cade-10q_20170630.htm

(Former name, former address and former fiscal year, if changed since last report)

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 ☐ No

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 ☐ No

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

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

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

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

	June 30, 2017			December 31, 2016
(In thousands, except share data)	(unaudited)
ASSETS
Cash and due from banks	$	62,304		$	48,017
Interest-bearing deposits with banks		220,962			199,747
Federal funds sold		5,609			1,161
Total cash and cash equivalents		288,875			248,925
Securities available-for-sale		1,079,935			1,139,347
Securities held-to-maturity (estimated fair value of $456 and $463 at June 30, 2017 and December 31, 2016, respectively)		425			425
Other securities - FRB and FHLB stock		49,551			41,493
Loans held for sale		49,757			17,822
Loans		7,716,621			7,432,711
Less: allowance for credit losses		(93,215	)		(82,268	)
Net loans		7,623,406			7,350,443
Interest receivable		42,128			39,889
Premises and equipment, net		65,252			66,676
Other real estate owned		20,718			18,875
Cash surrender value of life insurance		106,678			105,834
Net deferred tax asset		77,111			83,662
Goodwill		317,817			317,817
Other intangible assets, net		12,444			14,874
Other assets		77,460			84,806
Total Assets	$	9,811,557		$	9,530,888
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Noninterest-bearing deposits	$	1,857,809		$	1,840,955
Interest-bearing deposits		6,072,574			6,175,794
Total deposits		7,930,383			8,016,749
Securities sold under agreements to repurchase		4,980			3,494
Federal Home Loan Bank advances		175,000			—
Senior debt		184,485			193,788
Subordinated debt		98,568			98,441
Junior subordinated debentures		36,233			35,989
Other liabilities		77,854			101,929
Total liabilities		8,507,503			8,450,390
Shareholders' Equity:
Common Stock $0.01 par value, authorized 300,000,000 shares; 83,625,000 and 75,000,000 shares issued and outstanding at June 30, 2017 and December 31, 2016, respectively		836			750
Additional paid-in capital		1,036,198			879,665
Retained earnings		287,699			232,614
Accumulated other comprehensive loss ("OCI")		(20,679	)		(32,531	)
Total shareholders' equity		1,304,054			1,080,498
Total Liabilities and Shareholders' Equity	$	9,811,557		$	9,530,888

See accompanying notes to the unaudited condensed consolidated financial statements.

	Three Months Ended June 30,					Six Months Ended June 30,
(In thousands, except per share data)	2017			2016		2017			2016
INTEREST INCOME
Interest and fees on loans	$	90,429		$	75,675	$	171,239		$	149,436
Interest and dividends on securities:
Taxable		4,178			4,169		8,479			8,554
Tax-exempt		3,385			1,952		6,799			3,237
Other interest income		1,383			1,125		2,477			2,301
Total interest income		99,375			82,921		188,994			163,528
INTEREST EXPENSE
Interest on time deposits		5,298			4,360		9,419			8,191
Interest on other deposits		6,473			4,191		12,117			8,566
Interest on borrowed funds		5,220			5,121		10,316			10,256
Total interest expense		16,991			13,672		31,852			27,013
Net interest income		82,384			69,249		157,142			136,515
Provision for credit losses		6,701			14,471		12,487			24,943
Net interest income after provision for credit losses		75,683			54,778		144,655			111,572
NONINTEREST INCOME
Service charges on deposit accounts		3,784			3,270		7,599			6,624
Other service fees		1,071			816		2,043			1,466
Credit related fees		2,741			2,506		5,488			5,180
Trust services revenue		4,584			3,971		9,815			8,041
Mortgage banking income		1,213			1,101		2,079			2,185
Investment advisory revenue		5,061			4,653		9,977			9,257
Securities (losses) gains, net		(244	)		1,019		(163	)		1,083
Other income		4,779			5,769		10,256			9,415
Total noninterest income		22,989			23,105		47,094			43,251
NONINTEREST EXPENSE
Salaries and employee benefits		34,682			33,033		68,949			65,843
Premises and equipment		7,180			6,626		13,873			13,377
Intangible asset amortization		1,190			1,659		2,431			3,370
Other expense		13,082			14,550		25,202			27,320
Total noninterest expense		56,134			55,868		110,455			109,910
Income before income taxes		42,538			22,015		81,294			44,913
Income tax expense		13,570			7,175		26,209			14,732
Net income	$	28,968		$	14,840	$	55,085		$	30,181
Weighted average common shares outstanding (Basic)		81,918,956			75,000,000		78,478,591			75,000,000
Weighted average common shares outstanding (Diluted)		81,951,795			75,258,375		78,831,386			75,258,375
Earnings per common share (Basic)	$	0.35		$	0.20	$	0.70		$	0.40
Earnings per common share (Diluted)	$	0.35		$	0.20	$	0.70		$	0.40

See accompanying notes to the unaudited condensed consolidated financial statements.

	Three Months Ended June 30,						Six Months Ended June 30,
(In thousands)	2017			2016			2017			2016
Net income	$	28,968		$	14,840		$	55,085		$	30,181
Other comprehensive income, net of tax:
Net unrealized gains on securities available-for-sale:
Unrealized gains arising during the period (net of $(6,047), $(4,647), $(6,691), and $(8,433) tax effect, respectively)		10,451			7,960			11,563			14,445
Reclassification adjustments for losses (gains) realized in net income (net of $(90), $375, $(60), and $399 tax effect, respectively)		154			(644	)		103			(684	)
Net unrealized gains on securities available-for-sale		10,605			7,316			11,666			13,761
Net unrealized gains on derivative instruments designated as cash flow hedges:
Unrealized gains arising during the period (net of $(1,805), $(5,671), $(1,225), and $(11,875) tax effect, respectively)		3,111			9,716			2,101			20,342
Reclassification adjustments for (gains) realized in net income (net of $430, $1,329, $1,118, and $1,984 tax effect, respectively)		(736	)		(2,278	)		(1,915	)		(3,399	)
Net change in unrealized gains on derivative instruments		2,375			7,438			186			16,943
Other comprehensive income, net of tax		12,980			14,754			11,852			30,704
Comprehensive income	$	41,948		$	29,594		$	66,937		$	60,885

See accompanying notes to the unaudited condensed consolidated financial statements.

	Six Months Ended June 30,
(In thousands)	2017			2016
NET CASH FLOWS PROVIDED BY OPERATING ACTIVITIES	$	51,546		$	29,061
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of securities available-for-sale		(116,363	)		(409,683	)
Proceeds from sales of securities available-for-sale		129,048			139,441
Proceeds from maturities, calls and paydowns of securities available-for-sale		46,318			63,399
Proceeds from sale of commercial loans held for sale		—			328,840
Increase in loans, net		(290,758	)		(583,055	)
Purchase of premises and equipment		(5,706	)		(1,711	)
Proceeds from disposition of foreclosed property		4,533			19,757
Other, net		(14,862	)		14,891
Net cash used in investing activities		(247,790	)		(428,121	)
CASH FLOWS FROM FINANCING ACTIVITIES
(Decrease) increase in deposits, net		(86,354	)		685,355
Net change in securities sold under agreements to repurchase		1,486			797
Net change in short-term FHLB advances		175,000			(370,000	)
Purchase of senior debt		(9,600	)		—
Proceeds from issuance of common stock		155,662			—
Net cash provided by financing activities		236,194			316,152
Net increase (decrease) in cash and cash equivalents		39,950			(82,908	)
Cash and cash equivalents at beginning of period		248,925			467,207
Cash and cash equivalents at end of period	$	288,875		$	384,299

See accompanying notes to the unaudited condensed consolidated financial statements.

Cadence Bancorporation (the “Company”) is a Delaware corporation and a bank holding company whose primary asset is its investment in its wholly owned subsidiary bank, Cadence Bank, N.A., a national banking association (the “Bank”).

The accompanying unaudited condensed consolidated financial statements for the Company have been prepared in accordance with instructions to the SEC Form 10-Q and Article 10 of Regulation S-X; therefore, they do not include all information and footnotes necessary for a fair presentation of financial position, results of operations, comprehensive income, and cash flows in conformity with accounting principles generally accepted in the United States of America (“GAAP”). All adjustments consisting of normally recurring accruals that, in the opinion of management, are necessary for a fair presentation of the consolidated financial position and results of operations for the periods covered by this report have been included. These interim financial statements should be read in conjunction with the audited consolidated financial statements and footnote disclosures for the Company previously filed with the SEC in the Company’s prospectus filed with the Securities and Exchange Commission on April 14, 2017 pursuant to Rule 424(b) of the Securities Act. Operating results for the period ended June 30, 2017 are not necessarily indicative of the results that may be expected for the year ending December 31, 2017.

The Company and its subsidiaries follow accounting principles generally accepted in the United States of America, including, where applicable, general practices within the banking industry. The consolidated financial statements include the accounts of the Company and its subsidiaries. Significant intercompany accounts and transactions have been eliminated in consolidation. The assessment of whether or not the Company has a controlling interest (i.e., the primary beneficiary) in a variable-interest entity (“VIE”) is performed on an on-going basis. All equity investments in non-consolidated VIEs are included in “other assets” in the Company’s consolidated balance sheets (Note 20).

Certain amounts reported in prior years have been reclassified to conform to the 2017 presentation. These reclassifications did not materially impact the Company’s consolidated balance sheets or consolidated statements of income.

On March 30, 2017, the Board of Directors approved a 75-for-one stock split of the Company’s common stock. The stock split occurred on April 7, 2017. The effect of the stock split on outstanding shares and earnings per share has been retroactively applied to all periods presented.

The Bank operates under a national bank charter and is subject to regulation by the Office of the Comptroller of the Currency (OCC). The Bank provides lending services in Georgia and full banking services in five southern states: Alabama, Florida, Mississippi, Tennessee, and Texas.

The Company and the Bank also have certain other non-operating and immaterial subsidiaries.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and 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. Actual results could differ from those

estimates. Material estimates that are susceptible to significant change in the near term are the allowance for credit losses, valuation of and accounting for acquired credit impaired loans, valuation of goodwill, intangible assets and deferred income taxes.

In March 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-09, “Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting.” Under ASU 2016-09, all excess tax benefits and tax deficiencies related to share-based payment awards should be recognized as income tax expense or benefit in the income statement during the period in which they occur. Previously, such amounts were recorded in the pool of excess tax benefits included in additional paid-in capital, if such pool was available. Because excess tax benefits are no longer recognized in additional paid-in capital, the assumed proceeds from applying the treasury stock method when computing earnings per share should exclude the amount of excess tax benefits that would have previously been recognized in additional paid-in capital. Additionally, excess tax benefits should be classified along with other income tax cash flows as an operating activity rather than a financing activity, as was previously the case. ASU 2016-09 also provides that an entity can make an entity-wide accounting policy election to either estimate the number of awards that are expected to vest (current GAAP) or account for forfeitures when they occur. ASU 2016-09 changes the threshold to qualify for equity classification (rather than as a liability) to permit withholding up to the maximum statutory tax rates (rather than the minimum as was previously the case) in the applicable jurisdictions. The adoption at January 1, 2017 of ASU 2016-09 did not have a significant impact on our financial position, results of operations or cash flows.

In January 2017, the FASB issued ASU No. 2017-04, “Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment”, which simplifies how an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test. Therefore, any carrying amount which exceeds the reporting unit’s fair value (up to the amount of goodwill recorded) will be recognized as an impairment loss. ASU No. 2017-04 will be effective for annual reporting periods beginning after December 15, 2019, including interim reporting periods within those periods. The amendments will be applied prospectively on or after the effective date. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. Based on recent goodwill impairments tests, which did not require the application of Step 2, the Company does not expect the adoption of this ASU to have an immediate impact.

In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606),” (ASU 2014-09), which is intended to improve and converge the financial reporting requirements for revenue contracts with customers. Previous accounting guidance comprised broad revenue recognition concepts along with numerous industry-specific requirements. The new guidance establishes a five-step model which entities must follow to recognize revenue and removes inconsistencies and weaknesses in existing guidance. The banking industry does not expect significant changes because major sources of revenue are from financial instruments that have been excluded from the scope of the new standard (including loans, derivatives, debt and equity securities, etc.). ASU 2014-09 is effective for annual and interim periods beginning after December 15, 2017, and must be retrospectively applied. Entities will have the option of presenting prior periods as impacted by the new guidance or presenting the cumulative effect of initial application along with supplementary disclosures. We expect that ASU 2014-09 will require us to change how we recognize certain recurring revenue streams within insurance commissions and fees and other categories of noninterest income; however, we do not expect these changes to have a significant impact on our consolidated financial statements. We expect to adopt the standard in the first quarter of 2018 with a cumulative effect adjustment to opening retained earnings, if such adjustment is deemed to be significant.

In January 2016, the FASB issued ASU 2016-01, “Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities”. ASU 2016-1, among other things, (i) requires equity investments, with certain exceptions, to be measured at fair value with changes in fair value recognized in net income, (ii) simplifies the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment, (iii) eliminates the requirement for public business entities to disclose the methods and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheets, (iv) requires public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes, (v) requires an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments, (vi) requires separate presentation of financial assets and financial liabilities by measurement category and form of financial asset on the balance sheets or the accompanying notes to the financial statements and (viii) clarifies that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale. ASU 2016-01 will be effective for fiscal years and interim periods beginning after December 15, 2017. The Company does not expect this guidance will have a material effect on the Company’s consolidated balance sheets and consolidated statements of income.

In February 2016, the FASB issued ASU 2016-02, “Leases”. This ASU requires lessees to recognize lease assets and lease liabilities generated by contracts longer than a year on their balance sheets. The ASU also requires companies to disclose in the footnotes to their financial statements information about the amount, timing, and uncertainty for the payments they make for the lease agreements. ASU 2016-02 will be effective for annual periods and interim periods within those annual periods beginning after December 31, 2018. The Company is evaluating the effect of adopting this new accounting guidance.

In June 2016, he FASB has issued ASU No. 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments”. The guidance is intended to improve financial reporting by requiring timelier recording of credit losses on loans and other financial instruments. The guidance will replace the current incurred loss accounting model with an expected loss approach and requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. The guidance requires enhanced disclosures to help investors and other financial statement users better understand significant estimates and judgments used in estimating credit losses, as well as the credit quality and underwriting standards of an organization’s portfolio. The ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The Company is evaluating the effect of adopting this new accounting guidance.

In August 2016, the FASB issued ASU No. 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments”, in order to reduce current diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. ASU 2016-15 will be effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. The amendments should be applied using a retrospective transition method to each period presented. The Company is currently evaluating the impact of the ASU on the Company’s consolidated statement of cash flows. The Company is not expecting to early adopt the ASU.

In January 2017, the FASB issued ASU No. 2017-01, “Business Combinations (Topic 805): Clarifying the Definition of a Business”, which introduces amendments that are intended to clarify the definition of a business to assist companies and other reporting organizations with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The amendments are intended to narrow the current interpretation of a business. ASU No. 2017-01 will be effective for annual reporting periods beginning after December 15, 2017, including interim reporting periods within those periods. The amendments will be applied prospectively on or after the effective date. Early application of the amendments in this ASU is allowed for transactions, including when a subsidiary or group of assets is deconsolidated/derecognized, in which the acquisition date occurs before the issuance date or effective date of the amendments, only when the transaction has not been reported in financial statements that have been issued or made available for issuance. The Company is currently evaluating the effect of the ASU.

In March 2017, the FASB issued ASU No. 2017-08, “Receivables-Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities”, which will shorten the amortization period for callable debt securities held at a premium to the earliest call date instead of the maturity date. The amendments do not require an accounting change for securities held at a discount, which will continue to be amortized to the maturity date. ASU No. 2017-08 will be effective for annual reporting periods beginning after December 15, 2018, including interim reporting periods within those periods. The amendments should be applied using a modified-retrospective transition method as of the beginning of the period of adoption. Early adoption is permitted, including adoption in an interim period. The Company is currently assessing this pronouncement and it is not expected to have a material impact on the Company’s financial condition or results of operations.

A summary of amortized cost and estimated fair value of securities available-for-sale and securities held-to-maturity at June 30, 2017 and December 31, 2016 is as follows:

			Gross		Gross
	Amortized		Unrealized		Unrealized		Estimated
(In thousands)	Cost		Gains		Losses		Fair Value
June 30, 2017
Securities available-for-sale:
U.S. Treasury securities	$	100,656	$	—	$	3,058	$	97,598
Obligations of U.S. government agencies		87,786		689		125		88,350
Mortgage-backed securities issued or guaranteed by U.S. agencies (MBS)
Residential pass-through:
Guaranteed by GNMA		119,774		1,206		1,145		119,835
Issued by FNMA and FHLMC		252,723		1,543		2,137		252,129
Other residential mortgage-backed securities		44,969		293		778		44,484
Commercial mortgage-backed securities		65,150		—		3,781		61,369
Total MBS		482,616		3,042		7,841		477,817
Obligations of states and municipal subdivisions		422,500		2,742		14,819		410,423
Other securities		5,679		206		138		5,747
Total securities available-for-sale	$	1,099,237	$	6,679	$	25,981	$	1,079,935
Securities held-to-maturity:
Obligations of states and municipal subdivisions	$	425	$	31	$	—	$	456

(In thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
December 31, 2016
Securities available-for-sale:
U.S. Treasury securities	$	100,736	$	—	$	3,951	$	96,785
Obligations of U.S. government agencies		97,340		508		320		97,528
Mortgage-backed securities issued or guaranteed by U.S. agencies (MBS)
Residential pass-through:
Guaranteed by GNMA		152,918		1,401		1,166		153,153
Issued by FNMA and FHLMC		267,035		1,499		3,206		265,328
Other residential mortgage-backed securities		48,076		375		890		47,561
Commercial mortgage-backed securities		66,720		—		4,107		62,613
Total MBS		534,749		3,275		9,369		528,655
Obligations of states and municipal subdivisions		438,655		870		28,713		410,812
Other securities		5,580		149		162		5,567
Total securities available-for-sale	$	1,177,060	$	4,802	$	42,515	$	1,139,347
Securities held-to-maturity:
Obligations of states and municipal subdivisions	$	425	$	38	$	—	$	463

The scheduled contractual maturities of securities available-for-sale and securities held-to-maturity at June 30, 2017 were as follows:

Proceeds from sales, gross gains, and gross losses on sales of securities available for sale for the three and six months ended June 30, 2017 and 2016 are presented below. There were no other-than-temporary impairment charges included in gross realized losses for the three and six months ended June 30, 2017 and 2016. The specific identification method is used to reclassify gains and losses out of other comprehensive income at the time of sale.

Securities with a carrying value of $567.9 million and $380.4 million at June 30, 2017 and December 31, 2016, respectively, were pledged to secure public and trust deposits, FHLB borrowings, repurchase agreements and for other purposes as required or permitted by law.

The detail concerning securities classified as available-for-sale with unrealized losses as of June 30, 2017 and December 31, 2016 was as follows:

	Unrealized loss analysis
	Losses < 12 Months				Losses > 12 Months
			Gross				Gross
	Estimated		Unrealized		Estimated		Unrealized
(In thousands)	Fair Value		Losses		Fair Value		Losses
June 30, 2017
U.S. Treasury securities	$	97,598	$	3,058	$	—	$	—
Obligations of U.S. government agencies		3,669		7		32,088		118
Mortgage-backed securities		289,072		6,942		31,435		899
Obligations of states and municipal subdivisions		268,162		14,756		1,125		63
Other securities		—		—		4,285		138
Total	$	658,501	$	24,763	$	68,933	$	1,218

	Unrealized loss analysis
	Losses < 12 Months				Losses > 12 Months
			Gross				Gross
	Estimated		Unrealized		Estimated		Unrealized
(In thousands)	Fair Value		Losses		Fair Value		Losses
December 31, 2016
U.S. Treasury securities	$	96,785	$	3,951	$	—	$	—
Obligations of U.S. government agencies		51,463		277		12,150		43
Mortgage-backed securities		328,374		8,482		17,979		887
Obligations of states and municipal subdivisions		344,708		28,713		—		—
Other securities		—		—		4,216		162
Total	$	821,330	$	41,423	$	34,345	$	1,092

There were no securities classified as held-to-maturity with unrealized losses as of June 30, 2017 and December 31, 2016.

As of June 30, 2017 and December 31, 2016, approximately 67% and 75%, respectively, of the fair value of securities in the investment portfolio reflected an unrealized loss. As of June 30, 2017, there were 18 securities that had been in a loss position for more than twelve months, and 148 securities that had been in a loss position for less than 12 months. None of the unrealized losses relate to the marketability of the securities or the issuer’s ability to honor redemption of the obligations. The Company has adequate liquidity and, therefore, does not plan to sell and, more likely than not, will not be required to sell these securities before recovery of the indicated impairment. Accordingly, the unrealized losses on these securities have been determined to be temporary.

The following table presents total loans outstanding by portfolio segment and class of financing receivable as of June 30, 2017 and December 31, 2016. Outstanding balances also include Acquired Noncredit Impaired (“ANCI”) loans, originated loans and Acquired Credit Impaired (“ACI”) loans net of any remaining purchase accounting adjustments. Information about ACI loans is presented separately in the “Acquired Credit-Impaired Loans” section of this Note.

