# Hancock Whitney Corp: Form 10-Q for the period ended Mar 31, 2024

- Company: [Hancock Whitney Corp](/companies/hwc.md) (CIK 750577)
- Form: 10-Q
- Filed: 2024-05-08
- Accepted by EDGAR: May 8, 2024, 21:24 ET
- Period: 2024-03-31
- Accession: 0000950170-24-055917
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/750577/000095017024055917/hwc-20240331.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/750577/000095017024055917/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2024-03-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Interest expense | 3 months, 2024-01-01 to 2024-03-31 | $155.5m | us-gaap:InterestExpense |
| Income tax | 3 months, 2024-01-01 to 2024-03-31 | $24.7m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2024-01-01 to 2024-03-31 | $108.6m | us-gaap:NetIncomeLossAvailableToCommonStockholdersBasic |
| Diluted EPS | 3 months, 2024-01-01 to 2024-03-31 | $1.24 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2024-01-01 to 2024-03-31 | $1.25 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2024-01-01 to 2024-03-31 | 86,726,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2024-01-01 to 2024-03-31 | $166.7m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 3 months, 2024-01-01 to 2024-03-31 | $2.3m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Dividends paid | 3 months, 2024-01-01 to 2024-03-31 | $26.5m | us-gaap:PaymentsOfDividendsCommonStock |
| Total assets | at 2024-03-31 | $35.25bn | us-gaap:Assets |
| Total liabilities | at 2024-03-31 | $31.39bn | us-gaap:Liabilities |
| Long-term debt | at 2024-03-31 | $236.4m | us-gaap:LongTermDebt |
| Short-term borrowings | at 2024-03-31 | $667.8m | us-gaap:ShortTermBorrowings |
| Shareholders' equity | at 2024-03-31 | $3.85bn | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 116,362 characters.

### FORWARD-LOOKING STATEMENTS

The objective of this discussion and analysis is to provide material information relevant to the assessment of the financial condition and results of operations of Hancock Whitney Corporation and its subsidiaries during the three months ended March 31, 2024 and selected comparable prior periods, including an evaluation of the amounts and certainty of cash flows from operations and outside sources. This discussion and analysis is intended to highlight and supplement financial and operating data and information presented elsewhere in this report, including the consolidated financial statements and related notes. The discussion contains forward-looking statements within the meaning and protections of section 27A of the Securities Act of 1933, as amended, and section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are subject to risks and uncertainties. Should one or more of these risks or uncertainties materialize, our actual results may differ from those expressed or implied by the forward-looking statements. Important factors that could cause actual results to differ materially from the forward-looking statements we make in this Quarterly Report on Form 10-Q and in other reports or documents that we file from time to time with the SEC include, but are not limited to, the following:

- general economic and business conditions in our local markets, including conditions affecting employment levels, interest rates, inflation, supply chains, the threat of recession, volatile equity capital markets, property and casualty insurance costs, collateral values, customer income, creditworthiness and confidence, spending and savings that may affect customer bankruptcies, defaults, charge-offs and deposit activity; and the impact of the foregoing on customer and client behavior (including the velocity and levels of deposit withdrawals and loan repayment);
- adverse developments in the banking industry highlighted by high-profile bank failures and the potential impact of such developments on customer confidence, liquidity and regulatory responses to these developments (including increases in the cost of our deposit insurance assessments), the Company's ability to effectively manage its liquidity risk and any growth plans, and the availability of capital and funding;
- balance sheet and revenue growth expectations may differ from actual results;
- the risk that our provision for credit losses may be inadequate or may be negatively affected by credit risk exposure;
- loan growth expectations;
- management’s predictions about charge-offs;
- fluctuations in commercial and residential real estate values, especially as they relate to the value of collateral supporting the Company's loans;
- the risk that our enterprise risk management framework may not identify or address risks adequately, which may result in unexpected losses;
- the impact of future business combinations upon our performance and financial condition including our ability to successfully integrate the businesses;
- deposit trends, including growth, pricing and betas;
- credit quality trends;
- changes in interest rates, including actions taken by the Federal Reserve Board;
- net interest margin trends, including the impact of changes in interest rates;
- changes in the cost and availability of funding due to changes in the deposit and credit markets;
- success of revenue-generating and cost reducing initiatives;
- future expense levels;
- changes in expense to revenue (efficiency ratio), including the risk that we may not realize and/or sustain benefits from efficiency and growth initiatives or that we may not be able to realize cost savings or revenue benefits in the time period expected, which could negatively affect our future profitability;
- the effectiveness of derivative financial instruments and hedging activities to manage risks;
- risks related to our reliance on third parties to provide key components of our business infrastructure, including the risks related to disruptions in services or financial difficulties of a third-party vendor;
- risks related to potential claims, damages, penalties, fines and reputational damage resulting from pending or future litigation, regulatory proceedings or enforcement actions;
- risks related to the ability of our operational framework to manage risks associated with our business such as credit risk and operation risk, including third-party vendors and other service providers, which could among other things, result in a breach of operating or security systems as a result of a cyber-attack or similar acts;
- the extensive use, reliability, disruption, and accuracy of the models and data upon which we rely;
- risks related to our implementation of new lines of business, new products and services, new technologies, and expansion of our existing business opportunities;
- projected tax rates;
- future profitability;
- purchase accounting impacts, such as accretion levels;
- our ability to identify and address potential cybersecurity risks, which may be exacerbated by recent developments in generative artificial intelligence, on our systems and/or third party vendors and service providers on which we rely, a failure of which could disrupt our business and result in the disclosure of and/or misuse or misappropriation of confidential or proprietary information, disruption or damage to our systems, increased costs, losses, or adverse effects to our reputation;
- our ability to receive dividends from Hancock Whitney Bank could affect our liquidity, including our ability to pay dividends or take other capital actions;
- the risk that we may be required to make substantial expenditures to keep pace with regulatory initiatives and the rapid technology changes in the financial services market;
- the impact on our financial results, reputation, and business if we are unable to comply with all applicable federal and state regulations or other supervisory actions or directives and any necessary capital initiatives;
- our ability to effectively compete with other traditional and non-traditional financial services companies, some of whom possess greater financial resources than we do or are subject to different regulatory standards;
- our ability to maintain adequate internal controls over financial reporting;
- the financial impact of future tax legislation;
- the effects of war or other conflicts, including Russia's military action in Ukraine and the Israel-Hamas war, acts of terrorism, climate change, natural disasters such as hurricanes, freezes, flooding, man-made disasters, such as oil spills in the Gulf of Mexico, health emergencies, epidemics or pandemics, or other catastrophic events that may affect general economic conditions, and/or increase costs, including, but not limited to, property and casualty and other insurance costs;
- risks related to environmental, social and governance ("ESG") legislation, rulemaking, activism and litigation, the scope and pace of which could alter our reputation and shareholder, associate, customer and third-party affiliations;
- changes in laws and regulations affecting our businesses, including governmental monetary and fiscal policies, legislation and regulations relating to bank products and services, increased regulatory scrutiny resulting from bank failures, as well as changes in the enforcement and interpretation of such laws and regulations by applicable governmental and self-regulatory agencies, which could require us to change certain business practices, increase compliance risk, reduce our revenue, impose additional costs on us, or otherwise negatively affect our businesses; and
- the risk that the regulatory environment may not be conducive to or may prohibit the consummation of future mergers and/or business combinations, may increase the length of time and amount of resources required to consummate such transactions, and the potential to reduce anticipated benefits from such mergers or combinations.

Also, any statement that does not describe historical or current facts is a forward-looking statement. These statements often include the words “believes,” “expects,” “anticipates,” “estimates,” “intends,” “plans,” “forecast,” “goals,” “targets,” “initiatives,” “focus,” “potentially,” “probably,” “projects,” “outlook,” or similar expressions or future conditional verbs such as “may,” “will,” “should,” “would,” and “could.” Forward-looking statements are based upon the current beliefs and expectations of management and on information currently available to management. Our statements speak as of the date hereof, and we do not assume any obligation to update these statements or to update the reasons why actual results could differ from those contained in such statements in light of new information or future events.

Forward-looking statements are subject to significant risks and uncertainties. Investors are cautioned against placing undue reliance on such statements. Actual results may differ materially from those set forth in the forward looking statements. Additional factors that could cause actual results to differ materially can be found in Part I, Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2023, or in other periodic reports that we file with the SEC.

You are cautioned not to place undue reliance on these forward-looking statements. We do not intend, and undertake no obligation, to update or revise any forward-looking statements, whether as a result of differences in actual results, changes in assumptions or changes in other factors affecting such statements, except as required by law.

### OVERVIEW

### Non-GAAP Financial Measures

Management’s Discussion and Analysis of Financial Condition and Results of Operations include non-GAAP measures used to describe our performance. These non-GAAP financial measures have inherent limitations as analytical tools and should not be considered on a standalone basis or as a substitute for analyses of financial condition and results as reported under GAAP. Non-GAAP financial measures are not standardized and therefore, it may not be possible to compare these measures with other companies that present measures having the same or similar names. These disclosures should not be considered an alternative to GAAP.

A reconciliation of those measures to GAAP measures are provided in the Consolidated Financial Results table later in this item. The following is a summary of these non-GAAP measures and an explanation as to why they are deemed useful.

Consistent with the provisions of subpart 229.1400 of the Securities and Exchange Commission’s Regulation S-K, “Disclosures by Bank and Savings and Loan Registrants,” we present net interest income, net interest margin and efficiency ratios on a fully taxable equivalent ("te") basis. The te basis adjusts for the tax-favored status of net interest income from certain loans and investments using a statutory federal tax rate of 21% to increase tax-exempt interest income to a taxable equivalent basis. We believe this measure to be the preferred industry measurement of net interest income, and that it enhances comparability of net interest income arising from taxable and tax-exempt sources.

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

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

### Current Economic Environment

The battle against inflation continued to be at the forefront of the economic landscape in the first quarter of 2024. Headline and core (excluding food and energy) inflation have receded considerably below the 40-year highs experienced in 2022, although at 3.5% and 3.8%, respectively, in March 2024, both remain well above the Federal Reserve's target rate of 2%. First quarter 2024 gross domestic product (GDP) was 1.6% on an annual basis, falling short of estimates and significantly lower than fourth quarter 2023, which was revised up to 3.4%. The labor market remains strong, with upward wage pressure persisting and a 3.8% unemployment rate in March 2024. In response to signs of meaningful decrease in inflation in early to mid-2023, the Federal Reserve has held the benchmark interest rate steady since July 2023, with market expectation of rate cuts beginning in mid-2024. However, amid continued strong economic indicators and sustained disparity between the core inflation rate and the Federal Reserve's target, the organization has signaled that it will hold rates at elevated levels for longer than originally anticipated. While the continued strong pace of consumer spending and the strength of the labor market may help prevent or reduce the severity of a potential recession, the likelihood that rates will remain higher for longer and greater uncertainty surrounding the Federal Reserve's future actions with respect to monetary policy may adversely affect capital markets and could result in below-trend economic growth. Economic trends may be further influenced by factors outside of inflation, such continued pressure on the commercial real estate sector, a potential shutdown of the U.S. government and ongoing geopolitical conflict.

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

Within our markets, loan growth remains tempered in response to heightened interest rates and increased insurance costs. Further, we continue to narrow our credit appetite and focus on full-service relationships. However, interest rates on new, renewed and repricing variable rate loans continue to result in higher yields on earning assets. Our core client deposits, defined as total deposits excluding public funds and brokered deposits, grew $365 million during the quarter as we continue to maintain our diversified deposit base with competitive pricing, as much of our client base remains interest rate sensitive.

### Economic Outlook

We utilize economic forecasts produced by Moody’s that provide various scenarios to assist in the development of our economic outlook. This outlook discussion utilizes the February 2024 Moody’s forecasts, the most current available at the time of our computation of the March 31, 2024 allowance for credit losses. Moody’s state level forecasts for March were delayed due to recalibration, but the general outlook was not materially different than the February forecast utilized. The forecasts are anchored on a baseline forecast scenario, which Moody’s defines as the “most likely outcome” of where the economy is headed based on current conditions. Several upside and downside scenarios are produced that are derived from the baseline scenario that display varying depictions of economic performance as compared to the baseline.

Management applied a weighting of 40% to the baseline and 60% to the mild recessionary S-2 scenario in the computation of the allowance for credit losses at March 31, 2024, consistent with the scenarios and respective weighting used at December 31, 2023. Our overall credit loss outlook has not changed significantly, and we continue to believe a mild recession is reasonably possible due to uncertainty in current economic conditions.

The baseline scenario continues to incorporate the belief that the Federal Reserve will accomplish its goal of bringing inflation to or below its target without precipitating a recession. Key assumptions within the February 2024 baseline forecast include the following: (1) the Federal Funds rate has reached its terminal value in the rate hiking cycle, with rate cuts of 25 basis points in May, June, July and December 2024, with subsequent 25-basis point cuts per quarter until reaching 3% in late 2026, and 2.5% by 2030; (2) the U.S government will avoid a shut down in the current year; (3) while the labor market remains strong, there are indications of softening, and the unemployment rate will rise from its current rate of 3.8% to 3.9% in 2024 and 4.1% in 2025, and then recede to 4.0% in 2026 and 2027; (4) GDP will display modest annual growth of 2.3% in 2024, 1.6% in 2025, and 2.0% in 2026; and (5) the 10-year U.S. Treasury yield will average 4.2% in the first quarter of 2024, and will approach its equilibrium level of 4% over the year and remain near this level through the end of the decade.

