UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended September 30, 2018

or

¨ Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from                     to  

Commission File Number: 000-55106

BBVA Compass Bancshares, Inc.

(Exact name of registrant as specified in its charter)

Texas		20-8948381
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
2200 Post Oak Blvd. Houston, Texas		77056
(Address of principal executive offices)		(Zip Code)
	(205) 297-3000
(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer o	Accelerated filer o	Non-accelerated filer þ (Do not check if a smaller reporting company)
Smaller reporting company o	Emerging growth company o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class	Outstanding as of October 31, 2018
Common Stock (par value $0.01 per share)	222,950,751 shares

Explanatory Note

The registrant meets the conditions set forth in General Instruction H(1)(a) and (b) of Form 10-Q and is therefore filing this report with certain reduced disclosures as permitted by those instructions.

TABLE OF CONTENTS

		Page
Part I	Financial Information
Item 1.	Financial Statements (Unaudited)	7
	Condensed Consolidated Balance Sheets as of September 30, 2018 and December 31, 2017	7
	Condensed Consolidated Statements of Income for the three and nine months ended September 30, 2018 and 2017	8
	Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2018 and 2017	9
	Condensed Consolidated Statements of Shareholder's Equity for the nine months ended September 30, 2018 and 2017	10
	Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2018 and 2017	11
	Notes to the Unaudited Condensed Consolidated Financial Statements	12
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	60
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	85
Item 4.	Controls and Procedures	86
Part II	Other Information
Item 1.	Legal Proceedings	87
Item 1A.	Risk Factors	87
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	87
Item 3.	Defaults Upon Senior Securities	87
Item 4.	Mine Safety Disclosures	87
Item 5.	Other Information	87
Item 6.	Exhibits	89
Signatures		90

Glossary of Acronyms and Terms

The following listing provides a comprehensive reference of common acronyms and terms used throughout the document:

AFS	Available For Sale
ASC	Accounting Standards Codification
ASU	Accounting Standards Update
Basel III	Global regulatory framework developed by the Basel Committee on Banking Supervision
Bank	Compass Bank
BBVA	Banco Bilbao Vizcaya Argentaria, S.A.
BBVA Compass	Registered trade name of Compass Bank
BBVA Group	BBVA and its consolidated subsidiaries
BOLI	Bank Owned Life Insurance
BSI	BBVA Securities Inc.
Cash Flow Hedge	A hedge of a forecasted transaction or of the variability of cash flows to be received or paid related to a recognized asset or liability
CD	Certificate of Deposit and/or time deposits
CET1	Common Equity Tier 1
CET1 Risk-Based Capital Ratio	Ratio of Common Equity Tier 1 capital to risk-weighted assets
CFPB	Consumer Financial Protection Bureau
Company	BBVA Compass Bancshares, Inc. and its subsidiaries
Covered Assets	Loans and other real estate owned acquired from the FDIC subject to loss sharing agreements
Covered Loans	Loans acquired from the FDIC subject to loss sharing agreements
CRA	Community Reinvestment Act
EGRRCPA	Economic Growth Regulatory Relief and Consumer Protection Act
ERM	Enterprise Risk Management
EVE	Economic Value of Equity
Exchange Act	Securities and Exchange Act of 1934, as amended
Fair Value Hedge	A hedge of the fair value of a recognized asset or liability or of an unrecognized firm commitment
FASB	Financial Accounting Standards Board
FDIC	Federal Deposit Insurance Corporation
Federal Reserve Board	Board of Governors of the Federal Reserve System
FHC	Financial holding company
FHLB	Federal Home Loan Bank
FICO	Fair Isaac Corporation
Fitch	Fitch Ratings
FNMA	Federal National Mortgage Association
HTM	Held To Maturity
HVCRE	High-volatility commercial real estate
HVCRE ADC	HVCRE acquisition development or construction
Large FBO	Foreign Banking Organization with $100 billion or more in global total consolidated assets
LCR	Liquidity Coverage Ratio
Leverage Ratio	Ratio of Tier 1 capital to quarterly average on-balance sheet assets
Moody's	Moody's Investor Services, Inc.
MRA	Master Repurchase Agreement
MSR	Mortgage Servicing Rights
OREO	Other Real Estate Owned

3

OTTI	Other-Than-Temporary Impairment
OIS	Overnight Index Swap
Parent	BBVA Compass Bancshares, Inc.
Potential Problem Loans	Commercial loans rated substandard or below, which do not meet the definition of nonaccrual, TDR, or 90 days past due and still accruing
SBA	Small Business Administration
SBIC	Small Business Investment Company
SEC	Securities and Exchange Commission
Series A Preferred Stock	Floating Non-Cumulative Perpetual Preferred Stock, Series A
SOFR	Secured Overnight Financing Rate
S&P	Standard and Poor's Rating Services
Tax Cuts and Jobs Act	H.R. 1, formerly known as the Tax Cuts and Jobs Act of 2017
TBA	To be announced
TDR	Troubled Debt Restructuring
Tier 1 Risk-Based Capital Ratio	Ratio of Tier 1 capital to risk-weighted assets
Total Risk-Based Capital Ratio	Ratio of Total capital (the sum of Tier 1 capital and Tier 2 capital) to risk-weighted assets
U.S.	United States of America
U.S. Treasury	United States Department of the Treasury
U.S. GAAP	Accounting principles generally accepted in the U.S.

4

Unless otherwise specified, the terms “we,” “us,” “our,” and the “Company” are used to refer to BBVA Compass Bancshares, Inc. and its subsidiaries, or any one or more of them, as the context may require. The term “Parent” refers to BBVA Compass Bancshares, Inc. The term “BBVA” refers to Banco Bilbao Vizcaya Argentaria, S.A., the parent company of BBVA Compass Bancshares, Inc.

Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements about the Company and its industry that involve substantial risks and uncertainties. Statements other than statements of current or historical fact, including statements regarding the Company's future financial condition, results of operations, business plans, liquidity, cash flows, projected costs, and the impact of any laws or regulations applicable to the Company, are forward-looking statements. Words such as “anticipates,” “believes,” “estimates,” “expects,” “forecasts,” “intends,” “plans,” “projects,” “may,” “will,” “should,” and other similar expressions are intended to identify these forward-looking statements. Such statements are subject to factors that could cause actual results to differ materially from anticipated results. Such factors include, but are not limited to, the following:

• national, regional and local economic conditions may be less favorable than expected, resulting in, among other things, increased charge-offs of loans, higher provisions for credit losses and/or reduced demand for the Company's services;

• disruptions to the credit and financial markets, either nationally or globally;

• weakness in the real estate market, including the secondary residential mortgage market, which can affect, among other things, the value of collateral securing mortgage loans, mortgage loan originations and delinquencies, and profits on sales of mortgage loans;

• legislative, regulatory or accounting changes, which may adversely affect our business and/or competitive position, impose additional costs on the Company or cause us to change our business practices;

• the fiscal and monetary policies of the federal government and its agencies;

• the impact of consumer protection regulations, including the CFPB's residential mortgage and other regulations, which could adversely affect the Company's business, financial condition or results of operations;

• if the Bank's CRA rating were to decline, that could result in certain restrictions on the Company's activities;

• the failure to satisfy capital adequacy and liquidity guidelines applicable to the Company;

• volatile or declining oil prices, which could have a negative impact on the economies and real estate markets of states such as Texas, resulting in, among other things, higher delinquencies and increased charge-offs in the energy lending portfolio as well as other commercial and consumer loan portfolios indirectly impacted by declining oil prices;

• a failure by the Company to effectively manage the risks the Company faces, including credit, operational and cyber security risks;

• the impact that can result from having loans concentrated by loan type, industry segment, borrower type or location of the borrower or collateral;

• changes in the creditworthiness of customers;

• downgrades to the Company's credit ratings;

• changes in interest rates which could affect interest rate spreads and net interest income;

• costs and effects of litigation, regulatory investigations or similar matters;

• disruptions in the Company's ability to access capital markets, which may adversely affect its capital resources and liquidity;

• increased loan losses or impairment of goodwill and other intangibles;

• the Company's heavy reliance on communications and information systems to conduct its business and reliance on third parties and affiliates to provide key components of its business infrastructure, any disruptions of which could interrupt the Company's operations or increase the costs of doing business;

• negative public opinion, which could damage the Company's reputation and adversely impact business and revenues;

• the Company depends on the expertise of key personnel, and if these individuals leave or change their roles without effective replacements, operations may suffer;

• that the Company's financial reporting controls and procedures may not prevent or detect all errors or fraud;

• the Company is subject to certain risks related to originating and selling mortgages. It may be required to repurchase mortgage loans or indemnify mortgage loan purchases as a result of breaches of representations

5

and warranties, borrower fraud or certain breaches of its servicing agreements, and this could harm the Company's liquidity, results of operations and financial condition;

• increased pressures from competitors (both banks and non-banks) and/or an inability by the Company to remain competitive in the financial services industry, particularly in the markets which the Company serves, and keep pace with technological changes;

• unpredictable natural or other disasters, which could impact the Company's customers or operations;

• a loss of customer deposits, which could increase the Company's funding costs;

• the Company's dependence on the accuracy and completeness of information about clients and counterparties;

• changes in the Company's accounting policies or in accounting standards which could materially affect how the Company reports financial results and condition;

• the Company has in the past and may in the future pursue acquisitions, which could affect costs and from which the Company may not be able to realize anticipated benefits; and

• the Company may not be able to hire or retain additional qualified personnel and recruiting and compensation costs may increase as a result of turnover, both of which may increase costs and reduce profitability and may adversely impact the Company's ability to implement the Company's business strategies.

The forward-looking statements in this Quarterly Report on Form 10-Q speak only as of the time they are made and do not necessarily reflect the Company’s outlook at any other point in time. The Company undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or for any other reason. However, readers should carefully review the risk factors set forth in other reports or documents the Company files periodically with the SEC.

6

PART I FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

BBVA COMPASS BANCSHARES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
	September 30, 2018			December 31, 2017
	(In Thousands)
Assets:
Cash and due from banks	$	1,122,747		$	1,313,022
Federal funds sold, securities purchased under agreements to resell and interest bearing deposits	2,404,164			2,769,804
Cash and cash equivalents	3,526,911			4,082,826
Trading account assets	216,749			220,496
Debt securities available for sale	11,134,860			12,219,632
Debt securities held to maturity (fair value of $2,465,761 and $1,040,543 at September 30, 2018 and December 31, 2017, respectively)	2,490,568			1,046,093
Loans held for sale, at fair value	73,569			67,110
Loans	64,457,279			61,623,768
Allowance for loan losses	(875,393		)	(842,760		)
Net loans	63,581,886			60,781,008
Premises and equipment, net	1,155,795			1,214,874
Bank owned life insurance	731,527			722,596
Goodwill	4,983,296			4,983,296
Other assets	2,152,495			1,982,648
Total assets	$	90,047,656		$	87,320,579
Liabilities:
Deposits:
Noninterest bearing	$	20,968,391		$	21,630,694
Interest bearing	49,409,666			47,625,619
Total deposits	70,378,057			69,256,313
FHLB and other borrowings	5,045,302			3,959,930
Federal funds purchased and securities sold under agreements to repurchase	78,004			19,591
Other short-term borrowings	68,714			17,996
Accrued expenses and other liabilities	1,135,092			1,053,439
Total liabilities	76,705,169			74,307,269
Shareholder’s Equity:
Series A Preferred stock — $0.01 par value, liquidation preference $200,000 per share
Authorized — 30,000,000 shares
Issued — 1,150 shares at both September 30, 2018 and December 31, 2017	229,475			229,475
Common stock — $0.01 par value:
Authorized — 300,000,000 shares
Issued — 222,950,751 shares at both September 30, 2018 and December 31, 2017	2,230			2,230
Surplus	14,695,197			14,818,608
Accumulated deficit	(1,302,525		)	(1,868,659		)
Accumulated other comprehensive loss	(311,422		)	(197,405		)
Total BBVA Compass Bancshares, Inc. shareholder’s equity	13,312,955			12,984,249
Noncontrolling interests	29,532			29,061
Total shareholder’s equity	13,342,487			13,013,310
Total liabilities and shareholder’s equity	$	90,047,656		$	87,320,579

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

7

BBVA COMPASS BANCSHARES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
	Three Months Ended September 30,				Nine Months Ended September 30,
	2018		2017		2018		2017
	(In Thousands)
Interest income:
Interest and fees on loans	$	751,470	$	623,884	$	2,126,411	$	1,805,971
Interest on debt securities available for sale	53,201		50,599		163,595		155,755
Interest on debt securities held to maturity	16,110		6,994		41,598		20,454
Interest on trading account assets	833		6,247		2,507		26,349
Interest and dividends on other earning assets	17,449		14,888		44,240		41,511
Total interest income	839,063		702,612		2,378,351		2,050,040
Interest expense:
Interest on deposits	139,898		75,083		353,568		211,301
Interest on FHLB and other borrowings	37,131		29,904		93,799		71,422
Interest on federal funds purchased and securities sold under agreements to repurchase	3,169		4,623		5,104		16,462
Interest on other short-term borrowings	579		3,641		1,490		24,233
Total interest expense	180,777		113,251		453,961		323,418
Net interest income	658,286		589,361		1,924,390		1,726,622
Provision for loan losses	94,964		103,434		243,273		228,858
Net interest income after provision for loan losses	563,322		485,927		1,681,117		1,497,764
Noninterest income:
Service charges on deposit accounts	60,325		55,953		175,067		166,040
Card and merchant processing fees	44,219		32,297		127,945		94,749
Retail investment sales	28,286		26,817		88,176		82,876
Money transfer income	23,441		24,881		68,049		77,408
Investment banking and advisory fees	13,956		30,500		62,398		78,744
Corporate and correspondent investment sales	12,490		5,145		40,901		26,249
Asset management fees	11,143		10,336		32,902		30,162
Mortgage banking	6,717		3,450		23,078		9,636
Bank owned life insurance	4,597		4,322		13,187		12,711
Investment securities gains, net	—		3,033		—		3,033
Other	53,285		61,060		154,600		167,198
Total noninterest income	258,459		257,794		786,303		748,806
Noninterest expense:
Salaries, benefits and commissions	292,679		279,384		868,971		835,825
Professional services	68,403		64,775		197,625		187,422
Equipment	63,739		60,656		190,759		184,691
Net occupancy	42,514		42,227		125,607		125,568
Money transfer expense	16,120		15,938		46,143		50,069
Amortization of intangibles	1,170		2,525		3,933		7,575
Securities impairment:
Other-than-temporary impairment	418		—		989		242
Less: non-credit portion recognized in other comprehensive income	135		—		397		—
Total securities impairment	283		—		592		242
Other	120,602		108,457		314,338		304,367
Total noninterest expense	605,510		573,962		1,747,968		1,695,759
Net income before income tax expense	216,271		169,759		719,452		550,811
Income tax expense	41,756		39,308		151,849		142,097
Net income	174,515		130,451		567,603		408,714
Less: net income attributable to noncontrolling interests	426		584		1,482		1,458
Net income attributable to BBVA Compass Bancshares, Inc.	174,089		129,867		566,121		407,256
Less: preferred stock dividends	4,576		3,786		12,699		11,034
Net income attributable to common shareholder	$	169,513	$	126,081	$	553,422	$	396,222

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

8

BBVA COMPASS BANCSHARES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)
	Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017
	(In Thousands)
Net income	$	174,515		$	130,451		$	567,603		$	408,714
Other comprehensive income, net of tax:
Net unrealized (losses) gains arising during period from debt securities available for sale	(31,189		)	(646		)	(106,320		)	38,919
Less: reclassification adjustment for net gains on sale of debt securities available for sale in net income	—			1,911			—			1,911
Net change in net unrealized holding (losses) gains on debt securities available for sale	(31,189		)	(2,557		)	(106,320		)	37,008
Change in unamortized net holding losses on debt securities held to maturity	1,989			999			6,522			2,540
Unamortized unrealized net holding losses on debt securities available for sale transferred to debt securities held to maturity	—			—			(30,487		)	—
Less: non-credit related impairment on debt securities held to maturity	103			—			303			—
Change in unamortized non-credit related impairment on debt securities held to maturity	208			251			623			778
Net change in unamortized holding losses on debt securities held to maturity	2,094			1,250			(23,645		)	3,318
Unrealized holding gains (losses) arising during period from cash flow hedge instruments	10,996			855			19,340			(9,172		)
Change in defined benefit plans	—			—			(3,379		)	(485		)
Other comprehensive (loss) income, net of tax	(18,099		)	(452		)	(114,004		)	30,669
Comprehensive income	156,416			129,999			453,599			439,383
Less: comprehensive income attributable to noncontrolling interests	426			584			1,482			1,458
Comprehensive income attributable to BBVA Compass Bancshares, Inc.	$	155,990		$	129,415		$	452,117		$	437,925

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

9

BBVA COMPASS BANCSHARES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY (Unaudited)
	Preferred Stock		Common Stock		Surplus			Accumulated Deficit			Accumulated Other Comprehensive Loss			Non-Controlling Interests			Total Shareholder’s Equity
	(In Thousands)
Balance, December 31, 2016	$	229,475	$	2,230	$	14,985,673		$	(2,327,440	)	$	(168,252	)	$	29,021		$	12,750,707
Net income	—		—		—			407,256			—			1,458			408,714
Other comprehensive income, net of tax	—		—		—			—			30,669			—			30,669
Preferred stock dividends	—		—		(11,034		)	—			—			(1,037		)	(12,071		)
Common stock dividends	—		—		(60,000		)	—			—			—			(60,000		)
Capital contribution	—		—		—			—			—			111			111
Vesting of restricted stock	—		—		(1,538		)	—			—			—			(1,538		)
Restricted stock retained to cover taxes	—		—		(689		)	—			—			—			(689		)
Balance, September 30, 2017	$	229,475	$	2,230	$	14,912,412		$	(1,920,184	)	$	(137,583	)	$	29,553		$	13,115,903
Balance, December 31, 2017	$	229,475	$	2,230	$	14,818,608		$	(1,868,659	)	$	(197,405	)	$	29,061		$	13,013,310
Cumulative effect from adoption of ASU 2016-01	—		—		—			13			(13		)	—			—
Balance, January 1, 2018	$	229,475	$	2,230	$	14,818,608		$	(1,868,646	)	$	(197,418	)	$	29,061		$	13,013,310
Net income	—		—		—			566,121			—			1,482			567,603
Other comprehensive loss, net of tax	—		—		—			—			(114,004		)	—			(114,004		)
Preferred stock dividends	—		—		(12,699		)	—			—			(1,036		)	(13,735		)
Common stock dividends	—		—		(110,000		)	—			—			—			(110,000		)
Capital contribution	—		—		—			—			—			25			25
Vesting of restricted stock	—		—		(712		)	—			—			—			(712		)
Balance, September 30, 2018	$	229,475	$	2,230	$	14,695,197		$	(1,302,525	)	$	(311,422	)	$	29,532		$	13,342,487

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

10

BBVA COMPASS BANCSHARES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
	Nine Months Ended September 30,
	2018			2017
	(In Thousands)
Operating Activities:
Net income	$	567,603		$	408,714
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	183,839			222,467
Securities impairment	592			242
Amortization of intangibles	3,933			7,575
Accretion of discount, loan fees and purchase market adjustments, net	(48,771		)	(11,346		)
Net change in FDIC indemnification liability	—			22
Gain on termination of FDIC shared loss agreement	—			(1,779		)
Provision for loan losses	243,273			228,858
Net change in trading account assets	3,747			119,641
Net change in trading account liabilities	61,599			(66,800		)
Originations and purchases of mortgage loans held for sale	(486,143		)	(469,417		)
Sale of mortgage loans held for sale	494,542			516,069
Deferred tax (benefit) expense	(949		)	31,200
Investment securities gains, net	—			(3,033		)
Net (gain) loss on sale of premises and equipment	(194		)	2,468
Gain on sale of mortgage loans held for sale	(14,858		)	(19,178		)
Net (gain) loss on sale of other real estate and other assets	(122		)	1,606
Increase in other assets	(171,203		)	(193,377		)
Increase in other liabilities	23,883			7,059
Net cash provided by operating activities	860,771			780,991
Investing Activities:
Proceeds from sales of debt securities available for sale	—			210,906
Proceeds from prepayments, maturities and calls of debt securities available for sale	2,749,439			1,794,274
Purchases of debt securities available for sale	(2,947,622		)	(2,585,952		)
Proceeds from sales of equity securities	640,662			288,360
Purchases of equity securities	(648,083		)	(316,262		)
Proceeds from prepayments, maturities and calls of debt securities held to maturity	267,913			137,480
Purchases of debt securities held to maturity	(709,510		)	(6,233		)
Proceeds from sales of trading securities	—			2,762,293
Purchases of trading securities	—			(309,438		)
Net change in loan portfolio	(3,058,583		)	(604,297		)
Proceeds from sales of loans	46,055			175,259
Purchases of premises and equipment	(90,163		)	(81,590		)
Proceeds from sales of premises and equipment	3,604			2,064
Payments to FDIC for covered assets	—			(2,832		)
Net cash paid to the FDIC for termination of shared loss agreement	—			(131,603		)
Proceeds from settlement of BOLI policies	4,321			3,976
Cash payments for premiums of BOLI policies	(26		)	(27		)
Proceeds from sales of other real estate owned	15,943			22,650
Net cash (used in) provided by investing activities	(3,726,050		)	1,359,028
Financing Activities:
Net increase (decrease) in demand deposits, NOW accounts and savings accounts	326,314			(119,583		)
Net increase in time deposits	809,149			44,704
Net increase in federal funds purchased and securities sold under agreements to repurchase	58,413			5,709
Net increase (decrease) in other short-term borrowings	50,718			(2,475,438		)
Proceeds from FHLB and other borrowings	17,273,916			9,245,563
Repayment of FHLB and other borrowings	(16,130,158		)	(8,277,477		)
Capital contribution for non-controlling interest	25			111
Vesting of restricted stock	(712		)	(1,538		)
Restricted stock grants retained to cover taxes	—			(689		)
Common dividends paid	(110,000		)	(60,000		)
Preferred dividends paid	(13,735		)	(12,071		)
Net cash provided by (used in) financing activities	2,263,930			(1,650,709		)
Net (decrease) increase in cash, cash equivalents and restricted cash	(601,349		)	489,310
Cash, cash equivalents and restricted cash at beginning of year	4,270,950			3,419,488
Cash, cash equivalents and restricted cash at end of period	$	3,669,601		$	3,908,798

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

11

BBVA COMPASS BANCSHARES, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(1) Basis of Presentation

General

The accounting and reporting policies of the Company and the methods of applying those policies that materially affect the consolidated financial statements conform with U.S. GAAP and with general financial services industry practices. The accompanying unaudited consolidated financial statements include the accounts of BBVA Compass Bancshares, Inc. and its subsidiaries and have been prepared in conformity with U.S. GAAP for interim financial information and in accordance with the instructions to Quarterly Report on Form 10-Q and Article 10 of Regulation S-X as promulgated by the Securities and Exchange Commission. In the opinion of management, all adjustments, consisting of normal and recurring items, necessary for the fair presentation of the condensed consolidated financial statements have been included. Operating results for the three and nine months ended September 30, 2018, are not necessarily indicative of the results that may be expected for the year ended December 31, 2018. These interim financial statements should be read in conjunction with the consolidated financial statements and notes thereto in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017.

The Company has evaluated subsequent events for potential recognition and disclosure through the filing date of this Quarterly Report on Form 10-Q to determine if either recognition or disclosure of significant events or transactions is required.

Use of Estimates in the Preparation of Consolidated Financial Statements

The preparation of consolidated financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period, the most significant of which relate to the allowance for loan losses, goodwill impairment, fair value measurements and income taxes. Actual results could differ from those estimates.

Correction of Accounting Error

During the nine months ended September 30, 2018, income tax expense included $11.4 million of income tax expense related to the correction of an error in prior periods that resulted from an incorrect calculation of the proportional amortization of the Company's Low Income Housing Tax Credit investments. This error primarily related to 2017 and was corrected in the second quarter of 2018.

The Company has evaluated the effect of this correction on prior interim and annual periods' consolidated financial statements in accordance with the guidance provided by SEC Staff Accounting Bulletin No. 108, codified as SAB Topic 1.N, Considering the Effects of Prior Year Misstatements When Quantifying Misstatements in Current Year Financial Statements, and concluded that no prior annual period is materially misstated. In addition, the Company has considered the effect of this correction on the Company's nine months ended September 30, 2018 financial results and forecasted annual results of operations for the year ended December 31, 2018, and concluded that the impact on these periods is not material.

Recently Adopted Accounting Standards

Revenue from Contracts with Customers

In May 2014, the FASB released ASU 2014-09, Revenue from Contracts with Customers. The core principle of this codified guidance requires an entity to recognize revenue upon the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Because the guidance does not apply to revenue associated with financial instruments, including loans and securities accounted for under other U.S. GAAP, the new revenue recognition guidance did not have a material impact on the elements of the Company's statement of income most closely associated with financial instruments, including securities gains, interest income and interest expense.

On January 1, 2018, the Company adopted the amendments to the revenue recognition principles utilizing a modified retrospective transition method applied to all contracts with customers outstanding upon adoption. Results for reporting

12

periods beginning after January 1, 2018, are presented in accordance with the amendments to the revenue recognition principles, while prior period amounts have not been adjusted and continue to be presented in accordance with our historical accounting policies. The Company's implementation efforts include the identification of revenue within the scope of the guidance, as well as the evaluation of revenue contracts. The implementation of amendments to the revenue recognition standard had no impact on the measurement or recognition of revenue of prior periods. The Company did identify a prospective change in presentation of underwriting revenue and expenses, which will be shown gross in investment banking and advisory fees and other noninterest expense pursuant to the new requirements. The net quantitative impact of this presentation change to noninterest income and noninterest expense is immaterial and did not affect net income.

See Note 12, Revenue from Contracts with Customers, for the required quantitative and qualitative disclosures in accordance with this ASU.

Recognition and Measurement of Financial Assets and Liabilities

In January 2016, the FASB issued ASU 2016-01, Recognition and Measurement of Financial Assets and Liabilities. The amendments in this ASU revise an entity's accounting related to the classification and measurement of investments in equity securities and the presentation of certain fair value changes for financial liabilities measured at fair value. The ASU also amends certain disclosure requirements associated with the fair value of financial instruments. On January 1, 2018, the Company adopted the amendments in this ASU. Effective as of January 1, 2018, all equity securities previously classified as AFS securities were reclassified to other assets as the AFS classification is no longer permitted for equity securities under this ASU. This reclassification has been made for all periods presented. Additionally, an immaterial adjustment from accumulated other comprehensive income (loss) to accumulated deficit was made related to the unrealized gains associated with these equity securities. The remaining provisions of this ASU did not have a material impact on the Company's Consolidated Financial Statements and related disclosures upon adoption.

Included in the equity securities that were reclassified from AFS securities to other assets at January 1, 2018, was $450 million of FHLB and Federal Reserve stock carried at par that was not accounted for under ASC Topic 320 but had historically been presented in AFS securities. This reclassification has been made for all periods presented.  This reclassification was immaterial and had no effect on net income, comprehensive income, total assets, or total shareholder's equity as previously reported.

Statement of Cash Flows

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows - Classification of Certain Cash Receipts and Cash Payments, which provides guidance on eight specific cash flow issues with the objective of reducing the existing diversity in practice. Effective as of January 1, 2018, the adoption date, the Company changed the presentation of certain cash payments and receipts within its Condensed Consolidated Statements of Cash Flows. These changes were applied retrospectively to all periods presented within the statement of cash flows. For the nine months ended September 30, 2017, the Company reclassified an immaterial amount of proceeds from the settlement of bank-owned life insurance policies and premiums paid for bank owned life insurance policies from operating activities to investing activities.