	As of June 30, 2017
(In thousands)	ACI		ANCI			Originated			Total
Commercial and Industrial
General C&I⁽¹⁾	$	28,358	$	49,880		$	2,398,255		$	2,476,493
Energy sector		—		—			902,265			902,265
Restaurant industry		—		—			985,218			985,218
Healthcare		6,273		2,909			378,650			387,832
Total commercial and industrial		34,631		52,789			4,664,388			4,751,808
Commercial Real Estate
Income producing		89,909		15,129			999,245			1,104,283
Land and development		559		1,600			43,846			46,005
Total commercial real estate		90,468		16,729			1,043,091			1,150,288
Consumer
Residential real estate		166,816		123,977			1,272,900			1,563,693
Other		1,383		2,941			63,175			67,499
Total consumer		168,199		126,918			1,336,075			1,631,192
Small Business Lending		—		10,282			196,922			207,204
Total (Gross of unearned discount and fees)		293,298		206,718			7,240,476			7,740,492
Unearned discount and fees		—		(3,734	)		(20,137	)		(23,871	)
Total (Net of unearned discount and fees)	$	293,298	$	202,984		$	7,220,339		$	7,716,621

	As of December 31, 2016
(In thousands)	ACI		ANCI			Originated			Total
Commercial and Industrial
General C&I⁽¹⁾	$	31,709	$	47,592		$	2,337,364		$	2,416,665
Energy sector		—		—			939,369			939,369
Restaurant industry		—		—			864,085			864,085
Healthcare		6,338		4,102			434,663			445,103
Total commercial and industrial		38,047		51,694			4,575,481			4,665,222
Commercial Real Estate
Income producing		96,673		18,354			886,676			1,001,703
Land and development		1,497		1,952			67,555			71,004
Total commercial real estate		98,170		20,306			954,231			1,072,707
Consumer
Residential real estate		186,375		145,747			1,125,048			1,457,170
Other		1,690		7,180			59,819			68,689
Total consumer		188,065		152,927			1,184,867			1,525,859
Small Business Lending		—		9,158			184,483			193,641
Total (Gross of unearned discount and fees)		324,282		234,085			6,899,062			7,457,429
Unearned discount and fees		—		(4,301	)		(20,417	)		(24,718	)
Total (Net of unearned discount and fees)	$	324,282	$	229,784		$	6,878,645		$	7,432,711

The ACL is management’s estimate of credit losses inherent in the loan portfolio at the balance sheet date. The Company has an established process to determine the adequacy of the ACL that assesses the losses inherent in our portfolio. While management attributes portions of the ACL to specific portfolio segments, the entire ACL is available to absorb credit losses inherent in the total loan portfolio.

The ACL process involves procedures that appropriately consider the unique risk characteristics of the loan portfolio segments based on management’s assessment of the underlying risks and cash flows. For each portfolio segment, losses are estimated collectively for groups of loans with similar characteristics, individually for impaired loans or, for ACI loans, based on the changes in cash flows expected to be collected on a pool or individual basis.

The level of the ACL is influenced by loan volumes, risk rating migration, historic loss experience influencing loss factors, and other conditions influencing loss expectations, such as economic conditions. The primary indicator of credit quality for the portfolio segments is its internal risk ratings. The assignment of loan risk ratings is the primary responsibility of the lending officer and is subject to independent review by internal credit review, which also performs ongoing, independent review of the risk management process. The risk management process includes underwriting, documentation and collateral control. Credit review is centralized and independent of the lending function. The credit review results are reported to senior management and the Board of Directors.

A summary of the activity in the ACL for the three and six months ended June 30, 2017 and 2016 is as follows:

	For the Three Months Ended June 30, 2017
(In thousands)	Commercial and Industrial			Commercial Real Estate			Consumer			Small Business		Total
As of March 31, 2017	$	60,007		$	10,555		$	13,298		$	4,444	$	88,304
Provision for loan losses:
ACI loans		(46	)		203			(755	)		—		(598	)
ANCI loans		578			(40	)		(68	)		11		481
Originated loans		3,884			2,428			493			13		6,818
Total provision		4,416			2,591			(330	)		24		6,701
Charge-offs:
ACI loans		—			—			—			—		—
ANCI loans		—			—			27			47		74
Originated loans		2,551			—			134			120		2,805
Total charge-offs		2,551			—			161			167		2,879
Recoveries:
ACI loans		246			112			478			—		836
ANCI loans		8			—			75			27		110
Originated loans		109			2			25			7		143
Total recoveries		363			114			578			34		1,089
As of June 30, 2017	$	62,235		$	13,260		$	13,385		$	4,335	$	93,215

	For the Six Months Ended June 30, 2017
(In thousands)	Commercial and Industrial			Commercial Real Estate			Consumer			Small Business			Total
As of December 31, 2016	$	54,688		$	10,103		$	13,265		$	4,212		$	82,268
Provision for loan losses:
ACI loans		(183	)		318			(1,071	)		—			(936	)
ANCI loans		608			(42	)		8			(155	)		419
Originated loans		9,088			2,753			944			219			13,004
Total provision		9,513			3,029			(119	)		64			12,487
Charge-offs:
ACI loans		39			—			—			—			39
ANCI loans		34			—			151			47			232
Originated loans		2,788			—			251			120			3,159
Total charge-offs		2,861			—			402			167			3,430
Recoveries:
ACI loans		246			121			481			—			848
ANCI loans		16			—			104			182			302
Originated loans		633			7			56			44			740
Total recoveries		895			128			641			226			1,890
As of June 30, 2017	$	62,235		$	13,260		$	13,385		$	4,335		$	93,215
ACL
ACI loans collectively evaluated for impairment	$	1		$	3,086		$	6,640		$	—		$	9,727
ACI loans individually evaluated for impairment		199			7			218			—			424
ANCI loans collectively evaluated for impairment		890			201			55			257			1,403
ANCI loans individually evaluated for impairment		—			—			36			29			65
Originated loans collectively evaluated for impairment		47,991			9,966			6,436			4,044			68,437
Originated loans individually evaluated for impairment		13,154			—			—			5			13,159
ACL as of June 30, 2017	$	62,235		$	13,260		$	13,385		$	4,335		$	93,215
Loans
ACI loan pools collectively evaluated for impairment	$	24,335		$	81,703		$	168,199		$	—		$	274,237
ACI loans individually evaluated for impairment		10,296			8,765			—			—			19,061
ANCI loans collectively evaluated for impairment		52,789			16,729			125,313			9,935			204,766
ANCI loans individually evaluated for impairment		—			—			1,605			347			1,952
Originated loans collectively evaluated for impairment		4,535,886			1,043,091			1,335,785			196,224			7,110,986
Originated loans individually evaluated for impairment		128,502			—			290			698			129,490
Loans as of June 30, 2017	$	4,751,808		$	1,150,288		$	1,631,192		$	207,204		$	7,740,492

	For the Three Months Ended June 30, 2016
(In thousands)	Commercial and Industrial			Commercial Real Estate			Consumer			Small Business		Total
As of March 31, 2016	$	65,119		$	9,731		$	13,337		$	2,564	$	90,751
Provision for loan losses:
ACI loans		(174	)		(334	)		(864	)		—		(1,372	)
ANCI loans		(138	)		63			77			20		22
Originated loans		13,183			324			873			1,441		15,821
Total provision		12,871			53			86			1,461		14,471
Charge-offs:
ACI loans		—			—			—			—		—
ANCI loans		—			—			67			—		67
Originated loans		17,877			—			120			142		18,139
Total charge-offs		17,877			—			187			142		18,206
Recoveries:
ACI loans		10			20			3			—		33
ANCI loans		12			—			34			2		48
Originated loans		—			—			50			—		50
Total recoveries		22			20			87			2		131
As of June 30, 2016	$	60,135		$	9,804		$	13,323		$	3,885	$	87,147

	For the Six Months Ended June 30, 2016
(In thousands)	Commercial and Industrial			Commercial Real Estate			Consumer			Small Business			Total
As of December 31, 2015	$	55,824		$	8,136		$	13,450		$	2,373		$	79,783
Provision for loan losses:
ACI loans		(2,140	)		(113	)		(1,141	)		—			(3,394	)
ANCI loans		(163	)		26			155			(13	)		5
Originated loans		23,835			1,708			1,127			1,662			28,332
Total provision		21,532			1,621			141			1,649			24,943
Charge-offs:
ACI loans		—			—			—			—			—
ANCI loans		—			—			190			—			190
Originated loans		17,877			—			303			142			18,322
Total charge-offs		17,877			—			493			142			18,512
Recoveries:
ACI loans		13			47			5			—			65
ANCI loans		23			—			71			5			99
Originated loans		620			—			149			—			769
Total recoveries		656			47			225			5			933
As of June 30, 2016	$	60,135		$	9,804		$	13,323		$	3,885		$	87,147
ACL
ACI loans collectively evaluated for impairment	$	102		$	3,019		$	7,601		$	—		$	10,722
ACI loans individually evaluated for impairment		—			—			283			—			283
ANCI loans collectively evaluated for impairment		285			253			80			298			916
ANCI loans individually evaluated for impairment		—			—			61			—			61
Originated loans collectively evaluated for impairment		48,459			6,532			5,254			3,587			63,832
Originated loans individually evaluated for impairment		11,289			—			44			—			11,333
ACL as of June 30, 2016	$	60,135		$	9,804		$	13,323		$	3,885		$	87,147

The following includes certain key information about individually impaired originated and ANCI loans as of June 30, 2017 and December 31, 2016 and for the three and six months ended June 30, 2017 and 2016.

	As of June 30, 2017
(In thousands)	Recorded Investment in Impaired Loans⁽¹⁾		Unpaid Principal Balance		Related Specific Allowance		Nonaccrual Loans Included in Impaired Loans		Undisbursed Commitments
With no related allowance for credit losses
Commercial and Industrial
General C&I	$	12,818	$	13,908	$	—	$	7,032	$	6,428
Energy sector		84,073		91,988		—		71,012		5,239
Total commercial and industrial		96,891		105,896		—		78,044		11,667
Consumer
Residential real estate		1,107		1,114		—		38		—
Other		292		290		—		—		92
Total consumer		1,399		1,404		—		38		92
Total	$	98,290	$	107,300	$	—	$	78,082	$	11,759
With allowance for credit losses recorded
Commercial and Industrial
Energy sector	$	31,808	$	38,172	$	13,154	$	20,709	$	1,675
Consumer
Residential real estate		500		500		36		—		—
Small Business Lending		1,047		1,741		34		347		—
Total	$	33,355	$	40,413	$	13,224	$	21,056	$	1,675

	As of December 31, 2016
(In thousands)	Recorded Investment in Impaired Loans ⁽¹⁾		Unpaid Principal Balance		Related Specific Allowance		Nonaccrual Loans Included in Impaired Loans		Undisbursed Commitments
With no related allowance for credit losses
Commercial and Industrial
General C&I	$	12,334	$	13,426	$	—	$	6,838	$	1,363
Energy sector		99,200		103,322		—		85,149		8,465
Total commercial and industrial		111,534		116,748		—		91,987		9,828
Consumer
Residential real estate		437		435		—		—		—
Other		429		427		—		—		1
Total consumer		866		862		—		—		1
Small Business Lending		299		703		—		299		—
Total	$	112,699	$	118,313	$	—	$	92,286	$	9,829
With allowance for credit losses recorded
Commercial and Industrial
Energy sector	$	39,319	$	45,243	$	1,598	$	28,228	$	4,788
Consumer
Residential real estate		736		741		37		39		—
Small Business Lending		641		897		40		90		—
Total	$	40,696	$	46,881	$	1,675	$	28,357	$	4,788

The related amount of interest income recognized for impaired loans was $445 thousand and $867 thousand for the three and six months ended June 30, 2017, respectively, compared to $13 thousand and $444 thousand for the same periods in 2016.

Generally, cash receipts on nonperforming loans are used to reduce principal rather than recorded as interest income. Past due status is determined based upon contractual terms. A nonaccrual loan may be returned to accrual status when repayment is reasonably assured and there has been demonstrated performance under the terms of the loan or, if applicable, under the terms of the restructured loan. Approximately $1.0 million and $1.2 million of contractual interest paid was recognized on the cash basis for the three and six months ended June 30, 2017, respectively, compared to $0.8 million and $1.0 million for same periods in 2016.

Included in impaired loans are loans considered to be TDRs. The Company attempts to work with borrowers when necessary to extend or modify loan terms to better align with the borrower’s ability to repay. Extensions and modifications to loans are made in accordance with internal policies and guidelines which conform to regulatory guidance. Each occurrence is unique to the borrower and is evaluated separately. The Bank considers regulatory guidelines when restructuring loans to ensure that prudent lending practices are followed. Qualifying criteria and payment terms are structured by the borrower’s current and prospective ability to comply with the modified terms of the loan.

A modification is classified as a TDR if the borrower is experiencing financial difficulty and it is determined that the Company has granted a concession to the borrower. The Company may determine that a borrower is experiencing financial difficulty if the borrower is currently in default on any of its debt, or if it is probable that a borrower may default in the foreseeable future without the modification. Concessions could include reductions of interest rates, extension of the maturity date at a rate lower than current market rate for a new loan with similar risk, reduction of accrued interest, principal forgiveness, forbearance, or other concessions. The assessments of whether a borrower is experiencing or will likely experience financial difficulty and whether a concession has been granted is highly subjective in nature, and management’s judgment is required when determining whether a modification is classified as a TDR. Current amendments to the accounting guidance preclude a creditor from using the effective interest rate test in the debtor’s guidance on restructuring of payables (ASC 470-60-55-10) when evaluating whether a restructuring constitutes a TDR.

All TDRs are reported as impaired. Impaired classification may be removed if the borrower demonstrates compliance with the modified terms and the restructuring agreement specifies an interest rate equal to that which would be provided to a borrower with similar credit at the time of restructuring. The majority of TDRs are classified as impaired loans for the remaining life of the loan. Nonperforming loans and impaired loans are defined differently. Some loans may be included in both categories, whereas other loans may only be included in one category.

Included in loans are $2.1 million of consumer loans secured by single family residential real estate that are in process of foreclosure at both June 30, 2017 and December 31, 2016. Loans in process of foreclosure include those for which formal foreclosure proceedings are in process according to local requirements of the applicable jurisdiction. In addition to the single family residential real estate loans in process of foreclosure, the Company also held $5.5 million and $5.1 million of foreclosed single family residential properties in other real estate owned as of June 30, 2017 and December 31, 2016.

The following provides information regarding the credit exposure by portfolio segment and class of receivable as of June 30, 2017 and December 31, 2016:

	As of June 30, 2017				As of December 31, 2016
(Recorded Investment in thousands)	Residential Real Estate		Other		Residential Real Estate		Other
Originated Loans
Pass	$	1,274,710	$	62,525	$	1,126,679	$	59,145
Special mention		381		860		422		455
Substandard		1,313		46		1,096		415
Total originated loans		1,276,404		63,431		1,128,197		60,015
ANCI Loans
Pass		120,001		2,911		141,349		7,151
Special mention		1,951		44		2,156		53
Substandard		2,488		3		2,775		4
Total ANCI loans		124,440		2,958		146,280		7,208
Total	$	1,400,844	$	66,389	$	1,274,477	$	67,223

The following provides an aging of past due originated and ANCI loans by portfolio segment and class of receivable as of June 30, 2017 and December 31, 2016:

	As of June 30, 2017
	Accruing Loans						Non-Accruing Loans
(Recorded Investment in thousands)	30-59 DPD		60-89 DPD		90+DPD		0-29 DPD		30-59 DPD		60-89 DPD		90+DPD
Originated Loans
Commercial and Industrial
General C&I	$	—	$	—	$	—	$	193	$	—	$	—	$	6,839
Energy sector		—		—		—		86,462		—		—		6,567
Total commercial and industrial		—		—		—		86,655		—		—		13,406
Commercial Real Estate
Income producing		19		—		—		—		—		—		—
Consumer
Residential real estate		703		115		51		69		—		7		1,005
Other		492		24		—		—		—		—		—
Total consumer		1,195		139		51		69		—		7		1,005
Small Business Lending		162		42		—		65		93		5		74
Total	$	1,376	$	181	$	51	$	86,789	$	93	$	12	$	14,485
ANCI Loans
Commercial and Industrial
General C&I	$	—	$	365	$	—	$	—	$	64	$	—	$	—
Commercial Real Estate
Land and development		—		—		—		311		—		—		—
Income producing		—		1,100		—		—		—		—		—
Total commercial real estate		—		1,100		—		311		—		—		—
Consumer
Residential real estate		293		812		215		864		27		606		938
Other		1		—		—		—		—		—		—
Total consumer		294		812		215		864		27		606		938
Small Business Lending		22		—		30		123		57		—		370
Total	$	316	$	2,277	$	245	$	1,298	$	148	$	606	$	1,308

	As of December 31, 2016
	Accruing Loans						Non-Accruing Loans
(Recorded Investment in thousands)	30-59 DPD		60-89 DPD		90+DPD		0-29 DPD		30-59 DPD		60-89 DPD		90+DPD
Originated Loans
Commercial and Industrial
General C&I	$	3,930	$	—	$	—	$	—	$	6,839	$	—	$	250
Energy sector		—		—		—		112,937		—		—		447
Total commercial and industrial		3,930		—		—		112,937		6,839		—		697
Commercial Real Estate
Income producing		4		—		—		—		—		—		—
Consumer
Residential real estate		1,388		239		244		344		—		—		454
Other		534		—		—		—		—		—		—
Total consumer		1,922		239		244		344		—		—		454
Small Business Lending		2,003		563		87		80		16		36		—
Total	$	7,859	$	802	$	331	$	113,361	$	6,855	$	36	$	1,151
ANCI Loans
Commercial Real Estate
Land and development	$	259	$	—	$	—	$	—	$	—	$	341	$	—
Commercial and Industrial
Services		—		—		—		80		—		—		—
Other		—		—		—		45		—		—		—
Total commercial and industrial		—		—		—		125		—		—		—
Consumer
Residential real estate		1,522		839		252		1,083		30		—		1,619
Other		18		—		3		—		—		—		—
Total consumer		1,540		839		255		1,083		30		—		1,619
Small Business Lending		—		—		—		480		62		—		131
Total	$	1,799	$	839	$	255	$	1,688	$	92	$	341	$	1,750

The excess of cash flows expected to be collected over the carrying value of ACI loans is referred to as the accretable yield and is recognized in interest income using an effective yield method over the remaining life of the loan, or pools of loans. The accretable yield is affected by:

Changes in the amount of accretable discount for ACI loans for the six months ended June 30, 2017 and 2016 were as follows:

The following includes certain key information about individually impaired ACI loans and pooled ACI loans as of June 30, 2017 and December 31, 2016 and for the three and six months ended June 30, 2017 and 2016.

	As of June 30, 2017
	ACI Loans / Pools Identified as Impaired
(In thousands)	Recorded Investment in Impaired Loans⁽¹⁾		Unpaid Principal Balance		Related Specific Allowance		Nonaccrual Loans Included in Impaired Loans		Undisbursed Commitments
Commercial and Industrial
Healthcare	$	6,312	$	6,400	$	184	$	—	$	—
Other		30,523		39,189		16		—		—
Total commercial and industrial		36,835		45,589		200		—		—
Commercial Real Estate
Income producing		88,726		119,649		1,977		—		28
Land and development		4,577		6,086		1,116		225		409
Total commercial real estate		93,303		125,735		3,093		225		437
Consumer
Residential real estate		32,580		49,209		6,559		—		21
Other		1,785		2,881		299		—		2
Total consumer		34,365		52,090		6,858		—		23
Total	$	164,503	$	223,414	$	10,151	$	225	$	460

	As of December 31, 2016
	ACI Loans / Pools Identified as Impaired
(In thousands)	Recorded Investment in Impaired Loans⁽¹⁾		Unpaid Principal Balance		Related Specific Allowance		Nonaccrual Loans Included in Impaired Loans		Undisbursed Commitments
Commercial and Industrial
Healthcare	$	5,648	$	5,853	$	160	$	—	$	—
Other		9,904		22,403		16		1,818		—
Total commercial and industrial		15,552		28,256		176		1,818		—
Commercial Real Estate
Income producing		42,361		60,378		1,312		1,571		609
Land and development		11,067		22,568		1,342		274		604
Total commercial real estate		53,428		82,946		2,654		1,845		1,213
Consumer
Residential real estate		42,174		46,946		7,046		—		5
Other		2,121		3,229		401		—		10
Total consumer		44,295		50,175		7,447		—		15
Total	$	113,275	$	161,377	$	10,277	$	3,663	$	1,228

There were no ACI loans modified into a TDR for the three and six months ended June 30, 2017. In the six months ended June 30, 2016, there was one ACI loan modified into a TDR with a recorded investment of $947 thousand. The loan was income producing commercial real estate. There were no ACI TDRs experiencing payment default during the three and six months ended June 30, 2017 and 2016. Default is defined as the earlier of the troubled debt restructuring being placed on non-accrual status or obtaining 90 day past due status with respect to principal and interest payments.

The following provides information regarding the credit exposure by portfolio segment and class of receivable as of June 30, 2017 and December 31, 2016:

Commercial and Industrial credit exposure on ACI loans, based on internal risk rating:

Commercial Real Estate credit exposure on ACI loans, based on internal risk rating:

The following table summarizes the Company’s goodwill and other intangible assets at June 30, 2017 and December 31, 2016:

The Company primarily uses derivatives to manage exposure to market risk, including interest rate risk, credit risk and foreign currency risk, and to assist customers with their risk management objectives. Management will designate certain derivatives as hedging instruments in a qualifying hedge accounting relationship. The Company’s remaining derivatives consist of economic hedges that do not qualify for hedge accounting and derivatives held for customer accommodation, or other purposes.

