019, and the modifications were 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 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
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
95
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.
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 the consolidated statements of income as realized, reflected in
either other income under noninterest income or other expense under noninterest expense, depending on the nature of the item.
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 Consolidated Balance Sheets.
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 lease 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.
96
As allowed in the transition guidance in Topic 842, "Leases," 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 does 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. Accounting guidance permits the Company to first
assess qualitative factors to determine if it is more likely than not that the fair value of a reporting unit exceeds its carrying value. If
the Company determines it is more likely than not that the fair value exceeds book value, then a quantitative impairment test is not
necessary. If the Company elects to bypass the qualitative assessment, or concludes that it is more likely than not that the fair value is
less than the carrying value, a quantitative goodwill impairment test is performed. In addition, absent any triggering events,
quantitative impairment test will be performed every three years to ensure goodwill is periodically reviewed within a reasonable
timeframe. The quantitative 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.
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 Consolidated Balance Sheets 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
97
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 or loss 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. Unamortized premiums, discounts and
other basis adjustments on loans and investment securities are recognized in interest income as a yield adjustment over the contractual
lives. However, premiums for certain callable investment securities are amortized to the earliest call date.
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
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.
98
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 process the order to acquire the investment for which a commission fee is earned from either
the carrier or our third party service provider based on agreed-upon fee percentages on a trade date basis, net of any associated costs.
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. Prior to August 12, 2022,
investment and annuity services fee income was recorded on a gross basis, with expenses recorded in the appropriate expense line
item; subsequent to that date, such fee income is recorded net of expenses, as the Company is now agent in these transactions
following a change in service providers.
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 as of the effective date of the insurance policy, as the Company’s performance obligation
is connecting the customer to the insurance products. Until August 12, 2022, the Company also received contingent commissions from
insurance companies as additional incentive for achieving specified premium volume goals and/or the loss experience of the insurance
placed. Those fees are no longer earned following the change in service providers. These contingent commissions from insurance
companies as well as fees for policy renewals are recognized when determinable, which is generally when such commissions are
received or when we receive data from the insurance companies and/or our third party service provider that allows the reasonable
estimation of these amounts. Prior to August 12, 2022, costs associated with these transactions were reflected in the appropriate
expense line item; subsequent to that date, with the change in service providers, the Company is now agent in these transactions and
expenses are recorded net in this revenue 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.
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.
99
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 is primarily composed of letter 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.
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.
100
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 or 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 2022
In December 2022, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2022-06,
"Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848," to extend the sunset provisions in ASU 2020-04,
"Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” The amendments
101
in ASU 2020-04 provide optional expedients and exceptions for applying generally accepted accounting principles (GAAP) to
contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments in
this Update defer the sunset date of Topic 848 from December 31, 2022 to December 31, 2024, after which entities will no longer be
permitted to apply the relief in Topic 848. The amendments in this update were effective for all entities upon issuance. The adoption
of this standard was not material to the Company’s consolidated financial position or results of operations.
Accounting Standards Adopted in 2021 and 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.
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
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 additional standards were applicable to the Company and adopted in 2021 and 2020, but did not have a material impact
on the Company’s consolidated financial position or results of operation:
(cid:120)
(cid:120)
(cid:120)
(cid:120)
ASU 2021-06, “Presentation of Financial Statements (Topic 205), Financial Services – Depository and Lending (Topic
942) and Financial Services – Investment Companies (Topic 946)”
ASU 2021-01, “Reference Rate Reform (Topic 848)”
ASU 2020-08, “Codification Improvements to Subtopic 310-20, Receivables- Nonrefundable Fees and Other Costs”
ASU 2019-12, “Simplifying the Accounting for Income Taxes (Topic 740)”
Accounting Standards Issued But Not Yet Adopted
In March 2022, the FASB issued ASU 2022-01, "Derivatives and Hedging (Topic 815): Fair Value Hedging - Portfolio Layer
Method," to provide clarification of and expand upon certain provisions of Topic 815 that became effective with the issuance of ASU
2017-12. The amendments in this update include the following provisions: (1) expand the current last-of-layer method to allow
multiple hedged layers of a single closed portfolio and, accordingly, renaming the last-of-layer method to the portfolio layer method;
102
(2) expand the scope of the portfolio layer method to include nonprepayable financial assets; (3) specify that eligible hedging
instruments in a single-layer hedge may include spot-starting or forward-starting constant-notional swaps, or spot or forward-starting
amortizing-notional swaps and that the number of hedged layers corresponds with the number of hedges designated; (4) provide
additional guidance on the accounting for and disclosure of hedge basis adjustments that are applicable to the portfolio layer method
whether a single hedged layer or multiple hedged layers are designated, and; (5) specify how hedge basis adjustments should be
considered when determining credit losses for the assets included in the closed portfolio. The amendments in this update apply to all
entities that elect to apply the portfolio layer method of hedge accounting in accordance with Topic 815.
The amendments in this Update are effective for fiscal years beginning after December 15, 2022, and interim periods within those
fiscal years. Upon adoption, any entity may designate multiple hedged layers of a single closed portfolio solely on a prospective basis.
All entities are required to apply the amendments related to hedge basis adjustments under the portfolio layer method, except for those
related to disclosures, on a modified retrospective basis by means of a cumulative-effect adjustment to the opening balance of retained
earnings on the initial application date. Entities have the option to apply the amendments related to disclosures on a prospective basis
from the initial application date or on a retrospective basis to each prior period presented after the date of adoption of the amendments
in Update 2017-12. Within 30 days after the adoption, an entity may reclassify debt securities classified in the held-to-maturity
category at the date of adoption to the available-for-sale category only if the entity applies portfolio layer method hedging to one or
more closed portfolios that include those debt securities. The Company adopted this standard effective January 1, 2023 and elected to
apply amendments to disclosures on a prospective basis, with no reclassification of debt securities from held to maturity to available
for sale. The impact of adoption will not be material to the Company’s consolidated financial position or results of operations.
In March 2022, the FASB issued ASU 2022-02, "Financial Instruments: Credit Losses (Topic 326) - Troubled Debt Restructurings
and Vintage Disclosures." The amendments in this update cover two issues: (1) the elimination of TDR recognition and measurement
guidance as prescribed by ASC 310-40 and, instead, require that an entity evaluate (consistent with the accounting for other loan
modifications) whether the modification represents a new loan or a continuation of an existing loan. The amendments enhance
existing disclosure requirements and introduce new requirements related to certain modifications of receivables made to borrowers
experiencing financial difficulty; and, (2) for public business entities, the requirement that an entity disclose current-period gross
write-offs by year of origination for financing receivables and net investment in leases within the scope of Subtopic 326-20. Gross
write-off information must be included in the vintage disclosures required for public business entities in accordance with paragraph
326-20-50-6, which requires that an entity disclose the amortized cost basis of financing receivables by credit quality indicator and
class of financing receivable by year of origination.
The amendments in this update are effective for fiscal years beginning after December 15, 2022, including interim periods within
those fiscal years. For the elimination of recognition and measurement guidance on troubled debt restructurings by creditors in
Subtopic 310-40, an entity may elect to apply a modified retrospective transition by means of a cumulative-effect adjustment to the
opening retained earnings as of the beginning of the fiscal year of adoption, or a prospective approach applied to modifications
occurring after the date of adoption. The remainder of amendments should be applied prospectively. The Company adopted this
standard effective January 1, 2023 on a prospective bases for all amendments. The adoption of this standard will not be material to the
Company’s consolidated financial position or results of operations.
Note 2. Securities
The following tables set forth the amortized cost, gross unrealized gains and losses, and estimated fair value of debt securities
classified as available for sale and held to maturity at December 31, 2022 and 2021. Amortized cost of securities does not include
accrued interest which is reflected in the accrued interest line item on the consolidated balance sheets totaling $29.1 million and $25.5
million at December 31, 2022 and December 31, 2021, respectively. During the twelve months ended December 31, 2022, the
Company transferred securities with an aggregate fair value of $561.8 million, inclusive of an unrealized loss of $15.4 million, from
the available for sale portfolio to the held to maturity portfolio; as such, the securities were recorded with an amortized cost of $561.8
103
million within the held to maturity portfolio. The unrealized loss is reflected in accumulated other comprehensive income and is being
amortized to interest income over the remaining lives of the securities.
Securities Available for Sale
($ 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, 2022
Gross
Gross
Unrealized
Unrealized
Losses
Gains
Amortized
Cost
Fair
Value
Amortized
Cost
December 31,2021
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair
Value
$
113,211 $
207,014
— $
59
2,346 $
3,981
110,865 $
203,092
420,857 $
304,536
3,781 $
13,184
5,340 $
3,562
419,298
314,158
2,655,381
224
398,619 2,256,986 3,056,763
29,158
50,123 3,035,798
3,234,278
2,032
342,880 2,893,430 3,064,828
61,645
48,614 3,077,859
76,830
23,500
$ 6,310,214 $
—
—
2,315 $
6,242
2,420
70,588
21,080
756,488 $ 5,556,041 $ 6,984,530 $
119,046
18,500
1,837
210
109,815 $
—
8
120,883
18,702
107,647 $ 6,986,698
December 31, 2022
Gross
Gross
Unrealized
Unrealized
Losses
Gains
Amortized
Cost
Fair
Value
Amortized
Cost
December 31,2021
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair
Value
$
426,454 $
698,908
21 $
753
49,044 $
26,558
377,431 $
673,103
14,857 $
621,405
— $
37,941
20 $
205
14,837
659,141
734,478
—
72,532
661,946
268,907
682
1,499
268,090
948,691
—
87,211
861,480
603,156
28,679
669
631,166
43,964
$ 2,852,495 $
—
774 $
2,526
41,438
237,871 $ 2,615,398 $ 1,565,751 $
57,426
822
68,124 $
—
58,248
2,393 $ 1,631,482
The Company held no securities classified as trading at December 31, 2022 or 2021.
The following tables present the amortized cost and fair value of debt securities at December 31, 2022 by contractual maturity. Actual
maturities will differ from contractual maturities because of rights to call or repay obligations with or without penalties and scheduled
and unscheduled principal payments on mortgage-backed securities and 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
104
Amortized
Cost
Fair
Value
$
$
$
$
112 $
919,639
2,982,549
2,407,914
6,310,214 $
111
871,760
2,665,232
2,018,938
5,556,041
Amortized
Cost
Fair
Value
10,000 $
544,146
893,562
1,404,787
2,852,495 $
9,924
522,347
813,726
1,269,401
2,615,398
The following table presents the proceeds from, gross gains on, and gross losses on sales of securities during the years ended
December 31, 2022, 2021 and 2020. Net gains or losses are reflected in the "Securities transactions" line item on the Consolidated
Statements of Income.