In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows - Restricted Cash. The amendments in this ASU require that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. The Company adopted this ASU on January 1, 2018. The amendments in this ASU were applied retrospectively to all periods presented within the statement of cash flows. The implementation of this guidance resulted in a change in presentation of the Company's Condensed Consolidated Statement of Cash Flows and additional disclosures surrounding restricted cash balances. See Note 10, Supplemental Disclosure for Statement of Cash Flows, for the required disclosures in accordance with this ASU.

Retirement Benefits

In March 2017, the FASB issued ASU 2017-07, Compensation - Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. The amendments in this ASU require that an employer disaggregate the service cost component from the other components of net benefit cost. The amendments also provide explicit guidance on how to present the service cost component and the other components

13

of net benefit cost in the income statement and allow only the service cost component of net benefit cost to be eligible for capitalization. The Company adopted this ASU on January 1, 2018. The adoption of this standard did not have a material impact on the financial condition or results of operations of the Company.

Income Taxes

In March 2018, the FASB issued ASU 2018-05, Income Taxes (Topic 740): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118. The amendments in this ASU codified into existing U.S. GAAP the SEC Staff views expressed in Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act which allows companies to record provisional amounts during a measurement period not to extend beyond one year of the enactment date. Since the Tax Cuts and Jobs Act was enacted late in 2017, the Company expects ongoing guidance, analysis, and accounting interpretations, including additional information about facts and circumstances that existed at the enactment date when the Company files its federal tax return for the tax year 2017, which could result in adjustments to the Tax Cuts and Jobs Act accounting effects recorded during 2017. The Company expects to complete its analysis within the measurement period in accordance with this ASU.

Recently Issued Accounting Standards Not Yet Adopted

Leases

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) which supersedes ASC Topic 840, Leases. Subsequently, the FASB issued ASU 2018-01 in January 2018 which provides a practical expedient for land easements and issued ASU 2018-11 in July 2018 which includes an option to recognize a cumulative effect adjustment to retained earnings in the period of adoption instead of applying the guidance to prior comparative periods. This ASU, as amended, requires lessees to recognize right-of-use assets and associated liabilities that arise from leases, with the exception of short-term leases. Subsequent accounting for leases varies depending on whether the lease is classified as an operating lease or a finance lease. This ASU, as amended, does not make significant changes to lessor accounting. There are several new qualitative and quantitative disclosures required. Upon transition, lessees and lessors have the option to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective transition approach or to apply the modified retrospective approach with an additional, optional transition method that initially applies this ASU as of the adoption date and recognizes a cumulative effect adjustment to the opening balance of retained earnings in the period of adoption.

The Company intends to adopt the ASU, as amended, on January 1, 2019 and expects to elect the transition relief provisions. The Company is currently assessing the impact of the new guidance on the Company's financial condition and results of operations. The Company will recognize right-of-use assets and lease liabilities for virtually all of its operating lease commitments. The amounts of right-of-use assets and corresponding lease liabilities, recorded upon adoption, will be based, primarily, on the present value of unpaid future minimum lease payments as of January 1, 2019. Those amounts will also be impacted by assumptions around renewals and/or extensions and the interest rate used to discount those future lease obligations. As of December 31, 2017, the Company reported approximately $369 million in minimum lease payments due under such agreements from January 1, 2019 forward. While these leases represent a majority of the leases within the scope of the standard, the lease portfolio is subject to change as a result of the execution of new leases and terminations of existing leases prior to the effective date, as well as the identification of potential embedded and other leases. The Company does not expect this ASU to have a material impact on the timing of expense recognition on its results of operations.

Credit Losses

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses, which introduces new guidance for the accounting for credit losses on instruments within its scope. The new guidance introduces an approach based on expected losses to estimate credit losses on certain types of financial instruments. It also modifies the impairment model for AFS debt securities and provides for a simplified accounting model for purchased financial assets with credit deterioration since their origination. The amendments in this ASU are effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2019. Early application of this ASU is permitted. The Company is currently assessing the impact that the adoption of this standard will have on the financial condition and results of operations of the Company.

14

Goodwill

In January 2017, the FASB issued ASU 2017-04, Intangibles -Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, which simplifies the manner in which an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test.  Under the amendments in this ASU, an entity should (1) perform its annual or interim goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount, and (2) recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value, with the understanding that the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit.  Additionally, ASU No. 2017-04 removes the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment and, if it fails such qualitative test, to perform Step 2 of the goodwill impairment test.  This ASU is effective for fiscal years beginning after December 15, 2019, and for interim periods within those fiscal years.  Early adoption is permitted, including adoption in an interim period.  The ASU should be applied using a prospective method.  The Company is currently assessing this ASU and the impact of adoption.

Premium Amortization on Purchased Callable Debt Securities

In March 2017, the FASB issued ASU 2017-08, Receivables - Nonrefundable Fees and Other Costs (Subtopic 310-20), Premium Amortization on Purchased Callable Debt Securities. The amendments in this ASU reduce the amortization period for certain callable debt securities carried at a premium and require the premium to be amortized over a period not to exceed the earliest call date. These amendments do not apply to securities carried at a discount. This ASU is effective for fiscal years beginning after December 15, 2018, and for interim periods within those fiscal years.  Early adoption is permitted.  The ASU should be applied using a modified retrospective method.  The adoption of this standard is not expected to have a material impact on the financial condition or results of operations of the Company.

Derivatives and Hedging

In August 2017, the FASB issued ASU 2017-12, Derivatives and Hedging (Topic 815), Targeted Improvements to Accounting for Hedging Activities. The amendments in this ASU better align an entity's risk management activities and financial reporting for hedging relationships through changes to both the designation and measurement guidance for qualifying hedging relationships and the presentation of hedge results. This ASU is effective for fiscal years beginning after December 15, 2018, and for interim periods within those fiscal years.  Early adoption is permitted.  

In October 2018, the FASB issued ASU 2018-16, Inclusion of the SOFR OIS Rate as a Benchmark Interest Rate for Hedge Accounting Purposes. The amendments in this ASU permit the OIS rate based on SOFR as a US benchmark interest rate for hedge accounting purposes under Topic 815. For entities that have not already adopted ASU 2017-12, the amendments in this ASU are required to be adopted concurrently with the amendments in ASU 2017-12.

The Company intends to adopt these ASU on January 1, 2019. The adoption of these standards is not expected to have a material impact on the financial condition or results of operations of the Company.

Comprehensive Income

In February 2018, the FASB issued ASU 2018-02, Income Statement - Reporting Comprehensive Income, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. The amendments in this ASU allow a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act. This ASU is effective for fiscal years beginning after December 15, 2018, and for interim periods within those fiscal years. Early adoption is permitted. The Company expects to adopt this ASU on January 1, 2019 and reclassify from accumulated other comprehensive income to retained earnings the stranded tax effects resulting from the Tax Cuts and Jobs Act.

Fair Value Measurements

In August 2018, the FASB issued ASU 2018-13, Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurements. The amendments in this ASU modify the disclosure requirements for fair value measurements in Topic 820, Fair Value Measurements. This ASU is effective for fiscal years beginning after December 15, 2019, and for interim periods within those fiscal years. Early adoption is permitted. The Company is currently assessing the impact that the adoption of this standard will have on its fair value disclosures.

15

Internal-Use Software

In August 2018, the FASB issued ASU 2018-15, Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract. The amendments in this ASU align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software and hosting arrangements that include an internal-use software license. This ASU is effective for fiscal years beginning after December 15, 2019, and for interim periods within those fiscal years. Early adoption is permitted. The Company is currently assessing the impact that the adoption of this standard will have on the financial condition and results of operations of the Company.

(2)Debt Securities Available for Sale and Debt Securities Held to Maturity

The following tables present the adjusted cost and approximate fair value of debt securities available for sale and debt securities held to maturity.

	September 30, 2018
			Gross Unrealized
	Amortized Cost		Gains		Losses		Fair Value
	(In Thousands)
Debt securities available for sale:
U.S. Treasury and other U.S. government agencies	$	5,502,415	$	255	$	181,426	$	5,321,244
Agency mortgage-backed securities	2,284,650		6,595		46,711		2,244,534
Agency collateralized mortgage obligations	3,678,204		4,140		114,208		3,568,136
States and political subdivisions	884		62		—		946
Total	$	11,466,153	$	11,052	$	342,345	$	11,134,860
Debt securities held to maturity:
Collateralized mortgage obligations:
Agency	$	1,611,937	$	55	$	32,556	$	1,579,436
Non-agency	52,508		5,706		1,064		57,150
Asset-backed securities	5,617		1,769		313		7,073
States and political subdivisions	763,255		7,729		6,870		764,114
Other	57,251		866		129		57,988
Total	$	2,490,568	$	16,125	$	40,932	$	2,465,761

	December 31, 2017
			Gross Unrealized
	Amortized Cost		Gains		Losses		Fair Value
	(In Thousands)
Debt securities available for sale:
U.S. Treasury and other U.S. government agencies	$	4,265,296	$	996	$	61,854	$	4,204,438
Agency mortgage-backed securities	2,841,584		14,312		43,096		2,812,800
Agency collateralized mortgage obligations	5,302,531		4,203		106,723		5,200,011
States and political subdivisions	2,278		105		—		2,383
Total	$	12,411,689	$	19,616	$	211,673	$	12,219,632
Debt securities held to maturity:
Non-agency collateralized mortgage obligations	$	64,140	$	5,262	$	1,605	$	67,797
Asset-backed securities	9,308		1,747		628		10,427
States and political subdivisions	911,393		3,951		12,853		902,491
Other	61,252		243		1,667		59,828
Total	$	1,046,093	$	11,203	$	16,753	$	1,040,543

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The investments held within the states and political subdivision caption of debt securities held to maturity relate to private placement transactions underwritten as loans by the Company but that meet the definition of a security within ASC Topic 320, Investments – Debt Securities.

During the nine months ended September 30, 2018, the Company transferred approximately $1.0 billion of agency collateralized mortgage backed securities from available for sale to held to maturity.

The following tables disclose the fair value and the gross unrealized losses of the Company’s available for sale debt securities and held to maturity debt securities that were in a loss position at September 30, 2018 and December 31, 2017. This information is aggregated by investment category and the length of time the individual securities have been in an unrealized loss position.

	September 30, 2018
	Securities in a loss position for less than 12 months				Securities in a loss position for 12 months or longer				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
	(In Thousands)
Debt securities available for sale:
U.S. Treasury and other U.S. government agencies	$	2,508,360	$	47,663	$	2,803,723	$	133,763	$	5,312,083	$	181,426
Agency mortgage-backed securities	223,960		2,936		1,535,204		43,775		1,759,164		46,711
Agency collateralized mortgage obligations	372,572		3,231		2,621,181		110,977		2,993,753		114,208
Total	$	3,104,892	$	53,830	$	6,960,108	$	288,515	$	10,065,000	$	342,345
Debt securities held to maturity:
Collateralized mortgage obligations:
Agency	$	602,774	$	3,275	$	857,558	$	29,281	$	1,460,332	$	32,556
Non-agency	1,164		11		14,336		1,053		15,500		1,064
Asset-backed securities	—		—		3,892		313		3,892		313
States and political subdivisions	39,295		106		277,762		6,764		317,057		6,870
Other	6,961		75		2,454		54		9,415		129
Total	$	650,194	$	3,467	$	1,156,002	$	37,465	$	1,806,196	$	40,932

17

	December 31, 2017
	Securities in a loss position for less than 12 months				Securities in a loss position for 12 months or longer				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
	(In Thousands)
Debt securities available for sale:
U.S. Treasury and other U.S. government agencies	$	2,532,439	$	28,308	$	1,325,975	$	33,546	$	3,858,414	$	61,854
Agency mortgage-backed securities	390,106		2,731		1,666,045		40,365		2,056,151		43,096
Agency collateralized mortgage obligations	1,244,416		6,522		3,297,278		100,201		4,541,694		106,723
Total	$	4,166,961	$	37,561	$	6,289,298	$	174,112	$	10,456,259	$	211,673
Debt securities held to maturity:
Non-agency collateralized mortgage obligations	$	9,776	$	25	$	22,439	$	1,580	$	32,215	$	1,605
Asset-backed securities	—		—		6,243		628		6,243		628
States and political subdivisions	236,207		4,365		341,090		8,488		577,297		12,853
Other	19,048		98		20,736		1,569		39,784		1,667
Total	$	265,031	$	4,488	$	390,508	$	12,265	$	655,539	$	16,753

As indicated in the previous tables, at September 30, 2018, the Company held certain debt securities in unrealized loss positions. The Company does not intend to sell these securities nor is it more-likely-than-not-that it will be required to sell these securities before their anticipated recovery.

The Company regularly evaluates each available for sale and held to maturity debt security in a loss position for OTTI. In its evaluation, the Company considers such factors as the length of time and the extent to which the fair value has been below cost, the financial condition of the issuer, the Company’s intent to hold the security to an expected recovery in market value and whether it is more likely than not that the Company will have to sell the security before its fair value recovers. Activity related to the credit loss component of the OTTI is recognized in earnings. The portion of OTTI related to all other factors is recognized in other comprehensive income.

Management does not believe that any individual unrealized loss in the Company’s debt securities available for sale or held to maturity portfolios, presented in the preceding tables, represents an OTTI at either September 30, 2018 or December 31, 2017, other than those noted below.

The following table discloses activity related to credit losses for debt securities where a portion of the OTTI was recognized in other comprehensive income.

	Three Months Ended   September 30,				Nine Months Ended   September 30,
	2018		2017		2018		2017
	(In Thousands)
Balance at beginning of period	$	23,133	$	22,824	$	22,824	$	22,582
Reductions for securities paid off during the period (realized)	—		—		—		—
Additions for the credit component on debt securities in which OTTI was not previously recognized	—		—		—		242
Additions for the credit component on debt securities in which OTTI was previously recognized	283		—		592		—
Balance at end of period	$	23,416	$	22,824	$	23,416	$	22,824

For the three months ended September 30, 2018, there was $283 thousand of OTTI recognized on held to maturity securities. For the nine months ended September 30, 2018 and 2017, there was $592 thousand and $242 thousand,

18

respectively, of OTTI recognized on held to maturity securities. The debt securities primarily impacted by credit impairment are held to maturity non-agency collateralized mortgage obligations.

The contractual maturities of the securities portfolios are presented in the following table.

September 30, 2018	Amortized Cost		Fair Value
	(In Thousands)
Debt securities available for sale:
Maturing within one year	$	250,057	$	249,817
Maturing after one but within five years	3,854,418		3,744,156
Maturing after five but within ten years	704,053		679,993
Maturing after ten years	694,771		648,224
	5,503,299		5,322,190
Mortgage-backed securities and collateralized mortgage obligations	5,962,854		5,812,670
Total	$	11,466,153	$	11,134,860
Debt securities held to maturity:
Maturing within one year	$	31,445	$	31,550
Maturing after one but within five years	162,215		161,649
Maturing after five but within ten years	184,420		184,269
Maturing after ten years	448,043		451,707
	826,123		829,175
Collateralized mortgage obligations	1,664,445		1,636,586
Total	$	2,490,568	$	2,465,761

(3) Loans and Allowance for Loan Losses

The following table presents the composition of the loan portfolio.

	September 30, 2018		December 31, 2017
	(In Thousands)
Commercial loans:
Commercial, financial and agricultural	$	26,656,079	$	25,749,949
Real estate – construction	2,118,492		2,273,539
Commercial real estate – mortgage	12,397,004		11,724,158
Total commercial loans	41,171,575		39,747,646
Consumer loans:
Residential real estate – mortgage	13,402,472		13,365,747
Equity lines of credit	2,709,731		2,653,105
Equity loans	308,838		363,264
Credit card	763,686		639,517
Consumer direct	2,422,208		1,690,383
Consumer indirect	3,678,769		3,164,106
Total consumer loans	23,285,704		21,876,122
Total loans	$	64,457,279	$	61,623,768

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Allowance for Loan Losses and Credit Quality

The following table, which excludes loans held for sale, presents a summary of the activity in the allowance for loan losses. The portion of the allowance that has not been identified by the Company as related to specific loan categories has been allocated to the individual loan categories on a pro rata basis for purposes of the table below:

	Commercial, Financial and Agricultural			Commercial Real Estate (1)			Residential Real Estate (2)			Consumer (3)			Covered			Total
	(In Thousands)
Three months ended September 30, 2018
Allowance for loan losses:
Beginning balance	$	431,510		$	113,246		$	98,032		$	217,212		$	—		$	860,000
Provision for loan losses	9,560			896			1,446			83,062			—			94,964
Loans charged-off	(20,142		)	(2,328		)	(5,570		)	(73,599		)	—			(101,639		)
Loan recoveries	6,167			316			3,454			12,131			—			22,068
Net charge-offs	(13,975		)	(2,012		)	(2,116		)	(61,468		)	—			(79,571		)
Ending balance	$	427,095		$	112,130		$	97,362		$	238,806		$	—		$	875,393
Three months ended September 30, 2017
Allowance for loan losses:
Beginning balance	$	427,654		$	116,819		$	108,095		$	164,384		$	—		$	816,952
Provision for loan losses	20,513			10,633			8,411			63,877			—			103,434
Loans charged-off	(21,320		)	(7,913		)	(4,290		)	(55,102		)	—			(88,625		)
Loan recoveries	6,625			235			2,401			8,097			—			17,358
Net charge-offs	(14,695		)	(7,678		)	(1,889		)	(47,005		)	—			(71,267		)
Ending balance	$	433,472		$	119,774		$	114,617		$	181,256		$	—		$	849,119
Nine Months Ended September 30, 2018
Allowance for loan losses:
Beginning balance	$	420,635		$	118,133		$	109,856		$	194,136		$	—		$	842,760
Provision (credit) for loan losses	39,397			(9,184		)	(7,339		)	220,399			—			243,273
Loan charge-offs	(42,968		)	(3,217		)	(15,123		)	(210,195		)	—			(271,503		)
Loan recoveries	10,031			6,398			9,968			34,466			—			60,863
Net (charge-offs) recoveries	(32,937		)	3,181			(5,155		)	(175,729		)	—			(210,640		)
Ending balance	$	427,095		$	112,130		$	97,362		$	238,806		$	—		$	875,393
Nine Months Ended September 30, 2017
Allowance for loan losses:
Beginning balance	$	458,580		$	116,937		$	119,484		$	143,292		$	—		$	838,293
Provision (credit) for loan losses	49,045			7,534			2,639			169,671			(31		)	228,858
Loan charge-offs	(91,943		)	(8,927		)	(16,242		)	(160,261		)	—			(277,373		)
Loan recoveries	17,790			4,230			8,736			28,554			31			59,341
Net (charge-offs) recoveries	(74,153		)	(4,697		)	(7,506		)	(131,707		)	31			(218,032		)
Ending balance	$	433,472		$	119,774		$	114,617		$	181,256		$	—		$	849,119

(1) Includes commercial real estate – mortgage and real estate – construction loans.

(2) Includes residential real estate – mortgage, equity lines of credit and equity loans.

(3) Includes credit card, consumer direct and consumer indirect loans.

20

The table below provides a summary of the allowance for loan losses and related loan balances by portfolio.

	Commercial, Financial and Agricultural		Commercial Real Estate (1)		Residential Real Estate (2)		Consumer (3)		Total
	(In Thousands)
September 30, 2018
Ending balance of allowance attributable to loans:
Individually evaluated for impairment	$	101,396	$	8,663	$	25,944	$	528	$	136,531
Collectively evaluated for impairment	325,699		103,467		71,418		238,278		738,862
Total allowance for loan losses	$	427,095	$	112,130	$	97,362	$	238,806	$	875,393
Ending balance of loans:
Individually evaluated for impairment	$	276,460	$	92,748	$	153,772	$	2,654	$	525,634
Collectively evaluated for impairment	26,379,619		14,422,748		16,267,269		6,862,009		63,931,645
Total loans	$	26,656,079	$	14,515,496	$	16,421,041	$	6,864,663	$	64,457,279
December 31, 2017
Ending balance of allowance attributable to loans:
Individually evaluated for impairment	$	61,705	$	9,864	$	30,613	$	2,203	$	104,385
Collectively evaluated for impairment	358,930		108,269		79,243		191,933		738,375
Total allowance for loan losses	$	420,635	$	118,133	$	109,856	$	194,136	$	842,760
Ending balance of loans:
Individually evaluated for impairment	$	307,680	$	85,180	$	172,857	$	3,577	$	569,294
Collectively evaluated for impairment	25,442,269		13,912,517		16,209,259		5,490,429		61,054,474
Total loans	$	25,749,949	$	13,997,697	$	16,382,116	$	5,494,006	$	61,623,768

(1) Includes commercial real estate – mortgage and real estate – construction loans.

(2) Includes residential real estate – mortgage, equity lines of credit and equity loans.

(3) Includes credit card, consumer direct and consumer indirect loans.

The following tables present information on individually evaluated impaired loans, by loan class.

	September 30, 2018
	Individually Evaluated Impaired Loans With No Recorded Allowance						Individually Evaluated Impaired Loans With a Recorded Allowance
	Recorded Investment		Unpaid Principal Balance		Allowance		Recorded Investment		Unpaid Principal Balance		Allowance
	(In Thousands)
Commercial, financial and agricultural	$	78,029	$	108,460	$	—	$	198,431	$	217,774	$	101,396
Real estate – construction	—		—		—		12,172		12,489		1,008
Commercial real estate – mortgage	34,149		36,372		—		46,427		51,367		7,655
Residential real estate – mortgage	—		—		—		103,599		103,599		8,736
Equity lines of credit	—		—		—		16,375		16,379		13,797
Equity loans	—		—		—		33,798		34,475		3,411
Credit card	—		—		—		—		—		—
Consumer direct	—		—		—		2,144		2,144		30
Consumer indirect	—		—		—		510		510		498
Total loans	$	112,178	$	144,832	$	—	$	413,456	$	438,737	$	136,531

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	December 31, 2017
	Individually Evaluated Impaired Loans With No Recorded Allowance						Individually Evaluated Impaired Loans With a Recorded Allowance
	Recorded Investment		Unpaid Principal Balance		Allowance		Recorded Investment		Unpaid Principal Balance		Allowance
	(In Thousands)
Commercial, financial and agricultural	$	142,908	$	175,743	$	—	$	164,772	$	175,512	$	61,705
Real estate – construction	2,849		2,858		—		130		130		7
Commercial real estate – mortgage	35,140		36,415		—		47,061		55,122		9,857
Residential real estate – mortgage	—		—		—		117,751		117,751		10,214
Equity lines of credit	—		—		—		19,183		19,188		16,021
Equity loans	—		—		—		35,923		36,765		4,378
Credit card	—		—		—		—		—		—
Consumer direct	—		—		—		2,545		2,545		1,254
Consumer indirect	—		—		—		1,032		1,032		949
Total loans	$	180,897	$	215,016	$	—	$	388,397	$	408,045	$	104,385

The following tables present information on individually evaluated impaired loans, by loan class.

	Three Months Ended September 30, 2018				Three Months Ended September 30, 2017
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
	(In Thousands)
Commercial, financial and agricultural	$	286,815	$	29	$	348,075	$	191
Real estate – construction	12,182		1		4,230		2
Commercial real estate – mortgage	80,779		238		83,568		232
Residential real estate – mortgage	105,743		660		115,267		671
Equity lines of credit	16,885		184		20,845		219
Equity loans	33,836		295		37,085		323
Credit card	—		—		—		—
Consumer direct	923		9		2,599		11
Consumer indirect	550		1		1,355		2
Total loans	$	537,713	$	1,417	$	613,024	$	1,651
	Nine Months Ended September 30, 2018				Nine Months Ended September 30, 2017
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
	(In Thousands)
Commercial, financial and agricultural	$	268,037	$	622	$	472,639	$	743
Real estate – construction	10,060		5		1,811		6
Commercial real estate – mortgage	82,350		648		69,304		852
Residential real estate – mortgage	109,262		2,029		115,622		1,986
Equity lines of credit	17,833		571		22,151		671
Equity loans	34,814		897		38,711		997
Credit card	—		—		—		—
Consumer direct	2,197		24		1,320		22
Consumer indirect	707		4		1,706		8
Total loans	$	525,260	$	4,800	$	723,264	$	5,285

Detailed information on the Company's allowance for loan losses methodology and the Company's impaired loan policy are included in the Notes to the Company's Consolidated Financial Statements for the year ended December 31, 2017.

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The Company monitors the credit quality of its commercial portfolio using an internal dual risk rating, which considers both the obligor and the facility. The obligor risk ratings are defined by ranges of default probabilities of the borrowers, through internally assigned letter grades (AAA through D2) and the facility risk ratings are defined by ranges of the loss given default. The combination of those two approaches results in the assessment of the likelihood of loss and it is mapped to the regulatory classifications. The Company assigns internal risk ratings at loan origination and at regular intervals subsequent to origination. Loan review intervals are dependent on the size and risk grade of the loan, and are generally conducted at least annually. Additional reviews are conducted when information affecting the loan’s risk grade becomes available. The general characteristics of the risk grades are as follows:

• The Company’s internally assigned letter grades “AAA” through “B-” correspond to the regulatory classification “Pass.” These loans do not have any identified potential or well-defined weaknesses and have a high likelihood of orderly repayment. Exceptions exist when either the facility is fully secured by a CD and held at the Company or the facility is secured by properly margined and controlled marketable securities.

• Internally assigned letter grades “CCC+” through “CCC” correspond to the regulatory classification “Special Mention.” Loans within this classification have potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or in the institution’s credit position at some future date. Special mention loans are not adversely classified and do not expose an institution to sufficient risk to warrant adverse classification.

• Internally assigned letter grades “CCC-” through “D1” correspond to the regulatory classification “Substandard.” A loan classified as substandard is inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any. Substandard loans have a well-defined weakness or weaknesses that jeopardize the liquidation of the loan. They are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected.

• The internally assigned letter grade “D2” corresponds to the regulatory classification “Doubtful.” Loans classified as doubtful have all the weaknesses inherent in a loan classified as substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable or improbable.

The Company considers payment history as the best indicator of credit quality for the consumer portfolio. Nonperforming loans in the tables below include loans classified as nonaccrual, loans 90 days or more past due and loans modified in a TDR 90 days or more past due.

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The following tables, which exclude loans held for sale, illustrate the credit quality indicators associated with the Company’s loans, by loan class.

	Commercial
	September 30, 2018
	Commercial, Financial and Agricultural		Real Estate - Construction		Commercial Real Estate - Mortgage
	(In Thousands)
Pass	$	25,546,766	$	2,102,672	$	11,968,045
Special Mention	473,162		345		243,144
Substandard	523,901		15,475		173,044
Doubtful	112,250		—		12,771
	$	26,656,079	$	2,118,492	$	12,397,004

	December 31, 2017
	Commercial, Financial and Agricultural		Real Estate - Construction		Commercial Real Estate - Mortgage
	(In Thousands)
Pass	$	24,387,737	$	2,257,659	$	11,309,484
Special Mention	614,006		12,401		215,076
Substandard	623,672		3,479		187,049
Doubtful	124,534		—		12,549
	$	25,749,949	$	2,273,539	$	11,724,158

	Consumer
	September 30, 2018
	Residential Real Estate – Mortgage		Equity Lines of Credit		Equity Loans		Credit Card		Consumer Direct		Consumer Indirect
	(In Thousands)
Performing	$	13,238,758	$	2,673,420	$	298,071	$	750,529	$	2,410,036	$	3,660,262
Nonperforming	163,714		36,311		10,767		13,157		12,172		18,507
	$	13,402,472	$	2,709,731	$	308,838	$	763,686	$	2,422,208	$	3,678,769

	December 31, 2017
	Residential Real Estate -Mortgage		Equity Lines of Credit		Equity Loans		Credit Card		Consumer Direct		Consumer Indirect
	(In Thousands)
Performing	$	13,182,760	$	2,616,825	$	350,531	$	627,588	$	1,681,246	$	3,147,223
Nonperforming	182,987		36,280		12,733		11,929		9,137		16,883
	$	13,365,747	$	2,653,105	$	363,264	$	639,517	$	1,690,383	$	3,164,106

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The following tables present an aging analysis of the Company’s past due loans, excluding loans classified as held for sale.