The S-2 scenario presents a downside alternative to the baseline. The S-2 scenario assumes an increased likelihood of a U.S. government shutdown, longer and farther-reaching disturbance from geopolitical conflict, and continued disruption in the financial services industry leading to further tightening of credit standards. Further, the scenario assumes the unemployment rate will increase considerably to 5.0% in 2024 and 5.8% in 2025 before improving to 4.1% in 2026 and 4.0% in 2027. As the economy weakens, the Federal Reserve commences rate cuts in the second quarter of 2024, deeper than those assumed in the baseline. As a result of these pressures, the U.S. falls into a mild recession beginning in the second quarter of 2024 that lasts for three quarters, with the stock market contracting 22% and a peak-to-trough decline in GDP of 1%.

The credit loss outlook for our portfolio as a whole has not changed materially since December 31, 2023. We continue to closely monitor our portfolio for customers that are sensitive to prolonged inflation, the elevated interest rate environment and/or other economic circumstances that may impact credit quality. We expect full year 2024 loan growth in the low single digit range, reflecting our disciplined loan pricing, the potential for economic slowdown and a focus on lending to resilient borrowers with whom we have a full service relationship.

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

### Highlights of the First Quarter 2024

We reported net income for the first quarter of 2024 of $108.6 million, or $1.24 per diluted common share, compared to $50.6 million, or $0.58 per diluted common share, in the fourth quarter of 2023 and $126.5 million, or $1.45 per diluted common share, in the first quarter of 2023. The first quarter of 2024 includes a charge of $3.8 million, or $0.04 per diluted share after-tax, supplemental disclosure item attributable to a revision of the FDIC special assessment recorded in the prior quarter. The fourth quarter of 2023 included a net charge of $75.4 million, or $0.68 per diluted share after-tax, of supplemental disclosure items that included an FDIC special assessment, a loss on restructuring of the available for sale securities portfolio and a gain on the sale of a parking facility. There were no supplemental disclosure items in the first quarter of 2023.

#### First quarter 2024 results compared to fourth quarter 2023:

- Net income of $108.6 million, or $1.24 per diluted share, up $58.0 million, or $0.66 per diluted share; relatively flat when adjusted to exclude supplemental disclosure items
- Adjusted pre-provision net revenue, a non-GAAP measure, totaled $152.9 million, down $4.6 million, or 3%
- Period-end loans of $24.0 billion increased $49 million, or less than 1%
- Criticized commercial loans and nonaccrual loans continued to normalize from historically low levels, annualized net charge-offs declined to 0.15% compared to 0.27%
- Period-end deposits of $29.8 billion increased $85.8 million, or less than 1%
- Net interest margin of 3.32%, up 5 basis points (bps) from 3.27%
- Common equity tier 1 ratio of 12.65%, up 32 bps, and tangible common equity ratio of 8.61%, up 24 bps
- Efficiency ratio of 56.44%, compared to 55.58%

The first quarter of 2024 was a solid start to our 125th anniversary year. The results reflect our efforts to position our balance sheet for continued capital growth and enhanced profitability. We were able to grow core client deposits, hold our loan level relatively flat while focusing on lending to more granular, full service relationships, and, through prudent pricing efforts, experience modest net interest margin expansion. Our allowance for credit losses is solid at 1.42% and our credit metrics remain at or below peer averages. As with many other institutions, credit metrics continue to normalize from the recent benign environment, but we have seen no broad signs of weakening in any portfolio or geographic segment. We remain mindful of potential headwinds, but we believe we are well positioned to navigate the current operating environment.

### Consolidated Financial Results

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

*(in thousands, except per share data)*

| Income Statement Data: | Three Months Ended March 31, 2024 | December 31, 2023 | September 30, 2023 | June 30, 2023 | March 31, 2023 |
| --- | ---: | ---: | ---: | ---: | ---: |
| Interest income | $421,684 | $426,794 | $415,827 | $405,273 | $372,603 |
| Interest income (te) (a) | 424,514 | 429,628 | 418,679 | 408,110 | 375,187 |
| Interest expense | 155,513 | 157,334 | 146,593 | 131,362 | 87,609 |
| Net interest income (te) | 269,001 | 272,294 | 272,086 | 276,748 | 287,578 |
| Provision for credit losses | 12,968 | 16,952 | 28,498 | 7,633 | 6,020 |
| Noninterest income | 87,851 | 38,951 | 85,974 | 83,225 | 80,330 |
| Noninterest expense | 207,722 | 229,151 | 204,675 | 202,138 | 200,884 |
| Income before income taxes | 133,332 | 62,308 | 122,035 | 147,365 | 158,420 |
| Income tax expense | 24,720 | 11,705 | 24,297 | 29,571 | 31,953 |
| Net income | $108,612 | $50,603 | $97,738 | $117,794 | $126,467 |
| Supplemental disclosure items-included above, pre-tax: |  |  |  |  |  |
| Included in noninterest income: |  |  |  |  |  |
| Gain on sale of parking facility | $— | $16,126 | $— | $— | $— |
| Loss on securities portfolio restructure | — | (65,380) | — | — | — |
| Included in noninterest expense: |  |  |  |  |  |
| FDIC special assessment | 3,800 | 26,123 | — | — | — |
| **Balance Sheet Data:** |  |  |  |  |  |
| Period end balance sheet data |  |  |  |  |  |
| Loans | $23,970,938 | $23,921,917 | $23,983,679 | $23,789,886 | $23,404,523 |
| Earning assets | 31,985,610 | 32,175,097 | 32,733,591 | 32,715,630 | 34,106,792 |
| Total assets | 35,247,119 | 35,578,573 | 36,298,301 | 36,210,148 | 37,547,083 |
| Noninterest-bearing deposits | 10,802,127 | 11,030,515 | 11,626,371 | 12,171,817 | 12,860,027 |
| Total deposits | 29,775,906 | 29,690,059 | 30,320,337 | 30,043,501 | 29,613,070 |
| Stockholders' equity | 3,853,436 | 3,803,661 | 3,501,003 | 3,554,476 | 3,531,232 |
| Average balance sheet data |  |  |  |  |  |
| Loans | $23,810,163 | $23,795,681 | $23,830,724 | $23,654,994 | $23,086,529 |
| Earning assets | 32,556,821 | 33,128,130 | 33,137,565 | 33,619,829 | 32,753,781 |
| Total assets | 35,101,869 | 35,538,300 | 35,626,927 | 36,205,396 | 35,159,050 |
| Noninterest-bearing deposits | 10,673,060 | 11,132,354 | 11,453,236 | 12,153,453 | 12,963,133 |
| Total deposits | 29,560,956 | 29,974,941 | 29,757,180 | 29,372,899 | 28,792,851 |
| Stockholders' equity | 3,818,840 | 3,560,978 | 3,572,487 | 3,567,260 | 3,412,813 |
| **Common Shares Data:** |  |  |  |  |  |
| Earnings per share - basic | $1.25 | $0.58 | $1.12 | $1.35 | $1.45 |
| Earnings per share - diluted | 1.24 | 0.58 | 1.12 | 1.35 | 1.45 |
| Cash dividends per common share | 0.30 | 0.30 | 0.30 | 0.30 | 0.30 |
| Book value per share (period-end) | 44.49 | 44.05 | 40.64 | 41.27 | 41.03 |
| Tangible book value per share (period-end) | 34.12 | 33.63 | 30.16 | 30.76 | 30.47 |
| Weighted average number of shares - diluted | 86,726 | 86,604 | 86,437 | 86,370 | 86,282 |
| Period-end number of shares | 86,622 | 86,345 | 86,148 | 86,123 | 86,066 |

42

*($ in thousands)*

| Performance and other data: | Three Months Ended March 31, 2024 | December 31, 2023 | September 30, 2023 | June 30, 2023 | March 31, 2023 |
| --- | ---: | ---: | ---: | ---: | ---: |
| Return on average assets | 1.24% | 0.56% | 1.09% | 1.30% | 1.46% |
| Return on average common equity | 11.44% | 5.64% | 10.85% | 13.24% | 15.03% |
| Return on average tangible common equity | 14.96% | 7.55% | 14.53% | 17.76% | 20.49% |
| Tangible common equity ratio (b) | 8.61% | 8.37% | 7.34% | 7.50% | 7.16% |
| Tangible common equity Tier 1 (CET1) ratio | 12.65% | 12.33% | 12.06% | 11.83% | 11.60% |
| Net interest margin (te) | 3.32% | 3.27% | 3.27% | 3.30% | 3.55% |
| Noninterest income as a percentage of total revenue (te) | 24.62% | 12.51% | 24.01% | 23.21% | 21.83% |
| Efficiency ratio (c) | 56.44% | 55.58% | 56.38% | 55.33% | 53.76% |
| Allowance for loan losses as a percentage of period-end loans | 1.31% | 1.29% | 1.28% | 1.32% | 1.32% |
| Allowance for credit losses as a percentage of period-end loans | 1.42% | 1.41% | 1.40% | 1.45% | 1.46% |
| Annualized net charge-offs to average loans | 0.15% | 0.27% | 0.64% | 0.06% | 0.10% |
| Nonaccrual loans as a percentage of loans | 0.34% | 0.25% | 0.25% | 0.33% | 0.23% |
| FTE headcount | 3,564 | 3,591 | 3,681 | 3,705 | 3,679 |
| **Reconciliation of pre-provision net revenue (te) and adjusted pre-provision net revenue(te) (non-GAAP measures) (d)** |  |  |  |  |  |
| Net income (GAAP) | $108,612 | $50,603 | $97,738 | $117,794 | $126,467 |
| Provision for credit losses | 12,968 | 16,952 | 28,498 | 7,633 | 6,020 |
| Income tax expense | 24,720 | 11,705 | 24,297 | 29,571 | 31,953 |
| Pre-provision net revenue | 146,300 | 79,260 | 150,533 | 154,998 | 164,440 |
| Taxable equivalent adjustment | 2,830 | 2,834 | 2,852 | 2,837 | 2,584 |
| Pre-provision net revenue (te) | 149,130 | 82,094 | 153,385 | 157,835 | 167,024 |
| Adjustments from supplemental disclosure items |  |  |  |  |  |
| Gain on sale of parking facility | — | (16,126) | — | — | — |
| Loss on securities portfolio restructure | — | 65,380 | — | — | — |
| FDIC special assessment | 3,800 | 26,123 | — | — | — |
| Adjusted pre-provision net revenue (te) | $152,930 | $157,471 | $153,385 | $157,835 | $167,024 |
| **Reconciliation of revenue (te), adjusted revenue (te) and efficiency ratio (non-GAAP measures) (d)** |  |  |  |  |  |
| Net interest income | $266,171 | $269,460 | $269,234 | $273,911 | $284,994 |
| Noninterest income | 87,851 | 38,951 | 85,974 | 83,225 | 80,330 |
| Total GAAP revenue | 354,022 | 308,411 | 355,208 | 357,136 | 365,324 |
| Taxable equivalent adjustment | 2,830 | 2,834 | 2,852 | 2,837 | 2,584 |
| Total revenue (te) | 356,852 | 311,245 | 358,060 | 359,973 | 367,908 |
| Adjustments from supplemental disclosure items |  |  |  |  |  |
| Gain on sale of parking facility | — | (16,126) | — | — | — |
| Loss on securities portfolio restructure | — | 65,380 | — | — | — |
| Adjusted revenue | 356,852 | 360,499 | 358,060 | 359,973 | 367,908 |
| GAAP noninterest expense | 207,722 | 229,151 | 204,675 | 202,138 | 200,884 |
| Amortization of intangibles | (2,526) | (2,672) | (2,813) | (2,957) | (3,114) |
| Adjustments from supplemental disclosure items |  |  |  |  |  |
| FDIC special assessment | (3,800) | (26,123) | — | — | — |
| Adjusted noninterest expense | $201,396 | $200,356 | $201,862 | $199,181 | $197,770 |
| Efficiency ratio (c) | 56.44% | 55.58% | 56.38% | 55.33% | 53.76% |

(a) For analytical purposes, management adjusts interest income and net interest income for tax-exempt items to a taxable equivalent basis using a federal income tax rate of 21%.

(b) The tangible common equity ratio is common stockholders’ equity less intangible assets divided by total assets less intangible assets.

(c) The efficiency ratio is noninterest expense to total net interest (te) and noninterest income, excluding amortization of purchased intangibles and supplemental disclosure items.

(d) Refer to the non-GAAP financial measures section of this analysis for a discussion of these measures.

### RESULTS OF OPERATIONS

### Net Interest Income

Net interest income (te) for the first quarter of 2024 was $269.0 million, down $3.3 million, or 1%, compared to the fourth quarter of 2023, and $18.6 million, or 6%, compared to the first quarter of 2023.

The $3.3 million decrease in net interest income (te) compared to the fourth quarter of 2023 is largely attributable to one fewer accrual day, or approximately $2.0 million. Interest income (te) was down $5.1 million, largely due to a $3.6 million impact of one fewer accrual day, $3.3 million attributable to a decrease in the average balance of and lower yield on short-term investments, and an increase of $0.8 million in net nonaccrual interest reversals, partially offset by higher yields on loans. Interest expense was down $1.8 million, largely due to one fewer accrual day, or approximately $1.6 million, as the impact from growth in average public fund and retail interest-bearing deposits and higher rates paid on deposits was largely offset by decreases in the average balances of brokered time deposits and short-term borrowings. The net interest margin for the first quarter of 2024 was 3.32%, up 5 bps from 3.27% in the fourth quarter of 2023. The increase in the net interest margin from the prior quarter was largely driven by a favorable shift in the mix of earning assets and a decrease in short-term borrowings (6 bps), an increase in loan yields (4 bps), and the impact of the bond portfolio restructure (3 bps), partially offset by a change in deposit mix and rates (8 bps).