($ in thousands)
Proceeds
Gross gains
Gross losses
Years Ended December 31,
2021
2020
2022
$
73,219 $
—
87
198,681 $
1,649
1,316
211,919
1,984
1,496
Securities with carrying values totaling approximately $4.9 billion at December 31, 2022 and $4.0 billion at December 31, 2021 were
pledged as collateral, primarily to secure public deposits or securities sold under agreements to repurchase.
Credit Quality
The Company’s policy is to invest only in securities of investment grade quality. These investments are largely limited to U.S. agency
securities and municipal securities. Management has concluded, based on the long history of no credit losses, that the expectation of
nonpayment of the held to maturity securities carried at amortized cost is zero for securities that are backed by the full faith and credit
of and/or guaranteed by the U.S. government. As such, no allowance for credit losses has been recorded for these securities. The
municipal portfolio is analyzed separately for allowance for credit loss in accordance with the applicable guidance for each portfolio
as noted below.
The Company evaluates credit impairment for individual securities available for sale whose fair value was below amortized cost with
a more than inconsequential risk of default and where the Company had assessed whether the decline in fair value was significant
enough to suggest a credit event occurred. There were no securities that met the criteria of a credit loss event and therefore, no
allowance for credit loss was recorded in any period presented.
The fair value and gross unrealized losses for securities classified as available for sale with unrealized losses at December 31, 2022 are
presented in the table below.
Available for sale
($ 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
Fair
Value
Unrealized
Losses
Total
Fair
Value
Gross
Unrealized
Losses
$
$
102,607 $
192,334
636,060
1,489,974
41,703
13,194
2,475,872 $
754 $
3,981
49,790
114,195
3,275
1,306
8,258 $
—
1,611,832
1,351,530
28,884
7,386
173,301 $ 3,007,890 $
—
1,592 $ 110,865 $
192,334
348,829 2,247,892
228,685 2,841,504
70,587
20,580
2,346
3,981
398,619
342,880
6,242
2,420
583,187 $ 5,483,762 $ 756,488
2,967
1,114
The fair value and gross unrealized losses for securities classified as available for sale with unrealized losses at December 31, 2021 are
presented in the table below.
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
Fair
Value
Unrealized
Losses
Total
Fair
Value
Gross
Unrealized
Losses
$
$
198,318 $
43,021
1,293,179
786,206
—
6,992
2,327,716 $
2,305 $
2,372
20,581
14,819
—
8
63,534 $
25,126
819,596
665,687
—
—
40,085 $ 1,573,943 $
3,035 $ 261,852 $
68,147
1,190
29,541 2,112,775
33,796 1,451,893
—
6,992
5,340
3,562
50,122
48,615
—
8
67,562 $ 3,901,659 $ 107,647
—
—
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
105
and with a probability weighting of Moody’s economic forecasts. The resulting credit loss, if any, were negligible and no allowance
for credit losses was recorded.
The fair value and gross unrealized losses for securities classified as held to maturity with unrealized losses at December 31, 2022
follow are presented in the table below.
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
Total
Fair
Value
Gross
Unrealized
Losses
$ 145,893 $
49,044
26,558
64,346
72,532
270,800
87,211
163,653
2,526
—
$ 1,836,592 $ 112,063 $ 725,298 $ 125,808 $ 2,561,890 $ 237,871
35,799 $ 372,392 $
17,680
42,017
30,312
—
13,245 $ 226,499 $
8,878
30,515
56,899
2,526
560,288
391,146
697,827
41,438
624,634
661,946
861,480
41,438
The fair value and gross unrealized losses for securities classified as held to maturity with unrealized losses at December 31, 2021 are
presented in the table below.
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
Total
Fair
Value
Gross
Unrealized
Losses
$
14,837 $
7,795
253,661
56,366
—
$ 332,659 $
20 $
205
1,499
205
—
1,929 $
— $
—
—
11,837
—
11,837 $
— $
—
—
464
—
14,837 $
7,795
253,661
68,203
—
464 $ 344,496 $
20
205
1,499
669
—
2,393
At December 31, 2022 and 2021, the Company had 757 and 142 securities, respectively, with market values below their cost basis.
None of the unrealized losses relate to the marketability of the securities or the 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
deemed to be non-credit related at December 31, 2022 and 2021. As noted above, no allowance for credit loss was recorded as of
December 31, 2022 or 2021. 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.
106
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; 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 $100.2 million and
$67.8 million at December 31, 2022 and 2021, respectively. Included in commercial non-real estate loans at December 31, 2022 and
2021 was $38.8 million and $531.1 million, respectively, of Paycheck Protection Program loans, described below. The following table
presents loans, net of unearned income, by portfolio class at December 31, 2022 and 2021:
($ 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
2022
10,146,453 $
3,033,058
13,179,511
3,560,991
1,703,592
3,092,605
1,577,347
23,114,046 $
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
$
$
The following briefly describes the composition of each loan category and portfolio class.
Commercial and industrial
Commercial and industrial loans are made available to businesses for working capital (including financing of inventory and
receivables), business expansion, to facilitate the acquisition of a business, and the purchase of equipment and machinery, including
equipment leasing. These loans are primarily made based on the identified cash flows of the borrower and, when secured, have the
added strength of the underlying collateral.
Commercial non-real estate loans may be secured by the assets being financed or other tangible or intangible business assets such as
accounts receivable, inventory, ownership, enterprise value or commodity interests, and may incorporate a personal or corporate
guarantee; however, some short-term loans may be made on an unsecured basis, including a small portfolio of corporate credit cards,
generally issued as a part of overall customer relationships.
Commercial non-real estate loans also include loans made under the Small Business Administration’s (SBA) Paycheck Protection
Program (PPP). PPP loans are guaranteed by the SBA and are forgivable to the debtor upon satisfaction of certain criteria. The loans
bear interest at 1% per annum and have two or five year terms, depending on the date of origination. These loans also earn an
origination fee of 1%, 3%, or 5%, depending on the loan size, which is deferred and amortized over the estimated life of the loan using
the effective yield method.
Commercial real estate – owner occupied loans consist of commercial mortgages on properties where repayment is generally
dependent on the cash flow from the ongoing operations and activities of the borrower. Like commercial non-real estate, these loans
are primarily made based on the identified cash flows of the borrower, but also have the added strength of the value of underlying real
estate collateral.
Commercial real estate – income producing
Commercial real estate – income producing loans consist of loans secured by commercial mortgages on properties where the loan is
made to real estate developers or investors and repayment is dependent on the sale, refinance, or income generated from the operation
of the property. Properties financed include retail, office, multifamily, senior housing, hotel/motel, skilled nursing facilities and other
commercial properties.
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.
107
Residential mortgages
Residential mortgages consist of closed-end loans secured by first liens on 1- 4 family residential properties. The portfolio includes
both fixed and adjustable rate loans, although most longer term, fixed rate loans originated are generally sold in the secondary
mortgage market.
Consumer
Consumer loans include second lien mortgage home loans, home equity lines of credit and nonresidential consumer purpose loans.
Nonresidential consumer loans include both direct and indirect loans. Direct nonresidential consumer loans are made to finance the
purchase of personal property, including automobiles, recreational vehicles and boats, and for other personal purposes (secured and
unsecured), and 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,
2022 and 2021 were approximately $30.4 million and $62.9 million, respectively. Related party loan activity in 2022 reflect new loans
of $3.0 million, and repayments of $35.3 million.
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 $1.4 and $1.1 billion at December 31, 2022 and 2021, respectively.
The following schedules show activity in the allowance for credit losses by portfolio class for the years ended December 31, 2022 and
2021, as well as the corresponding recorded investment in loans at December 31, 2022 and 2021. Effective January 1, 2020, the
Company adopted the provisions of ASC 326 (CECL) using a modified retrospective basis.
($ 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
Residential
Mortgages
Year Ended December 31, 2022
Consumer
Total
$
$
$
$
$
$
$
$
$
$
$
$
95,888
(7,637 )
11,812
(3,602 )
96,461
$
53,433
$
149,321
$
108,058
$
22,102
$
30,623
$
(948 )
733
(4,934 )
48,284
$
(8,585 )
12,545
(8,536 )
$
144,745
$
(1,073 )
878
(35,902 )
71,961
$
(3 )
134
8,265
30,498
$
(137 )
1,749
229
32,464
$
31,961
(12,792 )
5,382
3,570
28,121
$
$
342,065
(22,590 )
20,688
(32,374 )
307,789
4,522
$
323
$
4,845
$
1,694
$
21,907
$
22
$
866
$
29,334
462
(21 )
441
(299 )
3,203
9
621
3,975
4,984
101,445
$
$
302
48,586
$
$
5,286
150,031
$
$
1,395
73,356
$
$
25,110
55,608
$
$
31
32,495
$
$
1,487
29,608
$
$
33,309
341,098
71
96,390
96,461
$
$
—
4,984
4,984
101,445
$
$
$
31
48,253
48,284
$
$
—
302
302
48,586
$
$
$
102
144,643
144,745
$
$
—
5,286
5,286
150,031
$
$
$
16
71,945
71,961
$
$
—
1,395
1,395
73,356
$
$
$
18
30,480
30,498
$
$
—
25,110
25,110
55,608
$
$
$
239
32,225
32,464
$
$
—
31
31
32,495
$
$
$
101
28,020
28,121
$
$
—
1,487
1,487
29,608
$
$
$
476
307,313
307,789
—
33,309
33,309
341,098
1,248
10,145,205
10,146,453
$
$
920
3,032,138
3,033,058
$
$
2,168
13,177,343
13,179,511
$
$
1,240
3,559,751
3,560,991
$
$
116
1,703,476
1,703,592
$
$
3,476
3,089,129
3,092,605
$
$
515
1,576,832
1,577,347
$
7,515
23,106,531
$ 23,114,046
108
($ 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
Residential
Mortgages
Year Ended December 31, 2021
Consumer
Total
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
109,474
$
26,462
$
48,842
$
149,693
(33,523 )
8,985
(29,267 )
95,888
69,134
(3,179 )
642
(13,164 )
53,433
$
$
218,827
(36,702 )
9,627
(42,431 )
149,321
(425 )
105
(1,096 )
$
108,058
$
(274 )
2,172
(6,258 )
22,102
$
(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
154,166
$
$
1,694
109,752
$
$
21,907
44,009
$
$
22
30,645
$
$
866
32,827
$
$
29,334
371,399
177
95,711
95,888
—
4,522
4,522
100,410
$
$
$
$
$
94
53,339
53,433
—
323
323
53,756
$
$
$
$
$
271
149,050
149,321
—
4,845
4,845
154,166
$
$
$
$
$
20
108,038
108,058
—
1,694
1,694
109,752
$
$
$
$
$
20
22,082
22,102
—
21,907
21,907
44,009
$
$
$
$
$
408
30,215
30,623
—
22
22
30,645
$
$
$
$
$
184
31,777
31,961
—
866
866
32,827
$
$
$
$
$
903
341,162
342,065
—
29,334
29,334
371,399
3,431
9,609,029
9,612,460
$
$
2,546
2,818,700
2,821,246
$
$
5,977
12,427,729
12,433,706
$
$
5,288
3,459,338
3,464,626
$
$
125
1,228,545
1,228,670
$
$
5,260
2,418,630
2,423,890
$
$
1,232
1,582,158
1,583,390
$
17,882
21,116,400
$ 21,134,282
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. The mix of macroeconomic variables underlying the December 2022 scenarios differ in some
respects from the comparable forecasts available at December 2021, given the shift in economic circumstances and risks.
