IberiaBank Corporation
Annual Report 2016

Plain-text annual report

A N N U A L R E P O R T 2 0 1 6 Ahead of the Curve FINAN CIAL HI GHLI GHTS (Dollars in thousands, except per share data) IN C O ME DATA For the Year Ending December 31, 2016 2015 % Change Net Interest Income Net Interest Income (TE) (1) Net Income Earnings Available to Common Shareholders—Basic Earnings Allocated to Common Shareholders $649,238 $587,758 596,362 142,844 142,844 141,164 658,701 186,777 178,800 176,928 10% 10% 31% 25% 25% PE R S HARE DATA Earnings Per Common Share—Basic Earnings Per Common Share—Diluted Book Value Per Common Share Tangible Book Value Per Common Share (Non-GAAP) (2) Cash Dividends $4.32 4.30 62.68 45.80 1.40 $3.69 3.68 58.87 40.35 1.36 NUMBER OF SHARES OUTSTANDING Basic Shares (Average) Diluted Shares (Average) Book Value Shares (Period-End) KE Y RATIOS 40,948 38,214 41,106 38,310 41,140 44,795 17% 17% 6% 14% 3% 7% 7% 9% Return on Average Assets Return on Average Common Equity Return on Average Tangible Common Equity (Non-GAAP) (2) Net Interest Margin (TE) (1) Efficiency Ratio (3) Tangible Efficiency Ratio (TE) (Non-GAAP) (1) (2) (3) Average Loans to Average Deposits Non-performing Assets to Total Assets (4) Allowance for Loan Losses to Loans Net Charge-offs to Average Loans Average Equity to Average Total Assets Tier 1 Leverage Ratio Common Stock Dividend Payout Ratio Tangible Common Equity Ratio (Non-GAAP) (2) Tangible Common Equity to Risk-Weighted Assets (2) 0.92% 7.08% 10.44% 3.53% 64.2% 62.4% 90.4% 1.16% 0.96% 0.23% 12.98% 10.86% 32.9% 9.82% 11.62% 0.78% 6.41% 9.65% 3.55% 70.6% 68.6% 87.6% 0.47% 0.97% 0.08% 12.29% 9.52% 38.5% 8.86% 9.95% (1) Fully taxable equivalent (TE) calculations include the tax benefit associated with related income sources that are tax-exempt using a rate of 35%, which approximates the marginal tax rate. (2) Tangible calculations eliminate the effect of goodwill and acquisition-related intangible assets and the corresponding amortization expense on a tax-effected basis where applicable. (3) The efficiency ratio represents non-interest expense as a percentage of total revenues. Total revenues are the sum of net interest income and non-interest income. (4) Non-performing assets include non-accruing loans and accruing loans 90 days or more past due, but exclude non-accrual and past due acquired impaired loans accounted for under ASC 310-30 that are currently accruing income. Directors of IBERIABANK Corporation are: Elaine D. Abell; Harry V. Barton, Jr.; Ernest P. Breaux, Jr.; Daryl G. Byrd; John N. Casbon; Angus R. Cooper II; William H. Fenstermaker; John E. Koerner III; Rick E. Maples, Jr.; E. Stewart Shea III; and David H. Welch, Ph.D. IBERIABANK Corporation is a financial holding company with consolidated assets at December 31, 2016, of $21.7 billion. IBERIABANK Corporation and its predecessor organizations have served clients for 130 years. The Corporation’s subsidiaries include IBERIABANK, Lenders Title Company, IBERIA Wealth Advisors, IBERIA Capital Partners, IB Aircraft Holdings, and IBERIA CDE. “No great thing is created suddenly.” - Epictetus, Greek Philosopher, c. 55-135 AD Ahead of the Curve The phrase “ahead of the curve” is used to describe when one is in an advanced position compared to others or one who is changing before competitors, be it in a technological, responsive, or leadership sense. The phrase first appeared with regularity in print during the Nixon presidency and is generally assumed to have initially referred to placement relative to mathematical curves, such as being on the right-hand side of the Bell curve that is used in statistics (suggesting one is above average) or on charts displaying time-to-adopt of new technologies (suggesting one is an early adopter of new technology). According to the Oxford English Dictionary, however, the phrase was actually adapted from the phrase “staying ahead of the power curve,” first used in 1926 in reference to the mathematics of flight. Aviators target optimal power, airspeed, and positioning to ensure safe and efficient flight. Many bankers and investors learned similar lessons of discipline, safe flight, and avoiding stall speed during the recent financial crisis. Set forth below is our Mission Statement, which has remained constant since we adopted it 17 years ago. It has served as a guiding principle of discipline, safety, and performance as we face challenges and opportunities – just as we did in 2016. MI SS IO N STATEMENT • Provide exceptional value-based client service • Great place to work • Growth that is consistent with high performance • Shareholder focused • Strong sense of community 2 5 7 9 10 13 14 16 17 18 141 President’s Letter to Shareholders Chairman’s Letter to Shareholders Client Growth Assimilating Prior Acquisitions Diversified Business Model Efficiency Profitability Position of Strength Preparing for Our Future Financials Corporate Information President’s Letter TO SHAREH OL DERS Dear Shareholders, We recently completed a very active year of focus, change, and opportunity. The outcomes associated with many of the activities and events that occurred during the year were as we expected, while others were somewhat of a surprise. These activities and events generally led to favorable outcomes for our shareholders, including improved financial operating performance in 2016 and enhanced long-term growth prospects. Overall, I was very pleased with our team’s achievements throughout the year, our active engagement to reduce the risk posture of our Company, and the unique position we occupy within the financial services industry. As exhibited throughout 2016, we are ahead of the industry curve in areas such as risk management, efficiency improvements, balance sheet strength, and planting seeds for future growth. Risk Management. To stay ahead of the curve, we made tremendous investments over the last several years in risk management processes, systems, and talent to assist us in better understanding and proactively managing the risks we face. As an outgrowth of those efforts, over the last two years we engaged in a “risk-off trade” to reduce our energy-related and indirect automobile loans, along with tightening our credit standards in select markets impacted by energy price volatility. Since year-end 2014, the cumulative decline in risk-off loans was $797 million, with estimated opportunity costs of $6 million in 2015 and $15 million in 2016. We believe the avoidance of potential future loss exposures vastly outweighed that were the near-term sacrificed in this risk-off trade. foregone revenues Over the last several years, we placed great focus on identifying, communicating, and reducing our energy-related exposures. On June 30, 2014, approximately 8.4% of our total loan portfolio was composed of energy-related loans when the price of oil was trading at $105 per barrel. About that time, we began a proactive “risk-off” reduction of our energy exposure given what we perceived was an over-extended market. By year-end 2015, our energy exposure declined to 4.8% of total loans. By late January 2016, the price of oil dropped below $27 per barrel. Despite our preemptive risk off efforts, the market price of our common stock declined precipitously. By year-end 2016, the price of oil rebounded above $54 per barrel, while our energy-related loans further declined to 3.7% of total loans, and our common stock price rebounded to all-time highs. We believe we took prudent steps, which while costly in the short term, provided appropriate long-term benefit to our shareholders. After seven years of participating in the loss-share programs associated with our FDIC-assisted acquisitions, we terminated 12 outstanding loss-share agreements in 2016. These agreements provided for the sharing of both losses and recoveries with the FDIC over the agreements’ terms. While the losses from these loans have diminished considerably, in 2016 we experienced $10 million in recoveries, of which $8 million, or 81%, was reimbursed to the FDIC. As a result of these negotiated terminations, we will no longer be required to share in recoveries with the FDIC as we have in the past. Efficiency Improvements. Throughout 2016, we focused on growing revenues and holding down expenses, which resulted in improved profitability to the benefit of our shareholders. In 2016, revenues increased $75 million, or 9%, and expenses declined $4 million, or 1%, compared to 2015. Over that period, our efficiency ratio improved from 71% to 64% (a lower ratio is better), and our non-Generally Accepted Accounting Principles (“non-GAAP”) core tangible efficiency ratio improved from 65% to 60%, and we thus achieved the long-term target we set five years ago. While our total assets increased 11% between year-ends 2015 and 2016, our number of full-time equivalent associates declined by 2%. As a result of our balance sheet expansion, relatively stable margin, and improved efficiency, our earnings grew $36 million, or 25%, and our earnings per common share climbed 17%, compared to 2015. Book value per common share increased 6% and tangible book value per 2 / ANNUAL REPORT 2016 common share climbed 14% over that period. In addition to these increases, our common shareholders also benefitted from an expansion in the price trading multiples on our common stock by year-end 2016. Overall, we experienced a very favorable improvement in our financial performance in 2016 with record core financial results. Balance Sheet Strength. Despite the risk-off trades and continued reduction of the acquired loan portfolios in 2016, average loans grew $1.4 billion, or 10%, compared to 2015, and year-end 2016 loans increased $738 million, or 5%, compared to the prior year-end. In addition, we experienced phenomenal client deposit growth in 2016. Average deposit growth increased $1.1 billion, or 7%, while year-end deposit growth increased $1.2 billion, or 8%. Approximately half of the deposit growth in 2016 was composed of low-cost, non-interest-bearing deposits. This may be a result of our building and solidifying core banking relationships with many of our commercial clients, as we now hold their primary operating accounts. As a result of the exceptional deposit growth in 2016, we experienced a significant increase in liquidity on our balance sheet. Cash, cash-equivalents, and liquid securities increased by $1.3 billion between year-ends 2015 and 2016 and equated to 16% of total assets at year-end 2016, up from 11% one year prior. We remain very asset-sensitive, implying that an increase in interest rates would be beneficial to our income over the next 12 months. We believe we are well-positioned for rising interest rates. internal capital Throughout much of 2016, generation (from our income earned less dividends paid to shareholders) was sufficient to support our balance sheet growth. As a result, we did not need to raise capital from external sources to support our growth. As the year progressed, however, we decided to opportunistically enter capital-driven transactions to take advantage of favorable market conditions that we believe bode well for our shareholders over the long-term. Early in 2016, the price of our common stock suffered as a result of perceived risk in our energy-related loan portfolio, while the cost for our Company to issue preferred stock remained favorably low. In May 2016, our Board of Directors authorized the repurchase of up to 950,000 shares of our common stock. To support the common stock purchase, we also authorized our second preferred stock offering, with net proceeds totaling $55 million. In June 2016, we repurchased 202,506 shares, or 21% of the authorized repurchase program, at a weighted average cost of $57.61 per share. As our earnings improved throughout the year, investor interest in asset-sensitive banks came back into favor, and the price of our common stock gained considerably. In early December, our common stock price reached all-time highs. As a result of the favorable market conditions and perceived growth opportunities, we further bolstered our capital position through the issuance and sale of 3.6 million common shares in an underwritten public offering. This resulted in net proceeds totaling $280 million and at a price of $81.50 per share, a price that was 31% higher than the weighted average price at which our common stock traded throughout 2016. As a result of the capital raise, net of shares repurchased, and the improvement in our share price in 2016, our market capitalization increased $1.5 billion, or 66%, between year-ends 2015 and 2016. We believe our capital raises in 2016 were very well-timed. Preparing for the Future. In March 2017, our bank marked the 130th anniversary since its founding in 1887. Our longevity and success continue to be driven by serving our clients and communities well, recruiting and retaining carefully managing high-quality associates, 3 risk, capitalizing on opportunities, planting and cultivating seeds for future growth, and delivering favorable long-term shareholder returns. In August 2016, certain markets in Louisiana received up to 31 inches of rain within a three-day period that caused extensive flooding. This flooding was considered to be a once-in-a-thousand year event. Fortunately, our Company and the vast majority of our clients avoided the devastating impact of the storms. To assist associates, clients, and communities in the recovery efforts, we provided financial assistance, low-interest loans, and other relief efforts. In addition, many of our associates assisted colleagues, friends, families, neighbors, and the broader community over several months in the recovery and rebuilding process. In 2016, we were very active in community development as well. For example, we invested nearly $60 million in various community development projects, an increase of 8% compared to 2015. We sponsored the National Community Reinvestment Coalition’s Annual Conference, one of the nation’s largest gatherings of community non-profits, policymakers, government officials, small businesses, banks, and academia, all coming together to create a just economy. We were also a significant contributor to Step Up For Students, which provides scholarships to give disadvantaged families the freedom to choose the best learning options for their children. Finally, as an innovative investment, we purchased a less-than-5% stake in New Orleans-based Liberty Financial Services, one of the nation’s largest African-American-owned banks, which provides viable banking solutions to various underserved communities in a very high-quality manner. We recognize that we must continuously invest in our communities given our Company can only be successful to the extent that the communities we serve are successful. In December 2016, we entered the vibrant Greenville market in Upstate South Carolina by hiring Samuel Erwin as South Carolina Regional President. Considered to be one of the nation’s top markets for economic growth, Upstate South Carolina is a 10-county area with a population of approximately 1.4 million people and 23 universities and colleges. We are excited to have Sam join our team and look forward to building out a dynamic presence in South Carolina. In March 2017, we announced an agreement to acquire Miami-based Sabadell United Bank, N.A., a subsidiary of Spain-based Banco de Sabadell, S.A. At December 31, 2016, Sabadell United Bank had $5.8 billion in total assets and 25 bank branches. This proposed acquisition will provide us entrance into the center of the Miami Metropolitan Statistical Area, a market with a population of more than six million people. Upon the completion of that pending transaction, the scale and strength of our Company would be enhanced and our relative ranking within our industry would continue to grow. When we announced our change of strategic direction in 1999, we had $1.3 billion in total assets, and we ranked as the 248th largest bank holding company in the U.S. With the addition of Sabadell United Bank, we would grow on a pro forma basis to $27.4 billion in assets and become the 40th largest bank holding company in the nation. In summary, we experienced a wave of activity in 2016 and early 2017 that we believe will benefit our Company and our shareholders for many years. During 2016, we exhibited great discipline by reducing our risk posture via our risk-off trade that sacrificed near-term income, while at the same time growing our sources of revenue in a high-quality manner and holding our cost structure in check. We made favorable investments in our Company, opportunistically repurchased shares and raised external capital, and we positioned our Company for future increases in interest rates. We delivered record financial operating results and planted a few new flags for future growth. It was an exciting year of focus, change, and opportunity. Our industry is changing, and we believe we are well-positioned to be ahead of the curve. On behalf of our leadership team and associates, we thank you for your continued support of our Company. Sincerely, Daryl G. Byrd President and Chief Executive Officer 4 / ANNUAL REPORT 2016 Chairman’s Letter TO T HE SH ARE HOLD E RS Dear Shareholders, Your Board of Directors was actively engaged throughout 2016 in its fiduciary responsibilities to the Company’s constituents – our shareholders, clients, regulators, communities, and associates. We recognize the important roles that we serve in aligning these varying interests. We also ensure that appropriate levels of risk oversight, goal setting, plan execution, corporate governance, and incentive compensation are designed to achieve desired outcomes. Mind you, this is no easy task. During 2016, we actively engaged appropriate outside parties to stay abreast of industry changes, opportunities, and challenges. We also engaged third parties to help us benchmark to appropriate industry standards and provide the Board with unbiased, independent insight regarding important topics, such as executive compensation, industry trends, and acquisitions. Finally, over the last several years members of the Compensation Committee of the Board participated in direct institutional investor outreach to gain unfiltered feedback regarding the Company’s performance, direction, and shareholder expectations. We have found this feedback and insight to be very helpful as we help guide this Company’s direction. Based on shareholder feedback and consultant input, the Compensation Committee refined the Company’s corporate governance policies and executive compensation programs over the last several years. Actions taken included more closely aligned executive pay and performance, greater transparency of clearly defined performance goals and metrics for annual incentives, increased ownership guidelines, adoption of policies regarding anti-pledging, and future change in control agreements, which require double-triggers and exclude excise tax provisions. In addition, annual incentives placed greater weight on operating earnings and asset quality measures, and less on balance sheet growth. Long-term incentives shifted to higher performance-based weighting rather than time-based metrics. As a result of these significant actions taken by the Compensation Committee, our shareholders overwhelmingly supported our 2016 Say-on-Pay vote. Shareholder value advanced on many fronts in 2016. The cresting of energy-related concerns assisted in the improvement in the price of bank stocks during the year, as did an increase in short-term interest rates and the discussion surrounding the perceived impact of potential future reductions in corporate and personal income tax rates. Of potentially equal or greater influence was the Company’s improved financial performance and actions taken to improve shareholder value. During 2016, the Board authorized the repurchase of up to 950,000 shares of the Company’s common stock, of which $12 million was expended to acquire 202,506 shares; 747,494 common shares remain outstanding under that program. In September 2016, the Board approved a 6% increase in cash dividends on common stock, equivalent to approximately $4 million in additional cash dividends paid on an annualized basis. Despite this increase in cash dividends, the common stock dividend payout ratio declined from 38% in 2015 to 33% in 2016. The aggregate amount of cash dividends paid to common and preferred shareholders totaled $67 million in 2016, a 22% increase compared to 2015. Importantly for our shareholders, the price of our common stock gained $28.68 per common share during 2016, an improvement of 52% compared to year-end 2015. Our common stock attained an all-time high of $91.10 per share in early December 2016, before settling at $83.75 at year-end 2016. A longer-term view since the change of strategic direction our leadership announced in late 1999 provides even more interesting results. For the 17-year period between year-ends 1999 and 2016, and assuming the reinvestment of dividends over that time frame, the total return on our Company’s common stock was 1,051%, or a 15% annualized return. While those measures are clearly outstanding, as evidenced in the chart on the next page, our shareholder returns compared to alternative investments over that period are particularly compelling. 5 TOTA L RETURN TO SHAREHO LD ER S December 31, 1999 to December 31, 2016 Including Reinvestment of Dividends into Company Stock Total Annualized Return Return Apple, Inc. IBERIABANK Corp. NIKE, Inc. Amazon.com, Inc. 3M Company United Technologies Corp. McDonald’s Corp. Berkshire Hathaway, Inc. The Walt Disney Co. Johnson & Johnson Goldman Sachs Group, Inc. JPMorgan Chase & Co. Procter & Gamble Co. The Coca-Cola Co. ExxonMobil Corp. Oracle Corp. Bank of America Corp. Wal-Mart Stores, Inc. Intel Corp. American Express Co. General Electric Co. 3,364% 1,051% 927% 885% 450% 372% 358% 345% 340% 279% 202% 176% 139% 120% 65% 49% 39% 34% 27% 6% 3% 23% 15% 15% 14% 11% 10% 9% 9% 9% 8% 7% 6% 5% 5% 9% 2% 2% 2% 1% 1% 0% Our shareholder performance was earned through the development and execution of a sound business model, unique strategic positioning, discipline, opportunistic investing, and keen business acumen. We also have gained excellent insight and advice over the years from our Board of Directors and local Advisory Boards. In accordance with good corporate governance practice, our Board has a mandatory retirement policy at the age of 76. Miles Pollard, a young man at heart, retired from the Board in 2016 after serving with us for 13 years. We thank Miles for his many years of loyalty and service to our Company and shareholders, and we will miss his sage counsel. During the year, Rick E. Maples joined the Board after retiring from Stifel, Nicolaus and Company, Inc., where he served for 31 years. We are delighted to have Rick as a member of our Board. Unfortunately, we also had to bid farewell to some very close friends and Advisory Board members who passed away in 2016, including Bill Rucks, Bob Lowe, and Billy Blake. These gentlemen served our Advisory Boards very well and for many years. We are honored to have worked with them and will miss them greatly. I am very proud of our leadership team, the more than 3,000 associates who serve our clients in a high-quality manner, our 218 Advisory Board members who serve on our 19 Advisory Boards in seven states, and my 10 fellow Board members who tirelessly serve our shareholders. On behalf of the Board of Directors of your Company, we thank you for the opportunity to continue to serve you. Sincerely, William H. Fenstermaker Chairman of the Board 6 / ANNUAL REPORT 2016 Client Growth Client growth at our Company was more measured in 2016 compared to prior years, though still quite favorable compared to the banking industry. Between year-ends 2015 and 2016, the commercial banking industry in the U.S. grew assets, loans, and investments at a 5% rate and deposits at a slightly higher rate of 6%. Over that period, our total assets and investments grew at well more than twice the industry rates. IBERIA BAN K CORPO RATIO N Period-End Compared to 12/31/15 12/31/16 $ Change % Change U.S. Commercial Banks % Change ($ in Billions) Assets Investments Loans Deposits $ 21.7 3.5 15.1 17.4 $ 2.2 0.6 0.7 1.2 11% 22% 5% 8% 5% 5% 5% 6% Source: SNL Financial Loan Volume. While our loan growth of 5% matched the industry’s rate of growth over that period, our loan growth was tempered by several factors, including reductions in acquired, energy-related, and indirect automobile loans. Over time, these countervailing forces are anticipated to diminish considerably. First, throughout 2016, we continued to resolve problem assets that were marked to fair value at acquisition, while loans that fit our credit profile were renewed or refinanced during the year. As a result, during 2016, loans acquired in FDIC-assisted and live-bank acquisitions declined $767 million, or 24%. At its peak in November 2009, acquired loans accounted for 30% of our total loan portfolio. By year-end 2015, the figure dropped to 22% and declined further to 16% of total loans at year-end 2016. Second, over the last several years, we made great strides reducing our energy-related loan and commitment exposure. As a result, energy-related loans declined $120 million, or 18%, from the start to the end of 2016. At December 31, 2016, total energy-related loans equated to $561 million, or less than 4% of total loans, down from a peak of greater than 8% of total loans. Third, for more than 20 years, we successfully provided indirect automobile loans to select automobile dealers in our footprint. In fact, at its peak in 2002, indirect automobile loans composed 23% of our loan portfolio. After many years of limited growth, we decided two years ago to exit the indirect automobile lending business. We concluded the compliance risk associated with that business in general had become unbalanced relative to potential returns generated by the business on a risk-adjusted basis. As a result, our indirect automobile loans outstanding declined from $397 million, or over 3% of total loans at year-end 2014, to $131 million, or less than 1% of total loans at year-end 2016. Indirect automobile loans declined $115 million, or 47%, during 2016. Loan Originations and Renewals. We achieved outstanding loan production levels in 2016. We attained record loan originations and renewals of $3.8 billion, up 10% compared to 2015. Originations and renewals combined with loan commitments totaled $5.2 billion, up 7% compared to 2015, also a record level for our Company. Midway through the year, our commercial loan pipeline hit $1 billion, reaching another record level. We originate mortgage loans with the intent to sell the loans to outside investors via our secondary marketing operations. In 2016, we originated $2.5 billion in mortgage loans, just shy of the record production level set in 2015. As shown in the following chart, loans originated to be held on our balance sheet and loans to be sold to investors totaled a record $6.3 billion, an increase of $357 billion, or 6%, compared to 2015. 7 LOA N ORIG IN ATI ON VOLU ME S ) s n o i l l i B n i $ ( l s e m u o V n o i t a n g i r i O On Balance Sheet Mortgage Production Note: The figures in the chart above may not total due to rounding. Deposit Volumes. Deposit growth in 2016 well exceeded industry results. Total deposits increased $1.2 billion, or 8%, between year-ends 2015 and 2016, including record quarterly deposit growth of $886 million during the fourth quarter of 2016. The mix of deposit growth was also very impressive – approximately half of the deposit growth in 2016 was composed of low-cost, non-interest-bearing deposits. Although no acquisitions were completed in 2016, approximately 62% of our deposit growth in 2016 was the result of new clients added during the year and 38% of the deposit growth was associated with expanded balances of continuing deposit relationships. We launched two deposit campaigns in 2016 that were broad-based across many markets and very well received. Competitive disruptions that were occurring in several markets at the time of the campaigns provided support for the campaigns’ success. We also received a significant influx late in the year of seasonal and temporary deposits that are expected to diminish over time. The significant inflow of deposits, particularly in the last half of 2016, resulted in a tremendous increase in our liquidity position. We placed some of that excess liquidity into short-term investments, and parked the remainder in cash-like investments until deployed at a later date when loan origination volumes accelerate. As a result, our investment portfolio grew $636 million, or 22%, between year-ends 2015 and 2016. Similarly, cash and cash equivalents increased $852 million, or 167%, over that period. This excess liquidity temporarily compressed our net interest margin, particularly in the second half of 2016. 8 / ANNUAL REPORT 2016 Assimilating Prior Acquisitions The three acquisitions that were announced in 2015 were closed, converted, and assimilated in that year. The targeted expense savings were generally achieved as initially projected. We are very pleased with the expense and revenue synergies and the favorable growth prospects associated with those acquisitions. A significant portion of the loan and deposit growth that we achieved in 2016 was concentrated in markets in which our recent acquisitions occurred, including the Atlanta, Orlando, Tampa, and Dallas markets. These four markets delivered $589 million in loan growth and $508 million of deposit growth between year-ends 2015 and 2016. These levels of growth equated to 80% and 41%, respectively, of our total loan and deposit growth during the year. St. Louis Trust One Bank CapitalSouth Bank ANB Financial Pocahontas Bancorp Northeast rtheast Arkansas ansas North Central Arkansas Northwest Arkansas Memphis First Private Bank Georgia Commerce Bank Central Arkansas/ Little Rock Mississippi Huntsville Birmingham Atlanta Dallas Shreveport Pulaski Bank Prattville Columbus Warner Robins American Horizons Bank Montgomery Completed Acquired Branch Locations American Horizons Bank Alliance Bank Pocahontas Bancorp Pulaski Bank ANB Financial CapitalSouth Bank Orion Bank Century Bank Sterling Bank OMNI Bank Cameron State Bank Florida Gulf Bank Trust One Bank Teche Federal Bank First Private Bank Florida Bank Old Florida Bank Georgia Commerce Bank Sabadell United Bank De Novo Branch Locations Teche Federal Bank Houston NE Louisiana/ Monroe Alexandria Alliance Bank Opelousas Lafayette Baton Ro Baton Rouge Mobile New Orleans/ Northshore ke Lake s harle Charles Acadia Acadiana M Morgan C City LBA Savings Bank Houma OMNI Bank Cameron State Bank Teche Federal Bank Tallahassee Jacksonville DeLand Orlando Tampa Florida Bank Century Bank Florida Gulf Bank Bradenton Sar Sarasota Cape Coral Fort M Fort Myers Estero N Naples Old Florida Bank Sterling Bank alm West Palm ach Beach Sabadell United Bank Ft. Lauderdale Orion Bank Key West Marathon 9 Diversified Business Model Geographic Diversification. With the completed acquisitions, our franchise has become more geographically diverse over time. Each of the 31 metropolitan statistical areas (“MSAs”) has different economic drivers and growth characteristics with little correlation between markets. Unlike many of our competitors, we price our deposits differently in each market to ensure optimal pricing from a growth and cost perspective. As shown in the charts that follow, the geographic diversification of our loans and deposits would be further enhanced upon the completion of the recently announced acquisition of Sabadell United Bank. LOANS BY STAT E FDIC & Acquired Impaired Other Georgia Florida Texas Alabama Tennessee Arkansas Louisiana Notes: “Other” market includes Mortgage, Lenders Title, Credit Card, and Other. “Pro Forma” includes Sabadell United Bank, based on total deposits at December 31, 2016. 10 / ANNUAL REPORT 2016 D EPOS ITS BY STAT E FDIC & Acquired Impaired Other Georgia Florida Texas Alabama Tennessee Arkansas Louisiana Notes: “Other” market includes Mortgage, Lenders Title, Credit Card, and Other. “Pro Forma” includes Sabadell United Bank, based on total deposits at December 31, 2016. Revenue Diversification. We made significant investments in various fee income businesses over the last decade in an effort to reduce our reliance on spread-based income and diversify our sources of revenue. These businesses are in varying stages of maturity, ranging from early stage to mature development. As shown in the following chart, sources of fee income from a few of these businesses exhibited significant increases in revenues over the last several years. FEE INC OME SOUR CE S Treasury Management Client Derivatives SBA 504 SBA 7(a) ) s n o i l l i M n i $ ( s e u n e v e R 11 Mortgage Loan Origination and Servicing. We originated $2.5 billion in residential mortgage loans in 2016, down less than 1%, compared to the mortgage industry growth rate of 13%, as measured by the Mortgage Bankers Association. Our loan refinancing levels were 20% of total originations, or less than half of the industry average of 48%, in 2016. We sold $2.5 billion in loans to investors, an increase of less than 1% compared to 2015, and a record level of annual sales. At year-end 2016, we retained $1.1 billion in loans serviced for the Company and outside investors, an increase of 17% compared to one year prior. We reported only $4 million in mortgage servicing rights at year-end 2016. Mortgage income totaled $84 million in 2016, an increase of $3 million, or 4%, compared to 2015. Title Insurance. Lenders Title Company (“LTC”) expanded into the New Orleans market during 2016. LTC experienced a 5% increase in title insurance transactions and reported $22 million in revenues in 2016, down 3% compared to 2015. Although down compared to the prior year, revenues in 2016 were the second highest level in LTC’s history. LTC’s net income increased 20% in 2016 compared to 2015. SBA Lending. Loans originated under Small Business Administration (“SBA”) programs increased in 2016. IBERIABANK earned Preferred Lender Program status during the year, and loans originated under the SBA 7(a) program increased 164% compared to 2015. Mercantile Capital’s SBA 504 program closed 42 transactions in 10 different states with total project costs for the transactions reaching a record level of $241 million. Treasury Management. Treasury Management (“TM”) increased investments in products and capabilities, and our sustained commitment to serve as the primary bank for our clients has enabled us to expand client relationships, acquire new clients, and grow deposits. TM continued to be a key driver of revenue and deposit growth in 2016. Led by an 18% increase in new clients, 31% expansion in service charge income, 24% increase in purchasing card income, and 18% growth in wire and cash management income, TM’s net fee income grew 28% in 2016 compared to 2015. Client Derivatives. The Company provides a full range of interest rate hedging products that allow qualified clients to lock in attractive long-term interest rates on certain commercial loans without increasing the Company’s exposure to potential changes in interest rates. In 2016, we closed a record 103 client derivative transactions in 18 markets. The number of transactions and net revenues from this activity more than doubled in 2016 compared to 2015. Syndications. The Company has full-service syndication expertise that manages the Company’s agented loan transactions throughout its footprint. The syndications team arranged $499 million in loans in eight markets throughout the Company’s footprint and achieved record transaction fees in 2016. Retail Brokerage. IBERIA Financial Services’ assets under management increased 9% during 2016, reaching $1.5 billion at year-end 2016. As a result of a shift away from transaction-based to greater fee-based business activity, revenues declined 15% compared to 2015. Advisory assets and associated fees increased 34% and 31%, respectively, compared to 2015. Institutional Brokerage. IBERIA Capital Partners (“ICP”) experienced reduced activity over the last two years as a result of the general decline in energy prices. As energy prices recovered in the second half of 2016, ICP revenues improved as well. Wealth Management. IBERIA Wealth Advisors’ (“IWA”) assets under administration grew by 93% to $2.7 billion at year-end 2016. IWA’s revenues and net income reached record levels in 2016. 12 / ANNUAL REPORT 2016 Efficiency Over the last four years, we have been one of the most active bank acquirers in the nation (by number of transactions completed). We completed five live bank acquisitions and the acquisition of a set of branches in Memphis, with aggregate loans totaling $3.3 billion and deposits of $3.8 billion, along with 62 bank branches in multiple markets in Florida, Texas, Louisiana, Georgia, and Tennessee. Efficiency improvements extended to staffing as well. total assets Between year-ends 2012 and 2016, increased by $8.5 billion, or 65%, while the number of full-time equivalent employees increased by 403, or only 15%. The reduction in staffing as a result of the bank branch consolidations combined with synergies gained in the support functions resulted in significant expense control during this period. During this period we were also very focused on improving the efficiency of our branch delivery system, our support functions, and balance sheet. Between 2013 and 2015, we executed improvement three distinct efficiency programs that generated aggregate run-rate savings of $50 million on a pre-tax basis. In 2016, we closed or consolidated 19 bank branches and eight mortgage locations and opened one bank branch, one title insurance office, and four mortgage locations. The net result of the 2016 initiatives was an additional $1 million in pre-tax savings per quarter commencing in the second quarter of 2016. In aggregate over the last four years, we acquired 62 bank branches, closed or consolidated 60 bank branches, and opened 10 new bank branches. Many of the newer branches were designed to be more efficient and to target the underserved banking segments within our communities. In summary, we closed nearly as many bank branches as we acquired during this period, and as a result, we were also one of the most active consolidators of bank branches in the nation (on a percentage of branches outstanding basis). Our efficiency improvement efforts have focused on both sides of the efficiency equation – improving revenues and reducing or holding down costs. We have been very successful on both fronts. Between 2013 and 2016, our total revenues expanded $324 million, or 58%, while total expenses increased only $94 million, or 20%, which resulted in an improvement in our efficiency ratio from 85% in 2013 to 64% in 2016. Similarly, our non-GAAP core tangible efficiency ratio over that period improved from 75% to 60%. The efficiency improvement in 2016 compared to 2015 was even more pronounced, as total revenues climbed $75 million, or 9%, while total expenses declined $4 million, or less than 1%. Throughout 2016, the quarterly efficiency ratio fluctuated between 61% and 71%, while the non-GAAP core tangible efficiency ratio remained very stable around 60% in each of the four quarters. The achievement of our long-term core tangible efficiency target of 60% is a testament to our corporate expense discipline and the dedication and hard work of our team. EFF IC IE NCY TRE ND ING (Lower Ratio is Preferred) 13 Profitability The growth in topline revenues over the last several years was primarily the result of solid loan and deposit growth combined with a fairly stable net interest margin and growing and diversified sources of fee income. In 2016, our total revenues were $883 million, up 9% compared to 2015, more than twice the industry’s growth rate. For companies such as ours, total revenues are simply a combination of net interest income, or the spread we earn between our assets and liabilities, plus non-interest income, which is fee income. In 2016 compared to 2015, our net interest income increased $61 million, or 10%, compared to the banking industry growth rate of 6%. The drivers of this improvement were our average earning assets, which grew 11%, and our net interest margin, which declined two basis points. Over this period, our non-interest (or fee) income increased $13 million, or 6%. These results were very favorable compared to a decline of 1% in fee income for the banking industry. Our decline in expenses of less than 1% compared very favorably to the industry’s expense growth rate of 1% year-over-year, thus showing our success at controlling costs during the year. As a result of our strong revenue growth and cost containment efforts, net income to common shareholders improved $36 million, or 25%, in 2016 compared to 2015. Earnings per common share on a fully diluted basis (“EPS”) increased by 17% over this period, well above industry results. As shown in the following charts, our EPS results on a reported and core basis have exhibited continuous improvement on each a quarterly and annual basis and achieved record core financial results during 2016. EAR N INGS PER COMM ON S HARE S P E y l r e t r a u Q Note: The sum of the quarterly figures in the chart above may not equal the annual figures due to rounding. 14 / ANNUAL REPORT 2016 CO RE EARNIN GS PE R CO MM ON SH AR E S P E e r o C y l r e t r a u Q Note: The sum of the quarterly figures in the chart above may not equal the annual figures due to rounding. Our return on average assets climbed to 0.92% on a reported basis and 0.95% on a core basis in 2016. As shown in the following chart, the improvement in these metrics has been very consistent over the last six years. RETU RN ON AVERAG E ASSE TS (Reported and Core Basis) Reported ROA Non-Core Adjustment Note: The sum of the quarterly figures in the chart above may not equal the annual figures due to rounding. 15 Position of Strength Strength of a financial institution can be measured in various ways, such as asset quality, balance sheet liquidity, capital ratios, ability to raise external capital at favorable pricing, depth and liquidity of trading in the financial institution’s stock, market capitalization, earnings, sensitivity, and management. Our Company improved its position of strength in each of these measures during 2016. Asset Quality. On the asset quality front, we successfully managed the “conveyor belt” on which our energy-related exposures are resolved. Energy issues crested in the second half of 2016, as evidenced by the declines in energy-related non-performing assets (“NPAs”), classified and criticized loans, and quarterly loan loss provision. Non-energy related asset quality remained very strong throughout 2016. At year-end 2016, non-energy NPAs as a percentage of total assets were a very healthy 48 basis points. Balance Sheet Liquidity. Our absolute level of liquidity was never stronger than it was at year-end 2016. At that time, the aggregate amount of cash, cash equivalents, and unpledged securities totaled $3.4 billion, up $1.3 billion, or 66%, compared to one year prior. Preferred Stock Issuance. In May 2016, we executed our second issuance and sale of preferred stock, resulting in $55 million in net proceeds. This security, along with our first preferred stock issuance that was sold in August 2015, are each traded on NASDAQ, and at year-end 2016, traded at 6% and 7% premiums to par value, respectively. Common Stock Issuance. We also recently completed two common stock offerings, each of which was among the largest common stock sales in our Company’s history. First, in December 2016, we sold approximately 3.6 million shares of common stock at $81.50 per common share, resulting in net proceeds of $280 million. The common stock offering was well-oversubscribed, was sold to investors at a price of 1.8 times tangible book value at year-end 2016, and was favorably priced at a discount to the last trading price of only 3.5%. Second, in early March 2017, we closed on a common stock sale of 6.1 million common shares at $83.00 per share, at a price discount to last trade of less than a 1%. This common stock sale was also well-oversubscribed and resulted in net proceeds of $506 million. Our ability to raise nearly $800 million in capital within 90 days at beneficial pricing is a testament to investors’ favorable perception of our Company and its strategic direction. Upon completion of the March 2017 common stock sale, our market capitalization was $4.2 billion, an increase of 85% compared to $2.3 billion at year-end 2015. The increase in market capitalization and 48% increase in our average daily trading volume in 2016 compared to 2015 are indicative of enhanced liquidity in our common stock and the depth of our trading market. The chart below shows the decline in our common stock price in the early part of 2016, followed by the significant increase in the following quarters of 2016. IB KC CO MMON STOCK PRICE Last Five Ye ar s O n A Q uar te r ly B as i s Note: Bars indicate trading range for shares of IBERIABANK common stock for each quarter. 16 / ANNUAL REPORT 2016 Preparing for Our Future The commercial banking industry is undergoing significant changes in many respects, including changes in interest rate environment, competitive dynamics, consolidation, regulatory focus, technological advancements, and client channel preferences, just to name a few. We believe our Company and its business model are well-suited for the changes that are occurring in our industry. Rising Interest Rates. We have maintained a short-duration asset base to position us well for rising interest rates. At year-end 2016, a total of 56% of our loans floated with changes in interest rates and another 16% of our loans were fixed-rate loans that mature within one year. Our investment portfolio is of relatively short duration with limited extension risk. Industry Consolidation. Our experience and favorable track record in M&A and our sizable investment in infrastructure provide us with the opportunity to be well-positioned for continued industry consolidation, though we remain very selective in our candidate selection process. Industry Evolution. We believe we are also making the right investments to prepare us for the evolving technological environment and changing client preferences regarding channel usage. We operate a “branch-lite” strategy, which we believe provides the optimal positioning for current and future banking needs. As our client preferences change, we change as well. Over the last three years, our ACH and wire amounts have nearly doubled in size. In addition, as shown in the following chart, we are executing a significantly greater number of transactions for our clients while their channel preferences are evolving. During 2016, we also worked to enhance our operational workflows and improve our client experience. For example, we launched a state-of-the-art mortgage origination platform, which is scalable, client focused, and supportive of our digital efforts. In addition, we commenced the rollout of a credit workflow system which provides a comprehensive management tool associated with the loan origination process for commercial and business banking clients. The benefits of this new credit workflow system include an improved client experience, gained efficiencies, enhanced mobile technology, increased client and prospect engagement, improved portfolio management, and an accelerated process for credit underwriting, decision making, and closing time. TRA NSACTION VOLUM E AND CH ANNE L USAG E s n o i t c a s n a r T l a t o T f o % ) s n o i l l i M n i ( s n o i t c a s n a r T l a t o T We recognize the importance of preparing for change and adopting change at an appropriate pace. We believe we are uniquely positioned to continue to grow organically and participate in ongoing industry consolidation. The year 2016 was an interesting year of change and opportunity. To continue to enjoy success, we must remain focused and stay appropriately ahead of the curve. 17 FINANCIALS 2016 19 21 64 65 67 Management’s Discussion and Analysis of Financial Condition and Results of Operations Selected Consolidated Financial and Other Data Management Report on Internal Control Over Financial Reporting Report of Independent Registered Public Accounting Firm Financial Statements 18 / ANNUAL REPORT 2016 This Annual Report, including the Financial Review and the Financial Statements and related Notes, contains forward-looking statements, which may include forecasts of our financial results and condition, expectations for our operations and business, and our assumptions for those forecasts and expectations. Do not unduly rely on forward-looking statements. Actual results may differ materially from our forward-looking statements due to several factors. Factors that could cause our actual results to differ materially from our forward-looking statements are described in this Report, including in the “Forward-Looking Statements” and “Risk Factors” sections, and in the “Regulation and Supervision” section of our Annual Report on Form 10-K for the year ended December 31, 2016 (“2016 Form 10-K”). When we refer to “the Company,” “we,” “our” or “us” in this Report, we mean IBERIABANK Corporation and Subsidiaries (consolidated). When we refer to the “Parent,” we mean IBERIABANK Corporation. See the Glossary of Acronyms at the end of this Report for terms used throughout this Report. To the extent that statements in this Report relate to future plans, objectives, financial results or performance of the Company, these statements are deemed to be forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements, which are based on management’s current information, estimates and assumptions and the current economic environment, are generally identified by use of the words “may”, “plan”, “believe”, “expect”, “intend”, “will”, “should”, “continue”, “potential”, “anticipate”, “estimate”, “predict”, “project” or similar expressions, or the negative of these terms or other comparable terminology, including statements related to the expected timing of the closing of proposed mergers, the expected returns and other benefits of the proposed mergers to shareholders, expected improvement in operating efficiency resulting from the mergers, estimated expense reductions, the impact on and timing of the recovery of the impact on tangible book value, and the effect of the mergers on the Company’s capital ratios. The Company’s actual strategies and results in future periods may differ materially from those currently expected due to various risks and uncertainties. Actual results could differ materially because of factors such as the level of market volatility, our ability to execute our growth strategy, including the availability of future bank acquisition opportunities, unanticipated losses related to the integration of, and refinements to purchase accounting adjustments for, acquired businesses and assets and assumed liabilities in these transactions, adjustments of fair values of acquired assets and assumed liabilities and of deferred taxes in acquisitions, actual results deviating from the Company’s current estimates and assumptions of timing and amounts of cash flows, credit risk of our customers, actual results deviating from the Company's current estimates, assumptions of timing and the amount of cash flows, our ability to satisfy new capital and liquidity standards such as those imposed by the Dodd-Frank Act and those adopted by the Basel Committee and federal banking regulators, sufficiency of our allowance for loan losses, changes in interest rates, access to funding sources, reliance on the services of executive management, competition for loans, deposits and investment dollars, reputational risk and social factors, changes in government regulations and legislation, increases in FDIC insurance assessments, geographic concentration of our markets and economic and business conditions in these markets, or nationally, including the impact of oil and gas prices, rapid changes in the financial services industry, dependence on our operational, technological, and organizational systems or infrastructure and those of third-party providers of those services, hurricanes and other adverse weather events, and valuation of intangible assets. Those and other factors that may cause actual results to differ materially from these forward-looking statements are discussed in the Company’s Annual Report on Form 10-K and other filings with the Securities and Exchange Commission (the “SEC”), available at the SEC’s website, http://www.sec.gov, and the Company’s website, http://www.iberiabank.com, under the heading “Investor Relations.” All information in this discussion is as of the date of this Report. The Company undertakes no duty to update any forward-looking statement to conform the statement to actual results or changes in the Company’s expectations. (cid:20)(cid:28) MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS EXECUTIVE OVERVIEW The Company is a $21.7 billion bank holding company primarily concentrated in commercial banking in the southeastern United States. We are shareholder and client-focused, expect high performance from our associates, believe in a strong sense of community, and strive to make the Company a great place to work. The Company focuses on improving long-term shareholder returns by setting challenging financial goals and executing on these goals even when faced with difficult economic and regulatory environments. The Company believes that shareholder value is created by investing in our people to ensure that we attract, develop, and retain talented team members, providing exceptional products and services to our customers in order to grow our high-quality client base, and improving the efficiency of our operations through expense reduction and revenue enhancement opportunities. Our Company has a growth strategy that includes both organic growth and growth through acquisitions and we have successfully executed this strategy over the last decade. We are mindful of the risks associated with growth and we recognize that a robust risk management process is essential to enhance and protect shareholder value. The Company continues to invest in a comprehensive risk management structure to stay ahead of potential threats and challenges, appropriately balancing risk with profitability and ensuring that our strategic goals deliver the intended results. 