The $18.6 million decrease in net interest income (te) compared to the first quarter of 2023 reflects the growth in and prevailing rates on interest-bearing liabilities outpacing those of earning assets. Interest income (te) increased $49.3 million, driven largely by higher yields on loans and loan growth. Interest expense increased $67.9 million, driven largely by the shift in the mix of deposits from noninterest-bearing and low interest-bearing transaction and savings deposits into higher cost products at competitive interest rates, partially offset by a decrease in the cost of borrowings largely the result of the decrease in average FHLB advances. The net interest margin was down 23 bps from the first quarter of 2023, driven largely by the cost of deposits. The rate on interest-bearing liabilities was up 119 bps compared to the first quarter of 2023, with the rate on interest-bearing deposits up 149 bps. The yield on average earning assets was up 61 bps, driven primarily by a 62 bp improvement in the loan yield.

We expect modest expansion in the net interest margin during 2024. Our expectation incorporates the assumption of three Federal Reserve interest rate cuts of 25 bps each in June, September and December of 2024, and of continued deposit remix, but at a slower pace.

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

*($ in millions)*

| Average earning assets | Three Months Ended March 31, 2024 Volume | Interest (d) | Rate | December 31, 2023 Volume | Interest (d) | Rate | March 31, 2023 Volume | Interest (d) | Rate |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Commercial & real estate loans (te) (a) | $18,431.0 | $295.7 | 6.45% | $18,548.9 | $297.6 | 6.37% | $18,322.2 | $259.1 | 5.73% |
| Residential mortgage loans | 3,963.0 | 36.9 | 3.72% | 3,803.7 | 35.2 | 3.70% | 3,214.4 | 28.1 | 3.49% |
| Consumer loans | 1,416.2 | 31.3 | 8.88% | 1,443.1 | 31.9 | 8.79% | 1,549.9 | 29.2 | 7.63% |
| Loan fees & late charges | — | 1.0 | 0.00% | — | 1.4 | 0.00% | — | (0.4) | 0.00% |
| Total loans (te) (b) | 23,810.2 | 364.9 | 6.16% | 23,795.7 | 366.1 | 6.11% | 23,086.5 | 316.0 | 5.54% |
| Loans held for sale | 15.4 | 0.3 | 7.90% | 12.3 | 0.3 | 8.52% | 22.9 | 0.3 | 5.21% |
| US Treasury and government agency securities | 515.6 | 3.5 | 2.69% | 654.1 | 5.2 | 3.18% | 541.3 | 3.4 | 2.49% |
| Mortgage-backed securities and collateralized mortgage obligations | 6,792.5 | 42.4 | 2.50% | 7,031.9 | 41.2 | 2.34% | 7,668.0 | 43.3 | 2.26% |
| Municipals (te) | 865.8 | 6.4 | 2.96% | 870.0 | 6.5 | 2.97% | 904.3 | 6.7 | 2.98% |
| Other securities | 23.5 | 0.2 | 3.51% | 23.4 | 0.2 | 3.51% | 23.5 | 0.2 | 3.50% |
| Total securities (te) (c) | 8,197.4 | 52.5 | 2.56% | 8,579.4 | 53.1 | 2.47% | 9,137.1 | 53.6 | 2.35% |
| Total short-term investments | 533.8 | 6.8 | 5.11% | 740.7 | 10.1 | 5.43% | 507.3 | 5.3 | 4.27% |
| Total earning assets (te) | $32,556.8 | $424.5 | 5.24% | $33,128.1 | $429.6 | 5.16% | $32,753.8 | $375.2 | 4.63% |
| Average interest-bearing liabilities |  |  |  |  |  |  |  |  |  |
| Interest-bearing transaction and savings deposits | $10,803.2 | $60.1 | 2.24% | $10,681.9 | $56.9 | 2.11% | $10,650.4 | $27.3 | 1.04% |
| Time deposits | 4,965.3 | 59.1 | 4.79% | 5,264.3 | 62.4 | 4.71% | 2,018.6 | 13.4 | 2.70% |
| Public funds | 3,119.4 | 28.3 | 3.65% | 2,896.3 | 26.8 | 3.68% | 3,160.7 | 23.7 | 3.04% |
| Total interest-bearing deposits | 18,887.9 | 147.5 | 3.14% | 18,842.5 | 146.1 | 3.08% | 15,829.7 | 64.4 | 1.65% |
| Repurchase agreements | 620.2 | 2.7 | 1.77% | 569.7 | 2.2 | 1.58% | 445.8 | 0.8 | 0.69% |
| Other short-term borrowings | 163.8 | 2.3 | 5.51% | 424.1 | 5.9 | 5.48% | 1,652.8 | 19.3 | 4.74% |
| Long-term debt | 236.3 | 3.0 | 5.19% | 236.3 | 3.1 | 5.19% | 242.1 | 3.1 | 5.11% |
| Total borrowings | 1,020.3 | 8.0 | 3.16% | 1,230.1 | 11.2 | 3.62% | 2,340.7 | 23.2 | 4.00% |
| Total interest-bearing liabilities | 19,908.2 | 155.5 | 3.14% | 20,072.6 | 157.3 | 3.11% | 18,170.4 | 87.6 | 1.95% |
| Net interest-free funding sources | 12,648.6 |  |  | 13,055.5 |  |  | 14,583.4 |  |  |
| Total cost of funds | $32,556.8 | $155.5 | 1.92% | $33,128.1 | $157.3 | 1.88% | $32,753.8 | $87.6 | 1.08% |
| Net interest spread (te) |  | $269.0 | 2.10% |  | $272.3 | 2.05% |  | $287.6 | 2.67% |
| Net interest margin | $32,556.8 | $269.0 | 3.32% | $33,128.1 | $272.3 | 3.27% | $32,753.8 | $287.6 | 3.55% |

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

(b) Includes nonaccrual loans.

(c) Average securities do not include unrealized holding gains/losses on available for sale securities.

(d) Included in interest income is net purchase accounting accretion of $0.3 million, $0.4 million, and $0.8 million for the three months ended March 31, 2024, December 31, 2023, and March 31, 2023, respectively.

### Provision for Credit Losses

During the first quarter of 2024, we recorded a provision for credit losses of $13.0 million, compared to $17.0 million in the fourth quarter of 2023 and $6.0 million in the first quarter of 2023. The provision in the first quarter of 2024 included net charge-offs of $9.0 million and a reserve build of $4.0 million, compared to net charge-offs of $16.1 million and a reserve build of $0.9 million in the fourth quarter of 2023 and net charge-offs of $5.7 million and a reserve build of $0.3 million in the first quarter of 2023. The provision recorded in the first quarter of 2024 and the fourth quarter of 2023 reflect a somewhat typical level in the current operating environment as compared to the first quarter 2023 level.

Net charge-offs in the first quarter of 2024 were $9.0 million, or 0.15% of average total loans on an annualized basis, compared to net charge-offs of $16.1 million, or 0.27%, in the fourth quarter of 2023 and net charge-offs of $5.7 million, or 0.10% in the first quarter of 2023. The first quarter of 2024 included net charge-offs of $5.3 million in the commercial portfolio and $3.9 million in the consumer portfolio, partially offset by net recoveries of $0.2 million in the residential mortgage portfolio. Net charge-offs in the commercial portfolio for the first quarter of 2024 includes an $8.8 million charge-off on a single commercial real estate - income producing credit and an $11.8 million recovery from a single legacy energy credit. The fourth quarter of 2023 included net charge-offs of $12.7 million in the commercial portfolio and $3.7 million in the consumer portfolio, partially offset by net recoveries of $0.4 million in the residential mortgage portfolio. The first quarter of 2023 included net charge-offs of $3.4 million in the commercial portfolio and $2.5 million in the consumer portfolio, partially offset by net recoveries of $0.2 million in the residential mortgage portfolio.

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

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

### Noninterest Income

Noninterest income totaled $87.9 million for the first quarter of 2024, up $48.9 million, or 126%, from the fourth quarter of 2023, and up $7.5 million, or 9%, from the first quarter of 2023. Noninterest income for the fourth quarter of 2023 included two supplemental disclosure items, a $16.1 million gain on the sale of a parking facility and a $65.4 million loss on the restructuring of the available for sale securities portfolio. Excluding the impact of the supplemental disclosure items, noninterest income for the first quarter of 2024 was relatively flat when compared to the fourth quarter of 2023, with increases in service charges on deposit accounts, trust fees, investment and annuity fees and income from secondary mortgage market operations offset by a decline in income from bank-owned life insurance and specialty lines of business. The increase in noninterest income from the first quarter of 2023 is primarily attributable to increases in service charges on deposit accounts, investment and annuity fees, income from bank-owned life insurance, net gains on sales of premises and equipment, and dividends on FHLB stock, partially offset by a decline in income from derivatives. A more detailed discussion of these and other noninterest income variances follows.

The components of noninterest income are presented in the following table for the indicated periods.

*($ in thousands)*

|  | Three Months Ended March 31, 2024 | December 31, 2023 | March 31, 2023 |
| --- | ---: | ---: | ---: |
| Service charges on deposit accounts | $22,239 | $21,643 | $20,622 |
| Trust fees | 17,077 | 16,845 | 16,734 |
| Bank card and ATM fees | 20,622 | 20,708 | 20,721 |
| Investment and annuity fees and insurance commissions | 11,844 | 11,086 | 8,867 |
| Secondary mortgage market operations | 2,891 | 2,083 | 2,168 |
| Income from bank-owned life insurance | 4,229 | 5,171 | 3,286 |
| Credit related fees | 3,131 | 3,308 | 2,765 |
| Income (loss) from customer and other derivatives | (2,802) | (1,165) | 583 |
| Securities transactions, net | — | (65,380) | — |
| Net gains on sales of premises, equipment and other assets | 2,779 | 17,078 | 407 |
| Other miscellaneous | 5,841 | 7,574 | 4,177 |
| Total noninterest income | $87,851 | $38,951 | $80,330 |
| **Supplemental Disclosure Items Included in Noninterest Income** |  |  |  |
| Securities transactions, net |  |  |  |
| Loss on securities portfolio restructure | $— | $(65,380) | $— |
| Net gains on sales of premises, equipment and other assets |  |  |  |
| Gain on sale of parking facility | — | 16,126 | — |

Service charges on deposit accounts are composed of overdraft fees, and nonsufficient funds fees on business accounts, business and corporate account analysis fees, overdraft protection fees and other customer transaction-related charges. Service charges on deposits totaled $22.2 million for the first quarter of 2024, up $0.6 million, or 3%, from the fourth quarter of 2023 and up $1.6 million, or 8%, from the first quarter of 2023. The linked-quarter increase is primarily attributable to net analysis fees, driven by deposit balance activity, pricing changes and strong sales activity. The increase from the same period in 2023 was also largely attributable to net analysis fees, and to consumer overdraft fees, driven by higher instances of overdrafts.

Trust fee income represents revenue generated from a full range of trust services, including asset management and custody services provided to individuals, businesses and institutions. Trust fees totaled $17.1 million for the first quarter of 2024, up $0.2 million, or 1%, from the fourth quarter of 2023, and up $0.3 million, or 2%, from the first quarter of 2023, primarily related to institutional trust fees for both periods.

Bank card and ATM fees include interchange and other income from credit and debit card transactions, fees earned from processing card transactions for merchants, and fees earned from ATM transactions. Bank card and ATM fees totaled $20.6 million for the first quarter of 2024, down $0.1 million, or less than 1%, from both the fourth quarter of 2023 and the first quarter of 2023, with modestly lower activity across most products.

Investment and annuity fees and insurance commissions, which include both fees earned from sales of annuity and insurance products, as well as managed account fees, totaled $11.8 million, up $0.8 million, or 7%, from the fourth quarter of 2023, and up $3.0 million, or 34% from the first quarter of 2023. The linked quarter and year over year increases reflect continued strong annuity sales performance and fixed-income trading commissions amid the elevated interest rate environment and favorable market conditions.

Income from secondary mortgage market operations is comprised of income produced from the origination and sales of residential mortgage loans in the secondary market. We offer a full range of mortgage products to our customers and typically sell longer-term fixed-rate loans while retaining the majority of adjustable-rate loans, as well as loans generated through programs to support customer relationships. Secondary mortgage market operations income will vary based on mortgage application volume, pull through rates, the percentage of loans ultimately sold in the secondary market and the timing of such sales. Income from secondary mortgage market operations was $2.9 million in the first quarter of 2024, up $0.8 million, or 39%, from the fourth quarter of 2023, and up $0.7 million, or 33% from the same quarter last year. The increases from both the fourth quarter of 2023 and the first quarter of 2023 were largely driven by an upward trend in the percentage of mortgage loans sold in the secondary market as opposed to those held in our portfolio.

Income from bank-owned life insurance (BOLI) is typically generated through insurance benefit proceeds as well as the growth of the cash surrender value of insurance contracts held. Income from BOLI was $4.2 million for the first quarter of 2024, down $0.9 million, or 18%, from the fourth quarter of 2023, and up $0.9 million, or 29% from the first quarter of 2023. The linked quarter decrease was primarily attributable to lower mortality gains, and the increase over the same quarter last year reflects an increase in income from both mortality gains and cash surrender value.