The decrease in the allowance for credit losses at December 31, 2022 compared to December 31, 2021 reflects the improvements in
economic conditions, particularly in the first half of the year, and in the Company’s credit quality metrics. In arriving at the allowance
for credit losses at December 31, 2022, the Company weighted Moody’s December 2022 baseline economic forecast at 25% and
downside recessionary S-2 scenario at 75%. The December 2022 baseline scenario maintains a generally optimistic outlook in its
assumptions surrounding the drivers of economic growth, including its expectations of the effectiveness of the Federal Reserve's
monetary policy in easing inflationary conditions, while sustaining economic growth and resulting in only a modest decline in job
growth. The S-2 scenario is less optimistic compared to the baseline, reflecting the view that supply chain issues worsen and keep
inflation elevated longer than expected in the baseline scenario. In turn, the Federal Reserve responds by raising the target interest rate
more than assumed in the baseline, the impact of which will cause the U.S. to fall into a recession in the first quarter of 2023 that lasts
for three quarters.
The decrease in the allowance for credit losses at December 31, 2021 as compared to December 31, 2020 reflects significant
improvement in economic conditions during the year and in the economic outlook at such time. Such improvements allowed for the
release of certain of the reserves built in 2020 in response to the economic damage and uncertainty that stemmed from the COVID-19
pandemic. In arriving at the allowance for credit losses at December 31, 2021, the Company weighted the baseline economic forecast
at 40%, the slower near-term growth scenario S-2 at 60%.
109
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.
($ 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,
2022
2021
Total
nonaccrual
Nonaccrual
without
allowance for
loan loss
Nonaccrual
without
allowance for
loan loss
Total
nonaccrual
$
$
4,020 $
1,461
5,481
1,240
309
25,269
6,692
38,991 $
941
692
1,633
1,174
—
1,884
—
4,691
$
$
6,974 $
4,921
11,895
5,458
844
25,439
11,887
55,523 $
1,264
729
1,993
5,207
—
1,997
48
9,245
Nonaccrual loans include nonaccruing loans modified in troubled debt restructurings (TDRs) of $2.6 million and $6.8 million, at
December 31, 2022 and 2021, respectively. Total TDRs, both accruing and nonaccruing, were $4.5 million at December 31, 2022 and
$10.6 million at December 31, 2021. All TDRs are individually evaluated for credit loss.
The table below presents detail by portfolio class TDRs that were modified during the years ended December 31, 2022, 2021 and
2020.
($ in thousands)
Troubled Debt Restructurings:
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
2022
Outstanding
Recorded Investment
Years Ended
2021
Outstanding
Recorded Investment
2020
Outstanding
Recorded Investment
Number
of
Contracts
Pre-
Modification
Post-
Modification
—
— $
Pre-
Modification
4 $
7,232 $
Post-
Modification
7,232
Number
of
Contracts
Number
of
Contracts
Pre-
Modification
Post-
Modification
745
745 $
— $
—
—
—
—
3
3
6 $
—
—
—
—
148
76
224 $
3 $
1
4
—
—
—
—
—
4
7,232
7,232
297
297
1,042
1,042
—
—
—
—
—
—
—
—
153
76
229
—
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
The TDRs modified during the year ended December 31, 2022 reflected in the table above include $0.1 million with reduced interest
rates, and $0.1 million with other modifications. The TDRs modified during the year ended December 31, 2021 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
terms or other payment concessions, $0.4 million of loans with significant covenant waivers, $1.1 million with reduced interest rates,
and $2.1 million of other modifications.
At December 31, 2022 and 2021, the Company had no unfunded commitments to borrowers whose loan terms had been modified in
TDRs.
Three commercial non real estate loans totaling $3.1 million and two residential mortgage and four consumer loans totaling $0.3
million had payment defaults during the year ended December 31, 2022, and had been modified in a TDR in the twelve months
preceding default. One residential mortgage loan totaling $0.6 million had a payment default during the year ended December 31,
2021, and had been modified in a TDR in the twelve months preceding default. Two commercial non real estate loans totaling $13.4
110
million, two residential mortgage loans totaling $0.8 million and one consumer loan totaling less than $0.1 million had payment
defaults during the year ended December 31, 2020, and had been modified in a TDR in the twelve months preceding default.
The TDR disclosures above do not include loans eligible for exclusion from TDR assessment under Section 4013 of the Coronavirus
Aid, Relief, and Economic Security Act (“CARES Act”). Eligible modification must be related to COVID-19, executed on a loan that
was not more than 30 days past due as of December 31, 2019 and executed between March 1, 2020 and December 31, 2020. This
exclusion relief was extended to January 1, 2022 by the Consolidated Appropriations Act, 2021. These loans are reported in the aging
analysis that follows based on the modified terms.
Aging Analysis
The tables below present the aging analysis of past due loans by portfolio class at December 31, 2022 and 2021.
December 31, 2022
($ 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
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
$
$
4,050 $
19,069
23,119
879
4,029
28,208
8,845
65,080 $
21,329 $
3,346
24,675
—
242
11,056
2,806
38,779 $
3,418 $
1,894
5,312
1,174
133
17,346
4,407
28,372 $ 132,231 $ 22,981,815 $ 23,114,046 $
28,797 $ 10,117,656 $ 10,146,453 $
24,309 3,008,749 3,033,058
53,106 13,126,405 13,179,511
2,053 3,558,938 3,560,991
4,404 1,699,188 1,703,592
56,610 3,035,995 3,092,605
16,058 1,561,289 1,577,347
996
1,623
2,619
—
54
293
1,619
4,585
December 31, 2021
($ 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
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
$
$
8,381 $
704
9,085
281
2,624
23,306
6,806
42,102 $
3,123 $
653
3,776
107
1,022
4,638
2,805
12,348 $
7,041 $
1,563
8,604
5,307
587
15,339
7,447
37,284 $
18,545 $ 9,593,915 $ 9,612,460 $
2,920 2,818,326 2,821,246
21,465 12,412,241 12,433,706
5,695 3,458,931 3,464,626
4,233 1,224,437 1,228,670
43,283 2,380,607 2,423,890
17,058 1,566,332 1,583,390
91,734 $ 21,042,548 $ 21,134,282 $
2,818
142
2,960
—
83
310
2,171
5,524
Credit Quality Indicators
The following tables present the credit quality indicators by segment and portfolio class of loans at December 31, 2022 and December
31, 2021.
($ in thousands)
Grade:
Pass
Pass-Watch
Special Mention
Substandard
Doubtful
Total
Commercial Non-
Real Estate
Commercial
Real
Estate - Owner
Occupied
Total
Commercial
and Industrial
Commercial
Real
Estate - Income
Producing
Construction
and
Land
Development
Total
Commercial
December 31, 2022
$
9,641,117 $ 2,912,057 $ 12,553,174 $ 3,440,648 $ 1,690,756 $ 17,684,578
457,620
333,936
90,253
86,247
211,643
206,154
—
—
$ 10,146,453 $ 3,033,058 $ 13,179,511 $ 3,560,991 $ 1,703,592 $ 18,444,094
284,843
79,980
140,513
—
111,587
3,810
4,946
—
49,093
6,267
65,641
—
12,097
196
543
—
111
($ in thousands)
Grade:
Pass
Pass-Watch
Special Mention
Substandard
Doubtful
Total
($ in thousands)
Performing
Nonperforming
Total
December 31, 2021
Commercial
Non-
Real Estate
Commercial
Real
Estate - Owner
Occupied
Total
Commercial
and Industrial
Commercial Real
Estate - Income
Producing
Construction
and
Land
Development
Total
Commercial
$
9,279,719 $ 2,650,399 $ 11,930,118 $
86,133
23,377
61,337
—
157,815
43,344
131,582
—
243,948
66,721
192,919
—
$
9,612,460 $ 2,821,246 $ 12,433,706 $
3,373,099 $ 1,216,177 $ 16,519,394
320,394
73,096
214,118
—
3,464,626 $ 1,228,670 $ 17,127,002
67,157
4,466
19,904
—
9,289
1,909
1,295
—
December 31, 2022
Residential
Mortgage
Consumer
$ 3,066,319 $ 1,570,186 $
26,286
7,161
$ 3,092,605 $ 1,577,347 $
December 31, 2021
Residential
Mortgage
Consumer
Total
4,636,505 $ 2,396,282 $ 1,570,516 $ 3,966,798
40,482
4,669,952 $ 2,423,890 $ 1,583,390 $ 4,007,280
27,608
33,447
12,874
Total
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.
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.
112
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, 2022 and 2021. The Company defines vintage as the later of origination, renewal
or restructure date.