2016 Financial Performance In 2016, the Company saw the full benefit from the prior year acquisitions, growing net revenues by $74.9 million, or 9%, while also successfully containing expenses, which declined $3.6 million, or 1%, compared to 2015. We have grown our balance sheet organically in 2016 by $2.2 billion, or 11%, to $21.7 billion, which included loan growth of $737.5 million, or 5%, and deposit growth of $1.2 billion, or 8%. Our expansion and subsequent growth into new market areas through prior period acquisitions has helped us diversify and manage our credit risk exposure. We have strengthened our liquidity and capital positions and have seen some downward pressure on net interest margin as a result, but expect that deployment of excess liquidity and capital in 2017 into higher yielding assets will subsequently improve our profitability metrics. See the "2017 Outlook" section below for further discussion. Highlights of the Company’s performance in 2016 include: • Diluted EPS (GAAP) of $4.30, up 17% from $3.68 in 2015, and core diluted EPS (non-GAAP) of $4.43 compared to core diluted EPS of $4.18 in 2015 (see Table 32 for reconciliation of GAAP to non-GAAP measures). • Net interest income of $649.2 million, up 10% from $587.8 million in 2015, and net interest margin on a taxable equivalent basis of 3.53%, compared to 3.55% in 2015. • Non-interest income of $233.8 million, up 6% from $220.4 million in 2015. • Non-interest expense of $566.7 million, a decrease of $3.6 million, or 1%, from 2015. • Efficiency ratio of 64.2%, an improvement of 640 basis points, from 70.6% in 2015, and core tangible efficiency ratio (non-GAAP) of 60.2%, compared to 64.5% in 2015. • Return on average assets of 0.92% and core return on average assets (non-GAAP) of 0.95%, an increase of 14 basis points and 7 basis points, respectively, compared to 2015. • Net income of $186.8 million, up 31% from $142.8 million in 2015, and net income available to common shareholders of $178.8 million, up 25% over 2015. • Total loan growth of $737.5 million, or 5%, including intentional risk-related reductions of approximately $355 million in 2016 in the energy portfolio, energy-related markets, and indirect automobile lending business ($797 million cumulative reduction since the start of the "risk-off trade" at the beginning of 2015). Energy-related loans were 3.7% of total loans at December 31, 2016. • Net charge-off ratio of 0.23% of average loans, an increase over 2015's ratio of 0.08% of average loans, as many of the Company's energy-related problem credits have moved through a cycle of deterioration and resolution, as expected. Excluding the energy portfolio, net charge-offs were 0.12% of average non-energy-related loans. Provision expense was $44.4 million, an increase of $13.5 million, or 44%, over 2015. (cid:21)(cid:19) • Net deposit growth of $1.2 billion, or 8%, including non-interest bearing deposit growth of $576.6 million, or 13%. • • Issued non-cumulative perpetual preferred stock, raising $55.3 million in net proceeds, and issued approximately 3.6 million shares of common stock, resulting in net proceeds of $279.2 million, further strengthening our capital position. The Company's total risk-based capital ratio increased to 14.13% at December 31, 2016, from 12.17% at December 31, 2015 and IBERIABANK met the requirements to be categorized as "well-capitalized" under the regulatory framework for prompt corrective action at December 31, 2016 and 2015. Successfully terminated all loss share agreements associated with FDIC-assisted acquisitions. As a result of this action, the Company recorded a $17.8 million pre-tax charge during the fourth quarter of 2016 to write-off the balance of the FDIC loss share receivable, and will benefit from all future recoveries and be responsible for all future losses and expenses related to the assets previously subject to these agreements. TABLE 1—SELECTED FINANCIAL INFORMATION (Dollars in thousands) Key Ratios Efficiency Ratio Tangible efficiency ratio (TE) (Non-GAAP) Return on average assets Return on average assets, core basis (Non-GAAP) Net interest margin (TE) Non-interest income Non-interest income, core basis (Non-GAAP) Non-interest expense Non-interest expense, core basis (Non-GAAP) Years Ended December 31 2016 2015 2014 2013 2012 64.17% 62.37% 0.92% 0.95% 3.53% 70.57% 68.57% 0.78% 0.88% 3.55% 74.73% 72.53% 0.72% 0.81% 3.51% 84.50% 82.10% 0.50% 0.71% 3.38% 77.49% 74.89% 0.63% 0.67% 3.58% $ 233,821 $ 220,393 $ 173,628 $ 168,958 $ 175,997 231,819 566,665 546,004 216,360 570,305 533,845 170,871 473,614 445,094 166,624 472,796 428,254 170,026 432,185 418,174 2017 Outlook The Company's long-term financial goals are as follows: • Return on Average Tangible Common Equity of 13% to 17% (core basis); • Core Tangible Efficiency Ratio of less than 60%; and • Legacy Asset Quality in the top 10% of our peers. Our strong liquidity and capital positions will be both our greatest opportunity and challenge in 2017 as our margin improvement will be dependent on our ability to deploy that excess liquidity and capital into higher yielding assets. In addition, continued improvement in credit quality will be instrumental to a successful 2017. Management's expectations for the Company in 2017 include the following: • Consolidated loan growth in the high-single digit range, including growth from our recent expansion into the South Carolina market; • Easing of the risk-off trade, reducing barriers to loan growth; • Deposit growth in the mid-single digit range; • Improvement in net interest margin as excess liquidity is deployed into higher yielding assets (timing of the reduction in excess liquidity is the most important factor on the overall margin level for the year); • Improvement in consolidated credit metrics; • Decline in provision expense from 2016 as credit conditions within the energy portfolio continue to improve; (cid:21)(cid:20) • Slight increase in non-interest income as declines in the mortgage business are offset by other non-interest income categories; • Continued cost containment efforts on non-interest expense to reach our goal of a sustained core tangible efficiency ratio below 60%; • Effective tax rate of approximately 34%; • EPS will continue to be pressured until excess liquidity and capital are deployed into higher yielding assets (i.e., currently excess liquidity and capital are earning the Fed Funds rate); and • Realization of the full benefit from our modeled asset sensitive position if interest rates move higher (i.e., we believe the next 25 basis point Fed Funds rate increase will result in approximately 5 cents of favorable quarterly EPS impact in the full quarter post the raise). (cid:21)(cid:21) Significant Transactions While there were no acquisitions in 2016, the Company saw the full benefit from the prior year acquisitions, growing revenues by $74.9 million, or 9%, while also successfully containing expenses, which declined $3.6 million, or 1%, compared to 2015. The balance sheet grew in 2016 by $2.2 billion, or 11%, to $21.7 billion, which included loan growth of $737.5 million, or 5%, and deposit growth of $1.2 billion, or 8%. The Company will continue to execute its growth strategy, both organically and through strategically sound acquisitions. Recently, the Company announced plans to expand into Greenville, South Carolina with the addition of a Regional President for that market. 2015 Acquisitions For over a decade, the Company has executed targeted acquisitions that were a strong strategic fit for the Company and provided additional value to existing shareholders. These acquisitions have provided significant growth and allowed for geographic, industry, and product diversification. In 2015, the Company further diversified its business, expanding its presence in Florida and Georgia through the acquisitions of Florida Bank Group on February 28, 2015, Old Florida on March 31, 2015, and Georgia Commerce on May 31, 2015. The acquired assets and liabilities are presented in Note 3, Acquisition Activity, to the consolidated financial statements. The following table is a summary of the Company's acquisition activity over the past five years: TABLE 2—SUMMARY OF ACQUISITION ACTIVITY FROM 2012 TO 2016 (Dollars in millions) Acquisition Florida Gulf Bancorp, Inc. Trust One Bank - Memphis Operations Teche Holding Company First Private Holdings, Inc. Florida Bank Group, Inc. Old Florida Bancshares, Inc. Georgia Commerce Bancshares, Inc. Total Acquisitions, 2012-2016 Total Tangible Assets Acquired Total Loans and Loans Held for Sale Acquired Acquisition Date Total Deposits Acquired Goodwill Other Intangible Assets 2012 $ 307.3 $ 215.8 $ 286.0 $ 32.4 $ 2014 2014 2014 2015 2015 2015 180.2 854.4 350.9 535.9 86.5 700.5 299.3 307.5 191.3 639.6 312.3 392.2 1,540.0 1,068.9 1,389.8 1,022.3 $ 4,791.0 793.4 $ 3,471.9 908.0 $ 4,119.2 $ 8.6 80.4 26.3 17.4 100.8 86.7 352.6 $ — 2.6 7.4 0.5 4.5 6.8 6.7 28.5 Termination of loss share agreements with the FDIC In conjunction with the acquisitions of certain assets and liabilities of six failed banks between 2009 and 2011, as well as the acquisition of Georgia Commerce in 2015, the Company entered into or assumed arrangements with the FDIC that obligated the FDIC to reimburse the Company for losses on certain loans associated with the FDIC-assisted transactions. Effective December 20, 2016, the Company entered into an agreement with the FDIC to terminate the Company’s loss share agreements ahead of their contractual maturities. Under the terms of the agreement, all rights and obligations of the Company and the FDIC have been resolved and completed. The Company received a net payment of $6.5 million from the FDIC as consideration for termination of the loss share agreements and subsequently derecognized the remaining FDIC indemnification asset and associated assets and liabilities, resulting in a pre-tax loss of $17.8 million. The Company will benefit from all future recoveries, and be responsible for all future losses and expenses related to the assets previously subject to the loss share agreements. Capital transactions On May 9, 2016, the Company issued an aggregate of 2,300,000 depositary shares (the “Series C Depositary Shares”), each representing a 1/400th ownership interest in a share of the Company’s 6.60% Fixed-to-Floating Non-Cumulative Perpetual Preferred Stock, Series C, par value $1.00 per share, (“Series C Preferred Stock”), with a liquidation preference of $10,000 per share of Series C Preferred Stock (equivalent to $25 per depositary share), which represents $57,500,000 in aggregate liquidation preference. Net proceeds from the offering, after deduction of underwriting discounts, commissions, and direct issuance costs were $55.3 million. (cid:21)(cid:22) On December 7, 2016, the Company issued an additional 3,593,750 shares of its common stock at a price of $81.50 per common share. Net proceeds from the offering totaled $279.2 million. FINANCIAL OVERVIEW Selected consolidated financial and other data for the past five years is shown in the following tables. TABLE 3—SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA(1,2) (Dollars in thousands, except per share data) Income Statement Data Years Ended December 31 2016 vs. 2015 2016 2015 2014 2013 2012 $ Change % Change Interest and dividend income $ 716,939 $ 646,858 $ 504,815 $ 437,197 $ 445,200 Interest expense 67,701 59,100 44,704 46,953 63,450 Net interest income 649,238 587,758 460,111 390,244 381,750 Provision for loan losses 44,424 30,908 19,060 5,145 20,671 70,081 8,601 61,480 13,516 47,964 13,428 (3,640) 65,032 21,099 43,933 (7,977) 11% 15 10 44 9 6 (1) 31 33 31 100 25 17 17 3 Net interest income after provision for loan losses Non-interest income Non-interest expense Income before income tax expense Income tax expense Net income 604,814 233,821 566,665 556,850 220,393 570,305 441,051 173,628 473,614 385,099 168,958 472,796 271,970 206,938 141,065 85,193 64,094 35,683 186,777 142,844 105,382 81,261 16,133 65,128 — 361,079 175,997 432,185 104,891 28,496 76,395 — Preferred stock dividends (7,977) — — Net Income Available to Common Shareholders Earnings per common share – basic Earnings per common share – diluted Cash dividends per common share $ 178,800 $ 142,844 $ 105,382 $ 65,128 $ 76,395 35,956 $ 4.32 $ 3.69 $ 3.31 $ 2.20 $ 2.59 4.30 1.40 3.68 1.36 3.30 1.36 2.20 1.36 2.59 1.36 0.63 0.62 0.04 (cid:21)(cid:23) 2016 2015 2014 2013 2012 $ Change % Change As of December 31 2016 vs. 2015 $21,659,190 $19,504,068 $15,757,904 $13,365,550 $13,129,678 $2,155,122 11% 1,362,126 510,267 548,095 391,396 970,977 851,859 167 (Dollars in thousands, except per share data) Balance Sheet Data Total assets Cash and cash equivalents Loans, net of unearned income Book value per common share (3) Tangible book value per common share (Non-GAAP)(3) (5) Key Ratios (4) Return on average assets 15,064,971 14,327,428 11,441,044 9,492,019 8,498,580 Investment securities 3,535,313 2,899,214 2,275,813 2,090,906 1,950,066 Goodwill and other intangible assets, net Deposits Borrowings 759,823 765,655 548,130 425,442 429,584 17,408,283 16,178,748 12,520,525 10,737,000 10,748,277 1,138,089 667,064 1,248,996 961,043 726,422 Shareholders’ equity 2,939,694 2,498,835 1,852,148 1,530,346 1,529,868 737,543 636,099 (5,832) 1,229,535 471,025 440,859 62.68 58.87 55.37 51.38 51.88 3.81 5 22 (1) 8 71 18 6 45.80 40.35 39.08 37.15 37.34 5.45 14 As of and For the Years Ended December 31 2016 2015 2014 2013 2012 0.92% 0.78% 0.72% 0.50% 0.63% Return on average common equity Return on average tangible common equity (Non-GAAP) (5) Equity to assets at end of period Earning assets to interest-bearing liabilities at end of period Interest rate spread (6) Net interest margin (TE) (6) (7) Non-interest expense to average assets Efficiency ratio (8) Tangible efficiency ratio (TE) (Non-GAAP) (5) (7) (8) Common stock dividend payout ratio 7.08 10.44 13.57 146.60 3.37 3.53 2.79 64.17 62.37 32.94 6.41 9.65 12.81 142.28 3.41 3.55 3.10 70.57 68.57 38.46 6.17 9.04 11.75 135.15 3.40 3.51 3.24 74.73 72.53 42.05 4.26 6.17 11.45 132.74 3.26 3.38 3.64 84.60 82.10 62.11 5.05 7.21 11.65 124.93 3.43 3.58 3.57 77.49 74.89 52.50 Asset Quality Data (Legacy) Non-performing assets to total assets at end of period (9) Allowance for credit losses to non-performing loans at end of period (9) Allowance for credit losses to total loans at end of period Consolidated Capital Ratios Tier 1 leverage capital ratio Common Equity Tier 1 (CET1) Tier 1 risk-based capital ratio Total risk-based capital ratio 1.20% 0.42% 0.41% 0.61% 0.69% 52.46 0.92 209.41 246.26 175.35 0.96 0.91 0.95 150.57 1.10 10.86% 9.52% 11.84 12.59 14.13 10.10 10.73 12.17 9.35% N/A 11.17 12.30 9.70% N/A 11.57 12.82 9.70% N/A 12.92 14.19 (cid:21)(cid:24) (1) Certain balances and amounts have been restated for the effect of the adoption of ASU No. 2014-01 on January 1, 2015. (2) 2012 data is impacted by the Company’s acquisition of Florida Gulf on July 31, 2012. 2014 data is impacted by the Company’s acquisitions of certain assets and liabilities of Trust One - Memphis on January 17, 2014, Teche on May 31, 2014, and First Private on June 30, 2014. 2015 data is impacted by the Company’s acquisitions of Florida Bank Group on February 28, 2015, Old Florida on March 31, 2015, and Georgia Commerce on May 31, 2015. (3) Shares used for book value purposes are net of shares held in treasury at the end of 2014, 2013, and 2012. (4) With the exception of end-of-period ratios, all ratios are based on average daily balances during the respective periods. (5) Tangible calculations eliminate the effect of goodwill and acquisition-related intangible assets and the corresponding amortization expense on a tax-effected basis where applicable. (6) Interest rate spread represents the difference between the weighted average yield on earning assets and the weighted average cost of interest-bearing liabilities. Net interest margin represents net interest income as a percentage of average net earning assets. (7) Fully taxable equivalent ("TE") calculations include the tax benefit associated with related income sources that are tax- exempt using a rate of 35%, which approximates the marginal tax rate. (8) The efficiency ratio represents non-interest expense as a percentage of total revenues. Total revenues are the sum of net interest income and non-interest income. (9) Non-performing loans consist of non-accruing loans and loans 90 days or more past due. Non-performing assets consist of non-performing loans and repossessed assets. The Company’s net income available to common shareholders for the year ended December 31, 2016 totaled $178.8 million, or $4.30 per diluted share, compared to $142.8 million, or $3.68 per diluted share, for 2015. Key components of the Company’s 2016 performance are summarized below. • Net interest income increased $61.5 million, or 10%, in 2016 when compared to 2015, a result of a $70.1 million, or 11%, increase in interest and dividend income partially offset by a $8.6 million, or 15%, increase in interest expense. Net interest income increases for 2016 are the result of a $1.8 billion increase in average earning assets offset by a one basis point decrease in average yield on earning assets, a $903.5 million increase in average interest-bearing liabilities, and a three basis point increase in funding costs when compared to 2015. Net interest margin on a tax-equivalent basis decreased two basis points to 3.53% from 3.55% when comparing the periods, largely due to excess liquidity, as well as excess capital currently invested in lower yielding cash and securities. • The Company recorded a provision for loan losses of $44.4 million in 2016, $13.5 million higher than the provision recorded in 2015. The increase in the provision was due primarily to the deterioration in credit quality in energy-related loans, which accounted for almost 50% of the Company's net charge-offs in 2016, and to a lesser extent, legacy loan growth ($1.5 billion, or 13%, growth since December 31, 2015). Net charge-offs were $33.8 million, or 0.23%, of average loans in 2016, compared to $10.9 million, or 0.08%, in 2015. As of December 31, 2016, the total allowance for loan losses as a percent of total loans was 0.96% compared to 0.97% at December 31, 2015. • Non-interest income increased $13.4 million, or 6%, when compared to 2015, a result of a $3.2 million increase in mortgage income, a $1.9 million increase in service charges, and a $1.5 million increase in credit card and merchant related income. All other non-interest income categories also increased $9.7 million primarily due to increases in client derivatives income, SBA loan income, and COLI income. These increases were partially offset by a $2.3 million decrease in broker commissions. • Non-interest expense decreased $3.6 million, or 1% in 2016. The primary reason for this decrease is the direct merger- related and severance expenses incurred during 2015 resulting from the Company's three 2015 acquisitions, which was partially offset by a $17.8 million loss incurred to terminate the Company's loss share agreements with the FDIC in December of 2016. • The Company paid a quarterly cash dividend of $0.36 per common share in the third and fourth quarters of 2016 and a quarterly cash dividend of $0.34 per common share in the first and second quarters of 2016, resulting in dividends of $1.40 for the year-to-date period compared to $1.36 in the prior year. The common stock dividend payout ratio was 32.9% in 2016, compared to 38.5% in 2015. • Total assets at December 31, 2016 were $21.7 billion, up $2.2 billion, or 11%, from December 31, 2015. Total loan growth of $737.5 million across many of the Company’s markets and a $851.9 million increase in total cash and cash equivalents drove the increase in total assets. The increase in total cash and cash equivalents was attributable to increased (cid:21)(cid:25) deposits and capital raised from the common stock issuance during 2016. The excess liquidity and excess capital is currently invested in cash equivalents until it is deployed into higher yielding assets. • Total loans net of unearned income at December 31, 2016 were $15.1 billion, an increase of $737.5 million, or 5%, from December 31, 2015. Loan growth during 2016 was driven by a $1.5 billion, or 13%, increase in legacy loans and a $766.9 million, or 24%, decrease in acquired loans. • Total deposits increased $1.2 billion, or 8%, to $17.4 billion at December 31, 2016. Non-interest-bearing deposits increased $576.6 million, or 13%, while interest-bearing deposits increased $652.9 million, or 6%. The year-over-year growth in deposits is the result of the continued strengthening of legacy client relationships, deeper expansion into markets from prior year acquisitions, and normal deposit campaigns. The Company's deposit balances generally increase at the end of each year due to real estate tax collections by our municipal customers. These balances typically remain on deposit with the Company for 45 to 60 days. Given the short-term nature of these seasonal funds, the deposit balances tied to these seasonal flows are held in liquid investments until they are withdrawn from the Company. The Company currently expects total deposits to decline during the first half of 2017. • Shareholders’ equity increased $440.9 million, or 18% from year-end 2015. The increase was driven by the issuances of common stock and non-cumulative perpetual preferred stock in 2016, resulting in net proceeds of $279.2 million and $55.3 million, respectively. In addition, undistributed net income of $119.9 million also contributed to the increase in shareholders' equity. These increases were partially offset by a $24.5 million decrease in accumulated other comprehensive income (net of tax), a result of the change in the net unrealized holding gain in the Company’s available for sale investment portfolio at the end of 2016. APPLICATION OF CRITICAL ACCOUNTING POLICIES AND ESTIMATES In preparing the consolidated financial statements and accompanying notes, management is required to apply significant judgment to various accounting, reporting, and disclosure matters. The accounting principles and methods used by the Company conform to GAAP and general banking accounting practices. The estimates and assumptions most significant to the Company are summarized in the following discussion and are further analyzed in the notes to the consolidated financial statements. Allowance for Credit Losses The allowance for credit losses has two components, the allowance for loan losses (contra asset) and the reserve for unfunded commitments (liability). Further, the allowance for loan losses consists of (i) probable incurred credit losses for legacy and acquired non-impaired loans and (ii) expected losses on acquired impaired loans. Allowances for Legacy and Acquired Non-Impaired Loans The legacy and acquired non-impaired ACL, which represent management’s estimate of probable losses inherent in the Company’s legacy and acquired non-impaired loan portfolios, involve a high degree of judgment and complexity. The Company’s policy is to establish reserves through provisions for credit losses on the consolidated statements of comprehensive income for estimated losses on delinquent and other problem loans, as well as loans which have not yet explicitly exhibited factors indicating credit weakness, when it is determined that losses have been incurred on such loans. Management’s determination of the appropriateness of the legacy and acquired non-impaired ACL is based on various factors requiring judgments and estimates, including management’s evaluation of the credit quality of the portfolio (determined through the assignment of risk ratings, assessments of past due status, and scores from credit agencies), historical loss experience, current economic conditions, the volume and type of lending conducted by the Company, composition of the portfolio, the amount of the Company’s classified assets, seasoning of the loan portfolio, the status of past due principal and interest payments, value of collateral, the ability to monetize guarantor support and other relevant factors. Estimates in which management exercises significant judgment are the assessments of risk ratings, collateral values, projected principal and interest cash flows and guarantor support on the Company’s commercial loan portfolio and the application of qualitative adjustments to the quantitative measurements across all portfolios. Other changes in estimates included in the estimation of the ACL may also have a significant impact on the consolidated financial statements. For further discussion of the ACL, see Note 1, Summary of Significant Accounting Policies, and Note 6, Allowance for Credit Losses, to the consolidated financial statements. (cid:21)(cid:26) Accounting for Acquired Impaired Loans and the Allowance for Acquired Impaired Loans The Company accounts for its acquisitions under ASC Topic No. 805, Business Combinations, which requires the use of the acquisition method of accounting. Accordingly, all acquired loans are recorded at fair value on the acquisition date applying the fair value methodology prescribed in ASC Topic No. 820, Fair Value Measurement. No ACL related to the acquired loans is recorded on the acquisition date, as the fair value of the loans acquired incorporates assumptions regarding credit risk. The fair value measurements include estimates related to market interest rates and projections of future cash flows that incorporate expectations of prepayments and the amount and timing of principal, interest and other cash flows, as well as any shortfalls thereof. Acquired loans are evaluated at acquisition and classified as purchased impaired (“acquired impaired”) or purchased non- impaired (“acquired non-impaired”). Purchased impaired loans exhibit (in management’s judgment) credit deterioration since origination to the extent that it is probable at the time of acquisition that the Company will be unable to collect all contractually required payments, and includes all covered loans. All other acquired loans are classified as purchased non- impaired. Over the life of the purchased impaired loans, the Company continues to estimate the amount and timing of cash flows expected to be collected on individual loans or on pools of loans sharing common risk characteristics. These expected cash flow estimates are updated for new information on a quarterly basis. Once cash flow estimates are updated, the Company evaluates whether the present value of these cash flows, determined using effective interest rates, have decreased and if so, recognizes provisions for credit losses in its consolidated statement of comprehensive income. For increases in cash flows expected to be collected, the Company adjusts the amount of accretable yield recognized on a prospective basis over the respective loan’s or pool’s remaining life. Valuation of Goodwill, Intangible Assets and Other Purchase Accounting Adjustments As previously mentioned, the Company accounts for acquisitions in accordance with ASC Topic No. 805, Business Combinations, which requires the use of the acquisition method of accounting. Under this method, the Company is required to record the assets acquired, including identified intangible assets, and liabilities assumed, at their respective fair values, which in many instances involves estimates based on third party valuations, such as appraisals, or internal valuations based on discounted cash flow analyses or other valuation techniques. The determination of the useful lives of intangible assets is subjective, as is the appropriate amortization method for such intangible assets. In addition, business combinations typically result in recording goodwill. As discussed in Note 1 to the consolidated financial statements, the Company performs a goodwill evaluation at least annually or whenever events or changes in circumstances indicate that it is more likely than not the fair value of a reporting unit is less than its respective carrying amount. For the annual October 1, 2016 impairment evaluation, management elected to bypass the qualitative assessment for each respective reporting unit (IBERIABANK, IMC, and LTC) and performed Step 1 of the goodwill impairment test. Step 1 of the goodwill impairment test requires the Company to compare the fair value of each reporting unit with its carrying amount, including goodwill. Accordingly, the Company determined the fair value of each reporting unit and compared the fair value to each respective reporting unit’s carrying amount. The Company determined that none of the reporting units’ fair values were below their respective carrying amounts. The Company concluded goodwill was not impaired as of October 1, 2016. Further, no events or changes in circumstances between October 1, 2016 and December 31, 2016 indicated that it was more likely than not the fair value of any reporting unit had been reduced below its carrying value. Based on the testing performed in 2016 and 2015, management concluded that for the IBERIABANK, IMC, and LTC reporting units, goodwill was not impaired at any time during those periods. Goodwill impairment evaluations require management to utilize significant judgments and assumptions including, but not limited to, the general economic environment and banking industry, reporting unit future performance (i.e., forecasts), events or circumstances affecting a respective reporting unit (e.g., interest rate environment), and changes in the Company stock price, amongst other relevant factors. Management’s judgments and assumptions are based on the best information available at the time. Results could vary in subsequent reporting periods if conditions differ substantially from the assumptions utilized in completing the evaluations. For additional information on goodwill and intangible assets, see Note 1, Summary of Significant Accounting Policies, and Note 10, Goodwill and Other Acquired Intangible Assets, to the consolidated financial statements. (cid:21)(cid:27) Income Taxes In the ordinary course of business, we conduct transactions in various taxing jurisdictions (Federal, state, and local) that are subject to complex income tax laws and regulations, which may differ by jurisdiction. The Company is often required to exercise significant judgment regarding the interpretation of these tax laws and regulations, in which the Company’s anticipated and actual liability could significantly vary based upon the taxing authority’s interpretation. Adjustments to current, accrued, or deferred taxes may occur due to modifications in tax rates, newly enacted laws, resolution of items with taxing authorities, alterations to interpretative statutory, judicial, and regulatory guidance that affects the Company’s tax positions, or other facts and circumstances. RESULTS OF OPERATIONS The Company reported income available to common shareholders of $178.8 million, $142.8 million, and $105.4 million for the years ended December 31, 2016, 2015, and 2014, respectively. EPS on a diluted basis was $4.30 for 2016, $3.68 for 2015, and $3.30 for 2014. The following discussion provides additional information on the Company’s operating results for the years ended December 31, 2016, 2015, and 2014, segregated by major income statement caption. Net Interest Income/Net Interest margin Net interest income is the difference between interest realized on earning assets and interest paid on interest-bearing liabilities and is also the largest driver of core earnings. As such, it is subject to constant scrutiny by management. The rate of return and relative risk associated with earning assets are weighed to determine the appropriateness and mix of earning assets. Additionally, the need for lower cost funding sources is weighed against relationships with clients and future growth opportunities. The Company’s net interest spread, which is the difference between the yields earned on average earning assets and the rates paid on average interest-bearing liabilities, was 3.37%, 3.41%, and 3.40%, during the years ended December 31, 2016, 2015, and 2014, respectively. The Company’s net interest margin on a taxable equivalent (“TE”) basis, which is net interest income (TE) as a percentage of average earning assets, was 3.53%, 3.55%, and 3.51%, respectively, for the same periods. (cid:21)(cid:28) The following table sets forth information regarding (i) the total dollar amount of interest income from earning assets and the resultant average yields; (ii) the total dollar amount of interest expense on interest-bearing liabilities and the resultant average rates; (iii) net interest income; (iv) net interest spread; and (v) net interest margin. Information is based on average daily balances during the indicated periods. Investment security market value adjustments and trade-date accounting adjustments are not considered to be earning assets and, as such, the net effect of these adjustments is included in non-earning assets. TABLE 4—AVERAGE BALANCES, NET INTEREST INCOME AND INTEREST YIELDS / RATES 2016 Interest Income/ Expense (2) Average Balance Yield/ Rate Average Balance 2015 Interest Income/ Expense (2) Yield/ Rate Average Balance 2014 Interest Income/ Expense (2) Yield/ Rate (Dollars in thousands) Earning Assets: Loans(1): Commercial loans $10,529,830 $ 459,352 4.34 % $ 9,292,251 $ 411,351 4.42 % $ 7,284,247 $ 359,801 Residential mortgage loans Consumer and other loans 1,236,640 2,894,584 54,966 4.44 % 1,165,524 53,948 4.63 % 869,510 148,719 5.14 % 2,815,554 141,667 5.03 % 2,310,339 Total loans 14,661,054 663,037 4.51 % 13,273,329 606,966 4.57 % 10,464,096 Loans held for sale Investment securities FDIC loss share receivable Other earning assets 204,669 2,927,588 29,396 654,357 6,564 59,154 3.21 % 176,793 2.15 % 2,595,806 6,164 53,165 3.49 % 130,425 2.17 % 2,148,963 (16,024) (53.62)% 4,208 0.64 % 52,494 553,629 (23,500) (44.15)% 4,063 0.73 % 120,567 371,490 44,563 122,342 526,706 5,153 44,677 2,896 Total earning assets 18,477,064 716,939 3.89 % 16,652,051 646,858 3.90 % 13,235,541 504,815 4.95 % 5.13 % 5.30 % 5.04 % 3.95 % 2.23 % 0.78 % 3.85 % (74,617) (61.04)% Allowance for loan losses Non-earning assets Total assets Interest-bearing liabilities Deposits: NOW accounts Savings and money market accounts Certificates of deposit Total interest-bearing deposits Short-term borrowings Long-term debt Total interest-bearing liabilities Non-interest-bearing demand deposits Non-interest-bearing liabilities Total liabilities Shareholders’ equity Total liabilities and shareholders’ equity Net earning assets Net interest income/ Net interest spread Net interest income (TE) / Net interest margin (TE) (3) (147,520) 1,991,690 $20,321,234 (130,808) 1,881,463 $18,402,706 (134,830) 1,531,283 $14,631,994 $ 2,922,587 8,816 0.30 % $ 2,620,570 6,903 0.26 % $ 2,240,137 6,006 0.27 % 6,578,622 2,141,399 11,642,608 614,073 616,309 24,725 18,039 51,580 2,453 13,668 0.38 % 6,274,498 0.84 % 2,260,237 21,063 19,137 0.34 % 4,616,026 0.85 % 1,889,858 0.44 % 11,155,305 47,103 0.42 % 8,746,021 0.39 % 2.18 % 426,011 388,220 797 11,200 0.18 % 2.85 % 782,033 335,211 12,802 14,282 33,090 1,364 10,250 0.28 % 0.76 % 0.38 % 0.17 % 3.02 % 12,872,990 67,701 0.52 % 11,969,536 59,100 0.49 % 9,863,265 44,704 0.45 % 4,582,533 228,117 17,683,640 2,637,594 $20,321,234 $ 5,604,074 3,996,821 175,315 16,141,672 2,261,034 $18,402,706 $ 4,682,515 2,916,509 144,861 12,924,635 1,707,359 $14,631,994 $ 3,372,276 $ $ 649,238 3.37 % 658,701 3.53 % $ $ 587,758 3.41 % 596,362 3.55 % $ $ 460,111 3.40 % 468,720 3.51 % (1) (2) (3) Total loans include non-accrual loans for all periods presented. Interest income in Table 4 above excludes approximately $11.9 million, $2.1 million and $1.8 million, in interest income that would have been recorded in 2016, 2015 and 2014, respectively, if non-accrual loans (excluding acquired impaired loans) had been current in accordance with their contractual terms. Interest income includes loan fees of $2.9 million, $2.8 million, and $2.4 million for the years ended December 31, 2016, 2015, and 2014, respectively. Taxable equivalent yields are calculated using a rate of 35%, which approximates the marginal tax rate. (cid:22)(cid:19) Net interest income increased $61.5 million, or 10%, to $649.2 million in 2016 when compared to 2015. The increase in net interest income for 2016 is the result of a $1.8 billion increase in average earning assets offset by a one basis point decrease in average yield on earning assets, a $903.5 million increase in average interest-bearing liabilities, and a three basis point increase in funding costs when compared to 2015. Net interest margin on a tax-equivalent basis decreased two basis points to 3.53% from 3.55% when comparing the periods, largely due to excess liquidity, as well as excess capital currently invested in lower yielding cash and securities. Average loans made up 79% and 80% of average earning assets in 2016 and 2015, respectively. Average loans increased $1.4 billion, or 10%, in 2016 as a result of the growth in the commercial legacy loan portfolio. Investment securities made up 16% of average earning assets in both 2016 and 2015. Average interest-bearing deposits made up 90% of average interest-bearing liabilities during 2016, compared to 93% during 2015. Average short-term borrowings made up 5% and 4% of average interest-bearing liabilities in 2016 and 2015, respectively. Average long-term debt made up 5% and 3% of average interest-bearing liabilities in 2016 and 2015, respectively. The following table sets forth information regarding average loan balances and average yields, segregated into the legacy and acquired portfolios, for the periods indicated. TABLE 5—AVERAGE LOAN BALANCES AND YIELDS (Dollars in thousands) Legacy loans Acquired loans Total loans FDIC loss share receivables Total loans and FDIC loss share receivables Years Ended December 31 2016 2015 2014 Average Balance $11,932,101 2,728,953 14,661,054 Average Yield 4.03 % $10,354,265 Average Balance Average Yield 3.95 % $ 8,860,141 Average Balance Average Yield 4.00 % 6.68 4.51 2,919,064 13,273,329 6.84 4.57 1,603,955 10,464,096 10.54 5.04 29,396 (53.62) 52,494 (44.15) 120,567 (61.04) $14,690,450 4.39% $13,325,823 4.38% $10,584,663 4.29% (cid:22)(cid:20) The following table displays the dollar amount of changes in interest income and interest expense for major components of earning assets and interest-bearing liabilities. The table distinguishes between (i) changes attributable to volume (changes in average volume between periods times the average yield/rate for the two periods), (ii) changes attributable to rate (changes in average rate between periods times the average volume for the two periods), and (iii) total increase (decrease). Changes attributable to both volume and rate are allocated ratably between the volume and rate categories. TABLE 6—SUMMARY OF CHANGES IN NET INTEREST INCOME 2016 Compared to 2015 2015 Compared to 2014 Change Attributable To Change Attributable To Days (1) Volume Rate Net Increase (Decrease) Days Volume Rate Net Increase (Decrease) (Dollars in thousands) Earning assets: Loans: Commercial loans $ 1,254 $ 54,454 Residential mortgage loans Consumer and other loans Loans held for sale Investment securities FDIC loss share receivable Other earning assets Net change in income on earning assets Interest-bearing liabilities: Deposits: NOW accounts Savings and money market accounts Certificates of deposit Borrowings Net change in expense on interest-bearing liabilities Change in net interest spread — — — — (44) — 3,213 4,801 920 7,174 11,831 926 $ (7,707) $ (2,195) 2,251 (520) (1,185) (4,311) (781) 48,001 $ — $ 94,541 1,018 7,052 400 5,989 7,476 145 — — — — — — 14,027 26,726 1,670 9,113 34,307 611 $ (42,991) $ (4,642) (7,401) (659) (625) 16,810 556 51,550 9,385 19,325 1,011 8,488 51,117 1,167 1,210 83,319 (14,448) 70,081 — 180,995 (38,952) 142,043 — — — 44 847 1,066 1,913 1,464 (1,001) 6,072 2,198 (97) (1,992) 3,662 (1,098) 4,124 — — — — 1,004 (107) 897 7,196 3,007 774 1,065 1,848 (391) 8,261 4,855 383 44 $ 1,166 7,382 $ 75,937 1,175 $ (15,623) $ 8,601 61,480 — 11,981 $ — $ 169,014 2,415 14,396 $ (41,367) $ 127,647 (1) The change attributable to days reflects the impact of 366 days in 2016 versus 365 days in 2015 and 2014, and in which the actual number of days impacts the yield calculation based on the respective accrual methods. 2016 vs. 2015 The $70.1 million increase in interest income in 2016 was largely driven by an increase in earning asset volume compared to 2015. Average loan balances increased $1.4 billion, or 10%, over 2015 due to a $1.6 billion, or 15%, increase in legacy loans largely driven by commercial loan growth. The declining balance of the FDIC loss share receivable and related amortization also contributed to a $7.5 million increase in interest income. The Company terminated all FDIC loss share receivables in December of 2016. During 2016, interest expense on interest-bearing liabilities increased $8.6 million, or 15%, partially due to a $4.5 million, or 10%, increase in interest expense on interest-bearing deposits. Growth of $487.3 million in the average balance of interest- bearing deposits and a two basis point increase in the rate paid during 2016 drove the increase in interest expense on interest- bearing deposits. In addition, interest expense on the Company’s borrowings also increased $4.1 million in 2016 as a result of an increase in average long-term debt of $228.1 million and an increase in average short-term debt of $188.1 million. 2015 vs. 2014 For the year ended December 31, 2015, earning asset volume, both for acquired earning assets and organic growth, drove the $142.0 million increase in interest income. Average loan balances increased $2.8 billion, or 27%, over 2014 and can be attributed to legacy loan growth, as well as loans acquired from Florida Bank Group, Old Florida, and Georgia Commerce. The (cid:22)(cid:21) declining balance of the FDIC loss share receivable and related amortization also contributed $51.1 million to the increase in interest income. Between 2014 and 2015, interest expense on interest-bearing liabilities increased $14.4 million, or 32%, primarily due to a $14.0 million, or 42%, increase in interest expense on interest-bearing deposits. The increase in interest expense on interest- bearing deposits in 2015 included growth of $2.4 billion in the average balance and a four basis point increase in the rate paid on interest-bearing deposits compared to 2014. Interest expense on the Company's borrowings increased $0.4 million as a result of an increase in average long-term debt of $53.0 million when compared to 2014. Provision for Loan Losses Management of the Company formally assesses the ACL quarterly and will make provisions for loan losses and unfunded lending commitments as necessary in order to maintain the appropriateness of the ACL at the balance sheet date. The provision for loan losses exceeded net charge-offs by $10.6 million and $20.0 million for the year ended December 31, 2016 and December 31, 2015, respectively. 2016 vs. 2015 On a consolidated basis, the Company recorded a provision for loan losses of $44.4 million for the year ended December 31, 2016, a $13.5 million increase from the provision recorded for the same period of 2015. The Company also recorded a reversal of provision for unfunded lending commitments of $2.9 million during the current year, which is recorded in "credit and other loan-related expense" in the Company's consolidated statements of comprehensive income. As a result, the Company’s total provision for credit losses was $41.5 million in 2016, which is $8.3 million, or 25%, above the provision recorded in 2015. The Company’s total provision for loan losses in 2016 was largely due to a $44.8 million provision recorded on legacy loans resulting primarily from the downward migration of energy-related credits, due to general energy sector weakness, as well as legacy loan growth of $1.5 billion, or 13%. Net charge-offs to average loans in the legacy portfolio were 0.28% as of December 31, 2016, compared to 0.10% as of December 31, 2015. Excluding energy-related loans and charge-offs, legacy net charge-offs to average loans were 0.15% in 2016. 2015 vs. 2014 On a consolidated basis, the Company recorded a provision for loan losses of $30.9 million for the year ended December 31, 2015, an $11.8 million increase from the provision recorded for the same period of 2014. The Company also recorded a provision for unfunded lending commitments of $2.3 million during 2015. As a result, the Company’s total provision for credit losses was $33.2 million in 2015, which is $13.5 million, or 69%, above the provision recorded in 2014. The Company’s total provision for loan losses in 2015 included a provision for changes in expected cash flows on the acquired loan portfolios of $3.2 million and a $27.7 million provision recorded on legacy loans. The increase in provision was due primarily to legacy loan growth of $1.5 billion, or 16%, from December 31, 2014, as well as higher net loan charge-offs and general energy sector weakness. Net charge-offs to average loans in the legacy portfolio were 0.10% as of December 31, 2015, compared to 0.06% as of December 31, 2014. Refer to the "Asset Quality" section of MD&A and Note 6, Allowance for Credit Losses, to the consolidated financial statements for additional information. Non-interest Income The Company’s operating results for the year ended December 31, 2016 included non-interest income of $233.8 million compared to $220.4 million and $173.6 million for the years ended December 31, 2015 and 2014, respectively. The increase in non-interest income from 2015 to 2016 was primarily a result of increases in mortgage income and other non-interest income, partially offset by a decrease in broker commissions. Non-interest income as a percentage of total gross revenue (defined as total interest and non-interest income) was 25% in both 2016 and 2015. (cid:22)(cid:22) The following table illustrates the primary components of non-interest income. TABLE 7—NON-INTEREST INCOME (Dollars in thousands) Mortgage income Service charges on deposit accounts Title revenue Broker commissions ATM/debit card fee income Credit card and merchant-related income Income from bank owned life insurance Gain on sale of available for sale securities Trust income Other non-interest income 2016 $ 83,853 2015 $ 80,662 2014 $ 51,797 $ Change % Change 4 3,191 $ Change % Change 56 28,865 2016 vs. 2015 2015 vs. 2014 44,135 22,213 15,338 14,240 12,171 5,241 2,001 7,174 42,197 22,837 17,592 13,989 10,675 4,356 1,575 6,974 35,573 20,492 18,783 12,023 9,718 5,473 771 6,019 1,938 (624) (2,254) 251 1,496 885 426 200 27,455 $233,821 19,536 $220,393 12,979 $173,628 7,919 13,428 5 (3) (13) 2 14 20 27 3 41 6 6,624 2,345 (1,191) 1,966 957 (1,117) 804 955 6,557 46,765 19 11 (6) 16 10 (20) 104 16 51 27 2016 vs. 2015 After record levels of mortgage production in 2015, mortgage income increased by $3.2 million in 2016. The increase in mortgage income was primarily attributable to a $5.3 million increase in gains on sales and increases in servicing and other income offset by a more unfavorable derivative valuation adjustment of $2.5 million. The Company originated $2.5 billion in mortgage loans in 2016, down $4.6 million from 2015. The Company sold $2.5 billion in mortgage loans in 2016, up $23.7 million from 2015. In addition to the slight increase in sales volume, margin on sales was up 26 basis points in 2016 over 2015. Other non-interest income increased $7.9 million, or 41%, in 2016, which included a $4.7 million, or 113%, increase in client derivatives income, a $0.9 million, or 69%, increase in business banking loan income, as well as a $1.3 million, or 239% increase in income from COLI assets (which is more than offset by an increase in salaries and benefits expense within non- interest expense). These increases were partially offset by a $2.3 million, or 13%, decrease in broker commissions and a $0.6 million, or 3%, decrease in title revenue. 2015 vs. 2014 In 2015, strong mortgage production and sales resulted in a $28.9 million increase in mortgage income compared to 2014. The Company originated $2.5 billion in mortgage loans in 2015, up $789.1 million, or 47% from 2014. The Company sold $2.5 billion in mortgage loans, up $799.1 million from 2014. Derivative valuation adjustments were more favorable in 2015 than 2014 by $5.3 million. Other fluctuations in non-interest income from 2014 to 2015 included increases in service charges, title revenue, and ATM/ debit card fee income offset partially by decreases in broker commissions and BOLI income. Other non-interest income increased $6.6 million, or 51%, in 2015 due to increases in commission income, gains on sales of fixed assets, and other commercial loan income. Non-interest Expense The Company’s results for 2016 included non-interest expense of $566.7 million, a decrease of $3.6 million from 2015. The primary reason for this decrease is the direct merger-related and severance expenses incurred during 2015 resulting from the Company's three 2015 acquisitions, partially offset by the $17.8 million loss incurred to terminate the Company's loss share agreements with the FDIC in December of 2016. Additionally, ongoing attention to expense control is part of the Company’s corporate culture. For the year, the Company’s efficiency ratio was 64.2%, compared to 70.6% in 2015. (cid:22)(cid:23) The following table illustrates the primary components of non-interest expense. TABLE 8—NON-INTEREST EXPENSE (Dollars in thousands) Salaries and employee benefits Net occupancy and equipment Communication and delivery Marketing and business development Data processing Amortization of acquisition intangibles Professional services Credit and other loan-related expense Insurance Loss on early termination of loss share agreements Travel and entertainment Other non-interest expense 2016 vs. 2015 2016 vs. 2015 2015 vs. 2014 2016 $ 331,686 2015 $ 322,586 2014 $ 259,086 65,797 12,383 12,332 25,091 8,415 19,153 10,937 17,270 17,798 8,481 68,541 13,506 13,176 34,424 7,811 22,368 16,653 16,670 — 9,525 59,571 12,029 11,707 27,249 5,807 18,975 13,692 14,359 — 9,033 37,322 $ 566,665 45,045 $ 570,305 42,106 $ 473,614 $ Change % Change 3 (4) (8) (6) (27) 8 (14) (34) 4 9,100 (2,744) (1,123) (844) (9,333) 604 (3,215) (5,716) 600 17,798 (1,044) (7,723) (3,640) 100 (11) (17) (1) $ Change % Change 25 63,500 8,970 1,477 1,469 7,175 2,004 3,393 2,961 2,311 — 492 2,939 96,691 15 12 13 26 35 18 22 16 — 5 7 20 Data processing decreased $9.3 million, or 27%, from 2015, largely due to merger-related conversion expenses from the Company's three 2015 acquisitions. Credit and other loan-related expense decreased $5.7 million, or 34%, from 2015, primarily as a result of a decrease in the reserve for unfunded lending commitments due to a risk shift from higher-risk energy-related commitments, which have decreased as these lines have funded or been curtailed, to lower-risk unfunded commitments. Net occupancy and equipment expense decreased $2.7 million, or 4%, compared to 2015, mostly due to decreases of $1.5 million in depreciation expense, as well as decreases in equipment rental, insurance, and utilities expenses. Other fluctuations are largely due to acquisition and merger-related expenses incurred in 2015, none of which the Company incurred in 2016 as there were no acquisitions in the current year. The decreases in 2016 were offset by a pre-tax loss of $17.8 million incurred to terminate the Company's loss share agreements with the FDIC ahead of their contractual maturities in December of 2016. The decreases in 2016 were also offset by a $9.1 million, or 3%, increase in salaries and employee benefits expense mostly due to a $6.0 million increase in commissions and incentives in 2016. The Company had 3,100 full-time equivalent employees at the end of 2016, a decrease of 51, or 2%, from 2015. 