	September 30, 2018
	30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due		Nonaccrual		Accruing TDRs		Total Past Due and Impaired		Not Past Due or Impaired		Total
	(In Thousands)
Commercial, financial and agricultural	$	38,512	$	16,416	$	9,609	$	290,239	$	522	$	355,298	$	26,300,781	$	26,656,079
Real estate – construction	3,252		5,278		532		12,882		121		22,065		2,096,427		2,118,492
Commercial real estate – mortgage	31,792		18,349		502		104,976		3,753		159,372		12,237,632		12,397,004
Residential real estate – mortgage	87,426		30,373		3,697		159,721		59,082		340,299		13,062,173		13,402,472
Equity lines of credit	13,556		4,298		1,186		35,125		—		54,165		2,655,566		2,709,731
Equity loans	2,082		1,042		241		10,378		28,383		42,126		266,712		308,838
Credit card	8,601		6,449		13,157		—		—		28,207		735,479		763,686
Consumer direct	30,153		14,455		8,988		3,184		1,189		57,969		2,364,239		2,422,208
Consumer indirect	86,310		23,587		6,853		11,654		—		128,404		3,550,365		3,678,769
Total loans	$	301,684	$	120,247	$	44,765	$	628,159	$	93,050	$	1,187,905	$	63,269,374	$	64,457,279

	December 31, 2017
	30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due		Nonaccrual		Accruing TDRs		Total Past Due and Impaired		Not Past Due or Impaired		Total
	(In Thousands)
Commercial, financial and agricultural	$	14,804	$	3,753	$	18,136	$	310,059	$	1,213	$	347,965	$	25,401,984	$	25,749,949
Real estate – construction	12,293		70		1,560		5,381		101		19,405		2,254,134		2,273,539
Commercial real estate – mortgage	10,473		3,270		927		111,982		4,155		130,807		11,593,351		11,724,158
Residential real estate – mortgage	69,474		34,440		8,572		173,843		64,898		351,227		13,014,520		13,365,747
Equity lines of credit	10,956		7,556		2,259		34,021		237		55,029		2,598,076		2,653,105
Equity loans	4,170		657		995		11,559		30,105		47,486		315,778		363,264
Credit card	6,710		4,804		11,929		—		—		23,443		616,074		639,517
Consumer direct	19,766		7,020		6,712		2,425		534		36,457		1,653,926		1,690,383
Consumer indirect	92,017		26,460		7,288		9,595		—		135,360		3,028,746		3,164,106
Total loans	$	240,663	$	88,030	$	58,378	$	658,865	$	101,243	$	1,147,179	$	60,476,589	$	61,623,768

Policies related to the Company's nonaccrual and past due loans are included in the Company's Consolidated Financial Statements for the year ended December 31, 2017.

It is the Company’s policy to classify TDRs that are not accruing interest as nonaccrual loans. It is also the Company’s policy to classify TDR past due loans that are accruing interest as TDRs and not according to their past due status. The tables above reflect this policy.

Modifications to borrowers' loan agreements are considered TDRs if a concession is granted for economic or legal reasons related to a borrower’s financial difficulties that otherwise would not be considered. Within each of the Company’s loan classes, TDRs typically involve modification of the loan interest rate to a below market rate or an extension or deferment of the loan. During the three months ended September 30, 2018, $1.9 million of TDR modifications included an interest rate concession and $106.5 million of TDR modifications resulted from modifications

25

to the loan’s structure. During the three months ended September 30, 2017, $3.3 million of TDR modifications included an interest rate concession and $102.3 million of TDR modifications resulted from modifications to the loan’s structure. During the nine months ended September 30, 2018, $25.3 million of TDR modifications included an interest rate concession and $113.0 million of TDR modifications resulted from modifications to the loan’s structure. During the nine months ended September 30, 2017, $5.2 million of TDR modifications included an interest rate concession and $212.5 million of TDR modifications resulted from modifications to the loan’s structure.

The following tables present an analysis of the types of loans that were restructured and classified as TDRs, excluding loans classified as held for sale.

	Three Months Ended September 30, 2018			Three Months Ended September 30, 2017
	Number of Contracts	Post-Modification Outstanding Recorded Investment		Number of Contracts	Post-Modification Outstanding Recorded Investment
	(Dollars in Thousands)
Commercial, financial and agricultural	1	$	104,065	11	$	103,223
Real estate – construction	—	—		—	—
Commercial real estate – mortgage	1	679		—	—
Residential real estate – mortgage	17	2,025		9	1,665
Equity lines of credit	3	80		7	368
Equity loans	7	464		10	342
Credit card	—	—		—	—
Consumer direct	2	1,098		—	—
Consumer indirect	—	—		1	5
Covered loans	—	—		—	—
	Nine Months Ended September 30, 2018			Nine Months Ended September 30, 2017
	Number of Contracts	Post-Modification Outstanding Recorded Investment		Number of Contracts	Post-Modification Outstanding Recorded Investment
	(Dollars in Thousands)
Commercial, financial and agricultural	5	$	121,263	24	$	205,387
Real estate – construction	2	307		—	—
Commercial real estate – mortgage	3	2,313		2	502
Residential real estate – mortgage	50	10,862		44	8,763
Equity lines of credit	7	197		34	1,708
Equity loans	19	2,235		26	1,031
Credit card	—	—		—	—
Consumer direct	3	1,104		—	—
Consumer indirect	—	—		14	209
Covered loans	—	—		2	103

Charge-offs and changes to the allowance related to modifications classified as TDRs were approximately $(100) thousand and $11.2 million for the three and nine months ended September 30, 2018, respectively. Charge-offs and changes to the allowance related to modifications classified as TDRs were approximately $20.3 million and $26.1 million for the three and nine months ended September 30, 2017.

The Company considers TDRs aged 90 days or more past due, charged off or classified as nonaccrual subsequent to modification, where the loan was not classified as a nonperforming loan at the time of modification, as subsequently defaulted.

26

The following tables provide a summary of initial subsequent defaults that occurred within one year of the restructure date. The table excludes loans classified as held for sale as of period-end and includes loans no longer in default as of period-end.

	Three Months Ended September 30, 2018			Three Months Ended September 30, 2017
	Number of Contracts	Recorded Investment at Default		Number of Contracts	Recorded Investment at Default
	(Dollars in Thousands)
Commercial, financial and agricultural	—	$	—	—	$	—
Real estate – construction	—	—		—	—
Commercial real estate – mortgage	—	—		—	—
Residential real estate – mortgage	2	327		—	—
Equity lines of credit	—	—		—	—
Equity loans	—	—		—	—
Credit card	—	—		—	—
Consumer direct	—	—		—	—
Consumer indirect	—	—		—	—
Covered loans	—	—		—	—
	Nine Months Ended September 30, 2018			Nine Months Ended September 30, 2017
	Number of Contracts	Recorded Investment at Default		Number of Contracts	Recorded Investment at Default
	(Dollars in Thousands)
Commercial, financial and agricultural	—	$	—	—	$	—
Real estate – construction	—	—		—	—
Commercial real estate – mortgage	—	—		—	—
Residential real estate – mortgage	4	474		1	505
Equity lines of credit	—	—		—	—
Equity loans	3	167		2	51
Credit card	—	—		—	—
Consumer direct	—	—		—	—
Consumer indirect	—	—		1	22
Covered loans	—	—		—	—

All commercial and consumer loans modified in a TDR are considered to be impaired, even if they maintain their accrual status.

At September 30, 2018 and December 31, 2017, there were $25.7 million and $15.9 million, respectively, of commitments to lend additional funds to borrowers whose terms have been modified in a TDR.

Foreclosure Proceedings

OREO totaled $19 million and $17 million at September 30, 2018 and December 31, 2017, respectively. OREO included $15 million and $12 million of foreclosed residential real estate properties at September 30, 2018 and December 31, 2017, respectively. As of September 30, 2018 and December 31, 2017, there were $62 million and $57 million, respectively, of loans secured by residential real estate properties for which formal foreclosure proceedings were in process.

(4)Loan Sales and Servicing

Loans held for sale were $74 million and $67 million at September 30, 2018 and December 31, 2017, respectively. Loans held for sale at September 30, 2018 and December 31, 2017 were comprised entirely of residential real estate — mortgage loans.

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The following table summarizes the Company's activity in the loans held for sale portfolio and loan sales, excluding activity related to loans originated for sale in the secondary market.

	Three Months Ended September 30,				Nine Months Ended September 30,
	2018		2017		2018		2017
	(In Thousands)
Loans transferred from held for investment to held for sale	$	—	$	—	$	—	$	—
Charge-offs on loans recognized at transfer from held for investment to held for sale	—		—		—		—
Loans and loans held for sale sold	37,580		—		46,055		175,088

The following table summarizes the Company's sales of loans originated for sale in the secondary market.

	Three Months Ended September 30,				Nine Months Ended September 30,
	2018		2017		2018		2017
	(In Thousands)
Residential real estate loans originated for sale in the secondary market sold (1)	$	148,967	$	164,075	$	479,684	$	496,891
Net gains recognized on sales of residential real estate loans originated for sale in the secondary market (2)	5,409		7,322		14,858		19,178
Servicing fees recognized (3)	2,544		2,461		8,181		8,025

(1) The Company has retained servicing responsibilities for all loans sold that were originated for sale in the secondary market.

(2) Net gains were recorded in mortgage banking income in the Company's Unaudited Condensed Consolidated Statements of Income.

(3) Beginning in 2018, recorded as a component of mortgage banking in the Company's Unaudited Condensed Consolidated Statements of Income. 2017 servicing fees are recorded as a component of other noninterest income in the Company's Unaudited Condensed Consolidated Statements of Income.

The following table provides the recorded balance of loans sold with retained servicing and the related MSRs.

	September 30, 2018		December 31, 2017
	(In Thousands)
Recorded balance of residential real estate mortgage loans sold with retained servicing (1)	$	4,587,189	$	4,635,334
MSRs (2)	55,312		49,597

(1) These loans are not included in loans on the Company's Unaudited Condensed Consolidated Balance Sheets.

(2) Recorded under the fair value method and included in other assets on the Company's Unaudited Condensed Consolidated Balance Sheets.

28

The fair value of MSRs is significantly affected by mortgage interest rates available in the marketplace, which influence mortgage loan prepayment speeds. In general, during periods of declining rates, the fair value of MSRs declines due to increasing prepayments attributable to increased mortgage-refinance activity. During periods of rising interest rates, the fair value of MSRs generally increases due to reduced refinance activity. The Company maintains a non-qualifying hedging strategy to manage a portion of the risk associated with changes in the fair value of the MSR portfolio.  This strategy includes the purchase of various trading securities.  The interest income, mark-to-market adjustments and gain or loss from sale activities associated with these securities are expected to economically hedge a portion of the change in the fair value of the MSR portfolio.

The following table is an analysis of the activity in the Company’s MSRs.

	Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017
	(In Thousands)
Carrying value, at beginning of period	$	54,276		$	49,398		$	49,597		$	51,428
Additions	1,594			1,729			5,266			5,328
Increase (decrease) in fair value:
Due to changes in valuation inputs or assumptions	2,533			721			9,403			(100		)
Due to other changes in fair value (1)	(3,091		)	(3,298		)	(8,954		)	(8,106		)
Carrying value, at end of period	$	55,312		$	48,550		$	55,312		$	48,550

(1) Represents the realization of expected net servicing cash flows, expected borrower repayments and the passage of time.

See Note 8, Fair Value Measurements, for additional disclosures related to the assumptions and estimates used in determining fair value of MSRs.

At September 30, 2018 and December 31, 2017, the sensitivity of the current fair value of the residential MSRs to immediate 10% and 20% adverse changes in key economic assumptions are included in the following table:

	September 30, 2018			December 31, 2017
	(Dollars in Thousands)
Fair value of MSRs	$	55,312		$	49,597
Composition of residential loans serviced for others:
Fixed rate mortgage loans	97.6		%	97.4		%
Adjustable rate mortgage loans	2.4			2.6
Total	100.0		%	100.0		%
Weighted average life (in years)	6.5			6.6
Prepayment speed:	9.7		%	9.7		%
Effect on fair value of a 10% increase	$	(1,507	)	$	(1,582	)
Effect on fair value of a 20% increase	(2,939		)	(3,068		)
Weighted average option adjusted spread:	7.1		%	8.2		%
Effect on fair value of a 10% increase	$	(1,769	)	$	(1,568	)
Effect on fair value of a 20% increase	(3,408		)	(3,031		)

The sensitivity calculations above are hypothetical and should not be considered to be predictive of future performance. As indicated, changes in fair value based on adverse changes in assumptions generally cannot be extrapolated because the relationship of the change in assumption to the change in fair value may not be linear. Also, in this table, the effect of an adverse variation in a particular assumption on the fair value of the MSRs is calculated without changing any other assumption; while in reality, changes in one assumption may result in changes to another, which may magnify or counteract the effect of the change.

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(5)Derivatives and Hedging

The Company is a party to derivative instruments in the normal course of business to meet the financing needs of its customers and to reduce its own exposure to fluctuations in interest rates and foreign currency exchange rates. The Company has made an accounting policy decision not to offset derivative fair value amounts under master netting agreements. See Summary of Significant Accounting Policies in the Notes to Consolidated Financial Statements in the Company's Annual Report on Form 10-K for the year ended December 31, 2017, for additional information on the Company's accounting policies related to derivative instruments and hedging activities. For derivatives cleared through central clearing houses the variation margin payments made are legally characterized as settlements of the derivatives. As a result, these variation margin payments are netted against the fair value of the respective derivative contracts in the balance sheet and related disclosures. The following table reflects the notional amount and fair value of derivative instruments included on the Company’s Unaudited Condensed Consolidated Balance Sheets on a gross basis.

	September 30, 2018						December 31, 2017
			Fair Value						Fair Value
	Notional Amount		Derivative Assets (1)		Derivative Liabilities (2)		Notional Amount		Derivative Assets (1)		Derivative Liabilities (2)
	(In Thousands)
Derivatives designated as hedging instruments:
Fair value hedges:
Interest rate swaps related to long-term debt	$	2,923,950	$	11,930	$	50,273	$	2,223,950	$	19,399	$	16,831
Total fair value hedges			11,930		50,273				19,399		16,831
Cash flow hedges:
Interest rate contracts:
Swaps related to commercial loans	5,500,000		27		56		9,075,000		325		2
Swaps related to FHLB advances	120,000		—		685		120,000		—		4,424
Foreign currency contracts:
Forwards related to currency fluctuations	6,788		485		—		3,220		—		144
Total cash flow hedges			512		741				325		4,570
Total derivatives designated as hedging instruments			$	12,442	$	51,014			$	19,724	$	21,401
Free-standing derivatives not designated as hedging instruments:
Interest rate contracts:
Forward contracts related to held for sale mortgages	$	271,674	$	686	$	179	$	141,000	$	85	$	130
Option contracts related to mortgage servicing rights	—		—		—		40,000		38		—
Interest rate lock commitments	122,862		2,136		1		114,184		2,416		—
Equity contracts:
Purchased equity option related to equity-linked CDs	519,750		20,779		—		810,011		39,791		—
Written equity option related to equity-linked CDs	452,696		—		18,316		718,428		—		35,562
Foreign exchange contracts:
Forwards and swaps related to commercial loans	469,088		3,472		1,122		358,729		291		3,501
Spots related to commercial loans	22,884		3		29		83,338		84		245
Swap associated with sale of Visa, Inc. Class B shares	129,931		—		3,248		99,826		—		2,496
Futures contracts (3)	2,416,000		—		—		1,449,000		—		—
Trading account assets and liabilities:
Interest rate contracts for customers	33,529,836		104,666		192,238		30,472,359		133,516		134,073
Foreign exchange contracts for customers	1,145,509		15,957		13,958		514,185		12,149		10,524
Total trading account assets and liabilities			120,623		206,196				145,665		144,597
Total free-standing derivative instruments not designated as hedging instruments			$	147,699	$	229,091			$	188,370	$	186,531

(1) Derivative assets, except for trading account assets that are recorded as a component of trading account assets on the Company's Unaudited Condensed Consolidated Balance Sheets, are recorded in other assets on the Company’s Unaudited Condensed Consolidated Balance Sheets.

(2) Derivative liabilities are recorded in accrued expenses and other liabilities on the Company’s Unaudited Condensed Consolidated Balance Sheets.

(3) Changes in fair value are cash settled daily; therefore, there is no ending balance at any given reporting period.

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Hedging Derivatives

The Company uses derivative instruments to manage the risk of earnings fluctuations caused by interest rate volatility. For those financial instruments that qualify and are designated as a hedging relationship, either a fair value hedge or cash flow hedge, the effect of interest rate movements on the hedged assets or liabilities will generally be offset by change in fair value of the derivative instrument.

Fair Value Hedges

The Company enters into fair value hedging relationships using interest rate swaps to mitigate the Company’s exposure to losses in value as interest rates change. Derivative instruments that are used as part of the Company’s interest rate risk management strategy include interest rate swaps that relate to the pricing of specific balance sheet assets and liabilities.

Interest rate swaps are used to convert the Company’s fixed rate long-term debt to a variable rate. The critical terms of the interest rate swaps match the terms of the corresponding hedged items. All components of each derivative instrument’s gain or loss are included in the assessment of hedge effectiveness.

The Company recognized no gains or losses for the three and nine months ended September 30, 2018 and 2017, related to hedged firm commitments no longer qualifying as a fair value hedge. At September 30, 2018, the fair value hedges had a weighted average expected remaining term of 3.6 years.

The following table reflects the change in fair value for interest rate contracts and the related hedged items as well as other gains and losses related to fair value hedges including gains and losses recognized because of hedge ineffectiveness.

		Gain (Loss) for the
	Condensed Consolidated	Three Months Ended September 30,						Nine Months Ended September 30,
	Statements of Income Caption	2018			2017			2018			2017
		(In Thousands)
Change in fair value of interest rate contracts:
Interest rate swaps hedging long term debt	Interest on FHLB and other borrowings	$	(13,181	)	$	(6,637	)	$	(63,679	)	$	(14,691	)
Hedged long term debt	Interest on FHLB and other borrowings	12,920			6,614			60,472			14,532
Other gains on interest rate contracts:
Interest and amortization related to interest rate swaps on hedged long term debt	Interest on FHLB and other borrowings	243			7,690			3,529			24,239

Cash Flow Hedges

The Company enters into cash flow hedging relationships using interest rate swaps and options, such as caps and floors, to mitigate exposure to the variability in future cash flows or other forecasted transactions associated with its floating rate assets and liabilities. The Company uses interest rate swaps and options to hedge the repricing characteristics of its floating rate commercial loans and FHLB advances. The Company also uses foreign currency forward contracts to hedge its exposure to fluctuations in foreign currency exchange rates due to a portion of money transfer expense being denominated in foreign currency. All components of each derivative instrument’s gain or loss are included in the assessment of hedge effectiveness. The initial assessment of expected hedge effectiveness is based on regression analysis. The ongoing periodic measures of hedge ineffectiveness are based on the expected change in cash flows of the hedged item caused by changes in the benchmark interest rate. There were no gains or losses reclassified from other comprehensive income because of the discontinuance of cash flow hedges related to certain forecasted transactions that are probable of not occurring for the three and nine months ended September 30, 2018 and 2017.

At September 30, 2018, cash flow hedges not terminated had a net fair value of $(229) thousand and a weighted average life of 0.5 years. Net losses of $12.8 million are expected to be reclassified to income over the next 12 months as net settlements occur. The maximum length of time over which the entity is hedging its exposure to the variability in future cash flows for forecasted transactions is 2.8 years.

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The following table presents the effect of derivative instruments designated and qualifying as cash flow hedges on the Company’s Unaudited Condensed Consolidated Balance Sheets and the Company’s Unaudited Condensed Consolidated Statements of Income.

	Gain (Loss) for the
	Three Months Ended   September 30,						Nine Months Ended   September 30,
	2018			2017			2018			2017
	(In Thousands)
Interest rate and foreign currency exchange contracts:
Net change in amount recognized in other comprehensive income	$	10,996		$	855		$	19,340		$	(9,172	)
Amount reclassified from accumulated other comprehensive income (loss) into net income	(14,033		)	(2,835		)	(36,887		)	5,043
Amount of ineffectiveness recognized in net income	78			202			443			229

Derivatives Not Designated As Hedges

Derivatives not designated as hedges include those that are entered into as either economic hedges to facilitate client needs or as part of the Company’s overall risk management strategy. Economic hedges are those that do not qualify to be treated as a fair value hedge, cash flow hedge or foreign currency hedge for accounting purposes, but are necessary to economically manage the risk exposure associated with the assets and liabilities of the Company. The Company holds a portfolio of futures, forwards and interest rate lock commitments as well as options related to its equity-linked CDs to mitigate its economic risk exposure. The Company also enters into a variety of interest rate contracts and foreign exchange contracts in its trading activities. See Note 14, Derivatives and Hedging, in the Notes to the December 31, 2017, Consolidated Financial Statements for a description of the Company's derivatives not designated as hedges.

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The net gains and losses recorded in the Company's Unaudited Condensed Consolidated Statements of Income from free-standing derivative instruments not designated as hedging instruments are summarized in the following table.

		Gain (Loss) for the
	Condensed Consolidated	Three Months Ended September 30,						Nine Months Ended September 30,
	Statements of Income Caption	2018			2017			2018			2017
		(In Thousands)
Futures contracts	Mortgage banking income  and corporate and correspondent investment sales	$	195		$	(18	)	$	400		$	(1	)
Interest rate contracts:
Forward contracts related to residential mortgage loans held for sale	Mortgage banking income	708			(46		)	553			(2,005		)
Interest rate lock commitments	Mortgage banking income	(475		)	(262		)	(281		)	531
Interest rate contracts for customers	Corporate and correspondent investment sales	8,639			5,979			28,559			21,318
Option contracts related to mortgage servicing rights	Mortgage banking income	—			(253		)	(38		)	(391		)
Equity contracts:
Purchased equity option related to equity-linked CDs	Other expense	(4,945		)	(8,921		)	(20,550		)	(14,783		)
Written equity option related to equity-linked CDs	Other expense	4,539			8,643			18,641			14,692
Foreign currency contracts:
Forward and swap contracts related to commercial loans	Other income	5,333			(13,107		)	23,717			(36,373		)
Spot contracts related to commercial loans	Other income	(2,649		)	1,620			(3,768		)	4,175
Foreign currency exchange contracts for customers	Corporate and correspondent investment sales	3,514			2,709			11,811			7,770

Derivatives Credit and Market Risks

By using derivative instruments, the Company is exposed to credit and market risk. If the counterparty fails to perform, credit risk is equal to the extent of the Company’s fair value gain in a derivative. When the fair value of a derivative instrument contract is positive, this generally indicates that the counterparty owes the Company and, therefore, creates a credit risk for the Company. When the fair value of a derivative instrument contract is negative, the Company owes the counterparty and, therefore, it has no credit risk. The Company minimizes the credit risk in derivative instruments by entering into transactions with high-quality counterparties that are reviewed periodically. Credit losses are also mitigated through collateral agreements and other contract provisions with derivative counterparties.

Market risk is the adverse effect that a change in interest rates or implied volatility rates has on the value of a financial instrument. The Company manages the market risk associated with interest rate contracts by establishing and monitoring limits as to the types and degree of risk that may be undertaken.

The Company’s derivatives activities are monitored by its Asset/Liability Committee as part of its risk-management oversight. The Company’s Asset/Liability Committee is responsible for mandating various hedging strategies that are developed through its analysis of data from financial simulation models and other internal and industry sources. The resulting hedging strategies are then incorporated into the Company’s overall interest rate risk management and trading strategies.

Entering into interest rate swap agreements and options involves not only the risk of dealing with counterparties and their ability to meet the terms of the contracts but also interest rate risk associated with unmatched positions. At September 30, 2018, interest rate swap agreements and options classified as trading were substantially matched. The Company had credit risk of $121 million related to derivative instruments in the trading account portfolio, which does not take into consideration master netting arrangements or the value of the collateral. There were no material credit losses associated with derivative instruments classified as trading for the three and nine months ended September 30,

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2018 and 2017. At September 30, 2018 and December 31, 2017, there were no material nonperforming derivative positions classified as trading.

The Company’s derivative positions designated as hedging instruments are primarily executed in the over-the-counter market. These positions at September 30, 2018, have credit risk of $12 million, which does not take into consideration master netting arrangements or the value of the collateral.

There were no credit losses associated with derivative instruments classified as nontrading for the three and nine months ended September 30, 2018 and 2017. At September 30, 2018 and December 31, 2017, there were no nonperforming derivative positions classified as nontrading.

As of September 30, 2018 and December 31, 2017, the Company had recorded the right to reclaim cash collateral of $83 million and $92 million, respectively, within other assets on the Company’s Unaudited Condensed Consolidated Balance Sheets and had recorded the obligation to return cash collateral of $38 million and $24 million, respectively, within deposits on the Company’s Unaudited Condensed Consolidated Balance Sheets.

Contingent Features

Certain of the Company’s derivative instruments contain provisions that require the Company’s debt maintain a certain credit rating from each of the major credit rating agencies. If the Company’s debt were to fall below this rating, it would be in violation of these provisions, and the counterparties to the derivative instruments could demand immediate and ongoing full overnight collateralization on derivative instruments in net liability positions. The aggregate fair value of all derivative instruments with credit-risk-related contingent features that were in a liability position on September 30, 2018, was $12 million for which the Company has collateral requirements of $12 million in the normal course of business. If the credit risk-related contingent features underlying these agreements had been triggered on September 30, 2018, the Company’s collateral requirements to its counterparties would not require any additional increases. The aggregate fair value of all derivative instruments with credit risk-related contingent features that were in a liability position on December 31, 2017, was $31 million for which the Company had collateral requirements of $30 million in the normal course of business. If the credit risk-related contingent features underlying these agreements had been triggered on December 31, 2017, the Company’s collateral requirements to its counterparties would have increased by $1 million.

Netting of Derivative Instruments

The Company is party to master netting arrangements with its financial institution counterparties for some of its derivative and hedging activities. The Company does not offset assets and liabilities under these master netting arrangements for financial statement presentation purposes. The master netting arrangements provide for single net settlement of all derivative instrument arrangements, as well as collateral, in the event of default with respect to, or termination of, any one contract with the respective counterparties. Cash collateral is usually posted by the counterparty with a net liability position in accordance with contract thresholds.

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The following table represents the Company’s total gross derivative instrument assets and liabilities subject to an enforceable master netting arrangement. The derivative instruments the Company has with its customers are not subject to an enforceable master netting arrangement.