Credit-related fees include fees assessed on letters of credit and unused portions of loan commitments. Credit-related fees were $3.1 million for the first quarter of 2024, down $0.2 million, or 5% from the fourth quarter of 2023, and up $0.4 million, or 13% from the same quarter last year. The decrease in credit-related fees compared to the prior quarter was due to a decline in letter of credit fees. The increase compared to same quarter last year was in both unused commitment and letter of credit fees. Income from these products will vary based on letters of credit issued, credit line utilization and prevailing assessment rates.

Income or losses from customer and other derivatives is largely from our customer interest rate derivative program and totaled a loss of $2.8 million for the first quarter of 2024, compared to a loss of $1.2 million in the prior quarter, and income of $0.6 million in the first quarter of 2023. Derivative income can be volatile and is dependent upon the composition of the portfolio, volume and mix of sales and termination activity, and market value adjustments due to market interest rate movement. Customer derivative income for the first quarter of 2024 includes a loss of approximately $1.5 million related to assumption changes for certain valuation inputs that is not expected to recur. The remainder of the decline in customer derivatives is largely tied to the change in the interest rate environment present in each of the comparative periods, which affects demand for variable rate loans and related derivative products, valuation adjustments, and related collateral income/expense for the program as a whole. In addition, valuation changes to our Visa B derivative liability in the first quarter of 2024 contributed to increased losses of $0.8 million compared to the fourth quarter of 2023 and $1.0 million compared to the first quarter of 2024.

There were no gains or losses on sales of securities during the first quarters of 2024 and 2023, compared to a loss on sales of securities of $65.4 million in the fourth quarter of 2023. The net loss recorded in the fourth quarter of 2023 resulted from the sale of approximately $1.04 billion of available for sale securities and reflects a strategic decision to restructure the portfolio to enhance net interest margin through the deployment of sales proceeds into higher-yielding earning assets and repayment of short-term borrowings.

Net gains on sales of premises, equipment and other assets consists primarily of net revenue earned from sales of excess-bank owned facilities and equipment no longer in use, gains on sales of Small Business Administration and other non-residential mortgage loans, and leases and other assets associated with the equipment finance line of business. The level of net gains or losses in a given reporting period will vary based on a variety of circumstances. Net gains on sales of premises, equipment and other assets totaled $2.8 million for the first quarter of 2024, compared to $17.1 million for the fourth quarter of 2023 and $0.4 million for the first quarter of 2023. The linked-quarter decline was largely driven by the fourth quarter 2023 gain on the sale of a stand-alone parking facility of $16.1 million that was identified as a supplemental disclosure item, partially offset by a first quarter 2024 gain on sale of bank premises and equipment and other miscellaneous activity. The sale of the parking facility allowed us to take advantage of favorable market conditions while exiting a service that was not a part of our core business. The year over year increase is largely attributable to the first quarter 2024 gain on the sale of bank premises and equipment.

Other miscellaneous income is comprised of various items, including income from small business investment companies (SBIC), Federal Home Loan Bank (FHLB) stock dividends, and fees from loan syndication and other specialty lines of business. Other miscellaneous income totaled $5.8 million, down $1.7 million, or 23%, from the prior quarter, and up $1.7 million, or 40% from the first quarter of 2023. The linked quarter decrease was largely driven by a $0.6 million decline in syndication fees and a $0.5 million decline in SBIC income, which can vary from period to period. The increase from the same quarter last year was largely attributable to a $1.3 million increase in dividends on FHLB stock.

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

### Noninterest Expense

Noninterest expense for the first quarter of 2024 was $207.7 million, down $21.4 million, or 9% from the fourth quarter of 2023, and up $6.8 million, or 3%, from the first quarter of 2023. Included in noninterest expense are supplemental disclosure items of $3.8 million in the first quarter of 2024, attributable to a revision of the FDIC's special assessment, and $26.1 million in the fourth quarter of 2023, attributable to an FDIC special assessment. Excluding the impact of the supplemental disclosure items, noninterest expense for the first quarter of 2024 was up $0.9 million, or less than 1%, from the fourth quarter of 2023, with an increase in personnel expense largely offset by decreases in data processing, professional services, net other retirement expense and other miscellaneous expenses. Excluding the impact of the supplemental disclosure item, noninterest expense for the first quarter of 2024 was up $3.0 million, or 2%, compared to the first quarter of 2023, with the increase being driven primarily by personnel expense. A more detailed discussion of these and other noninterest expense variances follows.

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

*($ in thousands)*

|  | Three Months Ended March 31, 2024 | December 31, 2023 | March 31, 2023 |
| --- | ---: | ---: | ---: |
| Compensation expense | $96,569 | $93,881 | $92,403 |
| Employee benefits | 24,588 | 20,461 | 22,920 |
| Personnel expense | 121,157 | 114,342 | 115,323 |
| Net occupancy expense | 13,395 | 13,226 | 12,206 |
| Equipment expense | 4,228 | 4,297 | 4,736 |
| Data processing expense | 28,737 | 30,128 | 28,182 |
| Professional services expense | 9,036 | 10,766 | 9,131 |
| Amortization of intangible assets | 2,526 | 2,672 | 3,114 |
| Deposit insurance and regulatory fees | 8,931 | 31,745 | 5,920 |
| Other real estate and foreclosed asset (income)/loss, net | (196) | (471) | 155 |
| Corporate value and franchise taxes and other non-income taxes | 5,071 | 4,623 | 5,253 |
| Advertising | 2,907 | 3,101 | 3,256 |
| Telecommunications and postage | 2,413 | 2,400 | 3,071 |
| Entertainment and contributions | 3,178 | 2,686 | 2,631 |
| Tax credit investment amortization | 1,554 | 1,494 | 1,401 |
| Printing and supplies | 882 | 966 | 990 |
| Travel expense | 1,103 | 1,404 | 1,046 |
| Net other retirement expense | (4,824) | (3,265) | (3,655) |
| Other miscellaneous | 7,624 | 9,037 | 8,124 |
| Total noninterest expense | $207,722 | $229,151 | $200,884 |
| **Supplemental Disclosure Items Included in Noninterest Income** |  |  |  |
| Deposit insurance and regulatory fees |  |  |  |
| FDIC deposit insurance special assessment | $3,800 | $26,123 | $— |

Personnel expense consists of salaries, incentive compensation, long-term incentives, payroll taxes, and other employee benefits such as 401(k), pension, and insurance for medical, life and disability. Personnel expense totaled $121.2 million for the first quarter of 2024, up $6.8 million, or 6% , from the prior quarter, and up $5.8 million, or 5%, from the same quarter last year. The linked quarter increase in expense reflects seasonal increases in payroll tax and benefits, an increase in incentive expense and a decrease in expense deferrals related to loan originations, as lower origination volume reduced the amount of wages capitalized. The year over year change reflects annual increases across most salary and benefit categories and a decrease in expense deferrals, as lower origination volumes and a larger percentage of mortgage loans sold in the secondary market reduced the amount of wages capitalized.

Occupancy and equipment expenses are primarily composed of lease expenses, depreciation, maintenance and repairs, rent, taxes, and other equipment expenses. Occupancy and equipment expenses totaled $17.6 million for the first quarter of 2024, up $0.1 million or 1%, from the prior quarter, and up $0.7 million, or 4%, from the same quarter last year. The increase compared to the same quarter last year reflects higher property insurance costs and leased building expense, partially offset by lower equipment expense.

Data processing expense includes expenses related to third party technology processing and servicing costs, technology project costs and fees associated with bank card and ATM transactions, and may vary with transaction volume and timing of technology enhancement initiatives. Data processing expense was $28.7 million for the first quarter of 2024, down $1.4 million, or 9%, from the fourth quarter of 2023, and up $0.6 million, or 2%, from the first quarter of 2023. The decline compared to the prior quarter was largely due to lower debit card processing expense. The modest increase over the same quarter last year was due to various miscellaneous items.

Professional services expense for the first quarter of 2024 totaled $9.0 million, down $1.7 million, or 16%, from the fourth quarter of 2023, and down $0.1 million, or 1%, from the same quarter last year. The decrease from the prior quarter was driven by a decrease in consulting fees. Professional service expense may vary from period to period, generally related to consulting and legal needs.

Deposit insurance and regulatory fees for the first quarter of 2024 totaled $8.9 million, down $22.8 million, or 72%, from the fourth quarter of 2023, and up $3.0 million, or 51%, from the first quarter of 2023. Included in the first quarter of 2024 and the fourth quarter of 2023 are $3.8 million and $26.1 million, respectively, attributable to a special assessment by the FDIC to cover losses incurred under the systemic risk exception following the failure of two large regional banks. Excluding the expense associated with the special assessment, deposit insurance and regulatory fees for the first quarter of 2024 were down $0.5 million, or 2%, from the fourth quarter of 2023 and down $0.8 million, or 13%, from the first quarter of 2023. The linked-quarter and year over year decreases are primarily attributable to modest improvement in the risk-based assessment calculation.

The FDIC special assessment expense recorded in the fourth quarter of 2023 and the first quarter of 2024 is management's estimate of our portion of the cost attributable to the systemic risk exception based on the information available from the FDIC. However, the loss estimates resulting from the failures of Silicon Valley Bank and Signature Bank may be subject to further change pending the projected and actual outcome of loss share agreements, joint ventures, and outstanding litigation. The exact amount of losses incurred will not be determined until the FDIC terminates the receiverships; therefore, the exact exposure to the Company remains unknown.

Net gains on sales of other real estate and foreclosed assets outpaced expense by $0.2 million in the first quarter of 2024, compared to $0.5 million in the fourth quarter of 2023, and a net expense of $0.2 million for the first quarter of 2023. The level of net expense or income associated with maintaining the other real estate owned portfolio can vary depending on sales activity and/or valuation adjustments. Gains or losses on the sale of other real estate and foreclosed assets may occur periodically and are dependent on the number and type of assets for sale and current market conditions.

Corporate value, franchise and other non-income tax expense for the first quarter of 2024 totaled $5.1 million, up $0.4 million, or 10%, from the prior quarter, and down $0.2 million, or 3%, from the same quarter last year, largely attributable to bank share tax. The calculation of bank share tax is based on multiple variables, including average quarterly assets, earnings and stockholders’ equity to determine the taxable assessment value.

Business development-related expenses (including advertising, travel, entertainment and contributions) totaled $7.2 million for the fourth quarter of 2024, virtually unchanged from the fourth quarter of 2023, and up $0.3 million, or 4% for the first quarter of 2023. The increase from the first quarter of 2023 was largely attributable to entertainment and contributions. The timing and level of business development expense can vary based on business needs and promotional campaigns.

All other expenses, excluding amortization of intangibles, is comprised of a variety of other operational expenses and losses, tax credit investment amortization, and other retirement expense. All other expenses totaled $7.6 million for the first quarter of 2024, down $3.0 million, or 28%, from the fourth quarter of 2023, and down $2.3 million, or 23% from the first quarter of 2023. The decreases from the fourth quarter of 2023 and the first quarter of 2023 were driven in large part by a reduction of other retirement expense of $1.6 million and $1.2 million, respectively.

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

### Income Taxes

The effective income tax rate for the first quarter of 2024 was approximately 18.5% compared to 18.8% in the fourth quarter of 2023 and 20.2% in the first quarter of 2023. The first quarter of 2024 effective income tax rate is lower than the first quarter of 2023 due primarily to lower forecasted annual pre-tax earnings.

Many factors impact the effective income tax rate including, but not limited to, the level of pre-tax income and relative impact of net tax benefits related to tax credit investments, tax-exempt interest income, bank-owned life insurance, and nondeductible expenses. Additionally, discrete tax items recognized in any given period affect the comparability of the effective income tax rate between periods. Such items include share-based compensation, valuation allowance changes, uncertain tax position changes and tax law changes. Based on the current forecast, management expects the effective income tax rate for 2024 will be in the 20%-21% range, absent any changes in tax law.

Our effective tax rate has historically varied from the federal statutory rate primarily because of tax-exempt income and tax credits. Interest income on bonds issued by or loans to state and municipal governments and authorities, and earnings from the bank-owned life insurance program are the major components of tax-exempt income. The main source of tax credits has been investments in tax-advantaged securities and tax credit projects. These investments are made primarily in the markets we serve and are directed at tax credits issued under the Federal and State New Market Tax Credit (“NMTC”) programs, Low-Income Housing Tax Credit (“LIHTC”) programs, as well as pre-2018 Qualified Zone Academy Bonds (“QZAB”) and Qualified School Construction Bonds (“QSCB”). These investments generate tax credits, which reduce current and future taxes and are recognized when earned as a benefit in the provision for income taxes.

We have invested in NMTC projects through investments in our own Community Development Entities (“CDE”), as well as other unrelated CDEs. Federal tax credits from NMTC investments are recognized over a seven-year period, while recognition of the benefits from state tax credits varies from three to five years. We have also invested in affordable housing projects that generate federal LIHTC tax credits that are recognized over a ten-year period, beginning in the year the rental activity begins. The amortization of the LIHTC investment cost is recognized as a component of income tax expense in proportion to the tax credits recognized over the ten-year credit period.

Based on tax credit investments that have been made to date in 2024, we expect to realize benefits from federal and state tax credits over the next three years totaling $9.8 million, $8.2 million, and $8.0 million in 2025, 2026, and 2027, respectively. We intend to continue making investments in tax credit projects. However, our ability to access new credits will depend upon, among other factors, federal and state tax policies and the level of competition for such credits.