The fair value of derivative positions outstanding is included in other assets and other liabilities in the accompanying consolidated balance sheets and in the net change in each of these financial statement line items in the accompanying consolidated statements of cash flows. For derivatives not designated as hedging instruments, gains and losses due to changes in fair value are included in noninterest income and the operating section of the consolidated statement of cash flows. For derivatives designated as hedging instruments, the effective portion of the gain or loss related to the derivative instrument is recognized as a component of other comprehensive income and subsequently reclassified as interest income when the forecasted transaction affects income. The ineffective portion of the gain or loss is recognized immediately as noninterest income. The notional amounts and estimated fair values as of June 30, 2017 and December 31, 2016 were as follows:

	June 30, 2017						December 31, 2016
			Fair Value						Fair Value
(In thousands)	Notional Amount		Other Assets		Other Liabilities		Notional Amount		Other Assets		Other Liabilities
Derivatives designated as hedging instruments (cash flow hedges):
Commercial loan interest rate swaps	$	1,332,000	$	—	$	15,902	$	1,332,000	$	1,184	$	17,225
Derivatives not designated as hedging instruments:
Commercial loan interest rate swaps		565,966		2,494		2,494		474,923		2,877		2,877
Commercial loan interest rate caps		237,079		57		57		286,959		94		94
Commercial loan interest rate floors		107,940		5		5		51,878		118		118
Mortgage loan held for sale interest rate lock commitments		14,762		167		—		3,788		88		—
Mortgage loan forward sale commitments		3,762		11		—		7,724		—		46
Mortgage loan held for sale floating commitments		21,223		—		—		5,895		—		—
Foreign exchange contracts		8,507		387		377		—		—		—
Total derivatives not designated as hedging instruments		959,239		3,121		2,933		831,167		3,177		3,135
Total derivatives	$	2,291,239	$	3,121	$	18,835	$	2,163,167	$	4,361	$	20,360

The Company is party to collateral support agreements with certain derivative counterparties. Such agreements require that the Company maintain collateral based on the fair values of derivative transactions. In the event of default by the Company, the counterparty would be entitled to the collateral. At June 30, 2017 and December 31, 2016, the Company was required to post $15.0 million and $20.3 million, respectively, in cash or securities as collateral for its derivative transactions, which are included in “interest-bearing deposits in banks” on the Company’s consolidated balance sheets. The Company’s master agreements represent written, legally enforceable bilateral agreements that (1) create a single legal obligation for all individual transactions covered by the master agreement and (2) in the event of default, provide the non-defaulting counterparty the right to accelerate, terminate, and close-out on a net basis all transactions under the agreement and to promptly liquidate or set-off collateral posted by the defaulting counterparty. As permitted by U.S. GAAP, the Company does not offset fair value amounts for the right to reclaim cash collateral or the obligation to return cash collateral against fair value amounts of derivatives executed with the same counterparty under the master agreement.

Gain (loss) included in the consolidated statements of income related to derivative instruments for the three and six months ended June 30, 2017 and 2016 were as follows:

The Company enters into certain interest rate swap, floor and cap agreements on commercial loans that are not designated as hedging instruments. These derivative contracts relate to transactions in which the Company enters into an interest rate swap, floor or cap with a loan customer while at the same time entering into an offsetting interest rate swap or cap with another financial institution. In connection with each swap transaction, the Company agrees to pay interest to the customer on a notional amount at a variable interest rate and receive interest from the customer on a similar notional amount at a fixed interest rate. At the same time, the Company agrees to pay another financial institution the same fixed interest rate on the same notional amount and receive the same variable interest rate on the same notional amount. The interest rate swap transaction allows the Company’s customer to effectively convert a variable rate loan to a fixed rate. The interest rate cap transaction allows the Company’s customer to minimize interest rate risk exposure to rising interest rates. Because the Company acts as an intermediary for its customer, changes in the fair value of the underlying derivative contracts for the most part offset each other and do not significantly impact the Company’s consolidated statements of income. The Company is exposed to credit loss in the event of nonperformance by the parties to the interest rate swap and cap agreements. However, the Company does not anticipate nonperformance by the counterparties. The estimated fair value has been recorded as an asset and a corresponding liability in the accompanying consolidated balance sheets as of June 30, 2017 and December 31, 2016.

Cash flow hedge relationships mitigate exposure to the variability of future cash flows or other forecasted transactions. The Company uses interest rate swaps to manage overall cash flow changes related to interest rate risk exposure on benchmark interest rate loans. In June 2015 and March 2016, the Company entered into the following interest rate swap agreements to manage overall cash flow changes related to interest rate risk exposure on benchmark interest rate loans.

Based on our current interest rate forecast, $1.6 million of deferred net loss on derivatives in OCI at June 30, 2017 is estimated to be reclassified into net interest income during the next twelve months due to the receipt of interest payments. Future changes to interest rates may significantly change actual amounts reclassified to income. There were no reclassifications into income during 2017 or 2016 as a result of any discontinuance of cash flow hedges because the forecasted transaction was no longer probable. The maximum length of time over which the Company is hedging a portion of its exposure to the variability in future cash flows for forecasted transactions is approximately nine years as of June 30, 2017.

Domestic time deposits $250,000 and over were $364.6 million and $318.8 million at June 30, 2017 and December 31, 2016, respectively. There were no foreign time deposits at either June 30, 2017 or December 31, 2016.

Securities sold under agreements to repurchase generally mature within one to seven days from the transaction date. Securities underlying the repurchase agreements remain under the control of the Company.

Information concerning the Company’s securities sold under agreements to repurchase as of June 30, 2017 and December 31, 2016 is summarized as follows:

Repurchase agreements are treated as collateralized financing obligations and are reflected as a liability in the consolidated balance sheets.

In June 2014, the Company and the Bank completed an unregistered $245 million multi-tranche debt transaction and in March 2015, the Company completed an unregistered $50 million debt transaction. These transactions enhanced our liquidity and the Bank’s capital levels to support balance sheet growth. Details of the debt transactions are as follows:

The senior transactions were structured with 4 and 7 year maturities to provide holding company liquidity and to stagger the Company’s debt maturity profile. The $35 million and $25 million subordinated debt transactions were structured with a 15 year maturity, 10 year call options, and fixed-to-floating interest rates in order to maximize regulatory capital treatment. These

subordinated debt structures were designed to achieve full Tier 2 capital treatment for 10 years. The $40 million subordinated debt transaction has a 5 year call option.

The Company’s senior notes are unsecured, unsubordinated obligations and are equal in right of payment to all of the Company’s other unsecured debt. The Company’s subordinated notes are unsecured obligations and will be subordinated in right of payment to all of the Company’s senior indebtedness and general creditors and to depositors at the Bank. The Company’s senior notes and subordinated notes are not guaranteed by any subsidiary of the Company, including the Bank.

The Bank’s subordinated notes are unsecured obligations and are subordinated in right of payment to all of the Bank’s senior indebtedness and general creditors and to depositors of the Bank. The Bank’s subordinated notes are not guaranteed by the Company or any subsidiary of the Bank.

Payment of principal on the Company’s and Bank’s subordinated notes may be accelerated by holders of such subordinated notes only in the case of certain insolvency events. There is no right of acceleration under the subordinated notes in the case of default. The Company and/or the Bank may be required to obtain the prior written approval of the Federal Reserve, and, in the case of the Bank, the OCC, before it may repay the subordinated notes issued thereby upon acceleration or otherwise.

In conjunction with the Company’s acquisition of Cadence Financial Corporation and Encore Bank, N.A., the junior subordinated debentures were marked to their fair value as of their respective acquisition dates. The related mark is being amortized over the remaining term of the junior subordinated debentures. The following is a list of junior subordinated debt:

FHLB advances are collateralized by deposits with the FHLB, FHLB stock and loans. FHLB advances were $175 million as of June 30, 2017. These advances matured in July 2017. There were no outstanding FHLB advances as of December 31, 2016. Any advances are collateralized by $1.4 billion of commercial and residential real estate loans pledged under a blanket lien arrangement as of June 30, 2017.

As of June 30, 2017 and December 31, 2016, the FHLB has issued for the benefit of the Bank irrevocable letters of credit totaling $335 million. The Bank has a $35 million irrevocable letter of credit in favor of the State of Alabama SAFE Program to secure certain deposits of the State of Alabama. This letter of credit expires September 27, 2017 upon 45 days’ prior notice of non-renewal; otherwise it automatically extends for a successive one-year term. The Bank also has a $300 million irrevocable letter of credit to secure a large treasury management deposit. This letter of credit expires May 26, 2018 upon 45 days’ prior notice of non-renewal; otherwise it automatically extends for a successive one-year term.

There were no borrowings from the FRB discount window as of June 30, 2017 and December 31, 2016. Any borrowings from the FRB will be collateralized by $753.6 million in commercial loans pledged under a borrower-in-custody arrangement.

The detail of the other noninterest income and other noninterest expense captions presented in the consolidated statements of income is as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
(In thousands)	2017		2016		2017		2016
Other Noninterest Expense
Net cost of operation of other real estate owned	$	427	$	107	$	723	$	790
Data processing expense		1,702		1,594		3,398		2,983
Special asset expenses		469		392		610		352
Consulting and professional fees		1,502		1,092		2,641		2,401
Loan related expenses		757		744		1,037		1,181
FDIC Insurance		954		2,292		2,447		3,799
Communications		675		721		1,330		1,379
Advertising and public relations		499		338		844		722
Legal expenses		508		978		940		1,722
Branch closure expenses		47		75		94		139
Other		5,542		6,217		11,138		11,852
Total other noninterest expense	$	13,082	$	14,550	$	25,202	$	27,320

Income tax expense for the three and six months ended June 30, 2017 was $13.6 million and $26.2 million, respectively, compared to $7.2 million and $14.7 million for the same periods in 2016. The effective tax rate was 31.9% and 32.2% for the three and six months ended June 30, 2017, respectively, compared to 32.6% and 32.8% for the same periods in 2016. The decrease in the effective tax rate for the three and six months ended June 30, 2017 compared to the three and six months ended June 30, 2016 was primarily driven by an increase in tax-exempt interest income.

The effective tax rate is primarily affected by the amount of pre-tax income, tax-exempt interest income, and the increase in cash surrender value of bank-owned life insurance. The effective tax rate is also affected by discrete items that may occur in any given period, but are not consistent from period-to-period, which may impact the comparability of the effective tax rate between periods.

The following table displays a reconciliation of the information used in calculating basic and diluted net income per common share for the three and six months ended June 30, 2017 and 2016.

In March 2017, the Board of Directors approved a 75-for-one stock split of the Company’s common stock. The stock split occurred on April 7, 2017. The effect of the stock split on outstanding shares and earnings per share has been retroactively applied to all periods presented.

In the normal course of business, loans are made to directors and executive officers and to companies in which they have a significant ownership interest. In the opinion of management, these loans are made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other parties, are consistent with sound banking practices, and are within applicable regulatory and lending limitations. The aggregate balances of related party loans and deposits as of June 30, 2017 and December 31, 2016 were insignificant.

The Bank is subject to the capital adequacy requirements of the OCC. The Company, as a bank holding company, is subject to the capital adequacy requirements of the Federal Reserve. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company’s consolidated financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and the Bank must meet specific capital guidelines that involve quantitative measures of assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgment by regulators about components, risk weightings, and other related factors.

The risk-based capital requirements of the Federal Reserve and the OCC define capital and establish minimum capital requirements in relation to assets and off-balance sheet exposure, adjusted for credit risk. The risk-based capital standards currently in effect are designed to make regulatory capital requirements sensitive to differences in risk profiles among bank holding companies and banks, to account for off-balance sheet exposure and to minimize disincentives for holding liquid assets. Assets and off-balance sheet items are assigned to broad risk categories, each with appropriate relative risk weights. The resulting capital ratios represent capital as a percentage of total risk-weighted assets and off-balance sheet items.

The Federal Reserve, the FDIC and the OCC have issued guidelines governing the levels of capital that banks must maintain. The bank guidelines for the period as of June 30, 2017 specify capital tiers, which include the following classifications:

The most recent notification from the OCC categorized the Bank as well-capitalized under the regulatory framework for prompt corrective action (the prompt corrective action requirements are not applicable to the Company). The actual capital amounts and ratios for the Company and the bank as of June 30, 2017 and December 31, 2016 are presented in the following table and as shown, are above the thresholds necessary to be considered “well-capitalized”. Management believes there are no conditions or events that would change that classification in the foreseeable future.

	Consolidated Company					Bank
(In thousands)	Amount		Ratio			Amount		Ratio
June 30, 2017
Tier 1 leverage	$	1,041,193		11.0	%	$	1,145,287		12.1	%
Common equity tier 1 capital (transitional)		1,005,672		10.9			1,097,096		11.9
Tier 1 risk-based capital		1,041,193		11.3			1,145,287		12.5
Total risk-based capital		1,234,044		13.4			1,264,250		13.7
The minimum amounts of capital and ratios established by banking regulators are as follows:
Tier 1 leverage	$	378,708		4.0	%	$	378,687		4.0	%
Common equity tier 1 capital (transitional)		413,993		4.5			413,777		4.5
Tier 1 risk-based capital		551,991		6.0			551,703		6.0
Total risk-based capital		735,988		8.0			735,604		8.0
Well capitalized requirement:
Tier 1 leverage	N/A		N/A			$	473,359		5.0	%
Common equity tier 1 capital (transitional)	N/A		N/A				597,678		6.5
Tier 1 risk-based capital	N/A		N/A				735,604		8.0
Total risk-based capital	N/A		N/A				919,505		10.0

	Consolidated Company					Bank
(In thousands)	Amount		Amount			Amount		Ratio
December 31, 2016
Tier 1 leverage	$	824,676		8.9	%	$	1,035,972		11.2	%
Common equity tier 1 (CET1)		793,268		8.8			989,990		11.0
Tier 1 risk-based capital		824,676		9.2			1,035,972		11.5
Total risk-based capital		1,007,011		11.2			1,144,519		12.8
The minimum amounts of capital and ratios established by banking regulators are as follows:
Tier 1 leverage	$	371,052		4.0	%	$	370,836		4.0	%
Common equity tier 1 (CET1)		403,718		4.5			403,578		4.5
Tier 1 risk-based capital		538,290		6.0			538,105		6.0
Total risk-based capital		717,720		8.0			717,473		8.0
Well capitalized requirement:
Tier 1 leverage	N/A		N/A			$	463,546		5.0	%
Common equity tier 1 (CET1)	N/A		N/A				583,248		6.5
Tier 1 risk-based capital	N/A		N/A				717,844		8.0
Total risk-based capital	N/A		N/A				897,305		10.0

Under regulations controlling national banks, the payment of any dividends by a bank without prior approval of the OCC is limited to the current year’s net profits (as defined by the OCC) and retained net profits of the two preceding years. The Federal Reserve, as primary regulator for bank holding companies, has also stated that all common stock dividends should be paid out of current income. As the Company does not generate income on a stand-alone basis, it does not have the capability to pay common stock dividends without receiving dividends from the Bank.

The Bank is required to maintain average reserve balances in the form of cash or deposits with the Federal Reserve Bank. The reserve balance varies depending upon the types and amounts of deposits. At June 30, 2017 and December 31, 2016, the required reserve balance with the Federal Reserve Bank was approximately $61.1 million and $38.3 million, respectively.

The consolidated financial statements do not reflect various commitments and contingent liabilities which arise in the normal course of banking business and which involve elements of credit risk, interest rate risk, and liquidity risk. The commitments and contingent liabilities are commitments to extend credit, home equity lines, overdraft protection lines, and standby letters of credit. Such financial instruments are recorded when they are funded. A summary of commitments and contingent liabilities at June 30, 2017 is as follows:

Commitments to extend credit and letters of credit include some exposure to credit loss in the event of nonperformance of the customer. Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Standby letters of credit are conditional commitments issued to guarantee the performance of a customer to a third party. The credit policies and procedures for such commitments are the same as those used for lending activities. Because these instruments have fixed maturity dates and because a number expire without being drawn upon, they generally do not present any significant liquidity risk. No significant losses on commitments were incurred during the three and six months ended June 30, 2017 and 2016. The Company does not anticipate any significant future losses as a result of these transactions.

The Company makes investments in limited partnerships, including certain low income housing partnerships for which tax credits are received. As of June 30, 2017 and December 31, 2016, unfunded capital commitments totaled $19.1 million and $15.1 million, respectively.

The Company and the Bank are defendants in various pending and threatened legal actions arising in the normal course of business. In the opinion of management, based upon the advice of legal counsel, the ultimate disposition of all pending and threatened legal action will not have a material effect on the Company’s consolidated financial statements.

Most of the loans, commitments and letters of credit involve customers or sponsors in the Company’s market areas. Investments in state and municipal securities also involve governmental entities within the Company’s market areas. General concentrations of credit by type of loan are set forth in Note 3 of these consolidated financial statements. The distribution of commitments to extend credit approximates the distribution of loans outstanding. Letters of credit were granted primarily to commercial borrowers.

The Company groups its assets and liabilities measured at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value. This hierarchy requires the Company to maximize the use of observable market data, when available, and to minimize the use of unobservable inputs when determining fair value. Each fair value measurement is placed into the proper level based on the lowest level of significant input. These levels are:

Transfers between fair value levels are recognized at the end of the fiscal quarter in which the associated change in inputs occurs.

The table below presents the Company’s assets and liabilities measured at fair value on a recurring basis categorized by the level of inputs used in the valuation of each asset at June 30, 2017 and December 31, 2016:

(In thousands)	Carrying Value		(Level 1)		(Level 2)		(Level 3)
June 30, 2017
Investment securities available-for-sale:
U.S. Treasury securities	$	97,598	$	—	$	97,598	$	—
Obligations of U.S. government agencies		88,350		—		88,350		—
Mortgage-backed securities issued or guaranteed by U.S. agencies (MBS)
Residential pass-through:
Guaranteed by GNMA		119,835		—		119,835		—
Issued by FNMA and FHLMC		252,129		—		252,129		—
Other residential mortgage-backed securities		44,484		—		44,484		—
Commercial mortgage-backed securities		61,369		—		61,369		—
Total MBS		477,817		—		477,817		—
Obligations of states and municipal subdivisions		410,423		—		410,423
Other securities		5,747		5,747		—		—
Total investment securities available-for-sale		1,079,935		5,747		1,074,188		—
Derivative assets		3,121		—		3,121		—
Other assets (Net profits interests)		16,405		—		—		16,405
Total recurring basis measured assets	$	1,099,461	$	5,747	$	1,077,309	$	16,405
Derivative liabilities	$	18,835	$	—	$	18,835	$	—
Total recurring basis measured liabilities	$	18,835	$	—	$	18,835	$	—

(In thousands)	Carrying Value		(Level 1)		(Level 2)		(Level 3)
December 31, 2016
Investment securities available-for-sale:
U.S. Treasury securities	$	96,785	$	—	$	96,785	$	—
Obligations of U.S. government agencies		97,528		—		97,528		—
Mortgage-backed securities issued or guaranteed by U.S. agencies (MBS)
Residential pass-through:
Guaranteed by GNMA		153,153		—		153,153		—
Issued by FNMA and FHLMC		265,328		—		265,328		—
Other residential mortgage-backed securities		47,561		—		47,561		—
Commercial mortgage-backed securities		62,613		—		62,613		—
Total MBS		528,655		—		528,655		—
Obligations of states and municipal subdivisions		410,812		—		410,812		—
Other securities		5,567		5,567		—		—
Total investment securities available-for-sale		1,139,347		5,567		1,133,780		—
Derivative assets		4,361		—		4,361		—
Other assets (Net profits interest)		19,425		—		—		19,425
Total recurring basis measured assets	$	1,163,133	$	5,567	$	1,138,141	$	19,425
Derivative liabilities	$	20,360	$	—	$	20,360	$	—
Total recurring basis measured liabilities	$	20,360	$	—	$	20,360	$	—

There were no transfers between the Level 1 and Level 2 fair value categories during the three and six months ended June 30, 2017 and 2016.

The tables below include a roll-forward of the condensed consolidated balance sheet amounts for the three and six months ended June 30, 2017 and 2016, including changes in fair value for financial instruments within Level 3 of the valuation hierarchy. Level 3 financial instruments typically include unobservable components, but may also include some observable components that may be validated to external sources. The gains or (losses) in the following table may include changes to fair value due in part to observable factors that may be part of the valuation methodology:

From time to time, the Company may be required to measure certain other financial assets at fair value on a nonrecurring basis in accordance with GAAP. These adjustments to fair value usually result from the application of lower of cost or fair value accounting or write-downs of individual assets. For assets measured at fair value on a nonrecurring basis which were still held on the balance sheets at June 30, 2017 and December 31, 2016, the following tables provide the level of valuation assumptions used to determine each adjustment and the related carrying value:

Significant unobservable inputs used in Level 3 fair value measurements for financial assets measured at fair value on a nonrecurring basis at June 30, 2017 and December 31, 2016 are summarized below:

In accordance with ASC 820-10-35, fair values are based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The following describes the assumptions and methodologies used to estimate the fair value of financial instruments recorded at fair value in the consolidated balance sheets and for estimating the fair value of financial instruments for which fair value is disclosed under ASC 825-10-50.

Investment Securities. When quoted prices are available in an active market, securities are classified as Level 1. For securities reported at fair value utilizing Level 2 inputs, the Company obtains fair value measurements from an independent pricing service. These fair value measurements consider observable market data that may include benchmark yield curves, reported trades, broker/dealer quotes, issuer spreads and credit information, among other inputs.

Loans Held for Sale. Loans held for sale are recorded at the lower of aggregate cost or fair value. Fair value is generally based on quoted market prices of similar loans and is considered to be Level 2.

Net Loans. Fair values of loans are estimated using discounted cash flow analyses using various discount spreads to Treasury yields that approximate interest rates currently being offered for loans with similar terms to borrowers of similar credit quality.

Derivative Financial Instruments. Derivative financial instruments are measured at fair value based on modeling that utilizes observable market inputs for various interest rates published by leading third-party financial news and data providers. This is observable data that represents the rates used by market participants for instruments entered into at that date; however, they are not based on actual transactions so they are classified as Level 2.

Other Assets - Net profits interests. The fair value of the net profit interests in oil and gas reserves was estimated using discounted cash flow analyses applied to the expected cash flows from producing developed wells. Expected cash flows are derived from reports prepared by consulting engineers under established professional standards for the industry.

Deposits. The fair values disclosed for demand deposits are, by definition, equal to the amount payable on demand at the reporting date (that is, their carrying amounts). Fair values for CDs are estimated using a discounted cash flow calculation that applies interest rate spreads to current Treasury yields.

FHLB Advances. The fair value of the FHLB advance approximates its book value considering their short-term maturities.

Security Sold Under Agreements to Repurchase. The carrying amount of security repurchase agreements approximates their fair values.

Senior Debt. The fair value of senior debt was estimated by obtaining broker indications that compared the Company’s senior debt to other comparable financial institutions.

Subordinated Debt. The fair value of subordinated debentures was estimated by obtaining broker indications that compared the Company’s subordinated debentures to other comparable financial institutions.

Junior Subordinated Debentures. The fair value of junior subordinated debentures was estimated by obtaining broker indications that compared the Company’s junior subordinated debentures to other comparable financial institutions.