	Gross Amounts Recognized		Gross Amounts Offset in the Condensed Consolidated Balance Sheets		Net Amount Presented in the Condensed Consolidated Balance Sheets		Financial Instruments Collateral Received/Pledged (1)		Cash Collateral Received/ Pledged (1)		Net Amount
	(In Thousands)
September 30, 2018
Derivative financial assets:
Subject to a master netting arrangement	$	108,916	$	—	$	108,916	$	—	$	35,326	$	73,590
Not subject to a master netting arrangement	51,225		—		51,225		—		—		51,225
Total derivative financial assets	$	160,141	$	—	$	160,141	$	—	$	35,326	$	124,815
Derivative financial liabilities:
Subject to a master netting arrangement	$	95,761	$	—	$	95,761	$	—	$	83,364	$	12,397
Not subject to a master netting arrangement	184,344		—		184,344		—		—		184,344
Total derivative financial liabilities	$	280,105	$	—	$	280,105	$	—	$	83,364	$	196,741
December 31, 2017
Derivative financial assets:
Subject to a master netting arrangement	$	93,409	$	—	$	93,409	$	—	$	21,423	$	71,986
Not subject to a master netting arrangement	114,685		—		114,685		—		—		114,685
Total derivative financial assets	$	208,094	$	—	$	208,094	$	—	$	21,423	$	186,671
Derivative financial liabilities:
Subject to a master netting arrangement	$	108,955	$	—	$	108,955	$	4,545	$	92,396	$	12,014
Not subject to a master netting arrangement	98,977		—		98,977		—		—		98,977
Total derivative financial liabilities	$	207,932	$	—	$	207,932	$	4,545	$	92,396	$	110,991

(1) The actual amount of collateral received/pledged is limited to the asset/liability balance and does not include excess collateral received/pledged. When excess collateral exists, the collateral shown in the table above has been allocated based on the percentage of the actual amount of collateral posted.

(6) Securities Financing Activities

Netting of Securities Purchased Under Agreements to Resell and Securities Sold Under Agreements to Repurchase

The Company has various financial assets and liabilities that are subject to enforceable master netting agreements or similar agreements. The Company's derivatives that are subject to enforceable master netting agreements or similar transactions are discussed in Note 5, Derivatives and Hedging. The Company enters into agreements under which it purchases or sells securities subject to an obligation to resell or repurchase the same or similar securities. Securities purchased under agreements to resell and securities sold under agreements to repurchase are generally accounted for as collateralized financing transactions and recorded at the amounts at which the securities were purchased or sold plus accrued interest. The securities pledged as collateral are generally U.S. Treasury securities and other U.S. government agency securities and mortgage-backed securities.

Securities purchased under agreements to resell and securities sold under agreements to repurchase are governed by a MRA. Under the terms of the MRA, all transactions between the Company and the counterparty constitute a single business relationship such that in the event of default, the nondefaulting party is entitled to set off claims and apply property held by that party in respect of any transaction against obligations owed. Any payments, deliveries, or other transfers may be applied against each other and netted. These amounts are limited to the contract asset/liability balance,

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and accordingly, do not include excess collateral received or pledged. The Company offsets the assets and liabilities under netting arrangements for the balance sheet presentation of securities purchased under agreements to resell and securities sold under agreements to repurchase provided certain criteria are met that permit balance sheet netting.

	Gross Amounts Recognized		Gross Amounts Offset in the Condensed Consolidated Balance Sheets		Net Amount Presented in the Condensed Consolidated Balance Sheets		Financial Instruments Collateral Received/Pledged (1)		Cash Collateral Received/ Pledged (1)		Net Amount
	(In Thousands)
September 30, 2018
Securities purchased under agreements to resell:
Subject to a master netting arrangement	$	855,221	$	727,500	$	127,721	$	127,721	$	—	$	—
Securities sold under agreements to repurchase:
Subject to a master netting arrangement	$	805,504	$	727,500	$	78,004	$	78,004	$	—	$	—
December 31, 2017
Securities purchased under agreements to resell:
Subject to a master netting arrangement	$	93,664	$	67,751	$	25,913	$	25,913	$	—	$	—
Securities sold under agreements to repurchase:
Subject to a master netting arrangement	$	85,632	$	67,751	$	17,881	$	17,881	$	—	$	—

(1) The actual amount of collateral received/pledged is limited to the asset/liability balance and does not include excess collateral received/pledged. When excess collateral exists, the collateral shown in the table above has been allocated based on the percentage of the actual amount of collateral posted.

Collateral Associated with Securities Financing Activities

Securities sold under agreements to repurchase are accounted for as secured borrowings. The following table presents the Company's related activity, by collateral type and remaining contractual maturity.

	Remaining Contractual Maturity of the Agreements
	Overnight and Continuous		Up to 30 days		30 - 90 days		Greater Than 90 days		Total
	(In Thousands)
September 30, 2018
Securities sold under agreements to repurchase:
U.S. Treasury and other U.S. government agencies	$	459,008	$	18,827	$	151,344	$	125,031	$	754,210
Mortgage-backed securities	—		—		51,294		—		51,294
Total	$	459,008	$	18,827	$	202,638	$	125,031	$	805,504
December 31, 2017
Securities sold under agreements to repurchase:
U.S. Treasury and other U.S. government agencies	$	4,906	$	—	$	12,900	$	4,981	$	22,787
Mortgage-backed securities	—		—		62,845		—		62,845
Total	$	4,906	$	—	$	75,745	$	4,981	$	85,632

In the event of a significant decline in fair value of the collateral pledged for the securities sold under agreements to repurchase, the Company would be required to provide additional collateral. The Company minimizes the risk by monitoring the liquidity and credit quality of the collateral, as well as the maturity profile of the transactions.

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At September 30, 2018, the fair value of collateral received related to securities purchased under agreements to resell was $875 million and the fair value of collateral pledged for securities sold under agreements to repurchase was $806 million. At December 31, 2017, the fair value of collateral received related to securities purchased under agreements to resell was $94 million and the fair value of collateral pledged for securities sold under agreements to repurchase was $91 million.

(7)Commitments, Contingencies and Guarantees

Commitments to Extend Credit & Standby and Commercial Letters of Credit

The following represents the Company’s commitments to extend credit, standby letters of credit and commercial letters of credit:

	September 30, 2018		December 31, 2017
	(In Thousands)
Commitments to extend credit	$	27,738,855	$	27,743,387
Standby and commercial letters of credit	1,273,364		1,446,903

Commitments to extend credit are agreements to lend to customers as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements.

Standby and commercial letters of credit are commitments issued by the Company to guarantee the performance of a customer to a third party. These guarantees are primarily issued to support public and private borrowing arrangements, including commercial paper, bond financing and similar transactions, and expire in decreasing amounts with terms ranging from one to four years.

The credit risk involved in issuing letters of credit and commitments is essentially the same as that involved in extending loan facilities to customers. The fair value of the letters of credit and commitments typically approximates the fee received from the customer for issuing such commitments. These fees are deferred and are recognized over the commitment period. At September 30, 2018 and December 31, 2017, the recorded amount of these deferred fees was $7 million and $9 million, respectively. The Company holds various assets as collateral supporting those commitments for which collateral is deemed necessary. At September 30, 2018, the maximum potential amount of future undiscounted payments the Company could be required to make under outstanding standby letters of credit was $1.3 billion. At September 30, 2018 and December 31, 2017, the Company had reserves related to letters of credit and unfunded commitments recorded in accrued expenses and other liabilities on the Company’s Unaudited Condensed Consolidated Balance Sheet of $72 million and $83 million, respectively.

Loan Sale Recourse

The Company has potential recourse related to specific FNMA securitizations. At both September 30, 2018 and December 31, 2017, the amount of potential recourse was $19 million of which the Company had reserved $793 thousand which is recorded in accrued expenses and other liabilities on the Company's Unaudited Condensed Consolidated Balance Sheets for the respective periods.

The Company also issues standard representations and warranties related to mortgage loan sales to government-sponsored agencies. Although these agreements often do not specify limitations, the Company does not believe that any payments related to these representations and warranties would materially change the financial condition or results of operations of the Company. At both September 30, 2018 and December 31, 2017, the Company had $1.3 million of reserves in accrued expenses and other liabilities on the Company’s Unaudited Condensed Consolidated Balance Sheets related to potential losses from loans sold.

Forward Starting Reverse Repurchase Agreements and Forward Starting Repurchase Agreements

The Company enters into securities purchased under agreements to resell and securities sold under agreements to repurchase that settle at a future date, generally within three business days. At September 30, 2018 the Company had

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forward starting reverse repurchase agreements of $83 million and no forward starting repurchase agreements. The Company had no forward starting reverse repurchase agreements or forward starting repurchase agreements at December 31, 2017.

Legal and Regulatory Proceedings

In the ordinary course of business, the Company is subject to legal proceedings, including claims, litigation, investigations and administrative proceedings, all of which are considered incidental to the normal conduct of business. The Company believes it has substantial defenses to the claims asserted against it in its currently outstanding legal proceedings and, with respect to such legal proceedings, intends to defend itself vigorously. Set forth below are descriptions of certain of the Company’s legal proceedings.

In June 2013, Compass Bank (“BBVA Compass”) was named as a defendant in a lawsuit filed in the United States District Court for the Northern District of Alabama, Intellectual Ventures II, LLC v. BBVA Compass, wherein the plaintiff alleges that BBVA Compass is infringing five patents owned by the plaintiff and related to the security infrastructure for BBVA Compass’ online banking services. The plaintiff seeks unspecified monetary relief. This lawsuit was dismissed in September 2018, and is now concluded.

In January 2014, BBVA Compass was named as a defendant in a lawsuit filed in the District Court of Dallas County, Texas, David Bagwell, individually and as Trustee of the David S. Bagwell Trust, et al. v. BBVA Compass, et al., wherein the plaintiffs (who are the borrowers and guarantors of the underlying loans) allege that BBVA Compass wrongfully sold their loans to a third party after representing that it would not do so. The plaintiffs seek unspecified monetary relief. Following trial in December 2017, the jury rendered a verdict in favor of the plaintiffs totaling $98 million. On June 27, 2018, the court entered a judgment in favor of the plaintiffs in the amount of $96 million, which includes prejudgment interest. BBVA Compass has appealed and will vigorously contest the judgment on appeal. The Company believes there are substantial defenses to these claims and intends to defend them vigorously.

In March 2015, BBVA Compass was named as a defendant in a lawsuit filed in the United States District Court for the Southern District of Texas, Lomix Limited Partnership, et al. v. BBVA Compass, wherein the plaintiffs (who are the borrower and guarantors of the underlying loan) allege that BBVA Compass wrongfully sold their loan to a third party, and wrongfully disclosed the guarantors’ personal financial information in connection with the sale of the loan. The plaintiffs seek unspecified monetary relief. The Company believes there are substantial defenses to these claims and intends to defend them vigorously.

In January 2016, BBVA Securities Inc. (“BSI”) was named as a defendant in a putative class action lawsuit filed in the United States District Court for the Southern District of Texas, In re Plains All American Pipeline, L.P. Securities Litigation, wherein the plaintiffs challenge statements made in registration materials and prospectuses filed with the Securities and Exchange Commission in connection with eight securities offerings of stock and notes issued by Plains GP Holdings and Plains All American Pipeline and underwritten by BSI, among others. The plaintiffs seek unspecified monetary relief. On April 2, 2018, the court granted the defendants' motion to dismiss with prejudice. The plaintiffs have appealed. The Company believes there are substantial defenses to these claims and intends to defend them vigorously.

In October 2016, BSI was named as a defendant in a putative class action lawsuit filed in the District Court of Harris County, Texas, St. Lucie County Fire District Firefighters' Pension Trust, individually and on behalf of all others similarly situated v. Southwestern Energy Company, et al., wherein the plaintiffs allege that Southwestern Energy Company, its officers and directors, and the underwriting defendants (including BSI) made inaccurate and misleading statements in the registration statement and prospectus related to a securities offering. The plaintiffs seek unspecified monetary relief. The Company believes there are substantial defenses to these claims and intends to defend them vigorously.

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In December 2016, BBVA Compass was named as a defendant in a putative class action lawsuit filed in the United States District Court for the Northern District of Alabama, Robert Hossfeld, individually and on behalf of all others similarly situated v. BBVA Compass, alleging violations of the Telephone Consumer Protection Act in the context of customer satisfaction survey calls to the cell phones of individuals who have not given, or who have withdrawn, consent to receive calls on their cell phones. The plaintiffs seek unspecified monetary relief. The Company believes there are substantial defenses to these claims and intends to defend them vigorously.

The Company and BBVA Compass have been named in two proceedings involving David L. Powell: one that was filed in January 2017 with the Federal Conciliation and Arbitration Labor Board of Mexico City, Mexico, David Lannon Powell Finneran v. BBVA Compass Bancshares, Inc., et al., and one that was filed in April 2018 in the United States District Court for the Northern District of Texas, David L. Powell, et al. v. BBVA Compass. The plaintiffs allege discrimination and wrongful termination in both proceedings, and seek unspecified monetary relief. The Company believes there are substantial defenses to these claims and intends to defend them vigorously.

In September 2017, BBVA Compass was named as a defendant in a putative class action lawsuit filed in the United States District Court for the Northern District of Illinois, dismissed and refiled in the Circuit Court of Jefferson County, Alabama, Lara Bellissimo, et al. individually and on behalf of similarly situated individuals v. BBVA Compass, alleging violations of the Telephone Consumer Protection Act in the context of collections calls to the cell phones of individuals who were not the individuals that provided the phone numbers to BBVA Compass. The plaintiffs seek unspecified monetary relief. The parties reached a settlement in principle on February 13, 2018, which has received preliminary court approval.

In November 2017, BBVA Compass was named as a defendant in a lawsuit filed in the United States District Court for the Southern District of New York and subsequently transferred to the United States District Court for the Northern District of Texas, Stabilis Fund II, LLC v. BBVA Compass, alleging that BBVA Compass fraudulently induced the plaintiff to purchase a loan that subsequently became the subject of litigation. The plaintiff seeks unspecified monetary relief. The Company believes there are substantial defenses to these claims and intends to defend them vigorously.

In January 2018, BBVA Compass was named as a defendant in a putative class action lawsuit filed in the United States District Court for the Northern District of Illinois, Petra Lopez and Colea Wright, on behalf of themselves and all others similarly situated v. BBVA Compass, challenging BBVA Compass’ assessment of certain overdraft fees and ATM fees. The plaintiffs seek unspecified monetary relief. In August 2018, the parties reached a settlement and the matter is now concluded.

In March 2018, the Company and BSI were named as defendants in a putative class action lawsuit filed in the United States District Court for the Southern District of New York, In re Mexican Government Bonds Antitrust Litigation, alleging that the defendant financial institutions engaged in collusion with respect to the sale of Mexican government bonds. Five substantially similar lawsuits were filed and consolidated with the original lawsuit. The plaintiffs seek unspecified monetary relief. The Company believes there are substantial defenses to these claims and intends to defend them vigorously.

The Company is or may become involved from time to time in information-gathering requests, reviews, investigations and proceedings (both formal and informal) by various governmental regulatory agencies, law enforcement authorities and self-regulatory bodies regarding the Company’s business. Such matters may result in material adverse consequences, including without limitation adverse judgments, settlements, fines, penalties, orders, injunctions, alterations in the Company’s business practices or other actions, and could result in additional expenses and collateral costs, including reputational damage, which could have a material adverse impact on the Company’s business, consolidated financial position, results of operations or cash flows.

The Company assesses its liabilities and contingencies in connection with outstanding legal proceedings utilizing the latest information available. Where it is probable that the Company will incur a loss and the amount of the loss can be reasonably estimated, the Company records a liability in its consolidated financial statements. These legal reserves may be increased or decreased to reflect any relevant developments. Where a loss is not probable or the amount

39

of a probable loss is not reasonably estimable, the Company does not accrue legal reserves. At September 30, 2018, the Company had accrued legal reserves in the amount of $24 million. Additionally, for those matters where a loss is reasonably possible and the amount of loss is reasonably estimable, the Company estimates the amount of losses that it could incur beyond the accrued legal reserves. Under U.S. GAAP, an event is “reasonably possible” if “the chance of the future event or events occurring is more than remote but less than likely” and an event is “remote" if “the chance of the future event or events occurring is slight.” For a limited number of legal matters in which the Company is involved, the Company is able to estimate a range of reasonably possible losses in excess of related reserves, if any. Management currently estimates these losses to range from $0 to approximately $87 million. This estimated range of reasonably possible losses is based on information available at September 30, 2018. The matters underlying the estimated range will change from time to time, and the actual results may vary significantly from this estimate. Those matters for which an estimate is not possible are not included within this estimated range; therefore, this estimated range does not represent the Company’s maximum loss exposure.

While the outcome of legal proceedings and the timing of the ultimate resolution are inherently difficult to predict, based on information currently available, advice of counsel and available insurance coverage, the Company believes that it has established adequate legal reserves. Further, based upon available information, the Company is of the opinion that these legal proceedings, individually or in the aggregate, will not have a material adverse effect on the Company’s financial condition or results of operations. However, in the event of unexpected future developments, it is possible that the ultimate resolution of those matters, if unfavorable, may be material to the Company’s results of operations for any particular period, depending, in part, upon the size of the loss or liability imposed and the operating results for the applicable period.

Income Tax Review

The Company is subject to review and examination from various tax authorities. The Company is currently under examination by a number of states, and has received notices of proposed adjustments related to state income taxes due for prior years. Management believes that adequate provisions for income taxes have been recorded.

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(8)Fair Value Measurements

See Note 20, Fair Value Measurements, in the Notes to the December 31, 2017, Consolidated Financial Statements for a description of valuation methodologies for assets and liabilities measured at fair value on a recurring and non-recurring basis.

The following tables summarize the financial assets and liabilities measured at fair value on a recurring basis.

			Fair Value Measurements at the End of the Reporting Period Using
	Fair Value		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
	September 30, 2018		(Level 1)		(Level 2)		(Level 3)
	(In Thousands)
Recurring fair value measurements
Assets:
Trading account assets:
U.S. Treasury and other U.S. government agencies	$	95,677	$	95,677	$	—	$	—
State and political subdivisions	199		—		199		—
Other debt securities	250		—		250		—
Interest rate contracts	104,666		—		104,666		—
Foreign exchange contracts	15,957		—		15,957		—
Total trading account assets	216,749		95,677		121,072		—
Debt securities available for sale:
U.S. Treasury and other U.S. government agencies	5,321,244		4,593,189		728,055		—
Mortgage-backed securities	2,244,534		—		2,244,534		—
Collateralized mortgage obligations	3,568,136		—		3,568,136		—
States and political subdivisions	946		—		946		—
Total debt securities available for sale	11,134,860		4,593,189		6,541,671		—
Loans held for sale	73,569		—		73,569		—
Derivative assets:
Interest rate contracts	14,779		—		12,643		2,136
Equity contracts	20,779		—		20,779		—
Foreign exchange contracts	3,960		—		3,960		—
Total derivative assets	39,518		—		37,382		2,136
Other assets:
Equity securities	20,000		20,000		—		—
MSR	55,312		—		—		55,312
SBIC	42,722		—		—		42,722
Liabilities:
Trading account liabilities:
U.S. Treasury and other U.S. government agencies	$	68,714	$	68,714	$	—	$	—
Interest rate contracts	192,238		—		192,238		—
Foreign exchange contracts	13,958		—		13,958		—
Total trading account liabilities	274,910		68,714		206,196		—
Derivative liabilities:
Interest rate contracts	51,194		—		51,193		1
Equity contracts	18,316		—		18,316		—
Foreign exchange contracts	1,151		—		1,151		—
Total derivative liabilities	70,661		—		70,660		1

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			Fair Value Measurements at the End of the Reporting Period Using
	Fair Value		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
	December 31, 2017		(Level 1)		(Level 2)		(Level 3)
	(In Thousands)
Recurring fair value measurements
Assets:
Trading account assets:
U.S. Treasury and other U.S. government agencies	$	74,195	$	74,195	$	—	$	—
State and political subdivisions	557		—		557		—
Other debt securities	79		—		79		—
Interest rate contracts	133,516		—		133,516		—
Foreign exchange contracts	12,149		—		12,149		—
Total trading account assets	220,496		74,195		146,301		—
Debt securities available for sale:
U.S. Treasury and other U.S. government agencies	4,204,438		3,248,898		955,540		—
Mortgage-backed securities	2,812,800		—		2,812,800		—
Collateralized mortgage obligations	5,200,011		—		5,200,011		—
States and political subdivisions	2,383		—		2,383		—
Total debt securities available for sale	12,219,632		3,248,898		8,970,734		—
Loans held for sale	67,110		—		67,110		—
Derivative assets:
Interest rate contracts	22,263		38		19,809		2,416
Equity contracts	39,791		—		39,791		—
Foreign exchange contracts	375		—		375		—
Total derivative assets	62,429		38		59,975		2,416
Other assets:
Equity securities	13,577		13,577		—		—
MSR	49,597		—		—		49,597
SBIC	45,042		—		—		45,042
Liabilities:
Trading account liabilities:
U.S. Treasury and other U.S. government agencies	$	17,996	$	17,996	$	—	$	—
Interest rate contracts	134,073		—		134,073		—
Foreign exchange contracts	10,524		—		10,524		—
Total trading account liabilities	162,593		17,996		144,597		—
Derivative liabilities:
Interest rate contracts	21,387		—		21,387		—
Equity contracts	35,562		—		35,562		—
Foreign exchange contracts	3,890		—		3,890		—
Total derivative liabilities	60,839		—		60,839		—

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There were no transfers between Levels 1 or 2 of the fair value hierarchy for the three and nine months ended September 30, 2018 and 2017. It is the Company’s policy to value any transfers between levels of the fair value hierarchy based on end of period fair values.

The following table reconciles the assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3).

	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
Three Months Ended September 30,	Other Trading Assets			Interest Rate Contracts, net			Other Assets - MSR			Other Assets - SBIC
	(In Thousands)
Balance, June 30, 2017	$	778		$	3,185		$	49,398		$	22,572
Transfers into Level 3	—			—			—			—
Transfers out of Level 3	—			—			—			—
Total gains or losses (realized/unrealized):
Included in earnings (1)	(215		)	(262		)	(2,577		)	—
Included in other comprehensive income	—			—			—			—
Purchases, issuances, sales and settlements:
Purchases	—			—			—			10,173
Issuances	—			—			1,729			—
Sales	—			—			—			—
Settlements	—			—			—			—
Balance, September 30, 2017	$	563		$	2,923		$	48,550		$	32,745
Change in unrealized gains (losses) included in earnings for the period, attributable to assets and liabilities still held at September 30, 2017	$	(215	)	$	(262	)	$	(2,577	)	$	—
Balance, June 30, 2018	$	—		$	2,610		$	54,276		$	41,513
Transfers into Level 3	—			—			—			—
Transfers out of Level 3	—			—			—			—
Total gains or losses (realized/unrealized):
Included in earnings (1)	—			(475		)	(558		)	—
Included in other comprehensive income	—			—			—			—
Purchases, issuances, sales and settlements:
Purchases	—			—			—			1,209
Issuances	—			—			1,594			—
Sales	—			—			—			—
Settlements	—			—			—			—
Balance, September 30, 2018	$	—		$	2,135		$	55,312		$	42,722
Change in unrealized gains (losses) included in earnings for the period, attributable to assets and liabilities still held at September 30, 2018	$	—		$	(475	)	$	(558	)	$	—

(1) Included in noninterest income in the Unaudited Condensed Consolidated Statements of Income.

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	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
Nine Months Ended September 30,	Other Trading Assets			Interest Rate Contracts, net			Other Assets - MSR			Other Assets - SBIC
	(In Thousands)
Balance, December 31, 2016	$	859		$	2,392		$	51,428		$	15,639
Transfers into Level 3	—			—			—			—
Transfers out of Level 3	—			—			—			—
Total gains or losses (realized/unrealized):
Included in earnings (1)	(296		)	531			(8,206		)	550
Included in other comprehensive income	—			—			—			—
Purchases, issuances, sales and settlements:
Purchases	—			—			—			16,556
Issuances	—			—			5,328			—
Sales	—			—			—			—
Settlements	—			—			—			—
Balance, September 30, 2017	$	563		$	2,923		$	48,550		$	32,745
Change in unrealized gains (losses) included in earnings for the period, attributable to assets and liabilities still held at September 30, 2017	$	(296	)	$	531		$	(8,206	)	$	550
Balance, December 31, 2017	$	—		$	2,416		$	49,597		$	45,042
Transfers into Level 3	—			—			—			—
Transfers out of Level 3	—			—			—			—
Total gains or losses (realized/unrealized):
Included in earnings (1)	—			(281		)	449			(6,673		)
Included in other comprehensive income	—			—			—			—
Purchases, issuances, sales and settlements:
Purchases	—			—			—			4,353
Issuances	—			—			5,266			—
Sales	—			—			—			—
Settlements	—			—			—			—
Balance, September 30, 2018	$	—		$	2,135		$	55,312		$	42,722
Change in unrealized gains (losses) included in earnings for the period, attributable to assets and liabilities still held at September 30, 2018	$	—		$	(281	)	$	449		$	(6,673	)

(1) Included in noninterest income in the Unaudited Condensed Consolidated Statements of Income.

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Assets Measured at Fair Value on a Nonrecurring Basis

Periodically, certain assets may be recorded at fair value on a non-recurring basis. These adjustments to fair value usually result from the application of lower of cost or fair value accounting or write-downs of individual assets due to impairment. The following tables represent those assets that were subject to fair value adjustments during the three and nine months ended September 30, 2018 and 2017, and still held as of the end of the period, and the related gains and losses from fair value adjustments on assets sold during the period as well as assets still held as of the end of the period.

			Fair Value Measurements at the End of the Reporting Period Using
	Fair Value		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs		Total Gains (Losses)
	September 30, 2018		(Level 1)		(Level 2)		(Level 3)		Three Months Ended September 30, 2018			Nine Months Ended September 30, 2018
	(In Thousands)
Nonrecurring fair value measurements
Assets:
Debt securities held to maturity	$	3,955	$	—	$	—	$	3,955	$	(283	)	$	(592	)
Impaired loans (1)	11,875		—		—		11,875		(17,225		)	(28,666		)
OREO	18,706		—		—		18,706		(1,322		)	(2,407		)
			Fair Value Measurements at the End of the Reporting Period Using
	Fair Value		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs		Total Gains (Losses)
	September 30, 2017		(Level 1)		(Level 2)		(Level 3)		Three Months Ended September 30, 2017			Nine Months Ended September 30, 2017
	(In Thousands)
Nonrecurring fair value measurements
Assets:
Debt securities held to maturity	$	1,863	$	—	$	—	$	1,863	$	—		$	(242	)
Impaired loans (1)	44,434		—		—		44,434		(12,389		)	(49,894		)
OREO	22,012		—		—		22,012		(1,845		)	(4,640		)

(1) Total gains (losses) represent charge-offs on impaired loans for which adjustments are based on the appraised value of the collateral.

The following is a description of the methodologies applied for valuing these assets:

Debt securities held to maturity – Nonrecurring fair value adjustments on debt securities held to maturity reflect impairment write-downs which the Company believes are other than temporary. For analyzing these securities, the Company has retained a third-party valuation firm. Impairment is determined through the use of cash flow models that estimate cash flows on the underlying mortgages using security-specific collateral and the transaction structure. The cash flow models incorporate the remaining cash flows which are adjusted for future expected credit losses. Future expected credit losses are determined by using various assumptions such as current default rates, prepayment rates, and loss severities. The Company develops these assumptions through the use of market data published by third-party sources in addition to historical analysis which includes actual delinquency and default information through the current period. The expected cash flows are then discounted at the interest rate used to recognize interest income on the security to arrive at a present value amount. As the fair value assessments are derived using a discounted cash flow modeling approach, the nonrecurring fair value adjustments are classified as Level 3.

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Impaired Loans – Impaired loans measured at fair value on a non-recurring basis represent the carrying value of impaired loans for which adjustments are based on the appraised value of the collateral. Nonrecurring fair value adjustments to impaired loans reflect full or partial write-downs that are generally based on the fair value of the underlying collateral supporting the loan. Loans subjected to nonrecurring fair value adjustments based on the current estimated fair value of the collateral are classified as Level 3.

OREO – OREO is recorded at the lower of recorded balance or fair value, which is based on appraisals and third-party price opinions, less estimated costs to sell. The fair value is classified as Level 3.