2015 vs. 2014 In 2015, net occupancy and equipment expenses were up $9.0 million from 2014, primarily due to additional growth from acquisitions in 2015, as the Company incurred security equipment monitoring costs, and increased rent expense and depreciation from additional branches. Data processing increased $7.2 million in 2015, primarily due to increases in merger- related computer services expense of $4.0 million, as well as the increased costs of strengthening the Company's cybersecurity. Due to the continued growth of the Company, professional services expense in 2015 was $3.4 million higher than in 2014. The $2.9 million, or 7%, increase in other non-interest expense in 2015 was primarily due to increases in ATM/debit card expense (due to a higher volume of ATM/debit card transactions) and deposit insurance expense (due to deposit growth). Salaries and employee benefits increased $63.5 million in 2015, primarily the result of increased staffing due to the growth of the Company, specifically from the three completed acquisitions during 2015. The Company had 3,151 full-time equivalent employees at the end of 2015, an increase of 394, or 14%, from 2014. The Company also had an increase of $8.8 million in commissions and incentives and $6.6 million increase in phantom stock expense for grants in 2015 that contributed to the overall increase in salaries and employee benefits. (cid:22)(cid:24) Income Taxes For the years ended December 31, 2016, 2015, and 2014, the Company recorded income tax expense of $85.2 million, $64.1 million, and $35.7 million, respectively, which resulted in an effective income tax rate of 31.3% in 2016, 31.0% in 2015, and 25.3% in 2014. The difference between the effective tax rate and the statutory federal and state tax rates relates to items that are non-taxable or non-deductible, primarily the effect of tax-exempt income and various tax credits. The effective tax rates in 2016 and 2015 have increased primarily due to the increase in pre-tax income without a corresponding proportional increase in tax credits. In addition, the effective tax rate has been negatively impacted by the post-merger effect of the 2015 acquisitions, which contributed to the increase in the Company's state effective tax rate given the higher statutory tax rates in Florida and Georgia. FINANCIAL CONDITION EARNING ASSETS Interest income associated with earning assets is the Company’s primary source of income. Earning assets are composed of interest-earning or dividend-earning assets, including loans, securities, short-term investments, and loans held for sale. Earning assets increased $2.2 billion, or 12%, during 2016. Major components of earning assets at December 31 are shown in the following table: TABLE 9—EARNING ASSETS COMPOSITION (Ending Balances) (Dollars in thousands) Legacy Loans Commercial Loans Residential mortgage Loans Consumer Loans Total Legacy Loans Acquired Loans Total Loans, Net of Unearned Income FDIC Loss Share Receivables Investment Securities Other Earning Assets Total Earning Assets 2016 2015 Increase (Decrease) $ 9,377,399 $ 8,133,341 $ 1,244,058 854,216 2,463,309 694,023 2,363,156 12,694,924 11,190,520 2,370,047 3,136,908 15,064,971 14,327,428 — 39,878 3,535,313 1,323,417 2,899,214 506,532 160,193 100,153 1,504,404 (766,861) 737,543 (39,878) 697,665 636,099 816,885 15% 23 4 13 (24) 5 (100) 5 22 161 $ 19,923,701 $ 17,773,052 $ 2,150,649 12% Total Loans and FDIC Loss Share Receivables 15,064,971 14,367,306 The following discussion highlights the Company’s major categories of earning assets. Loans The Company had total loans of approximately $15.1 billion at December 31, 2016, an increase of $737.5 million, or 5%, from December 31, 2015. Legacy loans increased $1.5 billion, or 13%, to $12.7 billion at December 31, 2016, while acquired loans decreased $766.9 million, or 24%, to $2.4 billion at December 31, 2016. The growth in the legacy portfolio included increases in commercial loans of $1.2 billion, or 15%, consumer loans of $100.2 million, or 4%, and mortgage loans of $160.2 million, or 23%, over December 31, 2015 balances. With no additional acquisitions during 2016, the acquired portfolio decreased as pay-downs and pay-offs occurred. In addition, acquired loans are transferred to the legacy portfolio as they are refinanced, renewed, restructured, or otherwise underwritten to the Company's standards. (cid:22)(cid:25) The major categories of loans outstanding at December 31, 2016 and 2015 are presented in the following tables, segregated into legacy and acquired loans. (Dollars in thousands) Legacy Commercial Commercial and Industrial $ 3,194,796 Real Estate $ 5,623,314 Acquired 1,178,952 Total loans $ 6,802,266 348,326 $ 3,543,122 TABLE 10—SUMMARY OF LOANS December 31, 2016 Consumer and Other Energy- related $ 559,289 1,904 $ 561,193 Residential Mortgage 854,216 $ 413,184 $ 1,267,400 Indirect automobile 131,048 $ Home Equity $ 1,783,421 4 131,052 372,505 $ 2,155,926 $ Credit Card $ 82,524 468 $ 82,992 Other $ 466,316 54,704 $ 521,020 Total $ 12,694,924 2,370,047 $ 15,064,971 Commercial Commercial and Industrial $ 2,952,102 Real Estate $ 4,504,062 Legacy December 31, 2015 Consumer and Other Energy- related $ 677,177 Residential Mortgage 694,023 $ Indirect automobile 246,214 $ Home Equity $ 1,575,643 Acquired 1,569,449 Total loans $ 6,073,511 492,476 $ 3,444,578 3,589 $ 680,766 501,296 $ 1,195,319 $ 84 246,298 490,524 $ 2,066,167 Credit Card $ 77,261 582 $ 77,843 Other $ 464,038 Total $ 11,190,520 78,908 $ 542,946 3,136,908 $ 14,327,428 Loan Portfolio Components The Company believes its loan portfolio is diversified by product and geography throughout its footprint. From a market perspective, total loan growth was seen primarily in the Atlanta, Tampa, Dallas, and Southeast Florida markets. Loans in the Atlanta market increased $168.7 million, or 21%, during 2016, while loans in the Tampa market increased $165.6 million, or 46%. Dallas had year-to-date loan growth of $136.5 million, or 31%, and Southeast Florida experienced growth of $133.8 million, or 43%, since the end of 2015. The Company’s loan to deposit ratio at December 31, 2016 and 2015 was 87% and 89%, respectively. The percentage of fixed- rate loans to total loans decreased from 48% at the end of 2015 to 45% at December 31, 2016. The table below sets forth the composition of the loan portfolio at December 31, followed by a discussion of activity by major loan type. TABLE 11—TOTAL LOANS BY LOAN TYPE (Dollars in thousands) 2016 2015 2014 2013 2012 Balance Mix Balance Mix Balance Mix Balance Mix Balance Mix Commercial loans: Real estate $ 6,802,266 45 % $ 6,073,511 42 % $ 4,361,779 38 % $ 3,786,501 40 % $ 3,578,363 42 % Commercial and industrial Energy-related Total commercial loans 3,543,122 561,193 10,906,581 24 4 73 3,444,578 680,766 10,198,855 24 5 71 2,571,695 880,608 7,814,082 23 8 69 2,324,235 752,682 6,863,418 24 8 72 2,015,081 575,817 6,169,261 24 7 73 Residential mortgage loans: 1,267,400 8 1,195,319 8 1,080,297 9 586,532 6 477,204 5 Consumer and other loans: Home equity Indirect automobile Other Total consumer and other loans 2,155,926 131,052 604,012 2,890,990 14 1 4 19 2,066,167 246,298 620,789 2,933,254 15 2 4 21 1,601,105 397,158 548,402 2,546,665 14 3 5 22 1,291,792 375,236 375,041 2,042,069 14 4 4 22 1,251,125 327,985 273,005 1,852,115 15 4 3 22 Total loans $15,064,971 100% $14,327,428 100% $11,441,044 100% $ 9,492,019 100% $ 8,498,580 100% (cid:22)(cid:26) Commercial Loans Total commercial loans increased $707.7 million, or 7%, from December 31, 2015, with $1.2 billion, or 15%, in legacy loan growth and a decrease in acquired commercial loans of $536.3 million, or 26%. The Company continued to attract and retain commercial customers in 2016 as commercial loans were 73% of the total loan portfolio at December 31, 2016, compared to 71% at December 31, 2015. Unfunded commitments on commercial loans including approved loan commitments not yet funded were $4.0 billion at December 31, 2016, an increase of $489.7 million, or 14%, when compared to the end of the prior year. Commercial real estate loans include loans to commercial customers for long-term financing of land and buildings or for land development or construction of a building. The commercial real estate portfolio is comprised of approximately 39% owner- occupied and 61% non-owner-occupied loans as of December 31, 2016. These loans are repaid from revenues through operations of the businesses, rents of properties, sales of properties and refinances. Commercial real estate loans increased $728.8 million, or 12%, during the year, consisting of increases in legacy commercial real estate loans of $1.1 billion, or 25%, offset by decreases in acquired commercial real estate loans of $390.5 million, or 25%. At December 31, 2016, commercial real estate loans totaled $6.8 billion, or 45% of the total loan portfolio, compared to 42% at December 31, 2015. The Company’s underwriting standards generally provide for loan terms of three to seven years, with amortization schedules of generally no more than twenty-five years. Low loan-to-value ratios are generally maintained and usually limited to no more than 80% at the time of origination. Commercial and industrial loans represent loans to commercial customers to finance general working capital needs, equipment purchases and other projects where repayment is derived from cash flows resulting from business operations. The Company originates commercial business loans on a secured and, to a lesser extent, unsecured basis. The Company’s commercial business loans may be term loans or revolving lines of credit. Term loans are generally structured with terms of no more than three to seven years, with amortization schedules of generally no more than fifteen years. Commercial business term loans are generally secured by equipment, machinery or other corporate assets. The Company also provides for revolving lines of credit generally structured as advances upon perfected security interests in accounts receivable and inventory. Revolving lines of credit generally have annual maturities. The Company obtains personal guarantees of the principals as additional security for most commercial business loans. As of December 31, 2016, commercial and industrial loans totaled $3.5 billion, or 24% of the total loan portfolio. This represents a $98.5 million, or 3%, increase from December 31, 2015. The following table details the Company’s commercial loans by state. TABLE 12—COMMERCIAL LOANS BY STATE OF ORIGINATION (Dollars in thousands) December 31, 2016 Legacy Louisiana Florida Alabama Texas Arkansas Georgia Tennessee Other Total $3,133,872 $1,546,290 $1,157,914 $1,849,625 $639,053 $436,936 $ 540,479 $ 73,230 $ 9,377,399 Acquired Total 193,059 $3,326,931 843,191 $2,389,481 19,050 $1,176,964 39,391 $1,889,016 — 395,299 $832,235 $639,053 12,868 $ 553,347 26,324 $ 99,554 1,529,182 $10,906,581 December 31, 2015 Legacy $3,081,494 $ 947,812 $1,059,604 $1,812,055 $569,384 $125,493 $ 486,703 $ 50,796 $ 8,133,341 Acquired Total 271,780 $3,353,274 1,079,000 $2,026,812 28,145 $1,087,749 40,854 $1,852,909 — 568,283 $693,776 $569,384 20,419 $ 507,122 57,033 $107,829 2,065,514 $10,198,855 Energy-related Loans The Company’s loan portfolio included energy-related loans of $561.2 million at December 31, 2016, or 4% of total loans, compared to $680.8 million at December 31, 2015, a decrease of $119.6 million, or 18%. At December 31, 2016, exploration and production (“E&P”) loans accounted for 52% of energy-related loans and 56% of energy-related commitments. Midstream companies accounted for 16% of energy-related loans and 19% of energy loan commitments, while service company loans totaled 32% of energy-related loans and 25% of energy commitments. The rapid and sustained decline in energy commodity prices that began in 2014 and culminated in early 2016 appears to be slowly recovering. The financial condition of businesses and communities tied to the oil and gas industries remains unsettled. While the vast majority of the Company's loan portfolio continues to have no exposure to these concerns, we took actions to (cid:22)(cid:27) mitigate the risks in the weakened economic environment by employing a risk-off strategy, reducing or exiting exposures in our highest risk credits and strengthening certain underwriting standards. During 2016, many of the Company's criticized (defined as special mention or worse) energy credits deteriorated and cycled through resolution, as expected. Management has been closely monitoring these loans since the decline in commodities prices in 2014. Although the level of criticized loans has significantly increased, the underlying collateral for these credits indicate no increased risk of loss has occurred in 2016. In late 2016, energy prices increased as compared to early 2016 and have shown some stabilization, and the Company expects that prices will remain stable or rise in the foreseeable future. The Company's historical focus on sound client selection, conservative credit underwriting, proactive portfolio management, and market and business diversification continue to serve the Company well. The strategic decision to expand into other markets across the southeast allows the Company to drive growth and profitability to offset declining positions in impacted energy segments of business. Based on the composition and detailed analysis of its energy portfolio at December 31, 2016, the Company believes most of its energy exposure is in areas of lower credit risk; however, a deterioration in prices of energy commodities could lead to increased losses in future periods. Residential Mortgage Loans Residential mortgage loans consist of loans to consumers to finance a primary residence. The vast majority of the residential mortgage loan portfolio is comprised of non-conforming 1-4 family mortgage loans secured by properties located in the Company's market areas and originated under terms and documentation that permit their sale in a secondary market. Larger mortgage loans of current and prospective private banking clients are generally retained to enhance relationships, but also tend to be more profitable due to the expected shorter durations and relatively lower servicing costs associated with loans of this size. The Company does not originate or hold high loan-to-value, negative amortization, option ARM, or other exotic mortgage loans in its portfolio. The Company makes insignificant investments in loans that would be considered sub-prime (e.g., loans with a credit score of less than 620) in order to facilitate compliance with relevant Community Reinvestment Act regulations. Total residential mortgage loans increased $72.1 million, or 6%, compared to December 31, 2015, primarily the result of private banking originations. Consumer and Other Loans The Company offers consumer loans in order to provide a full range of retail financial services to customers in the communities in which it operates. The Company originates substantially all of its consumer loans in its primary market areas. At December 31, 2016, $2.9 billion, or 19%, of the total loan portfolio was comprised of consumer loans, compared to $2.9 billion, or 21%, at the end of 2015. Total consumer loans at December 31, 2016 decreased $42.3 million from December 31, 2015. Indirect automobile loans largely contributed to this decline with a decrease of $115.2 million, or 47%. In January 2015, the Company announced it would exit the indirect automobile lending business. The Company concluded compliance risk associated with these loans had become unbalanced relative to potential returns generated by the business on a risk-adjusted basis. Consistent with 2015, home equity loans comprised the largest component of the consumer loan portfolio at December 31, 2016. Home equity lending allows customers to borrow against the equity in their home and is secured by a first or second mortgage on the borrower’s residence. Real estate market values at the time the loan is secured affect the amount of credit extended. Changes in these values may impact the extent of potential losses. The balance of home equity loans increased $89.8 million during the year to $2.2 billion at December 31, 2016. The Company’s sales and marketing efforts in 2016 have also contributed to the growth in legacy home equity loans since December 31, 2015. Unfunded commitments related to home equity loans and lines were $804.8 million at December 31, 2016, an increase of $53.4 million versus the prior year. The Company has approximately $905.9 million of loans with junior liens where the Company does not hold or service the respective loan holding the senior lien. The Company believes it has appropriately reserved for these loans in its allowance for credit losses. The remainder of the consumer loan portfolio at December 31, 2016 consisted of credit card loans, direct automobile loans and other personal loans, and comprised 4% of the total loan portfolio. Overall, the composition of the Company's loan portfolio as of December 31, 2016 is consistent with the composition as of December 31, 2015. In order to assess the risk characteristics of the loan portfolio, the Company considers the current U.S. economic environment and that of its primary market areas. See Note 6, Allowance for Credit Losses, to the consolidated financial statements for credit quality factors by loan portfolio segment. (cid:22)(cid:28) Additional information on the Company’s consumer loan portfolio is presented in the following tables. For the purposes of Table 16, unscoreable consumer loans have been included with loans with credit scores below 660. Credit scores reflect the most recent information available as of the dates indicated. TABLE 13—CONSUMER LOANS BY STATE OF ORIGINATION (Dollars in thousands) December 31, 2016 Legacy Acquired Total consumer loans December 31, 2015 Legacy Acquired Total consumer loans Louisiana Florida Alabama Texas Arkansas Georgia Tennessee Other Total $1,033,358 $437,316 $ 264,293 $119,366 $ 266,443 $ 68,167 $ 69,736 $ 204,630 $2,463,309 126,758 203,840 4,085 30,990 — 50,906 11,085 17 427,681 $1,160,116 $641,156 $ 268,378 $150,356 $ 266,443 $ 119,073 $ 80,821 $ 204,647 $2,890,990 $1,023,813 $286,539 $ 246,837 $113,773 $ 274,740 $ 32,562 $ 51,182 $ 333,710 $2,363,156 155,884 265,503 5,315 42,420 — 86,129 14,742 105 570,098 $1,179,697 $552,042 $ 252,152 $156,193 $ 274,740 $ 118,691 $ 65,924 $ 333,815 $2,933,254 TABLE 14—CONSUMER LOANS BY CREDIT SCORE Below 660 660-720 Above 720 Discount Total $ 526,479 $ 601,285 $ 1,335,545 $ — $ 2,463,309 169,980 $ 696,459 84,100 $ 685,385 195,324 $ 1,530,869 (21,723) 427,681 $ (21,723) $ 2,890,990 $ 427,938 $ 604,751 $ 1,330,467 $ — $ 2,363,156 122,619 $ 550,557 144,665 $ 749,416 334,023 $ 1,664,490 (31,209) 570,098 $ (31,209) $ 2,933,254 (Dollars in thousands) December 31, 2016 Legacy Acquired Total consumer loans December 31, 2015 Legacy Acquired Total consumer loans Loan Maturities The following table sets forth the scheduled contractual maturities of the Company’s total loan portfolio at December 31, 2016, unadjusted for scheduled principal reductions, prepayments or repricing opportunities. Demand loans, loans having no stated schedule of repayments and no stated maturity, and overdraft loans are reported as due in one year or less. The average life of a loan may be substantially less than the contractual terms because of scheduled amortization and prepayments. Of the loans with maturities greater than one year, approximately 80% of the balance of these loans bears a fixed rate of interest. TABLE 15—LOAN MATURITIES BY LOAN TYPE (Dollars in thousands) Commercial real estate Commercial and industrial Energy-related Residential mortgage Consumer and other Total $ One Year or Less 3,290,383 2,241,913 99,644 224,439 1,804,944 One Through Five Years After Five Years Discount $ 2,272,055 $ 1,273,488 $ 856,739 453,971 196,571 437,345 448,957 7,584 878,420 670,424 Total 6,802,266 3,543,122 (33,660) $ (4,487) (6) (32,030) (21,723) 2,890,990 (91,906) $ 15,064,971 1,267,400 561,193 $ 7,661,323 $ 4,216,681 $ 3,278,873 $ (cid:23)(cid:19) Mortgage Loans Held for Sale The Company continues to sell the majority of conforming mortgage loan originations in the secondary market rather than assume the interest rate risk associated with these longer term assets. Upon the sale, the Company retains servicing on a limited portion of these loans. Loans held for sale decreased $9.2 million, or 6%, to $157.0 million at December 31, 2016 compared to year-end 2015. In 2016 and 2015, the Company originated approximately $2.5 billion in mortgage loans. Loans held for sale have primarily been fixed-rate single-family residential mortgage loans under contracts to be sold in the secondary market. In most cases, loans in this category are sold within thirty days of closing. Buyers generally have recourse to return a purchased loan to the Company under limited circumstances. See Note 1 to the consolidated financial statements for further discussion. Investment Securities Investment securities increased by $636.1 million, or 22%, since December 31, 2015 to $3.5 billion at December 31, 2016. Investment securities approximated 16% and 15% of total assets at December 31, 2016 and December 31, 2015, respectively. The following table shows the carrying values of securities by category as of December 31 for the years indicated. TABLE 16—CARRYING VALUE OF SECURITIES (Dollars in thousands) 2016 2015 2014 2013 2012 Balance Mix Balance Mix Balance Mix Balance Mix Balance Mix Securities available for sale: U.S. Government- sponsored enterprise obligations Obligations of states and political subdivisions Mortgage-backed securities Other securities Securities held to maturity: U.S. Government- sponsored enterprise obligations Obligations of states and political subdivisions Mortgage-backed securities $ 212,358 6 % $ 252,083 9 % $ 315,553 14 % $ 395,561 19 % $ 285,724 15 % 283,199 2,851,709 98,831 3,446,097 8 80 3 97 187,961 2,264,813 95,429 2,800,286 7 78 3 97 90,190 4 107,479 5 127,075 7 1,751,615 77 1,432,278 68 1,330,656 68 1,495 — 1,479 — 1,549 — 2,158,853 95 1,936,797 92 1,745,004 90 — — — — 10,000 — 34,478 64,726 24,490 89,216 2 1 3 69,979 28,949 98,928 2 1 3 77,597 29,363 116,960 4 1 5 84,290 35,341 154,109 2 4 2 8 69,949 88,909 46,204 4 4 2 205,062 10 $ 3,535,313 100% $ 2,899,214 100% $ 2,275,813 100% $ 2,090,906 100% $ 1,950,066 100% All of the Company's mortgage-backed securities were issued by government-sponsored enterprises at December 31, 2016. The Company does not hold any Fannie Mae or Freddie Mac preferred stock, corporate equity, collateralized debt obligations, collateralized loan obligations, or structured investment vehicles, nor does it hold any private label collateralized mortgage obligations, subprime, Alt-A, sovereign debt, or second lien elements in its investment portfolio. At December 31, 2016, the Company's investment portfolio did not contain any securities that are directly backed by subprime or Alt-A mortgages. (cid:23)(cid:20) The following table summarizes activity in the Company’s investment securities portfolio during 2016 and 2015. There were no transfers of securities between investment categories during 2016. TABLE 17—INVESTMENT PORTFOLIO ACTIVITY (Dollars in thousands) Balance at beginning of period Purchases Acquisitions Sales, net of gains Principal maturities, prepayments and calls, net of gains Amortization of premiums and accretion of discounts Unrealized gains (losses) (1) Balance at end of period Available for Sale Held to Maturity 2016 $ 2,800,286 2015 $ 2,158,853 $ 2016 98,928 $ 2015 116,960 1,384,525 1,063,460 — (195,732) (484,138) (21,811) (37,033) $ 3,446,097 309,485 (227,029) (473,142) (17,268) (14,073) $ 2,800,286 $ — — — (8,791) (921) — 89,216 $ 5,833 — — (22,939) (926) — 98,928 (1) The Company elected to opt out of the requirement to include the net unrealized gains or losses on the Company's available for sale investment securities in regulatory capital in an effort to exclude the impact that changes in the Company's unrealized gains or losses on its available for sale investment portfolio may have on regulatory capital and the related capital ratios. See Note 16 to the consolidated financial statements for additional information. Funds generated as a result of sales and prepayments of investment securities are used to fund loan growth and purchase other securities. The Company continues to monitor market conditions and take advantage of market opportunities with appropriate risk and return elements. The Company assesses the nature of the unrealized losses in its investment portfolio at least quarterly to determine if there are losses that are deemed other-than-temporary. In its analysis of these securities, management considers numerous factors to determine whether there are instances where the amortized cost basis of the debt securities would not be fully recoverable including, the length of time and extent to which the fair value of the securities was less than their amortized cost, whether adverse conditions were present in the operations, geographic area or industry of the issuer, the payment structure of the security, including scheduled interest and principal payments, including the issuer's failures to make scheduled payments, if any, and the likelihood of failure to make such scheduled payments in the future, changes to the rating of the security by a rating agency, and subsequent recoveries or additional declines in fair value after the balance sheet date. Management believes it has considered these factors, as well as all relevant information available, when determining the expected future cash flows of the securities in question. Based on its analysis, the Company concluded no declines in the estimated fair value of the Company’s investment securities were deemed to be other-than-temporary at December 31, 2016 and 2015. Note 4 to the consolidated financial statements provides further information on the Company’s investment securities. Asset Quality The lending activities of the Company are governed by underwriting policies established by management and approved by the Board Risk Committee of the Board of Directors. Commercial risk personnel, in conjunction with senior lending personnel, underwrite the vast majority of commercial business and commercial real estate loans. The Company provides centralized underwriting of substantially all residential mortgage, small business and consumer loans. Established loan origination procedures require appropriate documentation, including financial data and credit reports. For loans secured by real property, the Company generally requires property appraisals, title insurance or a title opinion, hazard insurance, and flood insurance, where appropriate. Loan payment performance is monitored and late charges are generally assessed on past due accounts. Delinquent and problem loans are administered by functional teams of specialized risk officers. Risk ratings on commercial exposures (as described below) are reviewed on an ongoing basis and are adjusted as necessary based on the obligor’s risk profile and debt capacity. The central loan review department is responsible for independently assessing and validating risk ratings assigned to commercial exposures through a periodic sampling process. All other loans are also subject to loan reviews through a similar periodic sampling process. The Company exercises judgment in determining the risk classification of its commercial loans. The Company utilizes an asset risk classification system in accordance with guidelines established by the FRB as part of its efforts to monitor commercial asset quality. In connection with their examinations of insured institutions, both federal and state (cid:23)(cid:21) examiners also have the authority to identify problem assets and, if appropriate, reclassify them. There are three classifications for problem assets: “substandard,” “doubtful” and “loss”, all of which are considered adverse classifications. Substandard assets have one or more defined weaknesses and are characterized by the distinct possibility that the Company will sustain some loss if the weaknesses are not corrected. Doubtful assets have the weaknesses of substandard assets with the additional characteristic that the weaknesses make collection or liquidation in full questionable, and there is a high probability of loss based on currently existing facts, conditions and values. An asset classified as loss is considered not collectible and of such little value that continuance as an asset of the Company is not warranted. In the first quarter of 2016, the banking regulatory agencies issued interpretive guidance on the valuation of collateral underlying E&P loans and how such valuations should impact the assessment of the inherent credit risk (and ultimately risk ratings and charge-offs) in such loans. The Company's implementation of this guidance in the first quarter of 2016 contributed to the increase in criticized assets within the Company's energy portfolio. Commercial loans are placed on non-accrual status when any of the following occur: 1) the loan is maintained on a cash basis because of deterioration in the financial condition of the borrower; 2) collection of the full contractual amount of principal or interest is not expected (even if the loan is currently paying as agreed); 3) when principal or interest has been in default for a period of 90 days or more, unless the loan is both well secured and in the process of collection; or 4) the borrower has filed or is likely to file bankruptcy. Factors considered in determining the collection of the full contractual amount of principal or interest include assessment of the borrower’s cash flow, valuation of underlying collateral, and the ability and willingness of guarantors to provide credit support. Certain commercial loans are also placed on non-accrual status when payment is not past due and full payment of principal and interest is expected, but we have doubt about the borrower’s ability to comply with existing repayment terms. Consideration will be given to placing a loan on non-accrual due to the deterioration of the debtor’s repayment ability, the repayment of the loan becoming dependent on the liquidation of collateral, an existing collateral deficiency, the loan being classified as "Doubtful" or "Loss", the client filing for bankruptcy, and/or foreclosure being initiated. Regarding all classes within the C&I and CRE portfolios, the determination of a borrower’s ability to make the required principal and interest payments is based on an examination of the borrower’s current financial statements, industry, management capabilities, and other qualitative factors. When a loan is placed on non-accrual status, the accrual of interest income ceases and accrued but unpaid interest is generally reversed against interest income. Real estate acquired by the Company through foreclosure or by deed-in-lieu of foreclosure is classified as OREO, and is recorded at the lesser of the related loan balance (the pro-rata carrying value for acquired loans) or estimated fair value less costs to sell. Closed bank branches are also classified as OREO and recorded at the lower of cost or market value. Under GAAP, certain loan modifications or restructurings are designated as TDRs. In general, the modification or restructuring of a debt constitutes a TDR if the Company, for economic or legal reasons related to the borrower’s financial difficulties, grants a concession to the borrower that the Company would not otherwise consider under current market conditions. See Note 1, Summary of Significant Accounting Policies, to the consolidated financial statements for further information. (cid:23)(cid:22) Non-performing Assets The Company defines non-performing assets as non-accrual loans, accruing loans more than 90 days past due, OREO, and foreclosed property. Management continually monitors loans and transfers loans to non-accrual status when warranted. The Company accounts for loans formerly covered by loss sharing agreements with the FDIC, other loans acquired with deteriorated credit quality, as well as all loans acquired with significant discounts that did not exhibit deteriorated credit quality at acquisition, in accordance with ASC Topic 310-30. Collectively, all loans accounted for under ASC 310-30 are referred to as "purchased impaired loans". Application of ASC Topic 310-30 results in significant accounting differences, compared to loans originated or acquired by the Company that are not accounted for under ASC 310-30. See Note 1, Summary of Significant Accounting Policies, to the consolidated financial statements for further details. Due to the significant difference in accounting for purchased impaired loans, the Company believes inclusion of these loans in certain asset quality ratios that reflect non-performing assets in the numerator or denominator (or both) results in significant distortion to these ratios. In addition, because loan level charge-offs related to purchased impaired loans are not recognized in the financial statements until the cumulative amounts exceed the original loss projections on a pool basis, the net charge-off ratio for acquired loans is not consistent with the net charge-off ratio for other loan portfolios. The inclusion of these loans in certain asset quality ratios could result in a lack of comparability across quarters or years, and could impact comparability with other portfolios that were not impacted by purchased impaired loan accounting. The Company believes that the presentation of certain asset quality measures excluding purchased impaired loans, as indicated below, and related amounts from both the numerator and denominator provides better perspective into underlying trends related to the quality of its loan portfolio. Accordingly, the asset quality measures in the tables below present asset quality information excluding purchased impaired loans, as indicated within each table, and related amounts. Total non-performing assets increased $159.7 million, or 175%, compared to December 31, 2015. Legacy non-performing assets increased $163.9 million, or 241%, compared to December 31, 2015, as non-performing loans increased $171.1 million, offset by a decrease in OREO of $7.2 million. Including TDRs that are in compliance with their modified terms, total non-performing assets and TDRs increased $221.4 million over the past twelve months. (cid:23)(cid:23) The following table sets forth the composition of the Company’s legacy non-performing assets, including accruing loans past due 90 or more days and TDRs, as of December 31. TABLE 18—NON-PERFORMING ASSETS AND TROUBLED DEBT RESTRUCTURINGS (LEGACY) (Dollars in thousands) Non-accrual loans: Commercial Energy-related Mortgage Consumer and credit card Total non-accrual loans Accruing loans 90 days or more past due Total non-performing loans (1) OREO and foreclosed property (2) Total non-performing assets (1) Performing troubled debt restructurings (3) Total non-performing assets and troubled debt restructurings (1) Non-performing loans to total loans (1) (4) Non-performing assets to total assets (1) (4) Non-performing assets and troubled debt restructurings to total assets (1) (4) Allowance for credit losses to non-performing loans (4) (5) 2016 2015 2014 2013 2012 $ Change % Change 2016 vs. 2015 $ 47,666 $ 22,201 $ 9,953 $ 24,471 $ 32,313 25,465 150,329 13,014 10,534 221,543 1,104 222,647 9,264 231,911 95,951 7,081 13,674 7,972 50,928 624 51,552 16,491 68,043 38,441 27 14,362 10,628 34,970 754 35,724 21,243 56,967 1,430 — 10,237 8,979 43,687 1,075 44,762 28,272 73,034 1,376 — 143,248 8,367 7,237 47,917 1,371 49,288 26,380 75,668 2,354 (660) 2,562 170,615 480 171,095 (7,227) 163,868 57,510 $327,862 $106,484 $ 58,397 $ 74,410 $ 78,022 $ 221,378 115 N/M (5) 32 335 77 332 (44) 241 150 208 1.75% 1.20% 0.46% 0.42% 0.37% 0.41% 0.54% 0.61% 0.73% 0.69% 1.70% 0.65% 0.42% 0.62% 0.71% 52.46% 209.41% 246.26% 175.35% 150.57% Allowance for credit losses to total loans (4) (5) 0.92% 0.96% 0.91% 0.95% 1.10% (1) Non-performing loans and assets include accruing loans 90 days or more past due. (2) OREO and foreclosed property at December 31, 2016, 2015, 2014, 2013, and 2012 include $4.8 million, $8.1 million, (3) (4) (5) $11.6 million, $9.2 million, and $9.2 million, respectively, of former bank properties held for development or resale. Performing troubled debt restructurings for December 31, 2016, 2015, 2014, 2013 and 2012 exclude $136.8 million, $23.4 million, $2.2 million, $18.5 million, $15.4 million, respectively, in troubled debt restructurings that meet non- performing asset criteria. Total loans, total non-performing loans, and total assets exclude acquired loans and assets discussed below. The allowance for credit losses excludes the portion of the allowance related to acquired loans discussed below. Non-performing legacy loans were 1.75% of total legacy loans at December 31, 2016, 129 basis points higher than at December 31, 2015. The increase in legacy non-performing loans was due primarily to an increase of $143.2 million in energy- related non-accrual loans. The majority of the increase in energy-related non-accrual loans is comprised of 13 relationships that were deemed criticized in prior periods. The decline in energy prices has strained the cash flows of many energy companies. We believe our underwriting policies on energy are conservative and focus on obtaining strong collateral to support the underlying loans. Generally, our energy loans are senior credit facilities with well-secured collateral positions, and we do not engage in subordinated, second lien, or mezzanine financing to energy companies. As such, despite the increase in non- performing energy loans, we believe the risk of loss on these loans is mitigated by the respective collateral and related reserves. Non-performing assets as a percentage of total assets increased over the past year primarily as a result of the challenges our energy-related customers faced in 2016 as previously discussed. Legacy non-performing assets were 1.20% of total legacy assets at December 31, 2016, 78 basis points above December 31, 2015. The allowance for credit losses as a percentage of non- performing legacy loans was 52.46% at December 31, 2016 compared to 209.41% at December 31, 2015. The Company’s allowance for credit losses as a percentage of legacy loans decreased four basis points from 2015 to 0.92% at December 31, 2016. The Company has considered the collateral support on these non-performing assets in determining the allowance for credit losses. (cid:23)(cid:24) The Company had gross charge-offs on legacy loans of $38.0 million during the year ended December 31, 2016. Offsetting these charge-offs were recoveries of $5.0 million. As a result, net charge-offs on legacy loans during 2016 were $33.0 million, or 0.28% of average loans, as compared to net charge-offs of $10.1 million, or 0.10%, for 2015. Net charge-offs in 2016 included $16.2 million from a limited number of energy-related relationships. At December 31, 2016, the Company had $319.7 million of legacy commercial assets classified as substandard, $28.9 million of commercial assets classified as doubtful, and no commercial assets classified as loss. Accordingly, the aggregate of the Company’s legacy classified commercial assets was 1.61% of total assets, 2.31% of total loans, and 2.75% of legacy loans. At December 31, 2015, legacy classified commercial assets totaled $144.1 million, or 0.74% of total assets, 1.01% of total loans, and 1.29% of legacy loans. As with non-classified assets, a reserve for credit losses has been recorded for substandard loans at December 31, 2016 in accordance with the Company’s allowance for credit losses policy. In addition to the problem loans described above, there were $138.2 million of legacy commercial loans classified as special mention at December 31, 2016, which in management’s opinion were subject to potential future rating downgrades. Special mention loans are defined as loans where known information about possible credit problems of the borrowers causes management to have some doubt as to the ability of these borrowers to comply with the present loan repayment terms, which may result in future disclosure of these loans as non-performing. Special mention loans at December 31, 2016 increased $33.4 million, or 32%, from December 31, 2015. The increase was attributable to both loan growth and a general deterioration in credit quality, primarily as it relates to the Company's legacy energy-related loans. As noted above, the asset quality of the Company’s energy-related loan portfolio has been impacted by sustained low commodity prices. At December 31, 2016, $1.5 million of energy-related loans were past due greater than 30 days. Non-accrual energy-related loans totaled $150.3 million at year-end 2016, compared to $8.5 million at year-end 2015. In 2016, the Company has experienced $16.2 million in energy-related net charge-offs. There were no energy-related charge-offs in 2015. Past Due and Non-accrual Loans Past due status is based on the contractual terms of loans. At December 31, 2016, total acquired loans past due were 0.47% of total acquired loans, an increase of 13 basis points from December 31, 2015. Total legacy past due loans (including non-accrual loans) were 1.95% of total legacy loans at December 31, 2016 compared to 0.65% at December 31, 2015. Additional information on past due loans is presented in the following table. TABLE 19—PAST DUE AND NON-ACCRUAL LOAN SEGREGATION (Dollars in thousands) Accruing loans: 30-59 days past due 60-89 days past due 90-119 days past due 120 days past due or more Non-accrual loans Legacy December 31, 2016 Acquired (1) Total Amount % of Outstanding Balance Amount % of Outstanding Balance Amount % of Outstanding Balance $ $ 18,026 6,876 880 224 26,006 221,543 247,549 0.14 % $ 0.05 0.01 — 0.20 1.75 1.95% $ 2,586 1,381 250 32 4,249 6,958 11,207 0.11 % $ 0.06 0.01 — 0.18 0.29 0.47% $ 20,612 8,257 1,130 256 30,255 228,501 258,756 0.14 % 0.05 0.01 — 0.20 1.52 1.72% (1) Acquired past due and non-accrual loan amounts exclude acquired impaired loans, even if contractually past due or if the Company does not expect to receive payment in full, as the Company is currently accreting interest income over the expected life of the loans. (cid:23)(cid:25) (Dollars in thousands) Accruing loans: 30-59 days past due 60-89 days past due 90-119 days past due 120 days past due or more Non-accrual loans Legacy December 31, 2015 Acquired (1) Total Amount % of Outstanding Balance Amount % of Outstanding Balance Amount % of Outstanding Balance $ 13,839 0.12 % $ 6,270 461 163 20,733 50,928 71,661 $ 0.07 — — 0.19 0.46 0.65% $ 2,761 2,305 291 — 5,357 5,421 10,778 0.09 % $ 16,600 0.11 % 0.07 0.01 — 0.17 0.17 0.34% $ 8,575 752 163 26,090 56,349 82,439 0.06 0.01 — 0.18 0.39 0.57% (1) Acquired past due and non-accrual loan amounts exclude acquired impaired loans, even if contractually past due or if the Company does not expect to receive payment in full, as the Company is currently accreting interest income over the expected life of the loans. Total past due and non-accrual loans increased $176.3 million from December 31, 2015 to $258.8 million at December 31, 2016. The change was primarily due to an increase of $172.2 million in non-accrual loans of which $142.0 million of the increase was energy-related. Allowance for Credit Losses The allowance for credit losses represents management’s best estimate of probable credit losses inherent at the balance sheet date. Determination of the allowance for credit losses involves a high degree of complexity and requires significant judgment. Several factors are taken into consideration in the determination of the overall allowance for credit losses. Based on facts and circumstances available, management of the Company believes that the allowance for credit losses was appropriate at December 31, 2016 to cover probable losses in the Company’s loan portfolio. However, future adjustments to the allowance may be necessary, and the results of operations could be adversely affected, if circumstances differ substantially from the assumptions used by management in determining the allowance for credit losses. See the “Application of Critical Accounting Policies and Estimates” and Note 1, Summary of Significant Accounting Policies, to the consolidated financial statements for more information. (cid:23)(cid:26) The following tables set forth the activity in the Company’s allowance for credit losses. TABLE 20—SUMMARY OF ACTIVITY IN THE ALLOWANCE FOR CREDIT LOSSES (Dollars in thousands) Allowance for loan losses at beginning of period Transfer of balance to OREO and other Transfer of balance to the reserve for unfunded commitments Provision charged to operations 2016 $ 138,378 (2,781) 2015 $ 130,131 (10,419) 2014 $ 143,074 (22,157) 2013 $ 251,603 (43,802) 2012 $ 193,761 (42,090) — — — 44,424 30,908 19,060 (9,828) 5,145 — 20,671 (Reversal of) provision recorded through the FDIC loss share receivable (1,497) (1,360) (4,260) (56,085) 84,085 Charge-offs: Commercial Residential Mortgage Consumer and other Recoveries: Commercial Residential Mortgage Consumer and other Net charge-offs Allowance for loan losses at end of period Reserve for unfunded lending commitments at beginning of period Transfer of balance from the allowance for loan losses (Reversal of) provision for unfunded lending commitments Reserve for unfunded lending commitments at end of period Allowance for credit losses at end of period Allowance for loan losses to non-performing assets (1)(2) Allowance for loan losses to total loans at end of period (2) Net charge-offs to average loans (25,983) (313) (13,543) (39,839) (4,085) (362) (12,854) (17,301) (2,564) (613) (8,806) (11,983) (3,532) (518) (6,796) (10,846) (3,211) (993) (5,896) (10,100) 2,643 180 3,211 2,325 95 3,999 3,066 246 3,085 3,768 771 2,348 3,293 38 1,945 6,034 (33,805) 144,719 6,419 (10,882) 138,378 6,397 (5,586) 130,131 6,887 (3,959) 143,074 5,276 (4,824) 251,603 14,145 — (2,904) 11,801 — 2,344 11,147 — 654 — 9,828 1,319 — — — 11,241 $ 155,960 14,145 $ 152,523 11,801 $ 141,932 11,147 $ 154,221 — $ 251,603 57.60% 151.40% 141.30% 99.40% 129.90% 0.96 0.23 0.97 0.08 1.14 0.05 1.51 0.04 2.96 0.06 (1) Non-performing assets include accruing loans 90 days or more past due. For purposes of this table, non-accrual and past due loans exclude acquired impaired loans accounted for under ASC 310-30 that are currently accruing income. (2) The allowance for loan losses includes impairment reserves attributable to acquired impaired loans. TABLE 21—ALLOCATION OF THE ALLOWANCE FOR CREDIT LOSSES Commercial Residential Mortgage Consumer and other Total allowance for credit losses 2016 2015 2014 2013 2012 % of Loans Reserve % 76 % 73 % % of Loans Reserve % 73 % 71 % % of Loans Reserve % 70 % 69 % % of Loans Reserve % 69 % 72 % % of Loans Reserve % 71 % 73 % 8 % 8 % 8 % 8 % 7 % 9 % 10 % 6 % 10 % 5 % 19 % 22 % 23 % 22 % 16 % 19 % 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 19 % 21 % 21 % 22 % The allowance for credit losses was $156.0 million at December 31, 2016, or 1.04% of total loans, $3.4 million higher than at December 31, 2015. The allowance for credit losses as a percentage of loans was 1.06% at December 31, 2015. (cid:23)(cid:27) The allowance for credit losses on the legacy portfolio increased $8.9 million, or 8%, since December 31, 2015, primarily a result of deterioration in credit quality in energy-related loans, which accounted for almost 50% of the Company's net charge- offs in 2016, and to a lesser extent, legacy loan growth ($1.5 billion, or 13%, growth since December 31, 2015). The acquired allowance for credit losses includes a reserve of $39.2 million for losses probable in the portfolio at December 31, 2016 above estimated expected credit losses at acquisition, a decrease of $5.4 million, or 12%, from December 31, 2015. At December 31, 2016 and 2015, the legacy allowance for loan losses covered 47% and 182% of total non-performing loans, respectively. Including acquired non-impaired loans, the allowance for loan losses covered 63% of total non-performing loans at December 31, 2016 and 242% at December 31, 2015. FDIC Loss Share Receivable As part of the FDIC-assisted acquisitions in 2009 and 2010, the Company recorded a receivable from the FDIC, which represented the fair value of the expected reimbursable losses covered by the loss share agreements as of the acquisition dates. The FDIC loss share receivable was written-off in December of 2016 when the Company entered into an agreement with the FDIC to terminate the Company's loss share agreements prior to their contractual maturities. The Company received a net payment of $6.5 million from the FDIC as consideration for this termination and subsequently derecognized the remaining FDIC indemnification asset and associated assets and liabilities, resulting in a pre-tax loss of $17.8 million. The Company will benefit from all future recoveries, and be responsible for all future losses and expenses related to the assets previously subject to the loss share agreements. Amortization expense associated with the FDIC indemnification asset, which was previously expected to be $8 million in 2017, will no longer be recognized and will positively impact the net interest margin beginning in 2017. Cash and cash equivalents Cash and cash equivalents totaled $1.4 billion at December 31, 2016, an increase of $851.9 million, or 167%, from year-end 2015. Cash and due from banks increased $54.2 million to $295.9 million at December 31, 2016. Short-term investments primarily result from excess funds invested overnight in interest-bearing deposit accounts at the FRB and the FHLB of Dallas. These balances fluctuate daily depending on the funding needs of the Company and earn interest at the current FHLB and FRB short-term rates. The balance in interest-bearing deposits at other institutions of $1.1 billion at December 31, 2016 increased $797.6 million, or 297%, from December 31, 2015. The increase in total cash and cash equivalents was primarily attributable to an inflow of deposits at the end of 2016 and the common and preferred stock issuances during 2016. The Company’s cash activity is further discussed in the “Liquidity and Other Off-Balance Sheet Activities” section below. (cid:23)(cid:28) Other Assets The following table details other asset balances as of December 31: TABLE 22—OTHER ASSETS COMPOSITION (Dollars in thousands) Other Earning Assets FHLB stock, FRB stock, and other equity securities Fed funds sold and financing transactions Other interest-earning assets (1) Total reverse repurchase agreement Total other earning assets Non-Earning Assets Bank-owned life insurance Core deposit intangibles Title plant and other intangible assets Accrued interest receivable Other real estate owned Derivative market value Investment in tax credit entities Other non-earning assets Total non-earning assets Total other assets 2016 2015 2014 2013 2012 $ Change % Change 2016 vs. 2015 $ 93,718 $ 66,008 $ 74,130 $ 53,773 $ 46,216 27,710 — 6,660 1,268 101,646 — 5,660 — 71,668 — 5,412 — 79,542 — 3,412 — 57,185 4,875 3,412 — 54,503 160,875 131,575 21,836 30,044 122,573 19,595 104,203 100,556 14,622 19,122 7,072 52,124 21,200 38,886 76,592 7,224 47,863 34,131 30,486 7,511 37,696 53,947 32,903 7,439 32,143 99,173 30,076 7,660 32,183 121,536 42,119 141,951 139,326 132,487 137,508 170,998 549,583 $ 651,229 155,965 579,239 $ 650,907 95,606 509,157 $ 588,699 76,839 496,982 $ 554,167 50,532 511,216 $ 565,719 — 1,000 1,268 29,978 29,300 (8,208) (152) 4,261 (12,931) 8,400 (65,359) 15,033 (29,656) 322 42 — 18 100 42 22 (27) (2) 9 (38) 28 (46) 10 (5) — (1) Other interest-earning assets are composed primarily of trust preferred common securities. • The $27.7 million, or 42%, increase in FHLB stock, FRB stock, and other equity securities was the result of $31.5 million in stock purchases, $5.8 million in stock sales, and approximately $0.5 million in stock dividends received during 2016. • Bank-owned life insurance increased $29.3 million, or 22%, from 2015 to 2016 primarily due to the purchase of $24.1 million in additional BOLI policies, and to a lesser extent, increases in cash surrender values of policies held. • Core deposit intangibles decreased $8.2 million during the current year due to the amortization of core deposit intangibles. • The $65.4 million, or 46%, decrease in the investment in tax credit entities was primarily due to the unwind of certain tax credit investments expiring during 2016. • Other real estate includes all real estate, other than bank premises used in bank operations, which is owned or controlled by the Company, including real estate acquired in settlement of loans and former bank premises no longer used. The $12.9 million decrease in OREO from December 31, 2015 was a result of the sale of OREO properties, including a $3.4 million decrease in former bank premises. • The $15.0 million, or 10%, increase in other non-earning assets since December 31, 2015 was primarily the result of an increase in deferred tax assets due to a tax benefit of $6.7 million in the fourth quarter of 2016 as a result of the 2015 tax return filing. (cid:24)(cid:19) FUNDING SOURCES Deposits obtained from clients in its primary market areas are the Company’s principal source of funds for use in lending and other business purposes. The Company attracts local deposit accounts by offering a wide variety of products, competitive interest rates and convenient branch office locations and service hours. Increasing core deposits is a continuing focus of the Company and has been accomplished through the development of client relationships and acquisitions. Short-term and long- term borrowings are also an important funding source for the Company. Other funding sources include subordinated debt and shareholders’ equity. Refer to the “Liquidity and Other Off-Balance Sheet Activities” section below for further discussion of the Company’s sources and uses of funding. The following discussion highlights the major changes in the mix of deposits and other funding sources during 2016. Deposits The Company’s ability to attract and retain customer deposits is critical to the Company’s continued success. The year-over- year growth in deposits is the result of the continued strengthening of legacy client relationships, deeper expansion into markets from prior year acquisitions, and normal deposit campaigns. The Company's deposit balances generally increase at the end of any given year due to real estate tax collections by our municipal customers. These balances typically remain on deposit with the Company 45 to 60 days. Given the short-term nature of these seasonal funds, the deposit balances tied to these seasonal flows are held in liquid investments until they are withdrawn from the Company. The Company currently expects total deposits to decline during the first half of 2017. Total deposits increased $1.2 billion, or 8%, to $17.4 billion at December 31, 2016, from $16.2 billion at December 31, 2015. Over the same period, non-interest-bearing deposits increased $576.6 million, or 13%, and equated to 28% and 27% of total deposits at December 31, 2016 and 2015, respectively. Additionally, interest-bearing deposits also increased $652.9 million, or 6%, from December 31, 2015. The following table sets forth the composition of the Company’s deposits as of December 31: TABLE 23—DEPOSIT COMPOSITION BY PRODUCT (Dollars in thousands) 2016 2015 2014 2013 2012 $ Change % Change Non-interest-bearing deposits NOW accounts Money market accounts Savings accounts Certificates of deposit and other time deposits Total deposits $ 4,928,878 28 % $ 4,352,229 27 % $ 3,195,430 26 % $ 2,575,939 24 % $ 1,967,662 18 % 3,314,281 6,219,532 814,385 2,131,207 19 36 5 12 2,974,176 6,010,882 716,838 2,124,623 19 37 4 13 2,462,841 4,168,504 577,513 2,116,237 20 33 4 17 2,283,491 3,779,581 387,397 1,710,592 22 35 3 16 2,523,252 3,738,480 364,703 2,154,180 24 35 3 20 576,649 340,105 208,650 97,547 6,584 $17,408,283 100% $16,178,748 100% $12,520,525 100% $10,737,000 100% $10,748,277 100% 1,229,535 13 11 3 14 — 8 2016 vs. 2015 From a market perspective, total deposit growth on a percentage basis was seen primarily in the Tampa, Mobile, Huntsville, Baton Rouge, and New Orleans markets. Tampa's customer deposits increased $246 million, or 94%, during 2016, while total deposits in the Mobile market increased $94 million, or 42%, since the end of 2015. Huntsville had year-to-date