Limitations. The following fair value estimates are determined as of a specific point in time utilizing various assumptions and estimates. The use of assumptions and various valuation techniques, as well as the absence of secondary markets for certain financial instruments, will likely reduce the comparability of fair value disclosures between financial institutions. The fair values for loans involve the use of significant internally-developed pricing assumptions due to market-illiquidity for loans net of unearned income and loans held for sale as of June 30, 2017 and December 31, 2016. These assumptions are considered to reflect inputs that market participants would use in transactions involving these instruments as of the measurement date. This table only includes financial instruments of the Company, and, accordingly, the total of the fair value amounts does not represent, and should not be construed to represent, the underlying value of the Company.

The estimated fair values of the Company’s financial instruments are as follows:

	As of June 30, 2017
	Carrying
(In thousands)	Amount		Fair Value		Level 1		Level 2		Level 3
Financial Assets:
Cash and due from banks	$	62,304	$	62,304	$	62,304	$	—	$	—
Interest-bearing deposits in other banks		220,962		220,962		220,962		—		—
Federal funds sold		5,609		5,609		5,609		—		—
Securities available-for-sale		1,079,935		1,079,935		5,747		1,074,188		—
Securities held-to-maturity		425		456		—		456		—
Loans held for sale		49,757		49,757		—		49,757		—
Net loans		7,623,406		7,690,595		—		—		7,690,595
Derivative assets		3,121		3,121		—		3,121		—
Other assets-net profits interests		16,405		16,505		—		—		16,505
Financial Liabilities:
Deposits		7,930,383		7,872,338		—		7,872,338		—
Advances from FHLB		175,000		175,000		—		175,000		—
Securities sold under agreements to repurchase		4,980		4,980		—		4,980		—
Senior debt		184,485		201,164		—		201,164		—
Subordinated debt		98,568		100,116		—		100,116		—
Junior subordinated debentures		36,233		49,106		—		49,106		—
Derivative liabilities		18,835		18,835		—		18,835		—

	As of December 31, 2016
(In thousands)	Carrying Amount		Fair Value		Level 1		Level 2		Level 3
Financial Assets:
Cash and due from banks	$	48,017	$	48,017	$	48,017	$	—	$	—
Interest-bearing deposits in other banks		199,747		199,747		199,747		—		—
Federal funds sold		1,161		1,161		1,161		—		—
Securities available-for-sale		1,139,347		1,139,347		5,567		1,133,780		—
Securities held-to-maturity		425		463		—		463		—
Loans held for sale		17,822		17,822		—		17,822		—
Net loans		7,350,443		7,395,003		—		—		7,395,003
Derivative assets		4,361		4,361		—		4,361		—
Other assets-net profits interests		19,425		19,818		—		—		19,818
Financial Liabilities:
Deposits		8,016,749		7,904,926		—		7,904,926		—
Securities sold under agreements to repurchase		4,361		4,361		—		4,361		—
Senior debt		193,788		191,076		—		191,076		—
Subordinated debt		98,441		97,938		—		97,938		—
Junior subordinated debentures		35,989		47,409		—		47,409		—
Derivative liabilities		20,360		20,360		—		20,360		—

The Company determines reportable segments based on the services offered, the significance of the services offered, the significance of those services to the Company’s financial condition and operating results and management’s regular review of the operating results of those services. The Company operates through three operating segments: Banking, Financial Services and Corporate.

The Banking Segment includes the Commercial Banking, Retail Banking and Private Banking lines of business. The Commercial Banking line of business includes a general business services component primarily focusing on commercial & industrial (C&I), community banking, business banking and commercial real estate lending to clients in the geographic footprint in Texas and the southeast United States. In addition, the Commercial Banking line of business includes within C&I a separate component that focuses on select industries (which is referred to as the “specialized industries”) in which the Company believes it has specialized experience and service capabilities, including energy, healthcare, restaurant industry, and technology. The

Company serve clients in these specialized industries both within the geographic footprint and throughout the United States as a result of the national orientation of many of these businesses. The Retail Banking line of business offers a broad range of retail banking services including mortgage services through the branch network to serve the needs of consumer and small businesses in the geographic footprint. The Private Banking line of business offers banking services and loan products tailored to the needs of the high-net worth clients in the geographic footprint.

The Financial Services Segment includes the Trust, Retail Brokerage, Investment Services and Insurance businesses. These businesses offer products independently to their own customers as well as to Banking Segment clients. Investment Services operates through the “Linscomb & Williams” name and Insurance operates though the “Cadence Insurance” name. The products offered by the businesses in the Financial Services Segment primarily generate non-banking service fee income. The Corporate Segment reflects parent-only activities and intercompany eliminations.

Business segment results are determined based upon the management reporting system, which assigns balance sheet and income statement items to each of the business segments. The process is designed around the organizational and management structure and, accordingly, the results derived are not necessarily comparable with similar information published by other financial institutions or in accordance with generally accepted accounting principles.

The Company evaluates performance and allocates resources based on profit or loss from operations. There are no material inter-segment sales or transfers. The accounting policies used by each reportable segment are the same as those discussed in Note 1. All costs, except corporate administration and income taxes, have been allocated to the reportable segments. Therefore, combined amounts agree to the consolidated totals.

The following tables present the operating results of the segments as of and for the three and six months ended June 30, 2017 and 2016:

The Company administers a long-term incentive compensation plan that permits the granting of incentive awards in the form of stock options, restricted stock, restricted stock units, performance units, stock appreciation rights, or other stock-based awards. The terms of all awards issued under these plans are determined by the Compensation Committee of the Board of Directors

The Amended and Restated 2015 Omnibus Incentive Plan (the “Plan”), permits the Company to grant to employees and directors various forms of incentive compensation. The principal purposes of this plan are to focus directors, officers and other employees and consultants on business performance that creates shareholder value, to encourage innovative approaches to the business of the Company, and to encourage ownership of the Company’s stock. The Plan authorizes 7,500,000 common share equivalents available for grant, where grants of full value awards (e.g., shares of restricted stock, restricted stock units and performance stock units) count as one share equivalent. The number of remaining share equivalents available for future issuance under the Plan was 6,827,250 at June 30, 2017.

The Company recorded $385.6 thousand and $780.1 thousand equity-based compensation expense for the outstanding restricted stock units for the three and six months ended June 30, 2017, respectively, compared to $315.4 thousand and $630.7 thousand for the same periods in 2016. The remaining expense related to unvested restricted stock units is $2.6 million as of June 30, 2017 and will be recognized over the next 20 months.

There were 672,750 outstanding non-vested restricted stock units with a grant date fair value of $5.14. There were no grants or forfeitures for the three and six months ended June 30, 2017.

Activity within the balances in accumulated other comprehensive income (loss) is shown in the following tables for the six months ended June 30, 2017.

Under ASC 810-10-65, the Company is deemed to be the primary beneficiary and required to consolidate a variable interest entity (“VIE”) if it has a variable interest in the VIE that provides it with a controlling financial interest. For such purposes, the determination of whether a controlling financial interest exists is based on whether a single party has both the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and the obligation to absorb the losses of the

VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE. ASC 810-10-65, as amended, requires continual reconsideration of conclusions reached regarding which interest holder is a VIE’s primary beneficiary.

The Bank has invested in several affordable housing projects as a limited partner. The partnerships have qualified to receive annual affordable housing federal tax credits that are recognized as a reduction of current tax expense. The Company has determined that these structures meet the definition of VIE’s under Topic ASC 810 but that consolidation is not required, as the Bank is not the primary beneficiary. At June 30, 2017 and December 31, 2016, the Bank’s maximum exposure to loss associated with these limited partnerships was limited to the Bank’s investment. The Company accounts for these investments and the related tax credits using either the effective yield method or the proportional amortization method, depending upon the date of the investment. Under the effective yield method, the Bank recognizes the tax credits as they are allocated and amortizes the initial costs of the investments to provide a constant effective yield over the period that the tax credits are allocated. Under the proportional amortization method, the Bank amortizes the cost of the investment in proportion to the tax credits and other tax benefits received and recognizes the net investment performance in the income statement as a component of income tax expense. At June 30, 2017 and December 31, 2016, the Company had recorded investments in other assets on its consolidated balance sheets of approximately $8.7 million and $4.2 million, respectively related to these investments. Additionally, the Company invests in other certain limited partnerships accounted for under the cost method totaling $7.4 million and $6.1 million as of June 30, 2017 and December 31, 2016, respectively and the equity method totaling $6.6 million and $3.9 million as of June 30, 2017 and December 31, 2016, respectively.

During 2016, the Bank received net profits interests in oil and gas reserves, in connection with the reorganization under bankruptcy of two loan customers. The Company has determined that these contracts meet the definition of VIE’s under Topic ASC 810, but that consolidation is not required as the Bank is not the primary beneficiary. The net profits interests are financial instruments and recorded at estimated fair value, which was $16.4 million and $19.4 million at June 30, 2017 and December 31, 2016, respectively, representing the maximum exposure to loss as of that date.

The Company has established a rabbi trust related to the deferred compensation plan offered to certain of its employees. The Company contributes employee cash compensation deferrals to the trust. The assets of the trust are available to creditors of the Company only in the event the Company becomes insolvent. This trust is considered a VIE because either there is no equity at risk in the trust or because the Company provided the equity interest to its employees in exchange for services rendered. The Company is considered the primary beneficiary of the rabbi trust as it has the ability to select the underlying investments made by the trust, the activities that most significantly impact the economic performance of the rabbi trust. The Company includes the assets of the rabbi trust as a component of other assets and a corresponding liability for the associated benefit obligation in other liabilities in its consolidated balance sheets. At June 30, 2017 and December 31, 2016, the amount of rabbi trust assets and benefit obligation was $3.1 million and $3.0 million, respectively.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis presents our results of operations and financial condition on a consolidated basis for three and six months ended June 30, 2017. This discussion should be read in conjunction with the unaudited consolidated financial statements, accompanying footnotes and supplemental financial data included herein. The emphasis of this discussion will be amounts as of June 30, 2017 compared to December 31, 2016 for the balance sheets and the three and six months ended June 30, 2017 compared to June 30, 2016 for the statements of income.

Because we conduct our material business operations through our bank subsidiary, Cadence Bank, N.A., the discussion and analysis relates to activities primarily conducted by the Bank. We generate most of our revenue from interest on loans and investments and fee-based revenues. Our primary source of funding for our loans is deposits. Our largest expenses are interest on these deposits and salaries and related employee benefits. We measure our performance primarily through our net income, pre-tax and pre-loan provision earnings, net interest margin, efficiency ratio, ratio of allowance for credit losses to total loans, return on average assets and return on average equity, among other metrics, while maintaining appropriate regulatory leverage and risk-based capital ratios.

This Report on Form 10-Q contains forward-looking statements. These forward-looking statements reflect our current views with respect to, among other things, future events and our results of operations, financial condition and financial performance. These statements are often, but not always, made through the use of words or phrases such as “may,” “should,” “could,” “predict,” “potential,” “believe,” “will likely result,” “expect,” “continue,” “will,” “anticipate,” “seek,” “estimate,” “intend,” “plan,” “projection,” “would” and “outlook,” or the negative version of those words or other comparable words of a future or forward-looking nature. These forward-looking statements are not historical facts, and are based on current expectations, estimates and projections about our industry, management’s beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond our control. Accordingly, we caution you that any such forward-looking statements are not guarantees of future performance and are subject to risks, assumptions and uncertainties that are difficult to predict. Although we believe that the expectations reflected in these forward-looking statements are reasonable as of the date made, actual results may prove to be materially different from the results expressed or implied by the forward-looking statements.

There are or will be important factors that could cause our actual results to differ materially from those indicated in these forward-looking statements, including, but not limited to, the following:

The foregoing factors should not be construed as exhaustive and should be read together with the other cautionary statements included in this Report. If one or more events related to these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, actual results may differ materially from what we anticipate. Accordingly, you should not place undue reliance on any such forward-looking statements. Any forward-looking statement speaks only as of the date on which it is made, and we do not undertake any obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise. New factors emerge from time to time, and it is not possible for us to predict which will arise. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

Cadence Bancorporation is a bank holding company and a Delaware corporation headquartered in Houston, Texas, and is the parent company of Cadence Bank, National Association (N.A.). With $9.8 billion in assets, $7.7 billion in total loans (net of unearned discounts and fees), $7.9 billion in deposits and $1.3 billion in shareholders’ equity as of June 30, 2017, we currently operate a network of 65 branch locations across Texas, Alabama, Florida, Mississippi and Tennessee. We focus on middle-market commercial lending, complemented by retail banking and wealth management services, and provide a broad range of banking services to businesses, high net worth individuals and business owners.

We operate Cadence Bancorporation through three operating segments: Banking, Financial Services and Corporate. Our Banking Segment, which represented approximately 92.2% of our total revenues for the six months ended June 30, 2017, consists of our Commercial Banking, Retail Banking and Private Banking lines of business. Our Commercial Banking activities focus on commercial and industrial (“C&I”), community banking, business banking and commercial real estate lending and treasury management services to clients in our geographic footprint in Texas and the southeast United States. Within our Commercial Banking line of business, we focus on select industries, which we refer to as our “specialized industries,” in which we believe we have specialized experience and service capabilities. These industries include franchise restaurant, healthcare and technology. Energy lending is also an important part of our business as energy production and energy related industries are meaningful contributors to the economy in our primary markets. In our Retail Banking business line, we offer a broad range of banking services through our branch network to serve the needs of consumers and small businesses. In our Private Banking business line, we offer banking services, such as deposit services and residential mortgage lending, to affluent clients and business owners.

We are focused on organic growth and expanding our position in our markets. We believe that our franchise is positioned for continued growth as a result of prudent lending in our markets through experienced relationship managers and a client-centered, relationship-driven banking model, with particular emphasis on Texas-based expansion and our focus and capabilities in serving specialized industries. We believe our continued growth is supported by (i) our attractive geographic footprint, (ii) the stable and cost efficient deposit funding provided by our acquired franchises (each of which was a long-standing institution with an established customer network), (iii) our veteran board of directors and management team, (iv) our capital position and (v) our credit quality and risk management processes.

The following table summarizes certain selected consolidated financial data for the periods presented. The historical consolidated financial information presented below contains financial measures that are not presented in accordance with U.S. GAAP and which have not been audited. See “Table 33 - Non-GAAP Financial Measures.”

	As of and for the three months ended						As of and for the six months ended						As of and for the year ended
	June 30,						June 30,						December 31,
(In thousands)	2017			2016			2017			2016			2016
Statement of Income Data:
Net income	$	28,968		$	14,840		$	55,085		$	30,181		$	65,774
Net interest income		82,384			69,249			157,142			136,515			279,439
Noninterest income - service fees and revenue		22,144			20,048			44,632			40,535			81,976
Noninterest expense		56,134			55,868			110,455			109,910			220,180
Provision for credit losses		6,701			14,471			12,487			24,943			49,348
Efficiency ratio ⁽¹⁾		53.27	%		60.49	%		54.08	%		61.14	%		59.86	%
Period-End Balance Sheet Data:
Investment securities, available-for-sale	$	1,079,935		$	980,526		$	1,079,935		$	980,526		$	1,139,347
Total loans, net of unearned income		7,716,621			7,162,027			7,716,621			7,162,027			7,432,711
Allowance for credit losses ("ACL")		93,215			87,147			93,215			87,147			82,268
Total assets		9,811,557			9,221,807			9,811,557			9,221,807			9,530,888
Total deposits		7,930,383			7,672,657			7,930,383			7,672,657			8,016,749
Total shareholders’ equity		1,304,054			1,116,076			1,304,054			1,116,076			1,080,498
Asset Quality Ratios:
Total nonperforming assets ('NPAs") to total loans plus OREO and NPI		1.82	%		2.72	%		1.82	%		2.72	%		2.22	%
Total ACL to total loans		1.21			1.22			1.21			1.22			1.11
ACL to total nonperforming loans ("NPLs")		88.81			53.84			88.81			53.84			63.80
Net charge-offs to average loans ⁽²⁾		0.09			1.01			0.04			0.50			0.65
Capital Ratios:
Total shareholders’ equity to assets		13.29	%		12.10	%		13.29	%		12.10	%		11.34	%
Tangible common equity to tangible assets ⁽¹⁾		10.27			8.78			10.27			8.78			8.13
Common equity tier 1 (CET1) (transitional)		10.92			8.69			10.92			8.69			8.84
Tier 1 leverage capital		11.00			8.90			11.00			8.90			8.89
Tier 1 risk-based capital		11.31			9.00			11.31			9.00			9.19
Total risk-based capital		13.41			11.10			13.41			11.10			11.22

Net income for the three months ended June 30, 2017 totaled $29.0 million, a $14.1 million, or 95.2%, increase compared to $14.8 million for the same period in 2016. The primary drivers of the net $14.1 million increase included a $13.1 million increase in net interest income, a $2.1 million increase in service fees and revenue, and a $7.8 million decrease in provision for credit losses, offset by a $6.4 million increase in income taxes. Net income for the six months ended June 30, 2017 totaled $55.1 million, a $24.9 million, or 82.5%, increase compared to $30.2 million for the same period in 2016. The primary drivers of the net $24.9 million increase included a $20.6 million increase in net interest income, a $4.1 million increase in service fees and revenue, and a $12.5 million decrease in provision for credit losses, offset by an $11.5 million increase in income taxes. The resulting earnings per diluted common share for the three and six months ended June 30, 2017 were $0.35 and $0.70, compared to $0.20 and $0.40 for the same periods of 2016.

Net interest income was $82.4 million for the three months ended June 30, 2017, a $13.1 million, or 19.0%, increase compared to the same period of 2016, primarily driven by an increase in average earning assets. Our net interest spread increased to 3.42% for the three months ended June 30, 2017 compared to 3.10% for the same period in 2016, and the net interest margin on an annualized basis increased 39 basis points to 3.71% from 3.32%. Net interest income was $157.1 million for the six months ended June 30, 2017, a $20.6 million, or 15.1%, increase compared to the same period of 2016, primarily driven by an increase in average earning assets and market interest rates. Our net interest spread increased to 3.32% for the six months ended June 30, 2017 compared to 3.10% for the same period in 2016, and the net interest margin on an annualized basis increased 26 basis points to 3.58% from 3.32%.

Service fees and revenue was $22.1 million in the three months ended June 30, 2017, an increase of $2.1 million, or 10.5%, over the same period in 2016. The period-over-period increase included increases in trust service fees and service fees on deposits. Service fees and revenue was $44.6 million in the six months ended June 30, 2017, an increase of $4.1 million, or 10.1%, over the same period in 2016. The period-over-period increase included increases in trust service fees and service fees on deposits.

Noninterest expense for the three months ended June 30, 2017 increased $266 thousand, or 0.5%, to $56.1 million compared to $55.9 million during the same period of 2016. The three months ended June 30, 2017 included higher salary and benefits expenses offset by lower intangible amortization, FDIC insurance expense and professional fees. Noninterest expense for the six months ended June 30, 2017 increased $545 thousand, or 0.5%, to $110.5 million compared to $109.9 million during the same period of 2016. The six months ended June 30, 2017 included higher salary and benefits expenses offset by lower intangible amortization, FDIC insurance expense and professional fees.

Our efficiency ratio was 53.3% for the three months ended June 30, 2017, an improvement over the 60.5% efficiency ratio for the three months ended June 30, 2016. Our efficiency ratio was 54.1% for the six months ended June 30, 2017, an improvement over the 61.1% efficiency ratio for the six months ended June 30, 2016. A reconciliation of our non-GAAP measures is included in Table 33.

Provision for credit losses decreased $7.8 million, or 53.7%, to $6.7 million in the three months ended June 30, 2017, compared to $14.5 million in the three months ended June 30, 2016. Provision for credit losses decreased $12.5 million, or 49.9%, to $12.5 million in the six months ended June 30, 2017, compared to $24.9 million in the six months ended June 30, 2016. (See “—Provision for Credit Losses” and “—Asset Quality”). The higher provision for credit losses in 2016 was primarily related to our energy portfolio and a single healthcare loan that was charged-off during the second quarter of 2016. Annualized net charge-offs were 0.09% and 0.04% of average loans during the three and six months periods ended June 30, 2017, respectively, compared to 1.01% and 0.50% of average loans during the three and six months periods ended June 30, 2016, respectively.

Our total loans, net of unearned income increased $284 million, or 3.8%, from December 31, 2016 to $7.72 billion at June 30, 2017, which was driven by originated loan growth of $342 million, partially offset by a decrease of $58 million in the acquired loan portfolio. The increase was primarily driven by the commercial and residential real estate loan portfolios.

From an asset quality perspective, total nonperforming assets (“NPAs”) decreased $24.8 million, or 14.9%, compared to December 31, 2016. The decrease in NPAs from December 31, 2016 is primarily related to pay downs and general improvement of the energy portfolio. The bank does continue to see some stress due to low oil and gas prices, evidenced in elevated criticized loan levels within the energy portfolio. (See “—Asset Quality). Our total allowance for credit losses increased $10.9 million, or 13.3%, from $82.3 million at December 31, 2016 to $93.2 million at June 30, 2017, and represented approximately 1.2% of total loans at June 30, 2017 and 1.1% at December 31, 2016.

Total deposits decreased $86.4 million , or 1.1%, to $7.9 billion at June 30, 2017, from $8.0 billion at December 31, 2016 as a result of our brokered deposits declining $299 million. Over the same period, noninterest-bearing deposits increased $17 million, or 0.9%, and comprised 23.4% and 23.0% of total deposits at June 30, 2017 and December 31, 2016, respectively. Interest-bearing deposits decreased $103 million, or 1.7%, and comprised 76.6% and 77.0% of total deposits at June 30, 2017 and December 31, 2016, respectively, due to a decline in brokered deposits of $299 million.

Overall, our Tier 1 leverage ratio increased 211 basis points, total risk-based capital ratio increased 219 basis points and Tier 1 risk-based capital ratio increased 212 basis points from December 31, 2016. The increases are primarily due to our initial public offering which occurred in April 2017. We met all capital adequacy requirements and the Bank continued to meet the minimum requirements to be considered well-capitalized under regulatory guidelines as of June 30, 2017.