The tables below present quantitative information about the significant unobservable inputs for material assets and liabilities measured at fair value using significant unobservable inputs (Level 3) on a recurring and nonrecurring basis.

			Quantitative Information about Level 3 Fair Value Measurements
	Fair Value at				Range of Unobservable Inputs
	September 30, 2018		Valuation Technique	Unobservable Input(s)	(Weighted Average)
	(In Thousands)
Recurring fair value measurements:
Interest rate contracts, net	$	2,135	Discounted cash flow	Closing ratios (pull-through)	16.6% - 99.9% (65.6%)
				Cap grids	-0.2% - 2.5% (1.1%)
Other assets - MSRs	55,312		Discounted cash flow	Option adjusted spread	6.8% - 8.5% (7.1%)
				Constant prepayment rate or life speed	0.0% - 50.5% (9.7%)
				Cost to service	$65 - $4,000 ($77)
Other assets - SBIC investments	42,722		Transaction price	Transaction price	N/A
Nonrecurring fair value measurements:
Debt securities held to maturity	$	3,955	Discounted cash flow	Prepayment rate	8.4%
				Default rate	9.4%
				Loss severity	83.5%
Impaired loans	11,875		Appraised value	Appraised value	0.0% - 70.0% (10.1%)
OREO	18,706		Appraised value	Appraised value	8.0% (1)

(1) Represents discount to appraised value for estimated costs to sell.

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			Quantitative Information about Level 3 Fair Value Measurements
	Fair Value at				Range of Unobservable Inputs
	December 31, 2017		Valuation Technique	Unobservable Input(s)	(Weighted Average)
	(In Thousands)
Recurring fair value measurements:
Interest rate contracts, net	$	2,416	Discounted cash flow	Closing ratios (pull-through)	24.9% - 99.3% (66.1%)
				Cap grids	0.2% - 2.3% (0.9%)
Other assets - MSRs	49,597		Discounted cash flow	Option adjusted spread	4.6% - 17.2% (8.2%)
				Constant prepayment rate or life speed	0.0% - 46.7% (8.6%)
				Cost to service	$65 - $4,000 ($81)
Other assets - SBIC investments	45,042		Transaction price	Transaction price	N/A
Nonrecurring fair value measurements:
Debt securities held to maturity	$	1,659	Discounted cash flow	Prepayment rate	5.1%
				Default rate	4.8%
				Loss severity	70.6%
Impaired loans	70,749		Appraised value	Appraised value	0.0% - 100.0% (19.2%)
OREO	17,278		Appraised value	Appraised value	8.0% (1)

(1) Represents discount to appraised value for estimated costs to sell.

The following provides a description of the sensitivity of the valuation technique to changes in unobservable inputs for recurring fair value measurements.

Recurring Fair Value Measurements Using Significant Unobservable Inputs

Interest Rate Contracts - Interest Rate Lock Commitments

Significant unobservable inputs used in the valuation of interest rate contracts are pull-through and cap grids. Increases or decreases in the pull-through or cap grids will have a corresponding impact in the value of interest rate contracts.

Other Assets - MSRs

The significant unobservable inputs used in the fair value measurement of MSRs are option-adjusted spreads, constant prepayment rate or life speed, and cost to service assumptions. The impact of prepayments and changes in the option-adjusted spread are based on a variety of underlying inputs. Increases or decreases to the underlying cash flow inputs will have a corresponding impact on the value of the MSR asset. The impact of the costs to service assumption will have a directionally opposite change in the fair value of the MSR asset.

Other Assets - SBIC Investments

The significant unobservable inputs used in the fair value measurement of SBIC Investments are initially based upon transaction price. Increases or decreases in valuation factors such as recent or proposed purchase or sale of debt or equity of the issuer, pricing by other dealers in similar securities, size of position held, liquidity of the market will have a corresponding impact in the value of SBIC investments.

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Fair Value of Financial Instruments

The carrying amounts and estimated fair values, as well as the level within the fair value hierarchy, of the Company’s financial instruments, excluding financial instruments measured at fair value on a recurring basis, are as follows:

	September 30, 2018
	Carrying Amount		Estimated Fair Value		Level 1		Level 2		Level 3
	(In Thousands)
Financial Instruments:
Assets:
Cash and cash equivalents	$	3,526,911	$	3,526,911	$	3,526,911	$	—	$	—
Debt securities held to maturity	2,490,568		2,465,761		—		1,579,436		886,325
Loans, net	63,581,886		60,740,079		—		—		60,740,079
Liabilities:
Deposits	$	70,378,057	$	70,370,139	$	—	$	70,370,139	$	—
FHLB and other borrowings	5,045,302		5,065,944		—		5,065,944		—
Federal funds purchased and securities sold under agreements to repurchase	78,004		78,004		—		78,004		—

	December 31, 2017
	Carrying Amount		Estimated Fair Value		Level 1		Level 2		Level 3
	(In Thousands)
Financial Instruments:
Assets:
Cash and cash equivalents	$	4,082,826	$	4,082,826	$	4,082,826	$	—	$	—
Debt securities held to maturity	1,046,093		1,040,543		—		—		1,040,543
Loans, net	60,781,008		57,906,982		—		—		57,906,982
Liabilities:
Deposits	$	69,256,313	$	69,302,597	$	—	$	69,302,597	$	—
FHLB and other borrowings	3,959,930		4,010,308		—		4,010,308		—
Federal funds purchased and securities sold under agreements to repurchase	19,591		19,591		—		19,591		—

Fair Value Option

The Company has elected to apply the fair value option for single family real estate mortgage loans originated for resale in the secondary market. The election allows for a more effective offset of the changes in fair values of the loans and the derivative instruments used to economically hedge them without the burden of complying with the requirements for hedge accounting. The Company has not elected the fair value option for other loans held for sale primarily because they are not economically hedged using derivative instruments.

At both September 30, 2018 and December 31, 2017, no loans held for sale for which the fair value option was elected were 90 days or more past due or were in nonaccrual. Interest income on mortgage loans held for sale is recognized based on contractual rates and is reflected in interest and fees on loans in the Company's Unaudited Condensed Consolidated Statements of Income. Net gains or (losses) of $(47) thousand and $98 thousand resulting from changes in fair value of these loans were recorded in noninterest income during the three months ended September 30, 2018 and 2017, respectively. Net gains or (losses) of $(420) thousand and $1.2 million resulting from changes in fair value of these loans were recorded in noninterest income during the nine months ended September 30, 2018 and 2017, respectively.

The Company also had fair value changes on forward contracts related to residential mortgage loans held for sale of approximately $708 thousand and $(46) thousand for the three months ended September 30, 2018 and 2017,

48

respectively. The Company also had fair value changes on forward contracts related to residential mortgage loans held for sale of approximately $553 thousand and $(2.0) million for the nine months ended September 30, 2018 and 2017, respectively. An immaterial portion of these amounts was attributable to changes in instrument-specific credit risk.

The following table summarizes the difference between the aggregate fair value and the aggregate unpaid principal balance for residential mortgage loans measured at fair value.

	Aggregate Fair Value		Aggregate Unpaid Principal Balance		Difference
	(In Thousands)
September 30, 2018
Residential mortgage loans held for sale	$	73,569	$	71,871	$	1,698
December 31, 2017
Residential mortgage loans held for sale	$	67,110	$	64,992	$	2,118

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(9)Comprehensive Income

Comprehensive income is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances arising from nonowner sources. The following summarizes the change in the components of other comprehensive income.

	Three Months Ended September 30,
	2018									2017
	Pretax			Tax Expense/ (Benefit)			After-tax			Pretax			Tax Expense/ (Benefit)			After-tax
	(In Thousands)
Other comprehensive loss:
Unrealized holding losses arising during period from debt securities available for sale	$	(40,831	)	$	(9,642	)	$	(31,189	)	$	(1,025	)	$	(379	)	$	(646	)
Less: reclassification adjustment for net gains on sale of debt securities in net income	—			—			—			3,033			1,122			1,911
Net change in unrealized losses on debt securities available for sale	(40,831		)	(9,642		)	(31,189		)	(4,058		)	(1,501		)	(2,557		)
Change in unamortized net holding losses on debt securities held to maturity	2,604			615			1,989			1,586			587			999
Unamortized unrealized net holding losses on debt securities available for sale transferred to debt securities held to maturity	—			—			—			—			—			—
Less: non-credit related impairment on debt securities held to maturity	135			32			103			—			—			—
Change in unamortized non-credit related impairment on debt securities held to maturity	271			63			208			399			148			251
Net change in unamortized holding losses on debt securities held to maturity	2,740			646			2,094			1,985			735			1,250
Unrealized holding gains arising during period from cash flow hedge instruments	15,187			4,191			10,996			1,367			512			855
Change in defined benefit plans	—			—			—			—			—			—
Other comprehensive loss	$	(22,904	)	$	(4,805	)	$	(18,099	)	$	(706	)	$	(254	)	$	(452	)
	Nine Months Ended September 30,
	2018									2017
	Pretax			Tax Expense/ (Benefit)			After-tax			Pretax			Tax Expense/ (Benefit)			After-tax
	(In Thousands)
Other comprehensive income:
Unrealized holding (losses) gains arising during period from debt securities available for sale	$	(139,236	)	$	(32,916	)	$	(106,320	)	$	61,774		$	22,855		$	38,919
Less: reclassification adjustment for net gains on sale of debt securities in net income	—			—			—			3,033			1,122			1,911
Net change in unrealized (losses) gains on debt securities available for sale	(139,236		)	(32,916		)	(106,320		)	58,741			21,733			37,008
Change in unamortized net holding losses on debt securities held to maturity	8,538			2,016			6,522			4,032			1,492			2,540
Unamortized unrealized net holding losses on debt securities available for sale transferred to debt securities held to maturity	(39,904		)	(9,417		)	(30,487		)	—			—			—
Less: non-credit related impairment on debt securities held to maturity	397			94			303			—			—			—
Change in unamortized non-credit related impairment on debt securities held to maturity	815			192			623			1,236			458			778
Net change in unamortized holding losses on debt securities held to maturity	(30,948		)	(7,303		)	(23,645		)	5,268			1,950			3,318
Unrealized holding gains (losses) arising during period from cash flow hedge instruments	26,894			7,554			19,340			(14,581		)	(5,409		)	(9,172		)
Change in defined benefit plans	(4,425		)	(1,046		)	(3,379		)	(773		)	(288		)	(485		)
Other comprehensive (loss) income	$	(147,715	)	$	(33,711	)	$	(114,004	)	$	48,655		$	17,986		$	30,669

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Activity in accumulated other comprehensive income (loss), net of tax was as follows:

	Unrealized Gains (Losses) on Debt Securities Available for Sale and Transferred to Held to Maturity			Accumulated Gains (Losses) on Cash Flow Hedging Instruments			Defined Benefit Plan Adjustment			Unamortized Impairment Losses on Debt Securities Held to Maturity			Total
	(In Thousands)
Balance, December 31, 2016	$	(119,562	)	$	(10,080	)	$	(32,028	)	$	(6,582	)	$	(168,252	)
Other comprehensive income (loss) before reclassifications	38,919			(6,000		)	—			—			32,919
Amounts reclassified from accumulated other comprehensive income (loss)	629			(3,172		)	(485		)	778			(2,250		)
Net current period other comprehensive income (loss)	39,548			(9,172		)	(485		)	778			30,669
Balance, September 30, 2017	$	(80,014	)	$	(19,252	)	$	(32,513	)	$	(5,804	)	$	(137,583	)
Balance, December 31, 2017	$	(132,821	)	$	(24,765	)	$	(34,228	)	$	(5,591	)	$	(197,405	)
Other comprehensive loss before reclassifications	(136,807		)	(8,838		)	—			(303		)	(145,948		)
Cumulative effect of adoption of ASU 2016-01	(13		)	—			—			—			(13		)
Amounts reclassified from accumulated other comprehensive income (loss)	6,522			28,178			(3,379		)	623			31,944
Net current period other comprehensive income (loss)	(130,298		)	19,340			(3,379		)	320			(114,017		)
Balance, September 30, 2018	$	(263,119	)	$	(5,425	)	$	(37,607	)	$	(5,271	)	$	(311,422	)

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The following table presents information on reclassifications out of accumulated other comprehensive income (loss).

Details About Accumulated Other Comprehensive Income (Loss) Components	Amounts Reclassified From Accumulated Other Comprehensive Income (Loss)(1)												Condensed Consolidated Statements of Income Caption
	Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017
	(In Thousands)
Unrealized Gains (Losses) on Debt Securities Available for Sale and Transferred to Held to Maturity	$	—		$	3,033		$	—		$	3,033		Debt securities gains, net
	(2,604		)	$	(1,586	)	(8,538		)	(4,032		)	Interest on debt securities held to maturity
	(2,604		)	1,447			(8,538		)	(999		)
	615			(535		)	2,016			370			Income tax benefit (expense)
	$	(1,989	)	$	912		$	(6,522	)	$	(629	)	Net of tax
Accumulated Gains (Losses) on Cash Flow Hedging Instruments	$	(13,782	)	$	(2,258	)	$	(35,839	)	$	6,920		Interest and fees on loans
	(251		)	(577		)	(1,048		)	(1,877		)	Interest and fees on FHLB advances
	(14,033		)	(2,835		)	(36,887		)	5,043
	3,314			1,054			8,709			(1,871		)	Income tax benefit (expense)
	$	(10,719	)	$	(1,781	)	$	(28,178	)	$	3,172		Net of tax
Defined Benefit Plan Adjustment	$	—		$	—		$	4,425		$	773		(2)
	—			—			(1,046		)	(288		)	Income tax expense
	$	—		$	—		$	3,379		$	485		Net of tax
Unamortized Impairment Losses on Debt Securities Held to Maturity	$	(271	)	$	(399	)	$	(815	)	$	(1,236	)	Interest on debt securities held to maturity
	63			148			192			458			Income tax benefit
	$	(208	)	$	(251	)	$	(623	)	$	(778	)	Net of tax

(1) Amounts in parentheses indicate debits to the Unaudited Condensed Consolidated Statements of Income.

(2) These accumulated other comprehensive income components are included in the computation of net periodic pension cost (see Note 18, Benefit Plans, in the Notes to the December 31, 2017, Consolidated Financial Statements for additional details).

(10)Supplemental Disclosure for Statement of Cash Flows

The following table presents the Company’s supplemental disclosures for statement of cash flows.

	Nine Months Ended September 30,
	2018		2017
	(In Thousands)
Supplemental disclosures of cash flow information:
Interest paid	$	387,311	$	331,062
Net income taxes paid	121,156		109,460
Supplemental schedule of noncash investing and financing activities:
Transfer of loans and loans held for sale to OREO	$	17,249	$	25,156
Transfer of available for sale debt securities to held to maturity debt securities	1,017,275		—

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The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the Company’s Unaudited Condensed Consolidated Balance Sheets that sum to the total of the same such amounts shown in the Company's Unaudited Condensed Consolidated Statements of Cash Flows.

	Nine Months Ended September 30,
	2018		2017
	(In Thousands)
Cash and cash equivalents	$	3,526,911	$	3,734,658
Restricted cash in other assets	142,690		174,140
Total cash, cash equivalents and restricted cash shown in the statement of cash flows	$	3,669,601	$	3,908,798

Restricted cash primarily represents cash collateral related to the Company's derivatives as well as amounts restricted for regulatory purposes related to BSI and BBVA Compass Payments, Inc. Restricted cash is included in other assets on the Company’s Unaudited Condensed Consolidated Balance Sheets.

(11) Segment Information

The Company’s operating segments are based on the Company’s organizational structure. Each segment reflects the manner in which financial information is evaluated by management. The operating segment results include certain overhead allocations and intercompany transactions. All intercompany transactions have been eliminated to determine the consolidated balances. The Company operates primarily in the United States, and, accordingly, revenue and assets outside the United States are not material. There are no individual customers whose revenues exceeded 10% of consolidated revenue.

The following tables present the segment information for the Company’s existing segments.

	Three Months Ended September 30, 2018
	Commercial Banking and Wealth		Retail Banking		Corporate and Investment Banking			Treasury			Corporate Support and Other			Consolidated
	(In Thousands)
Net interest income (expense)	$	304,112	$	269,513	$	45,668		$	(24,814	)	$	63,807		$	658,286
Allocated provision (credit) for loan losses	37,897		61,060		(15,807		)	(553		)	12,367			94,964
Noninterest income	63,874		115,821		32,223			5,235			41,306			258,459
Noninterest expense	182,729		293,720		43,379			7,109			78,573			605,510
Net income (loss) before income tax expense (benefit)	147,360		30,554		50,319			(26,135		)	14,173			216,271
Income tax expense (benefit)	30,946		6,416		10,567			(5,488		)	(685		)	41,756
Net income (loss)	116,414		24,138		39,752			(20,647		)	14,858			174,515
Less: net income (loss) attributable to noncontrolling interests	24		—		—			405			(3		)	426
Net income (loss) attributable to BBVA Compass Bancshares, Inc.	$	116,390	$	24,138	$	39,752		$	(21,052	)	$	14,861		$	174,089
Average assets	$	39,016,626	$	18,839,497	$	8,311,665		$	16,257,647		$	7,693,233		$	90,118,668

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	Three Months Ended September 30, 2017
	Commercial Banking and Wealth		Retail Banking			Corporate and Investment Banking			Treasury		Corporate Support and Other			Consolidated
	(In Thousands)
Net interest income	$	278,528	$	231,066		$	43,592		$	10,626	$	25,549		$	589,361
Allocated provision (credit) for loan losses	19,303		89,390			(11,708		)	—		6,449			103,434
Noninterest income	57,939		110,135			53,097			6,758		29,865			257,794
Noninterest expense	159,357		299,689			43,496			6,340		65,080			573,962
Net income (loss) before income tax expense (benefit)	157,807		(47,878		)	64,901			11,044		(16,115		)	169,759
Income tax expense (benefit)	55,233		(16,758		)	22,716			3,865		(25,748		)	39,308
Net income (loss)	102,574		(31,120		)	42,185			7,179		9,633			130,451
Less: net income (loss) attributable to noncontrolling interests	176		—			—			414		(6		)	584
Net income (loss) attributable to BBVA Compass Bancshares, Inc.	$	102,398	$	(31,120	)	$	42,185		$	6,765	$	9,639		$	129,867
Average assets	$	36,030,116	$	18,066,202		$	9,870,647		$	15,686,910	$	7,646,104		$	87,299,979

	Nine Months Ended September 30, 2018
	Commercial Banking and Wealth		Retail Banking		Corporate and Investment Banking			Treasury			Corporate Support and Other			Consolidated
	(In Thousands)
Net interest income (expense)	$	905,470	$	794,004	$	132,734		$	(54,976	)	$	147,158		$	1,924,390
Allocated provision (credit) for loan losses	75,166		120,594		(45,630		)	(1,063		)	94,206			243,273
Noninterest income	188,012		340,317		122,204			17,133			118,637			786,303
Noninterest expense	533,310		871,560		119,763			17,912			205,423			1,747,968
Net income (loss) before income tax expense (benefit)	485,006		142,167		180,805			(54,692		)	(33,834		)	719,452
Income tax expense (benefit)	101,851		29,855		37,969			(11,485		)	(6,341		)	151,849
Net income (loss)	383,155		112,312		142,836			(43,207		)	(27,493		)	567,603
Less: net income (loss) attributable to noncontrolling interests	282		—		—			1,227			(27		)	1,482
Net income (loss) attributable to BBVA Compass Bancshares, Inc.	$	382,873	$	112,312	$	142,836		$	(44,434	)	$	(27,466	)	$	566,121
Average assets	$	38,332,544	$	18,538,673	$	8,346,850		$	16,096,911		$	7,667,498		$	88,982,476

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	Nine Months Ended September 30, 2017
	Commercial Banking and Wealth		Retail Banking			Corporate and Investment Banking		Treasury		Corporate Support and Other			Consolidated
	(In Thousands)
Net interest income	$	831,766	$	683,594		$	117,248	$	51,386	$	42,628		$	1,726,622
Allocated provision for loan losses	25,784		170,332			16,311		—		16,431			228,858
Noninterest income	155,774		329,754			142,768		16,740		103,770			748,806
Noninterest expense	482,317		893,914			111,675		18,983		188,870			1,695,759
Net income (loss) before income tax expense (benefit)	479,439		(50,898		)	132,030		49,143		(58,903		)	550,811
Income tax expense (benefit)	167,803		(17,814		)	46,211		17,200		(71,303		)	142,097
Net income (loss)	311,636		(33,084		)	85,819		31,943		12,400			408,714
Less: net income (loss) attributable to noncontrolling interests	216		—			—		1,250		(8		)	1,458
Net income (loss) attributable to BBVA Compass Bancshares, Inc.	$	311,420	$	(33,084	)	$	85,819	$	30,693	$	12,408		$	407,256
Average assets	$	35,840,756	$	18,039,800		$	10,556,407	$	15,375,036	$	7,670,357		$	87,482,356

The financial information presented was derived from the internal profitability reporting system used by management to monitor and manage the financial performance of the Company. This information is based on internal management accounting policies that have been developed to reflect the underlying economics of the businesses. These policies address the methodologies applied and include policies related to funds transfer pricing, cost allocations and capital allocations.

Funds transfer pricing was used in the determination of net interest income earned primarily on loans and deposits. The method employed for funds transfer pricing is a matched funding concept whereby lines of business which are fund providers are credited and those that are fund users are charged based on maturity, prepayment and/or repricing characteristics applied on an instrument level. Costs for centrally managed operations are generally allocated to the lines of business based on the utilization of services provided or other appropriate indicators. Capital is allocated to the lines of business based upon the underlying risks in each business considering economic and regulatory capital standards.

The development and application of these methodologies is a dynamic process. Accordingly, prior period financial results have been revised to reflect management accounting enhancements and changes in the Company's organizational structure. The 2017 segment information has been revised to conform to the 2018 presentation. In addition, unlike financial accounting, there is no authoritative literature for management accounting similar to U.S. GAAP. Consequently, reported results are not necessarily comparable with those presented by other financial institutions.

(12)Revenue from Contracts with Customers

As of January 1, 2018, the Company adopted ASU 2014-09 Revenue from Contracts with Customers - Topic 606 and all subsequent ASUs that modified 606. See Recently Adopted Accounting Standards section of Note 1, Basis of Presentation, for further discussion related to the transition and implementation of this ASU.

The following is a discussion of key revenues within the scope of the new revenue guidance:

Service charges on deposit accounts - Revenue from service charges on deposit accounts is earned through cash management, wire transfer, and other deposit-related services; as well as overdraft, non-sufficient funds, account management and other deposit-related fees. Revenue is recognized for these services either over time, corresponding with deposit accounts’ monthly cycle, or at a point in time for transactional related services and fees.

Card and merchant processing fees - Card and merchant processing fees consists of interchange fees from consumer credit and debit cards processed by card association networks, merchant services, and other card related services. Interchange rates are generally set by the credit card associations and based on purchase

55

volumes and other factors. Interchange fees are recognized as transactions occur. Merchant services income represents account management fees and transaction fees charged to merchants for the processing of card association transactions. Merchant services revenue is recognized as transactions occur, or as services are performed.

Investment banking and advisory fees - Investment banking and advisory fees primarily represent revenues earned by the Company for various corporate services including advisory, debt placement and underwriting. Revenues for these services are recorded at a point in time or upon completion of a contractually identified transaction. Underwriting costs are presented gross against underwriting revenues.

Money transfer income - Money transfer income represents income from the Parent’s wholly owned subsidiary, BBVA Compass Payments, Inc., which engages in money transfer services, including money transmission and foreign exchange services. Money transfer income is recognized as transactions occur.

Asset management, retail investment, and commissions fees - Asset management, retail investment, and commissions fees consists of fees generated from money management transactions and treasury management services, along with mutual fund and annuity sales fee income. Revenue from trade execution and brokerage services is earned through commissions from trade execution on behalf of clients. Revenue from these transactions is recognized on the trade date. Any ongoing service fees are recognized on a monthly basis as services are performed. Trust and asset management services include asset custody and investment management services provided to individual and institutional customers. Revenue is recognized monthly based on a minimum annual fee, and the market value of assets in custody. Additional fees are recognized for transactional activity. Insurance revenue is earned through commissions on insurance sales and earned at a point in time. These revenues are recorded in asset management fees and retail investment sales within noninterest income.

The following tables depict the disaggregation of revenue according to revenue type and segment.

	Commercial Banking and Wealth		Retail Banking		Corporate and Investment Banking		Treasury and Corporate Support and Other		Total
	(In Thousands)
Three Months Ended September 30, 2018
Service charges on deposit accounts	$	11,911	$	46,653	$	1,761	$	—	$	60,325
Card and merchant processing fees	7,113		33,786		—		3,320		44,219
Retail investment sales	28,286		—		—		—		28,286
Money transfer income	—		—		—		23,441		23,441
Investment banking and advisory fees	—		—		13,956		—		13,956
Asset management fees	11,143		—		—		—		11,143
	58,453		80,439		15,717		26,761		181,370
Other revenues (1)	5,421		35,382		16,506		19,780		77,089
Total noninterest income	$	63,874	$	115,821	$	32,223	$	46,541	$	258,459

(1) Other revenues primarily relate to revenues not derived from contracts with customers.

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	Commercial Banking and Wealth		Retail Banking		Corporate and Investment Banking		Treasury and Corporate Support and Other		Total
	(In Thousands)
Three Months Ended September 30, 2017
Service charges on deposit accounts	$	11,286	$	43,200	$	1,467	$	—	$	55,953
Card and merchant processing fees	130		29,947		—		2,220		32,297
Retail investment sales	26,817		—		—		—		26,817
Money transfer income	—		—		—		24,881		24,881
Investment banking and advisory fees	—		—		30,500		—		30,500
Asset management fees	10,336		—		—		—		10,336
	48,569		73,147		31,967		27,101		180,784
Other revenues (1)	9,370		36,988		21,130		9,522		77,010
Total noninterest income	$	57,939	$	110,135	$	53,097	$	36,623	$	257,794

(1) Other revenues primarily relate to revenues not derived from contracts with customers.

	Commercial Banking and Wealth		Retail Banking		Corporate and Investment Banking		Treasury and Corporate Support and Other		Total
	(In Thousands)
Nine Months Ended September 30, 2018
Service charges on deposit accounts	$	34,681	$	135,277	$	5,109	$	—	$	175,067
Card and merchant processing fees	21,220		97,090		—		9,635		127,945
Retail investment sales	88,176		—		—		—		88,176
Money transfer income	—		—		—		68,049		68,049
Investment banking and advisory fees	—		—		62,398		—		62,398
Asset management fees	32,902		—		—		—		32,902
	176,979		232,367		67,507		77,684		554,537
Other revenues (1)	11,033		107,950		54,697		58,086		231,766
Total noninterest income	$	188,012	$	340,317	$	122,204	$	135,770	$	786,303

(1) Other revenues primarily relate to revenues not derived from contracts with customers.

57

	Commercial Banking and Wealth		Retail Banking		Corporate and Investment Banking		Treasury and Corporate Support and Other		Total
	(In Thousands)
Nine Months Ended September 30, 2017
Service charges on deposit accounts	$	35,425	$	126,023	$	4,592	$	—	$	166,040
Card and merchant processing fees	380		88,053		—		6,316		94,749
Retail investment sales	82,876		—		—		—		82,876
Money transfer income	—		—		—		77,408		77,408
Investment banking and advisory fees	—		—		78,744		—		78,744
Asset management fees	30,162		—		—		—		30,162
	148,843		214,076		83,336		83,724		529,979
Other revenues (1)	6,931		115,678		59,432		36,786		218,827
Total noninterest income	$	155,774	$	329,754	$	142,768	$	120,510	$	748,806

(1) Other revenues primarily relate to revenues not derived from contracts with customers.