### LIQUIDITY AND CAPITAL RESOURCES

### Liquidity

Liquidity management ensures that funds are available to meet the cash flow requirements of our depositors and borrowers, while also meeting the operating, capital and strategic cash flow needs of the Company, the Bank and other subsidiaries. As part of the overall asset and liability management process, liquidity management strategies and measurements have been developed to manage and monitor liquidity risk. The following table summarizes available liquidity at March 31, 2024:

*($ in thousands)*

| Available Sources of Funding: Internal Sources: | March 31, 2024 Total Available | Amount Used | Net Availability |
| --- | ---: | ---: | ---: |
| Free securities | $3,286,735 | $— | $3,286,735 |
| External Sources: |  |  |  |
| Federal Home Loan Bank (a) | 6,855,722 | 533,088 | 6,322,634 |
| Federal Reserve Bank | 3,397,241 | — | 3,397,241 |
| Brokered deposits | 4,466,386 | 394,771 | 4,071,615 |
| Other | 1,259,000 | — | 1,259,000 |
| **Total Available Sources of Funding** | **$19,265,084** | **$927,859** | **$18,337,225** |
| Cash and other interest-bearing bank deposits |  |  | 853,300 |
| **Total Liquidity** |  |  | **$19,190,525** |

(a) Amount used includes letters of credit.

The failures of three major regional U.S. banks that experienced large-scale deposit runs in the first half of 2023 have brought the subject of bank liquidity into focus. Dampened depositor confidence over a financial institution's ability to protect deposit balances in excess of the federally insured limit is thought to pose a higher likelihood of a deposit run, and, in turn, the risk that the institution may have insufficient liquidity to meet the demand. At March 31, 2024, our available on and off-balance sheet liquidity of $19.2 billion is well in excess of our estimated uninsured, noncollateralized deposits of approximately $10.5 billion.

The asset portion of the balance sheet provides liquidity primarily through loan principal repayments, maturities and repayments of investment securities and occasional sales of various assets. Short-term investments such as federal funds sold, securities purchased under agreements to resell and interest-bearing deposits with the Federal Reserve Bank or with other commercial banks are additional sources of liquidity to meet cash flow requirements. Free securities represent unpledged securities that can be sold or used as collateral for borrowings, and include unpledged securities assigned to short-term dealer repurchase agreements or to the Federal Reserve Bank discount window. Total pledged securities were $4.2 billion at March 31,2024, compared to $4.7 billion at December 31, 2023 and $6.1 billion at March 31, 2023. Management has established an internal target for the ratio of free securities to total securities of 20% or greater. As shown in the table below, our ratio of free securities to total securities was 44.86% at March 31, 2024, compared to 38.80% December 31, 2023 and 28.45% at March 31, 2023. The free securities ratio at March 31, 2023 was impacted by pledging additional securities to the Federal Reserve Bank, done as a cautionary measure to increase borrowing capacity under its discount window as a result of the bank failures in the first quarter 2023. Both securities and FHLB letters of credit are pledged as collateral related to public funds and repurchase agreements.

| Liquidity Metrics | March 31, 2024 | December 31, 2023 | September 30 2023 | June 30, 2023 | March 31, 2023 |
| --- | ---: | ---: | ---: | ---: | ---: |
| Free securities / total securities | 44.86% | 38.80% | 46.12% | 41.23% | 28.45% |
| Core deposits / total deposits | 92.61% | 92.51% | 90.85% | 91.63% | 94.83% |
| Wholesale funds / core deposits | 4.71% | 7.21% | 10.24% | 11.00% | 15.43% |
| Liquid assets / total liabilities | 13.19% | 12.69% | 14.94% | 14.52% | 15.09% |
| Quarter-to-date average loans /quarter-to-date average deposits | 80.55% | 79.39% | 80.08% | 80.53% | 80.18% |

The liability portion of the balance sheet provides liquidity mainly through the ability to use cash sourced from customers’ interest-bearing and noninterest-bearing deposit accounts. At March 31, 2024, deposits totaled $29.8 billion, up $85.8 million compared to December 31, 2023.

Brokered time deposits at March 31, 2024 totaled $394.8 million, down $195.0 million from $589.8 million at December 31, 2023. These instruments bear interest plus fees of 5.35% per annum and will mature in May 2024. The use of brokered deposits as a funding source is subject to certain policies regarding the amount, term and interest rate.

Core deposits consist of total deposits excluding certificates of deposit of $250,000 or more and brokered deposits. Core deposits totaled $27.6 billion at March 31, 2024, up $109.6 million, or less than 1%, from December 31, 2023 and down $508.2 million, or 2%, from March 31, 2023. The increase in core deposits from December 31, 2023 is primarily attributable to growth in interest-bearing transaction accounts, money market accounts and CDs less than $250,000. The decline in core deposits from March 31, 2023 is largely due to a decline in noninterest-bearing deposits. The ratio of core deposits to total deposits was 92.61% at March 31, 2024, compared to 92.51% at December 31, 2023 and 94.83% at March 31, 2023.

Purchases of federal funds, securities sold under agreements to repurchase and other short-term borrowings from customers provide additional sources of liquidity to meet short-term funding requirements. Besides funding from customer sources, the Bank has a line of credit with the FHLB that is secured by blanket pledges of certain mortgage loans. At March 31, 2024, the Bank had no borrowings and approximately $6.3 billion available under this line. The unused borrowing capacity at the Federal Reserve’s discount window is approximately $3.4 billion. There were no outstanding borrowings with the Federal Reserve at any date during any period covered by this report.

Wholesale funds, which are comprised of short-term borrowings, long-term debt and brokered deposits were 4.71% of core deposits at March 31, 2024, compared to 7.21% at December 31, 2023 and 15.43% at March 31, 2023. At March 31, 2024, wholesale funds totaled $1.3 billion, a decrease of $682.0 million, or 34%, from December 31, 2023 and a decrease of $3.0 billion, or 70%, from March 31, 2023. The linked-quarter decrease was primarily due to the repayment of $700 million of FHLB advances and the maturity of $195 million of brokered time deposits, partially offset by a $212.9 million increase in customer repurchase agreements. The decrease from March 31, 2023 reflects the repayment of $3.1 billion of FHLB advances and a net reduction of $177.7 million in brokered deposits, partially offset by a $248.3 million increase in customer repurchase agreements. The Company has established an internal target for wholesale funds to be less than 25% of core deposits.

Other key measures used to monitor liquidity include the liquid asset ratio and the loan-to-deposit ratio. The liquid asset ratio (liquid assets, consisting of cash, short-term investments and free securities, divided by total liabilities) measures our ability to meet short-term obligations. Our liquid asset ratio was 13.19% at March 31, 2024, compared to 12.69% at December 31, 2023 and 15.09% at March 31, 2023. Management has established a minimum liquid asset ratio of 7.5% and an internal target of 12% or greater. The loan to deposit ratio (average loans outstanding for the reporting period divided by average deposits outstanding) measures the amount of funds the Company lends for each dollar of deposits on hand. Our average loan-to-deposit ratio for the first quarter of 2024 was 80.55%, compared to 79.39% for the fourth quarter of 2023 and 80.18% for the first quarter of 2023. Management has an established target range for the loan-to-deposit ratio of 87% to 89%, but will operate outside that range under certain circumstances.

Cash generated from operations is another important source of funds to meet liquidity needs. The Consolidated Statements of Cash Flows included in Part I, Item 1 of this document present operating cash flows and summarize all significant sources and uses of funds during the three months ended March 31, 2024 and 2023.

Dividends received from the Bank have been the primary source of funds available to the Parent for the payment of dividends to our stockholders and for servicing its debt. The liquidity management process takes into account the various regulatory provisions that can limit the amount of dividends the Bank can distribute to the Parent. The Parent targets cash and other liquid assets to provide liquidity in an amount sufficient to fund approximately six quarters of ongoing cash or liquid asset needs, consisting primarily of common stockholder dividends, debt service requirements, and any expected share repurchase or early extinguishment of debt. The Parent may operate below the target level on a temporary basis if a return to the target can be achieved in the near-term, generally not to exceed four quarters. The Parent had cash and liquid assets of $240.8 million at March 31, 2024.

### Capital Resources

Stockholders’ equity totaled $3.9 billion at March 31, 2024, up $49.8 million, or 1%, from December 31, 2023. The increase from December 31, 2023 is attributable to net income of $108.6 million, partially offset by other comprehensive loss of $32.4 million, net of tax, primarily the result of fair value adjustments on securities available for sale and cash flow hedges, and dividends of $26.5 million.

The tangible common equity (TCE) ratio was 8.61% at March 31, 2024, up 24 bps from 8.37% at December 31, 2023, driven primarily by tangible net earnings (+32 bps) and a decrease in tangible assets (+9 bps), partially offset by other comprehensive loss (-9 bps) and dividends (-8 bps).

The regulatory capital ratios of the Company and the Bank at March 31, 2024 remained well in excess of current regulatory minimum requirements, including capital conservation buffers, by at least $832 million. The Company and the Bank have been categorized as “well-capitalized” in the most recent notices received from our regulators. Refer to the Supervision and Regulation section in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 for further discussion of our capital requirements.

The following table shows the regulatory capital ratios for the Company and the Bank as calculated under current rules for the indicated periods. The capital ratios reflect the election to use the CECL five-year transition rule that allowed for the option to delay for two years the estimated impact of CECL on regulatory capital (0% in 2020 and 2021), followed by a three-year transition (25% in 2022, 50% in 2023, 75% in 2024, and 100% thereafter). The two-year delay included the full impact of January 1, 2020 cumulative effect impact plus an estimated impact of CECL calculated quarterly as 25% of the current ACL over the January 1, 2020 balance (modified transition amount). The modified transition amount was recalculated each quarter in 2020 and 2021, with the December 31, 2021 impact of $24.9 million plus day one impact of $44.1 million (net of tax) carrying through the remaining three years of the transition, as adjusted by the applicable transition percentage, equating to $17.2 million at March 31, 2024.

| Total capital (to risk weighted assets) | Well- Capitalized | March 31, 2024 | December 31, 2023 | September 30, 2023 | June 30, 2022 | March 31, 2022 |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Hancock Whitney Corporation | 10.00% | 14.34% | 13.93% | 13.63% | 13.44% | 13.21% |
| Hancock Whitney Bank | 10.00% | 13.39% | 13.04% | 12.82% | 12.70% | 12.54% |
| Tier 1 common equity capital (to risk weighted assets) |  |  |  |  |  |  |
| Hancock Whitney Corporation | 6.50% | 12.65% | 12.33% | 12.06% | 11.83% | 11.60% |
| Hancock Whitney Bank | 6.50% | 12.29% | 12.03% | 11.83% | 11.68% | 11.52% |
| Tier 1 capital (to risk weighted assets) |  |  |  |  |  |  |
| Hancock Whitney Corporation | 8.00% | 12.65% | 12.33% | 12.06% | 11.83% | 11.60% |
| Hancock Whitney Bank | 8.00% | 12.29% | 12.03% | 11.83% | 11.68% | 11.52% |
| Tier 1 leverage capital |  |  |  |  |  |  |
| Hancock Whitney Corporation | 5.00% | 10.49% | 10.10% | 10.01% | 9.64% | 9.63% |
| Hancock Whitney Bank | 5.00% | 10.19% | 9.86% | 9.82% | 9.52% | 9.57% |

We regularly perform stress analysis on our capital levels. One such scenario includes the hypothetical impact of including accumulated other comprehensive losses on market valuations of available for sale securities and cash flow hedges in regulatory capital and a further stress scenario that includes both those losses plus losses on the held to maturity investment portfolio in regulatory capital. We estimate that our regulatory capital ratios would remain in excess of the well-capitalized minimums under both of these stress scenarios at March 31, 2024.

On January 25, 2024, our board of directors declared the regular first quarter common stock cash dividend of $0.30 per share. The quarterly common stock cash dividend was paid on March 15, 2024 to shareholders of record on March 5, 2024. On April 25, 2024, our board of directors approved a $0.10, or 33%, increase in the regular quarterly common stock cash dividend to $0.40 per share payable on June 14, 2024 to shareholders of record on June 5, 2024. The Company has paid uninterrupted dividends to its shareholders since 1967.

On January 26, 2023, our board of directors authorized the repurchase of up to 4,297,000 shares of the Company’s common stock (approximately 5% of the shares of common stock outstanding as of December 31, 2022). The authorization is set to expire on December 31, 2024. The shares may be repurchased in the open market, by block purchase, through accelerated share repurchase plans, in privately negotiated transactions or otherwise, in one or more transactions, from time to time, depending upon market conditions and other factors, and in accordance with applicable regulations of the Securities and Exchange Commission. The Company is not obligated to purchase any shares under this program and the repurchase authorization may be terminated or amended by the Board at any time prior to the expiration date. As of March 31, 2024, no shares had been repurchased under this program.

### BALANCE SHEET ANALYSIS

### Short-Term Investments

Short-term assets are held to ensure funds are available to meet the cash flow needs of both borrowers and depositors. Short-term investments, including interest-bearing bank deposits and federal funds sold, were $439.0 million at March 31, 2024, down $188.1 million from December 31, 2023, primarily the result of the repayment of FHLB advances during the period. Average short-term investments of $533.8 million for the first quarter of 2024 were down $206.9 million from the fourth quarter of 2023. Typically, the balance of short-term investments will change on a daily basis depending upon movement in customer loan and deposit accounts.

### Securities

The purpose of the securities portfolio is to increase profitability, mitigate interest rate risk, provide liquidity and comply with regulatory pledging requirements. Our securities portfolio includes securities categorized as available for sale and held to maturity. Available for sale securities are carried at fair value and may be sold prior to maturity. Unrealized gains or losses on available for sale securities, net of deferred taxes, are recorded as accumulated other comprehensive income or loss in stockholders' equity.