We reported net income for the three and six months ended June 30, 2017 of $29.0 million and $55.1 million, respectively, compared to $14.8 million and $30.2 million for the three and six months ended June 30, 2016, respectively. The following table presents key earnings data for the periods indicated:

The largest component of our net income is net interest income, which is the difference between the income earned on interest-earning assets and interest paid on deposits and borrowings. We manage our interest-earning assets and funding sources to maximize our net interest margin. (See “—Quantitative and Qualitative Disclosures about Market Risk” for a discussion regarding

our interest rate risk). Net interest income is determined by the rates earned on our interest-earning assets, rates paid on our interest-bearing liabilities, the relative amounts of interest-earning assets and interest-bearing liabilities, the degree of mismatch and the maturity and re-pricing characteristics of our interest-earning assets and interest-bearing liabilities. Net interest income divided by average interest-earning assets represents our net interest margin. The yield on our net earning assets less the yield on our interest bearing liabilities represents our net interest spread.

Interest earned on our loan portfolio is the largest component of our interest income. Our originated and acquired noncredit impaired loan (“ANCI”) portfolios are presented at the principal amount outstanding net of deferred origination fees and unamortized discounts and premiums. Interest income is recognized based on the principal balance outstanding and the stated rate of the loan. Loan origination fees and certain direct origination costs are capitalized and recognized as an adjustment of the yield on the related loan. ANCI loans acquired through our acquisitions were initially recorded at fair value. Discounts or premiums created when the loans were recorded at their estimated fair values at acquisition are being accreted over the remaining term of the loan as an adjustment to the related loan’s yield.

The performance of loans within our acquired credit impaired (“ACI”) portfolio impacts interest income as the remaining discounts and proceeds received in excess of expected cash flow are realized in interest income when these loans are closed through payoff, charge off, workout, sale or foreclosure. At acquisition, the expected shortfall in future cash flows on our ACI portfolio, as compared to the contractual amount due, was recognized as a non-accretable discount. Any excess of expected cash flows over the acquisition date fair value is known as the accretable discount, and is recognized as accretion income over the life of each pool or individual ACI loan. Expected cash flows over the acquisition date fair value are re-estimated quarterly utilizing the same cash flow methodology used at the time of acquisition. Any subsequent decreases to the expected cash flows will generally result in a provision for credit losses charge in the consolidated statements of income. Conversely, subsequent increases in expected cash flows result in a transfer from the non-accretable discount to the accretable discount, which has a positive impact on accretion income prospectively. The following table summarizes the amount of interest income related to our ACI portfolio for the periods presented:

As of June 30, 2017 the weighted average contractual interest rate on the remaining active ACI portfolio loans was approximately 4.66%.

The following table is a rollforward of the accretable difference on our ACI portfolio for the periods indicated:

Our net interest income, fully-tax equivalent (FTE), for the three months ended June 30, 2017 and 2016 was $84.2 million and $70.3 million, respectively, an increase of $13.9 million. Our net interest margin for the three months ended June 30, 2017 and 2016 was 3.71% and 3.32%, respectively, an increase of 39 basis points. The yield on our total loan portfolio increased 50 basis points to 4.74% for the three months ended June 30, 2017 compared to 4.24% for the three months ended June 30, 2016 due to an increase in the rate and volume of our originated portfolio and higher recovery income on the ACI portfolio. The following table sets forth, on a tax equivalent basis, the components of our net interest income with the effect that the varying levels of interest-earning assets and interest-bearing liabilities and the applicable rates have had on changes in net interest income for the three months ended June 30, 2017:

	Three Months Ended June 30,
	2017 vs. 2016
	Net Interest Income				Increase		Changes Due To⁽¹⁾
(In thousands)	2017		2016		(Decrease)		Rate		Volume
Increase (decrease) in:
Income from interest-earning assets:
Interest and fees on loans:
Originated and ANCI loans	$	79,904	$	66,444	$	13,460	$	7,703	$	5,757
ACI portfolio		10,525		9,231		1,294		3,649		(2,355	)
Interest on securities:
Taxable		4,178		4,169		9		240		(231	)
Tax-exempt ⁽²⁾		5,208		3,003		2,205		143		2,062
Interest on fed funds and short-term investments		688		493		195		178		17
Interest on other investments		695		632		63		50		13
Total interest income		101,198		83,972		17,226		11,963		5,263
Expense from interest-bearing liabilities:
Interest on demand deposits		6,354		4,086		2,268		1,906		362
Interest on savings deposits		119		105		14		9		5
Interest on time deposits		5,298		4,360		938		1,124		(186	)
Interest on other borrowings		2,896		2,842		54		75		(21	)
Interest on subordinated debentures		2,324		2,279		45		30		15
Total interest expense		16,991		13,672		3,319		3,144		175
Net interest income	$	84,207	$	70,300	$	13,907	$	8,819	$	5,088

Our total interest income (FTE) for the three months ended June 30, 2017 totaled $101.2 million compared to $84.0 million in the three months ended June 30, 2016. This increase is primarily the result of an increase in the volume and yield of our originated loans, recovery income on our ACI portfolio and an increase in the volume of our investment portfolio. The yield on our originated loan portfolio reflects an increase in LIBOR rates in our loan portfolio. We also increased the level of our investments in tax-exempt securities which increased the interest income volume on our investment securities portfolio.

The following table presents a comparison of loan portfolio yield for the three months ended June 30, 2017 and 2016:

The yield on our ACI portfolio fluctuates due to the volume and timing of cash flows received or expected to be received. The yield on our ACI portfolio for the three months ended June 30, 2017 was 14.02% compared to 9.59% for the three months ended June 30, 2016. During the three months ended June 30, 2017, interest income on the ACI portfolio included $4.5 million in recovery income, compared to $1.2 million in the three months ended June 30, 2016. These amounts were realized on certain individual loans that were settled before expected, or where we received amounts above our estimates. Excluding these amounts, the yield on our ACI loans would have been 8.09% for the three months ended June 30, 2017 compared to 8.34% for the three months ended June 30, 2016. Our total loan yield, excluding these amounts, would have been 4.51% and 4.17% for the three months ended June 30, 2017 and 2016, respectively.

Our interest expense for the three months ended June 30, 2017 and 2016 was $17.0 million and $13.7 million, respectively, an increase of $3.3 million. This increase is primarily related to the impact of higher market rates on our interest bearing demand accounts and time deposits. Our cost of interest bearing deposits increased to 0.77% for the three months ended June 30, 2017 compared to 0.59% for the three months ended June 30, 2016. Our cost of borrowings for the three months ended June 30, 2017 and 2016 was 4.10% and 4.02%, respectively, and is primarily related to increases in LIBOR rates from the prior period.

The following table presents, on a tax equivalent basis, for the three months ended June 30, 2017 and 2016, our average balance sheet and our average yields on assets and average costs of liabilities. Average yields are calculated by dividing income or expense by the average balance of the corresponding assets or liabilities. Average balances have been calculated on a daily basis, except for ACI loans, which is a monthly average.

	Three Months Ended June 30,
	2017									2016
	Average			Income/			Yield/			Average			Income/			Yield/
(In thousands)	Balance			Expense			Rate			Balance			Expense			Rate
ASSETS
Interest-earning assets:
Loans, net of unearned income⁽¹⁾
Originated and ANCI loans	$	7,348,932		$	79,904			4.36	%	$	6,793,328		$	66,444			3.93	%
ACI portfolio		301,116			10,525			14.02			387,029			9,231			9.59
Total loans		7,650,048			90,429			4.74			7,180,357			75,675			4.24
Investment securities
Taxable		688,464			4,178			2.43			729,213			4,169			2.30
Tax-exempt ⁽²⁾		410,843			5,208			5.08			248,384			3,003			4.86
Total investment securities		1,099,307			9,386			3.42			977,597			7,172			2.95
Federal funds sold and short-term investments		312,287			688			0.88			302,508			493			0.66
Other investments		50,064			695			5.57			49,070			632			5.18
Total interest-earning assets		9,111,706			101,198			4.45			8,509,532			83,972			3.97
Noninterest-earning assets:
Cash and due from banks		59,220									50,196
Premises and equipment		65,392									69,920
Accrued interest and other assets		640,403									628,716
Allowance for credit losses		(90,366	)								(91,211	)
Total assets	$	9,786,355								$	9,167,153

LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Demand deposits	$	4,232,497		$	6,354			0.60	%	$	3,913,639		$	4,086			0.42	%
Savings deposits		186,307			119			0.26			179,079			105			0.24
Time deposits		1,676,170			5,298			1.27			1,747,641			4,360			1.00
Total interest-bearing deposits		6,094,974			11,771			0.77			5,840,359			8,551			0.59
Other borrowings		375,681			2,896			3.09			378,919			2,842			3.02
Subordinated debentures		134,692			2,324			6.92			133,918			2,279			6.84
Total interest-bearing liabilities		6,605,347			16,991			1.03			6,353,196			13,672			0.87
Noninterest-bearing liabilities:
Demand deposits		1,845,447									1,655,761
Accrued interest and other liabilities		84,344									66,162
Total liabilities		8,535,138									8,075,119
Shareholders' equity		1,251,217									1,092,034
Total liabilities and shareholders' equity	$	9,786,355								$	9,167,153
Net interest income/net interest spread					84,207			3.42	%					70,300			3.10	%
Net yield on earning assets/net interest margin								3.71	%								3.32	%
Taxable equivalent adjustment:
Investment securities					(1,823	)								(1,051	)
Net interest income				$	82,384								$	69,249

Our net interest income, fully-tax equivalent (FTE), for the six months ended June 30, 2017 and 2016 was $160.8 million and $138.3 million, respectively, an increase of $22.5 million. Our net interest margin for the six months ended June 30, 2017 and 2016 was 3.58% and 3.32%, respectively, an increase of 26 basis points. The yield on our total loan portfolio increased 29 basis points to 4.54% for the six months ended June 30, 2017 compared to 4.25% for the six months ended June 30, 2016 due to an increase in the rate and volume of our originated portfolio and a decline in volume of our higher yielding ACI portfolio. The following table sets forth, on a tax equivalent basis, the components of our net interest income with the effect that the varying

levels of interest-earning assets and interest-bearing liabilities and the applicable rates have had on changes in net interest income for the six months ended June 30, 2017:

	Six Months Ended June 30,
	2017 vs. 2016
	Net Interest Income				Increase			Changes Due To⁽¹⁾
(In thousands)	2017		2016		(Decrease)			Rate			Volume
Increase (decrease) in:
Income from interest-earning assets:
Interest and fees on loans:
Originated and ANCI loans	$	153,773	$	129,336	$	24,437		$	11,973		$	12,464
ACI portfolio		17,466		20,100		(2,634	)		2,474			(5,108	)
Interest on securities:
Taxable		8,479		8,554		(75	)		33			(108	)
Tax-exempt ⁽²⁾		10,460		4,980		5,480			251			5,229
Interest on fed funds and short-term investments		1,113		974		139			308			(169	)
Interest on other investments		1,364		1,327		37			(18	)		55
Total interest income		192,655		165,271		27,384			15,021			12,363
Expense from interest-bearing liabilities:
Interest on demand deposits		11,886		8,364		3,522			2,713			809
Interest on savings deposits		231		202		29			20			9
Interest on time deposits		9,419		8,191		1,228			1,387			(159	)
Interest on other borrowings		5,698		5,691		7			(319	)		326
Interest on subordinated debentures		4,618		4,565		53			32			21
Total interest expense		31,852		27,013		4,839			3,833			1,006
Net interest income	$	160,803	$	138,258	$	22,545		$	11,188		$	11,357

Our total interest income (FTE) for the six months ended June 30, 2017 totaled $192.7 million compared to $165.3 million in the six months ended June 30, 2016. This increase is primarily the result of an increase in the volume and yield of our originated loans offset by declines in the volume and yield of our ACI portfolio and an increase in the volume of our investment portfolio. The yield on our originated loan portfolio reflects the increase in LIBOR rates in our loan portfolio. We also increased the level of our investments in tax-exempt securities which increased the interest income volume on our investment securities portfolio.

The following table presents a comparison of loan portfolio yield for the six months ended June 30, 2017 :

The yield on our ACI portfolio fluctuates due to the volume and timing of cash flows received or expected to be received. The yield on our ACI portfolio for the six months ended June 30, 2017 was 11.41% compared to 10.04% for the six months ended June 30, 2016. During the six months ended June 30, 2017, interest income on the ACI portfolio included $5.1 million in recovery income, compared to $3.4 million in the six months ended June 30, 2016. These amounts were realized on certain individual loans that were settled before expected, or where we received amounts above our estimates. Excluding these amounts, the yield on our ACI loans would have been 8.10% for the six months ended June 30, 2017 compared to 8.36% for the six months ended June 30, 2016. Our total loan yield, excluding these amounts, would have been 4.41% and 4.15% for the six months ended June 30, 2017 and 2016 , respectively.

Our interest expense for the six months ended June 30, 2017 and 2016 was $31.9 million and $27.0 million, respectively, an increase of $4.8 million. This increase is primarily related to the impact of higher market rates on our interest bearing demand

accounts and time deposits. Our cost of interest bearing deposits increased to 0.71% for the six months ended June 30, 2017 compared to 0.58% for the six months ended June 30, 2016. Our cost of borrowings was 4.22% and 4.37% for the six months ended June 30, 2017 and 2016, respectively. The decline reflects our purchase of senior debt, offset by increases in FHLB advances.

The following table presents, on a tax equivalent basis, for the six months ended June 30, 2017 and 2016, our average balance sheet and our average yields on assets and average costs of liabilities. Average yields are calculated by dividing income or expense by the average balance of the corresponding assets or liabilities. Average balances have been calculated on a daily basis, except for ACI loans, which is a monthly average.

	Six Months Ended June 30,
	2017									2016
	Average			Income/			Yield/			Average			Income/			Yield/
(In thousands)	Balance			Expense			Rate			Balance			Expense			Rate
ASSETS
Interest-earning assets:
Loans, net of unearned income⁽¹⁾
Originated and ANCI loans	$	7,292,054		$	153,773			4.25	%	$	6,668,977		$	129,336			3.90	%
ACI portfolio		308,807			17,466			11.41			402,487			20,100			10.04
Total loans		7,600,861			171,239			4.54			7,071,464			149,436			4.25
Investment securities
Taxable		705,371			8,479			2.42			713,689			8,554			2.41
Tax-exempt ⁽²⁾		406,799			10,460			5.19			202,187			4,980			4.95
Total investment securities		1,112,170			18,939			3.43			915,876			13,534			2.97
Federal funds sold and short-term investments		288,453			1,113			0.75			341,348			974			0.57
Other investments		49,061			1,364			5.61			46,965			1,327			5.68
Total interest-earning assets		9,050,545			192,655			4.29			8,375,653			165,271			3.97
Noninterest-earning assets:
Cash and due from banks		56,351									49,800
Premises and equipment		65,843									70,162
Accrued interest and other assets		642,391									633,191
Allowance for credit losses		(86,335	)								(86,399	)
Total assets	$	9,728,795								$	9,042,407

LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
Demand deposits	$	4,343,503		$	11,886			0.55	%	$	3,976,291		$	8,364			0.42	%
Savings deposits		184,289			231			0.25			177,006			202			0.23
Time deposits		1,603,201			9,419			1.18			1,635,154			8,191			1.01
Total interest-bearing deposits		6,130,993			21,536			0.71			5,788,451			16,757			0.58
Other borrowings		358,173			5,698			3.21			337,643			5,691			3.39
Subordinated debentures		134,600			4,618			6.92			133,813			4,565			6.86
Total interest-bearing liabilities		6,623,766			31,852			0.97			6,259,907			27,013			0.87
Noninterest-bearing liabilities:
Demand deposits		1,851,518									1,635,205
Accrued interest and other liabilities		82,007									66,621
Total liabilities		8,557,291									7,961,733
Shareholders' equity		1,171,504									1,080,674
Total liabilities and shareholders' equity	$	9,728,795								$	9,042,407
Net interest income/net interest spread					160,803			3.32	%					138,258			3.10	%
Net yield on earning assets/net interest margin								3.58	%								3.32	%
Taxable equivalent adjustment:
Investment securities					(3,661	)								(1,743	)
Net interest income				$	157,142								$	136,515

The provision for credit losses is based on management’s quarterly assessment of the adequacy of our ACL which, in turn, is based on such factors as the composition of our loan portfolio and its inherent risk characteristics, the level of nonperforming loans and net charge-offs, both current and historic, local economic and credit conditions, the direction of collateral values, and regulatory guidelines. The provision for credit losses is charged against earnings in order to maintain our allowance for credit losses, which reflects management’s best estimate of probable losses inherent in our loan portfolio at the balance sheet date. (See “—Allowance for Credit Losses”).

Under accounting standards for business combinations, acquired loans are recorded at fair value with no credit loss allowance on the date of acquisition. A provision for credit losses is recorded in periods after the date of acquisition for the emergence of new probable and estimable losses on ANCI loans. A provision for credit losses is recognized on our ACI loans after the date of acquisition based on the re-estimation of expected cash flows. See “—Asset Quality”.

The provision for credit losses totaled $6.7 million and $12.5 million for the three and six months ended June 30, 2017, compared to $14.5 million and $24.9 million for the three and six months ended June 30, 2016. The following is a summary of our provision for credit losses for the periods indicated presented by originated, ANCI and ACI portfolios:

	Three Months Ended June 30,						Six Months Ended June 30,
(In thousands)	2017			2016			2017			2016
Originated Loans
Commercial and industrial	$	3,884		$	13,183		$	9,088		$	23,835
Commercial real estate		2,428			324			2,753			1,708
Consumer		493			873			944			1,127
Small business		13			1,441			219			1,662
Total originated loans		6,818			15,821			13,004			28,332
ANCI Loans
Commercial and industrial		578			(138	)		608			(163	)
Commercial real estate		(40	)		63			(42	)		26
Consumer		(68	)		77			8			155
Small business		11			20			(155	)		(13	)
Total ANCI		481			22			419			5
ACI Loans
Commercial and industrial		(46	)		(174	)		(183	)		(2,140	)
Commercial real estate		203			(334	)		318			(113	)
Consumer		(755	)		(864	)		(1,071	)		(1,141	)
Small business		—			—			—			—
Total ACI		(598	)		(1,372	)		(936	)		(3,394	)
Total Loans
Commercial and industrial		4,416			12,871			9,513			21,532
Commercial real estate		2,591			53			3,029			1,621
Consumer		(330	)		86			(119	)		141
Small business		24			1,461			64			1,649
Total provision for credit losses	$	6,701		$	14,471		$	12,487		$	24,943

Our originated loan portfolio is categorized into specific risk segments that are subject to estimated loss rates according to their respective segment and risk rating. The primary driver of the originated ACL is the underlying credit quality of the loans, which have seen credit risk migration trends as the portfolio has become more seasoned and as our energy segments have experienced stress from lower oil and gas prices. We recognized $6.7 million and $12.5 million in provision during the three and six months ended June 30, 2017, respectively, which included $6.8 million and $13.0 million provision related to the originated portfolio. The $6.8 million and $13.0 million in originated loan provision for the three and six months ended June 30, 2017 is primarily attributable to loan growth, credit migration and qualitative factors within the originated General C&I and CRE

portfolios, specific impairments within our energy Exploration and Production credits and a $2.6 million charge-off in the Exploration and Production portfolio during the second quarter of 2017.

The $14.5 million and $24.9 million provision expense recorded for the three and six months ended June 30, 2016 included $15.8 million and $28.3 million on the originated portfolio which was primarily due to loan growth, credit migration in our energy-related credits and the charge-offs of approximately $12.2 million of a single credit in the healthcare segment and approximately $5.5 million in two energy related credits in the second quarter of 2016, partially offset by recoveries.

Noninterest income is a component of our revenue and is comprised primarily of income generated from the services we provide our customers.

Noninterest income totaled $23.0 million and $47.1 million for the three and six months ended June 30, 2017, compared to $23.1 million and $43.3 million for the three and six months ended June 30, 2016. The increase in our service fees and revenue is primarily attributable to investment advisory revenue, trust services income, service charges on deposits, and income from bank-owned life insurance.

The following table compares noninterest income for the three and six months ended June 30, 2017 and 2016:

	Three Months Ended June 30,								Six Months Ended June 30,
(In thousands)	2017			2016		% Change			2017			2016		% Change
Investment advisory revenue	$	5,061		$	4,653		8.8	%	$	9,977		$	9,257		7.8	%
Trust services revenue		4,584			3,971		15.4			9,815			8,041		22.1
Service charges on deposit accounts		3,784			3,270		15.7			7,599			6,624		14.7
Credit-related fees		2,741			2,506		9.4			5,488			5,180		5.9
Insurance revenue		1,828			1,953		(6.4	)		3,957			4,276		(7.5	)
Bankcard fees		1,862			1,777		4.8			3,674			3,506		4.8
Mortgage banking revenue		1,213			1,101		10.2			2,079			2,185		(4.9	)
Other service fees earned		1,071			816		31.3			2,043			1,466		39.4
Total service fees and revenue		22,144			20,047		10.5			44,632			40,535		10.1
Securities (losses) gains, net		(244	)		1,019	NM				(163	)		1,083	NM
Other		1,089			2,039	NM				2,625			1,633	NM
Total other noninterest income		845			3,058		(72.4	)		2,462			2,716		(9.4	)
Total noninterest income	$	22,989		$	23,105		(0.5	)%	$	47,094		$	43,251		8.9	%

Investment Advisory Revenue. Our investment advisory revenue is comprised largely of investment management and financial planning revenues generated through our subsidiary Linscomb & Williams, Inc. (“L&W”). The 8.8% and 7.8% increase in investment advisory revenue for the three and six months ended June 30, 2017, respectively, to $5.1 million and $10.0 million, respectively, was mostly due to growth in assets under management due to both new customer origination and market improvements.

Trust Services Revenue. We earn fees from our customers for trust services. For the three months ended June 30, 2017 and 2016, trust fees totaled $4.6 million and $4.0 million, respectively, an increase of $0.6 million, or 15.4%. For the six months ended June 30, 2017 and 2016, trust fees totaled $9.8 million and $8.0 million, respectively, an increase of $1.8 million, or 22.1%. The increase was primarily due to growth in trust assets under management and through customer expansion.