(13)Related Party Transactions

The Company enters into various transactions with BBVA that affect the Company’s business and operations. The following discloses the significant transactions between the Company and BBVA during 2018 and 2017.

The Company believes all of the transactions entered into between the Company and BBVA were transacted on terms that were no more or less beneficial to the Company than similar transactions entered into with unrelated market participants, including interest rates and transaction costs. The Company foresees executing similar transactions with BBVA in the future.

Derivatives

The Company has entered into various derivative contracts as noted below with BBVA as the upstream counterparty. The total notional amount of outstanding derivative contracts between the Company and BBVA are $4.3 billion and $4.8 billion as of September 30, 2018 and December 31, 2017, respectively. The net fair value of outstanding derivative contracts between the Company and BBVA are detailed below.

	September 30, 2018			December 31, 2017
	(In Thousands)
Derivative contracts:
Fair value hedges	$	(45,428	)	$	(15,991	)
Cash flow hedges	485			(144		)
Free-standing derivatives not designated as hedging instruments	42,949			7,777

Securities Purchased Under Agreements to Resell/ Securities Sold Under Agreements to Repurchase

The Company enters into agreements with BBVA as the counterparty under which it purchases/sells securities subject to an obligation to resell/repurchase the same or similar securities. The following represents the amount of securities purchased under agreement to resell and securities sold under agreement to repurchase where BBVA is the counterparty.

	September 30, 2018		December 31, 2017
	(In Thousands)
Securities purchased under agreements to resell	$	126,193	$	—
Securities sold under agreements to repurchase	20,796		17,881

58

Borrowings

BSI, a wholly owned subsidiary of the Company, had a $420 million revolving note and cash subordination agreement with BBVA that was executed on March 16, 2012, with an original maturity date of March 16, 2018. On March 16, 2017, the agreement was amended to increase the available amount to $450 million and the maturity date was extended to March 16, 2023. BSI also had a $150 million line of credit with BBVA that was initiated on August 1, 2014. This agreement was terminated on July 13, 2017. On March 16, 2017, BSI entered into an uncommitted demand facility agreement with BBVA for a revolving loan facility up to $1 billion to be used for trade settlement purposes. BSI has not drawn against this facility in 2018. At both September 30, 2018 and December 31, 2017 there was no amount outstanding under the revolving note and cash subordination agreement. Interest expense related to these agreements was $0 and $25 thousand for the three months ended September 30, 2018 and 2017, respectively, and are included in interest on other short-term borrowings within the Company's Unaudited Condensed Consolidated Statements of Income. Interest expense related to these agreements was $232 thousand and $917 thousand for the nine months ended September 30, 2018 and 2017, respectively, and are included in interest on other short-term borrowings within the Company's Unaudited Condensed Consolidated Statements of Income.

Service and Referral Agreements

The Company and its affiliates entered into or were subject to various service and referral agreements with BBVA and its affiliates. Each of the agreements was done in the ordinary course of business and on market terms. Income associated with these agreements was $8.6 million and $13.2 million for the three months ended September 30, 2018 and 2017, respectively, and is recorded as a component of noninterest income within the Company's Unaudited Condensed Consolidated Statements of Income. Expenses associated with these agreements was $7.0 million and $8.7 million for the three months ended September 30, 2018 and 2017, respectively, and is recorded as a component of noninterest expense within the Company's Unaudited Condensed Consolidated Statements of Income. Income associated with these agreements was $33.9 million and $27.1 million for the nine months ended September 30, 2018 and 2017, respectively, and is recorded as a component of noninterest income within the Company's Unaudited Condensed Consolidated Statements of Income. Expenses associated with these agreements was $22.5 million and $21.3 million for the nine months ended September 30, 2018 and 2017, respectively and is recorded as a component of noninterest expense within the Company's Unaudited Condensed Consolidated Statements of Income.

Series A Preferred Stock

BBVA is the sole holder of the Series A Preferred Stock that the Company issued in December 2015. At September 30, 2018, the carrying amount of the Series A Preferred Stock was approximately $229 million. During the nine months ended September 30, 2018 and 2017, the Company paid $12.7 million and $11.0 million, respectively, of preferred stock dividends to BBVA.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Critical Accounting Policies

The accounting principles followed by the Company and the methods of applying these principles conform with accounting principles generally accepted in the United States of America and with general practices within the banking industry. The Company’s critical accounting policies relate to (1) the allowance for loan losses, (2) fair value of financial instruments, and (3) goodwill impairment. These critical accounting policies require the use of estimates, assumptions and judgments which are based on information available as of the date of the financial statements. Accordingly, as this information changes, future financial statements could reflect the use of different estimates, assumptions and judgments. Certain determinations inherently have a greater reliance on the use of estimates, assumptions and judgments and, as such, have a greater possibility of producing results that could be materially different than originally reported. The Company’s significant accounting policies and changes in accounting principles and effects of new accounting pronouncements are discussed in detail in Note 1 in the Notes to Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017. Additional disclosures regarding the effects of new accounting pronouncements are included in Note 1, Basis of Presentation, in the Notes to the Unaudited Condensed Consolidated Financial Statements, included herein.

Executive Overview

Financial Performance

Consolidated net income attributable to the Company for the three months ended September 30, 2018 was $174.1 million compared to $129.9 million earned during the three months ended September 30, 2017. The Company’s results of operations for the three months ended September 30, 2018, reflected higher net income before income tax expense primarily as a result of higher net interest income offset by higher noninterest expense.

Net interest income totaled $658.3 million for the three months ended September 30, 2018 compared to $589.4 million for the three months ended September 30, 2017. The net interest margin for the three months ended September 30, 2018 was 3.27%, compared to 3.13% for the three months ended September 30, 2017. Net interest income was positively impacted by higher interest rates due to the impact of increases in the Federal Reserve Board benchmark interest rate.

The provision for loan losses was $95.0 million for the three months ended September 30, 2018 compared to $103.4 million for the three months ended September 30, 2017. Provision for loan losses for the three months ended September 30, 2017 included $60 million of provision expense related to the estimated impact of Hurricanes Harvey and Irma on the loan portfolio. The increase in provision for loan losses for the three months ended September 30, 2018, excluding the additional provision expense in 2017 related to the hurricanes, was primarily attributable to loan growth during the three months ended September 30, 2018.

Net charge-offs for the three months ended September 30, 2018 totaled $79.6 million compared to $71.3 million for the three months ended September 30, 2017. The increase in net charge-offs for the three months ended September 30, 2018 as compared to the corresponding period in 2017 was primarily driven by a $10.5 million increase in consumer direct net charge-offs and a $4.9 million increase in consumer indirect net charge-offs offset by a $5.7 million decrease in commercial real estate–mortgage net charge-offs.

Noninterest income was $258.5 million for the three months ended September 30, 2018, relatively flat when compared to $257.8 million for the three months ended September 30, 2017.

Noninterest expense increased $31.5 million to $605.5 million for the three months ended September 30, 2018 compared to $574.0 million for the three months ended September 30, 2017. The increase was driven by a $13.3 million increase in salaries, benefits and commissions and a $12.1 million increase in other noninterest expense due, in part, to an increase in FDIC insurance expense as well as increases in business development and communications expense.

Income tax expense was $41.8 million for the three months ended September 30, 2018 compared to $39.3 million for the three months ended September 30, 2017. This resulted in an effective tax rate of 19.3% for the three months ended September 30, 2018 and 23.2% for three months ended September 30, 2017. The decrease in the tax rate was

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primarily driven by the enactment of the Tax Cuts and Jobs Act which reduced the corporate tax rate from 35% to 21% effective January 1, 2018.

The Company's total assets at September 30, 2018 were $90.0 billion, an increase of $2.7 billion from December 31, 2017 levels. Total loans, excluding loans held for sale, were $64.5 billion at September 30, 2018, an increase of $2.8 billion or 4.6% from year-end December 31, 2017 levels. The increase in loans was driven by increases in both commercial and consumer loans. Deposits increased $1.1 billion or 1.6% compared to December 31, 2017.

Total shareholder's equity at September 30, 2018 was $13.3 billion, an increase of $329 million compared to December 31, 2017.

Capital and Regulatory

Under the Basel III transitional provisions, the Company's Tier1 and CET1 ratios were 12.41% and 12.07%, respectively, at September 30, 2018 compared to 12.15% and 11.80%, respectively, at December 31, 2017.

On May 24, 2018, the EGRRCPA amended the Dodd-Frank Act by raising the asset thresholds above which certain financial institutions are subject to various enhanced prudential standards. The federal banking regulators have issued statements noting the interim positions the regulators will take with respect to their existing regulations until the regulators can formally amend their regulations to implement the EGRRCPA.

In its statement on the EGRRCPA, the Federal Reserve Board noted that it will no longer take action to require bank holding companies with $50 billion or more but less than $100 billion in total consolidated assets, such as the Company, to comply with its liquidity coverage ratio rule until it formally amends its regulations to implement the EGRRCPA. This relief is not required under the EGRRCPA, as the EGRRCPA did not exempt any bank holding companies from the Federal Reserve Board’s liquidity coverage ratio rule. We cannot predict whether the Company will become exempt from the Federal Reserve Board’s liquidity cover ratio rule when the Federal Reserve Board formally amends its rules to implement the EGRRCPA or whether the Federal Reserve Board will instead resume taking action to require the Company to comply with this rule. Under the EGRRCPA and the Federal Reserve Board’s statement regarding the EGRRCPA, certain enhanced prudential standards that apply to Large FBOs, such as BBVA, remain in effect, including liquidity risk management, liquidity stress testing and liquidity buffer requirements. The Company and the Bank are part of BBVA’s U.S. operations.

We cannot predict whether U.S. intermediate holding companies that are subsidiaries of Large FBOs, such as the Company, will be exempted from any regulatory requirements, such as supervisory and company-run Dodd-Frank Act Stress Test requirements and the Federal Reserve Board’s capital planning rule, when the Federal Reserve Board formally amends its rules to implement the EGRRCPA. Relief from these requirements is not required under the EGRRCPA for U.S. intermediate holding companies that are subsidiaries of Large FBOs.

The EGRRCPA prohibits the federal banking regulators from requiring banking organizations, including the Company and the Bank, to apply heightened risk weights to HVCREexposures, as required under the regulators’ current capital rules, unless the exposures satisfy a new statutory definition of an HVCRE ADC loan. On September 18, 2018, the federal banking regulators issued a proposed rule implementing the statutory definition of HVCRE ADC loan and the related risk-weight framework, without change, into their respective capital rules. In their statements regarding the EGRRCPA, the federal banking regulators noted that until they finalize the now-proposed rules implementing the new HVCRE ADC loan risk-weight framework required under the EGRRCPA, they will allow banking organizations either to continue to apply a heightened risk weight to exposures that satisfy the current regulatory definition of an HVCRE exposure or to apply a heightened risk weight to only those exposures that the banking organization believes satisfy the new statutory definition of an HVCRE ADC loan.

Liquidity

The Company’s sources of liquidity include customers’ interest-bearing and noninterest-bearing deposit accounts, loan principal and interest payments, investment securities, short-term investments and borrowings. As a holding company, the Parent’s primary source of liquidity is dividends from the Bank. Due to the net earnings restrictions on dividend distributions under Alabama law, the Bank must obtain regulatory approval prior to paying any dividends.

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During 2018, the Parent paid common dividends of $110 million to its sole shareholder, BBVA. Any dividends paid by the Parent must be set forth as capital actions in the Company's capital plan and not objected to by the Federal Reserve Board.

As noted in "Capital and Regulatory,” the Federal Reserve Board will no longer take action to require the Company to comply with the Federal Reserve Board’s LCR rule until it formally amends its regulations to implement the EGRRCPA. At September 30, 2018, the Company was fully compliant with the LCR rule.

Management believes that the current sources of liquidity are adequate to meet the Company’s requirements and plans for continued growth.

Analysis of Results of Operations

Consolidated net income attributable to the Company totaled $174.1 million and $129.9 million for the three months ended September 30, 2018 and 2017, respectively. The Company’s results of operations for the three months ended September 30, 2018, reflected higher net income before income tax expense primarily as a result of higher net interest income offset by higher noninterest expense.

Consolidated net income attributable to the Company totaled $566.1 million and $407.3 million for the nine months ended September 30, 2018 and 2017, respectively. The Company’s results of operations for the nine months ended September 30, 2018, reflected higher net income before income tax expense primarily as a result of higher net interest income and noninterest income.

Net Interest Income and Net Interest Margin

Net interest income is the principal component of the Company’s income stream and represents the difference, or spread, between interest and fee income generated from earning assets and the interest expense paid on deposits and borrowed funds. Fluctuations in interest rates as well as changes in the volume and mix of earning assets and interest bearing liabilities can impact net interest income. The following discussion of net interest income is presented on a fully taxable equivalent basis, unless otherwise noted, to facilitate performance comparisons among various taxable and tax-exempt assets.

Three Months Ended September 30, 2018 and 2017

Net interest income totaled $658.3 million for the three months ended September 30, 2018 compared to $589.4 million for the three months ended September 30, 2017.

Net interest income on a fully taxable equivalent basis totaled $671.4 million for the three months ended September 30, 2018, an increase of $60.2 million compared with $611.3 million for the three months ended September 30, 2017. The increase in net interest income was primarily the result of an increase in interest income on loans and investment securities offset by an increase in interest expense on interest bearing deposits.

Net interest margin was 3.27% for the three months ended September 30, 2018 compared to 3.13% for the three months ended September 30, 2017. The 14 basis point increase in net interest margin was primarily driven by the impact of higher interest rates.

The fully taxable equivalent yield for the three months ended September 30, 2018, for the loan portfolio was 4.71% compared to 4.23% for the same period in 2017. The 48 basis point increase was primarily driven by the impact of higher interest rates.

The fully taxable equivalent yield on the investment securities portfolio was 2.04% for the three months ended September 30, 2018 compared to 1.86% for the three months ended September 30, 2017. The increase was a result of increases in interest rates. Additionally, as interest rates have increased the amount of premium amortization required has decreased as actual and expected prepayments have decreased.

The average rate paid on interest bearing deposits was 1.12% for the three months ended September 30, 2018 compared to 0.67% for the three months ended September 30, 2017 and reflects the impact of higher interest rates on interest bearing deposit offerings including savings, money market and CD products.

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The average rate paid on FHLB and other borrowings for the three months ended September 30, 2018 was 3.34% compared to 2.35% for the corresponding period in 2017. The 99 basis point increase was primarily driven by the impact of higher rate FHLB advances as well as the impact of the $1.2 billion issuance of unsecured senior notes in June 2018.

Nine Months Ended September 30, 2018 and 2017

Net interest income totaled $1.9 billion for the nine months ended September 30, 2018 compared to $1.7 billion for the nine months ended September 30, 2017.

Net interest income on a fully taxable equivalent basis totaled $2.0 billion for the nine months ended September 30, 2018, an increase of $173.1 million compared with $1.8 billion for the nine months ended September 30, 2017. The increase in net interest income was primarily the result of an increase in interest income on loans and investment securities offset by an increase in interest expense on interest bearing deposits.

Net interest margin was 3.28% for the nine months ended September 30, 2018 compared to 3.07% for the nine months ended September 30, 2017. The 21 basis point increase in net interest margin was primarily driven by the impact of higher interest rates.

The fully taxable equivalent yield for the nine months ended September 30, 2018, for the loan portfolio was 4.57% compared to 4.13% for the same period in 2017. The 44 basis point increase was primarily driven by the impact of higher interest rates.

The fully taxable equivalent yield on the investment securities portfolio was 2.06% for the nine months ended September 30, 2018 compared to 1.94% for the nine months ended September 30, 2017. The 12 basis point increase was a result of increases in interest rates. Additionally, as interest rates have increased the amount of premium amortization required has decreased as actual and expected prepayments have decreased.

The average rate paid on interest bearing deposits was 0.97% for the nine months ended September 30, 2018 compared to 0.62% for the nine months ended September 30, 2017 and reflects the impact of higher interest rates offered on savings and money market products.

The average rate paid on FHLB and other borrowings for the nine months ended September 30, 2018 was 3.21% compared to 2.32% for the corresponding period in 2017. The 89 basis point increase was primarily driven by the impact of higher rate FHLB advances as well as the impact of the $750 million issuance of unsecured senior notes in June 2017 and the $1.2 billion issuance of unsecured senior notes in June 2018.

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The following table sets forth the major components of net interest income and the related annualized yields and rates.

Table 1 Consolidated Average Balance and Yield/ Rate Analysis
	Three Months Ended September 30, 2018							Three Months Ended September 30, 2017
	Average Balance			Income/Expense		Yield/ Rate		Average Balance			Income/ Expense		Yield/Rate
	(Dollars in Thousands)
Assets:
Interest earning assets:
Loans (1) (2) (3)	$	64,316,342		$	763,165	4.71	%	$	60,271,504		$	642,670	4.23	%
Debt securities – AFS	11,416,609			53,201		1.85		11,837,526			50,608		1.70
Debt securities – HTM (tax exempt) (3)	755,150			6,885		3.62		963,089			8,867		3.65
Debt securities – HTM (taxable)	1,605,504			10,663		2.63		159,804			1,221		3.03
Total debt securities - HTM	2,360,654			17,548		2.95		1,122,893			10,088		3.56
Trading account securities (3)	122,919			833		2.69		1,396,429			6,247		1.77
Other (4) (5)	3,175,714			17,449		2.18		2,793,157			14,888		2.11
Total earning assets	81,392,238			852,196		4.15		77,421,509			724,501		3.71
Noninterest earning assets:
Cash and due from banks	510,217							1,038,203
Allowance for loan losses	(866,131		)					(821,227		)
Net unrealized (loss) gain on investment securities available for sale	(296,537		)					(76,582		)
Other noninterest earning assets	9,378,881							9,738,076
Total assets	$	90,118,668						$	87,299,979
Liabilities:
Interest bearing liabilities:
Interest bearing demand deposits	$	7,703,562		12,644		0.65		$	7,557,010		6,819		0.36
Savings and money market accounts	26,759,661			63,796		0.95		24,551,131			27,962		0.45
Certificates and other time deposits	14,909,612			63,458		1.69		12,408,794			40,302		1.29
Total interest bearing deposits	49,372,835			139,898		1.12		44,516,935			75,083		0.67
FHLB and other borrowings	4,412,717			37,131		3.34		5,053,340			29,904		2.35
Federal funds purchased and securities sold under agreements to repurchase (5)	172,277			3,169		7.30		52,034			4,623		35.25
Other short-term borrowings	77,413			579		2.97		1,386,329			3,641		1.04
Total interest bearing liabilities	54,035,242			180,777		1.33		51,008,638			113,251		0.88
Noninterest bearing deposits	20,990,763							21,072,789
Other noninterest bearing liabilities	1,758,494							2,087,637
Total liabilities	76,784,499							74,169,064
Shareholder’s equity	13,334,169							13,130,915
Total liabilities and shareholder’s equity	$	90,118,668						$	87,299,979
Net interest income/net interest spread				$	671,419	2.82	%				$	611,250	2.83	%
Net interest margin						3.27	%						3.13	%
Taxable equivalent adjustment				13,133							21,889
Net interest income				$	658,286						$	589,361

(1) Loans include loans held for sale and nonaccrual loans.

(2) Interest income includes loan fees for rate calculation purposes.

(3) Yields are stated on a fully taxable equivalent basis assuming the tax rate in effect for each period presented.

(4) Includes federal funds sold, securities purchased under agreements to resell, interest bearing deposits, and other earning assets.

(5) Yield/rate reflects impact of balance sheet offsetting. See Note 6, Securities Financing Activities, in the notes to the financial statements.

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Table 1 Consolidated Average Balance and Yield/ Rate Analysis
	Nine Months Ended September 30, 2018							Nine Months Ended September 30, 2017
	Average Balance			Income/Expense		Yield/ Rate		Average Balance			Income/ Expense		Yield/Rate
	(Dollars in Thousands)
Assets:
Interest earning assets:
Loans (1) (2) (3)	$	63,247,623		$	2,160,341	4.57	%	$	60,166,823		$	1,859,740	4.13	%
Debt securities – AFS	11,458,832			163,598		1.91		11,626,864			155,840		1.79
Debt securities – HTM (tax exempt) (3)	814,394			20,921		3.43		974,886			26,264		3.60
Debt securities – HTM (taxable)	1,335,534			25,050		2.51		167,008			3,356		2.69
Total debt securities - HTM	2,149,928			45,971		2.86		1,141,894			29,620		3.47
Trading account securities (3)	131,618			2,508		2.55		2,235,621			26,352		1.58
Other (4) (5)	3,042,505			44,240		1.94		2,858,655			41,511		1.94
Total earning assets	80,030,506			2,416,658		4.04		78,029,857			2,113,063		3.62
Noninterest earning assets:
Cash and due from banks	605,800							918,124
Allowance for loan losses	(850,392		)					(835,915		)
Net unrealized (loss) gain on investment securities available for sale	(272,312		)					(102,531		)
Other noninterest earning assets	9,468,874							9,472,821
Total assets	$	88,982,476						$	87,482,356
Liabilities:
Interest bearing liabilities:
Interest bearing demand deposits	$	7,946,242		33,250		0.56		$	7,863,401		19,211		0.33
Savings and money market accounts	26,054,348			151,479		0.78		24,826,554			72,643		0.39
Certificates and other time deposits	14,560,787			168,839		1.55		12,554,506			119,447		1.27
Total interest bearing deposits	48,561,377			353,568		0.97		45,244,461			211,301		0.62
FHLB and other borrowings	3,903,295			93,799		3.21		4,115,511			71,422		2.32
Federal funds purchased and securities sold under agreements to repurchase (5)	100,045			5,104		6.82		64,676			16,462		34.03
Other short-term borrowings	69,242			1,490		2.88		2,239,427			24,233		1.45
Total interest bearing liabilities	52,633,959			453,961		1.15		51,664,075			323,418		0.84
Noninterest bearing deposits	21,282,629							20,922,150
Other noninterest bearing liabilities	1,850,856							1,899,015
Total liabilities	75,767,444							74,485,240
Shareholder’s equity	13,215,032							12,997,116
Total liabilities and shareholder’s equity	$	88,982,476						$	87,482,356
Net interest income/net interest spread				$	1,962,697	2.89	%				$	1,789,645	2.78	%
Net interest margin						3.28	%						3.07	%
Taxable equivalent adjustment				38,307							63,023
Net interest income				$	1,924,390						$	1,726,622

(1) Loans include loans held for sale and nonaccrual loans.

(2) Interest income includes loan fees for rate calculation purposes.

(3) Yields are stated on a fully taxable equivalent basis assuming the tax rate in effect for each period presented.

(4) Includes federal funds sold, securities purchased under agreements to resell, interest bearing deposits, and other earning assets.

(5) Yield/rate reflects impact of balance sheet offsetting. See Note 6, Securities Financing Activities, in the notes to the financial statements.

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Provision for Loan Losses

The provision for loan losses is the charge to earnings that management determines to be necessary to maintain the allowance for loan losses at a sufficient level reflecting management's estimate of probable incurred losses in the loan portfolio.

Three Months Ended September 30, 2018 and 2017

For the three months ended September 30, 2018, the Company recorded $95.0 million of provision for loan losses compared to $103.4 million for the three months ended September 30, 2017. Provision for loan losses for the three months ended September 30, 2017 included $60 million of provision expense related to the estimated impact of Hurricanes Harvey and Irma on the loan portfolio. The increase in provision for loan losses for the three months ended September 30, 2018, excluding the additional provision expense in 2017 related to the hurricanes, was primarily attributable to loan growth during the three months ended September 30, 2018.

At September 30, 2018, there was no remaining allowance for loan losses related to the Hurricanes Harvey and Irma impacted loan portfolio compared to $11 million at June 30, 2018 based upon management's best estimate of the probable incurred losses resulting from these hurricanes.

The Company recorded net charge-offs of $79.6 million during the three months ended September 30, 2018 compared to $71.3 million during the corresponding period in 2017. The increase in net charge-offs for the three months ended September 30, 2018, as compared to the corresponding period in 2017, was primarily driven by a $10.5 million increase in consumer direct net charge-offs and a $4.9 million increase in consumer indirect net charge-offs offset by a $5.7 million decrease in commercial real estate–mortgage net charge-offs.

Net charge-offs were 0.49% of average loans for the three months ended September 30, 2018 compared to 0.47% of average loans for the three months ended September 30, 2017.

Nine Months Ended September 30, 2018 and 2017

For the nine months ended September 30, 2018, the Company recorded $243.3 million of provision for loan losses compared to $228.9 million for the nine months ended September 30, 2017. The increase in provision for loan losses was primarily related to growth in the loan portfolio offset by a decrease in the allowance for loan losses related to the estimated impact of Hurricanes Harvey and Irma on the loan portfolio during the nine months ended September 30, 2018.

At September 30, 2018, there was no remaining allowance for loan losses related to the Hurricanes Harvey and Irma impacted loan portfolio compared to $45 million at December 31, 2017 based upon management's best estimate of the probable incurred losses resulting from these hurricanes.

The Company recorded net charge-offs of $210.6 million during the nine months ended September 30, 2018 compared to $218.0 million during the corresponding period in 2017. The decrease in net charge-offs for the nine months ended September 30, 2018 as compared to the corresponding period in 2017 was driven in part by a $41.2 million decrease in commercial, financial and agricultural net charge-offs primarily due to a decrease in charge-offs related to energy loans offset by a $32.1 million increase in consumer direct net charge-offs and a $12.2 million increase in consumer indirect net charge-offs primarily due to an increase in loan growth in the consumer direct and indirect portfolios. Consumer direct and indirect net charge-offs were 5.59% and 2.37% of average consumer direct and indirect loans, respectively, for the nine months ended September 30, 2018 compared to 4.96% and 2.11% of average consumer direct and indirect loans, respectively, for the nine months ended September 30, 2017.

Net charge-offs were 0.45% of average loans for the nine months ended September 30, 2018 compared to 0.48% of average loans for the nine months ended September 30, 2017.

For further discussion and analysis of the allowance for loan losses, refer to the discussion of lending activities found later in this section. Also, refer to Note 3, Loans and Allowance for Loan Losses, in the Notes to the Unaudited Condensed Consolidated Financial Statements for additional disclosures.

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Noninterest Income

The following table presents the components of noninterest income.

Table 2 Noninterest Income
	Three Months Ended September 30,				Nine Months Ended   September 30,
	2018		2017		2018		2017
	(In Thousands)
Service charges on deposit accounts	$	60,325	$	55,953	$	175,067	$	166,040
Card and merchant processing fees	44,219		32,297		127,945		94,749
Retail investment sales	28,286		26,817		88,176		82,876
Money transfer income	23,441		24,881		68,049		77,408
Investment banking and advisory fees	13,956		30,500		62,398		78,744
Corporate and correspondent investment sales	12,490		5,145		40,901		26,249
Asset management fees	11,143		10,336		32,902		30,162
Mortgage banking	6,717		3,450		23,078		9,636
Bank owned life insurance	4,597		4,322		13,187		12,711
Investment securities gains, net	—		3,033		—		3,033
Other	53,285		61,060		154,600		167,198
Total noninterest income	$	258,459	$	257,794	$	786,303	$	748,806

Three Months Ended September 30, 2018 and 2017

Noninterest income was $258.5 million for the three months ended September 30, 2018, compared to $257.8 million for the three months ended September 30, 2017. The increase in noninterest income was primarily driven by increases in card and merchant processing fees, corporate and correspondent investment sales, and mortgage banking partially offset by decreases in investment banking and advisory fees and other noninterest income.

Card and merchant processing fees represents income related to customers' utilization of their debt and credit cards, as well as interchange income and merchants' discounts. Income from card and merchant processing fees increased to $44.2 million for the three months ended September 30, 2018, compared to $32.3 million for the three months ended September 30, 2017. Contributing to this increase was a $4.4 million increase in interchange income related to growth in the number of accounts. Additionally, effective January 1, 2018, the Company began recording certain interchange income, previously recorded within other income, in card and merchant processing fees. This change resulted in a $6.8 million increase for the three months ended September 30, 2018.