Term Loans
Amortized Cost Basis by Origination Year
2022
2021
2020
2019
2018
Prior
Revolving
Loans
Converted
to Term
Loans
Revolving
Loans
Total
$ 4,789,035 $ 3,608,540 $ 2,026,017 $ 1,327,839 $ 779,966 $ 1,539,131 $ 3,482,828 $ 131,222 $ 17,684,578
457,620
9,985 $
64,263
67,767
84,696
94,484
46,483
58,567
31,375
30,511
50,016
—
13,625
14,409
—
3,694
21,266
—
7,749
29,350
—
1,719
21,637
—
5,701
23,593
—
25,184
40,213
—
2,070 $
11,159 $
—
90,253
211,643
—
$ 4,954,258 $ 3,700,837 $ 2,145,461 $ 1,411,421 $ 834,697 $ 1,626,992 $ 3,615,992 $ 154,436 $ 18,444,094
$ 735,080 $ 752,352 $ 564,345 $
255,146 $ 149,234 $
959,409 $ 1,216,105 $
1,251
2,632
944
1,954
2,461
22,143
459
4,834 4,636,505
33,447
1,603
$ 736,331 $ 754,984 $ 565,289 $
257,100 $ 151,695 $
981,552 $ 1,216,564 $
6,437 $ 4,669,952
Term Loans
Amortized Cost Basis by Origination Year
2021
2020
2019
2018
2017
Prior
Revolving
Loans
Converted
to Term
Loans
Revolving
Loans
Total
$ 4,946,459 $ 3,008,160 $ 2,035,849 $ 1,212,306 $ 937,639 $ 1,296,382 $ 3,002,064 $
68,421
19,467
31,598
45,846
27,188
69,310
52,850
80,535 $ 16,519,394
320,394
5,714
17,536
43,895
—
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
$ 580,813 $ 467,497 $ 355,833 $
223,494 $ 320,344 $
892,361 $ 1,120,461 $
565
951
2,018
4,465
4,719
24,365
1,432
5,995 3,966,798
40,482
1,967
$ 581,378 $ 468,448 $ 357,851 $
227,959 $ 325,063 $
916,726 $ 1,121,893 $
7,962 $ 4,007,280
December 31, 2022
($ in thousands)
Commercial Loans:
Pass
Pass-Watch
Special
Mention
Substandard
Doubtful
Total Commercial
Loans
Residential
Mortgage and
Consumer Loans:
Performing
Nonperforming
Total Consumer
Loans
December 31, 2021
($ in thousands)
Commercial Loans:
Pass
Pass-Watch
Special
Mention
Substandard
Doubtful
Total Commercial
Loans
Residential
Mortgage and
Consumer Loans:
Performing
Nonperforming
Total Consumer
Loans
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 $4.9 million and $4.4 million of consumer loans secured by single family
residential mortgage real estate that are in process of foreclosure as of December 31, 2022 and 2021, respectively. In addition to the
single family residential real estate loans in process of foreclosure, the Company also held $0.4 million and $2.4 million of foreclosed
single family residential properties in other real estate owned as of December 31, 2022 and 2021, respectively.
113
Loans Held for Sale
Loans held for sale totaled $26.4 million and $93.1 million, respectively, at December 31, 2022 and 2021. At December 31, 2022,
residential mortgage loans carried at the fair value option totaled $10.8 million with an unpaid principal balance of $10.6 million. All
other loans held for sale are carried at lower of cost or market.
Note 4. Property and Equipment
Property and equipment consisted of the following at December 31, 2022 and 2021:
($ 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,
2022
2021
68,016 $
323,305
121,796
103,022
15,917
632,056
(303,451 )
328,605 $
68,353
320,308
116,429
75,909
49,375
630,374
(280,065 )
350,309
$
$
Assets under development is comprised primarily of software design and implementation costs.
Depreciation and amortization expense was $31.6 million, $29.1 million and $30.1 million for the years ended December 31, 2022,
2021, and 2020, 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 $2.9 million and $5.5 million at December 31, 2022 and 2021, respectively, and were reported within Other Assets in the
consolidated balance sheets. For more information on the Company’s policy for accounting for assets held for sale, refer to Note 1 –
Summary of Significant Accounting Policies and Recent Accounting Pronouncements.
Note 5. Operating Leases
The Company has operating leases on a number of its branches, certain regional headquarters and other properties to limit its exposure
to ownership risks such as fluctuations in real estate prices and obsolescence. The Company leases real estate with lease terms
generally from five to 20 years, some of which have renewal options from one to 20 years. As these extension options are not
generally considered reasonably certain of renewal, they are not included in the lease term. The Company is not a lessee in any
contracts classified as finance leases.
The following tables present supplemental information pertaining to operating leases at and for the years ended December 31, 2022
and 2021.
($ 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
Years ended December 31,
2022
2021
16,564 $
6,800
17,591
141
December 31,
2022
2021
12.03
3.41 %
12.56
3.37 %
114
The following table sets forth the maturities of the Company’s lease liabilities and the present value discount at December 31, 2022.
($ in thousands)
2023
2024
2025
2026
2027
Thereafter
Total
Present value discount
Lease liability
$
$
$
16,311
14,238
13,632
12,256
11,138
77,982
145,557
(29,135 )
116,422
The following table sets forth the components of the Company’s lease expense for the years ended December 31, 2022 and 2021.
($ in thousands)
Operating lease expense
Short-term lease expense
Variable lease expense
Sublease income
Total
$
$
Years ended December 31,
2022
2021
2020
16,881 $ 17,757 $ 18,994
165
97
(138 )
16,645 $ 17,677 $ 19,118
135
105
(320 )
209
63
(508 )
At December 31, 2022, 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 $855.5
million at both December 31, 2022 and 2021.
The Company completed its annual impairment test of goodwill as of September 30, 2022 by performing a qualitative (“Step Zero”)
assessment. The qualitative assessment involved the examination of changes in macroeconomic conditions, industry and market
conditions, overall financial performance, cost factors and other relevant entity-specific events, including changes in management and
other key personnel and changes in the share price of the Company’s common stock. As a result of the assessment, the Company
concluded that its goodwill was not impaired.
No goodwill impairment charges were recognized during the years ended December 31, 2022, 2021 or 2020.
Identifiable intangible assets with finite lives are amortized over the periods benefited and are evaluated for impairment similar to
other long-lived assets. The purchase and carrying values of intangible assets subject to amortization at December 31, 2022 and 2021
were as follows:
($ in thousands)
Core deposit intangibles
Credit card and trust relationships
($ in thousands)
Core deposit intangibles
Credit card and trust relationships
Purchase
Value
December 31, 2022
Accumulated
Amortization
Carrying
Value
235,845 $
49,962
285,807 $
200,045 $
29,569
229,614 $
35,800
20,393
56,193
Purchase
Value
December 31, 2021
Accumulated
Amortization
Carrying
Value
235,845 $
49,962
285,807 $
188,135 $
27,446
215,581 $
47,710
22,516
70,226
$
$
$
$
Aggregate amortization expense by category of finite lived intangible assets for the years ended December 31, 2022, 2021, and 2020
are as follows:
115
($ in thousands)
Core deposit intangibles
Credit card and trust relationships
Merchant processing relationships
Years Ended December 31,
2021
2022
2020
$
$
11,909 $
2,124
—
14,033 $
14,304 $
2,361
—
16,665 $
16,864
2,637
415
19,916
At December 31, 2022, the weighted-average remaining life of core deposit intangibles was approximately 8 years, and the weighted-
average remaining life of other identifiable intangibles was approximately 12 years.
The following table shows estimated amortization expense of other intangible assets at December 31, 2022 for the five succeeding
years and all years thereafter, calculated based on current amortization schedules.
($ in thousands)
2023
2024
2025
2026
2027
Thereafter
Note 7. Other Assets
$
$
11,557
9,413
7,985
5,322
3,682
18,234
56,193
Significant balances included in Other Assets in the Consolidated Balance Sheets at December 31, 2022 and 2021 are presented
below.
($ in thousands)
Derivative assets
FHLB stock
Investments in small business investment and other companies
Investments in low income housing tax credit entities
Income tax receivable
Derivative collateral
Other
Total
December 31,
2022
2021
$
$
$
109,497
65,466
57,946
32,968
35,042
27,852
51,714
380,485 $
75,867
52,743
46,500
36,297
128,092
66,207
42,032
447,738
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 $37.5 million at both December 31, 2022 and 2021.
116
Note 8. Deposits
The following table presents a detail of deposits at December 31, 2022 and 2021:
($ 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, 2022 follows.
($ in thousands)
2023
2024
2025
2026
2027
Thereafter
Total time deposits
December 31,
2022
13,645,113 $
10,757,495
2021
14,392,808
11,677,333
3,132,828
111,397
3,244,225
1,418,596
4,920
15,425,236
29,070,349 $
3,216,651
77,956
3,294,607
1,091,959
9,190
16,073,089
30,465,897
$
$
$
$
1,388,731
94,920
24,496
13,000
11,856
1,911
1,534,914
Certificates of deposit in amounts greater than or equal to $250,000 totaled approximately $540.7 million at December 31, 2022.
Note 9. Short-Term Borrowings
The following table presents information concerning short-term borrowings at and for the years ended December 31, 2022 and 2021:
($ 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,
2022
2021
1,850 $
13,176
2,350
3.90 %
2.82 %
444,421 $
536,727
640,592
0.53 %
0.21 %
1,425,000 $
808,784
1,425,000
4.70 %
1.82 %
1,850
3,762
4,400
0.15 %
0.43 %
563,211
559,410
643,403
0.05 %
0.10 %
1,100,000
1,100,000
1,100,000
0.49 %
0.49 %
Federal funds purchased represent unsecured borrowings from other banks, generally on an overnight basis.
117
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 $1.4 billion of FHLB borrowings at December 31, 2022 consists of one fixed rate note entered into on December 30, 2022, that
matured on January 3, 2023. The $1.1 billion of FHLB borrowing at December 31, 2021 consisted of five fixed rate notes scheduled to
mature between 2034 and 2035, that were classified as short-term as the FHLB had the option to put (terminate) prior to maturity.
These notes were called and repaid during the second and third quarters of 2022.
Note 10. Long-Term Debt
At December 31, 2022 and 2021, long-term debt was comprised of the following:
($ in thousands)
Subordinated notes payable, maturing June 2060
Other long-term debt
Less: unamortized debt issuance costs
Total long-term debt
December 31,
2022
2021
172,500 $
75,261
(5,684 )
242,077 $
172,500
77,556
(5,836 )
244,220
$
$
The following table sets forth unamortized debt issuance costs associated with the respective debt instruments at December 31, 2022:
($ in thousands)
Subordinated notes payable, maturing June 2060
Other long-term debt
Total
Unamortized
Debt
Issuance
Costs
5,684
—
5,684
Principal
172,500 $
75,261
247,761 $
$
$
On June 9, 2020, the Company completed the issuance of subordinated notes payable with an aggregate principal amount of $172.5
million, with a stated maturity of June 15, 2060. The notes accrue interest at a fixed rate of 6.25% per annum, with quarterly interest
payments that began September 15, 2020. Subject to prior approval by the Federal Reserve, the Company may redeem the notes in
whole or in part on any interest payment date on or after June 15, 2025. This debt qualifies as tier 2 capital in the calculation of certain
regulatory capital ratios.
All of the Company’s other long-term debt consists of borrowings associated with tax credit fund activities. Although these
borrowings have indicated maturities through 2052, each is expected to be satisfied at the end of the seven-year compliance period for
the related tax credit investments.
Note 11. Derivatives
Risk Management Objective of Using Derivatives
The Company enters into derivative financial instruments to manage risks related to differences in the amount, timing, and duration of
the Company’s known or expected cash receipts and its known or expected cash payments. The Bank also enters into interest rate
derivative agreements as a service to certain qualifying customers. The Bank manages a matched book with respect to these customer
derivatives in order to minimize its net interest rate risk exposure resulting from such agreements. In addition, the Bank also enters
into risk participation agreements under which it may either sell or buy credit risk associated with a customer’s performance under
certain interest rate derivative contracts related to loans in which participation interests have been sold to or purchased from other
banks.