Service Charges on Deposit Accounts. We earn fees from our customers for deposit-related services. For the three months ended June 30, 2017 and 2016, service charges and fees totaled $3.8 million and $3.3 million, which is an increase of 15.7%. For the six months ended June 30, 2017 and 2016, service charges and fees totaled $7.6 million and $6.6 million, which is an increase of 14.7%. The increase was largely due to an increase in account analysis fees.

Credit-Related Fees. Our credit-related fees primarily include fees related to credit advisory services, unfunded commitment fees and letter of credit fees. For the three and six months ended June 30, 2017, credit-related fees increased 9.4% and 5.9%,

respectively, to $2.7 million and $5.5 million, respectively, compared to $2.5 million and $5.2 million for the three and six months ended June 30, 2016, primarily as a result of an increase in unfunded commitment, capital market and letter of credit fees.

Insurance Revenue. Our insurance revenue is comprised primarily of insurance commissions generated through our wholly-owned subsidiary, Cadence Insurance. Our insurance revenue was $1.8 million and $4.0 million for the three and six months ended June 30, 2017 compared to $2.0 million and $4.3 million for the same periods in 2016, a decrease of 6.4% and 7.5%, respectively, primarily as a result of lower contingent commissions from insurance carriers received in the first quarter of each year.

Bankcard Fees. Our bankcard fees are comprised primarily of automated teller machine (“ATM”) network fees and debit card revenue. Our bankcard fees of $1.9 million and $3.7 million for the three and six months ended June 30, 2017, respectively, increased 4.8% and 4.8%, respectively, compared to same periods in 2016, primarily due to increased volume and customer expansion.

Mortgage Banking Revenue. Our mortgage banking revenue is comprised primarily of mortgage loan sales and servicing income. The increase of $0.1 million, or 10.2%, for the three months ended June 30, 2017 was mostly due to higher service release premiums, offset by decreased volumes. The decline of $0.1 million, or 4.9%, for the six months ended June 30, 2017 was mostly due to lower gains related to decreased volumes.

Other Service Fees. Our other service fees primarily include retail services fees. For the three and six months ended June 30, 2017, other service fees totaled $1.1 million and $2.0 million, respectively. The increase over the three and six months ended June 30, 2016 was largely due to an increase in foreign exchange income.

Other Income. The decline in other income during the three-month period ended June 30, 2017 compared to 2016 is related to the effects of hedge accounting that occurred in 2016. The increase in other income for the six months ended June 30, 2017 compared to 2016 is primarily related to income on bank-owned life insurance and the increase in equity investments in certain limited partnership investments, partially offset by a decline in the estimated fair value of a net profits interests in oil and gas reserves due to lower forecasted production.

The following table compares noninterest expense for the three and six months ended June 30, 2017 and 2016:

	Three Months Ended June 30,							Six Months Ended June 30,
(In thousands)	2017		2016		% Change			2017		2016		% Change
Noninterest Expenses
Salaries and employee benefits	$	34,682	$	33,033		5.0	%	$	68,949	$	65,843		4.7	%
Premises and equipment		7,180		6,626		8.4			13,873		13,377		3.7
Intangible asset amortization		1,190		1,659		(28.3	)		2,431		3,370		(27.9	)
Net cost of operation of other real estate owned		427		107		299.1			723		790		(8.5	)
Data processing		1,702		1,594		6.8			3,398		2,983		13.9
Special asset expenses		469		392		19.6			610		352		73.3
Consulting and professional fees		1,502		1,092		37.5			2,641		2,401		10.0
Loan related expenses		757		744		1.7			1,037		1,181		(12.2	)
FDIC insurance		954		2,292		(58.4	)		2,447		3,799		(35.6	)
Communications		675		721		(6.4	)		1,330		1,379		(3.6	)
Advertising and public relations		499		338		47.6			844		722		16.9
Legal expenses		508		978		(48.1	)		940		1,722		(45.4	)
Branch closure expenses		47		75		(37.3	)		94		139		(32.4	)
Other		5,542		6,217		(10.9	)		11,138		11,852		(6.0	)
Total	$	56,134	$	55,868		0.5	%	$	110,455	$	109,910		0.5	%

Noninterest expense was $56.1 million and $110.5 million for the three and six months ended June 30, 2017, respectively, compared to $55.9 million and $109.9 million for the three and six months ended June 30, 2016, respectively. The slight increase

of $0.3 million and $0.5 million, or 0.5% and 0.5%, respectively, for the three and six months ended June 30, 2017, compared to the same periods in 2016 reflects our broad efforts to manage expenses.

Salaries and Employee Benefits. Salaries and employee benefit costs are the largest component of noninterest expense and include employee payroll expense, incentive compensation, health insurance, benefit plans and payroll taxes. Salaries and employee benefits increased $1.6 million and $3.1 million, or 5.0% and 4.7%, for the three and six months ended June 30, 2017, respectively, compared to 2016, largely due to short and long-term incentive costs as salary expense remained relatively level. The increase in long-term incentive costs is related to a higher corporate valuation and the short-term incentive is related to business growth. The following table provides additional detail of our salaries and employee benefits expense for the periods presented:

Premises and Equipment. Rent, depreciation and maintenance costs comprise the majority of premises and equipment expenses, which increased $554 thousand and $496 thousand, or 8.4% and 3.7%, for the three and six months ended June 30, 2017, respectively, compared to the three and six months ended June 30, 2016. This increase includes the increase in certain maintenance costs and the effect of a one-time lease termination credit recognized in 2016.

Intangible Asset Amortization. In conjunction with our previous acquisitions, we recorded core deposit and other customer intangible assets of approximately $66.0 million, which are being amortized on an accelerated basis over a seven- to ten-year period.

Net Cost of Operation of Other Real Estate Owned. Net cost of operation of other real estate owned primarily represents our gains (losses) on other real estate owned resulting from the sale or write-down of foreclosed property. During the three and six months ended June 30, 2017, we had net losses (gains) from the sale/write-down of foreclosed properties totaling $175 thousand and $292 thousand, respectively, compared to $(202) thousand and $486 thousand for the three and six months ended June 30, 2016, respectively. Our other costs of operations continue to decline as the volume and complexity of these properties diminishes. See “—Nonperforming Assets” for detail of foreclosed properties as of June 30, 2017.

Data Processing. Data processing expense for our operating systems totaled $1.7 million and $3.4 million for the three and six months ended June 30, 2017, respectively, compared to $1.6 million and $3.0 million for the three and six months ended June 30, 2016, an increase of 6.8% and 13.9%, respectively. The increases reflect growth in our business as well as implementations and enhancement of various technologies.

Special Asset Expenses. Special asset expenses include costs related to the management and resolution of our loan portfolio. For the three and six months ended June 30, 2017, special asset expenses were $469 thousand and $610 thousand, respectively. Our special asset expenses have been steadily declining and while these costs can fluctuate between periods, we expect these expenses to remain low in the foreseeable future.

Consulting and Professional Services. Consulting and professional services expenses include consulting, audit and professional fees paid to external parties. For the three and six months ended June 30, 2017, our consulting and professional services increased $410 thousand and $240 thousand, respectively, or 37.5% and 10.0%, respectively, compared to the three and six months ended June 30, 2016 as a result of the engagement of outside consultants related to regulatory compliance and additional costs of being a public company.

Loan-Related Expenses. Loan-related expenses include costs related to maintaining our various loan portfolios. For the three and six months ended June 30, 2017, our loan-related expenses totaled $0.8 million and $1.0 million, respectively, compared to $0.7 million and $1.2 million for the three and six months ended June 30, 2016, respectively. The increase is related to insurance costs on serviced loans and may fluctuate between periods.

FDIC Insurance. We are subject to risk-based assessment fees by the FDIC for deposit insurance. For the three and six months ended June 30, 2017 and 2016, FDIC insurance expense declined due to the increase in our levels of capital, and the reduction in our nonperformimg loans and brokered deposits .

Communications. Communications expenses include expenses related to both voice and data communications. During the three and six months ended June 30, 2017, our communications expenses declined slightly to $0.7 million and $1.3 million from $0.7 million and $1.4 million for the three and six months ended June 30, 2016, led by favorable contracting terms.

Advertising and Public Relations. Advertising and public relations expenses for the three and six months ended June 30, 2017 increased $161 thousand and $122 thousand, respectively, or 47.6% and 16.9%, respectively. The increases were driven by overall business growth as well as our initial public offering in April 2017. Our advertising and public relations expenses are seasonal and can fluctuate between quarters.

Legal Expenses. Our legal expenses include fees paid to outside counsel related to general legal matters as well as loan resolutions. For the three and six months ended June 30, 2017, our legal fees decreased $470 thousand and $782 thousand, respectively, or 48.1% and 45.4%, respectively, compared to the three and six months ended June 30, 2016, primarily due to reduced general litigation expenses.

Branch Closure Expenses. During 2017 and 2016, we incurred certain trailing costs related to branch closures.

Other. These expenses include costs for insurance, supplies, education and training, and other operational expenses. For the three and six months ended June 30, 2017, other noninterest expenses declined 10.9% and 6.0% compared to the three and six months ended June 30, 2016, respectively.

Income tax expense for the three and six months ended June 30, 2017 was $13.6 million and $26.2 million, respectively, compared to $7.2 million and $14.7 million for the three and six months ended June 30, 2016. The effective tax rate was 31.9% and 32.2% for the three and six months ended June 30, 2017, respectively, compared to 32.6% and 32.8% for the three and six months ended June 30, 2016. The decrease in the effective tax rate for the three and six months ended June 30, 2017 compared to the three and six months ended June 30, 2016 was primarily driven by an increase in tax-exempt interest income.

Our effective tax rate is impacted by pre-tax income, tax-exempt income, and the increase in the cash surrender value of bank-owned life insurance. The effective tax rate is also affected by discrete items that may occur in any given period, but are not consistent from period-to-period, which may impact the comparability of the effective tax rate between periods.

The following table summarizes selected components of our balance sheet as of the periods indicated.

	As of				Average Balance
(In thousands)	June 30, 2017		December 31, 2016		Three Months Ended June 30, 2017		Six Months Ended June 30, 2017		Year Ended December 31, 2016
Total assets	$	9,811,557	$	9,530,888	$	9,786,355	$	9,728,795	$	9,271,629
Total interest-earning assets		9,122,860		8,832,706		9,111,706		9,050,545		8,602,985
Total interest-bearing liabilities		6,571,839		6,507,506		6,605,347		6,623,766		6,419,582
Short-term and other investments		276,122		242,401		362,351		337,514		415,033
Securities available for sale		1,079,935		1,139,347		1,099,307		1,112,170		1,001,317
Loans, net of unearned income		7,716,621		7,432,711		7,650,048		7,600,861		7,186,635
Goodwill		317,817		317,817		317,817		317,817		317,817
Noninterest bearing deposits		1,857,809		1,840,955		1,845,447		1,851,518		1,688,405
Interest bearing deposits		6,072,574		6,175,794		6,094,974		6,130,993		5,966,897
Borrowings and subordinated debentures		499,266		331,712		510,373		492,773		452,685
Shareholders' equity		1,304,054		1,080,498		1,251,217		1,171,504		1,093,604

Our available-for-sale securities portfolio decreased $59.4 million, or 5.2%, to $1.08 billion at June 30, 2017, from $1.14 billion at December 31, 2016. At June 30, 2017, our investment security portfolio was 11.8% of our total interest-earning assets and produced an average taxable equivalent yield of 3.42% and 3.43% for the three and six months ended June 30, 2017.

The following table sets forth the fair value of the available-for-sale securities at the dates indicated:

	June 30,		December 31,		Percent Change
(In thousands)	2017		2016		2017 vs 2016
Investment securities available for sale:
U.S. Treasury securities	$	97,598	$	96,785		0.8	%
U.S. Agency securities		88,350		97,528		(9.4	)
Mortgage-backed securities issued or guaranteed by U.S. agencies (MBS):
Residential pass-through:
Guaranteed by GNMA		119,835		153,153		(21.8	)
Issued by FNMA and FHLMC		252,129		265,328		(5.0	)
Other residential mortgage-backed securities		44,484		47,561		(6.5	)
Commercial mortgage-backed securities		61,369		62,613		(2.0	)
Total MBS		477,817		528,655		(9.6	)
State, county and municipal securities		410,423		410,812		(0.1	)
Other securities		5,747		5,567		3.2
Total investment securities available for sale	$	1,079,935	$	1,139,347		(5.2	)%

The following table summarizes the investment securities with unrealized losses at June 30, 2017 by aggregated major security type and length of time in a continuous unrealized loss position:

	June 30, 2017
	Less than 12 Months				More than 12 Months				Total
(In thousands)	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Temporarily Impaired
U.S. Treasury securities	$	97,598	$	3,058	$	—	$	—	$	97,598	$	3,058
U.S. Agency securities		3,669		7		32,088		118		35,757		125
Mortgage-backed securities:
Residential pass-through		224,611		3,148		15,076		134		239,687		3,282
Other residential mortgage-backed securities		3,092		13		16,359		765		19,451		778
Commercial mortgage-backed securities		61,369		3,781		—		—		61,369		3,781
Total MBS		289,072		6,942		31,435		899		320,507		7,841
State, county and municipal securities		268,162		14,756		1,125		63		269,287		14,819
Equity securities		—		—		4,285		138		4,285		138
Total temporarily impaired securities	$	658,501	$	24,763	$	68,933	$	1,218	$	727,434	$	25,981

None of the unrealized losses relate to the marketability of the securities or the issuer’s ability to honor redemption of the obligations. We have adequate liquidity, no plans to sell securities and the ability and intent to hold securities to maturity resulting in full recovery of the indicated impairment. Accordingly, the unrealized losses on these securities have been determined to be temporary.

We originate commercial and industrial loans, commercial real estate loans (including construction loans), residential mortgages and other consumer loans. A strong emphasis is placed on the commercial portfolio, consisting of commercial and industrial and commercial real estate loan types, with over 76% of the portfolio residing in these loan types as of June 30, 2017. Our commercial portfolio is further diversified by industry concentration and includes loans to clients in specialized industries, including restaurant, healthcare and technology. Additional commercial lending activities include energy, construction, general corporate loans, business banking and community banking loans. Mortgage, wealth management and retail make up the majority of the consumer portfolio.

The following tables present total loans outstanding by portfolio component and class of financing receivable as of June 30, 2017 and December 31, 2016. The tables below are presented using a risk-based perspective of the loan portfolio. Total loan balances include ANCI loans, originated loans and ACI loans combined. Subsequent tables present the ANCI, ACI and originated loans separately.

	Total Loans						Change
(In thousands)	June 30, 2017			December 31, 2016			Q2 2017 vs YE 2016			Percent
Commercial and Industrial
General C&I	$	2,476,493		$	2,416,665		$	59,828			2.48		%
Energy sector		902,265			939,369			(37,104	)		(3.95	)
Restaurant industry		985,218			864,085			121,133			14.02
Healthcare		387,832			445,103			(57,271	)		(12.87	)
Total commercial and industrial		4,751,808			4,665,222			86,586			1.86
Commercial Real Estate
Income producing		1,104,283			1,001,703			102,580			10.24
Land and development		46,005			71,004			(24,999	)		(35.21	)
Total commercial real estate		1,150,288			1,072,707			77,581			7.23
Consumer
Residential real estate		1,563,693			1,457,170			106,523			7.31
Other		67,499			68,689			(1,190	)		(1.73	)
Total consumer		1,631,192			1,525,859			105,333			6.90
Small Business Lending		207,204			193,641			13,563			7.00
Total (Gross of Unearned Discount and Fees)		7,740,492			7,457,429			283,063			3.80
Unearned Discount and Fees		(23,871	)		(24,718	)		847			(3.43	)
Total (Net of Unearned Discount and Fees)	$	7,716,621		$	7,432,711		$	283,910			3.82		%

	Total Originated loans						Change
(In thousands)	June 30, 2017			December 31, 2016			Q2 2017 vs YE 2016			Percent
Commercial and Industrial
General C&I	$	2,398,255		$	2,337,364		$	60,891			2.61		%
Energy sector		902,265			939,369			(37,104	)		(3.95	)
Restaurant industry		985,218			864,085			121,133			14.02
Healthcare		378,650			434,663			(56,013	)		(12.89	)
Total commercial and industrial		4,664,388			4,575,481			88,907			1.94
Commercial Real Estate
Income producing		999,245			886,676			112,569			12.70
Land and development		43,846			67,555			(23,709	)		(35.10	)
Total commercial real estate		1,043,091			954,231			88,860			9.31
Consumer
Residential real estate		1,272,900			1,125,048			147,852			13.14
Other		63,175			59,819			3,356			5.61
Total consumer		1,336,075			1,184,867			151,208			12.76
Small Business Lending		196,922			184,483			12,439			6.74
Total (Gross of Unearned Discount and Fees)		7,240,476			6,899,062			341,414			4.95
Unearned Discount and Fees		(20,137	)		(20,417	)		280			(1.37	)
Total (Net of Unearned Discount and Fees)	$	7,220,339		$	6,878,645		$	341,694			4.97		%
Percent to total loans		93.57	%		92.55	%

	Total ANCI loans						Change
(In thousands)	June 30, 2017			December 31, 2016			Q2 2017 vs YE 2016			Percent
Commercial and Industrial
General C&I	$	49,880		$	47,592		$	2,288			4.81		%
Energy sector		—			—			—			—
Restaurant industry		—			—			—			—
Healthcare		2,909			4,102			(1,193	)		(29.08	)
Total commercial and industrial		52,789			51,694			1,095			2.12
Commercial Real Estate
Income producing		15,129			18,354			(3,225	)		(17.57	)
Land and development		1,600			1,952			(352	)		(18.03	)
Total commercial real estate		16,729			20,306			(3,577	)		(17.62	)
Consumer
Residential real estate		123,977			145,747			(21,770	)		(14.94	)
Other		2,941			7,180			(4,239	)		(59.04	)
Total consumer		126,918			152,927			(26,009	)		(17.01	)
Small Business Lending		10,282			9,158			1,124			12.27
Total (Gross of Unearned Discount and Fees)		206,718			234,085			(27,367	)		(11.69	)
Unearned Discount and Fees		(3,734	)		(4,301	)		567			(13.18	)
Total (Net of Unearned Discount and Fees)	$	202,984		$	229,784		$	(26,800	)		(11.66	)	%
Percent to total loans		2.63	%		3.09	%

	Total ACI loans						Change
(In thousands)	June 30, 2017			December 31, 2016			Q2 2017 vs YE 2016			Percent
Commercial and Industrial
General C&I	$	28,358		$	31,709		$	(3,351	)		(10.57	)	%
Energy sector		—			—			—			—
Restaurant industry		—			—			—			—
Healthcare		6,273			6,338			(65	)		(1.03	)
Total commercial and industrial		34,631			38,047			(3,416	)		(8.98	)
Commercial Real Estate
Income producing		89,909			96,673			(6,764	)		(7.00	)
Land and development		559			1,497			(938	)		(62.66	)
Total commercial real estate		90,468			98,170			(7,702	)		(7.85	)
Consumer
Residential real estate		166,816			186,375			(19,559	)		(10.49	)
Other		1,383			1,690			(307	)		(18.17	)
Total consumer		168,199			188,065			(19,866	)		(10.56	)
Small Business Lending		—			—			—			—
Total (Gross of Unearned Discount and Fees)		293,298			324,282			(30,984	)		(9.55	)
Unearned Discount and Fees		—			—			—			—
Total (Net of Unearned Discount and Fees)	$	293,298		$	324,282		$	(30,984	)		(9.55	)	%
Percent to total loans		3.80	%		4.36	%

Commercial and Industrial. Commercial and Industrial (“C&I”) loans increased by $86.6 million, or 1.9%, since December 31, 2016 and represented 61.4% of our total loan portfolio at June 30, 2017, compared to 62.6% of total loans at December 31, 2016. Approximately half of the originated commercial loan portfolio (combining C&I and CRE) consists of shared national credits, which vary by industry and geography. These transactions are generally relationship-based and have the potential for ancillary business. As of June 30, 2017, 91% of the shared national credit portfolio, or $2.6 billion, resides in the commercial and industrial segment of the loan portfolio, on a loan balance basis. As of June 30, 2017, the largest category of shared national credits is the Restaurant industry, representing 25% of the shared national credits portfolio, or $722 million as of June 30, 2017 compared to 24% of the shared national credits portfolio, or $663 million as of December 31, 2016. The next largest category of shared national credits is the Energy sector at 25% of all shared national credits, or $714 million, compared to 29% and $782 million as of December 31, 2016. The remaining amount of the shared national credit portfolio can be found in the services, healthcare and other categories and, to a lesser amount, the CRE segment of the loan portfolio. Additionally, all shared national credits are part of the originated loan portfolio.

Our C&I loan growth reflects our strategic focus on this broad loan category. We seek further diversification within C&I loans by industry to mitigate concentration risk in any one industry and/or risk type. Our specialized industries are significant drivers of the growth and diversification of this portion of our loan portfolio. Energy and specialized industries lending have experienced teams with extensive knowledge on their particular industry, allowing for quality underwriting and relationship-based lending.

General C&I. As of June 30, 2017 our general C&I category included the following types of loans: finance and insurance, professional services, commodities excluding energy, manufacturing, real estate, transportation, media and telecom and other. Generally C&I loans typically provide working capital, equipment financing and financing for expansion and are generally secured by assignments of corporate assets including accounts receivable, inventory and/or equipment.

Energy. Energy lending is an important part of our business and our energy team is comprised of experienced lenders with significant product expertise and long-standing relationships. Additionally, energy production and energy related industries are substantial contributors to the economies in the Houston metropolitan area and the state of Texas. As of June 30, 2017, energy loans outstanding totaled $902 million, or 11.7% of total loans compared to $939 million, or 12.6% as of December 31, 2016. We strive for a rigorous and thorough approach to energy underwriting and credit monitoring. As a result of the stress on oil and gas prices during the periods reported we have experienced downgrades, increased loan provisions and certain losses in the energy sector loans. As of June 30, 2017 we had an allowance for credit losses of $28.4 million for our energy loans, or 3.15% of the energy portfolio compared to $24.6 million, or 2.61% as of December 31, 2016. (See “—Provision for Credit Losses” and “—Allowance for Credit Losses”). As of June 30, 2017, we had $93 million of nonperforming energy credits, of which more than 90% were current with their contractual terms compared to $113.4 million of nonperforming energy credits as of December 31, 2016.