Income from investment banking and advisory fees decreased to $14.0 million for the three months ended September 30, 2018, compared to $30.5 million for the three months ended September 30, 2017, primarily driven by a decrease in the volume of underwriting activity during the third quarter 2018 compared to the same period in 2017.

Corporate and correspondent investment sales represents income generated through the sales of interest rate protection contracts to corporate customers and the sale of bonds and other services to the Company's correspondent banking clients. Income from corporate and correspondent investment sales increased to $12.5 million for the three months ended September 30, 2018, compared to $5.1 million for the three months ended September 30, 2017, due to an increase in income related to bond trading and interest rate contracts during the three months ended September 30, 2018 compared to the same period in 2017.

Mortgage banking for the three months ended September 30, 2018 was $6.7 million, an increase of $3.3 million compared to the three months ended September 30, 2017. Mortgage banking for the three months ended September 30, 2018, included $7.8 million of servicing income, guarantee fees and gains on sales of mortgage loans partially offset by net losses of $1.2 million related to fair value adjustments on mortgage loans held for sale, mortgage related derivatives and MSRs. Mortgage banking for the three months ended September 30, 2017, included $6.5 million of origination fees and gains on sales of mortgage loans partially offset by net losses of $2.7 million related to fair value adjustments on mortgage loans held for sale, mortgage related derivatives and MSRs.

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Other noninterest income is comprised of income recognized that does not typically fit into one of the other noninterest income categories and includes primarily various fees associated with letters of credit, loan syndication, ATMs and foreign exchange fees. The gain (loss) associated with the sale of fixed assets is also included in other income. For the three months ended September 30, 2018, other income decreased to $53.3 million, compared to $61.1 million for the three months ended September 30, 2017. This decrease was due in part to a $5.4 million decrease in interchange fees, that effective January 1, 2018, are recorded in card and merchant processing fees.

Nine Months Ended September 30, 2018 and 2017

Noninterest income was $786.3 million for the nine months ended September 30, 2018, compared to $748.8 million for the nine months ended September 30, 2017. The increase in noninterest income was primarily driven by increases in card and merchant processing fees, corporate and correspondent investment sales, and mortgage banking partially offset by decreases in money transfer income, investment banking and advisory fees and other noninterest income.

Income from card and merchant processing fees increased to $127.9 million for the nine months ended September 30, 2018, compared to $94.7 million for the nine months ended September 30, 2017, due to an $11.3 million increase in interchange income related to growth in the number of accounts. Additionally, effective January 1, 2018, the Company began recording certain interchange income, previously recorded within other income, in card and merchant processing fees. This change resulted in a $20.2 million increase for the nine months ended September 30, 2018.

Money transfer income decreased to $68.0 million for the nine months ended September 30, 2018, compared to $77.4 million for the nine months ended September 30, 2017, due to a decline in transaction volume during the nine months ended September 30, 2018 compared to the same period in 2017.

Income from investment banking and advisory fees decreased to $62.4 million for the nine months ended September 30, 2018, compared to $78.7 million for the nine months ended September 30, 2017. Contributing to this decrease was a decline in the volume of underwriting activity partially offset by an increase in structuring fees during 2018 compared to the same period in 2017.

Income from corporate and correspondent investment sales increased to $40.9 million for the nine months ended September 30, 2018, compared to $26.2 million for the nine months ended September 30, 2017, primarily driven by an increase in income related to bond trading, interest rate contracts and foreign currency exchange contracts during the nine months ended September 30, 2018.

Mortgage banking for the nine months ended September 30, 2018 was $23.1 million, an increase of $13.4 million compared to the nine months ended September 30, 2017. Mortgage banking for the nine months ended September 30, 2018, included $25.8 million of servicing income, guarantee fees and gains on sales of mortgage loans partially offset by net losses of $2.5 million related to fair value adjustments on mortgage loans held for sale, mortgage related derivatives and MSRs. Mortgage banking for the nine months ended September 30, 2017, included $18.3 million of origination fees and gains on sales of mortgage loans partially offset by net losses of $8.5 million related to fair value adjustments on mortgage loans held for sale, mortgage related derivatives and MSRs.

Other noninterest income decreased to $154.6 million for the nine months ended September 30, 2018, compared to $167.2 million for the nine months ended September 30, 2017, due in part to a $16.0 million decrease in interchange fees, that effective January 1, 2018, are recorded in card and merchant processing fees. This decrease was partially offset by an $8.1 million increase in income associated with agreements with BBVA and its affiliates.

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Noninterest Expense

The following table presents the components of noninterest expense.

Table 3 Noninterest Expense
	Three Months Ended September 30,				Nine Months Ended   September 30,
	2018		2017		2018		2017
	(In Thousands)
Salaries, benefits and commissions	$	292,679	$	279,384	$	868,971	$	835,825
Professional services	68,403		64,775		197,625		187,422
Equipment	63,739		60,656		190,759		184,691
Net occupancy	42,514		42,227		125,607		125,568
Money transfer expense	16,120		15,938		46,143		50,069
Amortization of intangibles	1,170		2,525		3,933		7,575
Total securities impairment	283		—		592		242
Other	120,602		108,457		314,338		304,367
Total noninterest expense	$	605,510	$	573,962	$	1,747,968	$	1,695,759

Three Months Ended September 30, 2018 and 2017

Noninterest expense was $605.5 million for the three months ended September 30, 2018, an increase of $31.5 million compared to $574.0 million for the three months ended September 30, 2017. The increase was driven by increases in salaries, benefits and commissions and other noninterest expense.

Salaries, benefits and commissions expense is comprised of salaries and wages in addition to other employee benefit costs and represents the largest components of noninterest expense. Salaries, benefits and commissions expense increased to $292.7 million during the three months ended September 30, 2018, compared to $279.4 million for the three months ended September 30, 2017, related to increases of approximately $6.8 million and $7.8 million in full time salaries and incentives, commissions and variable compensation, respectively, in 2018 compared to the corresponding period in 2017.

Other noninterest expense includes FDIC insurance, marketing, communications, postage, supplies, subscriptions, provision for unfunded commitments and gains and losses on the sales and write-downs of OREO. Other noninterest expense increased $12.1 million during the three months ended September 30, 2018, to $120.6 million compared to $108.5 million for the three months ended September 30, 2017. The increase was attributable to a $7.0 million increase in business development expense, a $5.7 million increase in communications and a $7.7 million increase in FDIC insurance which were partially offset by a $10.5 million decrease in the provision for unfunded commitments in 2018 compared to the corresponding period in 2017.

Nine Months Ended September 30, 2018 and 2017

Noninterest expense increased $52.2 million to $1.7 billion for the nine months ended September 30, 2018 compared to the nine months ended September 30, 2017. Noninterest expense was impacted by increases in salaries, benefits and commissions, professional services, equipment expense and other noninterest expense.

Salaries, benefits and commissions expense increased to $869.0 million during the nine months ended September 30, 2018, compared to $835.8 million for the nine months ended September 30, 2017, related to increases of approximately $25.9 million and $9.0 million in full time salaries and incentives, commissions and variable compensation, respectively, in 2018 compared to the corresponding period in 2017.

Professional services represents fees incurred for the various support functions, which includes legal, consulting, outsourcing and other professional related fees. Professional services increased $10.2 million during the nine months ended September 30, 2018, to $197.6 million compared to $187.4 million for the corresponding period in 2017 due to

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a $12.0 million increase in contractor services and a $4.6 million increase in outsourcing partially offset by a $5.2 million decrease in bankcard fees.

Equipment expense increased by $6.1 million during the nine months ended September 30, 2018, to $190.8 million compared to $184.7 million for the corresponding period in 2017 primarily due to a $4.3 million increase in software amortization and a $3.5 million increase in software maintenance which were partially offset by a $1.6 million decrease in depreciation expense.

Other noninterest expense increased $10.0 million during the nine months ended September 30, 2018, to $314.3 million compared to $304.4 million for the nine months ended September 30, 2017. The increase was attributable to a $23.7 million increase in business development expense, which was partially offset by a $15.4 million decrease in the provision for unfunded commitments in 2018 compared to the corresponding period in 2017.

Income Tax Expense

Three Months Ended September 30, 2018 and 2017

The Company’s income tax expense totaled $41.8 million and $39.3 million for the three months ended September 30, 2018 and 2017, respectively. The effective tax rate was 19.3% for the three months ended September 30, 2018 and 23.2% for the three months ended September 30, 2017.The decrease in the tax rate was primarily driven by the enactment of the Tax Cuts and Jobs Act which reduced the corporate tax rate from 35% to 21% effective January 1, 2018.

Nine Months Ended September 30, 2018 and 2017

The Company’s income tax expense totaled $151.8 million and $142.1 million for the nine months ended September 30, 2018 and 2017, respectively. The effective tax rate was 21.1% for the nine months ended September 30, 2018 and 25.8% for the nine months ended September 30, 2017.The decrease in the tax rate was primarily driven by the enactment of the Tax Cuts and Jobs Act which reduced the corporate tax rate from 35% to 21% effective January 1, 2018. The tax rate for the nine months ended September 30, 2018 was also impacted by $11.4 million of additional income tax expense related to the correction of an error in prior periods that resulted from an incorrect calculation of the proportional amortization of the Company's Low Income Housing Tax Credit investments. See Note 1, Basis of Presentation, in the Notes to the Unaudited Condensed Consolidated Financial Statements for additional disclosure.

Analysis of Financial Condition

A review of the Company’s major balance sheet categories is presented below.

Trading Account Assets

Trading account assets totaled $217 million at September 30, 2018, compared to $220 millionDecember 31, 2017.

Debt Securities

As of September 30, 2018, the securities portfolio included $11.1 billion in available for sale debt securities and $2.5 billion in held to maturity debt securities for a total debt securities portfolio of $13.6 billion, an increase of $360 million compared with December 31, 2017.

During the nine months ended September 30, 2018, the Company transferred approximately $1.0 billion of agency collateralized mortgage backed securities from available for sale to held to maturity. The Company also purchased approximately $709.5 million of agency collateralized mortgage backed securities that were classified as held to maturity.

Lending Activities

The Company groups its loans into portfolio segments based on internal classifications reflecting the manner in which the allowance for loan losses is established and how credit risk is measured, monitored and reported. Commercial loans are comprised of commercial, financial and agricultural, real estate — construction, and commercial real estate–mortgage loans. Consumer loans are comprised of residential real estate — mortgage, equity lines of credit, equity loans, credit cards, consumer direct and consumer indirect loans.

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The following table presents the composition of the loan portfolio.

Table 4 Loan Portfolio
	September 30, 2018		December 31, 2017
	(In Thousands)
Commercial loans:
Commercial, financial and agricultural	$	26,656,079	$	25,749,949
Real estate – construction	2,118,492		2,273,539
Commercial real estate – mortgage	12,397,004		11,724,158
Total commercial loans	$	41,171,575	$	39,747,646
Consumer loans:
Residential real estate – mortgage	$	13,402,472	$	13,365,747
Equity lines of credit	2,709,731		2,653,105
Equity loans	308,838		363,264
Credit card	763,686		639,517
Consumer direct	2,422,208		1,690,383
Consumer indirect	3,678,769		3,164,106
Total consumer loans	$	23,285,704	$	21,876,122
Total loans	$	64,457,279	$	61,623,768
Loans held for sale	73,569		67,110
Total loans and loans held for sale	$	64,530,848	$	61,690,878

Loans and loans held for sale, net of unearned income, totaled $64.5 billion at September 30, 2018, an increase of $2.8 billion from December 31, 2017. Both commercial loan growth and consumer loan growth driven by increased activity in consumer direct and indirect lending contributed to the increase.

See Note 3, Loans and Allowance for Loan Losses, and Note 4, Loan Sales and Servicing, in the Notes to the Unaudited Condensed Consolidated Financial Statements for additional discussion.

Asset Quality

Nonperforming assets, which includes nonaccrual loans, nonaccrual loans held for sale, accruing loans 90 days past due, accruing TDRs 90 days past due, other real estate owned and other repossessed assets, totaled $702 million at September 30, 2018, a decrease of $47 million compared to $749 million at December 31, 2017. As a percentage of total loans and loans held for sale, other real estate owned and other repossessed assets, nonperforming assets were 1.09% at September 30, 2018 compared with 1.21% at December 31, 2017.

The Company defines potential problem loans as commercial loans rated substandard or doubtful that do not meet the definition of nonaccrual, TDR or 90 days past due and still accruing. See Note 3, Loans and Allowance for Loan Losses, in the Notes to the Unaudited Condensed Consolidated Financial Statements for further information on the Company’s credit grade categories, which are derived from standard regulatory rating definitions. The following table provides a summary of potential problem loans.

Table 5 Potential Problem Loans
	September 30, 2018		December 31, 2017
	(In Thousands)
Commercial, financial and agricultural	$	362,293	$	456,953
Real estate – construction	3,200		232
Commercial real estate – mortgage	84,031		90,313
	$	449,524	$	547,498

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The following table summarizes asset quality information and includes loans held for sale.

Table 6 Asset Quality
	September 30, 2018		December 31, 2017
	(In Thousands)
Nonaccrual loans:
Commercial, financial and agricultural	$	290,239	$	310,059
Real estate – construction	12,882		5,381
Commercial real estate – mortgage	104,976		111,982
Residential real estate – mortgage	159,721		173,843
Equity lines of credit	35,125		34,021
Equity loans	10,378		11,559
Credit card	—		—
Consumer direct	3,184		2,425
Consumer indirect	11,654		9,595
Total nonaccrual loans	628,159		658,865
Nonaccrual loans held for sale	—		—
Total nonaccrual loans and loans held for sale	$	628,159	$	658,865
Accruing TDRs: (1)
Commercial, financial and agricultural	$	522	$	1,213
Real estate – construction	121		101
Commercial real estate – mortgage	3,753		4,155
Residential real estate – mortgage	59,082		64,898
Equity lines of credit	—		237
Equity loans	28,383		30,105
Credit card	—		—
Consumer direct	1,189		534
Consumer indirect	—		—
Total Accruing TDRs	93,050		101,243
Accruing TDRs classified as loans held for sale	—		—
Total Accruing TDRs (loans and loans held for sale)	$	93,050	$	101,243
Loans 90 days past due and accruing:
Commercial, financial and agricultural	$	9,609	$	18,136
Real estate – construction	532		1,560
Commercial real estate – mortgage	502		927
Residential real estate – mortgage	3,697		8,572
Equity lines of credit	1,186		2,259
Equity loans	241		995
Credit card	13,157		11,929
Consumer direct	8,988		6,712
Consumer indirect	6,853		7,288
Total loans 90 days past due and accruing	44,765		58,378
Loans held for sale 90 days past due and accruing	—		—
Total loans and loans held for sale 90 days past due and accruing	$	44,765	$	58,378
OREO	$	18,706	$	17,278
Other repossessed assets	$	9,875	$	13,473

(1) TDR totals include accruing loans 90 days past due classified as TDR.

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Nonperforming assets, which include loans held for sale, are detailed in the following tables.

Table 7 Nonperforming Assets
	September 30, 2018		December 31, 2017
	(In Thousands)
Nonaccrual loans	$	628,159	$	658,865
Loans 90 days or more past due and accruing (1)	44,765		58,378
TDRs 90 days or more past due and accruing	444		751
Nonperforming loans	673,368		717,994
OREO	18,706		17,278
Other repossessed assets	9,875		13,473
Total nonperforming assets	$	701,949	$	748,745

(1) Excludes loans classified as TDR.

Table 8 Asset Quality Ratios
	September 30, 2018		December 31, 2017
Asset Quality Ratios:
Nonperforming loans and loans held for sale as a percentage of loans and loans held for sale (1)	1.04	%	1.16	%
Nonperforming assets as a percentage of total loans and loans held for sale, other real estate owned, and other repossessed assets (2)	1.09		1.21
Allowance for loan losses as a percentage of loans	1.36		1.37
Allowance for loan losses as a percentage of nonperforming loans (3)	130.00		117.38

(1) Nonperforming loans include nonaccrual loans and loans held for sale (including nonaccrual loans classified as TDR), accruing loans 90 days past due and accruing TDRs 90 days past due.

(2) Nonperforming assets include nonperforming loans, other real estate owned and other repossessed assets.

(3) Nonperforming loans include nonaccrual loans (including nonaccrual loans classified as TDR), accruing loans 90 days past due and accruing TDRs 90 days past due.

The following table provides a rollforward of nonaccrual loans and loans held for sale, excluding covered loans.

Table 9 Rollforward of Nonaccrual Loans
	Nine Months Ended September 30,
	2018			2017
	(In Thousands)
Balance at beginning of period,	$	658,865		$	920,312
Additions	534,328			487,329
Returns to accrual	(148,261		)	(49,458		)
Loan sales	(40,095		)	(98,797		)
Payments and paydowns	(124,435		)	(290,722		)
Transfers to OREO	(15,677		)	(24,480		)
Charge-offs	(236,566		)	(277,372		)
Balance at end of period	$	628,159		$	666,812

When borrowers are experiencing financial difficulties, the Company, in order to assist the borrowers in repaying the principal and interest owed to the Company, may make certain modifications to the loan agreement. To facilitate this process, a concessionary modification that would not otherwise be considered may be granted resulting in a classification of the loan as a TDR. Within each of the Company’s loan classes, TDRs typically involve modification of the loan interest rate to a below market rate or an extension or deferment of the loan term. The financial effects of TDRs are reflected in the components that comprise the allowance for loan losses in either the amount of charge-offs or loan loss provision and period-end allowance levels. All TDRs are considered to be impaired loans. Refer to Note

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3, Loans and Allowance for Loan Losses, in the Notes to the Unaudited Condensed Consolidated Financial Statements for additional information.

The following table provides a rollforward of TDR activity, excluding covered loans and loans held for sale.

Table 10 Rollforward of TDR Activity
	Nine Months Ended September 30,
	2018			2017
	(In Thousands)
Balance at beginning period	$	285,606		$	213,868
New TDRs	138,281			217,600
Payments/Payoffs	(58,600		)	(123,460		)
Charge-offs	(5,821		)	(4,526		)
Transfer to OREO	—			(448		)
Balance at end of period	$	359,466		$	303,034

The Company’s aggregate recorded investment in impaired loans modified through TDRs was $359 million at September 30, 2018 compared to $286 million at December 31, 2017. Included in these amounts are $93 million at September 30, 2018 and $101 million at December 31, 2017 of accruing TDRs. Accruing TDRs are not considered nonperforming because they are performing in accordance with the restructured terms.

Allowance for Loan Losses

Management’s policy is to maintain the allowance for loan losses at a level sufficient to absorb estimated probable incurred losses in the loan portfolio. See Note 3, Loans and Allowance for Loan Losses, in the Notes to the Unaudited Condensed Consolidated Financial Statements for additional disclosures regarding the allowance for loan losses. The total allowance for loan losses increased to $875 million at September 30, 2018, from $843 million at December 31, 2017. The ratio of the allowance for loan losses to total loans was 1.36% at September 30, 2018 compared to 1.37% at December 31, 2017. Nonperforming loans were $673 million at September 30, 2018 compared to $718 million at December 31, 2017. The allowance attributable to individually impaired loans was $137 million at September 30, 2018 compared to $104 million at December 31, 2017. Loans individually evaluated for impairment may have no allowance recorded if the fair value of the collateral less costs to sell or the present value of the loan's expected future cash flows exceeds the recorded investment of the loan.

Net charge-offs were 0.49% of average loans for the three months ended September 30, 2018 compared to 0.47% of average loans for the three months ended September 30, 2017.

Net charge-offs were 0.45% of average loans for the nine months ended September 30, 2018 compared to 0.48% of average loans for the nine months ended September 30, 2017. The decrease in net charge-offs for the nine months ended September 30, 2018 as compared to the corresponding period in 2017 was driven in part by a $41.2 million decrease in commercial, financial and agricultural net charge-offs primarily due to a decrease in charge-offs related to energy loans and an $8.9 million decrease in commercial real estate – mortgagenet charge-offs offset by an $32.1 million increase in consumer direct net charge-offs and a $12.2 million increase in consumer indirect net charge-offs due to an increase in loan growth in the consumer direct and indirect portfolios. Consumer direct and indirect net charge-offs on consumer direct and indirect loans were 5.59% and 2.37% of average consumer direct and consumer indirect loans, respectively, for the nine months ended September 30, 2018 compared to 4.96% and 2.11% of average consumer direct and consumer indirect loans, respectively, for the nine months ended September 30, 2017.

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The following table sets forth information with respect to the Company’s loans, excluding loans held for sale, and the allowance for loan losses.

Table 11 Summary of Loan Loss Experience
	Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017
	(Dollars in Thousands)
Average loans outstanding during the period	$	64,249,540		$	60,215,551		$	63,189,287		$	60,111,031
Allowance for loan losses, beginning of period	$	860,000		$	816,952		$	842,760		$	838,293
Charge-offs:
Commercial, financial and agricultural	20,142			21,320			42,968			91,943
Real estate – construction	—			—			436			82
Commercial real estate – mortgage	2,328			7,913			2,781			8,845
Residential real estate – mortgage	3,192			2,587			7,798			8,769
Equity lines of credit	1,324			1,314			4,909			5,054
Equity loans	1,054			389			2,416			2,419
Credit card	11,721			11,333			34,937			33,479
Consumer direct	32,245			19,940			90,908			57,030
Consumer indirect	29,633			23,829			84,350			69,752
Total charge-offs	101,639			88,625			271,503			277,373
Recoveries:
Commercial, financial and agricultural	6,167			6,625			10,031			17,790
Real estate – construction	23			29			261			965
Commercial real estate – mortgage	293			206			6,137			3,265
Residential real estate – mortgage	1,102			870			2,770			4,453
Equity lines of credit	1,343			1,135			4,315			2,914
Equity loans	1,009			396			2,883			1,369
Credit card	2,035			742			4,078			2,392
Consumer direct	3,480			1,659			6,855			5,032
Consumer indirect	6,616			5,696			23,533			21,130
Covered	—			—			—			31
Total recoveries	22,068			17,358			60,863			59,341
Net charge-offs	79,571			71,267			210,640			218,032
Total provision for loan losses	94,964			103,434			243,273			228,858
Allowance for loan losses, end of period	$	875,393		$	849,119		$	875,393		$	849,119
Net charge-offs to average loans	0.49		%	0.47		%	0.45		%	0.48		%

Concentrations

The following tables provide further details regarding the Company’s commercial, financial and agricultural, commercial real estate, residential real estate and consumer portfolio segments as of September 30, 2018 and December 31, 2017.

Commercial, Financial and Agricultural

In accordance with the Company's lending policy, each commercial loan undergoes a detailed underwriting process, which incorporates the Company's risk tolerance, credit policy and procedures. In addition, the Company has a graduated approval process which accounts for the quality, loan type and total exposure of the borrower. The Company has also adopted an internal exposure-based limit which is based on a variety of risk factors, including but not limited to the borrower industry.

The commercial, financial and agricultural portfolio segment totaled $26.7 billion at September 30, 2018 compared to $25.7 billion at December 31, 2017. This segment consists primarily of large national and international companies and small to mid-sized companies. This portfolio segment also contains owner occupied commercial real estate loans. Loans in this portfolio are generally underwritten individually and are secured with the assets of the company, and/or

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the personal guarantees of the business owners. The Company minimizes the risk associated with this portfolio segment by various means, including maintaining prudent advance rates, financial covenants, and obtaining personal guarantees from the principals of the borrower.

The following table provides details related to the commercial, financial, and agricultural portfolio segment.

Table 12 Commercial, Financial and Agricultural
	September 30, 2018								December 31, 2017
Industry	Recorded Investment		Nonaccrual		Accruing TDRs		Accruing Greater Than 90 Days Past Due		Recorded Investment		Nonaccrual		Accruing TDRs		Accruing Greater Than 90 Days Past Due
	(In Thousands)
Autos, Components and Durable Goods	$	524,132	$	1,400	$	—	$	—	$	543,917	$	512	$	—	$	—
Basic Materials	450,396		2,815		—		—		622,869		53		—		—
Capital Goods & Industrial Services	3,083,225		60,241		130		2,033		2,833,429		12,889		143		2,626
Construction & Infrastructure	832,330		28,103		—		710		618,795		16,145		6		—
Consumer & Healthcare	3,328,600		44,084		338		138		3,512,885		41,594		886		—
Energy	2,804,326		33,250		—		—		2,791,942		150,448		—		—
Financial Services	808,652		5		—		1,906		1,110,420		29		—		—
General Corporates	1,761,395		3,991		7		4,501		1,558,631		3,260		23		14,975
Institutions	3,186,018		469		—		—		3,187,330		1,913		—		—
Leisure	2,410,934		29,404		—		—		2,440,319		3,030		107		—
Real Estate	1,408,227		253		—		—		944,538		—		—		—
Retail & Wholesale Trade	2,940,756		33,490		—		—		2,623,670		6,424		—		535
Telecoms, Technology & Media	1,820,798		1,641		47		321		1,499,897		3,317		48		—
Transportation	733,715		33,771		—		—		856,438		50,587		—		—
Utilities	562,575		17,322		—		—		604,869		19,858		—		—
Total Commercial, Financial and Agricultural	$	26,656,079	$	290,239	$	522	$	9,609	$	25,749,949	$	310,059	$	1,213	$	18,136

Commercial Real Estate

The commercial real estate portfolio segment includes the commercial real estate and real estate - construction loan portfolios. Commercial real estate loans totaled $12.4 billion and $11.7 billion at September 30, 2018 and December 31, 2017, respectively, and real estate — construction loans totaled $2.1 billion at September 30, 2018 and $2.3 billion at December 31, 2017.

This portfolio segment consists primarily of extensions of credits to real estate developers and investors for the financing of land and buildings, whereby the repayment is generated from the sale of the real estate or the income generated by the real estate property. The Company attempts to minimize risk on commercial real estate properties by various means, including requiring collateral with values that exceed the loan amount, adequate cash flow to service the debt, and the personal guarantees of principals of the borrowers. In order to minimize risk on the construction portfolio, the Company has established an operations group outside of the lending staff which is responsible for loan disbursements during the construction process.

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The following tables present the geographic distribution for the commercial real estate and real estate — construction portfolios.

Table 13 Commercial Real Estate
	September 30, 2018								December 31, 2017
State	Recorded Investment		Nonaccrual		Accruing TDRs		Accruing Greater Than 90 Days Past Due		Recorded Investment		Nonaccrual		Accruing TDRs		Accruing Greater Than 90 Days Past Due
	(In Thousands)
Alabama	$	380,060	$	6,223	$	2,263	$	—	$	390,134	$	9,727	$	2,370	$	261
Arizona	796,275		10,605		—		—		874,975		10,144		—		—
California	1,755,883		—		—		28		1,456,273		—		—		—
Colorado	477,136		6,149		—		—		454,649		6,371		—		—
Florida	1,022,847		6,845		78		—		1,067,876		6,907		101		—
New Mexico	192,527		5,917		123		14		197,515		8,153		127		—
Texas	3,869,295		42,527		411		460		3,546,972		38,990		656		666
Other	3,902,981		26,710		878		—		3,735,764		31,690		901		—
	$	12,397,004	$	104,976	$	3,753	$	502	$	11,724,158	$	111,982	$	4,155	$	927

Table 14 Real Estate – Construction
	September 30, 2018								December 31, 2017
State	Recorded Investment		Nonaccrual		Accruing TDRs		Accruing Greater Than 90 Days Past Due		Recorded Investment		Nonaccrual		Accruing TDRs		Accruing Greater Than 90 Days Past Due
	(In Thousands)
Alabama	$	52,231	$	97	$	—	$	115	$	52,315	$	97	$	—	$	115
Arizona	169,859		—		—		—		163,077		—		—		—
California	237,764		—		—		—		260,652		—		—		715
Colorado	105,076		—		—		—		71,736		—		—		—
Florida	206,279		—		—		—		272,460		62		—		—
New Mexico	9,781		—		48		—		7,165		—		52		—
Texas	862,665		12,360		73		417		1,038,219		4,796		49		730
Other	474,837		425		—		—		407,915		426		—		—
	$	2,118,492	$	12,882	$	121	$	532	$	2,273,539	$	5,381	$	101	$	1,560

Residential Real Estate

The residential real estate portfolio includes residential real estate — mortgage loans, equity lines of credit and equity loans. The residential real estate portfolio primarily contains loans to individuals, which are secured by single-family residences. Loans of this type are generally smaller in size than commercial real estate loans and are geographically dispersed throughout the Company's market areas, with some guaranteed by government agencies or private mortgage insurers. Losses on residential real estate loans depend, to a large degree, on the level of interest rates, the unemployment rate, economic conditions and collateral values.