customer deposit growth of $47 million, or 32%. Baton Rouge and New Orleans experienced growth of $112 million, or 18%, and $243 million, or 15%, respectively. The following table details large-denomination certificates of deposit by remaining maturity dates at December 31. TABLE 24—REMAINING MATURITIES OF CDS $100,000 AND OVER (Dollars in thousands) 2016 2015 2014 2013 2012 3 months or less 3 – 12 months 12 – 36 months More than 36 months $ 241,128 21 % $ 228,336 16 % $ 204,041 19 % $ 256,931 28 % $ 265,558 23 % 457,796 339,137 97,702 40 30 9 631,634 390,820 135,950 46 28 10 547,876 274,038 54,844 51 25 5 452,005 157,430 39,976 50 17 5 572,734 227,072 81,151 50 20 7 Total CDs $100,000 and over $1,135,763 100% $1,386,740 100% $1,080,799 100% $ 906,342 100% $1,146,515 100% (cid:24)(cid:20) Short-term Borrowings The Company may obtain advances from the FHLB of Dallas based upon its ownership of FHLB stock and certain pledges of its real estate loans and investment securities, provided certain standards related to the Company’s creditworthiness have been met. These advances are made pursuant to several credit programs, each of which has its own interest rate and range of maturities. The level of short-term borrowings can fluctuate significantly on a daily basis depending on funding needs and the source of funds chosen to satisfy those needs. The Company also enters into repurchase agreements to facilitate customer transactions that are accounted for as secured borrowings. These transactions typically involve the receipt of deposits from customers that the Company collateralizes with its investment portfolio and have an average rate of 13.1 basis points. The following table details the average and ending balances of repurchase transactions as of and for the years ended December 31: TABLE 25—REPURCHASE TRANSACTIONS (Dollars in thousands) Average balance Ending balance $ 2016 282,180 334,136 $ 2015 236,206 216,617 Total short-term borrowings increased $182.5 million, or 56%, from December 31, 2015, to $509.1 million at the end of 2016, a result of increases of $65.0 million in FHLB advances outstanding and $117.5 million in repurchase agreements. On an average basis, short-term borrowings increased $188.1 million, or 44%, from 2015, largely due to the increase in repurchase agreements during 2016. Total short-term borrowings were 3% of total liabilities and 45% of total borrowings at December 31, 2016 compared to 2% and 49%, respectively, at December 31, 2015. On an average basis, short-term borrowings were 3% of total liabilities and 50% of total borrowings in 2016, compared to 3% and 52%, respectively, during 2015. The weighted average rate paid on short-term borrowings was 0.39% during 2016, up 21 basis points compared to 0.18% in 2015. For additional information on the Company’s short-term borrowings, see Note 13, Short-Term Borrowings, to the Notes to the consolidated financial statements. Long-term Debt Long-term debt increased $288.5 million, or 85%, to $629.0 million from $340.4 million at December 31, 2015, largely due to an increase in FHLB advances during the year. This change in long-term debt also includes a decrease in new market tax credit notes payable associated with the unwind of certain tax credit investments during 2016. On a period-end basis, long-term debt was 3% and 2% of total liabilities at December 31, 2016 and 2015, respectively. On average, long-term debt increased to $616.3 million in 2016, $228.1 million, or 59%, higher than 2015, as the Company took advantage of favorable rates on FHLB advances to fund loan growth and for other liquidity purposes in 2016. Average long-term debt was 3% of total liabilities during the current year, compared to 2% during 2015. Long-term debt at December 31, 2016 included $480.1 million in fixed-rate advances from the FHLB of Dallas that cannot be prepaid without incurring substantial penalties. The remaining debt consisted of $120.1 million of the Company’s junior subordinated debt and $28.7 million in notes payable on investments in new market tax credit entities. Interest on the junior subordinated debt is payable quarterly and may be deferred at any time at the election of the Company for up to 20 consecutive quarterly periods. During any deferral period, the Company is subject to certain restrictions, including being prohibited from declaring dividends to its common shareholders. The junior subordinated debt is redeemable by the Company in whole or in part. For additional information, see Note 14, Long-Term Debt, to the consolidated financial statements. CAPITAL RESOURCES On May 4, 2016, the Company's Board of Directors authorized the repurchase of up to 950,000 shares of IBERIABANK Corporation's outstanding common stock. Stock repurchases under this program will be made from time to time, on the open market or in privately negotiated transactions. The timing of these repurchases will depend on market conditions and other requirements. The share repurchase program does not obligate the Company to repurchase any dollar amount or number of shares, and the program may be extended, modified, suspended, or discontinued at any time. During the second quarter of 2016, the Company repurchased 202,506 common shares at a weighted average price of $57.61 per common share. (cid:24)(cid:21) On May 9, 2016, the Company issued an aggregate 2,300,000 depositary shares each representing a 1/400th ownership interest in a share of the Company's 6.60% Fixed-to-Floating Non-Cumulative Perpetual Preferred Stock, Series C, par value $1.00 per share, ("Series C Preferred Stock"), with a liquidation preference of $10,000 per share of Series C Preferred Stock (equivalent to $25 per depositary share), which represents $57,500,000 in aggregate liquidation preference. Note 16 to the consolidated financial statements provides additional information on the preferred stock issuance. On December 7, 2016, the Company issued an additional 3,593,750 shares of its common stock at a price of $81.50 per common share. Net proceeds from the offering, after deduction of underwriting discounts, commissions, and direct issuance costs, were $279.2 million. Federal regulations impose minimum regulatory capital requirements on all institutions with deposits insured by the FDIC. The FRB imposes similar capital regulations on bank holding companies. Compliance with bank and bank holding company regulatory capital requirements, which include leverage and risk-based capital guidelines, are monitored by the Company on an ongoing basis. Under the risk-based capital method, a risk weight is assigned to balance sheet and off-balance sheet items based on regulatory guidelines. In July 2013, the U.S. banking regulatory agencies, including the FRB, approved a final rule to implement the revised capital adequacy standards of the BCBS or Basel III, and to address relevant provisions of the Dodd-Frank Act. The Company and IBERIABANK became subject to the new rules on January 1, 2015. The implementation of the BASEL III capital adequacy standards included a one-time election to opt out of the requirement to include most components of accumulated other comprehensive income, including the net unrealized gains or losses on the Company's available for sale investment securities, in Common Equity Tier 1 (CET1) capital. The Company elected to opt out of the requirement in the first quarter of 2015 in an effort to exclude the impact that changes in the Company's unrealized gain or loss on its available for sale investment portfolio have on regulatory capital and the related capital ratios. Certain provisions of the new rules will be phased in from that date to January 1, 2019. Additional information on the revised capital adequacy standards is included in Note 16 to the consolidated financial statements. At December 31, 2016 and 2015, the Company exceeded all required regulatory capital ratios, and the regulatory capital ratios of IBERIABANK were in excess of the levels established for “well-capitalized” institutions, as shown in the following table and chart. TABLE 26—REGULATORY CAPITAL RATIOS Ratio Tier 1 Leverage Entity IBERIABANK Corporation IBERIABANK Common Equity Tier 1 (CET1) IBERIABANK Corporation Tier 1 risk-based capital Total risk-based capital IBERIABANK IBERIABANK Corporation IBERIABANK IBERIABANK Corporation IBERIABANK 2016 Well- Capitalized Minimums N/A December 31, 2016 December 31, 2015 Actual Actual 10.86% 9.52% 5.00% N/A 6.50% N/A 8.00% N/A 10.00% 9.21 11.84 10.67 12.59 10.67 14.13 11.56 9.03 10.10 10.16 10.73 10.16 12.17 11.08 The increase in IBERIABANK Corporation's CET1 ratio from December 31, 2015 was primarily driven by an increase in regulatory capital from the additional common stock issued in 2016, as well as undistributed earnings in the current year. Additionally, IBERIABANK Corporation's Tier 1 risk-based capital ratio and Total Risk-Based Capital Ratio increased from December 31, 2015 as a result of the Company's issuance of additional preferred stock during 2016. Beginning January 1, 2016, minimum capital ratios were subject to a capital conservation buffer. In order to avoid limitations on distributions, including dividend payments, and certain discretionary bonus payments to executive officers, an institution must hold a capital conservation buffer above its minimum risk-based capital requirements. This capital conservation buffer is calculated as the lowest of the differences between the actual CET1 ratio, Tier 1 Risk-Based Capital Ratio, and Total Risk- Based Capital ratio and the corresponding minimum ratios. At December 31, 2016, the required minimum capital conservation buffer was 0.625%, and will increase in subsequent years by 0.625% until it is fully phased in on January 1, 2019 at 2.50%. At December 31, 2016, the capital conservation buffers of the Company and IBERIABANK were 6.13% and 3.56%, respectively. (cid:24)(cid:22) Management believes that at December 31, 2016, the Company and IBERIABANK would have met all capital adequacy requirements on a fully phased-in basis if such requirements were then effective. There can be no assurances that the Basel III capital rules will not be revised before the expiration of the phase-in periods. LIQUIDITY AND OTHER OFF-BALANCE SHEET ACTIVITIES Liquidity refers to the Company’s ability to generate sufficient cash flows to support its operations and to meet its obligations, including the withdrawal of deposits by customers, commitments to originate loans, and its ability to repay its borrowings and other liabilities. Liquidity risk is the risk to earnings or capital resulting from the Company’s inability to fulfill its obligations as they become due. Liquidity risk also develops from the Company’s failure to timely recognize or address changes in market conditions that affect the ability to liquidate assets in a timely manner or to obtain adequate funding to continue to operate on a profitable basis. The primary sources of funds for the Company are deposits and borrowings. Other sources of funds include repayments and maturities of loans and investment securities, securities sold under agreements to repurchase, and, to a lesser extent, off-balance sheet borrowing availability. Certificates of deposit scheduled to mature in one year or less at December 31, 2016 totaled $1.3 billion. Based on past experience, management believes that a significant portion of maturing deposits will remain with the Company. Additionally, the majority of the investment securities portfolio is classified as available-for-sale, which provides the ability to liquidate unencumbered securities as needed. Of the $3.5 billion in the investment securities portfolio, $2.0 billion is unencumbered and $1.5 billion has been pledged to support repurchase transactions, public funds deposits and certain long- term borrowings. Due to the relatively short implied duration of the investment securities portfolio, the Company has historically experienced significant cash inflows on a regular basis. Securities cash flows are highly dependent on prepayment speeds and could change materially as economic or market conditions change. See Note 12, Deposits, Note 13, Short-Term Borrowings, and Note 14, Long-Term Debt, to the consolidated financial statements for additional discussion related to the Company’s funding requirements. Scheduled cash flows from the amortization and maturities of loans and securities are relatively predictable sources of funds. Conversely, deposit flows, prepayments of loan and investment securities, and draws on customer letters and lines of credit are greatly influenced by general interest rates, economic conditions, competition, and customer demand. The FHLB of Dallas provides an additional source of liquidity to make funds available for general requirements and also to assist with the variability of less predictable funding sources. At December 31, 2016, the Company had $655.1 million of outstanding FHLB advances, $175.0 million of which was short-term and $480.1 million was long-term. Additional FHLB borrowing capacity available at December 31, 2016 amounted to $4.9 billion. At December 31, 2016, the Company also has various funding arrangements with commercial banks providing up to $180.0 million in the form of federal funds and other lines of credit. At December 31, 2016, there were no balances outstanding on these lines and all of the funding was available to the Company. Liquidity management is both a daily and long-term function of business management. The Company manages its liquidity with the objective of maintaining sufficient funds to respond to the predicted needs of depositors and borrowers and to take advantage of investments in earning assets and other earnings enhancement opportunities. Excess liquidity is generally invested in short-term investments such as overnight deposits. On a longer-term basis, the Company maintains a strategy of investing in various lending and investment security products. The Company uses its sources of funds primarily to fund loan commitments and meet its ongoing commitments associated with its operations. Based on its available cash at December 31, 2016 and current deposit modeling, the Company believes it has adequate liquidity to fund ongoing operations. The Company has adequate availability of funds from deposits, borrowings, repayments and maturities of loans and investment securities to provide the Company additional working capital if needed. In the normal course of business, the Company is a party to a number of activities that contain credit, market and operational risk that are not reflected in whole or in part in the Company’s consolidated financial statements. Such activities include traditional off-balance sheet credit-related financial instruments and commitments under operating leases. The Company provides customers with off-balance sheet credit support through loan commitments, lines of credit, and standby letters of credit. Many of the commitments are expected to expire unused or be only partially used; therefore, the total amount of commitments does not necessarily represent future cash requirements. Based on its available liquidity and available borrowing capacity, the Company anticipates it will continue to have sufficient funds to meet its current commitments. (cid:24)(cid:23) At December 31, 2016, the Company’s unfunded loan commitments outstanding totaled $355.6 million. At the same date, unused lines of credit, including credit card lines, amounted to $4.9 billion, as shown in the following table. TABLE 27—COMMITMENT EXPIRATION PER PERIOD (Dollars in thousands) Unused lines of credit Unfunded loan commitments Standby letters of credit Less than 1 year $2,554,176 355,558 1—3 Years $1,556,992 3—5 Years $ 284,642 Over 5 Years $ 504,120 Total $4,899,930 — — — 355,558 148,579 $3,058,313 11,656 $1,568,648 3,300 $ 287,942 25 $ 504,145 163,560 $5,419,048 The Company has entered into a number of long-term arrangements to support the ongoing activities of the Company. The required payments under such leasing and other debt commitments at December 31, 2016 are shown in the following table. TABLE 28—CONTRACTUAL OBLIGATIONS AND OTHER DEBT COMMITMENTS (Dollars in thousands) Operating leases Certificates of deposit Short-term borrowings Long-term debt 2017 15,927 $ $ 1,335,041 509,136 2018 14,981 507,162 — $ 2019 13,980 96,509 — $ 2020 12,742 83,623 — $ 2021 10,906 60,468 — 2022 and After 37,527 $ 48,404 — Total $ 106,063 2,131,207 509,136 55,516 $1,915,620 233,667 $ 755,810 97,042 $ 207,531 15,263 $ 111,628 55,564 $ 126,938 171,901 $ 257,832 628,953 $ 3,375,359 ASSET/LIABILITY MANAGEMENT, MARKET RISK AND COUNTERPARTY CREDIT RISK The principal objective of the Company’s asset and liability management function is to evaluate the interest rate risk included in certain balance sheet accounts, determine the appropriate level of risk given the Company’s business focus, operating environment, capital and liquidity requirements, and performance objectives, establish prudent asset concentration guidelines and manage the risk consistent with Board approved guidelines. Through such management, the Company seeks to reduce the vulnerability of its operations to changes in interest rates. The Company’s actions in this regard are taken under the guidance of the Asset and Liability Committee. The Asset and Liability Committee normally meets monthly to review, among other things, the sensitivity of the Company’s assets and liabilities to interest rate changes, local and national market conditions, and interest rates. In connection therewith, the Asset and Liability Committee generally reviews the Company’s liquidity, cash flow needs, composition of investments, deposits, borrowings, and capital position. The objective of interest rate risk management is to control the effects that interest rate fluctuations have on net interest income and on the net present value of the Company’s earning assets and interest-bearing liabilities. Management and the Board are responsible for managing interest rate risk and employing risk management policies that monitor and limit this exposure. Interest rate risk is measured using net interest income simulation and asset/liability net present value sensitivity analyses. The Company uses financial modeling to measure the impact of changes in interest rates on the net interest margin and to predict market risk. Estimates are based upon numerous assumptions including the nature and timing of interest rate levels including yield curve shape, prepayments on loans and securities, deposit decay rates, pricing decisions on loans and deposits, reinvestment/replacement of asset and liability cash flows, and others. These analyses provide a range of potential impacts on net interest income and portfolio equity caused by interest rate movements. Included in the modeling are instantaneous parallel rate shift scenarios, which are utilized to establish exposure limits. These scenarios are known as “rate shocks” because all rates are modeled to change instantaneously by the indicated shock amount, rather than a gradual rate shift over a period of time that has traditionally been more realistic. (cid:24)(cid:24) The Company’s interest rate risk model indicates that the Company is asset sensitive in terms of interest rate sensitivity. Based on the Company’s interest rate risk model at December 31, 2016, the table below illustrates the impact of an immediate and sustained 100 and 200 basis point increase or decrease in interest rates on net interest income over the next twelve months. TABLE 29—INTEREST RATE SENSITIVITY Shift in Interest Rates (in bps) 200 100 -100 -200 % Change in Projected Net Interest Income 11.8% 6.1% (7.9)% (12.2)% The influence of using the forward curve as of December 31, 2016 as a basis for projecting the interest rate environment would approximate a 1.4% increase in net interest income over the next 12 months. The computations of interest rate risk shown above are performed on a flat balance sheet and do not necessarily include certain actions that management may undertake to manage this risk in response to unanticipated changes in interest rates and other factors to include shifts in deposit behavior. The short-term interest rate environment is primarily a function of the monetary policy of the FRB. The principal tools of the FRB for implementing monetary policy are open market operations, or the purchases and sales of U.S. Treasury and Federal agency securities, as well as the establishment of a short-term target rate. The FRB’s objective for open market operations has varied over the years, but the focus has gradually shifted toward attaining a specified level of the Federal funds rate to achieve the long-run goals of price stability and sustainable economic growth. The Federal funds rate is the basis for overnight funding and drives the short end of the yield curve. Longer maturities are influenced by the market’s expectations for economic growth and inflation, but can also be influenced by FRB purchases and sales and expectations of monetary policy going forward. The Federal Open Market Committee (“FOMC”) of the FRB, in an attempt to stimulate the overall economy, has, among other things, kept interest rates low through its targeted Federal funds rate. On December 15, 2016, the FOMC voted to raise the target Federal funds rate by 0.25%, almost a year to the day since the last increase on December 17, 2015. The FOMC expects that economic conditions will evolve in a manner that will warrant only gradual increases in the Federal funds rate over the next several years. As the FOMC increases the Federal funds rate, it is possible that overall interest rates could rise, which may negatively impact the housing markets and the U.S. economic recovery. In addition, deflationary pressures, while possibly lowering our operating costs, could have a significant negative effect on our borrowers, especially our commercial borrowers, and the values of collateral securing loans, which could negatively affect our financial performance. The Company’s commercial loan portfolio is also impacted by fluctuations in the level of one-month LIBOR, as a large portion of this portfolio reprices based on this index. Our net interest income may be reduced if more interest-earning assets than interest-bearing liabilities reprice or mature during a period when interest rates are declining, or more interest-bearing liabilities than interest-earning assets reprice or mature during a period when interest rates are rising. The table below presents the Company’s anticipated repricing of loans and investment securities over the next four quarters. TABLE 30—REPRICING OF CERTAIN EARNING ASSETS (1) (Dollars in thousands) Investment securities Fixed rate loans Variable rate loans Total loans 1Q 2017 2Q 2017 3Q 2017 4Q 2017 $ 118,197 $ 130,868 $ 133,719 $ 124,829 Total less than one year 507,613 $ 825,653 7,637,439 8,463,092 $ 8,581,289 $ 569,777 180,173 749,950 880,818 $ 540,577 116,660 657,237 790,956 480,480 2,416,487 82,328 8,016,600 562,808 687,637 10,433,087 $10,940,700 $ (1) Amounts include expected maturities, scheduled paydowns, expected prepayments, and loans subject to floors and exclude the repricing of assets from prior periods, as well as non-accrual loans and market value adjustments. As part of its asset/liability management strategy, the Company has seen greater levels of loan originations with adjustable or variable rates of interest as well as commercial and consumer loans, which typically have shorter terms than residential mortgage loans. The majority of fixed-rate, long-term residential loans are sold in the secondary market to avoid assumption of the interest rate risk associated with longer duration assets in the current low rate environment. As of December 31, 2016, $8.3 (cid:24)(cid:25) billion, or 55%, of the Company’s total loan portfolio had adjustable interest rates. The Company had no significant concentration to any single borrower or industry segment at December 31, 2016. The Company’s strategy with respect to liabilities in recent periods has been to emphasize transaction accounts, particularly non-interest or low interest-bearing transaction accounts, which are significantly less sensitive to changes in interest rates. At December 31, 2016, 88% of the Company’s deposits were in transaction and limited-transaction accounts, compared to 87% at December 31, 2015. Non-interest-bearing transaction accounts were 28% of total deposits at December 31, 2016, compared to 27% of total deposits at December 31, 2015. Much of the liquidity increase experienced in the past several years has been due to a significant increase in non-interest- bearing demand deposits. The behavior of non-interest-bearing deposits and other types of demand deposits is one of the most important assumptions used in determining the interest rate and liquidity risk positions. A loss of these deposits in the future would reduce the asset sensitivity of the Company’s balance sheet as interest-bearing funds would most likely be increased to offset the loss of this favorable funding source. The table below presents the Company’s anticipated repricing of liabilities over the next four quarters. TABLE 31—REPRICING OF LIABILITIES (1) (Dollars in thousands) Time deposits Short-term borrowings Long-term debt 1Q 2017 2Q 2017 3Q 2017 4Q 2017 $ 422,686 $ 382,205 $ 333,197 $ 195,094 Total less than one year $ 1,333,182 429,136 133,761 985,583 $ 80,000 10,820 473,025 $ — — 509,136 5,828 339,025 $ 40,721 235,815 191,130 $ 2,033,448 $ (1) Amounts exclude the repricing of liabilities from prior periods. As part of an overall interest rate risk management strategy, derivative instruments may also be used as an efficient way to modify the repricing or maturity characteristics of on-balance sheet assets and liabilities. Management may from time to time engage in interest rate swaps to effectively manage interest rate risk. The interest rate swaps of the Company would modify net interest sensitivity to levels deemed appropriate. IMPACT OF INFLATION OR DEFLATION AND CHANGING PRICES The consolidated financial statements and related financial data presented herein have been prepared in accordance with GAAP, which generally require the measurement of financial position and operating results in terms of historical dollars, without considering changes in relative purchasing power over time due to inflation. Unlike most industrial companies, the majority of the Company’s assets and liabilities are monetary in nature. As a result, interest rates generally have a more significant impact on the Company’s performance than does the effect of inflation. Although fluctuations in interest rates are neither completely predictable nor controllable, the Company regularly monitors its interest rate position and oversees its financial risk management by establishing policies and operating limits. Interest rates do not necessarily move in the same direction or in the same magnitude as the prices of goods and services, since such prices are affected by inflation to a larger extent than interest rates. Although not as critical to the banking industry as to other industries, inflationary factors may have some impact on the Company’s growth, earnings, total assets and capital levels. Management does not expect inflation to be a significant factor in 2017. Conversely, a period of deflation could affect our business, as well as all financial institutions and other industries. Deflation could lead to lower profits, higher unemployment, lower production and deterioration in overall economic conditions. In addition, deflation could depress economic activity, including loan demand and the ability of borrowers to repay loans, and consequently impair earnings through increasing the value of debt while decreasing the value of collateral for loans. Management believes the most significant potential impact of deflation on financial results relates to the Company's ability to maintain a sufficient amount of capital to cushion against future losses. However, the Company would employ certain risk management tools to maintain its balance sheet strength in the event a deflationary scenario were to develop. (cid:24)(cid:26) Non-GAAP Measures This discussion and analysis included herein contains financial information determined by methods other than in accordance with GAAP. The Company’s management uses these non-GAAP financial measures in their analysis of the Company’s performance. Non-GAAP measures include but are not limited to descriptions such as core, tangible, and pre-tax pre-provision. These measures typically adjust GAAP performance measures to exclude the effects of the amortization of intangibles and include the tax benefit associated with revenue items that are tax-exempt, as well as adjust income available to common shareholders for certain significant activities or transactions that in management’s opinion can distort period-to-period comparisons of the Company’s performance. Transactions that are typically excluded from non-GAAP performance measures include realized and unrealized gains/losses on former bank owned real estate, realized gains/losses on securities, income tax gains/losses, merger related charges and recoveries, litigation charges and recoveries, and debt repayment penalties. Management believes presentations of these non-GAAP financial measures provide useful supplemental information that is essential to a proper understanding of the operating results of the Company’s core businesses. These non-GAAP disclosures should not be viewed as a substitute for operating results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies. Reconciliations of GAAP to non- GAAP disclosures are presented in Table 32, with the exception of forward-looking information. The Company is unable to estimate GAAP EPS guidance without unreasonable efforts due to the nature of one-time or unusual items that cannot be predicted, and therefore has not provided this information under Regulation S-K Item 10(e)(1)(i)(B). TABLE 32—RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES 2016 2015 2014 (Dollars in thousands, except per share amounts) Net income Preferred stock dividends Income available to common shareholders (GAAP) Non-interest income adjustments: Gain on sale of investments and other non-interest income Total non-core non- interest income Non-interest and other expense adjustments: Merger-related expense Severance expense Impairment of long-lived assets, net of (gain) loss on sale Loss on early termination of loss share agreements Debt prepayment Other non-core non- interest expense Total non-core non- interest expense Income tax benefits Core earnings (Non- GAAP) Pre-tax After-tax (1) Per share (2) Pre-tax After-tax (1) Per share (2) Pre-tax After-tax (1) Per share (2) $ 271,970 $ 186,777 $ — (7,977) 4.49 0.19 $ 206,938 $ 142,844 $ 3.68 $ 141,065 $ 105,382 $ 3.30 — — — — — — 271,970 178,800 4.30 206,938 142,844 3.68 141,065 105,382 3.30 (2,002) (1,301) (0.03) (4,033) (2,621) (0.07) (2,757) (2,319) (0.07) (2,002) (1,301) (0.03) (4,033) (2,621) (0.07) (2,757) (2,319) (0.07) 3 782 2 508 — 0.01 24,074 2,593 15,861 1,686 0.41 0.04 15,093 6,951 10,104 4,518 0.32 0.14 (674) (437) (0.01) 7,259 4,717 0.12 7,073 4,597 0.14 17,798 11,569 — — 0.28 — — 1,262 2,752 1,788 0.04 1,272 — 820 827 — 0.02 0.02 — — — — — — (597) (388) (0.01) 20,661 — 13,430 (6,836) 0.32 (0.16) 36,460 — 23,911 (2,041) 0.62 (0.05) 28,520 — 18,831 (2,959) 0.59 (0.09) Provision for loan losses 44,424 28,875 290,629 184,093 4.43 0.71 239,365 30,908 162,093 20,090 4.18 0.52 166,828 19,060 118,935 12,389 3.72 0.39 Core pre-provision earnings (Non-GAAP) (1) After-tax amounts, excluding preferred stock dividends, are calculated using a tax rate of 35%, which approximates the $ 182,183 $ 131,324 $ 212,968 $ 185,888 $ 270,273 $ 335,053 4.70 5.14 $ $ $ 4.12 marginal tax rate. (2) Diluted per share amounts may not appear to foot due to rounding. (cid:24)(cid:27) (Dollars in thousands) Net interest income (GAAP) Add: Effect of tax benefit on interest income Net interest income (TE) (Non-GAAP) Non-interest income (GAAP) Add: Effect of tax benefit on non-interest income Non-interest income (TE) (Non-GAAP) (1) Non-interest expense (GAAP) Less: Intangible amortization expense Tangible non-interest expense (Non-GAAP) (2) Net income (GAAP) Add: Effect of intangible amortization, net of tax Cash earnings (Non-GAAP) Total assets (GAAP) Less: Goodwill and other intangibles Total tangible assets (Non-GAAP) Average assets (Non-GAAP) Less: Goodwill and other intangibles Total average tangible assets (Non-GAAP) Total shareholders’ equity (GAAP) Less: Goodwill and other intangibles Preferred stock Total tangible common shareholders’ equity (Non-GAAP) Average shareholders’ equity (Non-GAAP) Less: Goodwill and other intangibles Preferred stock 2016 2015 2014 $ $ $ $ $ $ $ $ $ $ $ $ $ $ 649,238 9,463 658,701 233,821 2,822 236,643 566,665 8,415 558,250 186,777 5,470 192,247 21,659,190 755,765 20,903,425 20,321,234 759,749 19,561,485 2,939,694 755,765 132,097 2,051,832 2,637,594 759,749 112,598 $ $ $ $ $ $ $ $ $ $ $ $ $ $ 587,758 8,604 596,362 220,393 2,346 222,739 570,305 7,811 562,494 142,844 5,077 147,921 $ $ $ $ $ $ $ 460,111 8,609 468,720 173,628 2,947 176,575 473,614 5,807 467,807 105,382 3,775 109,157 19,504,068 $ 15,757,904 761,871 544,632 18,742,197 $ 15,213,272 18,402,706 $ 14,631,994 696,275 499,810 17,706,431 $ 14,132,184 2,498,835 $ 1,852,148 761,871 76,812 1,660,152 2,261,034 696,275 31,506 $ $ 544,632 — 1,307,516 1,707,359 499,810 — Average tangible common shareholders’ equity (Non-GAAP) $ 1,765,247 $ 1,533,253 $ 1,207,549 Return on average assets (GAAP) Effect of non-core revenues and expenses Core return on average assets (Non-GAAP) Return on average common equity (GAAP) Add: Effect of intangibles Effect of non-core items Core return on average tangible common equity (Non-GAAP) Efficiency ratio (GAAP) Effect of tax benefit related to tax-exempt income Efficiency ratio (TE) (Non-GAAP) (1) Effect of amortization of intangibles Effect of non-core items Core tangible efficiency ratio (TE) (Non-GAAP) (1) (2) Cash Yield: 0.92% 0.03 0.95% 7.08% 3.36 0.30 10.74% 64.17% (0.9) 63.27% (0.9) (2.2) 0.78% 0.10 0.88% 6.41% 3.24 (0.14) 9.51% 70.57% (1.0) 69.57% (1.0) (4.1) 0.72 % 0.09 0.81 % 6.17 % 2.87 (0.34) 8.70 % 74.73 % (1.3)% 73.43 % (0.9) (4.1) 60.17% 64.47% 68.43 % Earning assets average balance (GAAP) $ 18,477,064 $ 16,652,051 $ 13,235,541 (cid:24)(cid:28) Add: Adjustments Earning assets average balance, as adjusted (Non-GAAP) Net interest income (GAAP) Add: Adjustments Net interest income, as adjusted (Non-GAAP) Yield, as reported Add: Adjustments Yield, as adjusted (Non-GAAP) 73,010 18,550,074 649,238 (32,575) 616,663 $ $ $ $ $ $ 82,641 36,620 16,734,692 $ 13,272,161 587,758 (36,248) 551,510 $ $ 460,111 (12,371) 447,740 3.53% (0.19) 3.34% 3.55% (0.24) 3.31% 3.51 % (0.10) 3.41 % (1) Fully taxable-equivalent (TE) calculations include the tax benefit associated with related income sources that are tax-exempt using a rate of 35%, which approximates the marginal tax rate. (2) Tangible calculations eliminate the effect of goodwill and acquisition-related intangibles and the corresponding amortization expense on a tax-effected basis where applicable. (cid:25)(cid:19) TABLE 33 – QUARTERLY RESULTS OF OPERATIONS AND SELECTED CASH FLOW DATA (UNAUDITED) (Dollars in thousands, except per share data) Total interest and dividend income Fourth Quarter 180,805 $ Third Quarter 180,504 $ Second Quarter 178,694 $ First Quarter 176,936 $ 2016 Total interest expense Net interest income Provision for loan losses Net interest income after provision for loan losses Gain on sale of available-for-sale securities Other non-interest income Loss on early termination of loss share agreements Other non-interest expense Income before income taxes Income tax expense Net income Preferred stock dividends Income available to common shareholders Earnings allocated to unvested restricted stock Earnings allocated to common shareholders Earnings per share - basic Earnings per share - diluted Cash dividends declared per common share Total interest and dividend income Total interest expense Net interest income Provision for loan losses Net interest income after provision for loan losses Gain on sale of available-for-sale securities Other non-interest income Non-interest expense Income before income taxes Income tax expense Net income Income available to common shareholders Earnings allocated to unvested restricted stock Earnings allocated to common shareholders Earnings per share - basic Earnings per share - diluted Cash dividends declared per common share 19,140 161,665 5,169 156,496 4 53,234 17,798 133,772 58,164 13,034 45,130 (957) 44,173 (414) 43,759 1.05 1.04 0.36 $ $ $ $ $ $ $ $ 17,087 163,417 12,484 150,933 12 59,809 — 138,139 72,615 24,547 48,068 (3,590) 44,478 (462) 44,016 1.08 1.08 0.36 $ $ $ $ 2015 15,941 162,753 11,866 150,887 1,789 63,128 — 15,533 161,403 14,905 146,498 196 55,649 — 139,504 137,452 76,300 25,490 50,810 (854) 49,956 (540) 49,416 1.21 1.21 0.34 $ $ $ $ 64,891 22,122 42,769 (2,576) 40,193 (460) 39,733 0.98 0.97 0.34 Fourth Quarter 176,651 $ Third Quarter 171,077 $ Second Quarter 160,545 $ First Quarter 138,585 $ 15,491 161,160 11,711 149,449 6 52,497 138,975 62,977 18,570 44,407 44,407 (505) 43,902 1.08 1.08 0.34 $ $ $ $ 15,960 155,117 5,062 150,055 280 57,198 144,968 62,565 20,090 42,475 42,475 (492) 41,983 1.04 1.03 0.34 $ $ $ $ 14,868 145,677 8,790 136,887 903 60,610 153,209 45,191 14,355 30,836 30,836 (355) 30,481 0.79 0.79 0.34 $ $ $ $ 12,781 125,804 5,345 120,459 386 48,513 133,153 36,205 11,079 25,126 25,126 (344) 24,782 0.75 0.75 0.34 $ $ $ $ (cid:25)(cid:20) Glossary of Defined Terms Term ACL Definition Allowance for credit losses Acquired loans Loans acquired in a business combination AFS ALL AOCI ASC ASU Basel III BCBS Cameron CDE CET1 CFPB CSB Company Covered Loans Dodd-Frank Act ECL EPS FASB FDIC Securities available-for-sale Allowance for loan and lease losses Accumulated other comprehensive income (loss) Accounting Standards Codification Accounting Standards Update Global regulatory standards on bank capital adequacy and liquidity published by the BCBS Basel Committee on Banking Supervision Cameron Bancshares, Inc. IBERIA CDE, LLC Common Equity Tier 1 Capital defined by Basel III capital rules Consumer Financial Protection Bureau CapitalSouth Bank IBERIABANK Corporation and Subsidiaries Acquired loans with loss protection provided by the FDIC Dodd-Frank Wall Street Reform and Consumer Protection Act Expected credit losses Earnings per common share Financial Accounting Standards Board Federal Deposit Insurance Corporation First Private FHLB First Private Holdings, Inc Federal Home Loan Bank Florida Bank Group Florida Bank Group, Inc Florida Gulf Florida Gulf Bancorp, Inc. FOMC FRB GAAP Federal Open Market Committee Board of Governors of the Federal Reserve System Accounting principles generally accepted in the United States of America Georgia Commerce Georgia Commerce Bancshares, Inc. GSE HTM IAM Government-sponsored enterprises Securities held-to-maturity IBERIA Asset Management, Inc. IBERIABANK Banking subsidiary of IBERIABANK Corporation ICP IFS IMC IWA IBERIA Capital Partners, LLC IBERIA Financial Services IBERIABANK Mortgage Company IBERIA Wealth Advisors Legacy loans Loans that were originated directly or otherwise underwritten by the Company LIBOR LIHTC LTC MSA Non-GAAP NPA London Interbank Borrowing Offered Rate Low-income housing tax credit Lenders Title Company Metropolitan statistical area Financial measures determined by methods other than in accordance with GAAP Non-performing asset (cid:25)(cid:21) OCI Old Florida OMNI OREO OTTI Parent PCD RRP RULC SBA SEC TE Teche TDR Other comprehensive income Old Florida Bancshares, Inc. OMNI BANCSHARES, Inc. Other real estate owned Other than temporary impairment IBERIABANK Corporation Purchased Financial Assets with Credit Deterioration Recognition and Retention Plan Reserve for unfunded lending commitments Small Business Administration Securities and Exchange Commission Fully taxable equivalent Teche Holding Company Troubled debt restructuring Trust One-Memphis Trust One Bank (Memphis Operations) U.S. United States of America (cid:25)(cid:22) MANAGEMENT REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING To the Board of Directors of IBERIABANK Corporation The management of IBERIABANK Corporation (the “Company”) is responsible for establishing and maintaining effective internal control over financial reporting. The Company’s internal control system was designed to provide reasonable assurance to the Company’s management and Board of Directors regarding the preparation and fair presentation of the Company’s financial statements for external purposes in accordance with U.S. generally accepted accounting principles. Internal control over financial reporting includes self-monitoring mechanisms, and actions are taken to correct deficiencies as they are identified. All internal control systems, no matter how well designed, have inherent limitations and may not prevent or detect misstatements in the Company’s financial statements, including the possibility of circumvention or overriding of controls. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of a change in conditions, or that the degree of compliance with the policies or procedures may deteriorate. The Company’s management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2016. In making this assessment, it used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control—Integrated Framework (2013 Framework). Based on its assessment, management believes that, as of December 31, 2016, the Company’s internal control over financial reporting is effective based on those criteria. The Company’s independent registered public accounting firm has also issued an attestation report on the effectiveness of the Company’s internal control over financial reporting as of December 31, 2016. Daryl G. Byrd President and Chief Executive Officer Anthony J. Restel Senior Executive Vice President and Chief Financial Officer (cid:25)(cid:23) REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM The Board of Directors and Shareholders IBERIABANK Corporation We have audited IBERIABANK Corporation and subsidiaries’ internal control over financial reporting as of December 31, 2016, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). IBERIABANK Corporation and subsidiaries’ management is responsible 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 Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. 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. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) 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 (3) 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. In our opinion, IBERIABANK Corporation and subsidiaries maintained, in all material respects, effective internal control over financial reporting as of December 31, 2016, based on the COSO criteria. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of IBERIABANK Corporation and subsidiaries as of December 31, 2016 and 2015, and the related consolidated statements of comprehensive income, shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2016 and our report dated February 21, 2017 expressed an unqualified opinion thereon. New Orleans, Louisiana February 21, 2017 (cid:25)(cid:24) REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM The Board of Directors and Shareholders IBERIABANK Corporation We have audited the accompanying consolidated balance sheets of IBERIABANK Corporation and subsidiaries as of December 31, 2016 and 2015, and the related consolidated statements of comprehensive income, shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2016. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of IBERIABANK Corporation and subsidiaries at December 31, 2016 and 2015, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2016, in conformity with U.S. generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), IBERIABANK Corporation and subsidiaries’ internal control over financial reporting as of December 31, 2016, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 21, 2017 expressed an unqualified opinion thereon. New Orleans, Louisiana February 21, 2017 (cid:25)(cid:25) IBERIABANK CORPORATION AND SUBSIDIARIES Consolidated Balance Sheets (Dollars in thousands, except share data) Assets Cash and due from banks Interest-bearing deposits in banks Total cash and cash equivalents Securities available for sale, at fair value Securities held to maturity (fair values of $89,932 and $100,961, respectively) Mortgage loans held for sale, at fair value Loans covered by loss share agreements Non-covered loans, net of unearned income Total loans, net of unearned income Allowance for loan losses Loans, net FDIC loss share receivables Premises and equipment, net Goodwill Other assets Total Assets Liabilities Deposits: Non-interest-bearing Interest-bearing Total deposits Short-term borrowings Long-term debt Other liabilities Total Liabilities Shareholders’ Equity Preferred stock, $1 par value - 5,000,000 shares authorized Non-cumulative perpetual, liquidation preference $10,000 per share; 13,750 shares and 8,000 shares issued and outstanding, respectively, including related surplus Common stock, $1 par value - 100,000,000 shares authorized; 44,795,386 and 41,139,537 shares issued and outstanding, respectively Additional paid-in capital Retained earnings Accumulated other comprehensive income (loss) Total Shareholders’ Equity Total Liabilities and Shareholders’ Equity December 31, 2016 2015 $ 295,896 $ 1,066,230 1,362,126 3,446,097 89,216 157,041 — 241,650 268,617 510,267 2,800,286 98,928 166,247 229,217 15,064,971 14,098,211 15,064,971 (144,719) 14,920,252 — 306,373 726,856 14,327,428 (138,378) 14,189,050 39,878 323,902 724,603 651,229 $ 21,659,190 650,907 $ 19,504,068 $ 4,928,878 $ 4,352,229 12,479,405 17,408,283 509,136 628,953 173,124 18,719,496 11,826,519 16,178,748 326,617 340,447 159,421 17,005,233 132,097 44,795 76,812 41,140 2,084,446 1,797,982 704,391 (26,035) 2,939,694 $ 21,659,190 584,486 (1,585) 2,498,835 $ 19,504,068 The accompanying Notes are an integral part of these Consolidated Financial Statements. (cid:25)(cid:26) IBERIABANK CORPORATION AND SUBSIDIARIES Consolidated Statements of Comprehensive Income (Dollars in thousands, except per share data) Interest and Dividend Income Loans, including fees Mortgage loans held for sale, including fees Investment securities: Taxable interest Tax-exempt interest Amortization of FDIC loss share receivable Other Total interest and dividend income Interest Expense Deposits: NOW and MMDA Savings Time deposits Short-term borrowings Long-term debt Total interest expense Net interest income Provision for loan losses Net interest income after provision for loan losses Non-interest Income Mortgage income Service charges on deposit accounts Title revenue Broker commissions ATM/debit card fee income Credit card and merchant-related income Income from bank owned life insurance Gain on sale of available for sale securities Other non-interest income Total non-interest income Non-interest Expense Salaries and employee benefits Net occupancy and equipment Communication and delivery Marketing and business development Data processing Professional services Credit and other loan related expense Insurance Loss on early termination of loss share agreements Travel and entertainment Other non-interest expense Total non-interest expense Income before income tax expense Income tax expense Net Income Preferred stock dividends Net Income Available to Common Shareholders Year Ended December 31, 2015 2014 2016 $ 663,037 6,564 $ 606,966 6,164 $ 526,706 5,153 52,150 7,004 (16,024) 4,208 716,939 32,396 1,145 18,039 2,453 13,668 67,701 649,238 44,424 604,814 83,853 44,135 22,213 15,338 14,240 12,171 5,241 2,001 34,629 233,821 331,686 65,797 12,383 12,332 25,091 19,153 10,937 17,270 17,798 8,481 45,737 566,665 271,970 85,193 186,777 (7,977) 178,800 $ 47,380 5,785 (23,500) 4,063 646,858 38,815 5,862 (74,617) 2,896 504,815 27,226 740 19,137 797 11,200 59,100 587,758 30,908 556,850 80,662 42,197 22,837 17,592 13,989 10,675 4,356 1,575 26,510 220,393 322,586 68,541 13,506 13,176 34,424 22,368 16,653 16,670 — 9,525 52,856 570,305 206,938 64,094 142,844 — 142,844 $ 18,483 325 14,282 1,364 10,250 44,704 460,111 19,060 441,051 51,797 35,573 20,492 18,783 12,023 9,718 5,473 771 18,998 173,628 259,086 59,571 12,029 11,707 27,249 18,975 13,692 14,359 — 9,033 47,913 473,614 141,065 35,683 105,382 — 105,382 $ (cid:25)(cid:27) Income Available to Common Shareholders - Basic Earnings Allocated to Unvested Restricted Stock Earnings Allocated to Common Shareholders Earnings per common share - Basic Earnings per common share - Diluted Cash dividends declared per common share Comprehensive Income Net Income Other comprehensive income (loss), net of tax: Unrealized gains (losses) on securities: Unrealized holding gains (losses) arising during the period (net of tax effects of $12,261, $4,374, and $13,202, respectively) Reclassification adjustment for gains included in net income (net of tax effects of $700, $551 and $270, respectively) Unrealized gains (losses) on securities, net of tax Fair value of derivative instruments designated as cash flow hedges: Change in fair value of derivative instruments designated as cash flow hedges during the period (net of tax effects of $231, $20 and $0, respectively) Reclassification adjustment for losses included in net income (net of tax effects of $27, $0 and $0, respectively) Fair value of derivative instruments designated as cash flow hedges, net of tax Other comprehensive income (loss), net of tax Comprehensive income $ $ $ $ $ $ $ 178,800 (1,872) 176,928 4.32 4.30 1.40 $ $ $ 142,844 (1,680) 141,164 3.69 3.68 1.36 105,382 (1,651) 103,731 3.31 3.30 1.36 186,777 $ 142,844 $ 105,382 (22,771) (8,124) 24,517 (1,301) (24,072) (1,024) (9,148) (501) 24,016 (428) 50 38 — — — (378) (24,450) 162,327 $ 38 (9,110) 133,734 $ — 24,016 129,398 $ The accompanying Notes are an integral part of these Consolidated Financial Statements. (cid:25)(cid:28) (Dollars in thousands, except share and per share data) Balance, December 31, 2013 Net income Other comprehensive income/(loss) Cash dividends declared, $1.36 per share Reissuance of treasury stock under incentive plans, net of shares surrendered in payment, including tax benefit Common stock issued for acquisitions Treasury stock issued for recognition and retention plans Share-based compensation cost Balance, December 31, 2014 Net income Other comprehensive income/(loss) Cash dividends declared, $1.36 per share Reclassification of treasury stock under the LBCA (1) Common stock issued under incentive plans, net of shares surrendered in payment, including tax benefit Common stock issued for acquisitions Share-based compensation cost Balance, December 31, 2015 Net income Other comprehensive income/(loss) Cash dividends declared, $1.40 per share Preferred stock dividends Common stock issued under incentive plans, net of shares surrendered in payment, including tax benefit Common stock issued Common stock repurchases Share-based compensation cost Balance, December 31, 2016 IBERIABANK CORPORATION AND SUBSIDIARIES Consolidated Statements of Shareholders’ Equity Preferred Stock Common Stock Shares Amount Shares Amount Additional Paid-In Capital Retained Earnings Accumulated Other Comprehensive Income (Loss) Treasury Stock at Cost Total — $ — 31,917,385 $ 31,917 $ 1,178,284 $ 435,508 $ (16,491) $ (98,872) $ 1,530,346 — — — — — — — — — — — — — — — — — — — — — — — — — 3,242 3,345,516 3,346 211,319 — — — — (6,197) 11,985 105,382 — — 24,016 (44,317) — — — — — — — — — — — — 105,382 24,016 (44,317) 6,829 10,071 — 214,665 6,197 — — 11,985 — $ — 35,262,901 $ 35,263 $ 1,398,633 $ 496,573 $ 7,525 $ (85,846) $ 1,852,148 — — — — — — — — — — — — — — — — — — — (1,809,497) (1,809) (84,037) — — 211,729 212 2,201 7,474,404 7,474 467,279 — — — — — 13,906 142,844 — — (9,110) (54,931) — — — — — — — — — — — — — — 142,844 (9,110) (54,931) 85,846 — — — — — 2,413 474,753 76,812 13,906 8,000 $ 76,812 41,139,537 $ 41,140 $ 1,797,982 $ 584,486 $ (1,585) $ — $ 2,498,835 — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — 264,605 3,593,750 (202,506) 264 3,594 — (203) 7,756 275,648 — (11,463) — — 14,523 186,777 — — (24,450) (58,895) (7,977) — — — — — — — — — — — — — — — — — — — — — 186,777 (24,450) (58,895) (7,977) 8,020 279,242 55,285 (11,666) 14,523 13,750 $ 132,097 44,795,386 $ 44,795 $ 2,084,446 $ 704,391 $ (26,035) $ — $ 2,939,694 (cid:26)(cid:19) Preferred stock issued 5,750 55,285 — Preferred stock issued 8,000 76,812 (1) Effective January 1, 2015, companies incorporated in Louisiana became subject to the Louisiana Business Corporation Act (“LBCA”), which eliminates the concept of treasury stock and provides that shares reacquired by a company are to be treated as authorized but unissued. Refer to Note 1 for further discussion. The accompanying Notes are an integral part of these Consolidated Financial Statements. (cid:26)(cid:20) IBERIABANK CORPORATION AND SUBSIDIARIES Consolidated Statements of Cash Flows (Dollars in thousands) Cash Flows from Operating Activities Net income Adjustments to reconcile net income to net cash provided by operating activities: Depreciation, amortization, and accretion Amortization of purchase accounting adjustments, net Provision for loan losses Share-based compensation cost - equity awards Gain on sale of assets, net Gain on sale of available for sale securities Gain on sale of OREO, net Impairment of FDIC loss share receivables and other long-lived assets Amortization of premium/discount on securities, net (Benefit) expense for deferred income taxes Originations of mortgage loans held for sale Proceeds from sales of mortgage loans held for sale Realized and unrealized gains on mortgage loans held for sale, net Tax benefit associated with share-based payment arrangements Other operating activities, net Net Cash Provided by Operating Activities Cash Flows from Investing Activities Proceeds from sales of available for sale securities Proceeds from maturities, prepayments and calls of available for sale securities Purchases of available for sale securities Proceeds from maturities, prepayments and calls of held to maturity securities Purchases of held to maturity securities Purchases of equity securities Reimbursement of recoverable covered asset losses (to) from the FDIC Increase in loans, net of loans acquired Proceeds from sale of premises and equipment Purchases of premises and equipment, net of premises and equipment acquired Proceeds from disposition of OREO Cash paid for additional investment in tax credit entities Cash received in excess of cash paid for acquisitions Other investing activities, net Net Cash Used in Investing Activities Cash Flows from Financing Activities Increase in deposits, net of deposits acquired Net change in short-term borrowings, net of borrowings acquired Proceeds from long-term debt Repayments of long-term debt Cash dividends paid on common stock Cash dividends paid on preferred stock Net share-based compensation stock transactions (cid:26)(cid:21) Year Ended December 31, 2016 2015 2014 $ 186,777 $ 142,844 $ 105,382 5,332 (17,431) 44,424 14,523 (58) (2,001) (6,325) 20,883 22,732 (16,654) (2,460,033) 2,525,945 (74,486) (1,122) 64,460 306,966 15,457 (21,635) 30,908 13,906 (2,539) (1,575) (5,552) 6,954 18,195 4,551 (2,464,588) 2,516,936 (83,957) (580) 26,798 196,123 15,791 7,536 19,060 11,985 (14) (771) (4,221) 6,437 13,793 (25,027) (1,675,538) 1,720,443 (63,034) (2,105) (10,354) 119,363 197,733 228,604 61,702 484,138 (1,384,525) 473,142 (1,063,460) 8,791 — (31,530) (1,558) (704,025) 1,941 (12,840) 33,236 (19,208) — 3,450 (1,424,397) 1,230,008 182,518 304,728 (15,025) (56,793) (7,028) 6,899 22,939 (5,833) (16,362) (932) (703,946) 13,309 (19,502) 55,025 (9,671) 425,581 30,134 (570,972) 968,746 (520,653) 63,198 (201,259) (52,318) — 1,915 488,699 (703,179) 36,182 — (32,735) 5,734 (824,437) 5,129 (29,841) 84,429 (13,191) 188,803 19,950 (712,755) 641,026 110,298 54,637 (22,871) (43,070) — 7,966 Payments to repurchase common stock Net proceeds from issuance of common stock Net proceeds from issuance of preferred stock Tax benefit associated with share-based payment arrangements Net Cash Provided by Financing Activities Net Increase (Decrease) In Cash and Cash Equivalents Cash and Cash Equivalents at Beginning of Period Cash and Cash Equivalents at End of Period Supplemental Schedule of Non-cash Activities Acquisition of real estate in settlement of loans Common stock issued in acquisition Supplemental Disclosures Cash paid for: Interest on deposits and borrowings Income taxes, net (11,666) 279,242 55,285 1,122 1,969,290 851,859 510,267 1,362,126 $ — — 76,812 580 337,021 (37,828) 548,095 510,267 9,743 $ — $ 21,690 474,753 70,084 79,784 $ $ 58,556 53,476 $ $ $ $ $ $ $ $ $ $ — — — 2,105 750,091 156,699 391,396 548,095 27,050 214,665 43,210 52,094 The accompanying Notes are an integral part of these Consolidated Financial Statements. (cid:26)(cid:22) IBERIABANK CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES GENERAL The accompanying consolidated financial statements have been prepared in accordance with GAAP and practices generally accepted in the banking industry. The consolidated financial statements include the accounts of the Company and its subsidiaries. When we refer to the “Company,” “we,” “our,” or “us” in this Report, we mean IBERIABANK Corporation and subsidiaries (consolidated). When we refer to the “Parent,” we mean IBERIABANK Corporation. See the Glossary of Acronyms at the end of this Report for terms used throughout this Report. Reclassification Certain amounts reported in prior periods have been reclassified to conform to the current period presentation. These reclassifications did not have a material effect on previously reported consolidated financial statements. PRINCIPLES OF CONSOLIDATION The Company’s consolidated financial statements include all entities in which the Company has a controlling financial interest under either the voting interest or variable interest model. The assessment of whether or not the Company has a controlling interest (i.e., the primary beneficiary) in a VIE is performed on an on-going basis. All equity investments in non-consolidated VIEs are included in "other assets" in the Company’s consolidated balance sheets. The Company’s maximum exposure to loss as a result of its involvement with non-consolidated VIEs was approximately $84 million and $160 million at December 31, 2016 and 2015, respectively. The Company's maximum exposure to loss was equivalent to the carrying value of its investments and any related outstanding loans to the non-consolidated VIEs. Investments in entities that are not consolidated are accounted for under either the equity, cost, or proportional amortization method of accounting. Investments for which the Company has the ability to exercise significant influence over the operating and financing decisions of the entity are accounted for under the equity method. Investments for which the Company does not hold such ability are accounted for under the cost method. Investments in qualified affordable housing projects, which meet certain criteria, are accounted for under the proportional amortization method. The consolidated financial statements include the accounts of the Company and its subsidiaries, IBERIABANK; Lenders Title Company; IBERIA Capital Partners, LLC; 1887 Leasing, LLC; IBERIA Asset Management, Inc.; 840 Denning, LLC; and IBERIA CDE, LLC. All significant intercompany balances and transactions have been eliminated in consolidation. All normal, recurring adjustments which, in the opinion of management, are necessary for a fair presentation of the financial statements have been included. NATURE OF OPERATIONS The Company offers commercial and retail banking products and services to customers throughout locations in seven states through IBERIABANK. The Company also operates mortgage production offices in 10 states through IMC and offers a full line of title insurance and closing services throughout Arkansas and Louisiana through LTC and its subsidiaries. ICP provides equity research, institutional sales and trading, and corporate finance services throughout the energy industry. 