118
Fair Values of Derivative Instruments on the Balance Sheet
The table below presents the notional or contractual amounts and fair values of the Company’s derivative financial instruments as well
as their classification on the consolidated balance sheets at December 31, 2022 and 2021.
($ in thousands)
Derivatives designated as hedging
instruments:
Interest rate swaps - variable rate loans
Interest rate swaps - securities
Derivatives not designated as hedging
instruments:
Interest rate swaps
Risk participation agreements
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
December 31, 2022
Derivative (1)
December 31, 2021
Derivative (1)
Type of
Hedge
Notional or
Contractual
Amount
Assets
Liabilities
Notional or
Contractual
Amount
Assets
Liabilities
Cash Flow $ 2,100,000 $
Fair Value
5,884 $ 4,421
22,138 10,690
$ 2,816,000 $ 45,802 $ 112,262 $ 2,962,650 $ 28,022 $ 15,111
2,301 $ 112,262 $ 1,125,000 $
43,501
— 1,837,650
716,000
N/A
N/A
$ 4,620,544 $ 172,242 $ 169,712 $ 5,193,991 $ 75,819 $ 75,861
35
13
298,729
217,437
11
1
N/A
10,930
8
113
46,739
1
645
N/A
N/A
N/A
N/A
8
7
1,594
1,883
161
78
1,643
—
13,819
10,000
123,106
43,111
1
53
758
4,116
$ 5,120,239 $ 174,133 $ 173,330 $ 5,687,007 $ 78,149 $ 81,469
$ 7,936,239 $ 219,935 $ 285,592 $ 8,649,657 $ 106,171 $ 96,580
(30,304 ) (61,534 )
$ 75,867 $ 35,046
(81,471 )
(110,438 )
$ 109,497 $ 204,121
82,037
55,000
48,364
43,439
1,525
15
778
—
(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 cash of 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, 2022 expire as follows: $150 million in 2023; $50 million in 2025; $600 million in 2026 and $1.3 billion thereafter.
Fair Value Hedges of Interest Rate Risk
Interest rate swaps on securities available for sale
The Company is party to forward-starting fixed payer swaps that convert the latter portion of the term of certain available for sale
securities to a floating rate. These derivative instruments are designated as fair value hedges of interest rate risk. This strategy provides
the Company with a fixed rate coupon during the front-end unhedged tenor of the bonds and results in a floating rate security during
the back-end hedged tenor, with hedged start dates between November 2024 and July 2026, and maturity dates from December 2027
119
through March 2031. 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 hedged available for sale securities are part of 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, 2022, the amortized cost basis of the closed
portfolio of pre-payable commercial mortgage backed securities totaled $782.7 million. The amount that represents the hedged items
was $672.4 million and the basis adjustment associated with the hedged items was a loss of $43.6 million.
The Company terminated 25 fair value swap agreements during the twelve months ended December 31, 2022 and received cash of
approximately $90.6 million. At the time of termination, the value of the swap was recorded as an adjustment to the book value of the
underlying security, thereby changing its current book yield and extending its duration.
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.
120
At the closing of the loan, the rate lock commitment derivative expires and the Company generally records a loan held for sale at fair
value under the election of fair value option.
Customer foreign exchange forward contract derivatives
The Company enters into foreign exchange forward derivative agreements, primarily forward foreign currency contracts, with
commercial banking customers to facilitate their risk management strategies. The Bank manages its risk exposure from such
transactions by entering into offsetting agreements with unrelated financial institutions. The Bank has not elected to designate these
foreign exchange forward contract derivatives as hedges; as such, changes in the fair value of both the customer derivatives and the
offsetting derivatives are recognized directly in earnings.
Visa Class B derivative contract
The Company is a member of Visa USA. During the fourth quarter of 2018, the Company sold the majority of its Visa Class B
holdings, at which time it entered into a derivative agreement with the purchaser whereby the Company will make or receive cash
payments whenever the conversion ratio of the Visa Class B shares into Visa Class A shares is adjusted. The conversion ratio changes
when Visa deposits funds to a litigation escrow established by Visa to pay settlements for certain litigation, for which Visa is
indemnified by Visa USA members. The Company is also required to make periodic financing payments to the purchaser until all of
Visa’s covered litigation matters are resolved. Thus, the derivative contract extends until the end of Visa’s covered litigation matters,
the timing of which is uncertain.
The contract includes a contingent accelerated termination clause based on the credit ratings of the Company. At December 31, 2022
and 2021, the fair value of the liability associated with this contract was $1.9 million and $4.1 million respectively. Refer to Note 20 –
Fair Value of Financial Instruments for discussion of the valuation inputs and process for this derivative liability.
Effect of Derivative Instruments on the Statements of Income
The effects of derivative instruments on the Consolidated Statements of Income for the years ended December 31, 2022, 2021, and
2020 are presented in the table below.
($ in thousands)
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,
2022
2021
2020
Interest income - loans
$
9,928 $
26,674 $
17,351
Interest income - securities -
taxable
Noninterest income - securities
transactions, net
Interest expense - deposits
Noninterest income - secondary
mortgage market operations
Noninterest income - other
noninterest income
4,963
(640 )
1,620
—
2,499
—
2,918
1,568
8
—
46
—
5,832
25,261 $
13,477
43,578 $
12,814
30,219
$
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, 2022 and 2021 was $8.7 million and $49.4 million,
respectively, for which the Company had posted collateral of $8.5 million and $15.0 million, respectively.
121
Offsetting Assets and Liabilities
The Bank’s derivative instruments with certain counterparties contain legally enforceable netting provisions that allow for net
settlement of multiple transactions to a single amount, which may be positive, negative, or zero. Agreements with certain bilateral
counterparties require both parties to maintain collateral in the event that the fair values of derivative instruments exceed established
exposure thresholds. For centrally cleared derivatives, the Company is subject to initial margin posting and daily variation margin
exchange with the central clearinghouses. Offsetting information in regards to all derivative assets and liabilities, including accrued
interest subject to these master netting agreements at December 31, 2022 and 2021 is presented in the following tables:
As of December 31, 2022
($ in thousands)
Derivative Assets
Derivative Liabilities
As of December 31, 2021
($ in thousands)
Derivative Assets
Derivative Liabilities
Net Amounts
Presented in
the
Statement of
Financial
Position
Gross
Amounts
Offset in the
Statement of
Financial
Position
(112,338 ) $
(83,794 ) $
Gross
Amounts
Recognized
$
$
223,072 $
116,395 $
Gross Amounts Not Offset in the
Statement of Financial Position
Financial
Instruments
Cash
Collateral
Net
Amount
110,734 $
32,601 $
32,601 $
32,601 $
27,852 $
— $
105,985
—
Gross
Amounts
Offset in the
Statement of
Financial
Position
Net Amounts
Presented in
the
Statement of
Financial
Position
Gross
Amounts
Recognized
Gross Amounts Not Offset in the
Statement of Financial Position
Financial
Instruments
Cash
Collateral
Net
Amount
$
$
36,790 $
85,448 $
(29,882 ) $
(63,204 ) $
6,908 $
22,244 $
6,908 $
6,908 $
— $
66,207 $
—
(50,871 )
The Company has excess posted collateral compared to total exposure due to initial margin requirements for day-to-day rate volatility.
Note 12. Stockholders’ Equity
Common Shares Outstanding
Common shares outstanding excludes treasury shares of 6.3 million and 5.1 million with a first-in-first-out cost basis of $238.6 million
and $175.8 million at December 31, 2022 and 2021, respectively. Shares outstanding also excludes unvested restricted share awards of
0.7 million and 1.1 million at December 31, 2022 and 2021, respectively.
Stock Buyback Programs
On April 22, 2021, the Company’s board of directors approved a stock buyback program whereby the Company was 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
allowed 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 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. During the year ended December 31, 2022, the Company repurchased 1,204,368 shares of its common stock at an
average cost of $48.90 per share, inclusive of commissions. The company purchased a total of 1,654,244 shares at an average cost of
$48.77 per share under this program that expired on December 31, 2022.
Accumulated Other Comprehensive Income (Loss)
Accumulated Other Comprehensive Income or Loss (“AOCI”) is reported as a component of stockholders’ equity. AOCI can include,
among other items, unrealized holding gains and losses on securities available for sale (“AFS”), including the Company’s share of
unrealized gains and losses reported by a partnership accounted for under the equity method, gains and losses associated with pension
or other post-retirement benefits that are not recognized immediately as a component of net periodic benefit cost, and gains and losses
on derivative instruments that are designated as, and qualify as, cash flow hedges. Net unrealized gains and losses on AFS securities
reclassified as securities held to maturity (“HTM”) also continue to be reported as a component of AOCI and will be amortized over
the estimated remaining life of the securities as an adjustment to interest income. Subject to certain thresholds, unrealized losses on
122
employee benefit plans will be reclassified into income as pension and post-retirement costs are recognized over the remaining service
period of plan participants. Accumulated gains or losses on cash flow hedges of variable rate loans described in Note 11 will be
reclassified into income over the life of the hedge. Accumulated other comprehensive loss resulting from the terminated interest rate
swaps will be amortized over the remaining maturities of the designated instruments. Gains and losses within AOCI are net of
deferred income taxes, where applicable.