In addition, 24.3% of the energy portfolio was criticized or classified as of June 30, 2017. We recorded recoveries of $519 thousand and charge-offs of $2.6 million on our energy portfolio during the six months ended June 30, 2017 . As presented in the following table our energy lending business is comprised of three areas: Exploration and Production (“E&P”), Midstream and Energy Services:

	Energy Sector						June 30, 2017
(In thousands)	June 30, 2017			December 31, 2016			Unfunded Commitments		Criticized/ Classified
Outstanding Balance
E&P	$	322,464		$	371,870		$	105,451	$	144,305
Midstream		493,108			472,053			302,664		25,595
Energy Services		86,693			95,446			55,127		48,889
Total energy sector	$	902,265		$	939,369		$	463,242	$	218,789
Percent to total loans		11.70	%		12.60	%
Allocated ACL
E&P	$	22,167		$	13,018
Midstream		2,172			5,878
Energy Services		4,066			5,657
Total allocated ACL	$	28,405		$	24,553
ACL as a Percentage of Outstanding Balances
E&P		6.87	%		3.50	%
Midstream		0.44			1.25
Energy Services		4.69			5.93
Total percentage		3.15	%		2.61	%

E&P loans outstanding totaled $322.5 million and comprised approximately 36% of outstanding energy loans as of June 30, 2017 compared to $371.9 million, or 40% of outstanding energy loans as of December 31, 2016. E&P customers are primarily businesses that derive a majority of their revenues from the sale of oil and gas and whose credit needs require technical evaluation of oil and gas reserves. Emphasis for E&P is on high quality, independent producers with proven track records. Our E&P credit underwriting includes a combination of well-by-well analyses, frequent updates to our pricing decks and engaging energy engineers to actively monitor the portfolio and provide credit redeterminations, at a minimum, every six months. At least quarterly, and more frequently during periods of higher commodity price volatility, we adjust the base and sensitivity price decks on which we value our clients’ oil and gas reserves. Generally, we seek to follow the shape of the NYMEX strips for oil and natural gas, but at a discount to the strip. In periods of higher commodity prices, our discount from the strip is higher whereas in lower price periods our discount is lower. The price decks utilized in our engineering analysis are approved by our senior credit risk management committee. Borrowing base redeterminations occur every spring and fall, with the spring 2017 redetermination completed prior to the end of the second quarter.

Midstream loans outstanding totaled $493.1 million and comprised approximately 55% of outstanding energy loans as of June 30, 2017 compared to $472.1 million, or approximately 50% of outstanding energy loans as of December 31, 2016. Midstream lending is generally to customers who handle the gathering, treating and processing, storage or transportation of oil and gas. These customers’ businesses are generally less price sensitive than other energy segments given the nature of their fee-based revenue streams. Underwriting guidelines for the Midstream portfolio generally require a first lien on all assets as collateral.

Energy Services loans outstanding totaled $86.7 million and comprised approximately 10% of outstanding energy as of June 30, 2017 compared to $95.4 million, or approximately 10% of outstanding energy loans, as of December 31, 2016. Energy Services lending targets oilfield service companies that provide equipment and services used in the exploration for and extraction of oil and natural gas. Customers consist of a wide variety of businesses, including production equipment manufacturers, chemical sales, water transfer, rig equipment and other early and late stage services companies. The Company expects that additions to the Energy Services portfolio in the current environment would be on a limited basis, with any new loans primarily issued for short-term working capital facilities.

Specialized lending. The following table includes our specialized lending portfolio as of the dates presented:

Restaurant industry and healthcare are the largest components of our specialized industries. For these industries we focus on larger corporate clients, who are typically well-known within the industry. The client coverage for both of these components is national in scope, given the size and capital needs of the majority of the clients. Additionally, in the restaurant sector we focus on major franchisees and the operating companies of “branded” restaurant concepts. Our healthcare portfolio focuses on middle market healthcare providers with diversified payer mix, while our technology portfolio focuses on the technology sub-segments of software and services, network and communications infrastructure, and internet and mobility applications. Given these customer profiles, we frequently participate in such credits with two or more banks through syndication.

Commercial Real Estate. Commercial real estate (“CRE”) loans increased by $77.6 million, or 7.2%, since December 31, 2016. CRE loans represented 14.9% of our total loan portfolio as of June 30, 2017, compared to 14.4% of total loans as of December 31, 2016. Income Producing CRE includes non-owner occupied loans secured by commercial real estate, regardless of the phase of the loan (construction versus completed). Commercial construction loans are primarily included in Income Producing CRE. Additionally, all real estate investment trust and income producing loans are included in the Income Producing CRE segment. All owner occupied CRE loans reside in the various C&I segments in which the underlying risk exists. Our CRE lending team is a group of experienced relationship managers focusing on construction and income producing property lending which generally have property or sponsors located in our geographic footprint. CRE loans are secured by a variety of property types, including multi-family dwellings, office buildings, industrial properties and retail facilities.

Consumer. Consumer loans increased by $105.3 million, or 6.9%, from December 31, 2016 to June 30, 2017. Consumer loans represented 21.1% of total loans at June 30, 2017, compared to 20.5% of total loans at December 31, 2016. We originate residential real estate mortgages that are held for investment as well as held for sale in the secondary market. Approximately 18% of the consumer portfolio relates to acquired portfolios compared to 22% as of December 31, 2016. Our originated consumer loan portfolio totaled $1.3 billion as of June 30, 2017, an increase of $151.2 million, or 12.8% from December 31, 2016.

Small Business. Small Business loans increased by $13.6 million, or 7.0% from December 31, 2016 to June 30, 2017. Small business loans represented 2.7% of the total loan portfolio at June 30, 2017, compared to 2.6% of total loans at December 31, 2016. The small business category is defined as all commercial loans with a transactional exposure of $1.5 million or less and relationship exposure of $2.0 million or less.

Concentrations of Credit. Our concentrations of credit are closely and consistently monitored by the Company. Individual concentration limits are assessed and established, as needed, on a quarterly basis and measured as a percentage of risk-based capital. All concentrations greater than 25% of risk-based capital require a concentration limit, which is monitored and reported to the board of directors on at least a quarterly basis. In addition to the loans categorized in the loan portfolio section, we manage concentration limits for leveraged loans, technology loans, specialty chemical, and non-specialized enterprise value loans.

We evaluate the appropriateness of our underwriting standards in response to changes in national and regional economic conditions, including energy prices, interest rates, real estate values, and employment levels. Underwriting standards and credit monitoring activities are assessed and enhanced in response to changes in these conditions.

We focus on asset quality strength through robust underwriting, proactive monitoring and reporting of the loan portfolio and collaboration between the lines of business, credit administration and risk management.

Credit risk is governed and reported up to the board of directors primarily through our senior credit risk management committee. The senior credit risk management committee reviews credit portfolio management information such as problem loans,

delinquencies, concentrations of credit, asset quality trends, portfolio analysis, policy updates and changes, and other relevant information. Further, both senior loan committee and credit transition committee, the primary channels for credit approvals, report up through senior credit risk management committee. The senior loan committee generally approves all loans with relationship exposure greater than $5 million. Dual signature authority is utilized for loan approvals below the $5 million threshold. Additionally, the credit transition committee manages all material credit actions for classified credits greater than $5 million. Our board of directors receives information concerning asset quality measurements and trends on at least a quarterly basis if not more frequently. While we continue to proactively monitor the loan portfolio, external factors, such as an economic downturn, can lead to negative consequences such as lowered earnings and unemployment leading to the inability to make loan payments.

Credit policies have been established for each type of lending activity in which we engage, with a particular focus given to the commercial side of the Bank. Polices are evaluated and updated as needed based on changes in guidance and regulations as well as business needs of the Bank.

Each loan’s creditworthiness is assessed and assigned a risk rating, based on both the borrower strength as well as the collateral protection of the loan. Each risk rating takes into account the probability of default as well as loss given default. Risk rating accuracy and reporting are critical tools for monitoring the portfolio as well as determining the allowance for credit losses. Assigned risk ratings are periodically reviewed for accuracy and adjusted as appropriate for all relationships greater than $2.5 million.

Select asset quality metrics presented below distinguish between the originated, ANCI and ACI portfolios.

Nonperforming Assets. Nonperforming assets (“NPAs”) primarily consist of nonperforming loans and property acquired through foreclosures or repossession (which we refer to as other real estate owned or “OREO”). The following tables present nonperforming assets and additional asset quality data for the dates indicated:

	As of June 30, 2017
(Recorded Investment in thousands)	Originated			ANCI			ACI			Total
Nonperforming loans ("NPLs"):
Commercial and industrial	$	100,062		$	64			—		$	100,126
Commercial real estate		—			311			225			536
Consumer		1,081			2,435			—			3,516
Small business		237			550			—			787
Total NPLs		101,380			3,360			225			104,965
Foreclosed OREO and other NPAs		16,432			151			19,824			36,407
Total nonperforming assets ("NPAs")	$	117,812		$	3,511		$	20,049		$	141,372
NPLs as a percentage of total loans		1.31	%		0.04	%		0.00	%		1.36	%
NPLs as a percentage of portfolio		1.40	%		1.66	%		0.08	%
NPAs as a percentage of loans plus OREO/other NPAs		1.52	%		0.05	%		0.26	%		1.82	%
NPAs as a percentage of portfolio plus OREO/other NPAs		1.63	%		1.73	%		6.40	%
NPAs as a percentage of total assets		1.20	%		0.04	%		0.20	%		1.44	%
Accruing 90 days or more past due	$	51		$	245		$	18,025		$	18,321

	As of December 31, 2016
(Recorded Investment in thousands)	Originated			ANCI			ACI			Total
Nonperforming loans ("NPLs"):
Commercial and industrial	$	120,473		$	125		$	1,818		$	122,416
Commercial real estate		—			341			1,845			2,186
Consumer		798			2,732			—			3,530
Small business		132			673			—			805
Total NPLs		121,403			3,871			3,663			128,937
Foreclosed OREO and other NPAs		19,425			127			17,679			37,231
Total nonperforming assets ("NPAs")	$	140,828		$	3,998		$	21,342		$	166,168
NPLs as a percentage of total loans		1.63	%		0.05	%		0.05	%		1.73	%
NPLs as a percentage of portfolio		1.76	%		1.68	%		1.13	%
NPAs as a percentage of loans plus OREO/other NPAs		1.89	%		0.05	%		0.29	%		2.22	%
NPAs as a percentage of portfolio plus OREO/other NPAs		2.04	%		1.74	%		6.24	%
NPAs as a percentage of total assets		1.48	%		0.04	%		0.22	%		1.74	%
Accruing 90 days or more past due	$	331		$	255		$	18,364		$	18,950

Nonperforming Loans. Commercial loans, including small business loans, are generally placed on nonaccrual status when principal or interest is past due 90 days or more unless the loan is well secured and in the process of collection, or when the loan is specifically determined to be impaired. When a commercial loan is placed on nonaccrual status, interest accrued but not received is generally reversed against interest income.

Consumer loans, including residential first and second lien loans secured by real estate, are generally placed on nonaccrual status when they are 120 or more days past due. When a consumer loan is placed on nonaccrual status, interest accrued but not received is generally reversed against interest income.

Generally, cash receipts on nonperforming loans are used to reduce principal rather than recorded as interest income. Past due status is determined based upon contractual terms. A nonaccrual loan may be returned to accrual status when repayment is reasonably assured and there has been demonstrated performance under the terms of the loan or, if applicable, under the terms of the restructured loan. For the three and six months ended June 30, 2017, approximately $2.0 million and $4.8 million, respectively, of contractual interest accrued on nonperforming loans was not recognized in earnings; however, approximately $1.0 million and $1.2 million, respectively, of contractual interest paid was recognized on the cash basis.

Our nonperforming loans have decreased to 1.36% of our loan portfolio as of June 30, 2017 compared to 1.73% of our loan portfolio as of December 31, 2016, with the decrease primarily due to energy credits within our originated portfolio. As of June 30, 2017, $93.0 million, or 88.6%, of our nonperforming loans were in the energy portfolio, of which more than 90% were current under their contractual terms. (see “Potential Problem Loans” below).

During early 2016, banking regulators revised their definition of nonaccrual for E&P loans as it relates to leverage, including second-lien debt, in which we do not participate. As a result it has affected the nonaccrual status of certain loans in that portfolio. The following table includes our originated nonperforming loans and assets for the periods presented.

Other Real Estate Owned. Other real estate owned (“OREO”) consists of properties acquired through foreclosure and unutilized bank-owned properties. These properties, as held for sale properties, are initially recorded at fair value, less estimated costs to sell, on the date of foreclosure (establishing a new cost basis for the property). Subsequent to the foreclosure date the OREO is maintained at the lower of cost or fair value. Any write-down to fair value required at the time of foreclosure is charged to the allowance for credit losses. Subsequent gains or losses on other real estate owned resulting from either the sale of the property or additional valuation allowances, are reported in other noninterest expense.

The balance of foreclosed OREO was $20.7 million as of June 30, 2017 compared to $18.9 million as of December 31, 2016, with 99.1% related to foreclosures resulting from our ACI loan portfolio. Approximately 27.5% of our foreclosed OREO, or $5.5 million, is comprised of single-family residential properties located in Alabama and Florida. OREO also included a $6.8 million tract of undeveloped timber land in Florida and a $1.2 million commercial office building in Florida we foreclosed in the second quarter of 2017. As of June 30, 2017 and December 31, 2016, there had been no additions to OREO resulting from foreclosure or repossession from a shared national credit. However, we did receive during the second and fourth quarters of 2016, $19.1 million in net profits interests (“NPIs”) in certain oil and gas reserves related to energy credit bankruptcies related to two energy portfolio shared national credits that were charged-off in 2016. We recorded the NPIs at estimated fair value using a discounted cash flow analysis applied to the expected cash flows from the producing developed wells. These NPIs are considered financial instruments and recorded at fair value and are subject to the volatility of oil and gas prices and other operational factors outside of our control. The balance of the NPIs was $16.4 million as of June 30, 2017 compared to $19.4 million as of December 31, 2016. The decrease was primarily attributable to a decline in the estimated fair value due to lower production forecasts for one of the NPIs. The following tables present the balances of our OREO and NPIs as of the dates indicated:

	June 30, 2017
(In thousands)	Originated		ANCI		ACI		Other		Total
Acquired through foreclosure
Land	$	—	$	—	$	9,183	$	—	$	9,183
Residential property		27		128		5,346		—		5,501
Commercial property		—		23		5,295		—		5,318
Total foreclosed OREO		27		151		19,824		—		20,002
Unutilized bank-owned properties
Land		—		—		—		648		648
Commercial property		—		—		—		68		68
Total unutilized bank owned property		—		—		—		716		716
Total OREO		27		151		19,824		716		20,718
Other assets - net profits interests		16,405		—		—		—		16,405
Total OREO and other assets	$	16,432	$	151	$	19,824	$	716	$	37,123

	As of December 31, 2016
(In thousands)	Originated		ANCI		ACI		Other		Total
Acquired through foreclosure
Land	$	—	$	—	$	10,183	$	—	$	10,183
Residential property		97		104		4,937		—		5,138
Commercial property		—		23		2,559		—		2,582
Total foreclosed OREO		97		127		17,679		—		17,903
Unutilized bank-owned properties
Land		—		—		—		756		756
Commercial property		—		—		—		216		216
Total unutilized bank owned property		—		—		—		972		972
Total OREO		97		127		17,679		972		18,875
Other assets - net profits interests		19,425		—		—		—		19,425
Total OREO and other assets	$	19,522	$	127	$	17,679	$	972	$	38,300

Past Due 90 Days and Accruing. We classify certain loans with principal or interest past due 90 days or more as accruing loans if those loans are well secured and in the process of collection, or are specifically determined to be impaired as accruing loans. The bulk of the accruing 90 days or more past due loans reside in the ACI portfolio which approximately half consists of single family residential loans, the bulk of which are located in Florida and Alabama, with the remainder consisting of commercial real estate loans. These loans are monitored on a bi-weekly basis by both the lines of business and credit administration. As of June 30, 2017, there were no shared national credits that were 90 days or more past due and accruing.

Troubled Debt Restructuring. We attempt to work with borrowers when necessary to extend or modify loan terms to better align with the borrower’s ability to repay. Extensions and modifications to loans are made in accordance with internal policies and guidelines which conform to regulatory guidance. Each occurrence is unique to the borrower and is evaluated separately. The Bank considers regulatory guidelines when restructuring loans to ensure that prudent lending practices are followed. Qualifying criteria and payment terms are structured by the borrower’s current and prospective ability to comply with the modified terms of the loan.

A modification is classified as a troubled debt restructuring (a “TDR”) if the borrower is experiencing financial difficulty and it is determined that we have granted a concession to the borrower. We may determine that a borrower is experiencing financial difficulty if the borrower is currently in default on any of its debt, or if it is probable that a borrower may default in the foreseeable future without the modification. Concessions could include reductions of interest rates, extension of the maturity date at a rate lower than current market rate for a new loan with similar risk, reduction of accrued interest, principal forgiveness, forbearance, or other concessions. The assessments of whether a borrower is experiencing or will likely experience financial difficulty and whether a concession has been granted is highly subjective in nature, and management’s judgment is required when determining whether a modification is classified as a TDR.

All TDRs are reported as impaired. An impaired classification may be removed if the borrower demonstrates compliance with the modified terms and the restructuring agreement specifies an interest rate equal to that which would be provided to a borrower with similar credit at the time of restructuring. Nonperforming loans and impaired loans have unique definitions. Some loans may be included in both categories, whereas other loans may only be included in one category. As of June 30, 2017 there were 6 shared national credit borrowers that were considered TDRs, totaling $41.9 million. The following table summarizes our TDR activity for the three and six months ended June 30, 2017 and 2016:

	For the Three Months Ended June 30, 2017								For the Three Months Ended June 30, 2016
	Loans Modified into TDRs During the Period				TDRs Experiencing Payment Default (1) during the Period				Loans Modified into TDRs During the Period				TDRs Experiencing Payment Default (1) during the Period
(In thousands)	Number of TDRs		Recorded Investment		Number of TDRs		Recorded Investment		Number of TDRs		Recorded Investment		Number of TDRs		Recorded Investment
Consumer
Residential real estate		1	$	462		—	$	—		—	$	—		—	$	—
Other		—		—		—		—		1		187		—		—
Total Consumer		1		462		—		—		1		187		—		—
Small Business Lending		1		148		—		—		—		—		—		—
Total		2	$	610		—	$	—		1	$	187		—	$	—

	For the Six Months Ended June 30, 2017								For the Six Months Ended June 30, 2016
	Loans Modified into TDRs During the Period				TDRs Experiencing Payment Default (1) during the Period				Loans Modified into TDRs During the Period				TDRs Experiencing Payment Default (1) during the Period
(In thousands)	Number of TDRs		Recorded Investment		Number of TDRs		Recorded Investment		Number of TDRs		Recorded Investment		Number of TDRs		Recorded Investment
Commercial and Industrial
General C&I		1	$	196		—	$	—		—	$	—		—	$	—
Energy sector		—		—		—		—		1		7,024		—		—
Total commercial and industrial		1		196		—		—		1		7,024		—		—
Consumer
Residential real estate		1		462		—		—		1		336		—		—
Other		—		—		—		—		1		187		—		—
Total Consumer		1		462		—		—		2		523		—		—
Small Business Lending		1		148		—		—		—		—		—		—
Total		3	$	806		—	$	—		3	$	7,547		—	$	—

ACI Loans that were modified into TDRs. There were no ACI loans modified in a TDR for the three and six months ended June 30, 2017. In the six months ended June 30, 2016, there was one ACI loan modified in a TDR with a recorded investment of $947 thousand in income producing commercial real estate. There were no TDRs experiencing payment default during the three and six months ended June 30, 2017 and 2016. Default is defined as the earlier of the troubled debt restructuring being placed on non-accrual status or obtaining 90 day past due status with respect to principal and interest payments.

Potential Problem Loans. Potential problem loans represent loans that are currently performing, but for which known information about possible credit problems of the related borrowers causes management to have doubts as to the ability of such borrowers to comply with the present loan repayment terms and which may result in disclosure of such loans as nonperforming at some time in the future. These loans are not included in the amounts of nonaccrual or restructured loans presented above. We cannot predict the extent to which economic conditions or other factors may impact borrowers and the potential problem loans. Accordingly, there can be no assurance that other loans will not become 90 days or more past due, be placed on nonaccrual status,

become restructured, or require increased allowance coverage and provision for credit losses. We have identified no credits as a potential problem loan at June 30, 2017. Any potential problem loans would be assessed for loss exposure consistent with the methods described in Notes 1 and 3 to our Consolidated Financial Statements.

We expect the levels of nonperforming assets and potential problem loans to fluctuate in response to changing economic and market conditions, and the relative sizes of the respective loan portfolios, along with our degree of success in resolving problem assets. We seek to take a proactive approach with respect to the identification and resolution of problem loans.

The allowance for credit losses is maintained at a level that management believes is adequate to absorb all probable losses inherent in the loan portfolio as of the reporting date. Events that are not within the Company’s control, such as changes in economic factors, could change subsequent to the reporting date and could cause increases or decreases to the ACL. The amount of the allowance is affected by loan charge-offs, which decrease the allowance; recoveries on loans previously charged off, which increase the allowance; and the provision for credit losses charged to earnings, which increases the allowance. In determining the provision for credit losses, management monitors fluctuations in the ACL resulting from actual charge-offs and recoveries and reviews the size and composition of the loan portfolio in light of current and anticipated economic conditions (see Notes 1 and 3 to the Consolidated Financial Statements). This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available or as events change.