1887 Leasing, LLC owns an aircraft used by management of the Company. IAM provides wealth management and trust services for commercial and private banking clients. CDE is engaged in the purchase of tax credits. USE OF ESTIMATES The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. Material estimates that are susceptible to significant change in the near term are the allowance for credit losses, valuation of and accounting for acquired loans, goodwill and other intangibles, and income taxes. CONCENTRATION OF CREDIT RISKS Most of the Company’s business activity is with customers located within the states of Louisiana, Florida, Arkansas, Alabama, Texas, Georgia, and Tennessee. The Company’s lending activity is concentrated in its market areas in those states. The Company has emphasized originations of commercial loans and private banking loans, defined as loans to higher net worth (cid:26)(cid:23) clients. Repayments on loans are expected to come from cash flows of the borrower and/or guarantor. Losses on secured loans are limited by the value of the collateral upon default of the borrowers and guarantor support. Concentrations in commercial real estate have increased as a result of the Company's organic growth and recent acquisitions of banks with significant CRE portfolios. Additionally, as the Company has executed its risk-off strategy over the past two years, CRE concentrations have naturally increased as a percentage of the total portfolio. The Company does not have any excessive concentrations to any one industry or customer. BUSINESS COMBINATIONS Assets and liabilities acquired in business combinations are recorded at their acquisition date fair values. In accordance with ASC Topic 805, Business Combinations, the Company generally records provisional amounts at the time of acquisition based on the information available to the Company. The provisional estimates of fair values may be adjusted for a period of up to one year (“measurement period”) from the date of acquisition if new information is obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the measurement of the amounts recognized as of that date. Subsequent to the Company's early adoption of ASU No. 2015-16 during the third quarter of 2015, adjustments recorded during the measurement period are recognized in the current reporting period. Loans generally represent a significant portion of the assets acquired in the Company’s business acquisitions. If the Company discovers that it has materially underestimated the credit losses expected in the loan portfolio based on information available at the acquisition date within the measurement period, it will reduce or eliminate the gain and/or increase goodwill recorded on the acquisition in the period the adjustment is recorded. If the Company determines that losses arose subsequent to the acquisition date, such losses are reflected as a provision for credit losses. CASH AND CASH EQUIVALENTS For purposes of presentation in the consolidated statements of cash flows, cash and cash equivalents are defined as cash on hand, interest-bearing deposits, and non-interest-bearing demand deposits at other financial institutions with original maturities less than three months. IBERIABANK may be required to maintain average cash balances on hand or with the Federal Reserve Bank to meet regulatory reserve and clearing requirements. At December 31, 2016 and 2015, IBERIABANK had sufficient cash deposited with the Federal Reserve Bank to cover the required reserve balance. INVESTMENT SECURITIES Management determines the appropriate accounting classification of debt and equity securities at the time of acquisition and re- evaluates such designations at least quarterly. Debt securities that management has the ability and intent to hold to maturity are classified as HTM and carried at cost, adjusted for amortization of premiums and accretion of discounts using methods approximating the interest method. Securities acquired with the intention of recognizing short-term profits or which are actively bought and sold are classified as trading securities and reported at fair value, with unrealized gains and losses recognized in earnings. Securities not classified as HTM or trading, including equity securities with readily determinable fair values, are classified as AFS and recorded at fair value, with unrealized gains and losses excluded from earnings and reported in OCI. Credit-related declines in the fair value of debt and marketable equity securities that are considered OTTI are recorded in earnings. The Company evaluates its investment securities portfolio on a quarterly basis for indicators of OTTI. Declines in the fair value of individual HTM and AFS securities below their amortized cost basis are reviewed to determine whether the declines are other than temporary. In estimating OTTI losses, management considers 1) the length of time and the extent to which the fair value has been less than the amortized cost basis, 2) the financial condition and near-term prospects of the issuer, 3) its intent to sell and whether it is more likely than not that the Company would be required to sell those securities before the anticipated recovery of the amortized cost basis, and 4) for debt securities, the recovery of contractual principal and interest. For securities that the Company does not expect to sell, or it is not more likely than not it will be required to sell prior to recovery of its amortized cost basis, the credit component of an OTTI is recognized in earnings and the non-credit component is recognized in OCI. For securities that the Company does expect to sell, or it is more likely than not that it will be required to sell prior to recovery of its amortized cost basis, both the credit and non-credit component of an OTTI are recognized in earnings. Subsequent to recognition of OTTI, an increase in expected cash flows is recognized as a yield adjustment over the remaining expected life of the security based on an evaluation of the nature of the increase. Nonmarketable equity securities include stock acquired for regulatory purposes, such as Federal Home Loan Bank stock and Federal Reserve Bank stock. These securities are accounted for at amortized cost, evaluated for impairment at least quarterly, and included in "other assets". (cid:26)(cid:24) Gains or losses on securities sold are recorded on the trade date, using the specific identification method. LOANS HELD FOR SALE Loans and loan commitments which the Company does not have the intent and ability to hold for the foreseeable future or until maturity or payoff are classified as loans held for sale at the time of origination or acquisition. Subsequent to origination or acquisition, if the Company no longer has the intent or ability to hold a loan for the foreseeable future, generally a decision has been made to sell the loan, and it is classified within loans held for sale. Unless the fair value option has been elected at origination or acquisition, loans classified as held for sale are carried at the lower of cost or fair value. Amortization/accretion of remaining unamortized net deferred loan fees or costs and discounts or premiums (if applicable) ceases when a loan is classified as held for sale. Loans held for sale primarily consist of fixed rate single-family residential mortgage loans originated and committed to be sold in the secondary market. Mortgage loans originated and held for sale are recorded at fair value under the fair value option, unless otherwise noted. For mortgage loans for which the Company has elected the fair value option, gains and losses are included in mortgage income. For any other loans held for sale, net unrealized losses, if any, are recognized through a valuation allowance that is recorded as a charge to non-interest income. See Note 20 for further discussion of the determination of fair value for loans held for sale. In most cases, loans in this category are sold within thirty days and are generally sold with the mortgage servicing rights released. Buyers generally have recourse to return a purchased loan or request reimbursement for the loan premium or servicing rights under limited circumstances. Recourse conditions may include prepayment, payment default, breach of representations or warranties, and documentation deficiencies. During 2016 and 2015, an insignificant number of loans were returned to the Company. At December 31, 2016 and 2015, the recorded repurchase liability associated with transferred loans was not material. LOANS Legacy (Loans originated or renewed and underwritten by the Company) The Company originates mortgage, commercial, and consumer loans for customers. Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are reported at the unpaid principal balances, less the ALL, charge-offs, and unamortized net loan origination fees and direct costs, except for loans carried at fair value. Interest income is accrued as earned over the term of the loans based on the principal balance outstanding. Loan origination fees, net of certain direct origination costs, are deferred and recognized as an adjustment of the related loan yield. Acquired (Loans acquired through Business Combinations) Acquired loans are recorded at fair value on the acquisition date in accordance with ASC Topic 820, Fair Value Measurement, consistent with the exit price concept on the date of acquisition. Credit risk assumptions and any resulting credit discounts are included in the determination of fair value. Therefore, an ALL is not recorded at the acquisition date. The determination of fair value includes estimates related to discount rates, expected prepayments, and the amount and timing of undiscounted expected principal, interest, and other cash flows. Acquired loans are evaluated at acquisition and classified as purchased impaired (“acquired impaired”) or purchased non- impaired (“acquired non-impaired”). Purchased impaired loans reflect credit deterioration since origination to the extent that it is probable at the time of acquisition that the Company will be unable to collect all contractually required payments. At the time of acquisition, purchased impaired loans are accounted for individually or aggregated into loan pools with similar characteristics, which include: • whether the loan is performing according to contractual terms at the time of acquisition, • • • • the loan type based on regulatory reporting guidelines, namely whether the loan was a mortgage, consumer, or commercial loan, the nature of collateral, the interest rate type, whether fixed or variable rate, and the loan payment type, primarily whether the loan is amortizing or interest-only. From these pools, the Company uses certain loan information, including outstanding principal balance, estimated expected losses, weighted average maturity, weighted average term to re-price (if a variable rate loan), weighted average margin, and weighted average interest rate to estimate the expected cash flow for each loan pool. (cid:26)(cid:25) For purchased impaired loans, expected cash flows at the acquisition date in excess of the fair value of loans are recorded as interest income over the life of the loans using a level yield method if the timing and amount of future cash flows is reasonably estimable. For purchased non-impaired loans, the difference between the fair value and unpaid principal balance of the loan at acquisition, referred to as a purchase premium or discount, is amortized or accreted to income over the estimated life of the loans as an adjustment to yield. Subsequent to acquisition, the Company performs cash flow re-estimations at least quarterly for each purchased impaired loan and/or loan pool. Increases in estimated cash flows above those expected at acquisition are recognized on a prospective basis as interest income over the remaining life of the loan and/or pool. Decreases in expected cash flows subsequent to acquisition generally result in recognition of a provision for credit loss. The measurement of cash flows involves several assumptions and judgments (i.e., prepayments, default rates, loss severity, etc.). All of these factors are inherently subjective and significant changes in the cash flow estimations can result over the life of the loan. Classification The Company’s loan portfolio is disaggregated into portfolio segments for purposes of determining the ACL. The Company’s portfolio segments include commercial, residential mortgage, and consumer and other loans, bifurcated between legacy and acquired. The Company further disaggregates each commercial, residential mortgage, and consumer and other loans portfolio segment into classes for purposes of monitoring and assessing credit quality based on certain risk characteristics. Classes within the commercial loan portfolio segment include commercial real estate-construction, commercial real estate-other, commercial and industrial, and energy-related. Classes within the consumer and other loans portfolio segment include consumer-home equity, consumer-indirect automobile, consumer-credit card, and consumer-other. Troubled Debt Restructurings The Company periodically grants concessions to its customers in an attempt to protect as much of its investment as possible and minimize risk of loss. These concessions may include restructuring the terms of a loan to alleviate the burden of the customer’s near-term cash requirements. In order to be classified as a TDR, the Company must conclude that the restructuring constitutes a concession and the customer is experiencing financial difficulties. The Company defines a concession to the customer as a modification of existing terms for economic or legal reasons that it would otherwise not consider. The concession is either granted through an agreement with the customer or is imposed by a court or law. Concessions include modifying original loan terms to reduce or defer cash payments required as part of the loan agreement, including but not limited to: • • • • a reduction of the stated interest rate for the remaining original life of the loan, extension of the maturity date or dates at a stated interest rate lower than the current market rate for new loans with similar risk characteristics, reduction of the face amount or maturity amount of the loan as stated in the agreement, or reduction of accrued interest receivable on the loan. In its determination of whether the customer is experiencing financial difficulties, the Company considers numerous indicators, including, but not limited to: • whether the customer is currently in default on its existing loan(s), or is in an economic position where it is probable the customer will be in default on its loan(s) in the foreseeable future without a modification, • whether the customer has declared or is in the process of declaring bankruptcy, • whether there is substantial doubt about the customer’s ability to continue as a going concern, • whether, based on its projections of the customer’s current capabilities, the Company believes the customer’s future cash flows will be insufficient to service the loan, including interest, in accordance with the contractual terms of the existing agreement for the foreseeable future, and • whether, without modification, the customer cannot obtain sufficient funds from other sources at an effective interest rate equal to the current market rate for a similar loan for a non-troubled debtor. If the Company concludes that both a concession has been granted and the customer is experiencing financial difficulties, the Company identifies the loan as a TDR. All TDRs are considered impaired loans. (cid:26)(cid:26) NON-ACCRUAL AND PAST DUE LOANS (INCLUDING LOAN CHARGE-OFFS) Loans are generally considered past due when contractual payments of principal and interest have not been received within 30 days from the contractual due date. Residential mortgage loans are considered past due when contractual payments have not been received for two consecutive payment dates. Legacy and purchased non-impaired loans are placed on non-accrual status when any of the following occur: 1) the loan is maintained on a cash basis because of deterioration in the financial condition of the borrower; 2) collection of the full contractual amount of principal or interest is not expected (even if the loan is currently paying as agreed); 3) when principal or interest has been in default for a period of 90 days or more, unless the loan is both well secured and in the process of collection; or 4) the borrower has filed or is likely to file bankruptcy. Factors considered in determining the collection of the full contractual amount of principal or interest include assessment of the borrower’s cash flow, valuation of underlying collateral, and the ability and willingness of guarantors to provide credit support. Certain commercial loans are also placed on non- accrual status when payment is not past due and full payment of principal and interest is expected, but we have doubt about the borrower’s ability to comply with existing repayment terms. Consideration will be given to placing a loan on non-accrual due to the deterioration of the debtor’s repayment ability, the repayment of the loan becoming dependent on the liquidation of collateral, an existing collateral deficiency, the loan being classified as "Doubtful" or "Loss", the client filing for bankruptcy, and/or foreclosure being initiated. Regarding all classes within the C&I and CRE portfolios, the determination of a borrower’s ability to make the required principal and interest payments is based on an examination of the borrower’s current financial statements, industry, management capabilities, and other qualitative measures. Purchased impaired loans are placed on non-accrual status when the Company cannot reasonably estimate cash flows on a loan or loan pool. Legacy and purchased non-impaired loans are evaluated for potential charge-off in accordance with the parameters discussed in the following paragraph or when the loan is placed on non-accrual status, whichever is earlier. Loans within the commercial portfolio (except for purchased impaired) are generally evaluated for charge-off at 90 days past due, unless both well-secured and in the process of collection. Closed and open-end residential mortgage and consumer loans (except for purchased impaired) are evaluated for charge-off no later than 120 days past due. Any outstanding loan balance in excess of the fair value of the collateral less costs to sell is charged-off no later than 120 days past due for loans secured by real estate. For non-real estate secured loans, in lieu of charging off the entire loan balance, loans may be written down to the fair value of the collateral less costs to sell if repossession of collateral is assured and in process. The accrual of interest, as well as the amortization/accretion of any remaining unamortized net deferred fees or costs and discount or premium, is discontinued at the time the loan is placed on non-accrual status. All accrued but uncollected interest for loans that are placed on non-accrual status is reversed through interest income. Cash receipts received on non-accrual loans are generally applied against principal until the loan has been collected in full, after which time any additional cash receipts are recognized as interest income (i.e., cost recovery method). However, interest may be accounted for under the cash-basis method as long as the remaining recorded investment in the loan is deemed fully collectible. Loans are returned to accrual status when the borrower has demonstrated a capacity to continue payment of the debt (generally a minimum of six months of payment history) and collection of contractually required principal and interest associated with the debt is reasonably assured. At such time, the accrual of interest and amortization/accretion of any remaining unamortized net deferred fees or costs and discount or premium shall resume. Any interest income which was applied to the principal balance shall not be reversed and subsequently will be recognized as an adjustment to yield over the remaining life of the loan. IMPAIRED LOANS For all classes within the commercial portfolio, all loans with an outstanding commitment balance above a specific threshold are evaluated on a quarterly basis for potential impairment. Generally, residential mortgage and consumer loans within any class are not individually evaluated on a regular basis for impairment. All TDRs, regardless of the outstanding balance amount or portfolio classification, and all purchased impaired loans are considered to be impaired. A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal and/or interest when due, according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value, and the likelihood of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Impairment losses are measured on a loan-by-loan basis for commercial and certain residential mortgage or consumer loans, based on either the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s observable market price, or the fair value of the collateral if the loan is collateral-dependent. This measurement requires significant judgment and use of estimates, and the actual loss ultimately recognized by the Company may differ significantly from the estimates. (cid:26)(cid:27) ALLOWANCE FOR CREDIT LOSSES The Company maintains the ACL at a level that management believes appropriate to absorb estimated probable credit losses incurred in the loan portfolios (including unfunded commitments) as of the consolidated balance sheet date. The ACL consists of the allowance for loan losses (contra asset) and the reserve for unfunded commitments (liability). The manner in which the ACL is determined is based on 1) the accounting method applied to the underlying loans and 2) whether the loan is required to be measured for impairment. The Company delineates between loans accounted for under the contractual yield method, legacy and purchased non-impaired loans, and purchased impaired loans. Further, for legacy and acquired non-impaired loans, the Company attributes portions of the ACL to loans and loan commitments that it measures individually, and groups of homogeneous loans and loan commitments that it measures collectively for impairment. Determination of the appropriate ACL involves a high degree of complexity and requires significant judgment regarding the credit quality of the loan portfolio. Several factors are taken into consideration in the determination of the overall ACL, including a qualitative component. These factors include, but are not limited to, the overall risk profiles of the loan portfolios, net charge-off experience, the extent of impaired loans, the level of non-accrual loans, the level of 90 days past due loans, the value of collateral, the ability to monetize guarantor support, and the overall percentage level of the allowance relative to the loan portfolio, amongst other factors. The Company also considers overall asset quality trends, changes in lending practices and procedures, trends in the nature and volume of the loan portfolio, including the existence and effect of any portfolio concentrations, changes in experience and depth of lending staff, the Company’s legal, regulatory and competitive environment, national and regional economic trends, data availability and applicability that might impact the portfolio or the manner in which it estimates losses, and risk rating accuracy and risk identification. The allowance for loan losses for all impaired loans (excluding purchased impaired) is determined on an individual loan basis, considering the facts and circumstances specific to each borrower. The allowance is based on the difference between the recorded investment in the loan and generally either the estimated net present value of projected cash flows or the estimated value of the collateral associated with the loan, if the loan is deemed collateral-dependent. For non-impaired loans (excluding purchased impaired), the allowance for loan losses is calculated based on pools of loans with similar characteristics. The pool- level allowance is calculated through the application of PD (i.e., probability of default) and LGD (i.e., loss given default) factors for each individual loan. PDs and LGDs are determined based on historical default and loss information for similar loans. For purposes of establishing estimated loss percentages for pools of loans that share common risk characteristics, the Company’s loan portfolio is segmented by various loan characteristics including loan type, risk rating (commercial), Vantage or FICO score (residential mortgage and consumer), past due status (residential mortgage and consumer) and call report code. The default and loss information is measured over an appropriate period for each loan pool and adjusted as deemed appropriate. Qualitative adjustments are incorporated into the pool-level analysis to accommodate for the imprecision of certain assumptions and uncertainties inherent in the calculation. See the "Loans" section of this Footnote for discussion of the determination of the ACL for purchased impaired loans. Certain inherent, but unconfirmed losses are probable within the loan portfolio. The Company’s current methodology for determining the level of inherent losses is based on historical loss rates, current credit grades, specific allocation, and other qualitative adjustments. In a stable or deteriorating credit environment, heavy reliance on historical loss rates and the credit grade rating process results in model-derived reserves that tend to slightly lag behind portfolio deterioration. Similar lags can occur in an improving credit environment whereby required reserves can lag slightly behind portfolio improvement. Given these and other model limitations, qualitative adjustment factors may be incremental or decremental to the quantitative model results. In periods prior to 2015, the Company estimated incurred losses on its Exploration and Production and its Oil Field Services portfolios as an aggregate portfolio. Beginning in 2015, as the performance of these two portfolios began to diverge, the Company disaggregated the analysis of incurred losses within these portfolios, which included modifying its LGD estimates for the portfolios to more closely align with published historical industry data and other factors. Absent this change, the Company would have recorded an additional $10.0 million, or 17 cents per share, in provision expense for the year ended December 31, 2015. The reserve for unfunded commitments is determined using similar methodologies described above for non-impaired loans. The loss factors used in the reserve for unfunded commitments are equivalent to the loss factors used in the allowance for loan losses, while also considering utilization of unused commitments. FDIC LOSS SHARE RECEIVABLE The Company entered into or assumed arrangements with the FDIC which obligated the FDIC to reimburse the Company for losses on certain loans associated with FDIC-assisted transactions. The indemnification assets were recorded at fair value as of the acquisition dates based on estimated cash flows to be received over the expected life of the acquired assets, not to exceed the term of the indemnification agreements. (cid:26)(cid:28) Effective as of December 20, 2016, the Company entered into an agreement with the FDIC to terminate the Company’s twelve loss share agreements ahead of their contractual maturities. Under the terms of the agreement, all rights and obligations of the Company and FDIC have been resolved and completed. The Company received a net payment of $6.5 million from the FDIC as consideration for termination of the loss share agreements and subsequently derecognized the remaining FDIC indemnification asset of $20.4 million, along with other transaction related-adjustments (including tax impacts), resulting in a net loss of $11.2 million. PREMISES AND EQUIPMENT Land is carried at cost. Buildings, furniture, fixtures, and equipment are carried at cost, less accumulated depreciation computed on a straight-line basis over the estimated useful lives of 10 to 40 years for buildings and related improvements and generally 3 to 20 years for furniture, fixtures, and equipment. Leasehold improvements are amortized over the lease term, including any renewal periods that are reasonably assured, or the asset’s useful life, whichever is shorter. Premises and equipment are evaluated for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. SOFTWARE Software is amortized on a straight-line basis over its estimated useful life. The estimated useful life of software is generally three years, but can vary depending on the specific facts and circumstances. Software is evaluated for impairment whenever events or changes in circumstances indicate that the carrying amount of the software may not be recoverable. Software is recorded within "other assets" on the Company’s consolidated balance sheets with carrying amounts at December 31, 2016 and 2015 of $5.6 million and $6.2 million, respectively. GOODWILL AND OTHER INTANGIBLE ASSETS Goodwill Goodwill represents the excess of the consideration paid in a business combination over the fair value of the identifiable net assets acquired. Goodwill is not amortized, but is assessed for potential impairment at a reporting unit level on an annual basis, as of October 1st, or whenever events or changes in circumstances indicate that it is more likely than not the fair value of a reporting unit is less than its respective carrying amount. As part of its testing, the Company may elect to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If the results of the qualitative assessment indicate that more likely than not a reporting unit’s fair value is less than its carrying amount, the Company determines the fair value of the respective reporting unit (through the application of various quantitative valuation methodologies) relative to its carrying amount to determine whether quantitative indicators of potential impairment are present (i.e., Step 1). The Company may also elect to bypass the qualitative assessment and begin with Step 1. If the results of Step 1 indicate that the fair value of the reporting unit may be below its carrying amount, the Company determines the fair value of the reporting unit’s assets and liabilities, considering deferred taxes, and then measures impairment loss by comparing the implied fair value of goodwill with the carrying amount of that goodwill (i.e., Step 2). Title Plant Costs incurred to construct a title plant, including the costs incurred to obtain, organize, and summarize historical information, are capitalized until the title plant can be used to perform title searches. A purchased title plant, including a purchased undivided interest in a title plant, is recorded at cost at the date of acquisition. For a title plant acquired separately or as part of a business acquisition, cost is measured as the fair value of the consideration paid. Capitalized costs of a title plant are not depreciated or charged to income unless circumstances indicate that the carrying amount of the title plant has been impaired. Impairment indicators include a change in legal requirements or statutory practices, identification of obsolescence, or abandonment of the title plant, among other indicators. Capitalized storage and retrieval costs (e.g., costs to convert from one storage retrieval system to another or to modernize the storage and retrieval systems) incurred after a title plant is operational are charged to expense in a systematic and rational manner. Title plant is recorded within "other assets" on the Company’s consolidated balance sheets. Intangible assets subject to amortization The Company’s acquired intangible assets that are subject to amortization include (amongst other ancillary intangibles described in Note 10) core deposit intangibles, amortized on a straight-line or accelerated basis, and a customer relationship intangible asset, amortized on an accelerated basis, over average lives not to exceed 10 years. The Company reviews intangible assets for impairment whenever events or changes in circumstances indicate that their carrying amounts may not be (cid:27)(cid:19) recoverable. Impairment is identified if the sum of the undiscounted estimated future cash flows is less than the carrying value of the asset. Intangible assets are recorded within "other assets" on the Company’s consolidated balance sheets. OTHER REAL ESTATE OWNED Other real estate owned includes all real estate, other than bank premises used in bank operations, owned or controlled by the Company, including real estate acquired in settlement of loans. Properties are initially recognized at the recorded investment of the loan (which is the pro-rata carrying value of loans accounted for in accordance with ASC Topic 310-30, Receivables - Loans and Debt Securities Acquired with Deteriorated Credit Quality) or at estimated fair value less costs to sell, whichever is less, generally when the Company has received physical possession (legal title is not required for non-consumer residential property). The amount by which the recorded investment of the loan exceeds the fair value less costs to sell of the property is charged to the ALL. Subsequent to foreclosure, the assets are carried at the lower of cost or fair value less costs to sell. Former bank properties transferred to OREO are recorded at the lower of cost or market. Subsequent declines in the fair value of other real estate are recorded as adjustments to the carrying amount through a valuation allowance. Revenue and expenses from operations, gain or loss on sale, and changes in the valuation allowance are included in net expenses from foreclosed assets. The Company included property write-downs of $3.4 million and $4.0 million in earnings for the years ended December 31, 2016 and 2015, respectively. OREO is recorded within "other assets" on the Company’s consolidated balance sheets. DERIVATIVE FINANCIAL INSTRUMENTS The Company enters into various derivative financial instruments to manage interest rate risk, asset sensitivity, and other exposures such as liquidity and credit risk, as well as to facilitate customer transactions. The primary types of derivatives utilized by the Company for its risk management strategies include interest rate swap agreements, interest rate lock commitments, forward sales commitments, and written and purchased options. All derivative instruments are recognized on the consolidated balance sheets as "other assets" or "other liabilities" at fair value, regardless of whether a right of offset exists. Changes in the fair value (i.e., gains or losses) of a derivative instrument are recorded based on whether it has been designated and qualifies as part of a hedging relationship. Interest rate swap and foreign exchange contracts are entered into by the Company to allow its commercial customers to manage their exposure to market rate fluctuations. To mitigate the Company's exposure to the rate risk associated with customer contracts, offsetting derivative positions are entered into with reputable counterparties. The Company manages its credit risk, or potential risk of default, from the customer contracts through credit limit approval and monitoring procedures. These contracts are not designated for hedge accounting (i.e., treated as economic hedges). Derivatives Designated in Hedging Relationships For cash flow hedges, the effective portion of the gain or loss related to the derivative instrument is initially reported as a component of OCI and subsequently reclassified into earnings when the forecasted transaction affects earnings or when the hedge is terminated. The ineffective portion of the gain or loss, if any, is reported in earnings immediately, in either "other income" or "other expense", respectively. In applying hedge accounting for derivatives (ASC Topic 815-30 Derivatives and Hedging - Cash Flow Hedges), the Company establishes and documents a method for assessing the effectiveness of the hedging derivative and a measurement approach for determining the ineffective aspect of the hedge upon the inception of the hedge. Derivatives Not Designated in Hedging Relationships For derivative instruments that are not designated as hedging instruments, changes in the fair value of the derivatives are recognized in earnings immediately. Common Types of Derivatives Interest rate swap agreements Interest rate swaps are agreements to exchange interest payments based upon notional amounts. The exchange of payments typically involves paying a fixed rate and receiving a variable rate or vice versa. As part of its activities to manage interest rate risk (i.e., the exposure to the variability of future cash flows or other forecasted transactions due to fluctuating market rates), the Company enters into interest rate contracts, which typically include interest rate swap agreements. The Company primarily utilizes these instruments, which the Company designates as cash flow hedges, to convert a portion of its variable-rate loans or debt to a fixed rate. (cid:27)(cid:20) Interest rate lock commitments The Company enters into commitments to originate mortgage loans intended for sale whereby the interest rate on the prospective loan is determined prior to funding (“rate lock”). A rate lock is provided to a borrower, subject to conditional performance obligations, for a specified period of time that typically does not exceed 60 days. Rate lock commitments on mortgage loans that are intended to be sold are recognized as derivatives. Accordingly, such commitments are recorded at fair value as derivative assets or liabilities, with changes in fair value recorded in mortgage income on the consolidated statements of comprehensive income. Forward sales commitments The Company uses forward sales commitments 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 sale of these loans, as changes in interest rates have the potential to cause a decline in value of rate locks and mortgage loans included in the held for sale portfolio. These commitments are recognized as derivatives and recorded at fair value as derivative assets or liabilities, with changes in fair value recorded in mortgage income on the consolidated statements of comprehensive income. Equity-indexed certificates of deposit IBERIABANK offers its customers a certificate of deposit that provides the purchaser a guaranteed return of principal at maturity plus a potential return, which allows IBERIABANK to identify a known cost of funds. The rate of return is based on the performance of a group of publicly traded stocks that represent a variety of industry segments. Because it is based on an equity index, the rate of return represents an embedded derivative that is not clearly and closely related to the host instrument and is to be accounted for separately. Accordingly, the certificate of deposit is separated into two components: a zero coupon certificate of deposit (the host instrument) and a written option purchased by the depositor (an embedded derivative). The discount on the zero coupon deposit is amortized over the life of the deposit, and the written option is carried at fair value on the Company’s consolidated balance sheets, with changes in fair value recorded through earnings. IBERIABANK offsets the risks of the written option by purchasing an option with terms that mirror the written option, which is also carried at fair value on the Company’s consolidated balance sheets. OFF-BALANCE SHEET CREDIT-RELATED FINANCIAL INSTRUMENTS In the ordinary course of business, the Company executes various commitments to extend credit, including commitments under commercial construction arrangements, commercial and home equity lines of credit, credit card arrangements, commercial letters of credit, and standby letters of credit. Such financial instruments are recorded on the funding date. TRANSFERS OF FINANCIAL ASSETS Transfers of financial assets, or portions thereof which meet the definition of a participating interest, are accounted for as sales when control over the assets has been surrendered. Control over transferred assets is deemed to be surrendered when 1) the assets have been legally isolated from the Company, 2) the transferee obtains the right, free of conditions that constrain it from taking advantage of that right and provide the Company with more than a trivial benefit, to pledge or exchange the transferred assets, and 3) the Company does not maintain effective control over the transferred assets. Should the transfer not satisfy all three criteria, the transaction is recorded as a secured borrowing. If the transfer is accounted for as a sale, the transferred assets are derecognized from the Company’s balance sheet and a gain or loss on sale is recognized. If the transfer is accounted for as a secured borrowing, the transferred assets remain on the Company’s balance sheet and the proceeds from the transaction are recognized as a liability. Servicing Rights The Company recognizes the rights to service mortgage and other loans as separate assets, which are recorded in "other assets" in the consolidated balance sheets, when purchased or when servicing is contractually separated from the underlying loans by sale with servicing rights retained. For loan sales with servicing retained, a servicing right (generally an asset) is recorded at fair value for the right to service the loans sold. All servicing rights are identified by class and subsequently accounted for under the amortization method. INCOME TAXES The Company and all subsidiaries file a consolidated Federal income tax return on a calendar year basis. The Company files income tax returns in the U.S. Federal jurisdiction and various state and local jurisdictions through IBERIABANK Corporation (cid:27)(cid:21) (Parent), IBERIABANK, IMC, LTC, and their subsidiaries. In lieu of Louisiana state income tax, IBERIABANK is subject to the Louisiana bank shares tax, portions of which are included in both "non-interest expense" and "income tax expense" in the Company’s consolidated statements of comprehensive income. With few exceptions, the Company is no longer subject to U.S. federal, state or local income tax examinations for years before 2012. Deferred income tax assets and liabilities are determined using the liability (or balance sheet) method. Under this method, the net deferred tax asset or liability is determined based on the tax effects of the temporary differences between the book and tax bases of the various balance sheet assets and liabilities and gives current recognition to changes in tax rates and laws. The measurement of deferred tax assets is reduced, if necessary, by the amount of any tax benefits that, based on available evidence, are not expected to be realized. The Company recognizes interest and penalties accrued related to unrecognized tax benefits, if applicable, in "non-interest expense". SHARE-BASED COMPENSATION PLANS The Company issues stock options, restricted stock awards, restricted share units, performance units, and phantom awards under various plans to directors, officers, and other key employees. Compensation cost for all awards is recognized on a straight-line basis over the requisite service period, which is generally the vesting period, taking into account retirement eligibility. For service awards with graded vesting, the Company recognizes compensation cost on a straight-line basis. The majority of the Company's share-based awards qualify for equity accounting and contain service conditions. Under equity accounting, the fair value of the award is measured at the grant date and not subsequently remeasured. For awards that contain a market condition, the Company includes the market condition in the determination of the grant date fair value of the award. Compensation cost for an award with a market condition is recognized regardless of whether the market condition is satisfied, assuming the requisite service is met. The Company does not include performance conditions in the determination of the grant date fair value of the award. Compensation cost for an award with a performance condition is not recognized if the performance condition is not satisfied. Phantom awards and performance units, accounted for as liability awards, are remeasured at each reporting period based on their fair value until the date of settlement. Compensation cost for each reporting period until settlement is based on the change (or a portion of the change, depending on the percentage of the requisite service that has been rendered at the reporting date) in the fair value of the phantom award and performance unit for each reporting period. Compensation expense relating to share-based awards is recognized in net income as part of “salaries and employee benefits” on the consolidated statements of comprehensive income for employees and “professional services” for non-employee directors. The exercise price for the options granted by the Company is not less than the fair market value of the underlying stock at the grant date. EARNINGS PER COMMON SHARE Basic earnings per share represents income available to common shareholders divided by the weighted average number of common shares outstanding during the period. Diluted earnings per share reflects additional common shares that would have been outstanding if dilutive potential common shares, in the form of stock options or restricted stock units, had been issued, as well as any adjustment to income that would result from the assumed issuance. Participating common shares issued by the Company relate to unvested outstanding restricted stock awards, the earnings allocated to which are used in determining income available to common shareholders under the two-class method. The two-class method allocates earnings for the period between common shareholders and other participating securities holders. The participating awards receiving dividends are allocated the same percentage of income as if they were outstanding shares. SHARE REPURCHASES Repurchases of the Company’s common stock are recorded at cost. Effective January 1, 2015, companies incorporated in Louisiana became subject to the Louisiana Business Corporation Act (which replaced the Louisiana Business Corporation Law). Provisions of the Louisiana Business Corporation Act eliminated the concept of treasury stock and provide that shares reacquired by a company are to be treated as authorized but unissued shares. As a result of this change in law, for the consolidated financial statements beginning with the quarterly period ended March 31, 2015, the Company classifies shares previously classified as treasury stock as a reduction to issued shares of common stock, and accordingly, adjusts the stated value of common stock and paid-in-capital. (cid:27)(cid:22) COMPREHENSIVE INCOME Accounting principles generally require that recognized revenue, expenses, gains, and losses be included in net income. Although certain changes in assets and liabilities, such as unrealized gains and losses on available for sale securities and cash flow hedges, are reported as a separate component of the shareholders’ equity section of the consolidated balance sheets, such items, along with net income, are components of comprehensive income. FAIR VALUE MEASUREMENTS Fair value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The Company estimates fair value based on the assumptions market participants would use when selling an asset or transferring a liability and characterizes such measurements within the fair value hierarchy based on the inputs used to develop those assumptions and measure fair value. The hierarchy requires the Company to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows: • Level 1 - Quoted prices in active markets for identical assets or liabilities. • Level 2 - Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data. • Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. This includes certain pricing models, discounted cash flow methodologies, and similar techniques that use significant unobservable inputs. A description of the valuation methodologies used for instruments measured at fair value follows, as well as the classification of such instruments within the valuation hierarchy. The descriptions below are exclusive of assets