A roll forward of the components of Accumulated Other Comprehensive Income (Loss) is presented in the table that follows:
($ in thousands)
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 loss 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
Net change in unrealized gain or loss
Reclassification of net income or loss realized and
included in earnings
Valuation adjustments to employee benefit plans
Transfer of net unrealized loss from AFS to HTM
securities portfolio
Amortization of unrealized net gain or loss on securities
transferred to HTM
Income tax benefit
Balance, December 31, 2022
Available
for Sale
Securities
HTM
Securities
Transferred
from AFS
Employee
Benefit
Plans
Cash Flow
Hedges
Equity
Method
Investment
Total
$ 28,950 $
183,441
639 $ (101,278 ) $ 17,399 $
—
45,831
—
(434 ) $ (54,724 )
(4,935 ) 224,337
—
—
—
—
6,368
(37,451 )
(17,351 )
—
—
—
(10,983 )
(37,451 )
—
(41,167 )
$ 171,224 $
(208,760 )
—
6,788
(470 )
107
276 $ (125,573 ) $ 39,511 $
—
—
(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
(6,735 )
—
—
—
—
59,606
(6,735 )
—
46,407
$ 11,037 $
(785,538 )
(158 )
35
—
(12,799 )
—
6,705
153 $ (80,946 ) $ 16,284 $
—
— (113,171 )
—
—
(158 )
40,348
(463 ) $ (53,935 )
468 (898,241 )
1,707
—
—
—
2,274
(24,139 )
(9,928 )
—
—
—
(5,947 )
(24,139 )
15,405
(15,405 )
—
—
—
—
—
172,981
$ (584,408 ) $ (10,734 ) $ (97,952 ) $ (79,093 ) $
—
27,722
1,355
3,163
—
4,859
—
1,355
— 208,725
5 $ (772,182 )
123
The following table shows the line items in the consolidated statements of income affected by amounts reclassified from AOCI:
Year Ended December 31, Increase (decrease) in affected line
2022
2021
item in the income statement
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 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
$
1,355 $
(305 )
1,050
(1,707 )
385
(1,322 )
(2,274 )
505
(1,769 )
(1,748 )
394
(1,354 )
11,676
(2,629 )
9,047
—
—
—
158 Interest income
(35 ) Income taxes
123 Net income
(2,166 ) Securities transactions, net
487 Income taxes
(1,679 ) Net income
(4,555 ) Other noninterest expense
1,015 Income taxes
(3,540 ) Net income
22,561 Interest income
(5,054 ) Income taxes
17,507 Net income
4,113 Interest income
(921 ) Income taxes
3,192 Net income
(4,468 ) Noninterest income
— Income taxes
(4,468 ) Net income
5,652 $ 11,135 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% Common Equity Tier 1, 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 Common Equity Tier 1 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, 2022 and 2021, the Company
and the Bank were in compliance with all of their respective minimum regulatory capital requirements.
124
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, 2022 and 2021.
($ in thousands)
At December 31, 2022
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
$
3,279,419
3,279,536
9.53
9.54
$ 1,376,092
1,374,761
4.00
4.00
$ 1,720,115
1,718,451
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, 2021
Tier 1 leverage capital
$
$
$
3,279,419
3,279,536
11.41
11.43
$ 1,293,035
1,291,467
4.50
4.50
$ 1,867,717
1,865,453
3,279,419
3,279,536
11.41
11.43
$ 1,724,046
1,721,956
6.00
6.00
$ 2,298,728
2,295,942
3,726,834
3,554,451
12.97
12.39
$ 2,298,728
2,295,942
8.00
8.00
$ 2,873,411
2,869,927
10.00
10.00
Hancock Whitney Corporation
Hancock Whitney Bank
$
2,890,770
2,926,874
8.25 $ 1,402,223
1,401,157
8.36
4.00 $ 1,752,779
1,751,447
4.00
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
$
$
2,890,770
2,926,874
11.09 $ 1,172,563
1,171,341
11.24
4.50 $ 1,693,702
1,691,937
4.50
2,890,770
2,926,874
11.09 $ 1,563,417
1,561,788
11.24
6.00 $ 2,084,557
2,082,384
6.00
3,345,387
3,208,991
12.84 $ 2,084,557
2,082,384
12.33
8.00 $ 2,605,696
2,602,980
8.00
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 $44.1 million (net of tax) carrying through the remaining three years of the transition.
Regulatory Restrictions on Dividends
Regulatory policy statements provide that generally, bank holding companies should pay dividends only out of current operating
earnings and that the level of dividends must be consistent with current and expected capital requirements. Dividends received from
the Bank have been the primary source of funds available to the Company for the payment of dividends to its stockholders. Federal
and state banking laws and regulations restrict the amount of dividends the Bank may distribute to the Company without prior
regulatory approval, as well as the amount of loans it may make to the Company. Dividends paid by the Bank are subject to approval
by the Commissioner of Banking and Consumer Finance of the State of Mississippi. Further, a capital conservation buffer of 2.5%
above each of the minimum capital ratio requirements (Common Equity Tier 1, Tier 1, and Total risk-based capital) must be met for a
bank or bank holding company to be able to pay dividends without restrictions.
125
Note 13. Other Noninterest Income and Other Noninterest Expense
The components of other noninterest income and other noninterest expense are as follows:
($ 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
Years Ended December 31,
2021
2022
2020
15,881 $
10,483
5,832
21,715
53,911 $
13,783 $
16,744
10,336
11,870
3,795
4,336
4,768
(29,693 )
—
—
22,256
58,195 $
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
$
$
$
$
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
Years Ended December 31,
2021
2022
2020
$
$
142,433 $
14,840
157,273
(23,556 )
1,390
(22,166 )
135,107 $
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 )
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.
126
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
Net unrealized losses on securities available-for-sale and cash flow hedges
Derivatives
Other
Gross deferred tax assets
State valuation allowance
Net deferred tax assets
Deferred tax liabilities:
Employee compensation and benefits
Net unrealized gains on securities available-for-sale an cash flow hedges
Fixed assets & intangibles
Lease Financing
Right-of-use Asset
Other
Gross deferred tax liabilities
Net deferred tax asset (liability)
December 31,
2022
2021
77,045 $
485
—
3,591
26,207
195,090
38,082
10,085
350,585
(3,591 )
346,994 $
(8,399 ) $
—
(26,589 )
(52,385 )
(21,809 )
(26,394 )
(135,576 ) $
211,418 $
85,118
1,838
2,326
3,646
27,553
—
1,735
8,883
131,099
(3,646 )
127,453
(11,137 )
(10,136 )
(35,705 )
(52,896 )
(23,075 )
(13,938 )
(146,887 )
(19,434 )
$
$
$
$
$
Reported income tax expense (benefit) differed from amounts computed by applying the statutory income tax rate of 21% for the years
ended December 31, 2022, 2021 and 2020 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 Federal and State New Market Tax Credit (“NMTC”) programs, Low-Income Housing Tax
Credit (“LIHTC”) programs, as well as pre-2018 Qualified Zone Academy Bonds (“QZAB”), Qualified School Construction Bonds
(“QSCB”). A summary of the factors that impacted income tax expense follows.
2022
Years Ended December 31,
2021
2020
Amount
$ 138,431
%
Amount
%
Amount
%
21.0 % $ 119,292
21.0 % $
(26,196 )
21.0 %
($ 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
13,272
(8,612 )
(1,812 )
(8,039 )
(2,084 )
1,836
2.0
(1.3 )
(0.3 )
(1.2 )
(0.3 )
0.3
9,048
(9,100 )
(2,653 )
(7,889 )
(1,671 )
1,609
238
1,877
$ 135,107
—
0.3
(4,948 )
1,153
20.5 % $ 104,841
1.6
(1.6 )
(0.5 )
(1.4 )
(0.3 )
0.3
(0.9 )
0.3
18.5 % $
(1,269 )
(10,444 )
(4,857 )
(8,072 )
1,351
2,094
(30,167 )
(2,011 )
(79,571 )
1.0
8.4
3.9
6.5
(1.1 )
(1.7 )
24.2
1.6
63.8 %
The Company had approximately $61.0 million in state net operating loss carryforwards that originated in the tax years 2003 through
2020 and begin expiring in 2032. A $61.0 million gross state valuation allowance has been established for all non-bank entity level
127
state NOL carryforwards, which translates to a net $3.6 million valuation allowance in the Company’s deferred tax inventory. The
impact of this valuation allowance is not material to the financial statements.
The tax benefit of a position taken or expected to be taken in a tax return should be recognized when it is more likely than not that the
position will be sustained on its technical merits. The liability for unrecognized tax benefits was immaterial as of December 31, 2022,
2021 and 2020. The Company does not expect the liability for unrecognized tax benefits to change significantly during 2023. The
Company recognizes interest and penalties, if any, related to income tax matters in income tax expense, and the amounts recognized
during 2022, 2021 and 2020 were insignificant.
The Company and its subsidiaries file a consolidated U.S. federal income tax return, as well as filing various state returns. Generally,
the federal returns for years prior to 2019 are no longer subject to examination. However, as a result of the 2020 federal NOL
carryback, the 2015 to 2018 returns may still be subject to examination by the IRS. State returns that are open to examination vary by
jurisdiction and are generally open three to four years.
Note 15. Earnings (Loss) Per Share
The Company calculates earnings (loss) per share using the two-class method. The two-class method allocates net income or loss to
each class of common stock and participating security according to common dividends declared and participation rights in
undistributed earnings. For reporting periods in which a net loss is recorded, net loss is not allocated to participating securities because
the holders of such securities bear no contractual obligation to fund or otherwise share in the loss. Participating securities consist of
nonvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents
A summary of the information used in the computation of earnings (loss) per common share follows.
($ 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
Years Ended December 31,
2021
2022
2020
$
$
$
$
524,089 $
463,215 $
(45,174 )
7,620
516,469 $
9,134
454,081 $
1,756
(46,930 )
86,068
326
86,394
86,823
204
87,027
86,533
—
86,533
6.00 $
5.98 $
5.23 $
5.22 $
(0.54 )
(0.54 )
Potential common shares consist of stock options, nonvested performance-based awards, nonvested restricted stock units, 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 3,116 for the year
ended December 31, 2022 and 1,079 for the year ended December 31, 2021 and, as such were excluded from the calculation of diluted
earnings per common diluted share for the respective periods.
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
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.
128
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 2022 or 2021. The Company does not anticipate being required to make a
contribution, nor does it anticipate making a discretionary contribution to the Pension Plan in 2023.
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 $17.3 million, $16.6 million and $17.4 million for the years ended December
31, 2022, 2021, and 2020, 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 6.50%
increase in health costs, declining to 5.2% uniformly over a three year period, and then following the Getzen model thereafter. At
December 31, 2022, the mortality assumption was based on Revised RP-2014 Employee and Healthy Annuitants Bottom Quartile
Fully Generational Mortality Table for Males and Females - Projected with Improvement Scale MP-2021.
129
The following tables detail the changes in the benefit obligations and plan assets of the defined benefit plans for the years ended
December 31, 2022 and 2021, 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
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 (gain) at beginning of year
Net actuarial loss (gain)
Unrecognized loss (gain) at end of year
Projected benefit obligation
Accumulated benefit obligation
Fair value of plan assets
2022
2021
Pension Benefits
2022
2021
Other Post-
Retirement Benefits
$
$
$
$
$
646,832 $
11,438
14,639
—
(152,009 )
—
(25,154 )
495,746
859,883
(133,843 )
1,150
—
(25,154 )
(1,501 )
700,535
204,789 $
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 $
108,121 $
27,122
135,243 $
495,746 $
472,843
700,535
164,770 $
(56,649 )
108,121 $
646,832
607,408
859,883
20,282 $
59
375
794
(5,906 )
—
(1,808 )
13,796
—
—
1,015
793
(1,808 )
—
—
(13,796 ) $
18,330
93
348
778
(1,506 )
4,173
(1,934 )
20,282
—
—
1,156
778
(1,934 )
—
—
(20,282 )
(3,581 ) $
(5,256 )
(8,837 ) $
(2,804 )
(777 )
(3,581 )
The net funded status of $204.8 million for pension benefits plans includes an excess of plan assets over the benefit obligation of
$216.8 million on the defined benefit pension plan, offset by an unfunded benefit obligation of $12.0 million for the nonqualified
retirement plan.