Investment in securities totaled $7.6 billion at March 31, 2024, down $40.8 million, or 1%, from December 31, 2023. The decrease from December 31, 2023 reflects an unfavorable fair market valuation adjustment of $48.3 million on the available for sale portfolio, partially offset by net purchases.

At March 31, 2024, securities available for sale totaled $4.9 billion and securities held to maturity totaled $2.7 billion.

Our securities portfolio consists mainly of residential and commercial mortgage-backed securities and collateralized mortgage obligations that are issued or guaranteed by U.S. government agencies. We invest only in high quality investment grade securities with a targeted portfolio effective duration generally between two and five and a half years. At March 31, 2024, the average expected maturity of the portfolio was 6.04 years with an effective duration of 4.49 years and a nominal weighted-average yield of 2.51%. Under an immediate, parallel rate shock using increases of 100 bps and 200 bps, the effective durations would be 4.49 and 4.46 years, respectively. At December 31, 2023, the average expected maturity of the portfolio was 6.22 years with an effective duration of 4.60 years and a nominal weighted-average yield of 2.48%. The changes in expected maturity, effective duration, and nominal weighted-average yield were largely the result of maturities, paydowns and purchases during the quarter. At March 31, 2024, approximately $514 million of our available for sale securities are hedged with $478 million in fair value hedges in order to provide protection and flexibility to reposition and/or reprice the portfolio in a rising interest rate environment, effectively reducing the duration (market price risk) on the hedged securities.

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

### Loans

Total loans at March 31, 2024 were $24.0 billion, up $49.0 million, or less than 1%, from December 31,2023, with the increase primarily attributable to the residential mortgage loan portfolio.

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

*($ in thousands)*

| Total loans: | March 31, 2024 | December 31, 2023 | September 30, 2023 | June 30, 2023 | March 31, 2023 |
| --- | ---: | ---: | ---: | ---: | ---: |
| Commercial non-real estate | $9,926,333 | $9,957,284 | $10,075,585 | $10,113,932 | $10,013,482 |
| Commercial real estate - owner occupied | 3,080,192 | 3,093,763 | 3,081,327 | 3,058,829 | 3,050,748 |
| Total commercial and industrial | 13,006,525 | 13,051,047 | 13,156,912 | 13,172,761 | 13,064,230 |
| Commercial real estate - income producing | 4,042,797 | 3,986,943 | 4,027,553 | 3,762,428 | 3,758,455 |
| Construction and land development | 1,541,773 | 1,551,091 | 1,614,846 | 1,768,252 | 1,726,916 |
| Residential mortgages | 3,983,321 | 3,886,072 | 3,721,106 | 3,581,514 | 3,329,793 |
| Consumer | 1,396,522 | 1,446,764 | 1,463,262 | 1,504,931 | 1,525,129 |
| Total loans | $23,970,938 | $23,921,917 | $23,983,679 | $23,789,886 | $23,404,523 |

Commercial and industrial (“C&I”) loans, including both non-real estate and owner occupied real estate secured loans, totaled approximately $13.0 billion, or 54% of the total loan portfolio, at March 31, 2024, down less than 1%, compared to December 31,

2023\. Loan growth in this portfolio segment has tempered, as demand has been affected by the interest rate environment and as a result of management's selective credit appetite with a focus on resilient industries and borrowers.

The Bank lends mainly to middle market and smaller commercial entities, although it participates in larger shared credit loan facilities. Shared national credits outstanding at March 31, 2024 totaled approximately $2.75 billion, or 11% of total loans, up from $2.63 billion at December 31, 2023. At March 31, 2024, our larger concentrations in shared national credits include approximately $465 million to finance and insurance customers, $438 million to healthcare-related customers, $378 million to manufacturing customers, and $359 million to real estate rental and leasing customers, with the remainder of the balance in other diverse industries.

Our loan portfolio is well diversified by product, client, and geography throughout our footprint. Nevertheless, we may be exposed to certain concentrations of credit risk which exist in relation to different borrowers or groups of borrowers, specific types of collateral, industries, loan products, or regions. The following table provides detail of the more significant industry concentrations for our commercial and industrial loan portfolio, which is based on NAICS codes for all industries, with the exception of energy, which is based on the borrower’s source of revenue (i.e. a manufacturer whose income is derived from energy-related business is reported as energy).

*( $ in thousands )*

| Commercial & industrial loans: | March 31, 2024 Balance | Pct of Total | December 31, 2023 Balance | Pct of Total | September 30, 2023 Balance | Pct of Total | June 30, 2023 Balance | Pct of Total | March 31, 2023 Balance | Pct of Total |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Health care and social assistance | $1,500,050 | 11% | $1,481,669 | 11% | $1,465,057 | 11% | $1,454,716 | 11% | $1,398,300 | 10% |
| Retail trade | 1,285,503 | 10% | 1,236,830 | 9% | 1,231,718 | 9% | 1,250,708 | 9% | 1,238,090 | 9% |
| Real estate and rental and leasing | 1,254,432 | 10% | 1,270,568 | 10% | 1,289,505 | 10% | 1,249,557 | 9% | 1,368,460 | 10% |
| Manufacturing | 1,108,134 | 9% | 1,120,232 | 9% | 1,159,312 | 9% | 1,143,417 | 9% | 1,149,578 | 9% |
| Wholesale trade | 1,090,634 | 8% | 1,111,643 | 8% | 1,046,650 | 8% | 1,064,342 | 8% | 999,258 | 8% |
| Construction | 992,489 | 8% | 998,802 | 8% | 1,047,345 | 8% | 1,052,386 | 8% | 1,025,582 | 8% |
| Transportation and warehousing | 951,673 | 7% | 872,379 | 7% | 884,057 | 7% | 902,181 | 7% | 852,153 | 7% |
| Finance and insurance | 862,004 | 7% | 878,824 | 7% | 931,750 | 7% | 925,639 | 7% | 914,033 | 7% |
| Professional, scientific, and technical services | 762,181 | 6% | 735,381 | 6% | 766,440 | 6% | 768,863 | 6% | 732,068 | 6% |
| Accommodation, food services and entertainment | 705,308 | 5% | 706,141 | 5% | 726,582 | 5% | 714,463 | 5% | 677,488 | 5% |
| Public administration | 443,547 | 3% | 461,390 | 3% | 477,830 | 4% | 489,503 | 4% | 507,291 | 4% |
| Information | 435,439 | 3% | 424,532 | 3% | 442,928 | 3% | 417,465 | 3% | 407,754 | 3% |
| Other services (except public administration) | 386,709 | 3% | 396,674 | 3% | 392,561 | 3% | 393,319 | 3% | 387,396 | 3% |
| Admin, Support, Waste Mgmt, Remediation Services | 296,396 | 2% | 357,390 | 3% | 360,617 | 3% | 348,540 | 3% | 326,667 | 3% |
| Educational services | 252,309 | 2% | 247,003 | 2% | 247,427 | 2% | 264,377 | 2% | 282,488 | 2% |
| Energy | 204,746 | 2% | 204,633 | 2% | 205,030 | 1% | 222,603 | 2% | 227,171 | 2% |
| Other | 474,971 | 4% | 546,956 | 4% | 482,103 | 4% | 510,682 | 4% | 570,453 | 4% |
| Total commercial & industrial loans | $13,006,525 | 100% | $13,051,047 | 100% | $13,156,912 | 100% | $13,172,761 | 100% | $13,064,230 | 100% |

Commercial real estate – income producing loans totaled approximately $4.0 billion at March 31, 2024, up $55.9 million, or 1%, from December 31, 2023. Construction and land development loans totaled approximately $1.5 billion at March 31, 2024, down $9.3 million, or 1%, from December 31, 2023. The increase in commercial real estate – income producing loans was in part the result of completed construction projects moving to permanent financing. In addition, we continue to see slowing of prepayments in our commercial real estate – income producing portfolio driven by the current interest rate environment. We are continuing to limit our growth in income producing real estate with a focus on resilient projects given the current economic environment. The following table details the end-of-period aggregated commercial real estate – income producing and construction loan balances by property type. Loans reflected in 1-4 family residential construction include both loans to construction builders as well as single family borrowers.

*( $ in thousands )*

| Commercial real estate - income producing and construction loans: | March 31, 2024 Balance | Pct of Total | December 31, 2023 Balance | Pct of Total | September 30, 2023 Balance | Pct of Total | June 30, 2023 Balance | Pct of Total | March 31, 2023 Balance | Pct of Total |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Multifamily | $1,366,673 | 24% | $1,268,342 | 23% | $1,189,768 | 21% | $1,087,984 | 20% | $1,017,351 | 19% |
| Retail | 818,665 | 15% | 812,556 | 15% | 848,914 | 15% | 822,134 | 15% | 802,220 | 15% |
| Healthcare related properties | 800,164 | 14% | 777,473 | 14% | 864,331 | 15% | 844,304 | 15% | 865,414 | 16% |
| Industrial | 777,519 | 14% | 753,074 | 13% | 724,359 | 13% | 698,409 | 13% | 677,907 | 12% |
| Office | 503,446 | 9% | 514,763 | 9% | 547,516 | 10% | 555,080 | 10% | 561,248 | 10% |
| Hotel, motel and restaurants | 474,636 | 9% | 477,761 | 9% | 464,014 | 8% | 448,362 | 8% | 475,377 | 9% |
| 1-4 family residential construction | 362,495 | 7% | 429,107 | 8% | 527,325 | 9% | 593,238 | 11% | 623,293 | 11% |
| Other land loans | 180,857 | 3% | 187,514 | 3% | 198,722 | 4% | 219,398 | 4% | 219,192 | 4% |
| Other | 300,115 | 5% | 317,444 | 6% | 277,450 | 5% | 261,771 | 5% | 243,369 | 4% |
| Total commercial real estate - income producing and construction loans | $5,584,570 | 100% | $5,538,034 | 100% | $5,642,399 | 100% | $5,530,680 | 100% | $5,485,371 | 100% |

54

The residential mortgage loan portfolio totaled $4.0 billion at March 31, 2024, up $97.2 million, or 3%, from December 31, 2023. Growth in residential mortgage includes a combination of completed construction loans converting to permanent financing, as well as new loan growth.

The consumer loan portfolio totaled $1.4 billion at March 31, 2024 down $50.2 million, or 3%, from December 31, 2023. Changes in the consumer loan portfolio reflect both slowing demand and the impact of our exit from the indirect automobile lending market, where the existing portfolio is in run-off. The indirect loan portfolio totaled $41.5 million at March 31, 2024, down approximately $11.0 million from December 31, 2023.

Average loans for the first quarter of 2024 totaling $23.8 billion was up $14.5 million, or less than 1%, compared to the fourth quarter of 2023.

Management expects the period end loan growth percentage for the full year of 2024 to be in the low single digits compared to the December 31, 2023 balance of $23.9 billion, with most of the growth occurring during the second half of the year.

### Allowance for Credit Losses and Asset Quality

Our allowance for credit losses was $340.8 million at March 31, 2024, up $4.0 million from $336.8 million at December 31, 2023. The increase in the allowance for credit losses is attributable to a $13.0 million provision for credit losses, partially offset by $9.0 million of net charge-offs. Our overall credit loss outlook is not significantly different from that at December 31, 2023, and most of our credit metrics remain near historically low levels. However, uncertainty related to inflationary pressure and the outcome of the Federal Reserve’s actions with respect to monetary policy, and stress in the commercial real estate sector continues to result in an elevated reserve relative to pre-pandemic levels. The allowance for loan loss increased $5.8 million and the reserve for unfunded lending commitments decreased $1.8 million when compared to December 31, 2023. The modest increase in the allowance for loan loss compared to December 31, 2023, reflects a relatively consistent credit loss outlook and continued focus on risks that impact certain segments within our loan portfolio. The decline in the reserve for unfunded lending commitments compared to December 31, 2023 was largely volume driven.

We utilized the February 2024 Moody's economic scenarios for our allowance for credit losses at March 31, 2024, the most current available at the time of our computation. Moody's annual update of certain state and municipal employment-related variables resulted in a delay in the delivery of the March 2024 scenarios, however, certain qualitative factors were applied to the computation in consideration of expected changes between the February and March scenarios. After considering the variables underlying each of the Moody's economic scenarios, management probability-weighed the baseline scenario at 40% and the downside S-2 mild recessionary scenario at 60% in the computation of the allowance for credit losses at March 31, 2024, consistent with the weighting used in the prior quarter. Each of the scenarios considered have varying degrees of severity and duration of inflationary pressure, including volatility in commodities prices and impacts to the labor market, the consequences of the Federal Reserve's actions with regard to monetary policy, the effects of disruption in the financial services industry, and impacts from geopolitical unrest. Refer to the Economic Outlook section of this discussion and analysis for further information on the Moody’s scenarios and our weighting assumptions.

Our allowance for credit losses coverage to total loans was 1.42% at March 31, 2024, up from 1.41% at December 31, 2023. The allowance for credit losses on the commercial portfolio totaled $272.7 million, or 1.47% of that portfolio, at March 31, 2024, up from $270.7 million, or 1.46%, at December 31, 2023. The allowance for credit losses on the residential mortgage portfolio totaled $41.2 million, or 1.03% of that portfolio, at March 31, 2024, up from $39.0 million, or 1.00%, at December 31, 2023, due largely to growth in the portfolio. The allowance for credit losses on the consumer portfolio totaled $26.9 million, or 1.92% of that portfolio, at March 31, 2024, down slightly from $27.1 million, or 1.87%, at December 31, 2023.