or liabilities acquired in business combinations, as all such instruments are required to initially be measured at fair value. Cash and cash equivalents The carrying amounts of cash and cash equivalents approximate their fair value. Investment securities Securities are classified within Level 1 where quoted market prices are available in an active market. Inputs include securities that have quoted prices in active markets for identical assets. If quoted market prices are unavailable, fair value is estimated using quoted prices of securities with similar characteristics, at which point the securities are classified within Level 2 of the hierarchy. Mortgage loans held for sale Mortgage loans originated and held for sale are recorded at fair value under the fair value option, unless otherwise noted. When determining the fair value of loans held for sale, the Company obtains quotes or bids on these loans directly from the purchasing financial institutions (Level 2). Loans The fair values of mortgage loans are estimated based on present values using entry-value rates (the interest rate that would be charged for a similar loan to a borrower with similar risk at the indicated balance sheet date) at December 31, 2016 and 2015, weighted for varying maturity dates. Other loans are valued based on present values using entry-value interest rates at December 31, 2016 and 2015 applicable to each category of loans, which are classified within Level 3 of the hierarchy. Impaired loans Loans are measured for impairment using the methods permitted by ASC Topic 310, Receivables. Fair value measurements are used in determining impairment using either the loan’s observable market price (Level 1), if available, or the fair value of the collateral, if the loan is collateral-dependent (Level 3). Fair value of the collateral is determined by appraisals or independent valuation. (cid:27)(cid:23) Measuring the impairment of loans using the present value of expected future cash flows, discounted at the loan’s effective interest rate, is not considered a fair value measurement under GAAP as the interest rate used to discount the cash flows does not necessarily reflect current credit or market conditions for such loans. Other real estate owned Fair values of OREO are determined by sales agreement or appraisal and costs to sell are based on estimation per the terms and conditions of the sales agreement or amounts commonly used in real estate transactions. Inputs include appraisal values on the properties or recent sales activity for similar assets in the property’s market, and thus OREO measured at fair value is classified within Level 3 of the hierarchy. Derivative financial instruments Fair values of interest rate swaps, interest rate locks, forward sales commitments, and written and purchased options are estimated using prices of financial instruments with similar characteristics and thus are classified within Level 2 of the fair value hierarchy. Deposits The fair values of NOW accounts, money market deposits and savings accounts are the amounts payable on demand at the reporting date. Certificates of deposit are valued using a discounted cash flow model based on the weighted-average rate at December 31, 2016 and 2015 for deposits with similar remaining maturities. The fair value of the Company’s deposits are categorized within Level 3 of the fair value hierarchy. Short-term borrowings The carrying amounts of short-term borrowings maturing within ninety days approximate their fair values. Long-term debt The fair values of long-term debt are estimated using discounted cash flow analyses based on the Company’s current incremental borrowing rates for similar types of borrowing arrangements. The fair value of the Company’s long-term debt is categorized within Level 3 of the fair value hierarchy. Off-balance sheet items The Company has outstanding commitments to extend credit and standby letters of credit. These off-balance sheet financial instruments are generally exercisable at the market rate prevailing at the date the underlying transaction will be completed. At December 31, 2016 and 2015, the fair value of guarantees under commercial and standby letters of credit was not material. NOTE 2 – RECENT ACCOUNTING PRONOUNCEMENTS ASU No. 2014-09 In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers, which implements a common revenue standard and clarifies the principles used for recognizing revenue. The amendments in the ASU clarify that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. As part of that principle, the entity should identify the contract(s) with the customer, identify the performance obligation(s) of the contract, determine the transaction price, allocate that transaction price to the performance obligation(s), and then recognize revenue when or as the entity satisfies the performance obligation(s). The amendments also provide additional guidance/principles associated with gross vs. net presentation (i.e., principal versus agency considerations). The amendments in ASU No. 2014-09 will be effective for annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. Earlier application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that annual reporting period. The amendments will be applied through the election of one of two retrospective methods. The Company intends to adopt the amendments beginning January 1, 2018 through the modified-retrospective transition method. Based on the Company’s preliminary scoping, walkthroughs, and contract reviews, it does not expect to recognize a significant cumulative adjustment to equity upon implementation of the standard. Further, the Company does not expect a significant impact to the Company’s consolidated statements of comprehensive income or consolidated balance sheets from either a presentation or timing perspective, but is still analyzing some contracts (e.g., card interchange and rewards). The (cid:27)(cid:24) Company does anticipate additional disclosures will be presented in the notes to the consolidated financial statements following adoption. ASU No. 2015-02 In February 2015, the FASB issued ASU No. 2015-02, Consolidation - Amendments to the Consolidation Analysis, which changes the analysis that a reporting entity must perform to determine whether it should consolidate certain types of legal entities. The amendments in the guidance: 1) modify the evaluation of whether limited partnerships and similar legal entities are variable interest entities or voting interest entities, 2) eliminate the presumption that a general partner should consolidate a limited partnership, 3) affect the consolidation analysis of reporting entities that are involved with VIEs, particularly those that have fee arrangements and related party relationships, and 4) provide a scope exception from consolidation guidance for certain investment funds. The Company adopted the amendment, effective January 1, 2016, through retrospective application on all existing agreements; however, there was no resulting change to amounts reported in prior periods. Refer to Note 1 for current principles of consolidation. ASU No. 2015-05 In April 2015, the FASB issued new accounting guidance related to whether a cloud computing arrangement includes a software license (ASU No. 2015-05, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement). If a cloud computing arrangement includes a software license, the customer should account for the software license element of the arrangement consistent with the acquisition of other software licenses. If a cloud computing arrangement does not include a software license, the customer should account for the arrangement as a service contract. The Company adopted the amendment prospectively on all arrangements entered into or materially modified beginning January 1, 2016, on an individual arrangement basis. The impact of the adoption of ASU 2015-05 was not material to the Company’s consolidated financial statements. ASU No. 2016-01 In January 2016, the FASB issued ASU No. 2016-01, Financial Statements - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. The amendments will not change the guidance for classifying and measuring investments in debt securities or loans; however, the ASU will impact how entities measure certain equity investments, recognize changes in the fair value of financial liabilities measured under the fair value option that are attributable to instrument-specific credit risk, and disclose and present financial assets and liabilities in financial statements. Specifically, the aforementioned amendments will require measurement of equity investments at fair value, with changes recognized in net income, unless the investments qualify for the new practicability exception, the equity method of accounting, or consolidation. For financial liabilities measured using the fair value option, any change in fair value caused by a change in an entity’s own credit risk will be recognized separately in OCI, as opposed to earnings. The amendments will also require entities to present financial assets and financial liabilities separately, grouped by measurement category and form of financial asset in the statement of financial position or in the accompanying notes to the financial statements. Entities will also no longer have to disclose the methods and significant assumptions for financial instruments measured at amortized cost, but will be required to measure such instruments under the “exit price” notion for disclosure purposes. ASU No. 2016-01 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. An entity will record a cumulative-effect adjustment to beginning retained earnings as of the beginning of the first reporting period in which the guidance is adopted, with two exceptions. The amendments related to equity investments without readily determinable fair values (including disclosure requirements) will be effective prospectively. The requirement to use the exit price notion to measure the fair value of financial instruments for disclosure purposes will also be applied prospectively. The Company does not expect a significant cumulative-effect adjustment to be recorded at adoption or any significant impact to the consolidated financial statements associated with the accounting for its current equity investments. The Company does anticipate financial statement disclosures to be impacted, specifically related to financial instruments measured at amortized cost whose fair values are disclosed under the “entry price” notion, but is currently still in the process of determining the impact. ASU No. 2016-02 In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). The most significant amendment to existing GAAP is the recognition of lease assets (i.e., right of use assets) and liabilities on the balance sheet for leases that are classified as (cid:27)(cid:25) operating leases by lessees. The lessor model remains similar to the current accounting model in existing GAAP. Additional amendments include, but are not limited to, the elimination of leveraged leases; modification to the definition of a lease; amendments on sale and leaseback transactions; and disclosure of additional quantitative and qualitative information. ASU 2016-02 will be effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. The Company anticipates adopting the amendments on January 1, 2019. The Company is currently assessing the practical expedients it may elect at adoption, but does not anticipate the amendments will have a significant impact to the consolidated financial statements. Based on the Company’s preliminary analysis of its current portfolio, the impact to the Company’s consolidated balance sheets is estimated to result in less than a 1% increase in assets and liabilities. The adjustment to retained earnings is not expected to be material based on the transition guidance associated with current sale-leaseback agreements. The Company also anticipates additional disclosures to be provided at adoption. ASU No. 2016-09 In March 2016, the FASB issued ASU No. 2016-09, Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. The amendments will require recognition of excess tax benefits and deficiencies associated with awards which vest or settle within income tax expense or benefit in the statement of comprehensive income, with the tax effects treated as discrete items in the reporting period in which they occur. The ASU further requires entities to recognize excess tax benefits regardless of whether the benefit reduces taxes payable in the current period. This will eliminate the current APIC pool concept. The amendments will also allow an accounting policy election to account for forfeitures as they occur, permit an entity to withhold up to the maximum statutory tax rates in the applicable jurisdictions while still qualifying for equity classification, and change the classification of certain cash flows associated with stock compensation. ASU 2016-09 will be effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. The transition method for implementing each amendment varies. The Company expects to elect an accounting policy to account for forfeitures as they occur upon adoption. Based on the Company's current stock valuation and estimated exercise activity associated with stock options, it anticipates an insignificant reduction to income tax expense at adoption. ASU No. 2016-13 In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The amendments introduce an impairment model that is based on expected credit losses (“ECL”), rather than incurred losses, to estimate credit losses on certain types of financial instruments (e.g., loans and held-to- maturity securities), including certain off-balance sheet financial instruments (e.g., loan commitments). The ECL should consider historical information, current information, and reasonable and supportable forecasts, including estimates of prepayments, over the contractual term. Financial instruments with similar risk characteristics may be grouped together when estimating the ECL. The ASU also amends the current AFS security impairment model for debt securities. The new model will require an estimate of ECL when the fair value is below the amortized cost of the asset through the use of an allowance to record estimated credit losses (and subsequent recoveries). Non-credit related losses will continue to be recognized through OCI. In addition, the amendments provide for a simplified accounting model for purchased financial assets with a more-than- insignificant amount of credit deterioration since their origination. The initial estimate of expected credit losses would be recognized through an ALL with an offset (i.e., increase) to the cost basis of the related financial asset at acquisition. ASU 2016-13 will be effective for fiscal years beginning after December 15, 2019, including interim periods. The amendments will be applied through a modified-retrospective approach, resulting in a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective. A prospective transition approach is required for debt securities for which OTTI had been recognized before the effective date. Amounts previously recognized in AOCI as of the date of adoption that relate to improvements in cash flows expected to be collected should continue to be accreted into income over the remaining life of the asset. Recoveries of amounts previously written off relating to improvements in cash flows after the date of adoption should be recorded in earnings when received. The Company is currently evaluating the impact of the ASU on the Company’s consolidated financial statements. (cid:27)(cid:26) ASU No. 2016-15 In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments, in order to reduce current diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. ASU 2016-15 will be effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. The amendments should be applied using a retrospective transition method to each period presented. The Company is currently evaluating the impact of the ASU on the Company’s consolidated statement of cash flows. The Company is not expecting to early adopt the ASU. ASU No. 2017-01 In January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business, which introduces amendments that are intended to clarify the definition of a business to assist companies and other reporting organizations with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The amendments are intended to narrow the current interpretation of a business. ASU No. 2017-01 will be effective for annual reporting periods beginning after December 15, 2017, including interim reporting periods within those periods. The amendments will be applied prospectively on or after the effective date. Early application of the amendments in this ASU is allowed for transactions, including when a subsidiary or group of assets is deconsolidated/derecognized, in which the acquisition date occurs before the issuance date or effective date of the amendments, only when the transaction has not been reported in financial statements that have been issued or made available for issuance. The Company is currently evaluating the effect of the ASU. ASU No. 2017-04 In January 2017, the FASB issued ASU No. 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, which simplifies how an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test. Therefore, any carrying amount which exceeds the reporting unit’s fair value (up to the amount of goodwill recorded) will be recognized as an impairment loss. ASU No. 2017-04 will be effective for annual reporting periods beginning after December 15, 2019, including interim reporting periods within those periods. The amendments will be applied prospectively on or after the effective date. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. Based on recent goodwill impairments tests, which did not require the application of Step 2, the Company does not expect the adoption of this ASU to have an immediate impact. (cid:27)(cid:27) NOTE 3 –ACQUISITION ACTIVITY 2015 Acquisitions During 2015, the Company expanded its presence in Florida and Georgia through acquisitions of Florida Bank Group, Inc. on February 28, 2015, Old Florida Bancshares, Inc. on March 31, 2015, and Georgia Commerce Bancshares, Inc. on May 31, 2015. The Company accounts for business combinations under the acquisition method in accordance with ASC Topic 805, Business Combinations. Accordingly, for each transaction the purchase price is allocated to the fair value of the assets acquired and liabilities assumed as of the date of acquisition. Upon receipt of final fair value estimates during the measurement period, which must be within one year of the acquisition dates, the Company records any adjustments to the preliminary fair value estimates in the reporting period in which the adjustments are determined. During the first quarter of 2016, the Company finalized the purchase price allocations related to the Florida Bank Group and Old Florida acquisitions. During the second quarter of 2016, the Company finalized the purchase price allocation related to the Georgia Commerce acquisition. The impact of these adjustments during 2016 was a $2.3 million increase to goodwill, with an offsetting decrease to net deferred tax assets. (cid:27)(cid:28) The following tables summarize the consideration paid, allocation of purchase price to net assets acquired and resulting goodwill for the aforementioned acquisitions. Acquisition of Florida Bank Group, Inc. (Dollars in thousands) Equity consideration Common stock issued Total equity consideration Non-Equity consideration Cash Total consideration paid Number of Shares Amount 752,493 $ 47,497 47,497 42,988 90,485 73,043 17,442 Fair value of net assets assumed including identifiable intangible assets Goodwill $ (Dollars in thousands) Assets Cash and cash equivalents Investment securities Loans Other real estate owned Core deposit intangible Deferred tax asset, net Other assets Total Assets Liabilities Interest-bearing deposits Non-interest-bearing deposits Borrowings Other liabilities Total Liabilities As Acquired Fair Value Adjustments As recorded by the Company $ $ $ $ 72,982 107,236 312,902 498 — 18,151 29,817 541,586 282,417 109,548 60,000 1,898 453,863 $ $ $ $ — 136 (1) (5,371) (2) (75) (3) 4,489 (4) 8,569 (5) (8,949) (6) (1,201) 263 (7) — 8,598 (8) 4,618 (9) 13,479 $ $ $ $ 72,982 107,372 307,531 423 4,489 26,720 20,868 540,385 282,680 109,548 68,598 6,516 467,342 Explanation of certain fair value adjustments: (1) The amount represents the adjustment of the book value of Florida Bank Group’s investments to their estimated fair value on the date of acquisition. (2) The amount represents the adjustment of the book value of Florida Bank Group's loans to their estimated fair values based on acquisition date interest rates and expected cash flows, which includes estimates of expected credit losses inherent in the portfolio. (3) The adjustment represents the adjustment of Florida Bank Group's OREO to its estimated fair value less costs to sell on the date of acquisition. (4) The amount represents the fair value of the core deposit intangible asset created in the acquisition. (5) The amount represents the net deferred tax asset recognized on the fair value adjustments of Florida Bank Group acquired assets and assumed liabilities. (6) The amount represents the adjustment of the book value of Florida Bank Group’s property, equipment, and other assets to their estimated fair value at the acquisition date based on their appraised value. (7) The amount represents the adjustment of the book value of Florida Bank Group's time deposits to their estimated fair values at the date of acquisition. (8) The amount represents the adjustment of the book value of Florida Bank Group’s borrowings to their estimated fair value based on acquisition date interest rates and the credit characteristics inherent in the liability. (9) The amount is necessary to record Florida Bank Group's rent liability at fair value. (cid:28)(cid:19) Acquisition of Old Florida Bancshares, Inc. (Dollars in thousands) Equity consideration Common stock issued Total equity consideration Non-Equity consideration Cash Total consideration paid Number of Shares Amount 3,839,554 $ 242,007 242,007 11,145 253,152 152,375 100,777 Fair value of net assets assumed including identifiable intangible assets Goodwill $ (Dollars in thousands) Assets Cash and cash equivalents Investment securities Loans held for sale Loans Other real estate owned Core deposit intangible Deferred tax asset, net Other assets Total Assets Liabilities Interest-bearing deposits Non-interest-bearing deposits Borrowings Other liabilities Total Liabilities As Acquired Fair Value Adjustments As recorded by the Company $ $ $ $ 360,688 67,209 5,952 1,073,773 4,515 — 9,490 30,549 1,552,176 1,048,765 340,869 1,528 3,038 1,394,200 $ $ $ $ — — — (10,822) (1) 1,449 (2) 6,821 (3) 4,388 (4) (7,238) (5) (5,402) 123 (6) — — 76 (7) 199 $ $ $ $ 360,688 67,209 5,952 1,062,951 5,964 6,821 13,878 23,311 1,546,774 1,048,888 340,869 1,528 3,114 1,394,399 Explanation of certain fair value adjustments: (1) The amount represents the adjustment of the book value of Old Florida's loans to their estimated fair values based on acquisition date interest rates and expected cash flows, which includes estimates of expected credit losses inherent in the portfolio. (2) The adjustment represents the adjustment of Old Florida's OREO to its estimated fair value less costs to sell on the date of acquisition. (3) The amount represents the fair value of the core deposit intangible asset created in the acquisition. (4) The amount represents the net deferred tax asset recognized on the fair value adjustment of Old Florida acquired assets and assumed liabilities. (5) The amount represents the adjustment of the book value of Old Florida’s property, equipment, and other assets to their estimated fair value at the acquisition date based on their appraised value. (6) The amount represents the adjustment of the book value of Old Florida's time deposits to their estimated fair values on the date of acquisition. (7) The adjustment is necessary to record Old Florida's rent liability at fair value. (cid:28)(cid:20) Acquisition of Georgia Commerce Bancshares, Inc (Dollars in thousands) Equity consideration Common stock issued Total equity consideration Non-Equity consideration Cash Total consideration paid Number of Shares Amount 2,882,357 $ 185,249 185,249 5,015 190,264 103,569 86,695 Fair value of net assets assumed including identifiable intangible assets Goodwill $ (Dollars in thousands) Assets Cash and cash equivalents Investment securities Loans held for sale Loans Other real estate owned Core deposit intangible Deferred tax asset, net Other assets Total Assets Liabilities Interest-bearing deposits Non-interest-bearing deposits Borrowings Other liabilities Total Liabilities As Acquired Fair Value Adjustments As recorded by the Company $ 51,059 $ 135,710 1,249 807,726 9,795 — 3,603 28,956 1,038,098 $ 658,133 249,739 13,204 4,171 925,247 $ $ $ $ — (807) (1) — (15,607) (2) (4,207) (3) 6,720 (4) 5,452 (5) (657) (6) (9,106) $ 176 (7) — — — 176 $ 51,059 134,903 1,249 792,119 5,588 6,720 9,055 28,299 1,028,992 658,309 249,739 13,204 4,171 925,423 Explanation of certain fair value adjustments: (1) The amount represents the adjustment of the book value of Georgia Commerce’s investments to their estimated fair value on the date of acquisition. (2) The amount represents the adjustment of the book value of Georgia Commerce's loans to their estimated fair value based on acquisition date interest rates and expected cash flows, which includes estimates of expected credit losses inherent in the portfolio. (3) The adjustment represents the adjustment of Georgia Commerce's OREO to its estimated fair value less costs to sell on the date of acquisition. (4) The amount represents the fair value of the core deposit intangible asset created in the acquisition. (5) The amount represents the net deferred tax asset recognized on the fair value adjustment of Georgia Commerce acquired assets and assumed liabilities. (6) The amount represents the adjustment of the book value of Georgia Commerce’s property, equipment, and other assets to their estimated fair value at the acquisition date based on their appraised value. (7) The amount represents the adjustment of the book value of Georgia Commerce's time deposits to their estimated fair values at the date of acquisition. There were no acquisitions during the year ended December 31, 2016. (cid:28)(cid:21) NOTE 4 – INVESTMENT SECURITIES The amortized cost and fair values of investment securities, with gross unrealized gains and losses, consist of the following: (Dollars in thousands) Securities available for sale: December 31, 2016 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value U.S. Government-sponsored enterprise obligations $ 212,662 $ 245 $ Obligations of state and political subdivisions Mortgage-backed securities Other securities Total securities available for sale Securities held to maturity: Obligations of state and political subdivisions Mortgage-backed securities Total securities held to maturity 286,458 2,888,180 98,974 3,486,274 64,726 24,490 89,216 $ $ $ $ $ $ 1,948 4,820 361 7,374 1,609 57 1,666 $ $ $ (549) $ (5,207) (41,291) (504) (47,551) $ 212,358 283,199 2,851,709 98,831 3,446,097 (133) $ (817) (950) $ 66,202 23,730 89,932 (Dollars in thousands) Securities available for sale: December 31, 2015 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value U.S. Government-sponsored enterprise obligations $ 252,514 $ 1,161 $ Obligations of state and political subdivisions Mortgage-backed securities Other securities Total securities available for sale Securities held to maturity: Obligations of state and political subdivisions Mortgage-backed securities Total securities held to maturity 182,541 2,272,879 95,496 2,803,430 69,979 28,949 98,928 $ $ $ $ $ $ 5,429 8,457 430 15,477 2,803 107 2,910 $ $ $ (1,592) $ (9) (16,523) (497) (18,621) $ 252,083 187,961 2,264,813 95,429 2,800,286 (101) $ (776) (877) $ 72,681 28,280 100,961 Securities with carrying values of $1.5 billion and $1.4 billion were pledged to secure public deposits and other borrowings at December 31, 2016 and 2015, respectively. (cid:28)(cid:22) Information pertaining to securities with gross unrealized losses, aggregated by investment category and length of time that individual securities have been in a continuous loss position, is as follows: (Dollars in thousands) Securities available for sale: U.S. Government-sponsored enterprise obligations Obligations of state and political obligations Mortgage-backed securities Other Securities Total securities available for sale Securities held to maturity: Obligations of state and political obligations Mortgage-backed securities Total securities held to maturity (Dollars in thousands) Securities available for sale: U.S. Government-sponsored enterprise obligations Obligations of state and political obligations Mortgage-backed securities Other Securities Total securities available for sale Securities held to maturity: Obligations of state and political obligations Mortgage-backed securities Total securities held to maturity December 31, 2016 Less Than Twelve Months Over Twelve Months Total Gross Unrealized Losses Estimated Fair Value Gross Unrealized Losses Estimated Fair Value Gross Unrealized Losses Estimated Fair Value $ (549) $ 150,554 $ — $ — $ (549) $ 150,554 (5,207) 148,059 (38,667) 2,191,563 (451) 36,484 $ (44,874) $ 2,526,660 — (2,624) (53) — 98,912 (5,207) (41,291) (504) 148,059 2,290,475 3,850 $ (2,677) $ 102,762 40,334 $ (47,551) $2,629,422 $ $ (133) $ (330) (463) $ 10,602 12,288 22,890 $ $ — $ — $ (487) 10,960 (487) $ 10,960 $ (133) $ (817) (950) $ 10,602 23,248 33,850 December 31, 2015 Less Than Twelve Months Over Twelve Months Total Gross Unrealized Losses Estimated Fair Value Gross Unrealized Losses Estimated Fair Value Gross Unrealized Losses Estimated Fair Value $ (1,214) $ 177,839 $ (378) $ 28,116 $ (1,592) $ 205,955 (9) 5,765 (11,737) (488) 1,279,914 51,975 $ (13,448) $1,515,493 $ $ (9) $ (45) (54) $ 1,999 3,530 5,529 $ $ $ — — (4,786) (9) 185,215 499 (5,173) $ 213,830 5,765 (9) (16,523) (497) 1,465,129 52,474 $ (18,621) $1,729,323 4,162 (92) $ (731) 17,573 (823) $ 21,735 $ $ (101) $ (776) (877) $ 6,161 21,103 27,264 The Company assessed the nature of the unrealized losses in its portfolio as of December 31, 2016 and 2015 to determine if there are losses that should be deemed other-than-temporary. In its analysis of these securities, management considered numerous factors to determine whether there were instances where the amortized cost basis of the debt securities would not be fully recoverable, including, but not limited to: • The length of time and extent to which the estimated fair value of the securities was less than their amortized cost, • Whether adverse conditions were present in the operations, geographic area, or industry of the issuer, • The payment structure of the security, including scheduled interest and principal payments, including the issuer’s failures to make scheduled payments, if any, and the likelihood of failure to make scheduled payments in the future, • Changes to the rating of the security by a rating agency, and • Subsequent recoveries or additional declines in fair value after the balance sheet date. (cid:28)(cid:23) Management believes it has considered these factors, as well as all relevant information available, when determining the expected future cash flows of the securities in question. In each instance, management has determined the cost basis of the securities would be fully recoverable. Management also has the intent to hold debt securities until their maturity or anticipated recovery if the security is classified as available for sale. In addition, management does not believe the Company will be required to sell debt securities before the anticipated recovery of the amortized cost basis of the security. As a result of the Company's analysis, no declines in the estimated fair value of the Company's investment securities were deemed to be other- than-temporary at December 31, 2016 or 2015. At December 31, 2016, 397 debt securities had unrealized losses of 1.79% of the securities’ amortized cost basis. At December 31, 2015, 252 debt securities had unrealized losses of 1.10% of the securities’ amortized cost basis. The unrealized losses for each of the securities related to market interest rate changes and not credit concerns of the issuers. Additional information on securities that have been in a continuous loss position for over twelve months at December 31 is presented in the following table. (Dollars in thousands) Number of securities Issued by Fannie Mae, Freddie Mac, or Ginnie Mae Issued by political subdivisions Other Amortized Cost Basis Issued by Fannie Mae, Freddie Mac, or Ginnie Mae Issued by political subdivisions Other Unrealized Loss Issued by Fannie Mae, Freddie Mac, or Ginnie Mae Issued by political subdivisions Other 2016 2015 28 — 3 31 40 2 1 43 $ $ $ $ 112,983 $ 236,800 — 3,903 116,886 3,111 — 53 3,164 $ $ $ 4,253 508 241,561 5,895 92 9 5,996 The Fannie Mae, Freddie Mac, and Ginnie Mae securities are rated AA+ by S&P and Aaa by Moodys. The amortized cost and estimated fair value of investment securities by maturity at December 31, 2016 are presented in the following table. Securities are classified according to their contractual maturities without consideration of principal amortization, potential prepayments or call options. Accordingly, actual maturities may differ from contractual maturities. Weighted average yields are calculated on the basis of the yield to maturity based on the amortized cost of each security. Securities Available for Sale Securities Held to Maturity (Dollars in thousands) Within one year or less One through five years After five through ten years Over ten years Weighted Average Yield 2.29 % $ 1.65 2.25 Amortized Cost 15,540 283,914 703,768 284,150 697,829 Estimated Fair Value Weighted Average Yield Amortized Cost Estimated Fair Value $ 15,477 2.59 % $ 2,551 $ 2.95 3.07 2.81 2.88% $ 9,903 18,181 58,581 89,216 $ 2,570 10,082 18,569 58,711 89,932 2.05 2,483,052 2.06% $ 3,486,274 2,448,641 $ 3,446,097 (cid:28)(cid:24) The following is a summary of realized gains and losses from the sale of securities classified as available for sale. Gains or losses on securities sold are recorded on the trade date, using the specific identification method. (Dollars in thousands) Realized gains Realized losses Years Ended December 31 2016 2015 2014 $ $ 2,949 (948) 2,001 $ $ 1,834 (259) 1,575 $ $ 863 (92) 771 In addition to the gains above, the Company realized certain gains on calls of securities held to maturity that were not significant to the consolidated financial statements. Other Equity Securities The Company accounts for the following securities at amortized cost, which approximates fair value, in “other assets” on the consolidated balance sheets at December 31: (Dollars in thousands) Federal Home Loan Bank (FHLB) stock Federal Reserve Bank (FRB) stock Other investments 2016 2015 $ $ 42,326 $ 48,584 2,808 93,718 $ 16,265 48,584 1,159 66,008 (cid:28)(cid:25) NOTE 5 – LOANS Loans consist of the following, segregated into legacy and acquired loans, for the periods indicated: (Dollars in thousands) Commercial loans: Real estate Commercial and industrial Energy-related December 31, 2016 Legacy Loans Acquired Loans Total $ 5,623,314 $ 1,178,952 $ 6,802,266 3,194,796 559,289 9,377,399 348,326 1,904 3,543,122 561,193 1,529,182 10,906,581 Residential mortgage loans: 854,216 413,184 1,267,400 Consumer and other loans: Home equity Indirect automobile Other Total (Dollars in thousands) Commercial loans: Real estate Commercial and industrial Energy-related 1,783,421 131,048 372,505 4 2,155,926 131,052 548,840 2,463,309 $ 12,694,924 $ 55,172 427,681 2,370,047 604,012 2,890,990 $ 15,064,971 December 31, 2015 Legacy Loans Acquired Loans Total $ 4,504,062 $ 1,569,449 $ 6,073,511 2,952,102 677,177 8,133,341 492,476 3,589 3,444,578 680,766 2,065,514 10,198,855 Residential mortgage loans: 694,023 501,296 1,195,319 Consumer and other loans: Home equity Indirect automobile Other Total 1,575,643 246,214 541,299 490,524 2,066,167 84 79,490 246,298 620,789 2,363,156 $ 11,190,520 $ 570,098 3,136,908 2,933,254 $ 14,327,428 Between 2009 and 2011, the Company acquired certain assets and liabilities of six failed banks. Substantially all of the loans and foreclosed real estate that were acquired through these transactions were covered by loss share agreements between the FDIC and IBERIABANK, as well as FDIC loss share agreements assumed in connection with the Company's acquisition of Georgia Commerce in 2015, which afforded IBERIABANK loss protection. In December of 2016, the Company terminated all loss share agreements associated with FDIC-assisted acquisitions. Covered loans, which are included in the December 31, 2015 acquired loans table above, were $229.2 million at December 31, 2015 of which $191.7 million were residential mortgage and home equity loans. As a result of the termination of the loss share agreements, there were no covered loans outstanding as of December 31, 2016. Refer to Note 7 for additional information regarding the Company’s termination of its loss share agreements. Net deferred loan origination fees were $22.6 million and $18.7 million at December 31, 2016 and 2015, respectively. In addition to loans issued in the normal course of business, the Company considers overdrafts on customer deposit accounts to be loans and reclassifies these overdrafts as loans in its consolidated balance sheets. At December 31, 2016 and 2015, overdrafts of $4.2 million and $5.1 million, respectively, have been reclassified to loans. (cid:28)(cid:26) Loans with carrying values of $4.5 billion and $3.9 billion were pledged as collateral for borrowings at December 31, 2016 and 2015, respectively. Aging Analysis The following tables provide an analysis of the aging of loans as of December 31, 2016 and 2015. Due to the difference in accounting for acquired loans, the tables below further segregate the Company’s loans between loans originated, or renewed and underwritten by the Company ("legacy loans") and acquired loans. December 31, 2016 Legacy loans Accruing Current or less than 30 days past due 30-59 days 60-89 days > 90 days Total Past Due Non-accrual Loans Total Loans $ 740,761 $ — $ — $ — $ — $ — $ 740,761 1,861 3,999 — 2,012 5,249 2,551 199 2,155 351 870 1,526 1,577 1,430 405 99 618 — — — 1,104 — — — — 2,212 4,869 1,526 4,693 6,679 2,956 298 2,773 16,439 31,227 150,329 13,014 4,882,553 3,194,796 559,289 854,216 7,979 1,783,421 1,038 624 893 131,048 82,524 466,316 (Dollars in thousands) Commercial real estate - Construction Commercial real estate - Other 4,863,902 Commercial and industrial 3,158,700 Energy-related Residential mortgage 407,434 836,509 Consumer - Home equity 1,768,763 Consumer - Indirect automobile Consumer - Credit card Consumer - Other 127,054 81,602 462,650 Total $ 12,447,375 $ 18,026 $ 6,876 $ 1,104 $ 26,006 $ 221,543 $ 12,694,924 December 31, 2015 Legacy loans Accruing Current or less than 30 days past due 30-59 days 60-89 days > 90 days Total Past Due Non-accrual Loans Total Loans $ 635,560 $ 801 $ — $ — $ 801 $ 120 $ 636,481 2,687 1,208 15 1,075 3,549 2,187 394 1,923 793 739 — 2,485 870 518 113 752 95 87 — 442 — — — — 3,575 2,034 15 4,002 4,419 2,705 507 2,675 15,422 3,867,581 6,659 7,081 13,674 2,952,102 677,177 694,023 5,628 1,575,643 1,181 394 769 246,214 77,261 464,038 (Dollars in thousands) Commercial real estate - Construction Commercial real estate - Other 3,848,584 Commercial and industrial 2,943,409 Energy-related Residential mortgage 670,081 676,347 Consumer - Home equity 1,565,596 Consumer - Indirect automobile Consumer - Credit card Consumer - Other 242,328 76,360 460,594 Total $ 11,118,859 $ 13,839 $ 6,270 $ 624 $ 20,733 $ 50,928 $ 11,190,520 (cid:28)(cid:27) December 31, 2016 Acquired loans (1) (2) Accruing Current or Less Than 30 days past due 30-59 days 60-89 days > 90 days Total Past Due Non- accrual Loans Discount/ Premium Acquired Impaired Loans Total Loans $ 26,714 $ — $ — $ — $ — $ 1,946 $ (243) $ 32,991 $ 61,408 55 51 — 989 189 — — 97 32 — — — 250 — — — 803 124 — 1,317 1,517 — — 488 1,221 1,317 — 719 1,395 — — 360 (3,649) 247,677 1,117,544 (837) 32,732 348,326 (6) — 1,904 (1,835) (5,237) 122,952 88,419 413,184 372,505 — — 4 — 4 468 (1,004) 5,411 54,704 (Dollars in thousands) Commercial real estate - Construction Commercial real estate - Other Commercial and industrial Energy-related Residential mortgage 871,492 314,990 1,910 290,031 716 73 — 328 Consumer - Home equity 286,411 1,078 Consumer - Indirect automobile Consumer - Credit Card Consumer - Other — 468 49,449 — — 391 Total $1,841,465 $ 2,586 $ 1,381 $ 282 $ 4,249 $ 6,958 $ (12,811) $ 530,186 $ 2,370,047 December 31, 2015 Acquired loans (1) (2) Accruing Current or Less Than 30 days past due 30-59 days 60-89 days > 90 days Total Past Due Non- accrual Loans Discount/ Premium Acquired Impaired Loans Total Loans $ 69,167 $ 180 $ 117 $ — $ 297 $ — $ (358) $ 56,320 $ 125,426 861 623 — 7 622 — — 468 705 — — 940 416 — — 127 — — — — 1,566 623 — 947 291 1,329 — — — — — 595 1,491 1,154 170 1,109 1,291 — — 206 (4,479) (2,517) 2 (6,601) (7,333) — — 354,757 1,444,023 50,762 1,231 140,580 114,130 65 582 492,476 3,589 501,296 490,524 84 582 (2,570) 6,292 78,908 (Dollars in thousands) Commercial real estate - Construction Commercial real estate - Other 1,090,688 Commercial and industrial 442,454 Energy-related Residential mortgage Consumer - Home equity Consumer - Indirect automobile Consumer - Credit Card Consumer - Other 2,186 365,261 381,107 19 — 74,385 Total $2,425,267 $ 2,761 $ 2,305 $ 291 $ 5,357 $ 5,421 $ (23,856) $ 724,719 $ 3,136,908 (1) (2) Past due and non-accrual information presents acquired loans at the gross loan balance, prior to application of discounts. Past due and non-accrual loan amounts exclude acquired impaired loans, even if contractually past due or if the Company does not expect to receive payment in full, as the Company is currently accreting interest income over the expected life of the loans. (cid:28)(cid:28) Loans Acquired As discussed in Note 3, during 2015, the Company acquired loans with fair values of $0.3 billion from Florida Bank Group, $1.1 billion from Old Florida, and $0.8 billion from Georgia Commerce. Of the total $2.2 billion of loans acquired, $2.1 billion were determined to have no evidence of deteriorated credit quality and are accounted for under ASC Topics 310-10 and 310-20. The remaining $57.8 million were determined to exhibit deteriorated credit quality since origination under ASC 310-30. The tables below show the balances acquired during 2015 for these two subsections of the acquired portfolio as of the acquisition date. (Dollars in thousands) Contractually required principal and interest at acquisition Expected losses and foregone interest Cash flows expected to be collected at acquisition Fair value of acquired loans at acquisition Acquired Non- Impaired Loans 2,384,114 $ (15,539) 2,368,575 2,105,466 $ (Dollars in thousands) Contractually required principal and interest at acquisition Non-accretable difference (expected losses and foregone interest) Cash flows expected to be collected at acquisition Accretable yield Basis in acquired loans at acquisition Acquired Impaired Loans 76,445 $ (11,867) 64,578 (6,823) 57,755 $ The following is a summary of changes in the accretable difference for all loans accounted for under ASC 310-30 during the years ended December 31: (Dollars in thousands) Balance at beginning of period Additions Transfers from non-accretable difference to accretable yield Accretion Changes in expected cash flows not affecting non-accretable differences (1) Balance at end of period 2016 $ 227,502 2015 $ 287,651 — 6,823 5,490 (68,211) 10,273 $ 175,054 9,916 (80,479) 3,591 $ 227,502 2014 354,892 13,848 25,844 (103,233) (3,700) 287,651 $ $ (1) Includes changes in cash flows expected to be collected due to the impact of changes in actual or expected timing of liquidation events, modifications, changes in interest rates and changes in prepayment assumptions. Troubled Debt Restructurings Information about the Company’s troubled debt restructurings ("TDRs") at December 31, 2016 and 2015 is presented in the following tables. Modifications of loans that are accounted for within a pool under ASC Topic 310-30 are excluded as TDRs. Accordingly, such modifications do not result in the removal of those loans from the pool, even if the modification of those loans would otherwise be considered a TDR. As a result, all such acquired loans that would otherwise meet the criteria for classification as a TDR are excluded from the tables below. (cid:20)(cid:19)(cid:19) TDRs totaling $222.4 million and $57.0 million occurred during the twelve months ended December 31, 2016 and December 31, 2015, respectively, through modification of the original loan terms. There were no TDRs that occurred during the twelve months ended December 31, 2014 through modification of the original loan terms. The following table provides information on how the TDRs were modified during the years ended December 31: (Dollars in thousands) Extended maturities Interest rate adjustment Maturity and interest rate adjustment Movement to or extension of interest-rate only payments Forbearance Other concession(s) (1) Total 2016 2015 $ 75,315 $ 15,594 193 2,470 27,931 76,819 39,708 222,436 $ $ — 23,374 241 122 17,710 57,041 (1) Other concessions may include covenant waivers, forgiveness of principal or interest associated with a customer bankruptcy, or a combination of any of the above concessions. Of the $222.4 million of TDRs occurring during the twelve months ended December 31, 2016, $85.9 million are on accrual status and $136.5 million are on non-accrual status. Of the $57.0 million of TDRs occurring during the twelve months ended December 31, 2015, $34.5 million were on accrual status and $22.5 million are on non-accrual status. (cid:20)(cid:19)(cid:20) The following table presents the end of period balance for loans modified in a TDR during the years ended December 31: 2016 Pre- modification Outstanding Recorded Investment $ 30,844 $ Number of Loans 44 59 24 43 158 79 116 523 $ 36,379 133,933 5,141 13,273 983 3,087 223,640 $ Post- modification Outstanding Recorded Investment 24,997 34,415 141,848 4,946 12,568 792 2,870 222,436 2015 Pre- modification Outstanding Recorded Investment $ 26,764 $ Number of Loans 11 26 2 1 50 6 17 113 $ 21,233 9,797 70 4,440 79 248 62,631 $ Post- modification Outstanding Recorded Investment 25,250 18,114 9,484 68 3,865 79 181 57,041 (In thousands, except number of loans) Commercial real estate Commercial and industrial Energy-related Residential mortgage Consumer - Home equity Consumer - Indirect Consumer - Other Total Information detailing TDRs that defaulted during the years ended December 31, 2016 and 2015 and were modified in the previous twelve months (i.e., the twelve months prior to the default) is presented in the following table. The Company has defined a default as any loan with a loan payment that is currently past due greater than 30 days, or was past due greater than 30 days at any point during the previous twelve months, or since the date of modification, whichever is shorter. (In thousands, except number of loans) Commercial real estate Commercial and industrial Energy-related Residential mortgage Consumer - Home Equity Consumer - Indirect automobile Consumer - Other Total December 31, 2016 December 31, 2015 Number of Loans Recorded Investment Number of Loans Recorded Investment $ 9 21 2 8 25 37 22 124 $ 467 12,996 5,034 405 1,379 338 606 21,225 6 $ 22,075 20 1 — 20 6 9 62 $ 8,970 3,120 — 1,547 79 2 35,793 (cid:20)(cid:19)(cid:21) NOTE 6 – ALLOWANCE FOR CREDIT LOSSES AND CREDIT QUALITY Allowance for Credit Losses Activity A summary of changes in the allowance for credit losses for the years ended December 31 is as follows: (Dollars in thousands) Allowance for credit losses Legacy Loans Acquired Loans Total 2016 Allowance for loan losses at beginning of period $ 93,808 $ 44,570 $ 138,378 Provision for (Reversal of) loan losses before benefit attributable to FDIC loss share agreements Adjustment attributable to FDIC loss share arrangements Net provision for loan losses Adjustment attributable to FDIC loss share arrangements Transfer of balance to OREO and other Loans charged-off Recoveries Allowance for loan losses at end of period Reserve for unfunded commitments at beginning of period Provision for (Reversal of) unfunded lending commitments Reserve for unfunded commitments at end of period Allowance for credit losses at end of period 44,791 — 44,791 — (9) (38,055) 5,034 105,569 14,145 (2,904) 11,241 116,810 $ $ $ $ $ $ $ $ (1,864) 1,497 (367) (1,497) (2,772) (1,784) 1,000 39,150 $ — $ — — $ $ 39,150 42,927 1,497 44,424 (1,497) (2,781) (39,839) 6,034 144,719 14,145 (2,904) 11,241 155,960 Allowance for credit losses Allowance for loan losses at beginning of period Provision for loan losses before benefit attributable to FDIC loss share agreements Adjustment attributable to FDIC loss share arrangements Net provision for loan losses Adjustment attributable to FDIC loss share arrangements Transfer of balance to OREO and other Loans charged-off Recoveries Allowance for loan losses at end of period Reserve for unfunded commitments at beginning of period Provision for unfunded lending commitments Reserve for unfunded commitments at end of period Allowance for credit losses at end of period Legacy Loans Acquired Loans Total 2015 $ 76,174 $ 53,957 $ 130,131 27,711 — 27,711 — — (15,778) 5,701 93,808 11,801 2,344 14,145 107,953 $ $ $ $ $ $ $ $ 1,837 1,360 3,197 (1,360) (10,419) (1,523) 718 44,570 $ 29,548 1,360 30,908 (1,360) (10,419) (17,301) 6,419 138,378 — $ 11,801 — — $ $ 44,570 2,344 14,145 152,523 (cid:20)(cid:19)(cid:22) Allowance for credit losses Allowance for loan losses at beginning of period Provision for loan losses before benefit attributable to FDIC loss share agreements Adjustment attributable to FDIC loss share arrangements Net provision for loan losses Adjustment attributable to FDIC loss share arrangements Transfer of balance to OREO and other Loans charged-off Recoveries Allowance for loan losses at end of period Reserve for unfunded commitments at beginning of period Provision for unfunded lending commitments Reserve for unfunded commitments at end of period Allowance for credit losses at end of period Legacy Loans Acquired Loans Total 2014 $ 67,342 $ 75,732 $ 143,074 14,274 — 14,274 $ — $ — (11,312) 5,870 76,174 11,147 654 11,801 87,975 $ $ $ $ $ $ $ $ $ $ 526 4,260 4,786 $ (4,260) $ (22,157) (671) 527 53,957 $ — $ — — $ $ 53,957 14,800 4,260 19,060 (4,260) (22,157) (11,983) 6,397 130,131 11,147 654 11,801 141,932 A summary of changes in the allowance for credit losses for legacy loans, by loan portfolio type, for the years ended December 31 is as follows: (Dollars in thousands) Allowance for loan losses at beginning of period Provision for (Reversal of) loan losses Transfer of balance to OREO and other Loans charged off Recoveries Allowance for loan losses at end of period $ 2016 Commercial Real Estate Commercial and Industrial Energy- related Residential Mortgage Consumer Total $ 24,658 $ 23,283 $ 23,863 $ 3,947 $ 18,057 $ 93,808 4,042 — (4,316) 1,024 25,408 $ 15,476 — (3,720) 395 35,434 14,776 — (16,993) 840 $ 22,486 $ 64 (9) (313) 146 3,835 $ 10,433 — (12,713) 2,629 18,406 $ 44,791 (9) (38,055) 5,034 105,569 Reserve for unfunded commitments at beginning of period Provision for (Reversal of) unfunded commitments Reserve for unfunded commitments at end of period Allowance on loans individually evaluated for impairment Allowance on loans collectively evaluated for impairment Loans, net of unearned income: Balance at end of period Balance at end of period individually evaluated for impairment Balance at end of period collectively evaluated for impairment $ $ $ 4,160 $ 3,448 $ 2,665 $ 830 $ 3,042 $ 14,145 (954) 87 (1,662) (173) (202) (2,904) 3,206 641 $ $ 3,535 10,864 $ $ 1,003 9,769 $ $ 657 144 $ $ 2,840 1,358 $ $ 11,241 22,776 24,767 24,570 12,717 3,691 17,048 82,793 $ 5,623,314 $ 3,194,796 $ 559,289 $ 854,216 $2,463,309 $12,694,924 34,031 41,518 196,327 4,312 16,457 292,645 5,589,283 3,153,278 $ 362,962 849,904 2,446,852 12,402,279 (cid:20)(cid:19)(cid:23) (Dollars in thousands) Allowance for loan losses at beginning of period Provision for (Reversal of) loan losses Loans charged off Recoveries Allowance for loan losses at end of period $ Commercial Real Estate Commercial and Industrial Energy- related Residential Mortgage Consumer Total 2015 $ 26,752 $ (1,466) (2,525) 1,897 24,658 $ 24,455 (103) (1,276) 207 23,283 $ 5,949 $ 2,678 $ 16,340 $ 76,174 17,917 (3) — $ 23,863 $ 1,493 (291) 67 3,947 $ 9,870 (11,683) 3,530 18,057 $ 27,711 (15,778) 5,701 93,808 Reserve for unfunded commitments at beginning of period Provision for (Reversal of) unfunded commitments Reserve for unfunded commitments at end of period Allowance on loans individually evaluated for impairment Allowance on loans collectively evaluated for impairment Loans, net of unearned income: Balance at end of period Balance at end of period individually evaluated for impairment Balance at end of period collectively evaluated for impairment $ $ $ 3,370 $ 3,733 $ 1,596 $ 168 $ 2,934 $ 11,801 790 (285) 1,069 4,160 1,246 $ $ 3,448 272 $ $ 2,665 2,122 $ $ 662 830 1 108 2,344 $ $ 3,042 352 $ $ 14,145 3,993 23,412 23,011 21,741 3,946 17,705 89,815 $ 4,504,062 $ 2,952,102 $ 677,177 $ 694,023 $2,363,156 $11,190,520 28,857 20,086 13,020 70 4,608 66,641 4,475,205 2,932,016 $ 664,157 693,953 2,358,548 11,123,879 (Dollars in thousands) Allowance for loan losses at beginning of period Provision for (Reversal of) loan losses Loans charged off Recoveries Allowance for loan losses at end of period Reserve for unfunded commitments at beginning of period Provision for (Reversal of) unfunded commitments Reserve for unfunded commitments at end of period Allowance on loans individually evaluated for impairment Allowance on loans collectively evaluated for impairment Loans, net of unearned income: Balance at end of period Balance at end of period individually evaluated for impairment Balance at end of period collectively evaluated