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Residential real estate — mortgage loans totaled $13.4 billion at both September 30, 2018 and December 31, 2017, respectively. Risks associated with residential real estate — mortgage loans are mitigated through rigorous underwriting procedures, collateral values established by independent appraisers and mortgage insurance. In addition, the collateral for this portfolio segment is concentrated in the Company's footprint as indicated in the table below.

Table 15 Residential Real Estate — Mortgage
	September 30, 2018								December 31, 2017
State	Recorded Investment		Nonaccrual		Accruing TDRs		Accruing Greater Than 90 Days Past Due		Recorded Investment		Nonaccrual		Accruing TDRs		Accruing Greater Than 90 Days Past Due
	(In Thousands)
Alabama	$	948,496	$	18,023	$	12,130	$	360	$	972,764	$	17,766	$	12,526	$	560
Arizona	1,331,337		12,688		8,632		575		1,290,388		14,649		9,526		387
California	3,165,534		15,178		3,777		—		3,028,148		13,607		3,574		1,018
Colorado	1,111,780		5,113		905		—		1,128,379		18,772		3,216		—
Florida	1,618,337		38,201		9,575		569		1,670,169		38,272		9,636		2,109
New Mexico	223,398		2,602		1,299		146		221,425		2,598		1,735		143
Texas	4,555,052		53,153		19,570		2,047		4,588,299		51,316		20,037		3,479
Other	448,538		14,763		3,194		—		466,175		16,863		4,648		876
	$	13,402,472	$	159,721	$	59,082	$	3,697	$	13,365,747	$	173,843	$	64,898	$	8,572

The following table provides information related to refreshed FICO scores for the Company's residential real estate portfolio.

Table 16 Residential Real Estate - Mortgage
	September 30, 2018								December 31, 2017
FICO Score	Recorded Investment		Nonaccrual		Accruing TDRs		Accruing Greater Than 90 Days Past Due		Recorded Investment		Nonaccrual		Accruing TDRs		Accruing Greater Than 90 Days Past Due
	(In Thousands)
Below 621	$	739,728	$	107,389	$	17,867	$	2,918	$	709,239	$	112,391	$	22,201	$	4,979
621 – 680	1,105,519		23,401		12,554		476		1,225,385		22,815		14,549		2,130
681 – 720	1,797,573		9,768		15,992		293		1,863,614		9,372		14,439		80
Above 720	9,104,501		10,000		12,152		—		8,801,004		5,081		13,385		713
Unknown	655,151		9,163		517		10		766,505		24,184		324		670
	$	13,402,472	$	159,721	$	59,082	$	3,697	$	13,365,747	$	173,843	$	64,898	$	8,572

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Equity lines of credit and equity loans totaled $3.0 billion at both September 30, 2018 and December 31, 2017. Losses in these portfolios generally track overall economic conditions. These loans are underwritten in accordance with the underwriting standards set forth in the Company's policy and procedures. The collateral for this portfolio segment is concentrated within the Company's footprint as indicated in the table below.

Table 17 Equity Loans and Lines
	September 30, 2018								December 31, 2017
State	Recorded Investment		Nonaccrual		Accruing TDRs		Accruing Greater Than 90 Days Past Due		Recorded Investment		Nonaccrual		Accruing TDRs		Accruing Greater Than 90 Days Past Due
	(In Thousands)
Alabama	$	502,939	$	10,051	$	8,945	$	381	$	539,208	$	9,967	$	8,878	$	1,121
Arizona	355,342		6,822		3,789		11		375,807		8,005		3,593		191
California	405,995		3,341		141		146		359,209		731		378		—
Colorado	192,407		2,761		1,084		136		193,297		3,307		1,464		175
Florida	338,355		8,566		6,209		92		368,033		8,768		6,553		692
New Mexico	51,875		1,394		599		70		53,165		1,647		610		—
Texas	1,141,993		11,700		7,215		591		1,093,651		12,077		8,456		1,032
Other	29,663		868		401		—		33,999		1,078		410		43
	$	3,018,569	$	45,503	$	28,383	$	1,427	$	3,016,369	$	45,580	$	30,342	$	3,254

The following table provides information related to refreshed FICO scores for the Company's equity loans and lines.

Table 18 Equity Loans and Lines
	September 30, 2018								December 31, 2017
FICO Score	Recorded Investment		Nonaccrual		Accruing TDRs		Accruing Greater Than 90 Days Past Due		Recorded Investment		Nonaccrual		Accruing TDRs		Accruing Greater Than 90 Days Past Due
	(In Thousands)
Below 621	$	203,347	$	23,223	$	6,713	$	1,044	$	204,128	$	22,828	$	7,894	$	2,303
621 – 680	369,071		10,023		9,769		251		387,870		11,518		10,781		245
681 – 720	530,739		7,894		3,757		8		551,072		7,348		4,791		41
Above 720	1,906,993		3,939		8,070		105		1,863,106		3,816		6,643		227
Unknown	8,419		424		74		19		10,193		70		233		438
	$	3,018,569	$	45,503	$	28,383	$	1,427	$	3,016,369	$	45,580	$	30,342	$	3,254

Other Consumer

The Company centrally underwrites and sources from the Company's branches or online, credit card loans and other consumer direct loans. Total consumer direct loans at September 30, 2018 were $2.4 billion and $1.7 billion at December 31, 2017. Total credit cards at September 30, 2018 were $764 million and $640 million at December 31, 2017.

The Company also operates a consumer finance unit which purchases loan contracts for indirect automobile and other consumer financing. These loans are centrally underwritten using underwriting guidelines and industry accepted tools. Total consumer indirect loans at September 30, 2018 were $3.7 billion compared to $3.2 billion at December 31, 2017.

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The following tables provide information related to refreshed FICO scores for the Company's consumer direct and consumer indirect loans.

Table 19 Consumer Direct
	September 30, 2018								December 31, 2017
FICO Score	Recorded Investment		Nonaccrual		Accruing TDRs		Accruing Greater Than 90 Days Past Due		Recorded Investment		Nonaccrual		Accruing TDRs		Accruing Greater Than 90 Days Past Due
	(In Thousands)
Below 621	$	173,335	$	3,094	$	45	$	7,340	$	95,221	$	376	$	—	$	3,680
621 – 680	491,431		42		1,144		498		275,816		30		178		1,543
681 – 720	576,457		13		—		458		380,645		2,005		351		392
Above 720	1,116,805		35		—		34		873,764		6		5		455
Unknown	64,180		—		—		658		64,937		8		—		642
	$	2,422,208	$	3,184	$	1,189	$	8,988	$	1,690,383	$	2,425	$	534	$	6,712

Table 20 Consumer Indirect
	September 30, 2018								December 31, 2017
FICO Score	Recorded Investment		Nonaccrual		Accruing TDRs		Accruing Greater Than 90 Days Past Due		Recorded Investment		Nonaccrual		Accruing TDRs		Accruing Greater Than 90 Days Past Due
	(In Thousands)
Below 621	$	827,404	$	9,331	$	—	$	6,445	$	683,543	$	6,648	$	—	$	5,850
621 – 680	1,087,712		1,781		—		312		986,894		2,282		—		1,020
681 – 720	719,807		356		—		43		679,363		439		—		208
Above 720	1,040,761		186		—		53		812,966		226		—		208
Unknown	3,085		—		—		—		1,340		—		—		2
	$	3,678,769	$	11,654	$	—	$	6,853	$	3,164,106	$	9,595	$	—	$	7,288

Foreign Exposure

As of September 30, 2018, foreign exposure risk did not represent a significant concentration of the Company's total portfolio of loans and was substantially represented by borrowers domiciled in Mexico and foreign borrowers currently residing in the United States. 

Funding Activities

Deposits are the primary source of funds for lending and investing activities and their cost is the largest category of interest expense. The Company also utilizes brokered deposits as a funding source in addition to customer deposits. Scheduled payments, as well as prepayments, and maturities from portfolios of loans and investment securities also provide a stable source of funds. FHLB advances, other secured borrowings, federal funds purchased, securities sold under agreements to repurchase and other short-term borrowed funds, as well as longer-term debt issued through the capital markets, all provide supplemental liquidity sources. The Company’s funding activities are monitored and governed through the Company’s asset/liability management process.

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At September 30, 2018, the Company's and the Bank's credit ratings were as follows:

Table 21 Credit Ratings
	As of September 30, 2018
	Standard & Poor’s	Moody’s	Fitch
BBVA Compass Bancshares, Inc.
Long-term debt rating	BBB+	Baa2	BBB+
Short-term debt rating	A-2	-	F2
Compass Bank
Long-term debt rating	BBB+	Baa2	BBB+
Long-term bank deposits (1)	N/A	A2	A-
Subordinated debt	BBB	Baa2	BBB
Short-term debt rating	A-2	P-2	F2
Short-term deposit rating (1)	N/A	P-1	F2
Outlook	Stable	Stable	Stable

(1) S&P does not provide a rating; therefore, the rating is N/A.

The cost and availability of financing to the Company and the Bank are impacted by its credit ratings. A downgrade to the Company’s or Bank’s credit ratings could affect its ability to access the credit markets and increase its borrowing costs, thereby adversely impacting the Company’s financial condition and liquidity. Key factors in maintaining high credit ratings include a stable and diverse earnings stream, strong credit quality, strong capital ratios and diverse funding sources, in addition to disciplined liquidity monitoring procedures. See the risk factors disclosed in the Company's Annual Report on Form 10-K for the year ended December 31, 2017, for additional information.

A credit rating is not a recommendation to buy, sell or hold securities, and the ratings are subject to revision or withdrawal by the assigning rating agency. Each rating should be evaluated independently of any other rating.

Deposits

Total deposits increased by $1.1 billion from December 31, 2017 to September 30, 2018. At September 30, 2018 and December 31, 2017, total deposits included $7.5 billion and $8.4 billion of brokered deposits, respectively. The following table presents the Company’s deposits segregated by major category:

Table 22 Composition of Deposits
	September 30, 2018				December 31, 2017
	Balance		% of Total		Balance		% of Total
	(Dollars in Thousands)
Noninterest-bearing demand deposits	$	20,968,391	29.8	%	$	21,630,694	31.3	%
Interest-bearing demand deposits	7,823,185		11.1		8,382,607		12.1
Savings and money market	26,909,319		38.2		25,361,280		36.6
Time deposits	14,677,162		20.9		13,881,732		20.0
Total deposits	$	70,378,057	100.0	%	$	69,256,313	100.0	%

Borrowed Funds

In addition to internal deposit generation, the Company also relies on borrowed funds as a supplemental source of funding. Borrowed funds consist of short-term borrowings, FHLB advances, subordinated debentures and other long-term borrowings.

Short-term borrowings are primarily in the form of federal funds purchased, securities sold under agreements to repurchase and other short-term borrowings.

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The short-term borrowings table presents the distribution of the Company’s short-term borrowed funds and the corresponding weighted average interest rates. Also provided are the maximum outstanding amounts of borrowings, the average amounts of borrowings and the average interest rates at period-end.

Table 23 Short-Term Borrowings
	Maximum Outstanding at Any Month End		Average Balance		Average Interest Rate		Ending Balance		Average Interest Rate at Period End
	(Dollars in Thousands)
Balance at September 30, 2018
Federal funds purchased	$	2,000	$	110	2.25	%	$	—	2.25	%
Securities sold under agreements to repurchase (1)	183,511		99,935		1.57		78,004		2.15
Other short-term borrowings	159,004		69,242		2.88		68,714		3.98
	$	344,515	$	169,287			$	146,718
Balance at December 31, 2017
Federal funds purchased	$	1,710	$	402	1.24	%	$	1,710	1.50	%
Securities sold under agreements to repurchase (1)	114,361		58,222		0.92		17,881		1.23
Other short-term borrowings	2,771,539		1,703,738		1.55		17,996		1.48
	$	2,887,610	$	1,762,362			$	37,587

(1) Average interest rate does not reflect impact of balance sheet offsetting. See Note 6, Securities Financing Activities, in the Notes to the Unaudited Condensed Consolidated Financial Statements.

Total short-term borrowings increased $109 million at September 30, 2018 from $38 million at December 31, 2017.

At September 30, 2018 and December 31, 2017, FHLB and other borrowings were $5.0 billion and $4.0 billion, respectively. In June 2018, the Bank issued under its Global Bank Note Program $700 million aggregate principal amount of its 3.50% unsecured senior notes due 2021, and $450 million aggregate principal amount of its floating rate unsecured senior notes due 2021. For the nine months ended September 30, 2018, the Company had $17.3 billion of proceeds received from FHLB and other borrowings and repayments were approximately $16.1 billion.

Shareholder’s Equity

Total shareholder's equity was $13.3 billion at September 30, 2018, compared to $13.0 billion at December 31, 2017, an increase of $329 million. Shareholder's equity increased $566 million due to earnings attributable to the Company during the period, offset by a $114 million increase in other comprehensive loss largely attributable to an increase in unrealized losses on available for sale securities and the payment of preferred and common dividends totaling $123 million to its sole shareholder, BBVA.

Risk Management

In the normal course of business, the Company encounters inherent risk in its business activities. The Company’s risk management approach includes processes for identifying, assessing, managing, monitoring and reporting risks. Management has grouped the risks facing its operations into the following categories: credit risk, interest rate risk, liquidity risk, operational risk, market risk, model risk, reputational risk, fiduciary risk, suitability risk, compliance risk, legal risk, and strategic and business risk. Each of these risks is managed through the Company’s ERM program. The ERM program provides the structure and framework necessary to identify, measure, control and manage risk across the organization. ERM is the cornerstone for defining risk tolerance, identifying and monitoring key risk indicators, managing capital and integrating the Company’s capital planning process with on-going risk assessments and related stress testing for major risks.

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Market Risk Management

The effective management of market risk is essential to achieving the Company’s strategic financial objectives. As a financial institution, the Company’s most significant market risk exposure is interest rate risk in its balance sheet; however, market risk also includes product liquidity risk, price risk and volatility risk in the Company’s lines of business. The primary objectives of market risk management are to minimize any adverse effect that changes in market risk factors may have on net interest income, and to offset the risk of price changes for certain assets recorded at fair value.

Interest Rate Market Risk

The Company’s net interest income and the fair value of its financial instruments are influenced by changes in the level of interest rates. The Company manages its exposure to fluctuations in interest rates through policies established by its Asset/Liability Committee. The Asset/Liability Committee meets regularly and has responsibility for approving asset/liability management policies, formulating strategies to improve balance sheet positioning and/or earnings and reviewing the interest rate sensitivity of the Company.

Management utilizes an interest rate simulation model to estimate the sensitivity of the Company’s net interest income to changes in interest rates. Such estimates are based upon a number of assumptions for each scenario, including the level of balance sheet growth, deposit repricing characteristics and the rate of prepayments.

The estimated impact on the Company’s net interest income sensitivity over a one-year time horizon at September 30, 2018 and June 30, 2018, are shown in the table below. Such analysis assumes a gradual and sustained parallel shift in interest rates, expectations of balance sheet growth and composition and the Company’s estimate of how interest-bearing transaction accounts would reprice in each scenario using current yield curves at September 30, 2018.

Table 24 Net Interest Income Sensitivity
	Estimated % Change in Net Interest Income
	September 30, 2018		June 30, 2018
Rate Change
+ 200 basis points	8.85	%	8.24	%
+ 100 basis points	4.48		4.19
- 100 basis points	(5.36	)	(5.13	)

The following table shows the effect that the indicated changes in interest rates would have on EVE. Inherent in this calculation are many assumptions used to project lifetime cash flows for every item on the balance sheet that may or may not be realized, such as deposit decay rates, prepayment speeds and spread assumptions. This measurement only values existing business without consideration of new business or potential management actions.

Table 25 Economic Value of Equity
	Estimated % Change in Economic Value of Equity
	September 30, 2018		June 30, 2018
Rate Change
+ 300 basis points	(9.23)	%	(9.46)	%
+ 200 basis points	(6.09	)	(6.27	)
+ 100 basis points	(3.00	)	(3.08	)
- 100 basis points	1.79		1.48

The Company is also subject to trading risk. The Company utilizes various tools to measure and manage price risk in its trading portfolios. In addition, the Board of Directors of the Company has established certain limits relative to positions and activities. The level of price risk exposure at any given point in time depends on the market environment and expectation of future price and market movements, and will vary from period to period.

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Derivatives

The Company uses derivatives primarily to manage economic risks related to commercial loans, mortgage banking operations, long-term debt and other funding sources. The Company also uses derivatives to facilitate transactions on behalf of its clients. As of September 30, 2018, the Company had derivative financial instruments outstanding with notional amounts of $47.6 billion. The estimated net fair value of open contracts was in a liability position of $120 million at September 30, 2018. For additional information about derivatives, refer to Note 5, Derivatives and Hedging, in the Notes to the Unaudited Condensed Consolidated Financial Statements.

Liquidity Management

Liquidity is the ability of the Company to convert assets into cash or cash equivalents without significant loss and to raise additional funds by increasing liabilities. Liquidity management involves maintaining the Company’s ability to meet the day-to-day cash flow requirements of its customers, whether they are depositors wishing to withdraw funds or borrowers requiring funds to meet their credit needs. Without proper liquidity management, the Company would not be able to perform the primary function of a financial intermediary and would, therefore, not be able to meet the needs of the communities it serves.

The Company regularly assesses liquidity needs under various scenarios of market conditions, asset growth and changes in credit ratings. The assessment includes liquidity stress testing which measures various sources and uses of funds under the different scenarios. The assessment provides regular monitoring of unused borrowing capacity and available sources of contingent liquidity to prepare for unexpected liquidity needs and to cover unanticipated events that could affect liquidity.

The asset portion of the balance sheet provides liquidity primarily through unencumbered securities available for sale, loan principal and interest payments, maturities and prepayments of investment securities held to maturity and, to a lesser extent, sales of investment securities available for sale and trading account assets. Other short-term investments such as federal funds sold, and securities purchased under agreements to resell, are additional sources of liquidity.

The liability portion of the balance sheet provides liquidity through various customers’ interest-bearing and noninterest-bearing deposit accounts and through FHLB and other borrowings. Brokered deposits, federal funds purchased, securities sold under agreements to repurchase and other short-term borrowings as well as excess borrowing capacity with the FHLB and access to the debt capital markets are additional sources of liquidity and, basically, represent the Company’s incremental borrowing capacity. These sources of liquidity are used as necessary to fund asset growth and meet short-term liquidity needs.

In addition to the Company’s financial performance and condition, liquidity may be impacted by the Parent’s structure as a holding company that is a separate legal entity from the Bank. The Parent requires cash for various operating needs including payment of dividends to its shareholder, the servicing of debt, and the payment of general corporate expenses. The primary source of liquidity for the Parent is dividends paid by the Bank. Applicable federal and state statutes and regulations impose restrictions on the amount of dividends that may be paid by the Bank. In addition to the formal statutes and regulations, regulatory authorities also consider the adequacy of the Bank’s total capital in relation to its assets, deposits and other such items. Due to the net earnings restrictions on dividend distributions under Alabama law, the Bank was not permitted to pay dividends at September 30, 2018 or December 31, 2017 without regulatory approval. Appropriate limits and guidelines are in place to ensure the Parent has sufficient cash to meet operating expenses and other commitments without relying on subsidiaries or capital markets for funding. Any future dividends paid from the Parent must be set forth as capital actions in the Company's capital plans and not objected to by the Federal Reserve Board.

The Company’s ability to raise funding at competitive prices is affected by the rating agencies’ views of the Company’s credit quality, liquidity, capital and earnings. Management meets with the rating agencies on a routine basis to discuss the current outlook for the Company.

As noted in “Executive Overview—Capital and Regulatory” in Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations, the Federal Reserve Board will no longer take action to require the Company to comply with the Federal Reserve Board’s LCR rule until it formally amends its regulations to implement the EGRRCPA. At September 30, 2018, the Company was fully compliant with the LCR requirements applicable to

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it in effect for 2018. However, should the Company's cash position or investment mix change in the future, the Company's ability to meet the LCR requirement may be impacted.

Management believes that the current sources of liquidity are adequate to meet the Company’s requirements and plans for continued growth.

Capital

The Company and the Bank are subject to various regulatory capital requirements administered by federal and state banking regulators. Failure to meet minimum risk-based and leverage capital requirements can subject the Company and the Bank to a series of increasingly restrictive regulatory actions.

The following table sets forth the Company's U.S. Basel III regulatory capital ratios subject to transitional provisions at September 30, 2018 and December 31, 2017.

Table 26  Capital Ratios
	September 30, 2018			December 31, 2017
	(Dollars in Thousands)
Capital:
CET1 Capital	$	8,410,346		$	7,964,877
Tier 1 Capital	8,644,546			8,199,077
Total Capital	10,156,383			9,689,834
Ratios:
CET1 Risk-based Capital Ratio	12.07		%	11.80		%
Tier 1 Risk-based Capital Ratio	12.41			12.15
Total Risk-based Capital Ratio	14.58			14.36
Leverage Ratio	10.12			9.98

At September 30, 2018, the regulatory capital ratios of the Bank exceeded the “well-capitalized” standard for banks based on applicable U.S. regulatory capital requirements. The Company continually monitors these ratios to ensure that the Bank exceeds this standard.

In April 2018, the Federal Reserve Board proposed a rule that would amend the capital planning and stress testing rules applicable to large bank holding companies, such as the Company, as well as the U.S. Basel III capital rules applicable to such bank holding companies, to shift the quantitative capital requirements that are based on pro forma losses under stressed conditions from a quantitative component of the annual capital planning requirements to an ongoing capital buffer requirement, as well as to modify certain assumptions used in determining the pro forma losses. Also in April 2018, the Federal Reserve Board and other U.S. federal banking agencies proposed a rule regarding the regulatory capital treatment of the implementation of and transition to ASU 2016-13, which establishes new accounting guidance for credit losses, as discussed in Note 1, Basis of Presentation, Recently Issued Accounting Standards Not Yet Adopted.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Refer to “Market Risk Management” in Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations, herein.

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Item 4.Controls and Procedures

Disclosure Controls and Procedures.

Management of the Company, with the participation of its Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the Company’s disclosure controls and procedures. Based on their evaluation, as of the end of the period covered by this Quarterly Report on Form 10-Q, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) were effective.

Changes In Internal Control Over Financial Reporting.

There have been no changes in the Company’s internal control over financial reporting during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II OTHER INFORMATION

Item 1. Legal Proceedings

See under “Legal and Regulatory Proceedings” in Note 7, Commitments, Contingencies and Guarantees, of the Notes to the Unaudited Condensed Consolidated Financial Statements.

Item 1A. Risk Factors

Various risk and uncertainties could affect the Company's business. These risks are described elsewhere in this report and the Company's other filings with the SEC, including the Company's Annual Report on Form 10-K for the year-ended December 31, 2017.

There have been no material changes to the risk factors disclosed in the Company's Annual Report on Form 10-K for the year-ended December 31, 2017.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Omitted pursuant to General Instruction H of Form 10-Q.

Item 3. Defaults Upon Senior Securities

Omitted pursuant to General Instruction H of Form 10-Q.

Item 4. Mine Safety Disclosures

Not Applicable.

Item 5. Other Information

Disclosure Pursuant to Section 219 of the Iran Threat Reduction and Syria Human Rights Act

The Company discloses the following information pursuant to Section 13(r) of the Exchange Act, which requires an issuer to disclose whether it or any of its affiliates knowingly engaged in certain activities, transactions or dealings relating to Iran or with natural persons or entities designated by the U.S. government under specified executive orders, including activities not prohibited by U.S. law and conducted outside the United States by non-U.S. affiliates in compliance with local law. In order to comply with this requirement, the Company has requested relevant information from its affiliates globally.

The Company has not knowingly engaged in activities, transactions or dealings relating to Iran or with natural persons or entities designated by the U.S. government under the specified executive orders.

Because the Company is controlled by BBVA, a Spanish corporation, the Company's disclosure includes activities, transactions or dealings conducted outside the United States by non-U.S. affiliates of BBVA and its consolidated subsidiaries that are not controlled by the Company. The BBVA Group has the following activities, transactions and dealings with Iran requiring disclosure.

Legacy contractual obligations related to counter indemnities. Before 2007, the BBVA Group issued certain counter indemnities to its non-Iranian customers in Europe for various business activities relating to Iran in support of guarantees provided by Bank Melli, one of which remained outstanding during the three months ended September 30, 2018. For the three months ended September 30, 2018, no fees and/or commissions have been recorded in connection with these counter indemnities. The BBVA Group does not allocate direct costs to fees and commissions and therefore has not disclosed a separate profit measure. In accordance with Council Regulation (EU) Nr. 267/2012 of March 23, 2012, any payments of amounts due to Bank Melli under these counter indemnities were initially blocked and thereafter released upon authorization by the relevant Spanish authorities. The BBVA Group is committed to terminating the outstanding counter indemnity as soon as contractually possible and does not intend to enter into new business relationships involving Bank Melli.

Iranian embassy-related activity. The BBVA Group maintains bank accounts in Spain for one employee of the Iranian embassy in Spain. This employee is a Spanish citizen. Estimated gross revenues for the three months ended

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September 30, 2018, from embassy-related activity, which include fees and/or commissions, did not exceed $1,056. The BBVA Group does not allocate direct costs to fees and commissions and therefore has not disclosed a separate profit measure.

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Item 6. Exhibits

Exhibit Number	Description of Documents
3.1	Restated Certificate of Formation of BBVA Compass Bancshares, Inc., (incorporated herein by reference to Exhibit 3.1 of the Company's Current Report on Form 8-K filed with the Commission on April 13, 2015 File No. 0-55106 and as amended by the Certificate of Preferences and Rights of the Floating Non-Cumulative Perpetual Preferred Stock, Series A incorporated herein by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K filed with the Commission on December 3, 2015, File No. 0-55106).
3.2	Bylaws of BBVA Compass Bancshares, Inc. (incorporated herein by reference to Exhibit 3.2 of the Company’s Registration Statement on Form 10 filed with the Commission on November 22, 2013, File No. 0-55106).
31.1	Certification by the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification by the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification by the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification by the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.1	Interactive Data File.

Certain instruments defining rights of holders of long-term debt of the Company and its subsidiaries constituting less than 10% of the Company’s total assets are not filed herewith pursuant to Item 601(b)(4)(iii)(A) of Regulation S-K. At the SEC’s request, the Company agrees to furnish the SEC a copy of any such agreement.

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SIGNATURES

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

Date: November 6, 2018	BBVA Compass Bancshares, Inc.
	By:	/s/ Kirk P. Pressley
		Name:	Kirk P. Pressley
		Title:	Senior Executive Vice President, Chief Financial Officer and Duly Authorized Officer

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