Criticized commercial loans totaled $339.9 million at March 31, 2024, up $66.2 million, or 24% from $273.7 million at December 31, 2023. Criticized loans are defined as those having potential weaknesses that deserve management’s close attention (risk-rated as special mention, substandard and doubtful), including both accruing and nonaccruing loans. The Company routinely assesses the ratings of loans in its portfolio through an established and comprehensive portfolio management process. In addition, the Company often reviews portfolios of loans to determine if there are areas of risk not specifically identified in its loan by loan approach. Criticized commercial loans comprised 1.83% of that portfolio at March 31, 2024, up from 1.47% at December 31, 2023. While criticized commercial loans increased, we are not yet seeing significant weakening in any specific portfolio sector or geography. Management believes the increase is reflective of expected normalization of credit metrics following the mostly benign credit environment in recent years and our credit metrics remain in the top quartile of our peers. Our criticized commercial loans at March 31, 2024 are diversified across many industries, with the largest concentrations being construction, totaling $58.7 million; manufacturing, totaling $45.1 million; transportation and warehousing, totaling $41.3 million; wholesale trade, totaling $38.5 million; real estate and rental and leasing, totaling $35.5 million; finance and insurance, totaling $34.1 million; accommodation, food services and entertainment, totaling $19.4 million; and, retail trade, totaling $19.3 million. Commercial loans risk rated pass-watch totaled $471.0 million at March 31, 2024, up $37.4 million, or 9%, from $433.6 million at December 31, 2023. The pass-watch risk rating includes credits with negative performance trends that reflect sufficient risk to cause concern, but have not risen to the level of criticized.

Net charge-offs were $9.0 million, or 0.15% of average total loans on an annualized basis in the first quarter of 2024, compared to $16.1 million, or 0.27% in the fourth quarter of 2023 and $5.7 million, or 0.10% in the first quarter of 2023. Net charge-offs in the commercial portfolio totaled $5.3 million in the first quarter of 2024, compared to $12.7 million in the fourth quarter of 2023; net charge-offs in the consumer portfolio totaled $3.9 million in the first quarter of 2024, compared to $3.7 million in the fourth quarter of 2023; and net recoveries in the residential mortgage portfolio totaled $0.1 million in the first quarter of 2024, compared to $0.4 million in the fourth quarter of 2023. Net charge-offs in the commercial portfolio for the first quarter of 2024 includes an $8.8 million charge off on a single commercial real estate - income producing credit and an $11.8 million recovery from a single legacy energy credit.

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

*($ in thousands)*

| Provision and Allowance for Credit Losses Allowance for loan losses: | Three Months Ended March 31, 2024 | December 31, 2023 | March 31, 2023 |
| --- | ---: | ---: | ---: |
| Allowance for loan losses at beginning of period | $307,907 | $306,291 | $307,789 |
| Loans charged-off: |  |  |  |
| Commercial non real estate | 9,630 | 14,993 | 4,528 |
| Commercial real estate - owner-occupied | — | — | — |
| Total commercial & industrial | 9,630 | 14,993 | 4,528 |
| Commercial real estate - income producing | 8,819 | — | — |
| Construction and land development | 75 | — | 61 |
| Total commercial | 18,524 | 14,993 | 4,589 |
| Residential mortgages | 56 | 2 | 20 |
| Consumer | 4,786 | 4,606 | 3,363 |
| Total charge-offs | 23,366 | 19,601 | 7,972 |
| Recoveries of loans previously charged-off: |  |  |  |
| Commercial non real estate | 13,104 | 1,733 | 1,033 |
| Commercial real estate - owner-occupied | 102 | 510 | 195 |
| Total commercial & industrial | 13,206 | 2,243 | 1,228 |
| Commercial real estate - income producing | 3 | 2 | — |
| Construction and land development | 61 | 1 | 6 |
| Total commercial | 13,270 | 2,246 | 1,234 |
| Residential mortgages | 202 | 390 | 181 |
| Consumer | 914 | 910 | 838 |
| Total recoveries | 14,386 | 3,546 | 2,253 |
| Total net charge-offs | 8,980 | 16,055 | 5,719 |
| Provision for loan losses | 14,799 | 17,671 | 7,315 |
| Allowance for loan losses at end of period | $313,726 | $307,907 | $309,385 |
| **Reserve for Unfunded Lending Commitments:** |  |  |  |
| Reserve for unfunded lending commitments at beginning of period | $28,894 | $29,613 | $33,309 |
| Provision for losses on unfunded lending commitments | (1,831) | (719) | (1,295) |
| Reserve for unfunded lending commitments at end of period | $27,063 | $28,894 | $32,014 |
| **Total Allowance for Credit Losses** | $340,789 | $336,801 | $341,399 |
| **Total Provision for Credit Losses** | $12,968 | $16,952 | $6,020 |
| **Coverage Ratios:** |  |  |  |
| Allowance for loan losses to period-end loans | 1.31% | 1.29% | 1.32% |
| Allowance for credit losses to period-end loans | 1.42% | 1.41% | 1.46% |
| **Charge-offs ratios:** |  |  |  |
| Gross charge-offs to average loans | 0.39% | 0.33% | 0.14% |
| Recoveries to average loans | 0.24% | 0.06% | 0.04% |
| Net charge-offs to average loans | 0.15% | 0.27% | 0.10% |
| **Net Charge-offs to average loans by portfolio** |  |  |  |
| Commercial non real estate | (0.14)% | 0.53% | 0.14% |
| Commercial real estate - owner-occupied | (0.01)% | (0.07)% | (0.03)% |
| Total commercial & industrial | (0.11)% | 0.39% | 0.10% |
| Commercial real estate - income producing | 0.89% | (0.00)% | — |
| Construction and land development | 0.00% | (0.00)% | 0.01% |
| Total commercial | 0.11% | 0.27% | 0.07% |
| Residential mortgages | (0.01)% | (0.04)% | (0.02)% |
| Consumer | 1.10% | 1.02% | 0.66% |

56

The following table sets forth for the periods indicated nonaccrual loans and loans modified or restructured, by type, and foreclosed and surplus ORE and other foreclosed assets. The table also includes loans past due 90 days or more and still accruing.

*($ in thousands)*

| Loans accounted for on a nonaccrual basis: | March 31, 2024 | December 31, 2023 | September 30, 2023 | June 30, 2023 | March 31, 2023 |
| --- | ---: | ---: | ---: | ---: | ---: |
| Commercial non-real estate | $17,487 | $20,840 | $22,108 | $39,361 | $12,378 |
| Commercial non-real estate - modified | — | — | — | 907 | 924 |
| Total commercial non-real estate | 17,487 | 20,840 | 22,108 | 40,268 | 13,302 |
| Commercial real estate - owner occupied | 2,197 | 2,228 | 2,432 | 1,620 | 1,709 |
| Commercial real estate - owner-occupied - modified | — | — | — | 675 | 684 |
| Total commercial real estate - owner-occupied | 2,197 | 2,228 | 2,432 | 2,295 | 2,393 |
| Commercial real estate - income producing | 24,066 | 461 | 344 | 356 | 1,501 |
| Commercial real estate - income producing - modified | — | — | — | — | — |
| Total commercial real estate - income producing | 24,066 | 461 | 344 | 356 | 1,501 |
| Construction and land development | 2,228 | 815 | 742 | 370 | 340 |
| Construction and land development - modified | — | — | — | — | — |
| Total construction and land development | 2,228 | 815 | 742 | 370 | 340 |
| Residential mortgage | 25,757 | 26,039 | 26,885 | 27,458 | 30,110 |
| Residential mortgage - modified | 167 | 98 | 20 | — | — |
| Total residential mortgage | 25,924 | 26,137 | 26,905 | 27,458 | 30,110 |
| Consumer | 10,180 | 8,555 | 7,800 | 7,473 | 6,698 |
| Consumer - modified | — | — | — | — | — |
| Total consumer | 10,180 | 8,555 | 7,800 | 7,473 | 6,698 |
| Total nonaccrual loans | $82,082 | $59,036 | $60,331 | $78,220 | $54,344 |
| ORE and foreclosed assets | 2,793 | 3,628 | 4,527 | 2,174 | 1,976 |
| Total nonaccrual loans and ORE and foreclosed assets | $84,875 | $62,664 | $64,858 | $80,394 | $56,320 |
| Modified loans - still accruing: |  |  |  |  |  |
| Commercial non-real estate | $31,442 | $21,956 | $11,500 | $1,010 | $10 |
| Commercial real estate - owner occupied | 1,761 | 1,774 | 17,035 | — | — |
| Commercial real estate - income producing | 1,573 | — | — | — | — |
| Construction and land development | 84 | 85 | 86 | — | — |
| Residential mortgage | 2,180 | 359 | 166 | — | — |
| Consumer | 385 | 274 | 62 | — | — |
| Total modified loans - still accruing | $37,425 | $24,448 | $28,849 | $1,010 | $10 |
| Total reportable modified loans | $37,592 | $24,546 | $28,869 | $2,592 | $1,618 |
| Loans 90 days past due still accruing | $7,938 | $9,609 | $24,170 | $7,552 | $13,155 |
| Ratios: |  |  |  |  |  |
| Nonaccrual loans to total loans | 0.34% | 0.25% | 0.25% | 0.33% | 0.23% |
| Nonaccrual loans plus ORE and foreclosed assets to loans plus ORE and foreclosed assets | 0.35% | 0.26% | 0.27% | 0.34% | 0.24% |
| Allowance for loan losses to nonaccrual loans | 382.21% | 521.56% | 507.68% | 402.07% | 569.31% |
| Allowance for loan losses to nonaccrual loans and accruing loans 90 days past due | 348.51% | 448.55% | 362.47% | 366.67% | 458.35% |
| Loans 90 days past due still accruing to loans | 0.03% | 0.04% | 0.10% | 0.03% | 0.06% |

Nonaccrual loans plus ORE and foreclosed assets totaled $84.9 million at March 31, 2024, up $22.2 million from December 31, 2023. Nonaccrual loans of $82.1 million increased $23.0 million from December 31, 2023. While the level of nonaccrual loans increased, the ratio remains relatively low at 0.34% of the total portfolio and is mostly representative of a normalization of credit metrics following a mostly benign credit environment in recent years. ORE and foreclosed assets were $2.8 million at March 31, 2024, down $0.8 million from December 31, 2023. Nonaccrual loans plus ORE and other foreclosed assets as a percentage of total loans, ORE and other foreclosed assets was 0.35% at March 31, 2024, up 9 bps from December 31, 2023.

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

### Deposits

Deposits provide the most significant source of funding for our interest earning assets. Generally, our ability to compete for market share depends on our deposit pricing and our wide range of products and services that are focused on customer needs, among other things. We offer high-quality banking services with convenient delivery channels, including online and mobile banking. We provide specialized services to our commercial customers to promote commercial deposit growth. These services include treasury management, industry expertise and lockbox services.

The failures of three large U.S. banks in the first half of 2023 created disruption in the financial services industry. While many factors played a role in the ultimate failures, these institutions had significant industry/demographic concentration within their deposit bases and a high ratio of uninsured deposits. Lack of diversity in concentration within a deposit base may increase the risk of events or trends that could prompt a larger-scale demand for deposits outflow. Concerns over a financial institution's ability to protect deposit balances in excess of the federally insured limit may increase the risk of a deposit run. We consider our deposit base to be seasoned, stable and well-diversified. We also offer our customers an insured cash sweep product (ICS) that allows customers to secure deposits above FDIC insured limits. We have seen a continued increase in demand for the ICS product following the 2023 bank failures, with the balance totaling $372.5 million at March 31, 2024, compared to $303.8 million at December 31, 2023 and $111.4 million at March 31, 2023. At March 31, 2024, we have calculated our average deposit account size by dividing period-end deposits by the population of accounts with balances to be approximately $37,700 which includes $194,500 in our commercial and small business lines (excluding public funds), $130,800 in our wealth management business line, and $18,800 in our consumer business line.

Further, at March 31, 2024, our sources of liquidity exceed uninsured deposits. We have estimated the Bank’s amount of uninsured deposits using the methodologies and assumptions required for FDIC regulatory reporting to be approximately $14.0 billion at March 31, 2024, compared to $13.8 billion at December 31, 2023. Our uninsured deposit total at March 31, 2024 includes approximately $3.5 billion of public funds that have pledged securities as collateral, leaving $10.5 billion of noncollateralized, uninsured deposits compared to total liquidity of $19.2 billion. Our ratio of noncollateralized, uninsured deposits to total deposits was approximately 35.4% at March 31, 2024, compared to 34.4% at December 31, 2023.

Total deposits were $29.8 billion at March 31, 2024, virtually unchanged from December 31, 2023. Average deposits for the first quarter of 2024 were $29.6 billion, down $0.0 billion, or 1%, from the fourth quarter of 2023.