for impairment Commercial Real Estate Commercial and Industrial Energy- related Residential Mortgage Consumer Total 2014 $ 22,872 $ 20,839 $ 2,171 (1,164) 2,873 26,752 3,071 299 3,370 20 $ $ $ $ 4,971 (1,400) 45 24,455 1,814 1,919 3,733 407 $ $ $ $ $ $ $ $ $ 2,546 $ 14,207 $ 67,342 6,878 (929) — — 5,949 3,043 (1,447) 566 (578) 144 2,678 72 96 $ $ 7,495 (8,170) 2,808 16,340 3,147 (213) $ $ 1,596 $ 168 $ 2,934 — $ — $ 3 14,274 (11,312) 5,870 76,174 11,147 654 11,801 430 $ $ $ $ 26,732 24,048 5,949 2,678 16,337 75,744 $ 3,676,811 $ 2,452,521 $ 872,866 $ 527,694 $2,138,822 $9,668,714 7,036 3,965 — — 699 11,700 3,669,775 2,448,556 872,866 527,694 2,138,123 9,657,014 (cid:20)(cid:19)(cid:24) A summary of changes in the allowance for loan losses for acquired loans, by loan portfolio type, for the years ended December 31 is as follows: Commercial Real Estate Commercial and Industrial Energy- related Residential Mortgage Consumer Total 2016 (Dollars in thousands) Allowance for loan losses at beginning of period Provision for (Reversal of) loan losses Decrease in FDIC loss share receivable Transfer of balance to OREO and other Loans charged off Recoveries Allowance for loan losses at end of period Allowance on loans individually evaluated for impairment $ $ $ 25,979 $ 2,819 $ (1,598) (34) (868) (22) 117 23,574 737 $ $ 1,645 (50) (519) (932) 267 3,230 780 $ $ 125 (86) — — — — 39 $ 7,841 $ 759 (1,090) (132) — 34 7,412 $ $ 7,806 (1,087) (323) (1,253) (830) 582 4,895 $ $ 44,570 (367) (1,497) (2,772) (1,784) 1,000 39,150 — $ — $ — $ 1,517 Allowance on loans collectively evaluated for impairment Loans, net of unearned income: Balance at end of period Balance at end of period individually evaluated for impairment Balance at end of period collectively evaluated for impairment Balance at end of period acquired with deteriorated credit quality 22,837 2,450 39 7,412 4,895 37,633 $ 1,178,952 $ 348,326 $ 1,904 $ 413,184 $ 427,681 $ 2,370,047 8,246 1,879 — — 10 10,135 890,038 313,715 1,904 290,232 333,837 1,829,726 280,668 32,732 — 122,952 93,834 530,186 (Dollars in thousands) Allowance for loan losses at beginning of period Provision for (Reversal of) loan losses Increase (Decrease) in FDIC loss share receivable Transfer of balance to OREO and other Loans charged off Recoveries Allowance for loan losses at end of period Allowance on loans individually evaluated for impairment $ $ Allowance on loans collectively evaluated for impairment Loans, net of unearned income: Commercial Real Estate Commercial and Industrial Energy- related Residential Mortgage Consumer Total 2015 $ 29,949 $ $ 6,484 $ 2,182 757 (6,849) (281) 221 25,979 $ $ 3,265 (122) (49) (275) — — 2,819 $ $ 51 74 — — — — 125 $ 2,126 (235) (491) (71) 28 7,841 $ 14,208 (1,063) $ 53,957 3,197 (1,833) (2,804) (1,171) 469 7,806 (1,360) (10,419) (1,523) 718 44,570 86 $ $ — $ 41 — $ — $ 45 25,979 2,778 125 7,841 7,761 44,484 Balance at end of period $ 1,569,449 $ 492,476 $ 3,589 $ 501,296 $ 570,098 $ 3,136,908 Balance at end of period individually evaluated for impairment Balance at end of period collectively evaluated for impairment Balance at end of period acquired with deteriorated credit quality 720 164 — — 458 1,342 1,157,652 441,550 2,358 360,716 448,571 2,410,847 411,077 50,762 1,231 140,580 121,069 724,719 (cid:20)(cid:19)(cid:25) (Dollars in thousands) Allowance for loan losses at beginning of period Provision for loan losses Increase (Decrease) in FDIC loss share receivable Transfer of balance to OREO and other Loans charged off Recoveries Allowance for loan losses at end of period Allowance on loans individually evaluated for impairment $ $ Allowance on loans collectively evaluated for impairment Loans, net of unearned income: Balance at end of period Balance at end of period individually evaluated for impairment Balance at end of period collectively evaluated for impairment Balance at end of period acquired with deteriorated credit quality Portfolio Segment Risk Factors Commercial Real Estate Commercial and Industrial Energy- related Residential Mortgage Consumer Total 2014 $ 42,026 $ 6,641 $ — $ 10,889 $ 16,176 $ 75,732 665 227 (13,117) — 148 29,949 $ 536 509 (4,421) — — 3,265 $ 51 — — — — 51 1,296 2,238 4,786 (3,854) (1,914) (35) 102 6,484 $ (1,142) (2,705) (636) 277 14,208 $ (4,260) (22,157) (671) 527 53,957 $ — $ — $ — $ — $ — $ — 29,949 3,265 51 6,484 14,208 53,957 $ 684,968 $ 119,174 $ 7,742 $ 552,603 $ 407,843 $ 1,772,330 — — — — — — 169,338 60,584 7,742 402,347 265,168 905,179 515,630 58,590 — 150,256 142,675 867,151 Commercial real estate loans include loans to commercial customers for long-term financing of land and buildings or for land development or construction of a building. These loans are repaid through revenues from operations of the businesses, rents of properties, sales of properties and refinances. Commercial and industrial loans represent loans to commercial customers to finance general working capital needs, equipment purchases and other projects where repayment is derived from cash flows resulting from business operations. The Company originates commercial business loans on a secured and, to a lesser extent, unsecured basis. Residential mortgage loans consist of loans to consumers to finance a primary residence. The vast majority of the residential mortgage loan portfolio is comprised of non-conforming 1-4 family mortgage loans secured by properties located in the Company's market areas and originated under terms and documentation that permit their sale in a secondary market. Consumer loans are offered by the Company in order to provide a full range of retail financial services to its customers and include home equity, credit card and other direct consumer installment loans. The Company originates substantially all of its consumer loans in its primary market areas. Loans in the consumer segment are sensitive to unemployment and other key consumer economic measures. Credit Quality The Company utilizes an asset risk classification system in accordance with guidelines established by the Federal Reserve Board as part of its efforts to monitor commercial asset quality. “Special mention” loans are defined as loans where known information about possible credit problems of the borrower cause management to have some doubt as to the ability of these borrowers to comply with the present loan repayment terms and which may result in future disclosure of these loans as non- performing. For assets with identified credit issues, the Company has two primary classifications for problem assets: “substandard” and “doubtful.” Substandard assets have one or more defined weaknesses and are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected. Doubtful assets have the weaknesses of substandard assets with the additional characteristic that the weaknesses make collection or liquidation in full satisfaction of the loan balance outstanding questionable, which makes probability of loss based on currently existing facts, conditions, and values higher. Loans classified as “Pass” do not meet the criteria set forth for special mention, substandard, or doubtful classification and are not considered criticized. Asset risk classifications are determined at origination or acquisition and reviewed on an ongoing basis. Risk (cid:20)(cid:19)(cid:26) classifications are changed if, in the opinion of management, the risk profile of the customer has changed since the last review of the loan relationship. The Company’s investment in loans by credit quality indicator is presented in the following tables. The tables below further segregate the Company’s loans between loans that were originated by the Company (legacy loans) and acquired loans. Loan premiums/discounts in the tables below represent the adjustment of acquired loans to fair value at the acquisition date, as adjusted for income accretion and changes in cash flow estimates in subsequent periods. Asset risk classifications for commercial loans reflect the classification as of December 31, 2016 and 2015, respectively. Credit quality information in the tables below includes total loans acquired (including acquired impaired loans) at the gross loan balance, prior to the application of premiums/discounts, at December 31, 2016 and 2015. Loan delinquency is the primary credit quality indicator that the Company utilizes to monitor consumer asset quality. December 31, 2016 December 31, 2015 Legacy loans (Dollars in thousands) Pass Special Mention Sub- standard Doubtful Total Pass Special Mention Sub- standard Doubtful Total Commercial real estate - Construction $ 734,687 Commercial real estate - Other 4,801,494 $ 2,203 $ 3,871 $ — $ 740,761 $ 634,889 $ 160 $ 1,432 $ — $ 636,481 26,159 54,900 — 4,882,553 3,806,528 21,877 37,001 2,175 3,867,581 Commercial and industrial Energy- related Total 3,112,300 29,763 35,199 17,534 3,194,796 2,911,396 14,826 19,888 5,992 2,952,102 242,123 80,084 225,724 11,358 559,289 531,657 67,937 74,272 3,311 677,177 $8,890,604 $ 138,209 $ 319,694 $ 28,892 $9,377,399 $7,884,470 $ 104,800 $ 132,593 $ 11,478 $8,133,341 (Dollars in thousands) Residential mortgage Consumer - Home equity Consumer - Indirect automobile Consumer - Credit card Consumer - Other Total Legacy loans December 31, 2016 December 31, 2015 Current $ 836,509 30+ Days Past Due $ 17,707 Total $ 854,216 Current $ 676,347 30+ Days Past Due $ 17,676 Total $ 694,023 1,768,763 14,658 1,783,421 1,565,596 10,047 1,575,643 127,054 81,602 3,994 922 131,048 82,524 242,328 76,360 3,886 901 246,214 77,261 462,650 $3,276,578 $ 3,666 40,947 466,316 $3,317,525 460,594 $3,021,225 $ 3,444 35,954 464,038 $3,057,179 December 31, 2016 December 31, 2015 Acquired loans Pass Special Mention Sub- standard Doubtful Loss Premium/ (Discount) Total Pass Special Mention Sub- standard Doubtful Loss Premium/ (Discount) Total $ 46,498 $ 459 $ 3,118 $ 2,574 $ — $ 8,759 $ 61,408 $ 104,064 $ 1,681 $ 8,803 $ 771 $ — $ 10,107 $ 125,426 1,090,063 19,284 49,136 1,457 323,154 1,910 1,416 — 27,749 — 494 — 23 — — (42,419) 1,117,544 1,395,884 26,080 79,119 6,124 111 (63,295) 1,444,023 (4,487) 348,326 473,241 8,376 16,510 (6) 1,904 2,166 55 170 1,206 1,198 43 — (6,900) 492,476 — 3,589 $ 1,461,625 $ 21,159 $ 80,003 $ 4,525 $ 23 $ (38,153) $ 1,529,182 $ 1,975,355 $ 36,192 $ 104,602 $ 9,299 $ 154 $ (60,088) $ 2,065,514 (Dollars in thousands) Commercial real estate - Construction Commercial real estate - Other Commercial and industrial Energy-related Total (cid:20)(cid:19)(cid:27) December 31, 2016 December 31, 2015 Acquired loans (Dollars in thousands) Residential mortgage Current $ 424,300 30+ Days Past Due $20,914 Premium (Discount) $ (32,030) $ 413,184 Total Current $ 506,103 30+ Days Past Due $24,752 Consumer - Home equity 377,021 12,807 (17,323) 372,505 503,635 16,381 Consumer - Indirect automobile Consumer - Other Total Legacy Impaired Loans 12 — (8) 4 72 12 58,141 $ 859,474 1,423 $35,144 (4,392) 55,172 $ (53,753) $ 840,865 79,732 $1,089,542 1,475 $42,620 Total Premium (Discount) $ (29,559) $ 501,296 490,524 (29,492) 84 — (1,717) 79,490 $ (60,768) $1,071,394 Information on the Company’s investment in legacy impaired loans, which include all TDRs and all other non-accrual loans evaluated or measured individually for impairment purposes of determining the allowance for loan losses, is presented in the following tables as of and for the periods indicated. (Dollars in thousands) With no related allowance recorded: Commercial real estate Commercial and industrial Energy-related Consumer - Home equity Consumer - Other With an allowance recorded: Commercial real estate Commercial and industrial Energy-related Residential mortgage Consumer - Home equity Consumer - Indirect automobile Consumer - Other Total Total commercial loans Total mortgage loans Total consumer loans December 31, 2016 Unpaid Principal Balance Recorded Investment Related Allowance Average Recorded Investment Interest Income Recognized 948 805 2,903 — — 494 1,107 1,677 161 434 49 102 8,680 7,934 161 585 $ 17,299 $ 16,507 $ — $ 21,133 $ — — — — (641) (10,864) (9,769) (144) (993) (114) (251) 15,492 114,623 — — 16,771 29,333 47,469 4,377 10,227 956 1,469 $ (22,776) $ 261,850 $ (21,274) $ 244,821 4,377 $ $ (144) (1,358) 12,652 14,202 152,424 13,189 143,239 — — 17,688 28,829 53,967 4,627 13,906 1,037 — — 17,524 28,329 53,088 4,312 13,257 758 2,447 $ 306,426 $ 284,409 4,627 2,442 $ 292,645 $ 271,876 4,312 17,390 16,457 (cid:20)(cid:19)(cid:28) (Dollars in thousands) With no related allowance recorded: Commercial real estate Commercial and industrial Energy-related Consumer - Home equity Consumer - Other With an allowance recorded: Commercial real estate Commercial and industrial Energy-related Residential mortgage Consumer - Home equity Consumer - Other Total Total commercial loans Total mortgage loans Total consumer loans (Dollars in thousands) With no related allowance recorded: Commercial real estate Commercial and industrial Consumer - Home equity With an allowance recorded: Commercial real estate Commercial and industrial Consumer - Other Total Total commercial loans Total mortgage loans Total consumer loans December 31, 2015 Unpaid Principal Balance Recorded Investment Related Allowance Average Recorded Investment Interest Income Recognized $ 17,002 $ 16,145 $ — $ 15,864 $ 14,571 14,340 — 730 66 12,765 5,748 13,046 70 3,859 130 67,987 63,132 70 4,785 $ $ — 730 66 12,712 5,746 13,020 70 3,683 129 66,641 61,963 70 4,608 $ $ — — — — (1,246) (272) (2,122) (1) (337) (15) (3,993) $ (3,640) $ (1) (352) $ $ 18,839 — 533 66 12,985 5,975 13,899 70 2,453 30 70,714 67,562 70 3,082 $ $ 315 1,148 — 22 5 530 313 454 5 73 3 2,868 2,760 5 103 December 31, 2014 Unpaid Principal Balance Recorded Investment Related Allowance Average Recorded Investment Interest Income Recognized $ 7,615 $ 6,680 $ — $ 6,703 $ 132 3,710 748 356 1,590 17 14,036 13,271 — 765 $ $ 2,483 682 356 1,482 17 11,700 11,001 — 699 $ $ $ $ — — (20) (407) (3) (430) $ (427) $ — (3) 2,602 696 378 1,849 18 12,246 11,532 — 714 $ $ 39 19 23 24 2 239 218 — 21 As of December 31, 2016 and 2015, the Company was not committed to lend a material amount of additional funds to any customer whose loan was classified as impaired or as a troubled debt restructuring. (cid:20)(cid:20)(cid:19) NOTE 7 – LOSS SHARING AGREEMENTS AND FDIC LOSS SHARE RECEIVABLE In conjunction with the acquisitions of certain assets and liabilities of six failed banks between 2009 and 2011, as well as the acquisition of Georgia Commerce in 2015, the Company entered into or assumed arrangements with the FDIC that obligated the FDIC to reimburse the Company for losses on certain loans associated with the FDIC-assisted transactions. The indemnification assets were recorded at fair value as of the acquisition dates based on estimated cash flows to be received over the expected life of the acquired assets, not to exceed the term of the indemnification agreements. Effective as of December 20, 2016, the Company entered into an agreement with the FDIC to terminate the Company’s loss share agreements ahead of their contractual maturities. Under the terms of the agreement, all rights and obligations of the Company and the FDIC have been resolved and completed. The Company received a net payment of $6.5 million from the FDIC as consideration for termination of the loss share agreements and subsequently derecognized the remaining FDIC indemnification asset and associated assets and liabilities, resulting in a pre-tax loss of $17.8 million. The Company will benefit from all future recoveries, and be responsible for all future losses and expenses related to the assets previously subject to the loss share agreements. The following is a summary of the year-to-date activity for the FDIC loss share receivables: (Dollars in thousands) Balance at beginning of period Reversal of loan loss provision recorded on FDIC covered loans Amortization Submission of reimbursable losses to the FDIC Impairment Changes due to a change in cash flow assumptions on OREO and other changes Balance at end of period December 31 2016 2015 $ 39,878 (1,497) (16,024) (1,945) (20,402) (10) — $ 69,627 (1,360) (23,500) (2,444) — (2,445) 39,878 $ $ (cid:20)(cid:20)(cid:20) NOTE 8 –TRANSFERS AND SERVICING OF FINANCIAL ASSETS (INCLUDING MORTGAGE BANKING ACTIVITY) Commercial Banking Activity The unpaid principal balances of loans serviced for others were $1.0 billion and $888.4 million at December 31, 2016 and 2015, respectively. Custodial escrow balances maintained in connection with the foregoing portfolio of loans serviced for others, and included in demand deposits, were not significant at December 31, 2016 and 2015. Mortgage Banking Activity IBERIABANK through its subsidiary, IMC, originates mortgage loans for sale into the secondary market. The loans originated primarily consist of residential first mortgages that conform to standards established by the GSEs, but can also consist of junior lien loans secured by residential property. These sales are primarily to private companies that are unaffiliated with the GSEs on a servicing-released basis. During 2016, $14.0 million of mortgage loans held for sale for which the fair value option was elected were transferred from loans held for sale to loans held for investment. Changes to the carrying amount of mortgage loans held for sale at December 31 are presented in the following table. (Dollars in thousands) Balance at beginning of period Originations and purchases Sales, net of gains Mortgage loans transferred to held for investment Other Balance at end of period $ $ 2,460,033 (2,451,459) (14,017) (3,763) 157,041 $ 2,464,588 (2,432,979) — (5,434) 166,247 2016 166,247 $ 2015 140,072 $ 2014 128,442 The following table details the components of mortgage income for the years ended December 31: (Dollars in thousands) Fair value changes of derivatives and mortgage loans held for sale: Mortgage loans held for sale and derivatives Derivative settlements, net Gains on sales Servicing and other income, net Servicing Rights 2016 2015 $ $ 1,361 (6,640) 87,925 1,207 83,853 $ $ 2,216 (5,017) 82,671 792 80,662 Servicing rights are recorded at the lower of cost or market value in “other assets” on the Company's consolidated balance sheets and amortized over the remaining servicing life of the loans, with consideration given to prepayment assumptions. Mortgage servicing rights had the following carrying values as of the periods indicated: December 31, 2016 December 31, 2015 (Dollars in thousands) Mortgage servicing rights $ Gross Carrying Amount 7,202 Accumulated Amortization $ (3,144) $ Net Carrying Amount 4,058 Gross Carrying Amount 6,104 $ Accumulated Amortization $ (2,320) $ Net Carrying Amount 3,784 In addition, there was an insignificant amount of non-mortgage servicing rights related to SBA loans as of December 31, 2016 and no non-mortgage servicing rights as of December 31, 2015. (cid:20)(cid:20)(cid:21) 1,675,538 (1,657,409) — (6,499) 140,072 2014 631 (8,743) 59,156 753 51,797 $ $ $ NOTE 9 – PREMISES AND EQUIPMENT Premises and equipment consisted of the following at December 31: (Dollars in thousands) Land Buildings Furniture, fixtures and equipment Total premises and equipment Accumulated depreciation Total premises and equipment, net 2016 2015 $ 84,616 $ 239,626 115,775 440,017 (133,644) 306,373 $ $ 84,438 245,934 140,031 470,403 (146,501) 323,902 Depreciation expense was $20.8 million, $22.2 million, and $19.4 million, for the years ended December 31, 2016, 2015, and 2014, respectively. The Company actively engages in leasing office space available in buildings it owns. Leases have different terms ranging from monthly rental to 16 years. For the year ended December 31, 2016, income from these leases averaged $0.2 million per month. Total lease income for the years ended December 31, 2016, 2015, and 2014 was $2.8 million, $2.4 million, and $1.6 million, respectively. Income from leases is reported as a reduction in occupancy and equipment expense. The total allocated cost of the portion of the buildings held for lease at December 31, 2016 and 2015 was $8.7 million and $8.2 million, respectively, with related accumulated depreciation of $3.1 million and $2.6 million, respectively. The Company leases certain branch and corporate offices, land and ATM facilities through operating leases with terms that range from one to 50 years, some of which contain renewal options and escalation clauses under various terms. In addition, some have early termination clauses. Rent expense for the years ended December 31, 2016, 2015, and 2014 totaled $16.6 million, $15.4 million, and $10.9 million, respectively. Minimum future annual rent commitments under lease agreements for the periods indicated are as follows: (Dollars in thousands) 2017 2018 2019 2020 2021 2022 and thereafter $ $ 15,927 14,981 13,980 12,742 10,906 37,527 106,063 NOTE 10 – GOODWILL AND OTHER ACQUIRED INTANGIBLE ASSETS Goodwill Changes to the carrying amount of goodwill by reporting unit for the years ended December 31, 2016 and 2015 are provided in the following table. (Dollars in thousands) Balance, December 31, 2014 Goodwill acquired during the year Balance, December 31, 2015 Goodwill adjustments during the year Balance, December 31, 2016 IBERIABANK 489,183 $ 207,077 696,260 2,253 698,513 $ $ $ $ $ IMC LTC Total 23,178 — 23,178 — 23,178 $ $ $ 5,165 — 5,165 — 5,165 $ $ $ 517,526 207,077 724,603 2,253 726,856 The goodwill adjustments during 2016 are the result of the finalization of fair value estimates related to the 2015 acquisitions of Florida Bank Group, Old Florida, and Georgia Commerce during the respective measurement periods. See Note 3 for further information on these acquisitions. (cid:20)(cid:20)(cid:22) The Company performed the required annual goodwill impairment test as of October 1, 2016. The Company’s annual impairment test did not indicate impairment in any of the Company’s reporting units as of the testing date. Following the testing date, management evaluated the events and changes that could indicate that goodwill might be impaired and concluded that a subsequent test was not necessary. Title Plant The Company held title plant assets recorded in “other assets” on the Company's consolidated balance sheets totaling $6.7 million at both December 31, 2016 and 2015. No events or changes in circumstances occurred during 2016 to suggest the carrying value of the title plant was not recoverable. Intangible assets subject to amortization Definite-lived intangible assets had the following carrying values included in “other assets” on the Company’s consolidated balance sheets as of December 31: 2016 2015 Gross Carrying Amount $ 74,001 Accumulated Amortization $ (52,165) $ Net Carrying Amount Gross Carrying Amount 21,836 $ 74,001 Accumulated Amortization $ (43,957) $ Net Carrying Amount (Dollars in thousands) Core deposit intangibles Customer relationship intangible asset Non-compete agreement Other intangible assets Total $ 1,348 63 — 75,412 $ (1,064) (22) — (53,251) $ 284 41 — 22,161 $ 1,348 100 205 75,654 $ (984) (79) (114) (45,134) $ The related amortization expense of intangible assets is as follows: (Dollars in thousands) Aggregate amortization expense for the years ended December 31: 2014 2015 2016 (Dollars in thousands) Estimated amortization expense for the years ended December 31: 2017 2018 2019 2020 2021 2022 and thereafter $ $ (cid:20)(cid:20)(cid:23) 30,044 364 21 91 30,520 Amount 5,807 7,811 8,415 6,733 5,740 5,019 3,513 1,066 90 NOTE 11 –DERIVATIVE INSTRUMENTS AND OTHER HEDGING ACTIVITIES The Company enters into derivative financial instruments to manage interest rate risk, exposures related to liquidity and credit risk, and to facilitate customer transactions. The primary types of derivatives used by the Company include interest rate swap agreements, foreign exchange contracts, interest rate lock commitments, forward sales commitments, written and purchased options and credit derivatives. All derivative instruments are recognized on the consolidated balance sheets as "other assets" or "other liabilities" at fair value, as required by ASC Topic 815, Derivatives and Hedging. For cash flow hedges, the effective portion of the gain or loss related to the derivative instrument is initially reported as a component of other comprehensive income and subsequently reclassified into earnings when the forecasted transaction affects earnings or when the hedge is terminated. The ineffective portion of the gain or loss is reported in earnings immediately. In applying hedge accounting for derivatives, the Company establishes and documents a method for assessing the effectiveness of the hedging derivative and a measurement approach for determining the ineffective aspect of the hedge upon the inception of the hedge. The Company has designated interest rate swaps in a cash flow hedge to convert forecasted variable interest payments to a fixed rate on its junior subordinated debt and has concluded that the forecasted transactions are probable of occurring. For derivative instruments that are not designated as hedging instruments, changes in the fair value of the derivatives are recognized in earnings immediately. Information pertaining to outstanding derivative instruments is as follows: Balance Sheet Location Asset Derivatives Fair Value December 31, 2016 December 31, 2015 Balance Sheet Location Liability Derivatives Fair Value December 31, 2016 December 31, 2015 (Dollars in thousands) Derivatives designated as hedging instruments under ASC Topic 815: Interest rate contracts Total derivatives designated as hedging instruments under ASC Topic 815 Derivatives not designated as hedging instruments under ASC Topic 815: Interest rate contracts Foreign exchange contracts Forward sales contracts Written and purchased options Other contracts Total derivatives not designated as hedging instruments under ASC Topic 815 Total $ $ $ Other assets Other assets Other assets Other assets Other assets Other assets — $ — $ Other liabilities $ $ 58 58 525 525 $ $ — — 20,719 $ 18,077 Other liabilities $ 20,719 $ 18,077 27 6,014 156 1,588 12,125 10,607 1 — Other liabilities Other liabilities Other liabilities Other liabilities 26 794 8,098 47 29,684 $ 30,209 $ 134 474 6,254 63 25,002 25,002 38,886 $ 38,886 $ 30,428 30,486 (cid:20)(cid:20)(cid:24) (Dollars in thousands) Derivatives designated as hedging instruments under ASC Topic 815: Interest rate contracts Total derivatives designated as hedging instruments under ASC Topic 815 Derivatives not designated as hedging instruments under ASC Topic 815: Interest rate contracts Foreign exchange contracts Forward sales contracts Written and purchased options Other contracts Total derivatives not designated as hedging instruments under ASC Topic 815 Total Asset Derivatives Notional Amount Liability Derivatives Notional Amount December 31, 2016 December 31, 2015 December 31, 2016 December 31, 2015 $ $ — $ 108,500 — $ 108,500 $ $ 108,500 108,500 $ $ — — $ 1,033,955 $ 590,334 $ 1,033,955 $ 590,334 4,474 229,181 289,115 8,784 4,392 223,841 328,210 — 4,474 120,567 154,170 106,518 4,392 173,430 181,949 43,169 $ $ 1,565,509 1,565,509 $ $ 1,146,777 1,255,277 $ $ 1,419,684 1,528,184 $ $ 993,274 993,274 The Company has entered into risk participation agreements with counterparties to transfer or assume credit exposures related to interest rate derivatives. The notional amounts of risk participation agreements sold were $106.5 million and $43.2 million at December 31, 2016 and December 31, 2015, respectively. Assuming all underlying third party customers referenced in the swap contracts defaulted at December 31, 2016 and December 31, 2015, the exposure from these agreements would not be material based on the fair value of the underlying swaps. The Company is party to collateral agreements with certain derivative counterparties. Such agreements require that the Company maintain collateral based on the fair values of individual derivative transactions. In the event of default by the Company, the counterparty would be entitled to the collateral. At December 31, 2016 and 2015, the Company was required to post $1.9 million and $10.9 million, respectively, in cash or securities as collateral for its derivative transactions, which are included in "interest-bearing deposits in banks" on the Company’s consolidated balance sheets. The Company does not anticipate additional assets will be required to be posted as collateral, nor does it believe additional assets would be required to settle its derivative instruments immediately if contingent features were triggered at December 31, 2016. The Company’s master netting agreements represent written, legally enforceable bilateral agreements that (1) create a single legal obligation for all individual transactions covered by the master agreement and (2) in the event of default, provide the non-defaulting counterparty the right to accelerate, terminate, and close-out on a net basis all transactions under the agreement and to promptly liquidate or set-off collateral posted by the defaulting counterparty. As permitted by U.S. GAAP, the Company does not offset fair value amounts recognized for the right to reclaim cash collateral or the obligation to return cash collateral against recognized fair value amounts of derivatives executed with the same counterparty under a master netting agreement. (cid:20)(cid:20)(cid:25) The following table reconciles the gross amounts presented in the consolidated balance sheets to the net amounts that would result in the event of offset. (Dollars in thousands) Derivatives subject to master netting arrangements Derivative assets Interest rate contracts not designated as hedging instruments Written and purchased options Total derivative assets subject to master netting arrangements Derivative liabilities Interest rate contracts designated as hedging instruments Interest rate contracts not designated as hedging instruments Total derivative liabilities subject to master netting arrangements December 31, 2016 Gross Amounts Not Offset in the Balance Sheet Derivatives Collateral (1) Net Gross Amounts Presented in the Balance Sheet $ $ $ 20,719 $ 8,085 (9,677) $ — — $ — 11,042 8,085 28,804 $ (9,677) $ — $ 19,127 525 $ — $ (181) $ 344 20,719 (9,677) (1,711) 9,331 $ 21,244 $ (9,677) $ (1,892) $ 9,675 (1) Consists of cash collateral recorded at cost, which approximates fair value, and investment securities. (Dollars in thousands) Derivatives subject to master netting arrangements Derivative assets Interest rate contracts designated as hedging instruments Interest rate contracts not designated as hedging instruments Written and purchased options Total derivative assets subject to master netting arrangements Derivative liabilities Interest rate contracts designated as hedging instruments Interest rate contracts not designated as hedging instruments Total derivative liabilities subject to master netting arrangements December 31, 2015 Gross Amounts Not Offset in the Balance Sheet Derivatives Collateral (1) Net Gross Amounts Presented in the Balance Sheet $ $ $ $ 100 $ (43) $ — $ 57 18,241 6,255 (119) — — — 18,122 6,255 24,596 $ (162) $ — $ 24,434 43 $ (43) $ — $ — 18,241 (119) (10,877) 7,245 18,284 $ (162) $ (10,877) $ 7,245 (1) Consists of cash collateral recorded at cost, which approximates fair value, and investment securities. During the years ended December 31, 2016 and 2015, the Company has not reclassified into earnings any gain or loss as a result of the discontinuance of cash flow hedges, because it was probable the original forecasted transaction would not occur by the end of the originally specified term. At December 31, 2016, the Company does not expect to reclassify a material amount from accumulated other comprehensive income into interest income over the next twelve months for derivatives that will be settled. (cid:20)(cid:20)(cid:26) At December 31, 2016, 2015, and 2014, and for the years then ended, information pertaining to the effect of the hedging instruments on the consolidated financial statements is as follows: Location of Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion) Amount of Gain (Loss) Reclassified from Accumulated OCI into Income net of taxes (Effective Portion) Amount of Gain (Loss) Recognized in OCI net of taxes (Effective Portion) Location of Gain (Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing) Amount of Gain (Loss) Recognized in Income on Derivative (Ineffective Portion and Amount Excluded from Effectiveness Testing) For the Years Ended December 31 2016 2015 2014 2016 2015 2014 2016 2015 2014 $ $ (428) $ 38 $ — (428) $ 38 $ — Interest expense $ $ 50 50 $ — $ — $ — $ — Interest expense $ — $ — $ $ — $ — $ (1) (1) (Dollars in thousands) Derivatives in ASC Topic 815 Cash Flow Hedging Relationships Interest rate contracts Total Information pertaining to the effect of derivatives not designated as hedging instruments on the consolidated financial statements as of December 31, is as follows: (Dollars in thousands) Interest rate contracts (1) Foreign exchange contracts Forward sales contracts Written and purchased options Other contracts Total (1) Includes fees associated with customer interest rate contracts. Location of Gain (Loss) Recognized in Income on Derivatives Amount of Gain (Loss) Recognized in Income on Derivatives 2016 2015 2014 Other income Other income Mortgage income Mortgage income Other income $ 8,830 $ 4,143 $ 2,513 15 (1,731) (327) 17 6,804 22 (2,947) 274 — 1,492 — (3,225) (5,739) — $ (6,451) $ $ At December 31, additional information pertaining to outstanding interest rate swap agreements not designated as hedging instruments is as follows: (Dollars in thousands) Weighted average pay rate Weighted average receive rate Weighted average maturity in years Unrealized gain (loss) relating to interest rate swaps 2016 2015 2014 4.1% 2.5% 3.2% 0.9% 2.9% 0.4% 7.4 years 7.5 years 7.7 years $ — $ — $ — (cid:20)(cid:20)(cid:27) NOTE 12 – DEPOSITS Deposits at December 31 are summarized as follows: (Dollars in thousands) Non-interest-bearing deposits Negotiable order of withdrawal (NOW) Money market deposits accounts (MMDA) Savings deposits Certificates of deposit and other time deposits $ $ 2016 4,928,878 3,314,281 6,219,532 814,385 2015 4,352,229 2,974,176 6,010,882 716,838 2,131,207 $ 17,408,283 2,124,623 $ 16,178,748 Total time deposits summarized by denomination at December 31 are as follows: (Dollars in thousands) Time deposits less than $250,000 Time deposits greater than $250,000 2016 1,661,631 469,576 2,131,207 $ $ A schedule of maturities of all time deposits as of December 31, 2016 is as follows: (Dollars in thousands) Years ending December 31 2017 2018 2019 2020 2021 2022 and thereafter NOTE 13 – SHORT-TERM BORROWINGS Short-term borrowings at December 31 are summarized as follows: (Dollars in thousands) Federal Home Loan Bank advances Securities sold under agreements to repurchase 2016 175,000 334,136 509,136 $ $ 2015 1,456,804 667,819 2,124,623 1,335,041 507,162 96,509 83,623 60,468 48,404 2,131,207 2015 110,000 216,617 326,617 $ $ $ $ $ $ The levels of securities sold under agreements to repurchase and FHLB advances can fluctuate significantly on a day-to-day basis, depending on funding needs and which sources are used to satisfy those needs. All such arrangements are considered typical of the banking and brokerage industries and are accounted for as borrowings. Securities sold under agreements to repurchase, which are classified as secured borrowings, generally mature daily and are reflected at the amount of cash received in connection with the transaction. The Company may be required to provide additional collateral based on the fair value of the underlying securities. (cid:20)(cid:20)(cid:28) Additional information on the Company’s short-term borrowings for the years indicated is as follows: (Dollars in thousands) Outstanding at December 31 Maximum month-end outstanding balance Average daily outstanding balance Average rate during the year Average rate at year end $ $ 2016 509,136 807,993 614,073 0.39% 0.30% 2015 326,617 798,933 426,011 $ 2014 845,742 1,034,741 782,033 0.18% 0.20% 0.17% 0.18% NOTE 14 – LONG-TERM DEBT Long-term debt at December 31 is summarized as follows: (Dollars in thousands) IBERIABANK: Federal Home Loan Bank notes, 0.864% to 7.040% Notes payable - Investment fund contribution, 7 to 40 year term, 0.50% to 3.60% fixed IBERIABANK Corporation (junior subordinated debt): Statutory Trust I, 3 month LIBOR (1), plus 3.25%, issued November 2002 Statutory Trust II, 3 month LIBOR (1), plus 3.15%, issued June 2003 Statutory Trust III, 3 month LIBOR (1), plus 2.00%, issued September 2004 Statutory Trust IV, 3 month LIBOR (1), plus 1.60%, issued October 2006 American Horizons Statutory Trust I, 3 month LIBOR (1), plus 3.15%, assumed January 2005 Statutory Trust V, 3 month LIBOR (1), plus 1.435%, issued June 2007 Statutory Trust VI, 3 month LIBOR (1), plus 2.75%, issued November 2007 Statutory Trust VII, 3 month LIBOR (1), plus 2.54%, issued November 2007 Statutory Trust VIII, 3 month LIBOR (1), plus 3.50%, issued March 2008 OMNI Trust I, 3 month LIBOR (1), plus 3.30%, assumed May 2011 OMNI Trust II, 3 month LIBOR (1), plus 2.79%, assumed May 2011 GA Commerce Trust II, 3 month LIBOR (1), plus 1.64%, assumed May 2015 2016 2015 $ 480,118 $ 136,628 28,725 508,843 83,709 220,337 10,310 10,310 10,310 15,464 6,186 10,310 12,372 13,403 7,217 8,248 7,732 8,248 10,310 10,310 10,310 15,464 6,186 10,310 12,372 13,403 7,217 8,248 7,732 8,248 120,110 628,953 $ 120,110 340,447 $ (1) The interest rate on the Company’s long-term debt indexed to LIBOR is based on the 3-month LIBOR rate. The 3-month LIBOR rate was 1.00% and 0.61% at December 31, 2016 and 2015, respectively. Outstanding FHLB advances are a mix of bullet and amortizing structures. Amortizing FHLB advances are amortized over periods ranging from 1.5 to 30 years, and have a balloon feature at maturity. Advances are collateralized by a blanket pledge of eligible loans, subject to contractual adjustments which reduce the borrowing base, as well as a secondary pledge of FHLB stock and FHLB demand deposits, the amount of which can exceed the amounts borrowed based on contractually required adjustments. Total additional FHLB advances for both short-term borrowings and long-term debt at December 31, 2016 were $4.9 billion under the blanket floating lien including $1.5 billion from pledges of investment securities. The weighted average advance rate was 1.76% and 3.79% at December 31, 2016 and 2015, respectively. Junior subordinated debt consists of a total of $120.1 million in Junior Subordinated Deferrable Interest Debentures of the Company issued to statutory trusts that were funded by the issuance of floating rate capital securities of the trusts. The terms of the junior subordinated debt are 30 years, and they are callable at par by the Company any time after 5 years. Interest is payable quarterly and may be deferred at any time at the election of the Company for up to 20 consecutive quarterly periods. During a deferral period, the Company is subject to certain restrictions, including being prohibited from declaring and paying dividends to its common shareholders. (cid:20)(cid:21)(cid:19) As of January 1, 2015, 75% of the Company's junior subordinated debt was excluded from Tier 1 capital for regulatory purposes. Effective January 1, 2016, the Company was subject to an additional 25% phase out of its junior subordinated debt from Tier 1 capital. As a result, 100% of the Company's junior subordinated debt is excluded from Tier 1 capital (but included in Tier 2 capital) at December 31, 2016. Advances and long-term debt at December 31, 2016 have maturities or call dates in future years as follows: (Dollars in thousands) 2017 2018 2019 2020 2021 2022 and thereafter $ $ 55,516 233,667 97,042 15,263 55,564 171,901 628,953 (cid:20)(cid:21)(cid:20) NOTE 15 – INCOME TAXES The provision for income tax expense consists of the following for the years ended December 31: (Dollars in thousands) Current expense Deferred expense (benefit) Tax credits Amortization on qualified affordable housing tax credits Tax benefits attributable to items charged to equity and goodwill $ $ 2016 103,335 (16,654) (7,112) 4,185 $ 67,025 $ 4,551 (11,268) 2,023 1,439 85,193 $ 1,763 64,094 $ 2015 2014 69,612 (25,027) (12,012) 1,005 2,105 35,683 There was a balance payable of $2 million and a balance receivable of $13 million for federal and state income taxes at December 31, 2016 and 2015, respectively. The provision for federal income taxes differs from the amount computed by applying the federal income tax statutory rate of 35 percent on income before income tax expense as indicated in the following analysis for the years ended December 31: (Dollars in thousands) Federal tax based on statutory rate Increase (decrease) resulting from: Effect of tax-exempt income Interest and other nondeductible expenses State taxes, net of federal benefit Tax credits Amortization on qualified affordable housing tax credits Other Effective tax rate 2016 95,189 2015 72,428 2014 49,373 $ $ $ (8,203) 3,250 4,770 (7,112) 4,185 (6,886) 85,193 $ (6,919) 5,899 3,955 (11,268) 2,023 (2,024) 64,094 $ (7,064) 2,642 2,531 (12,012) 1,005 (792) 35,683 31.3% 31.0% 25.3% $ The composition of other items resulting in a net tax benefit of $6.9 million for the year ending December 31, 2016 arose principally from completion of a study concluding existence of $6.5 million net unrealized built-in gains on the 2015 Florida Bank Group acquisition and $0.2 million of dividends on restricted stock. The Company recognized a $6.5 million deferred tax asset, a portion of which was claimed on the 2015 income tax return filed in the fourth quarter of 2016. (cid:20)(cid:21)(cid:21) The net deferred tax asset at December 31 is as follows: (Dollars in thousands) Deferred tax asset: NOL carryforward Allowance for credit losses Deferred compensation Basis difference in acquired assets Unrealized loss on securities available for sale OREO Other Deferred tax liability: Basis difference in acquired assets Gain on acquisition FHLB stock Premises and equipment Acquisition intangibles Deferred loan costs Investments acquired Other 2016 2015 $ 19,584 $ 58,036 10,852 32,923 14,019 4,498 14,754 154,666 (13,150) — (270) (6,132) (8,134) (4,702) — (9,196) (41,584) 113,082 $ 17,258 56,446 7,528 48,256 854 6,210 10,438 146,990 (31,975) (212) (122) (1,658) (7,648) (4,610) (167) (16,694) (63,086) 83,904 Net deferred tax asset $ Net operating loss carryforwards arising from acquisitions during 2015 expire over a 20-year period and will be utilized subject to annual Internal Revenue Code Section 382 limitations. No benefit was recognized at acquisition for net operating losses that will expire unused due to the IRS limitations. The Company determined that the net deferred tax asset is more likely than not to be realized based on an assessment of all available positive and negative evidence and therefore no valuation allowance has been recorded as of December 31, 2016 or 2015. Retained earnings at December 31, 2016 and 2015 included approximately $21.9 million accumulated prior to January 1, 1987 for which no provision for federal income taxes has been made. If this portion of retained earnings is used in the future for any purpose other than to absorb bad debts, it will be added to future taxable income. The Company does not believe it has any unrecognized tax benefits included in its consolidated financial statements. The Company has not had any settlements in the current period with taxing authorities, nor has it recognized tax benefits as a result of a lapse of the applicable statute of limitations. During the years ended December 31, 2016, 2015, and 2014, the Company did not recognize any interest or penalties in its consolidated financial statements, nor has it recorded a liability for interest or penalty payments. (cid:20)(cid:21)(cid:22) NOTE 16 – SHAREHOLDERS' EQUITY, CAPITAL RATIOS AND OTHER REGULATORY MATTERS Preferred Stock On August 5, 2015, the Company issued an aggregate of 3,200,000 depositary shares (the “Series B Depositary Shares”), each representing a 1/400th ownership interest in a share of the Company’s 6.625% Fixed-to-Floating Non-Cumulative Perpetual Preferred Stock, Series B, par value $1.00 per share, (“Series B Preferred Stock”), with a liquidation preference of $10,000 per share of Series B Preferred Stock (equivalent to $25 per depositary share) which represents $80,000,000 in aggregate liquidation preference. On May 9, 2016, the Company issued an aggregate of 2,300,000 depositary shares (the “Series C Depositary Shares”), each representing a 1/400th ownership interest in a share of the Company’s 6.60% Fixed-to-Floating Non-Cumulative Perpetual Preferred Stock, Series C, par value $1.00 per share, (“Series C Preferred Stock”), with a liquidation preference of $10,000 per share of Series C Preferred Stock (equivalent to $25 per depositary share), which represents $57,500,000 in aggregate liquidation preference. The following table presents a summary of the Company's non-cumulative perpetual preferred stock: Issuance Date Earliest Redemption Date Annual Dividend Rate 2016 2015 Liquidation Amount Carrying Amount Carrying Amount (Dollars in millions) Series B Preferred Stock Series C Preferred Stock 8/5/2015 5/9/2016 8/1/2025 5/1/2026 6.625% $ 80,000 $ 76,812 6.600% 57,500 55,285 $ 137,500 $ 132,097 $ $ 76,812 — 76,812 Dividends will accrue and be payable on the Series B Preferred Stock, if declared by the Company's Board of Directors, and will be paid semi-annually, in arrears, at an annual rate equal to 6.625% for each period from the issuance date up to and including August 1, 2025 and will be paid quarterly, in arrears, at an annual rate equal to three-month LIBOR plus 4.262% for each period after August 1, 2025. The Company may redeem the Series B Preferred Stock at its option, subject to regulatory approval, as described in the Company’s Registration Statement on Form 8-A, filed with the Securities and Exchange Commission on August 5, 2015. Dividends will accrue and be payable on the Series C Preferred Stock, if declared by the Company's Board of Directors, and will be paid quarterly, in arrears, at an annual rate equal to (i) 6.600% for each period from the issuance date to May 1, 2026 and (ii) three-month LIBOR plus 4.920% for each period on or after May 1, 2026. The Company may redeem the Series C Preferred Stock at its option, subject to regulatory approval, as described in the Company’s Registration Statement on Form 8- A, filed with the Securities and Exchange Commission on May 9, 2016. Common Stock During the second quarter of 2016, the Company's Board of Directors authorized the repurchase of up to 950,000 shares of IBERIABANK Corporation's outstanding common stock. Stock repurchases under this program will be made from time to time, on the open market or in privately negotiated transactions. The timing of these repurchases will depend on market conditions and other requirements. The share repurchase program does not obligate the Company to repurchase any dollar amount or number of shares, and the program may be extended, modified, suspended, or discontinued at any time. During 2016, the Company repurchased 202,506 common shares at a weighted average price of $57.61 per common share. On December 7, 2016, the Company issued an additional 3,593,750 shares of its common stock at a price of $81.50 per common share. Net proceeds from the offering, after deduction of underwriting discounts, commissions, and direct issuance costs, were $279.2 million. (cid:20)(cid:21)(cid:23) Regulatory Capital The Company and IBERIABANK are subject to various regulatory capital requirements administered by the federal and state banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company’s consolidated financial statements. Under capital adequacy regulations and the regulatory framework for prompt corrective action, the Company and IBERIABANK, as applicable, must meet specific capital guidelines that involve quantitative measures of their assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting practices. The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors. On January 1, 2015, the Company and IBERIABANK became subject to revised capital adequacy standards of the BCBS to address relevant provisions of the Dodd-Frank Act. Certain provisions of the new rules will be phased in from that date to January 1, 2019. The final rules: • Required that non-qualifying capital instruments, including trust preferred securities and cumulative perpetual preferred stock, must be fully phased out of Tier 1 capital by January 1, 2016, • Established new qualifying criteria for regulatory capital, including new limitations on the inclusion of deferred tax assets and mortgage servicing rights, • Required a minimum ratio of common equity Tier 1 capital (“CET1”) to risk-weighted assets of 4.5%, Increased the minimum Tier 1 capital to risk-weighted assets ratio requirements from 4% to 6%, • Implemented a new capital conservation buffer requirement for a banking organization to maintain a buffer composed • of CET1 capital in an amount greater than 2.5% above the minimum CET1 capital, Tier 1 capital and total risk-based capital ratios in order to avoid limitations on capital distributions, including dividend payments, and certain discretionary bonus payments to executive officers, with the buffer to be phased in beginning on January 1, 2016 at 0.625% and increasing annually until fully phased in at 2.5% by January 1, 2019. A banking organization with a buffer of less than the required amount would be subject to increasingly stringent limitations on certain distributions and payments as the buffer approaches zero, and Increased capital requirements for past-due loans, high volatility commercial real estate exposures, and certain short- term commitments and securitization exposures. • Management believes that, as of December 31, 2016 and 2015, the Company and IBERIABANK met all capital adequacy requirements to which they are subject. (cid:20)(cid:21)(cid:24) As of December 31, 2016, the most recent notification from the FRB categorized IBERIABANK as well-capitalized under the regulatory framework for prompt corrective action (the prompt corrective action requirements are not applicable to the Company). To be categorized as well-capitalized, an institution must maintain minimum total risk-based, Tier 1 risk-based and Tier 1 leverage ratios as set forth in the following table. There are no conditions or events since the notification that management believes have changed that categorization. The Company’s and IBERIABANK’s actual capital amounts and ratios as of December 31 are presented in the following table. (Dollars in thousands) Tier 1 Leverage Consolidated IBERIABANK Common Equity Tier 1 (CET1) (1) Consolidated IBERIABANK Tier 1 Risk-Based Capital (1) Consolidated IBERIABANK Total Risk-Based Capital (1) Consolidated IBERIABANK Tier 1 Leverage Consolidated IBERIABANK Common Equity Tier 1 (CET1) Consolidated IBERIABANK Tier 1 Risk-Based Capital Consolidated IBERIABANK Total Risk-Based Capital Consolidated IBERIABANK Minimum Well-Capitalized Actual Amount Ratio Amount Ratio Amount Ratio 2016 $ 818,440 4.00% N/A N/A $2,221,528 10.86% 816,152 4.00 1,020,190 5.00 1,878,703 9.21 $ 794,334 792,111 4.50% 4.50 N/A 1,144,160 N/A $2,089,431 1,878,703 6.50 $1,059,112 1,056,147 $1,412,149 1,408,197 6.00% N/A N/A $2,221,528 6.00 1,408,197 8.00 1,878,703 8.00% N/A N/A $2,493,988 8.00 1,760,246 10.00 2,034,663 11.84% 10.67 12.59% 10.67 14.13% 11.56 Minimum Well-Capitalized Actual Amount Ratio Amount Ratio Amount Ratio 2015 $ 751,798 749,226 4.00% 4.00 N/A N/A $1,790,034 936,532 5.00 1,691,022 $ 750,616 748,667 4.50% 4.50 N/A 1,081,408 N/A $1,684,097 1,691,022 6.50 $1,000,822 6.00% N/A N/A $1,790,034 998,223 6.00 1,330,964 8.00 1,691,022 $1,334,429 1,330,964 8.00% N/A N/A $2,029,932 8.00 1,663,705 10.00 1,843,545 9.52% 9.03 10.10% 10.16 10.73% 10.16 12.17% 11.08 (1) Beginning January 1, 2016, minimum capital ratios are subject to a capital conservation buffer. In order to avoid limitations on distributions, including dividend payments, and certain discretionary bonus payments to executive officers, an institution must hold a capital conservation buffer above its minimum risk-based capital requirements. This capital conservation buffer is calculated as the lowest of the differences between the actual CET1 ratio, Tier 1 Risk-Based Capital Ratio, and Total Risk- Based Capital ratio and the corresponding minimum ratios. At December 31, 2016, the required minimum capital conservation buffer was 0.625%, and will increase in subsequent years by 0.625% until it is fully phased in on January 1, 2019 at 2.50%. At December 31, 2016, the capital conservation buffers of the Company and IBERIABANK were 6.13% and 3.56%, respectively. Restrictions on Dividends, Loans and Advances IBERIABANK is restricted under applicable laws in the payment of dividends to an amount equal to current year earnings plus undistributed earnings for the immediately preceding year, unless prior permission is received from the Commissioner of Financial Institutions for the State of Louisiana. Dividends payable by IBERIABANK in 2017 without permission will be limited to 2017 earnings plus an additional $191.0 million. (cid:20)(cid:21)(cid:25) Funds available for loans or advances by IBERIABANK to the Parent amounted to $187.9 million. In addition, any dividends that may be paid by IBERIABANK to the Parent would be restricted if IBERIABANK did not comply with the above- described capital conservation buffer requirements and would be prohibited if the effect thereof would cause IBERIABANK’s capital to be reduced below applicable minimum capital requirements. During any deferral period under the Company’s junior subordinated debt, the Company would be prohibited from declaring and paying dividends to preferred and common shareholders. In addition, so long as any shares of Series B Preferred Stock or Series C Preferred Stock remain outstanding, we are prohibited from paying dividends on any of our common stock if the required payments on our Series B Preferred Stock and Series C Preferred Stock have not been made. See Note 14 to the consolidated financial statements for additional information. NOTE 17 –EARNINGS PER SHARE Share-based payment awards that entitle holders to receive non-forfeitable dividends before vesting