Net actuarial gain is a significant component of the change in the projected benefit obligation of the Pension Plan for the year ended
December 31, 2022. The actuarial gain was primarily driven by a change in the discount rate used in computing the projected benefit
obligation at December 31, 2022.
During the twelve months ended December 31, 2021, the Company completed a Voluntary Early Retirement Incentive Program
(VERIP), which was accepted by approximately 260 eligible Pension Plan participants. The event constituted a curtailment of the
Pension Plan and resulted in a re-measurement of the projected benefit obligation. The program had two components: a supplemental
cash incentive, substantially all of which was paid through the Pension Plan with existing plan assets, and coverage in a post-
retirement medical plan, with each component having specific age and years of service requirements. The impact of offering these
incentives is classified as special termination benefits in the table above.
130
The following table shows net periodic (benefit) cost included in expense and the changes in the amounts recognized in AOCI during
2022, 2021, and 2020.
($ 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
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
Total recognized in net periodic benefit
cost and other comprehensive income
Discount rate for benefit obligations
Discount rate for net periodic benefit cost
Expected long-term return on plan assets
Rate of compensation increase
*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
2022
2021
Pension Benefits
2020
2022
2020
2021
Other Post-Retirement Benefits
Years Ended December 31,
$
14,639
(46,615 )
$ 11,438 $ 11,616 $ 12,898
16,207
(48,191 )
—
7,021
(12,065 )
13,476
(46,654 )
16,052
5,284
(226 )
—
2,830
(17,708 )
59 $
93 $
375
—
—
(650 )
(216 )
348
—
4,173
(729 )
3,885
105
484
—
—
(653 )
(64 )
(2,830 )
29,952
(5,284 )
(51,365 )
(7,021 )
35,539
650
(5,906 )
729
(1,506 )
653
1,912
27,122
(56,649 )
28,518
(5,256 )
(777 )
2,565
$
9,414 $ (56,875 ) $ 16,453
$
5.00 %
2.77 %
5.50 %
2.77 %
2.40 %
5.75 %
2.40 %
3.14 %
6.50 %
scaled **
scaled **
scaled *
(5,472 ) $
4.98 %
2.32 %
n/a
n/a
3,108 $
2.32 %
2.31 %
n/a
n/a
2,501
2.31 %
3.11 %
n/a
n/a
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, 2022:
($ in thousands)
2023
2024
2025
2026
2027
2028-2032
.
Pension
Post-Retirement
Total
$
$
26,901 $
27,878
29,187
30,524
31,824
173,696
320,010 $
1,491 $
1,279
1,083
885
900
4,165
9,803 $
28,392
29,157
30,270
31,409
32,724
177,861
329,813
The expected benefit payments are estimated based on the same assumptions used to measure the Company’s benefit obligations at
December 31, 2022.
The fair values of pension plan assets at December 31, 2022 and 2021, 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.
131
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, 2022
$
9,050
9,050
29,577
344
5,087
35,008
50,956
105,486
156,442
200,500
—
—
$
200,500 $
—
—
31,268
—
—
31,268
—
—
31,268
—
—
31,268
— $
—
—
—
—
—
—
—
—
—
—
—
— $
9,050
9,050
60,845
344
5,087
66,276
50,956
105,486
156,442
231,768
410,280
58,487
700,535
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
The following table presents the percentage allocation of the plan assets by asset category and corresponding target allocations at
December 31, 2022 and 2021.
Asset category
Cash and equivalents
Fixed income securities
Equity securities
Real assets
Plan Assets
at December 31,
Target Allocation
at December 31,
2022
2021
2022
2021
1 %
68
22
9
100 %
3 %
45
44
8
100 %
0 - 5%
62-84%
16-22%
4-10%
0 - 5%
41-47%
35-51%
0-12%
132
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 3,900,000 shares of the Company’s common
stock (inclusive of the increase of 1,400,000 shares approved by the Company's shareholders during the twelve months ended
December 31, 2022), 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, 2022, there were 2.6 million shares available for future issuance under the 2020 equity compensation plan.
For the years ended December 31, 2022, 2021 and 2020, total share-based compensation expense recognized in income was $23.5
million, $22.4 million and $21.1 million, respectively. The total recognized tax benefit related to the share-based compensation was
$7.0 million, $9.9 million and $4.9 million for 2022, 2021 and 2020, respectively.
At December 31, 2022, the Company had 1,476 outstanding and exercisable stock options, with a weighted average exercise price of
$53.73, weighted average remaining contractual term of less than 1 year, and no aggregate intrinsic value. During the twelve months
ended December 31, 2022, 7,630 stock options with an aggregate intrinsic value of $0.1 million were exercised. The total intrinsic
value of options exercised during the year ended December 31, 2021 was $0.2 million.
A summary of the Company’s nonvested restricted and performance shares for the year ended December 31, 2022 is presented below:
Nonvested at January 1, 2022
Granted
Vested
Cancelled/Forfeited
Nonvested at December 31, 2022
Number of
Shares
1,453,085 $
562,806
(465,912 )
(118,464 )
1,431,515 $
Weighted-
Average
Grant-Date
Fair Value ($)
34.58
52.24
36.06
35.65
40.95
At December 31, 2022, there was $45.0 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 $16.9 million and $18.7 million during the years ended December
31, 2022 and 2021, respectively.
During the twelve months ended December 31, 2022, the Company granted 444,490 restricted stock units (RSUs) to certain eligible
employees. Unlike restricted share awards (RSAs), which comprise the majority of the unvested share-based compensation awards,
133
the holders of unvested restricted stock units have no rights as a shareholder of the Company, including voting or dividend rights. The
Company has elected to award dividend equivalents on each restricted stock unit. Such dividend equivalents are forfeited should the
employee terminate employment prior to the vesting of the RSU.
During the year ended December 31, 2022, the Company granted 36,475 performance shares subject to a total shareholder return
(“TSR”) performance metric with a grant date fair value of $61.47 per share and 36,475 performance shares subject to an operating
earnings per share performance metric with a grant date fair value of $47.36 per share to key members of executive management. The
number of performance shares subject to TSR that ultimately vest at the end of the three-year performance period, if any, will be based
on the relative rank of the Company’s three-year TSR among the TSRs of a peer group of 50 regional banks. The fair value of the
performance shares subject to TSR at the grant date was determined using a Monte Carlo simulation method. The number of
performance shares subject to operating earnings per share that ultimately vest will be based on the Company’s attainment of certain
operating earnings per share goals over the two-year performance period. The maximum number of performance shares that could vest
is 200% of the target award. Compensation expense for these performance shares is recognized on a straight-line basis over the three-
year service period.
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. Under regulatory capital guidelines, the Company and Bank must include unfunded commitments meeting certain
criteria in risk-weighted capital calculations.
Commitments to extend credit include revolving commercial credit lines, nonrevolving loan commitments issued mainly to finance
the acquisition and development or construction of real property or equipment, and credit card and personal credit lines. The
availability of funds under commercial credit lines and loan commitments generally depends on whether the borrower continues to
meet credit standards established in the underlying contract and has not violated other contractual conditions. Loan commitments
generally have fixed expiration dates or other termination clauses and may require payment of a fee by the borrower. Credit card and
personal credit lines are generally subject to cancellation if the borrower’s credit quality deteriorates. A number of commercial and
personal credit lines are used only partially or, in some cases, not at all before they expire, and the total commitment amounts do not
necessarily represent future cash requirements of the Company.
A substantial majority of the letters of credit are standby agreements that obligate the Bank to fulfill a customer’s financial
commitments to a third party if the customer is unable to perform. The Bank issues standby letters of credit primarily to provide credit
enhancement to its customers’ other commercial or public financing arrangements and to help them demonstrate financial capacity to
vendors of essential goods and services.
The contract amounts of these instruments reflect the Company’s exposure to credit risk. The Company undertakes the same credit
evaluation in making loan commitments and assuming conditional obligations as it does for on-balance sheet instruments and may
require collateral or other credit support. At December 31, 2022 and 2021 the Company had a reserve for unfunded lending
commitments totaling $33.3 million and $29.3 million, respectively.
The following table presents a summary of the Company’s off-balance sheet financial instruments as of December 31, 2022 and
December 31, 2021:
($ in thousands)
Commitments to extend credit
Letters of credit
Legal Proceedings
December 31,
2022
2021
$
10,202,464 $
400,505
9,444,803
396,956
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.
134
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.
Fair Value of Assets and Liabilities Measured on a Recurring Basis
The following tables present for each of the fair value hierarchy levels the Company’s financial assets and liabilities that are measured
at fair value on a recurring basis in the consolidated balance sheets at December 31, 2022 and 2021:
($ 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)
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)
Total recurring fair value measurements - liabilities
(1)
For further disaggregation of derivative assets and liabilities, see Note 11 – Derivatives.
Level 1
Level 2
Level 3
Total
December 31, 2022
110,865 $
— $
203,092
—
—
21,080
— 2,256,986
— 2,893,430
—
70,588
— 5,556,041
10,843
—
109,497
—
— $ 5,676,381 $
110,865
— $
203,092
—
21,080
—
2,256,986
—
2,893,430
—
70,588
—
5,556,041
—
10,843
—
109,497
—
— $ 5,676,381
— $
— $
202,238 $
202,238 $
1,883 $
1,883 $
204,121
204,121
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
$
$
$
$
$
$
$
$
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
135
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
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, 2022 and
2021 for financial instruments of a material nature that are classified within Level 3 of the fair value hierarchy and are measured at fair
value on a recurring basis:
($ in thousands)
Balance at December 31, 2020
Cash settlement
Losses included in earnings
Balance at December 31, 2021
Cash settlement
Losses included in earnings
Balance at December 31, 2022
$
$
5,645
(1,767 )
238
4,116
(2,429 )
196
1,883
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
136
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, 2022
1,883
Discounted cash flow
$
December 31, 2021
4,116
Discounted cash flow
6-12%
9%
1.61x-1.60x
1.6030x
3-12 months
6%-12%
9%
1.62x-1.60x
1.6091x
3-24 months
The Company’s policy is to recognize transfers between valuation hierarchy levels as of the end of a reporting period.
Fair Value of Assets Measured on a Nonrecurring Basis
Certain assets and liabilities are measured at fair value on a nonrecurring basis. Collateral-dependent loans individually evaluated for
credit loss loans are level 2 assets measured at the fair value of the underlying collateral based on independent third-party appraisals
that take into consideration market-based information such as recent sales activity for similar assets in the property’s market.