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

*($ in thousands)*

|  | March 31, 2024 | December 31, 2023 | September 30, 2023 | June 30, 2023 | March 31, 2023 |
| --- | ---: | ---: | ---: | ---: | ---: |
| Noninterest-bearing deposits | $10,802,127 | $11,030,515 | $11,626,371 | $12,171,817 | $12,860,027 |
| Interest-bearing retail transaction and savings deposits | 10,969,720 | 10,680,741 | 10,678,462 | 10,455,175 | 10,682,568 |
| Interest-bearing public fund deposits: |  |  |  |  |  |
| Public fund transaction and savings deposits | 2,989,966 | 3,069,341 | 2,761,267 | 2,828,301 | 2,987,565 |
| Public fund time deposits | 76,304 | 73,674 | 91,969 | 97,130 | 98,644 |
| Total interest-bearing public fund deposits | 3,066,270 | 3,143,015 | 2,853,236 | 2,925,431 | 3,086,209 |
| Retail time deposits | 4,543,018 | 4,246,027 | 4,005,025 | 3,328,577 | 2,411,765 |
| Brokered time deposits | 394,771 | 589,761 | 1,157,243 | 1,162,501 | 572,501 |
| Total interest-bearing deposits | 18,973,779 | 18,659,544 | 18,693,966 | 17,871,684 | 16,753,043 |
| Total deposits | $29,775,906 | $29,690,059 | $30,320,337 | $30,043,501 | $29,613,070 |

Noninterest-bearing demand deposits were $10.8 billion at March 31, 2024, down $0.2 billion, or 2%, from December 31, 2023. Noninterest-bearing demand deposits comprise 36% of total deposits at March 31, 2024, compared to 37% at December 31, 2023 and 43% at March 31, 2023. Noninterest-bearing deposit levels have declined somewhat as customers shift to interest-bearing products amid the elevated interest rate environment and as spending increases in an inflationary environment. The current level of noninterest-bearing deposits to total deposits of 36% represents what we consider to be a more typical, pre-pandemic mix of noninterest-bearing and interest-bearing deposits.

Interest-bearing transaction and savings accounts of $11.0 billion at March 31, 2024 were up $0.3 billion, or 3%, from December 31, 2023. Interest-bearing public fund deposits totaled $3.1 billion at March 31, 2024, down $ 0.1million, or 2%, from December 31, 2023. The decrease in public funds is mostly reflective of typical seasonal outflows. Retail time deposits totaled $4.5 billion at March 31, 2024, up $0.3 billion, or 7%, from December 31, 2023. The increase in retail time deposits reflects both deposit growth and in part a continued shift from other deposit products amid the elevated interest rate environment as depositors take advantage of attractive rate offerings. Brokered time deposits totaled $394.8 million at March 31, 2024, down $195.0 million as a result of the maturity of instruments that were not replaced. At March 31, 2024, brokered time deposits outstanding bear interest at 5.35% and will mature in May 2024.

While the pace is slowing, interest rates paid on deposit accounts continued to increase in the first quarter of 2024, particularly on retail time and money market deposits where we have offered promotional rates. The following table sets forth average balances and weighted-average rates paid on deposits for the first quarter of 2024 and the fourth and first quarters of 2023.

*($ in millions)*

| Interest-bearing deposits: | Three months ended March 31, 2024 Balance | Rate | Mix | December 31, 2023 Balance | Rate | Mix | March 31, 2023 Balance | Rate | Mix |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Interest-bearing transaction deposits | $2,557.7 | 1.46% | 8.7% | $2,501.0 | 1.39% | 8.3% | $2,468.9 | 0.46% | 8.6% |
| Money market deposits | 6,131.3 | 3.28 | 20.7 | 6,010.0 | 3.17 | 20.1 | 5,497.3 | 1.80 | 19.1 |
| Savings deposits | 2,114.2 | 0.15 | 7.2 | 2,170.9 | 0.03 | 7.2 | 2,684.2 | 0.01 | 9.3 |
| Time deposits | 4,965.3 | 4.79 | 16.8 | 5,264.3 | 4.72 | 17.6 | 2,018.6 | 2.70 | 7.0 |
| Public Funds | 3,119.4 | 3.65 | 10.6 | 2,896.3 | 3.68 | 9.7 | 3,160.7 | 3.04 | 11.0 |
| Total interest-bearing deposits | 18,887.9 | 3.14% | 64.0 | 18,842.5 | 3.08% | 62.9 | 15,829.7 | 1.65% | 55.0 |
| Noninterest-bearing demand deposits | 10,673.1 |  | 36.0 | 11,132.4 |  | 37.1 | 12,963.2 |  | 45.0 |
| Total deposits | $29,561.0 |  | 100.0% | $29,974.9 |  | 100.0% | $28,792.9 |  | 100.0% |

The following sets forth the maturities of time certificates of deposit greater than $250,000 at March 31, 2024.

*($ in thousands)*

|  | March 31, 2024 |
| --- | ---: |
| Three months | $867,697 |
| Over three months through six months | 514,286 |
| Over six months through one year | 414,843 |
| Over one year | 10,072 |
| Total | $1,806,898 |

Management expects low single-digit end of period deposit growth in 2024 from the balance of $29.7 billion at December 31, 2023.

### Short-Term Borrowings

At March 31, 2024, short-term borrowings totaled $667.8 million, down $487.1 million, or 42%, from December 31, 2023. The decline from December 31, 2023 is primarily attributable to the repayment of $700 million of FHLB advances, partially offset by an increase in customer repurchase agreements. Average short-term borrowings of $784.0 million in the first quarter of 2024 were down $209.8 million, or 21%, from the fourth quarter of 2023.

Short-term borrowings are a core portion of the Company’s funding strategy and can fluctuate depending on our funding needs and the sources utilized. Customer repurchase agreements and FHLB borrowings are the major sources of short-term borrowings. Customer repurchase agreements are offered mainly to commercial customers to assist them with their cash management strategies or to provide a temporary investment vehicle for their excess liquidity pending redeployment for corporate or investment purposes. While customer repurchase agreements provide a recurring source of funds to the Bank, amounts available will vary. FHLB borrowings are funds from the Federal Home Loan Bank that are collateralized by certain residential mortgage and commercial real estate loans included in the Bank’s loan portfolio, subject to specific criteria.

### Long-Term Debt

Long-term debt totaled $236.4 million at March 31, 2024, virtually unchanged from December 31, 2023.

Long-term debt at March 31, 2024 includes subordinated notes payable with an aggregate principal amount of $172.5 million, a stated maturity of June 15, 2060, and a fixed rate of 6.25% per annum that qualify as Tier 2 capital of certain regulatory capital ratios. Subject to prior approval by the Federal Reserve, the Company may redeem these notes in whole or in part on any of its quarterly interest payment dates after June 15, 2025.

### OFF-BALANCE SHEET ARRANGEMENTS

### Loan Commitments and Letters of Credit

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

Commitments to extend credit include revolving commercial credit lines, non-revolving loan commitments issued mainly to finance the acquisition and development or construction of real property or equipment, and credit card and personal credit lines. The availability of funds under commercial credit lines and loan commitments generally depends on whether the borrower continues to meet credit standards established in the underlying contract and has not violated other contractual conditions. Loan commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee by the borrower. Credit card and personal credit lines are generally subject to cancellation if the borrower’s credit quality deteriorates. A number of commercial and personal credit lines are used only partially or, in some cases, not at all before they expire, and the total commitment amounts do not necessarily represent our future cash requirements.

A substantial majority of the letters of credit are standby agreements that obligate the Bank to fulfill a customer’s financial commitments to a third party if the customer is unable to perform. The Bank issues standby letters of credit primarily to provide credit enhancement to its customers’ other commercial or public financing arrangements and to help them demonstrate financial capacity to vendors of essential goods and services.

The contractual amounts of these instruments reflect our exposure to credit risk. The Bank undertakes the same credit evaluation in making loan commitments and assuming conditional obligations as it does for on-balance sheet instruments and may require collateral or other credit support. At March 31, 2024, the Company had a reserve for unfunded lending commitments totaling $27.1 million.

The following table shows the commitments to extend credit and letters of credit at March 31, 2024 according to expiration date.

*($ in thousands)*

|  | Total | Expiration Date Less than 1 year | 1-3 years | 3-5 years | More than 5 years |
| --- | ---: | ---: | ---: | ---: | ---: |
| Commitments to extend credit | $9,330,583 | $3,513,546 | $2,579,929 | $2,435,218 | $801,890 |
| Letters of credit | 499,963 | 404,866 | 24,051 | 70,918 | 128 |
| Total | $9,830,546 | $3,918,412 | $2,603,980 | $2,506,136 | $802,018 |

### CRITICAL ACCOUNTING POLICIES AND ESTIMATES

There were no material changes or developments during the reporting period with respect to methodologies that the Company uses when applying what management believes are critical accounting policies and developing critical accounting estimates as disclosed in its Annual Report on Form 10-K for the year ended December 31, 2023.

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

### NEW ACCOUNTING PRONOUNCEMENTS

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

## Market risk

As filed, 6,159 characters.

Our primary market risk is interest rate risk that stems from uncertainty with respect to the absolute and relative levels of future market interest rates that affect our financial products and services. In an attempt to manage our exposure to interest rate risk, management measures the sensitivity of our net interest income and cash flows under various market interest rate scenarios, establishes interest rate risk management policies and implements asset/liability management strategies designed to promote a relatively stable net interest margin under varying rate environments.

### Net Interest Income at Risk

The following table presents an analysis of our interest rate risk as measured by the estimated changes in net interest income resulting from an instantaneous and sustained parallel shift in rates at March 31, 2024. Shifts are measured in 100 basis point increments in a range from -500 to +500 basis points from base case, with -300 through +300 basis points presented in the table below. Our interest rate sensitivity modeling incorporates a number of assumptions including loan and deposit repricing characteristics, the rate of loan prepayments and other factors. The base scenario assumes that the current interest rate environment is held constant over a 24-month forecast period and is the scenario to which all others are compared in order to measure the change in net interest income. Policy limits on the change in net interest income under a variety of interest rate scenarios are approved by the Board of Directors. All policy scenarios assume a static volume forecast where the balance sheet is held constant, although other scenarios are modeled.

| Change in Interest Rates (basis points) | Estimated Increase (Decrease) in NII Year 1 | Year 2 |
| ---: | ---: | ---: |
| -300 | -7.29% | -12.84% |
| -200 | -4.46% | -7.99% |
| -100 | -1.94% | -3.69% |
| +100 | 2.15% | 3.51% |
| +200 | 4.00% | 6.84% |
| +300 | 5.86% | 10.23% |

The results indicate a general asset sensitivity across most scenarios driven primarily by repricing in variable rate loans and a funding mix which includes a large percentage of noninterest-bearing and lower rate sensitive deposits. As rates increased in the first half of 2023 and remain elevated, the funding mix has continued to shift to more rate sensitive deposits and wholesale funding which has resulted in a lower net interest income at risk measurements compared to recent years. When deemed prudent, management has taken actions to mitigate exposure to interest rate risk with on-or off-balance sheet financial instruments and intends to do so in the future. Possible actions include, but are not limited to, changes in the pricing of loan and deposit products, modifying the composition of earning assets and interest-bearing liabilities, and adding to, modifying or terminating existing interest rate swap agreements or other financial instruments used for interest rate risk management purposes.

Even if interest rates change in the designated amounts, there can be no assurance that our assets and liabilities would perform as anticipated. Additionally, a change in the U.S. Treasury rates in the designated amounts accompanied by a change in the shape of the U.S. Treasury yield curve would cause significantly different changes to net interest income than indicated above. Strategic management of our balance sheet and earnings is fluid and would be adjusted to accommodate these movements. As with any method of measuring interest rate risk, certain shortcomings are inherent in the methods of analysis presented above. For example, although certain assets and liabilities may have similar maturities or periods to repricing, they may react in different degrees to changes in market interest rates. Also, the interest rates on certain types of assets and liabilities may fluctuate in advance of changes in market interest rates, while interest rates on other types may lag behind changes in market rates. Certain assets such as adjustable-rate loans have features which restrict changes in interest rates on a short-term basis and over the life of the asset. Also, the ability of many borrowers to service their debt may decrease in the event of an interest rate increase. All of these factors are considered in monitoring exposure to interest rate risk.

### Economic Value of Equity (EVE)

EVE simulation involves calculating the present value of all future cash flows from assets and subtracting the present value of all future cash outflows from liabilities including the impact of off-balance sheet items such as interest rate hedges. This analysis results in a theoretical market value of the bank's equity or EVE. Management’s focus on EVE analysis is not on the resulting calculation of EVE itself, but instead on the sensitivity of EVE to changes in market rates. Policy limits on the change in EVE under a variety of interest rate scenarios are approved by the Board of Directors. The following table presents an analysis of the change in the Bank’s EVE resulting from instantaneous and parallel shifts in rates as of March 31, 2024. Shifts are measured in 100 basis point increments ranging from -500 to +500 basis points from base case, with -300 through +300 basis points presented in table below.

| Change in Interest Rates (basis points) |  | Estimated Change in EVE at March 31, 2024 |
| ---: | ---: | ---: |
| - | 300 | 2.92% |
| - | 200 | 2.86% |
| - | 100 | 1.93% |
| + | 100 | -2.41% |
| + | 200 | -5.10% |
| + | 300 | -7.87% |

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

## Controls and procedures

As filed, 1,368 characters.

In connection with the preparation of this Quarterly Report on Form 10-Q, an evaluation was carried out by the Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Disclosure controls and procedures are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and that such information is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosures. Based on that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that, as of March 31, 2024, the Company’s disclosure controls and procedures were effective.

Our management, including the Chief Executive Officer and Chief Financial Officer, identified no change in our internal control over financial reporting that occurred during the three month period ended March 31, 2024, that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.

## Risk factors

As filed, 846 characters.

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

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

Filed May 8, 2024.
Source: SEC EDGAR, the filing index for accession 0000950170-24-055917. Last ingested by Listed: Oct 24, 2026, 14:54 ET. No prices; not investment advice.