are considered participating securities that are included in the calculation of earnings per share using the two-class method. The two-class method is an earnings allocation formula under which earnings per share is calculated for common stock and participating securities according to dividends declared and participating rights in undistributed earnings. Under this method, all earnings, distributed and undistributed, are allocated to common shares and participating securities based on their respective rights to receive dividends. The following table presents the calculation of basic and diluted earnings per share for the periods indicated. (In thousands, except per share data) Earnings per common share - basic Net income Preferred stock dividends Dividends and undistributed earnings allocated to unvested restricted shares Net income allocated to common shareholders - basic Weighted average common shares outstanding Earnings per common share - basic Earnings per common share - diluted Net income allocated to common shareholders - basic Dividends and undistributed earnings allocated to unvested restricted shares Net income allocated to common shareholders - diluted Weighted average common shares outstanding Dilutive potential common shares Weighted average common shares outstanding - diluted Earnings per common share - diluted For the Years Ended December 31, 2016 2015 2014 186,777 (7,977) $ 142,844 $ 105,382 — — (1,872) 176,928 $ (1,680) 141,164 $ 40,948 4.32 38,214 3.69 (1,651) 103,731 31,307 3.31 176,928 $ 141,164 $ 103,731 (37) 176,891 $ (48) 141,116 $ 40,948 158 41,106 38,214 96 38,310 4.30 $ 3.68 $ (34) 103,697 31,307 126 31,433 3.30 $ $ $ $ $ For the years ended December 31, 2016, 2015, and 2014, the calculations for basic shares outstanding exclude the weighted average shares owned by the Recognition and Retention Plan (“RRP”) of 447,818; 607,608; and 625,555, respectively. The effects from the assumed exercises of 155,969; 159,236; and 13,101 stock options were not included in the computation of diluted earnings per share for the years ended December 31, 2016, 2015, and 2014, respectively, because such amounts would have had an antidilutive effect on earnings per common share. (cid:20)(cid:21)(cid:26) NOTE 18 – SHARE-BASED COMPENSATION The Company has various types of share-based compensation plans that permit the granting of awards in the form of stock options, restricted stock, restricted share units, phantom stock and performance units. These plans are administered by the Compensation Committee of the Board of Directors, which selects persons eligible to receive awards and determines the terms, conditions and other provisions of the awards. At December 31, 2016, awards of 2,456,052 shares could be made under approved incentive compensation plans. The Company issues shares to fulfill stock option exercises and restricted share units and restricted stock awards vesting from available authorized common shares. At December 31, 2016, the Company believes there are adequate authorized shares to satisfy anticipated stock option exercises and restricted share unit and restricted stock award vesting. Stock option awards The Company issues stock options under various plans to directors, officers and other key employees. The option exercise price cannot be less than the fair value of the underlying common stock as of the date of the option grant and the maximum option term cannot exceed ten years. The following table represents the activity related to stock options during the periods indicated: Outstanding options, December 31, 2013 Granted Exercised Forfeited or expired Outstanding options, December 31, 2014 Granted Exercised Forfeited or expired Outstanding options, December 31, 2015 Granted Exercised Forfeited or expired Outstanding options, December 31, 2016 Exercisable options, December 31, 2014 Exercisable options, December 31, 2015 Exercisable options, December 31, 2016 Weighted Average Exercise Price Aggregate Intrinsic Value (Dollars in thousands) Weighted Average Remaining Contract Life (in years) $ $ $ $ $ $ 53.47 65.31 48.57 $ 4,612 60.38 55.92 62.50 51.71 66.52 56.99 48.65 55.39 59.49 55.38 55.92 56.54 56.66 1,516 3,597 $ 20,583 6.0 $ 11,366 4.4 Number of Shares 1,072,829 77,434 (267,421) (15,160) 867,682 82,001 (119,917) (15,989) 813,777 160,624 (196,769) (56,094) 721,538 562,752 546,842 415,376 (cid:20)(cid:21)(cid:27) The following table represents weighted average remaining life as of December 31, 2016 for options outstanding within the stated exercise prices: Exercise Price Range Per Share $36.48 to $47.50 $47.51 to $52.35 $52.36 to $54.82 $54.83 to $59.81 $59.82 to $62.82 $62.83 to $111.71 Total options Options Outstanding Options Exercisable Number of Options 147,913 151,527 116,558 68,683 154,506 82,351 721,538 Weighted Average Exercise Price $ $ 47.27 51.56 53.39 56.33 61.32 67.83 55.38 Weighted Average Remaining Life 8.9 years 4.9 years 4.6 years 3.7 years 5.7 years 7.1 years 6.0 years Number of Options Weighted Average Exercise Price 5,849 $ 113,328 90,653 64,387 98,688 42,471 415,376 $ 45.42 51.51 53.68 56.17 60.63 69.81 56.66 The Company uses the Black-Scholes option pricing model to estimate the fair value of stock option awards. The following weighted-average assumptions were used for option awards issued during the years ended December 31: Expected dividends Expected volatility Risk-free interest rate Expected term (in years) 2016 2015 2014 2.8% 29.0% 1.4% 6.5 2.2% 35.6% 2.0% 7.5 2.1% 35.8% 2.3% 7.5 Weighted-average grant-date fair value $ 10.46 $ 19.57 $ 21.26 The assumptions above are based on multiple factors, including historical stock option exercise patterns and post-vesting employment termination behaviors, expected future exercise patterns and the expected volatility of the Company’s stock price. The following table represents the compensation expense that is included in non-interest expense and related income tax benefits in the accompanying consolidated statements of comprehensive income related to stock options for the years ended December 31: (Dollars in thousands) Compensation expense related to stock options Income tax benefit related to stock options 2016 2015 2014 $ 2,010 $ 1,861 $ 331 317 2,053 375 At December 31, 2016, there was $2.1 million of unrecognized compensation cost related to stock options that is expected to be recognized over a weighted-average period of 2.6 years. Restricted stock awards The Company issues restricted stock under various plans for certain officers and directors. The restricted stock awards may not be sold or otherwise transferred until certain restrictions have lapsed. The holders of the restricted stock receive dividends and have the right to vote the shares. The compensation expense for these awards is determined based on the market price of the Company's common stock at the date of grant applied to the total number of shares granted and is recognized over the vesting period (generally three to seven years). As of December 31, 2016 and 2015, unrecognized share-based compensation associated with these awards totaled $16.0 million and $19.5 million, respectively. The unrecognized compensation cost related to restricted stock awards at December 31, 2016 is expected to be recognized over a weighted-average period of 2.2 years. Restricted share units In 2015, the Company issued restricted share units to certain of its executive officers. Restricted share units vest after the end of a three year performance period, based on satisfaction of the market and performance conditions set forth in the restricted share unit agreement. Recipients do not possess voting or investment power over the common stock underlying such units until vesting. The grant date fair value of these restricted share units is the same as the value of the corresponding number of shares of common stock, adjusted for assumptions surrounding the market-based conditions contained in the respective agreements. See Note 1 for further discussion of restricted share units with market or performance conditions. (cid:20)(cid:21)(cid:28) The following table represents the compensation expense that was included in non-interest expense and related income tax benefits in the accompanying consolidated statements of comprehensive income related to restricted stock awards and restricted share units for the years ended December 31: (Dollars in thousands) Compensation expense related to restricted stock awards and restricted share units Income tax benefit related to restricted stock awards and restricted share units 2016 2015 2014 $ 12,513 $ 12,045 $ 9,932 4,380 4,215 3,476 The following table represents unvested restricted stock award and restricted share unit activity for the years ended December 31: Balance at beginning of period Granted Forfeited Earned and issued Balance at end of period 2016 507,130 254,276 (28,855) (189,290) 543,261 2015 506,289 207,575 (26,970) (179,764) 507,130 2014 523,756 168,254 (18,171) (167,550) 506,289 The weighted average grant date fair value of restricted stock awards and restricted share units granted was $48.84, $63.16, and $65.11 for the years ended December 31, 2016, 2015, and 2014, respectively. The total fair value of restricted stock awards and restricted share units vested during the years ended December 31, 2016, 2015, and 2014 was $10.7 million, $11.3 million, and $10.9 million, respectively. Phantom stock awards The Company issues phantom stock awards to certain key officers and employees. The awards are subject to a vesting period of five to seven years and are paid out in cash upon vesting. The amount paid per vesting period is calculated as the number of vested “share equivalents” multiplied by the closing market price of a share of the Company’s common stock on the vesting date. Share equivalents are calculated on the date of grant as the total award’s dollar value divided by the closing market price of a share of the Company’s common stock on the grant date. Award recipients are also entitled to a “dividend equivalent” on each unvested share equivalent held by the award recipient. A dividend equivalent is a dollar amount equal to the cash dividends that the participant would have been entitled to receive if the participant’s share equivalents were issued in shares of common stock. Dividend equivalents are reinvested as share equivalents that will vest and be paid out on the same date as the underlying share equivalents on which the dividend equivalents were paid. The number of share equivalents acquired with a dividend equivalent is determined by dividing the aggregate of dividend equivalents paid on the unvested share equivalents by the closing price of a share of the Company’s common stock on the dividend payment date. Performance units In 2016 and 2015, the Company issued performance units to certain of its executive officers. Performance units are tied to the value of shares of the Company's common stock, are payable in cash, and vest in increments of one-third per year after attainment of one or more performance measures. The value of performance units is the same as the value of the corresponding number of shares of common stock. The following table indicates compensation expense recorded for phantom stock and performance units based on the number of share equivalents vested at December 31 of the years indicated and the current market price of the Company’s stock at that time: (Dollars in thousands) Compensation expense related to phantom stock and performance units 2016 2015 2014 $ 12,933 $ 12,109 $ 5,496 (cid:20)(cid:22)(cid:19) The following table represents phantom stock award and performance unit activity during the periods indicated. (Dollars in thousands) Balance, December 31, 2013 Granted Forfeited share equivalents Vested share equivalents Balance, December 31, 2014 Granted Forfeited share equivalents Vested share equivalents Balance, December 31, 2015 Granted Forfeited share equivalents Vested share equivalents Balance, December 31, 2016 Number of share equivalents (1) Value of share equivalents (2) 433,884 $ 27,270 146,166 (22,800) (81,903) 475,347 167,573 (34,681) (145,809) 462,430 215,745 (42,051) (163,294) 472,830 $ $ $ 9,479 1,479 5,512 30,826 9,228 1,910 9,288 25,466 18,069 3,522 8,509 39,600 (1) Number of share equivalents includes all reinvested dividend equivalents for the years indicated. (2) Except for share equivalents at the beginning of each period, which are based on the value at that time, and vested share payments, which are based on the cash paid at the time of vesting, the value of share equivalents is calculated based on the market price of the Company’s stock at the end of the respective periods. The market price of the Company’s stock was $83.75, $55.07 and $64.85 on December 31, 2016, 2015 and 2014, respectively. 401(k) defined contribution plan The Company has a 401(k) Profit Sharing Plan covering substantially all of its employees. Annual employer contributions to the Plan are set by the Board of Directors. The Company made contributions of $1.9 million, $1.7 million, and $1.5 million for the years ended December 31, 2016, 2015, and 2014, respectively. The Plan provides, among other things, that participants in the Plan be able to direct the investment of their account balances within the Profit Sharing Plan into alternative investment funds. Participant deferrals under the salary reduction election may be matched by the employer based on a percentage to be determined annually by the employer. NOTE 19 – COMMITMENTS AND CONTINGENCIES Off-balance sheet commitments In the normal course of business, to meet the financing needs of its customers, the Company is a party to credit related financial instruments, with risk not reflected in the consolidated financial statements. These financial instruments include commitments to extend credit, standby letters of credit, and commercial letters of credit. Such commitments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the consolidated balance sheets. The credit policies used for these commitments are consistent with those used for on-balance sheet instruments. The Company’s exposure to credit loss in the event of non-performance by its customers under such commitments or letters of credit represents the contractual amount of the financial instruments as indicated in the table below. At December 31, 2016 and 2015, the fair value of guarantees under commercial and standby letters of credit was $1.6 million and $1.5 million, respectively. These amounts represent the unamortized fees associated with the guarantees and is included in “other liabilities” on the Company's consolidated balance sheets. This fair value will decrease as the existing commercial and standby letters of credit approach their expiration dates. (cid:20)(cid:22)(cid:20) At December 31, 2016 and 2015, respectively, the Company had the following financial instruments outstanding and related reserves, whose contract amounts represent credit risk: (Dollars in thousands) Commitments to grant loans Unfunded commitments under lines of credit Commercial and standby letters of credit Reserve for unfunded lending commitments $ 2016 355,558 4,899,930 163,560 11,241 2015 $ 61,240 4,617,802 150,281 14,145 Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to be drawn upon, the total commitment amounts generally represent future cash requirements. The Company evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral, if any, is based on management’s credit evaluation of the customer. Unfunded commitments under commercial lines of credit, revolving credit lines, and overdraft protection agreements are commitments for possible future extensions of credit to existing customers. Many of these types of commitments do not contain a specified maturity date and may not be drawn upon to the total extent to which the Company is committed. See Note 6 for additional discussion related to the Company’s unfunded lending commitments. Commercial and standby letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. These guarantees are primarily issued to support public and private borrowing arrangements, including commercial paper issuance, bond financing, and similar transactions. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. When necessary they are collateralized, generally in the form of marketable securities and cash equivalents. Legal proceedings The nature of the business of the Company’s banking and other subsidiaries ordinarily results in a certain amount of claims, litigation, investigations, and legal and administrative cases and proceedings, which are considered incidental to the normal conduct of business. Some of these claims are against entities or assets of which the Company is a successor or acquired in business acquisitions. The Company has asserted defenses to these litigations and, with respect to such legal proceedings, intends to continue to defend itself vigorously, litigating or settling cases according to management’s judgment as to what is in the best interest of the Company and its shareholders. In July of 2016, a subsidiary of IBERIABANK received a subpoena from the Office of Inspector General of the U.S. Department of Housing and Urban Development (“HUD”) requesting information on certain previously originated loans insured by the Federal Housing Administration ("FHA") as well as other documents regarding the subsidiary's FHA-related policies and practices. The Company is cooperating with HUD and is in the process of responding to the subpoena. Given the current status of the matter, the Company is unable to determine if its submission of the information requested will result in an additional information request by HUD and/or further proceedings by HUD or other government agencies. The Company assesses its liabilities and contingencies in connection with outstanding legal proceedings utilizing the latest information available. Where it is probable that the Company will incur a loss and the amount of the loss can be reasonably estimated, the Company records a liability in its consolidated financial statements. These legal reserves may be increased or decreased to reflect any relevant developments on a quarterly basis. Where a loss is not probable or the amount of loss is not estimable, the Company does not accrue legal reserves. While the outcome of legal proceedings is inherently uncertain, based on information currently available, advice of counsel, and available insurance coverage, the Company’s management believes that it has established appropriate legal reserves. Any liabilities arising from pending legal proceedings are not expected to have a material adverse effect on the Company’s consolidated financial position, consolidated results of operations, or consolidated cash flows. However, it is possible that the ultimate resolution of these matters, if unfavorable, may be material to the Company’s consolidated financial position, consolidated results of operations, or consolidated cash flows. As of the date of this filing, the Company believes the amount of losses associated with legal proceedings that it is reasonably possible to incur above amounts already accrued is not material. (cid:20)(cid:22)(cid:21) NOTE 20 – FAIR VALUE MEASUREMENTS Recurring fair value measurements The Company has segregated all financial assets and liabilities that are measured at fair value on a recurring basis into the most appropriate level within the fair value hierarchy based on the inputs used to estimate the fair value at the measurement date in the tables below. See Note 1, Summary of Significant Accounting Policies, for a description of how fair value measurements are determined. (Dollars in thousands) Assets Securities available for sale Mortgage loans held for sale Derivative instruments Total Liabilities Derivative instruments Total Assets Securities available for sale Mortgage loans held for sale Derivative instruments Total Liabilities Derivative instruments Total Level 1 Level 2 Level 3 Total December 31, 2016 — $ 3,446,097 $ — $ 3,446,097 — — — $ — $ — $ 157,041 38,886 3,642,024 30,209 30,209 $ $ $ — — — $ — $ — $ 157,041 38,886 3,642,024 30,209 30,209 Level 1 Level 2 Level 3 Total December 31, 2015 — $ 2,800,286 $ — $ 2,800,286 — — — $ — $ — $ 166,247 30,486 2,997,019 25,002 25,002 $ $ $ — — — $ — $ — $ 166,247 30,486 2,997,019 25,002 25,002 $ $ $ $ $ $ $ $ During 2016 and 2015, there were no transfers between the Level 1 and Level 2 fair value categories. Gains and losses (realized and unrealized) included in earnings (or accumulated other comprehensive income) during 2016 related to assets and liabilities measured at fair value on a recurring basis are reported in non-interest income or other comprehensive income as follows: (Dollars in thousands) Total gains (losses) included in earnings Change in unrealized gains (losses) relating to assets still held at December 31, 2016 Non-interest income Other comprehensive income (loss), net of tax $ 5,567 $ — — (24,450) (cid:20)(cid:22)(cid:22) Non-recurring fair value measurements The Company has segregated all assets and liabilities that are measured at fair value on a non-recurring basis into the most appropriate level within the fair value hierarchy based on the inputs used to determine the fair value at the measurement date in the tables below. (Dollars in thousands) Assets Loans OREO, net Total (Dollars in thousands) Assets Loans OREO, net Total Level 1 Level 2 Level 3 Total December 31, 2016 $ $ $ $ — $ — — $ — $ 93,485 — 185 — $ 93,670 Level 1 Level 2 Level 3 December 31, 2015 — $ — — $ — $ — — $ 31,669 1,662 33,331 $ $ $ $ 93,485 185 93,670 Total 31,669 1,662 33,331 The tables above exclude the initial measurement of assets and liabilities that were acquired as part of the acquisitions completed in 2015. These assets and liabilities were recorded at their fair value upon acquisition in accordance with U.S. GAAP and were not re-measured during the periods presented unless specifically required by U.S. GAAP. Acquisition date fair values represent either Level 2 fair value measurements (investment securities, property, equipment, and debt) or Level 3 fair value measurements (loans, OREO, deposits, and core deposit intangible assets). In accordance with the provisions of ASC Topic 310, the Company records certain loans considered impaired at their estimated fair value. A loan is considered impaired if it is probable the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement. Fair value is measured at the estimated fair value of the collateral for collateral- dependent loans. Impaired loans with an unpaid principal balance of $125.5 million and $40.2 million were recorded at their fair value at December 31, 2016 and December 31, 2015, respectively. These loans are net of reserves and charge-offs of $32.0 million and $8.5 million included in the Company's allowance for credit losses at December 31, 2016 and December 31, 2015, respectively. The Company did not record any liabilities at fair value for which measurement of the fair value was made on a non-recurring basis during the years ended December 31, 2016, 2015 and 2014. Fair value option The Company has elected the fair value option for certain originated residential mortgage loans held for sale, which allows for a more effective offset of the changes in fair values of the loans and the derivative instruments used to hedge them without the burden of complying with the requirements for hedge accounting. The Company has $12.7 million of mortgage loans held for investment for which the fair value option was elected upon origination and continue to be accounted for at fair value. The following table summarizes the difference between the aggregate fair value and the aggregate unpaid principal balance for mortgage loans held for sale measured at fair value: (Dollars in thousands) Mortgage loans held for sale, at fair value December 31, 2016 December 31, 2015 Aggregate Fair Value $ 157,041 Aggregate Unpaid Principal $ 153,801 Aggregate Fair Value Less Unpaid Principal $ 3,240 Aggregate Fair Value $ 166,247 Aggregate Unpaid Principal $ 161,083 Aggregate Fair Value Less Unpaid Principal $ 5,164 Interest income on mortgage loans held for sale is recognized based on contractual rates and is reflected in interest income on loans held for sale in the consolidated statements of comprehensive income. Net gains (losses) resulting from the change in fair value of these loans that were recorded in mortgage income in the consolidated statements of comprehensive income totaled $2.1 million and ($1.0 million) for the years ended December 31, 2016 and 2015, respectively. The changes in fair value are mostly offset by economic hedging activities, with an insignificant portion of these changes attributable to changes in instrument-specific credit risk. (cid:20)(cid:22)(cid:23) NOTE 21 – FAIR VALUE OF FINANCIAL INSTRUMENTS The estimated fair value of a financial instrument is the current amount that would be exchanged between willing parties, other than in a forced liquidation. Fair value is best determined based upon quoted market prices. However, in many instances, there are no quoted market prices for the Company’s various financial instruments. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the instrument. ASC Topic 825, Financial Instruments, excludes certain financial instruments and all non-financial instruments from its disclosure requirements. Consequently, the aggregate fair value amounts presented may not necessarily represent the underlying fair value of the Company. The carrying amount and estimated fair values, as well as the level within the fair value hierarchy, of the Company’s financial instruments are included in the tables below. See Note 1, Summary of Significant Accounting Policies, for a description of how fair value measurements are determined. (Dollars in thousands) Financial Assets December 31, 2016 Carrying Amount Fair Value Level 1 Level 2 Level 3 Cash and cash equivalents $ 1,362,126 $ 1,362,126 $ 1,362,126 $ — $ 3,535,313 3,536,029 — 3,536,029 — — Investment securities Loans and loans held for sale, net of unearned income and allowance for loan losses FDIC loss share receivables Derivative instruments Financial Liabilities Deposits Short-term borrowings Long-term debt Derivative instruments (Dollars in thousands) Financial Assets 15,077,293 15,066,055 — 38,886 — 38,886 — — — 157,041 14,909,014 — 38,886 — — $ 17,408,283 $ 16,762,475 $ — $ — $ 16,762,475 509,136 628,953 30,209 509,136 617,656 30,209 334,136 175,000 — — — — 617,656 30,209 — Carrying Amount Fair Value Level 1 Level 2 Level 3 December 31, 2015 Cash and cash equivalents $ 510,267 $ 510,267 $ 510,267 $ — $ Investment securities 2,899,214 2,901,247 — 2,901,247 — — Loans and loans held for sale, net of unearned income and allowance for loan losses FDIC loss share receivables Derivative instruments 14,355,297 14,674,749 39,878 30,486 9,163 30,486 — — — 166,247 14,508,502 — 30,486 9,163 — Financial Liabilities Deposits Short-term borrowings Long-term debt Derivative instruments $ 16,178,748 $ 15,696,245 $ — $ — $ 15,696,245 326,617 340,447 25,002 326,617 309,847 25,002 216,617 110,000 — — — — 309,847 25,002 — The fair value estimates presented herein are based upon pertinent information available to management as of December 31, 2016 and 2015. Although management is not aware of any factors that would significantly affect the estimated fair value amounts, such amounts have not been comprehensively revalued for purposes of these financial statements since that date and, therefore, current estimates of fair value may differ significantly from the amounts presented herein. (cid:20)(cid:22)(cid:24) NOTE 22 – RELATED PARTY TRANSACTIONS In the ordinary course of business, the Company may execute transactions with various related parties. These transactions are consummated at terms equivalent to the prevailing market rates and terms at the time. Examples of such transactions may include lending or deposit arrangements, transfers of financial assets, services for administrative support, and other miscellaneous items. The Company has granted loans to executive officers and directors and their affiliates. These loans, including the related principal additions, principal payments, and unfunded commitments are not material to the consolidated financial statements at December 31, 2016 and 2015. None of the related party loans were classified as non-accrual, past due, troubled debt restructurings, or potential problem loans at December 31, 2016 and 2015, with the exception of the loan discussed below. IBERIABANK and several other financial institutions have extended credit (the “Credit Facility”) under a multi-bank syndicated credit facility to Stone Energy Corporation (the “Borrower"). One of the Company’s directors, David H. Welch, is the Chairman, President and Chief Executive Officer of the Borrower. IBERIABANK holds approximately 6 percent of the total commitments from twelve banks under the Credit Facility. On December 14, 2016, the Borrower filed for Chapter 11 Bankruptcy with the U.S. Bankruptcy Court in the Southern District of Texas. At the time of the filing, $341.5 million was outstanding under the Credit Facility. Of this amount, approximately $20.3 million was outstanding and due to IBERIABANK. At December 31, 2016 and as of the date of this Report, the outstanding amount due IBERIABANK under the Credit Facility remained on non-accrual status. On February 15, 2017, Borrower’s Second Amended Joint Prepackaged Plan of Reorganization (the “Plan”) was approved by the U.S. Bankruptcy Court. Pursuant to the Plan, banks under the Credit Facility are to be allowed a claim in the aggregate principal amount of $341.5 million, which was the principal amount outstanding under the Credit Facility at the time of the bankruptcy filing. The Plan further provides that banks under the Credit Facility are to receive, on account of their prepetition claims, (i) their respective pro rata share of commitments and obligations owing with respect to outstanding loans under a new 4-year Reserve Based Lending Facility (the “Exit Facility”), and (ii) their respective pro rata share of prepetition cash as a partial repayment of such outstanding loans subject to re-borrowing to the extent permitted and pursuant to the terms of the Exit Facility held by such banks. As proposed under the Plan, the Exit Facility will differ from the Credit Facility with respect to the size of the facility and in certain other areas. These differences include, but are not limited to (i) a reduction in the facility size to $200 million, (ii) a reduction in the borrowing base from $360 million to $200 million, and (iii) both the facility size and borrowing base being subject to further, ratable, reduction in the event of certain other occurrences. Definitive agreements with respect to the Exit Facility have yet to be finalized and so we are unable to provide further information regarding the Exit Facility at this time. As confirmed, the Plan proposes a full recovery to the banks under the Credit Facility of their prepetition claims, including IBERIABANK’s prepetition claim of approximately $20.3 million. Deposits from related parties held by the Company were not material at December 31, 2016 and 2015. NOTE 23 – BUSINESS SEGMENTS Each of the Company’s reportable operating segments serves the specific needs of the Company’s customers based on the products and services it offers. The reportable segments are based upon those revenue-producing components for which separate financial information is produced internally and primarily reflect the manner in which resources are allocated and performance is assessed. Further, the reportable operating segments are also determined based on the quantitative thresholds prescribed within ASC Topic 280, Segment Reporting, and consideration of the usefulness of the information to the users of the consolidated financial statements. The Company reports the results of its operations through three reportable segments: IBERIABANK, IMC, and LTC. The IBERIABANK segment represents the Company’s commercial and retail banking functions, including its lending, investment, and deposit activities. IBERIABANK also includes the Company’s wealth management, capital markets, and other corporate functions. The IMC segment represents the Company’s origination, funding, and subsequent sale of one-to-four family residential mortgage loans. The LTC segment represents the Company’s title insurance and loan closing services. Certain expenses not directly attributable to a specific reportable segment are allocated to segments based on pre-determined methods that reflect utilization. Also within IBERIABANK are certain reconciling items that translate reportable segment results into consolidated results. The following tables present certain information regarding our operations by reportable segment, including a reconciliation of segment results to reported consolidated results for the periods presented. Reconciling items between segment results and reported results include: (cid:20)(cid:22)(cid:25) • Elimination of interest income and interest expense representing interest earned by IBERIABANK on interest-bearing checking accounts held by related companies, as well as the elimination of the related deposit balances at the IBERIABANK segment; • Elimination of investment in subsidiary balances on certain operating segments included in total and average segment assets; and • Elimination of intercompany due to and due from balances on certain operating segments that are included in total and average segment assets. (Dollars in thousands) Interest and dividend income Interest expense Net interest income Provision for loan losses Mortgage income Title revenue Other non-interest income Allocated expenses Non-interest expense Income before income tax expense Income tax expense Net income Total loans and loans held for sale, net of unearned income Total assets Total deposits Average assets (Dollars in thousands) Interest and dividend income Interest expense Net interest income Provision for loan losses Mortgage income Title revenue Other non-interest income Allocated expenses Non-interest expense Income before income tax expense Income tax expense Net income Total loans and loans held for sale, net of unearned income Total assets Total deposits Average assets Year Ended December 31, 2016 IMC LTC Consolidated 9,261 $ 3,633 5,628 88 83,448 — 4 10,686 65,133 13,173 5,023 8,150 217,652 315,057 5,541 335,913 $ $ 2 — 2 — — 22,213 — 3,286 17,433 1,496 605 891 $ 716,939 67,701 649,238 44,424 83,853 22,213 127,755 — 566,665 271,970 85,193 $ 186,777 — $ 15,222,012 24,866 — 26,060 21,659,190 17,408,283 20,321,234 Year Ended December 31, 2015 IMC LTC Consolidated 7,062 $ 2,878 4,184 — 79,696 — (2) 12,036 57,784 14,058 5,581 8,477 188,012 256,888 4,917 230,819 $ $ 3 — 3 — — 22,837 (7) 4,217 17,363 1,253 507 746 $ 646,858 59,100 587,758 30,908 80,662 22,837 116,894 — 570,305 206,938 64,094 $ 142,844 — $ 14,493,675 27,095 — 25,671 19,504,068 16,178,748 18,402,706 IBERIABANK 707,676 $ $ 64,068 643,608 44,336 405 — 127,751 (13,972) 484,099 257,301 79,565 $ $ $ 177,736 $ 15,004,360 21,319,267 17,402,742 19,959,261 IBERIABANK 639,793 $ $ 56,222 583,571 30,908 966 — 116,903 (16,253) 495,158 191,627 58,006 $ $ $ 133,621 $ 14,305,663 19,220,085 16,173,831 18,146,216 (cid:20)(cid:22)(cid:26) (Dollars in thousands) Interest and dividend income Interest expense Net interest income Provision for loan losses Mortgage income Title revenue Other non-interest income Allocated expenses Non-interest expense Income before income tax expense Income tax expense Net income Total loans and loans held for sale, net of unearned income Total assets Total deposits Average assets IBERIABANK 498,820 $ $ 42,983 455,837 18,966 71 — 101,401 (11,602) 412,165 137,780 34,352 $ $ $ 103,428 $ 11,415,973 15,537,731 12,515,329 14,430,768 Year Ended December 31, 2014 IMC LTC Consolidated 5,992 $ 1,721 4,271 94 51,726 — (61) 8,203 44,761 2,878 1,148 1,730 165,143 194,156 5,196 176,003 $ $ 3 — 3 — — 20,492 (1) 3,399 16,688 407 183 224 $ 504,815 44,704 460,111 19,060 51,797 20,492 101,339 — 473,614 141,065 35,683 $ 105,382 — $ 11,581,116 26,017 — 25,223 15,757,904 12,520,525 14,631,994 (cid:20)(cid:22)(cid:27) NOTE 24 – CONDENSED PARENT COMPANY ONLY FINANCIAL STATEMENTS Condensed financial statements of the Parent are shown below. The Parent has no significant operating activities. Condensed Balance Sheets (Dollars in thousands) Assets Cash in bank Investments in subsidiaries Other assets Liabilities and Shareholders’ Equity Liabilities Shareholders’ equity December 31 2016 2015 $ $ $ $ 436,792 $ 154,298 2,635,682 40,423 3,112,897 173,203 2,939,694 3,112,897 $ $ $ 2,449,325 54,454 2,658,077 159,242 2,498,835 2,658,077 (Dollars in thousands) Operating income Condensed Statements of Income Year Ended December 31 2016 2015 2014 Reimbursement of management expenses $ 65,104 $ Other income Total operating income Operating expenses Interest expense Salaries and employee benefits expense Other expenses Total operating expenses 829 65,933 3,948 45,623 19,566 69,137 Income (loss) before income tax benefit and increase in equity in undistributed earnings of subsidiaries Income tax expense (benefit) Income (loss) before equity in undistributed earnings of subsidiaries Equity in undistributed earnings of subsidiaries Net Income Preferred stock dividends Net Income Available to Common Shareholders (3,204) 530 (3,734) 190,511 186,777 (7,977) 178,800 $ $ 59,255 (329) 58,926 3,393 41,689 17,492 62,574 (3,648) 800 (4,448) 147,292 142,844 — 142,844 $ 46,433 437 46,870 3,224 31,981 14,576 49,781 (2,911) (518) (2,393) 107,775 105,382 — 105,382 $ (cid:20)(cid:22)(cid:28) Condensed Statements of Cash Flows Year Ended December 31 2016 2015 2014 $ 186,777 $ 142,844 $ 105,382 98 (190,511) 14,523 — (1,122) 12,417 22,182 — — — (6,000) (749) (6,749) (56,793) (7,028) 6,899 (11,666) 279,242 55,285 1,122 267,061 282,494 154,298 436,792 $ 416 (147,292) 13,906 (110) (580) 82,105 91,289 (5,054) 12 (2) 5,000 — (44) (52,318) — 1,915 — — 76,812 580 26,989 118,234 36,064 154,298 $ 595 (107,775) 11,985 — (2,105) (27,274) (19,192) 4,783 — (36) (14,600) — (9,853) (43,070) — 7,966 — — — 2,105 (32,999) (62,044) 98,108 36,064 (Dollars in thousands) Cash Flow from Operating Activities Net income Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization Net income of subsidiaries Share-based compensation cost Gain on sale of assets Tax benefit associated with share-based payment arrangements Other operating activities, net Net Cash Provided by (Used in) Operating Activities Cash Flow from Investing Activities Cash paid in excess of cash received for acquisitions Proceeds from sale of premises and equipment Purchases of premises and equipment Return of capital from (Capital contributed to) subsidiary Other investing activities, net Net Cash (Used in) Investing Activities Cash Flow from Financing Activities Cash dividends paid on common stock Cash dividends paid on preferred stock Net share-based compensation stock transactions Payments to repurchase common stock Net proceeds from issuance of common stock Net proceeds from issuance of preferred stock Tax benefit associated with share-based payment arrangements Net Cash Provided by (Used In) Financing Activities Net Increase (Decrease) in Cash and Cash Equivalents Cash and Cash Equivalents at Beginning of Period Cash and Cash Equivalents at End of Period $ (cid:20)(cid:23)(cid:19) C ORPORATE INFORMATION 142 Directors and Executive Officers 143 Presidents 144 Advisory Board Members 146 Corporate Information 147 Stock Information 141 Directors and Executive Officers BOA RD OF DIR EC TORS William H. Fenstermaker Chairman of the Board, IBERIABANK Corporation; Chairman and Chief Executive Officer, C.H. Fenstermaker and Associates, Inc. E. Stewart Shea III Vice Chairman of the Board, IBERIABANK Corporation; Private Investor Elaine D. Abell Attorney-at-Law; President, Fountain Memorial Funeral Home and Cemetery Harry V. Barton, Jr. Owner of Barton Advisory Services, LLC and Harry V. Barton CPA, LLC; Registered Investment Advisor and Certified Public Accountant Ernest P. Breaux, Jr. Retired, Iberia Investment Group, L.L.C., Ernest P. Breaux Electrical, Inc., Equipment Tool Rental & Supply Daryl G. Byrd President and Chief Executive Officer, IBERIABANK Corporation and IBERIABANK John N. Casbon Executive Vice President, First American Title Insurance Company Angus R. Cooper II Chairman and Chief Executive Officer, Cooper/T. Smith Corporation John E. Koerner III Managing Member, Koerner Capital, L.L.C. Rick E. Maples Senior Advisor, Stifel Financial Corporation David H. Welch, Ph.D. President and Chief Executive Officer, Stone Energy Corporation E XE CUT IVE OFFICERS Daryl G. Byrd President and Chief Executive Officer Michael J. Brown Vice Chairman, Chief Operating Officer Jefferson G. Parker Vice Chairman, Managing Director of Brokerage, Trust, and Wealth Management Elizabeth A. Ardoin Senior Executive Vice President, Director of Communications, Corporate Real Estate, and Human Resources John R. Davis Senior Executive Vice President, Director of Financial Strategy Anthony J. Restel Senior Executive Vice President, Chief Financial Officer J. Randolph Bryan Executive Vice President, Chief Risk Officer Robert M. Kottler Executive Vice President, Director of Retail, Small Business, and Mortgage H. Spurgeon Mackie, Jr. Executive Vice President, Chief Credit Officer Robert B. Worley, Jr. Executive Vice President, Corporate Secretary and General Counsel 142 / ANNUAL REPORT 2016 STATE PRESIDENTS Samuel L. Erwin South Carolina Karl E. Hoefer Louisiana Gregory A. King Alabama Susan A. Martinez Florida Greg K. Smithers Arkansas and Tennessee Mark W. Tipton Georgia Pete M. Yuan Texas Presidents MAR KET PRE SID E NTS Jennifer Brancaccio Southeast Florida and Florida Keys Ken R. Brown Mobile, Alabama W. Bryan Chapman Energy Lending Philip C. Earhart Southwest Louisiana Samuel L. Erwin Greenville, South Carolina David C. Gordley Southwest Florida Rodney L. Hall Atlanta, Georgia Abel Harding North Florida Hunter G. Hill New Orleans, Louisiana Paul E. Hutcheson, Jr. Northeast Arkansas James Phillip Jett, Jr. Central Arkansas and Northwest Arkansas Carmen A. Jordan Houston, Texas Greg E. Kahmann Northeast Louisiana and Shreveport, Louisiana Gregory A. King Birmingham, Alabama Daryl S. Kirkham Dallas, Texas Ben Marmande Baton Rouge, Louisiana Rick Pullum Central Florida Nathan Raines Memphis, Tennessee Michael J. Roth Tampa Bay, Florida Eric E. Sanders Huntsville, Alabama N. Jerome Vascocu, Jr. Acadiana Region, Louisiana IBE RIA BA NK M ORTGAGE COM PANY William R. Edwards President and Chief Executive Officer LEND ERS TIT LE COMPAN Y Beau J. Fast President and Chief Executive Officer IBER IA CAPI TAL PART NERS Jefferson G. Parker Managing Director of Brokerage, Trust, and Wealth Management 142 / ANNUAL REPORT 2016 143 Advisory Board Members AL ABA MA Gregory A. King Alabama President Birmingham Gregory A. King Market President W. Charles Mayer III, Chairman George W. Bradford Philip A. Currie Hewes Hull J. Michael “Mike” Kemp, Sr. Sandra “Sandy” R. Killion Tricia Kirk Steven “Steve” K. Mote Michael A. Mouron Margaret Ann Pyburn Ed D. Robinson Mobile Ken R. Brown Market President Angus R. Cooper II, Chairman M. Warren Butler Scott Hall Cooper Robert T. Cunningham III Brooks C. DeLaney Michael L. Lapeyrouse Charles Hamilton “Ham” McGuire S. Wesley Pipes V Paige B. Plash Haymes S. Snedeker ARKANSAS Greg K. Smithers Arkansas President Central Arkansas James Phillip Jett, Jr. Market President Albert B. Braunfisch Byron M. Eiseman, Jr. Robert M. Head Daniel “Dan” W. Rahn, M.D. David E. Snowden, Jr. Mark V. Williamson Northeast Arkansas Paul E. Hutcheson, Jr. Market President Ralph P. Baltz N. Ray Campbell Jack N. Harrington Kaneaster Hodges, Jr. Jennifer H. James John M. Minor Louise Runyan Jeffrey Steven Rutledge Brad F. Snider FLORIDA Susan A. Martinez Florida President Central Florida Rick Pullum Market President Randy O. Burden, Chairman Dennis L. Buhring John O. Burden, Sr. James P. Caruso Steve Castino Tracy S. Forrest Leigh Ann Horton Jason W. Searl Douglas E. Starcher Craig T. Ustler Jacksonville Abel Harding Market President Thomas “Tom” E. Gibbs, Chairman Dane Grey William “Tripp” Guilliford III Gina Hill Marty McCoy Michael R. Munz Charles B. Tomm W. Hamilton Traylor Southwest Florida David C. Gordley Market President James “Jim” W. Moore, Chairman Jay A. Brett Kevin M. Burns R. Ernest “Ernie” Hendry, D.D.S. Lynn A. Kirby Wayne R. Kirkwood Stephen Machiz, M.D. Howard E. Palen F. John Reingardt Trudi K. Williams Tampa Bay Michael J. Roth Market President N. Troy Fowler Lewis S. Lee, Jr. Robert Rothman 144 / ANNUAL REPORT 2016 GE ORG IA Mark W. Tipton Georgia President Atlanta Rodney L. Hall Market President Mark B. Chandler Harald R. Hansen H. C. “Buddy” Henry, Jr. Richard “Rich” S. Novack Gregory “Greg” S. Pope Donal Ratigan Mark C. West Anthony L.“Lee” Wood, Jr. LOU ISI AN A Karl E. Hoefer Louisiana President Acadiana Region N. Jerome Vascocu, Jr. Market President Lafayette Elaine D. Abell, Chairperson Bennett Boyd Anderson, Jr. Charles Theodore “Ted” Beaullieu, Sr. Edward F. Breaux, M.D. James A. Caillier, Ed.D. Richard D. Chappuis, Jr. Todd G. Citron Thomas J. Cox Blake R. David James “Jim” M. Doyle Lester J. “Joey” Durel, Jr. Bryan Evans Charles T. Goodson W. J. “Tony” Gordon III Edward J. “E.J.” Krampe III Frank X. Neuner, Jr. Dwight “Bo” S. Ramsay Gail S. Romero Robert L. Wolfe, Jr. New Iberia Cecil C. Broussard, Co-Chairman E. Stewart Shea III, Co-Chairman Taylor Barras John L. Beyt III, D.D.S. Caroline C. Boudreaux Martha B. Brown Donelson “Don” T. Caffery, Jr. J. L. Chauvin George B. Cousin, M.D. David D. Daly J. David Duplantis Ernest Freyou Henry L. Friedman Cecil A. Hymel II Thomas “Tom” F. Kramer, M.D. Edward P. Landry Thomas R. Leblanc, Sr. Patrick O. Little John Jeffrey “Jeff” Simon Baton Rouge Ben Marmande Market President John H. Bateman Beau J. Box Teri G. Fontenot John Paul Funes Rhaoul Guillaume, Sr. John C. Hamilton G. Michael Hollingsworth Robert B. McCall III C. Brent McCoy Julio A. Melara Matthew L. Mullins Eugene H. Owen Stanley E. Peters, Jr., M.D. Michael A. Polito O. Miles Pollard, Jr. Matthew C. Saurage William S. Slaughter III J. Shawn Usher New Orleans Hunter G. Hill Market President John N. Casbon, Co-Chairman John E. Koerner III, Co-Chairman Coleman E. Adler II W. Thomas Allen John D’Arcy Becker Darryl D. Berger Scott M. Bohn Christian T. Brown John D. Charbonnet David T. Darragh Cindy Brennan Davis James P. Favrot Paul H. Flower Ruth “Ruthie” J. Frierson Howard C. Gaines John D. Georges William F. Grace, Jr. Gordon H. Kolb, Jr. John “Jack” P. Laborde William H. Langenstein III Patricia “Pat” S. LeBlanc E. Archie Manning III Frank M. Maselli Michael J. McNulty III William M. Metcalf, Jr. Jefferson G. Parker R. Hunter Pierson, Jr. Patrick J. Quinlan, M.D. J. C. Rathborne Anthony Recasner, Ph.D. James J. Reiss, Jr. William Henry Shane J. Benton Smallpage, Jr. Robert M. Steeg John “Jack” F. Stumpf, Jr. Stephen F. Stumpf Carroll W. Suggs Phyllis M. Taylor Ben B. Tiller Steven W. Usdin Northeast Louisiana Greg E. Kahmann Market President Malcolm E. Maddox, Chairman Mary C. Biggs Danny R. Graham W. Bruce Hanks Linda Singler Holyfield Tex R. Kilpatrick Charles Marsala, Jr. Joe E. Mitcham, Jr. Virgil Orr, Ph.D. Cindy J. Rogers Jerry W. Thomas Shreveport Greg E. Kahmann Market President Carlton Murray, Chairman Harry L. Avant Chris Campbell Michael O. Fleming, M.D. Frank Hood Goldsberry Raymond J. Lasseigne Kevin O’Brien Long C. Scott Massey Robert M. Mills Roland B. Ricou W. Harrison Smith Southwest Louisiana Philip C. Earhart Market President Kay C. Barnett Kendall “Ken” Broussard Keith F. DeSonier, M.D. Douglas “Doug” B. Gehrig Mary Shaddock Jones Jonathan “Jon” P. Manns Benjamin “Ben” E. Marriner William “Bill” B. Monk Oliver G. “Rick” Richard III Thomas “Tom” B. Shearman III 145 Marshall J. Simien, Jr. William Gray Stream Philip C. “Corey” Tarver T EN NE SS EE Greg K. Smithers Tennessee President Memphis Nathan Raines Market President J. Scott Fountain James W. Gibson II Sally Jones Heinz Joel Kimbrough R. Michael Kiser McNeal McDonnell Philip H. Trenary T EXAS Pete M. Yuan Texas President Dallas Daryl S. Kirkham Market President Daniel H. Chapman, Chairman Stephen S. Eppig Terry Kelley John W. Peavy III, Ph.D. Ana L. Rodriguez Houston Carmen A. Jordan Market President James “Jim” Lykes, Chairman Bethany Andell Margaret Barradas Dan Braun David L. Ducote Michael R. Dumas Joseph Edmonds, M.D. Stuart Goldman Russell “Rusty” Hardin Kennard McGuire H. Benjamin “Ben” Samuels Scott Sanders Fredrick “Rick” Smith David Y. Stutts Todd P. Sullivan Jerold “Jerry” Winograd Ken Yang Segev Zadok C ORPORATE INFORMATION CO RPORAT E HE ADQ UARTERS IBERIABANK Corporation 200 West Congress Street Lafayette, LA 70501 337.521.4012 CO RPORAT E MA ILIN G ADDR ES S P.O. Box 52747 Lafayette, LA 70505-2747 ANNUAL M EE T IN G IBERIABANK Corporation Annual Meeting of Shareholders will be held on Tuesday, May 9, 2017 at 4:00 p.m., local time, at the Windsor Court Hotel, located at 300 Gravier Street, New Orleans, Louisiana. DIVIDE ND R EI N VESTMEN T P LA N IBERIABANK Corporation shareholders may take advantage of our Dividend Reinvestment Plan. This program provides a convenient, economical way for shareholders to increase their holdings of the Company’s common stock. The shareholder pays no brokerage commissions or service charges while participating in the plan. A nominal fee is charged at the time that an individual terminates plan participation. This plan does not currently offer participants the ability to purchase additional shares with optional cash payments. INTERNET ADDRESSES www.iberiabank.com www.iberiabankmortgage.com www.iberiabankcreditcards.com www.lenderstitlegroup.com www.utla.com www.lenderstitle.com SHAREHOLDER ASSISTANCE Shareholders requesting a change of address, records, or information about the Dividend Reinvestment Plan or lost certificates should contact: Computershare P.O. Box 30170 College Station, TX 77842-3170 800.368.5948 www.computershare.com/investor in the IBERIABANK Corporation Dividend To enroll Reinvestment Plan, shareholders must complete an enrollment form. A summary of the plan and enrollment forms are available from Computershare at the address provided under Shareholder Assistance. FOR INF OR MAT IO N Copies of the Company’s Annual Report on Form 10-K, including financial statements and financial statement schedules, will be furnished to Shareholders without cost by sending a written request to Robert B. Worley, Jr., Secretary, IBERIABANK Corporation, 601 Poydras Street, 21st Floor, New Orleans, Louisiana 70130. This and other information regarding IBERIABANK Corporation and its subsidiaries may be accessed from our websites. In addition, shareholders may contact: Daryl G. Byrd, President and CEO 337.521.4003 John R. Davis, Senior Executive Vice President 337.521.4005 146 / ANNUAL REPORT 2016 STOCK INFORMATION As of January 31, 2017, IBERIABANK Corporation had approximately 2,710 shareholders of record. This total does not reflect shares held in nominee or “street name” accounts through various firms. The tables to the right are a summary of regular quarterly cash dividends and market prices for the Company’s common stock in the last two years. These market prices do not reflect retail markups, markdowns, or commissions. SECU RIT IE S L ISTIN G IBERIABANK Corporation’s common stock trades on the NASDAQ Global Select Market under the symbol “IBKC.” In local and national newspapers, the Company is listed under “IBERIABANK.” The Company’s Series B Preferred Stock and Series C Preferred Stock trade on the NASDAQ Global Select market under the symbols “IBKCP” and “IBKCO,” respectively. 2016 Dividends High Low Closing Declared Market Price First Quarter $54.60 $42.20 $51.27 $0.34 Second Quarter $63.73 $47.87 $59.73 $0.34 Third Quarter Fourth Quarter $69.93 $56.28 $67.12 $0.36 $91.10 $62.66 $83.75 $0.36 2015 Market Price Dividends High Low Closing Declared First Quarter Second Quarter $65.45 $54.34 $63.03 $0.34 $71.21 $61.13 $68.23 $0.34 Third Quarter $69.99 $56.63 $58.21 $0.34 Fourth Quarter $65.38 $52.27 $55.07 $0.34 DIVI DE ND R ESTR I CTIO NS The majority of the Company’s revenue is from dividends declared and paid to the Company by its subsidiary, IBERIABANK, which is subject to laws and regulations that limit the amount of dividends and other distributions it can pay. In addition, the Company and IBERIABANK are required to maintain capital at or above regulatory minimums and to remain “well-capitalized” under prompt corrective action regulations. The declaration and payment of dividends on the Company’s capital stock also are subject to contractual restrictions. While the Company has Series B Preferred Stock and Series C Preferred Stock outstanding, the Company may not declare and pay a dividend on its common stock unless dividends on all such outstanding preferred stock have been declared and paid in full or declared and a sum sufficient for the payment of those dividends has been set aside. See Long-Term Debt (Note 14) and Shareholder’s Equity, Capital Ratios and Other Regulatory Matters (Note 16) to the Consolidated Financial Statements and Management’s Discussion and Analysis of Financial Condition and Result of Operations – Funding Sources – Long-term Debt, for additional information. TOTA L RE TURN P ERFO RM ANCE TOTA L RETU RN PER FORMANCE STOCK PERFORMANCE GRAPH The graph and table shown here, which were prepared by SNL Financial LC (“SNL”), compares the cumulative total return on our Common Stock over a measurement period beginning December 31, 2011 with (i) the cumulative total return on the stocks included in the National Association of Securities Dealers, Inc. Automated Quotation (“NASDAQ”) Composite Index and (ii) the cumulative total return on the stocks included in the SNL greater than $10 Billion Bank Index. All of these cumulative returns are computed assuming the quarterly reinvestment of dividends paid during the applicable period. Source : SNL Financial, an offering of S&P Global Market Intelligence ©2017 147 200 West Congress Street Lafayette, Louisiana 70501 337.521.4012 www.iberiabank.com 

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