Other real estate owned and foreclosed assets, including both foreclosed property and surplus banking property, are level 3 assets that
are adjusted to fair value, less estimated selling costs, upon transfer from loans or property and equipment. Subsequently, other real
estate owned and foreclosed assets is carried at the lower of carrying value or fair value less estimated selling costs. Fair values are
determined by sales agreement or third-party appraisals as discounted for estimated selling costs, information from comparable sales,
and marketability of the assets.
The fair value information presented below is not as of the period end, rather it was as of the date the fair value adjustment was
recorded during the twelve months for each of the dates presented below, and excludes nonrecurring fair value measurements of assets
no longer on the balance sheet.
The following tables present the Company’s financial assets that are measured at fair value on a nonrecurring basis for each of the fair
value hierarchy levels:
($ 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
Level 2
Level 3
Total
December 31, 2022
— $
—
— $
4,692 $
—
4,692 $
— $
2,017
2,017 $
4,692
2,017
6,709
Level 1
Level 2
Level 3
Total
December 31, 2021
— $
—
— $
13,253 $
—
13,253 $
— $
7,533
7,533 $
13,253
7,533
20,786
$
$
$
$
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.
137
Securities – The fair value measurement for securities available for sale was discussed earlier in the note. The same measurement
techniques were applied to the valuation of securities held to maturity.
Loans, Net – The fair value measurement for certain impaired loans was described earlier in this note. For the remaining portfolio,
fair values were generally determined by discounting scheduled cash flows using discount rates determined with reference to current
market rates at which loans with similar terms would be made to borrowers of similar credit quality.
Loans Held For Sale – These loans are either carried under the fair value option or at the lower of cost or market. Given the short
duration of these instruments, the carrying amount is considered a reasonable estimate of fair value.
Deposits – The accounting guidance requires that the fair value of deposits with no stated maturity, such as noninterest-bearing
demand deposits 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 – At December 31, 2022, short-term FHLB borrowings was comprised of one fixed-rate instrument
entered into on December 30, 2022 and maturing on January 3, 2023; as such, the carrying amount of the instruments is a reasonable
estimate of fair value and is reflected as Level 1 in the respective table below. At December 31, 2021, short-term FHLB borrowings
was comprised of fixed-rate instruments for which the fair value was estimated by discounting the future contractual cash flows using
current market rates at which borrowings with similar terms and options could be obtained and, therefore, is reflected as Level 2 in
respective the table below.
Long-Term Debt – The fair value is estimated by discounting the future contractual cash flows using current market rates at which
debt with similar terms could be obtained.
Derivative Financial Instruments – The fair value measurement for derivative financial instruments was described earlier in this
note.
The following tables present the estimated fair values of the Company’s financial instruments by fair value hierarchy levels and the
corresponding carrying amounts.
$
($ 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
Level 1
Level 2
Level 3
Total
Fair Value
Carrying
Amount
December 31, 2022
888,519 $
— $
— 5,556,041
— 2,615,398
—
—
—
— $
—
—
4,692 22,132,683
—
26,385
—
109,497
888,519 $
5,556,041
2,615,398
888,519
5,556,041
2,852,495
22,137,375 22,806,257
26,385
109,497
26,385
109,497
$
— $
1,850
444,421
1,425,000
—
—
— $ 29,041,635 $
—
—
—
—
—
—
—
200,060
1,883
202,238
29,041,635 $ 29,070,349
1,850
444,421
1,425,000
242,077
204,121
1,850
444,421
1,425,000
200,060
204,121
138
Level 1
Level 2
Level 3
Total
Fair Value
Carrying
Amount
December 31, 2021
($ 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
$
$ 4,231,836 $
— $
— 6,986,698
— 1,631,482
—
—
—
4,231,836 $
6,986,698
1,631,482
13,253 20,720,568 20,733,821
93,069
93,069
75,867
75,867
— $
—
—
—
—
— $
1,850
563,211
— $ 30,432,646 $ 30,432,646 $
1,850
—
—
563,211
—
—
1,119,026
—
— 1,119,026
253,677
—
253,677
—
35,046
4,116
30,930
—
4,231,836
6,986,698
1,565,751
20,792,217
93,069
75,867
30,465,897
1,850
563,211
1,100,000
244,220
35,046
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,
2022
2021
127,184 $
3,342,743
25,634
14,939
3,510,500 $
166,816 $
1,056
3,342,628
3,510,500 $
90,277
3,706,046
24,726
17,323
3,838,372
166,664
1,356
3,670,352
3,838,372
$
$
$
$
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 (loss)
2022
Years Ended December 31,
2021
2020
$
$
$
180,000 $
2,500
355,853
538,353
17,708
(3,444 )
524,089 $
(718,247 )
(194,158 ) $
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
139
Condensed Statements of Cash Flows
($ in thousands)
Cash flows from operating activities - principally
dividends received from subsidiaries
Net cash provided by operating activities
Cash flows from investing activities:
Proceeds from sale of premises and equipment
Net cash provided by 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 under accelerated share repurchase agreement
Net cash provided by (used in) financing activities
Net increase (decrease) in cash
Cash, beginning of year
Cash, end of year
2022
Years Ended December 31,
2021
2020
$
192,816 $
192,816
160,887 $
160,887
71,067
71,067
855
855
—
—
—
—
(94,458 )
(58,892 )
3,972
(7,386 )
—
(156,764 )
36,907
90,277
127,184 $
—
(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
$
140
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, 2022.
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, 2022 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, 2022.
There was no change in the Company’s internal control over financial reporting that occurred during the fourth quarter of 2022 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 26, 2023, at
11:00 a.m. Central Daylight Time at Hancock Whitney Plaza, 2510 14th street, Gulfport, Mississippi. 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 2023
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 2023 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, "Section 16(a)
Beneficial Ownership Reporting Compliance.” 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
141
“Transactions with Related Persons.” Information concerning our audit committee will appear in our proxy statement under the
caption “Board of Directors and Corporate 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 2023
annual meeting of shareholders under the captions “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 2023 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 2023 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 2023
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 2023
annual meeting of shareholders under the caption “Independent Registered Public Accounting Firm.” Such information is incorporated
herein by reference.
142
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, 2022 and 2021
Consolidated Statements of Income – Years ended December 31, 2022, 2021 and 2020
Consolidated Statements of Other Comprehensive Income – Years ended December 31, 2022, 2021, and 2020
Consolidated Statements of Changes in Stockholders’ Equity– Years ended December 31, 2022, 2021, and 2020
Consolidated Statements of Cash Flows –Years ended December 31, 2022, 2021, and 2020
Notes to Consolidated Financial Statements – December 31, 2022
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.
143
Exhibit
Number
3.1
3.2
4.1
4.2
4.3
4.4
*10.1
*10.2
*10.3
*10.4
*10.5
*10.6
EXHIBIT INDEX
Description
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 and incorporated herein by reference).
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 and incorporated herein by reference).
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 (File No. 001-36872) filed with the Commission on March 17, 2017 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).
Amendment to the Hancock Whitney Corporation 2020 Long Term Incentive Plan (filed as Appendix B of the
Company’s definitive Proxy Statement on Schedule 14A (File No. 001-36872) filed with the Commission on March 15,
2022 and incorporated herein by reference).
Hancock Whitney Corporation 2010 Nonqualified Deferred Compensation Plan, restated effective May 25, 2018 (filed
as Exhibit 99.3 to the Company’s Form S-8 (File No. 333-258295) filed with the Commission on July 30, 2021 and
incorporated herein by reference).
Hancock Whitney Corporation 2010 Employee Stock Purchase Plan, amended and restated effective July 1, 2018 (filed
as Exhibit 99.2 to the Company’s Form S-8 (file No. 333-258295) filed with the Commission on July 30, 2021 and
incorporated herein by reference).
*10.7
Form of Change in Control Employment Agreement between the Company and certain named executive officers
effective January 1, 2021.
*10.8
Hancock Whitney Corporation Executive Incentive Plan effective January 1, 2022.
*10.9
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).
*10.10
Form of Restricted Common Stock Award Agreement effective January 1, 2020.
*10.11
Form of Restricted Stock Unit Award Agreement effective January 1, 2022.
*10.12
Form of Performance Stock Unit Award Agreement effective January 1, 2020.
*10.13
Form of Performance Stock Unit Award Agreement effective January 1, 2022.
**21.1
Subsidiaries of the Company.
**23.1
Consent of PricewaterhouseCoopers, LLP.
**31.1
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.
144
**31.2
**32.1
**32.2
101
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, 2022, 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.
145
ITEM 16. FORM 10-K SUMMARY
Not applicable.
146
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 24, 2023
Date
By: /s/ John M. Hairston
John M. Hairston
President & Chief Executive Officer
(Principal Executive Officer)
February 24, 2023
Date
By: /s/ Michael M. Achary
Michael M. Achary
Senior Executive Vice President & Chief Financial Officer
(Principal Financial Officer)
147
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/ Joan C. Teofilo
Joan C. Teofilo
/s/ C. Richard Wilkins
C. Richard Wilkins
Chairman of the Board, Director
February 24, 2023
February 24, 2023
February 24, 2023
February 24, 2023
February 24, 2023
February 24, 2023
February 24, 2023
February 24, 2023
February 24, 2023
February 24, 2023
February 24, 2023
February 24, 2023
February 24, 2023
February 24, 2023
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
148
Corporate Information
Annual Meeting
The annual meeting of stockholders will be held at 11:00 a.m. Central Time,
Wednesday, April 26, 2023, 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:
Kathryn Shrout Mistich
Vice President
Investor Relations Manager
Hancock Whitney Corporation
P.O. Box 4019
Gulfport, MS 39502-4019
Subsidiaries of Hancock Whitney Corporation
Hancock Whitney Bank
Hancock Whitney Equipment Finance, LLC
InvestorRelations@hancockwhitney.com
Earnings releases and other financial information about the company are
available on the company’s Investor Relations website:
Hancock Whitney Equipment Financing and Leasing, LLC
investors.hancockwhitney.com
Hancock Whitney Investment Services, Inc.
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
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
Alan M. Ganucheau
Treasurer
Cecil “Chip” W. Knight, Jr.
Chief Banking Officer
American Stock Transfer & Trust Company, LLC
6201 15th Avenue
Brooklyn, NY 11219
Joseph S. Exnicios
President, Hancock Whitney Bank
Miles S. Milton
Chief Wealth Management 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
Chief Legal Officer &
Corporate Secretary
Joshua R. Caldwell
Chief Internal Auditor
Cindy S. Collins
Chief Compliance Officer
Michael Otero
Chief Risk Officer
Rudi Hall Thompson
Chief Human Resources Officer
Christopher S. Ziluca
Chief Credit Officer
*Independent Chairman of the Board
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