Total ACL for the period ending June 30, 2017 was $93.2 million, or 1.21% on total loans (net of unearned discounts and fees) of $7.72 billion. This compares with $82.3 million on loans of $7.43 billion, or 1.11% at December 31, 2016. The following tables present the allocation of the allowance for credit losses and the percentage of these loans to total loans. The allocation below is neither indicative of the specific amounts or the loan categories in which future charge-offs may occur, nor is it an indicator of any future loss trends. The allocation of the allowance to each category does not restrict the use of the allowance to absorb any losses in any category.

	Allowance for Credit Losses				Percent of ACL to Each Category of Loans						Percent of Loans in Each Category to Total Loans
	June 30,		December 31,		June 30,			December 31,			June 30,			December 31,
(In thousands)	2017		2016		2017			2016			2017			2016
Originated Loans
Commercial and industrial	$	61,145	$	54,213		1.31	%		1.19	%		60.26	%		61.36	%
Commercial real estate		9,966		7,205		0.96			0.76			13.48			12.80
Consumer		6,436		5,687		0.48			0.48			17.26			15.89
Small business		4,049		3,907		2.06			2.12			2.54			2.47
Total originated loans		81,596		71,012		1.13	%		1.03	%		93.54	%		92.52	%
ANCI Loans
Commercial and industrial		890		299		1.69	%		0.58	%		0.68	%		0.69	%
Commercial real estate		201		243		1.20			1.20			0.22			0.27
Consumer		91		131		0.07			0.09			1.64			2.05
Small business		286		305		2.78			3.33			0.13			0.12
Total ANCI		1,468		978		0.72	%		0.43	%		2.67	%		3.13	%
ACI Loans
Commercial and industrial		200		176		0.58	%		0.46	%		0.45	%		0.51	%
Commercial real estate		3,093		2,655		3.42			2.70			1.17			1.32
Consumer		6,858		7,447		4.08			3.96			2.17			2.52
Small business		—		—		—			—			—			—
Total ACI		10,151		10,278		3.46	%		3.17	%		3.79	%		4.35	%
Total Loans
Commercial and industrial		62,235		54,688		1.31	%		1.18	%		61.39	%		62.56	%
Commercial real estate		13,260		10,103		1.15			0.94			14.87			14.39
Consumer		13,385		13,265		0.82			0.87			21.07			20.46
Small business		4,335		4,212		2.09			2.18			2.67			2.59
Total allowance for credit losses	$	93,215	$	82,268		1.20	%		1.11	%		100.00	%		100.00	%

Originated ACL. The ACL on our originated loan portfolio totaled $81.6 million, or 1.13% on loans of $7.2 billion as of June 30, 2017 compared to $71.0 million, or 1.03% on loans of $6.9 billion as of December 31, 2016. The primary driver of the originated ACL is the underlying credit quality of the loans, which has migrated as the portfolio has become more seasoned in addition to the stress on our energy portfolio due to decline in oil and gas prices. Our loans are categorized into specific risk segments and are subject to loss rates according to their segment and risk rating. As June 30, 2017, $61.1 million, or 74.9% of our originated ACL is attributable to our C&I loan segment compared to $54.2 million, or 76.3%, as December 31, 2016. The ACL as a percentage of the C&I portfolio has increased to 1.31%% as of June 30, 2017 from 1.19% as of December 31, 2016. The increase in the level of ACL as a percentage of C&I loans as of June 30, 2017 from December 31, 2016 is primarily the result of general loan growth, the migration of a few credits within the criticized status in the General C&I portfolio, and specific impairment on three energy credits where collateral values have declined, primarily as a result of related commodity prices.

The level of criticized and classified loans in the C&I portfolio is presented in the following tables.

As of June 30, 2017, $10.0 million, or 12.2% of our originated ACL is attributable to the CRE loan segment compared to $7.2 million, or 10.1%, as of December 31, 2016. The ACL as a percentage of the CRE portfolio has increased to 0.96% as of June 30, 2017 from 0.76% as of December 31, 2016, primarily as a result of qualitative considerations and some grade migration in the CRE portfolio.

In addition to quantitative elements, certain qualitative and environmental factors are also considered at management’s discretion, which are generally based on a combination of internal and external factors and trends. At June 30, 2017, these totaled $11.6 million and accounted for approximately 14.2% of the originated ACL compared to $16.7 million, or 23.5%, as of December 31, 2016, with the most significant consideration being the stress on the energy industry from the volatility of oil and gas prices, and the amount of losses realized in the energy portfolio in 2016 and 2015. Approximately $9.7 million and $16.0 million as of June 30, 2017 and December 31, 2016, respectively, of these qualitative reserves were allocated to the energy portfolio.

As of June 30, 2017 and December 31, 2016, $40.4 million, or 49.5% and $31.7 million, or 45.7%, respectively of the total originated ACL, was attributable to shared national credits. During the three and six months ended June 30, 2017 we recorded a $2.6 million charge-off to a single E&P credit that was a shared national credit. During 2016 we recorded gross charge-offs of two energy portfolio credits totaling $32.9 million that were shared national credits. The ACL is estimated based on the underlying credit quality of the loan, primarily based on its risk segment and risk rating. This methodology is consistent whether or not a loan is a shared national credit.

ANCI ACL. The ACL on our ANCI loans totaled $1.5 million on $203.0 million in loans, or 0.72% and $1.0 million on $229.8 million in loans, or 0.43%, at June 30, 2017 and December 31, 2016, respectively. The increase in the ANCI reserve is related to a single credit amounting to $0.3 million that migrated to criticized status during the second quarter of 2017. ANCI loans were recorded at fair value at the date of each acquisition and are pooled for ACL assessment based on risk segment, with the majority of the ANCI loans within the consumer residential category. Any net shortage of credit mark indicates the need for an allowance on that segment of loans with certain loans individually reviewed for specific impairment.

ACI ACL. The ACL on our ACI loans totaled $10.2 million on $293.3 million in loans, or 3.46%, at June 30, 2017, compared to $10.3 million on $324.3 million in loans, or 3.17% at December 31, 2016. At the time of our acquisitions, we estimated the fair value of the total ACI loan portfolio by segregating the portfolio into loan pools with similar characteristics and certain specifically-reviewed non-homogeneous loans.

Since the acquisition dates, the expected cash flows have been re-estimated quarterly utilizing the same cash flow methodology used at the time of each acquisition. Any subsequent decreases to the expected cash flows generally result in a provision for credit losses. Conversely, subsequent increases in expected cash flows result first in the reversal of any impairment, then in a transfer from the non-accretable discount to the accretable discount, which would have a positive impact on accretion income prospectively. These cash flow evaluations are inherently subjective, as they require material estimates, all of which may be susceptible to significant change.

The largest component of our ACI ACL is attributable to our consumer category, primarily first and second-lien residential loans, that represents 67.6% of the ACI ACL at June 30, 2017 compared to 72.5% of the ACI ACL at December 31, 2016. This component of the ACL has declined $0.6 million to $6.9 million since December 31, 2016 due to impairment reversals on the residential pools, largely driven by loan pay-offs.

The commercial real estate component comprises 30.5% of the ACI ACL at June 30, 2017 and has increased $0.4 million to $3.1 million since December 31, 2016.

The following table summarizes certain information with respect to our ACL on the total loan portfolio and the composition of charge-offs and recoveries for the periods indicated. Subsequent tables present this information separately for the originated, ANCI and ACI portfolios:

	Total Loans
	Three Months Ended June 30,						Six Months Ended June 30,						Year Ended December 31,
(In thousands)	2017			2016			2017			2016			2016
Allowance for credit losses at beginning of period	$	88,304		$	90,751		$	82,268		$	79,783		$	79,783
Charge-offs:
Commercial and industrial		2,551			17,877			2,861			17,877			46,368
Commercial real estate		—			—			—			—			—
Consumer		161			187			402			493			2,093
Small business		167			142			167			142			841
Total charge-offs		2,879			18,206			3,430			18,512			49,302
Recoveries:
Commercial and industrial		363			22			895			656			1,449
Commercial real estate		114			20			128			47			578
Consumer		578			87			641			225			403
Small business		34			2			226			5			9
Total recoveries		1,089			131			1,890			933			2,439
Net charge-offs		1,790			18,075			1,540			17,579			46,863
Provision for credit losses:
Commercial and industrial		4,416			12,871			9,513			21,532			43,782
Commercial real estate		2,591			53			3,029			1,621			1,389
Consumer		(330	)		86			(119	)		141			1,506
Small business		24			1,461			64			1,649			2,671
Total provision for credit losses		6,701			14,471			12,487			24,943			49,348
Allowance for credit losses at end of period	$	93,215		$	87,147		$	93,215		$	87,147		$	82,268
Loans at end of period, net of unearned income	$	7,716,621		$	7,162,027		$	7,716,621		$	7,162,027		$	7,432,711
Average loans, net of unearned income		7,650,048			7,180,357			7,600,861			7,071,464			7,186,635
Ratio of ending allowance to ending loans		1.21	%		1.22	%		1.21	%		1.22	%		1.11	%
Ratio of net charge-offs to average loans⁽¹⁾		0.09			1.01			0.04			0.50			0.65
Net charge-offs as a percentage of:
Provision for credit losses		26.71			124.90			12.33			70.48			94.96
Allowance for credit losses⁽¹⁾		7.70			83.19			3.33			40.45			56.96
Allowance for credit losses as a percentage of nonperforming loans		88.81			53.84			88.81			53.84			63.80

	Originated Loans
	Three Months Ended June 30,						Six Months Ended June 30,						Year Ended December 31,
(In thousands)	2017			2016			2017			2016			2016
Allowance for credit losses at beginning of period	$	77,440		$	77,433		$	71,011		$	64,386		$	64,386
Charge-offs:
Commercial and industrial		2,551			17,877			2,788			17,877			46,368
Commercial real estate		—			—			—			—			—
Consumer		134			120			251			303			634
Small business		120			142			120			142			841
Total charge-offs		2,805			18,139			3,159			18,322			47,843
Recoveries:
Commercial and industrial		109			—			633			620			1,386
Commercial real estate		2			—			7			—			3
Consumer		25			50			56			149			225
Small business		7			—			44			—			—
Total recoveries		143			50			740			769			1,614
Net charge-offs		2,662			18,089			2,419			17,553			46,229
Provision for credit losses:
Commercial and industrial		3,884			13,183			9,088			23,835			46,024
Commercial real estate		2,428			324			2,753			1,708			2,378
Consumer		493			873			944			1,127			1,772
Small business		13			1,441			219			1,662			2,681
Total provision for credit losses		6,818			15,821			13,004			28,332			52,855
Allowance for credit losses at end of period	$	81,596		$	75,165		$	81,596		$	75,165		$	71,012
Loans at end of period, net of unearned income	$	7,220,339		$	6,524,014		$	7,220,339		$	6,524,014		$	6,878,645
Ratio of ending allowance to ending loans		1.13	%		1.15	%		1.13	%		1.15	%		1.03	%
Net charge-offs as a percentage of:
Provision for credit losses		39.04			114.34			18.60			61.95			87.47
Allowance for credit losses⁽¹⁾		13.09			96.78			5.98			46.96			65.28
Allowance for credit losses as a percentage of nonperforming loans		80.49			48.34			80.49			48.34			58.49

	ANCI Loans
	Three Months Ended June 30,						Six Months Ended June 30,						Year Ended December 31,
(In thousands)	2017			2016			2017			2016			2016
Allowance for credit losses at beginning of period	$	951		$	974		$	979		$	1,063		$	1,063
Charge-offs:
Commercial and industrial		—			—			34			—			—
Commercial real estate		—			—			—			—			—
Consumer		27			67			151			190			367
Small business		47			—			47			—			—
Total charge-offs		74			67			232			190			367
Recoveries:
Commercial and industrial		8			12			16			23			44
Commercial real estate		—			—			—			—			101
Consumer		75			34			104			71			168
Small business		27			2			182			5			9
Total recoveries		110			48			302			99			322
Net (recoveries) charge-offs		(36	)		19			(70	)		91			45
Provision for credit losses:
Commercial and industrial		578			(138	)		608			(163	)		(169	)
Commercial real estate		(40	)		63			(42	)		26			(85	)
Consumer		(68	)		77			8			155			225
Small business		11			20			(155	)		(13	)		(10	)
Total provision for credit losses		481			22			419			5			(39	)
Allowance for credit losses at end of period	$	1,468		$	977		$	1,468		$	977		$	979
Loans at end of period, net of unearned income	$	202,984		$	268,766		$	202,984		$	268,766		$	229,784
Ratio of ending allowance to ending loans		0.72	%		0.36	%		0.72	%		0.36	%		0.43	%
Net charge-offs (recoveries) as a percentage of:
Provision for credit losses		(7.48	)		86.36			(16.71	)	NM				(115.38	)
Allowance for credit losses⁽¹⁾		(9.84	)		9.46			(9.62	)		18.92			4.61
Allowance for credit losses as a percentage of nonperforming loans		43.69			39.23			43.69			39.23			25.29

	ACI Loans
	Three Months Ended June 30,						Six Months Ended June 30,						Year Ended December 31,
(In thousands)	2017			2016			2017			2016			2016
Allowance for credit losses at beginning of period	$	9,913		$	12,344		$	10,278		$	14,334		$	14,334
Charge-offs:
Commercial and industrial		—			—			39			—			—
Commercial real estate		—			—			—			—			—
Consumer		—			—			—			—			1,092
Small business		—			—			—			—			—
Total charge-offs		—			—			39			—			1,092
Recoveries:
Commercial and industrial		246			10			246			13			20
Commercial real estate		112			20			121			47			474
Consumer		478			3			481			5			10
Small business		—			—			—			—			—
Total recoveries		836			33			848			65			504
Net (recoveries) charge-offs		(836	)		(33	)		(809	)		(65	)		588
Provision for credit losses:
Commercial and industrial		(46	)		(174	)		(183	)		(2,140	)		(2,073	)
Commercial real estate		203			(334	)		318			(113	)		(904	)
Consumer		(755	)		(864	)		(1,071	)		(1,141	)		(491	)
Small business		—			—			—			—			—
Total provision for credit losses		(598	)		(1,372	)		(936	)		(3,394	)		(3,468	)
Allowance for credit losses at end of period	$	10,151		$	11,005		$	10,151		$	11,005		$	10,278
Loans at end of period, net of unearned income	$	293,298		$	369,247		$	293,298		$	369,247		$	324,282
Ratio of ending allowance to ending loans		3.46	%		2.98	%		3.46	%		2.98	%		3.17	%
Net (recoveries) charge-offs as a percentage of:
Provision for credit losses		139.80			2.41			86.43			1.92			(16.96	)
Allowance for credit losses⁽¹⁾		(33.33	)		(1.28	)		(16.07	)		(1.19	)		5.74
Allowance for credit losses as a percentage of nonperforming loans	NM				283.49		NM				283.49			280.59

Deposits. Our strategy is to fund asset growth primarily with customer deposits in order to maintain a stable liquidity profile and a more competitive cost of funds. We categorize deposits as brokered and non-brokered consistent with the banking industry. All customer deposits are non-brokered. The following table illustrates the growth in our deposits during the periods indicated:

					Percent to Total						Percentage Change
	June 30,		December 31,		June 30,			December 31,			2Q 2017
(In thousands)	2017		2016		2017			2016			vs YE 2016
Noninterest-bearing demand	$	1,857,809	$	1,840,955		23.4	%		23.0	%		0.9		%
Interest-bearing demand		4,286,184		4,541,412		54.1			56.7			(5.6	)
Savings		188,983		180,687		2.4			2.3			4.6
Time deposits less than $100,000		616,004		605,661		7.8			7.5			1.7
Time deposits greater than $100,000		981,403		848,034		12.3			10.5			15.7
Total deposits (including brokered)	$	7,930,383	$	8,016,749		100.0	%		100.0	%		(1.1	)	%

Total brokered deposits	$	743,068	$	1,041,858		9.4	%		13.0	%		(28.7	)	%

The following tables set forth our average deposits and the average rates expensed for the periods indicated:

The increase in advances from the FHLB are short-term and matured in July, 2017.

As of June 30, 2017 and December 31, 2016, our ratio of shareholders’ equity to total assets was 13.29% and 11.34%, respectively, and we had tangible common equity ratios of 10.27% and 8.13%, respectively. Tangible common equity ratio is a non-GAAP financial measure. We believe that this non-GAAP financial measure provides investors with information useful in understanding our financial performance and, specifically, our capital position. The tangible common equity ratio is calculated as tangible common shareholders’ equity divided by tangible assets. Tangible common equity is calculated as total shareholders’ equity less goodwill and other intangible assets, net, and tangible assets are total assets less goodwill and other intangible assets,

net. The following table provides a reconciliation of tangible common equity to GAAP total common shareholders’ equity and tangible assets to GAAP total assets:

We are subject to regulatory capital requirements that require us to maintain certain minimum common equity Tier 1 capital, Tier 1 leverage, Tier 1 risk-based, and total risk-based ratios. At June 30, 2017, our capital ratios exceeded these requirements. Our actual regulatory capital amounts and ratios at June 30, 2017 are presented in the following table:

	June 30, 2017
	Cadence					Cadence
	Bancorporation					Bank N.A.
(In thousands)	Amount		Ratio			Amount		Ratio
Actual
Tier 1 leverage	$	1,041,193		11.0	%	$	1,145,287		12.1	%
Common equity Tier 1 (CET1)		1,005,672		10.9			1,097,096		11.9
Tier 1 risk-based capital		1,041,193		11.3			1,145,287		12.5
Total risk-based capital		1,234,044		13.4			1,264,250		13.7
Minimum levels
Tier 1 leverage	$	378,708		4.0	%	$	378,687		4.0	%
Common equity Tier 1 (CET1)		413,993		4.5			413,777		4.5
Tier 1 risk-based capital		551,991		6.0			551,703		6.0
Total risk-based capital		735,988		8.0			735,604		8.0
To Be Well Capitalized
Tier 1 leverage	NA		NA			$	473,359		5.0	%
Common equity Tier 1 (CET1)	NA		NA				597,678		6.5
Tier 1 risk-based capital	NA		NA				735,604		8.0
Total risk-based capital	NA		NA				919,505		10.0

We measure and seek to manage liquidity risk by a variety of processes, including monitoring the composition of our funding mix; monitoring financial ratios specifically designed to measure liquidity risk; maintaining a minimum liquidity cushion; and performing forward cash flow gap forecasts in various liquidity stress testing scenarios designed to simulate possible stressed liquidity environments. We attempt to limit our liquidity risk by setting board-approved concentration limits on sources of funds and limits on liquidity ratios used to measure liquidity risk, and maintaining adequate levels of on-hand liquidity. We use the following ratios to monitor and analyze our liquidity:

As of June 30, 2017, all of our liquidity measures were within our established guidelines.

The goal of liquidity management is to ensure that we maintain adequate funds to meet changes in loan demand or any deposit withdrawals. Additionally, we strive to maximize our earnings by investing our excess funds in securities and other assets. To meet our short-term liquidity needs, we seek to maintain a targeted cash position and have borrowing capacity through many wholesale sources including correspondent banks, the Federal Home Loan Bank (“FHLB”) and the Federal Reserve Bank. To meet long-term liquidity needs, we additionally depend on the repayment of loans, sales of loans, term wholesale borrowings, brokered deposits and the maturity or sale of investment securities.

The aggregate amount of time deposits in denominations of $100,000 or more as of June 30, 2017 and December 31, 2016, was $981.4 million and $848.1 million, respectively.

At June 30, 2017, the scheduled maturities of time deposits greater than $100,000 were as follows:

At June 30, 2017, we had $288.9 million cash and cash equivalents on hand, an increase of $40.0 million or 16.1% over our cash and cash equivalents of $248.9 million at December 31, 2016. At June 30, 2017 our cash and cash equivalents comprised 2.94% of total assets compared to 2.61% at December 31, 2016. We monitor our liquidity position and increase or decrease our short-term liquid assets as necessary. The higher balance in cash and cash equivalents at June 30, 2017 is due to timing of net loan fundings and customer deposits at the end of the quarter.

As shown in the Condensed Consolidated Statements of Cash Flows, operating activities provided $51.5 million in the six months ended June 30, 2017 compared to $29.1 million in the six months ended June 30, 2016. The increase in operating funds during the six months ended June 30, 2017 was due primarily to an increase in net income and an increase in proceeds from the sale of held for sale loans, offset by an increase in originations of loans held for sale and a decrease in other assets related to the refund of a bid deposit made in the fourth quarter of 2016 to acquire a large treasury management deposit account.

Investing activities during the six months ended June 30, 2017 used $247.8 million of net funds, primarily due to net loan fundings of $290.8 million, partially offset by sales and other cash flows from available for sale securities. This compares to investing activities during the six months ended June 30, 2016 using $428.1 million of net funds, primarily due to net loan fundings of $583.1 million and the purchase of available for sale securities of $409.7 million, partially offset by sales of certain commercial loans of $328.8 million.

Financing activities during the six months ended June 30, 2017 provided net funds of $236.2 million, due to $175.0 million in advances from FHLB and net proceeds of $155.7 million from the issuance of common stock, partially offset by a decrease in deposits of $86.4 million. This compares to financing activities during the six months ended June 30, 2016 providing net funds of $316.2 million, resulting from an increase in deposits of $685.4 million and a decrease in short-term FHLB borrowings of $370.0 million.

We identify “efficiency ratio,” “adjusted noninterest expense,” “adjusted operating revenue,” “tangible common equity,” “tangible common equity ratio,” “return on average tangible common equity,” “tangible book value per share” and “pre-tax pre-provision net earnings” as “non-GAAP financial measures.” In accordance with the SEC’s rules, we identify certain financial measures as non-GAAP financial measures if such financial measures exclude or include amounts in the most directly comparable measures calculated and presented in accordance with generally accepted accounting principles (“GAAP”) in effect in the United States in our statements of income, balance sheet or statements of cash flows. Non-GAAP financial measures do not include operating and other statistical measures, ratios or statistical measures calculated using exclusively financial measures calculated in accordance with GAAP.

The non-GAAP financial measures that we discuss herein should not be considered in isolation or as a substitute for the most directly comparable or other financial measures calculated in accordance with GAAP. Moreover, the manner in which we calculate these non-GAAP financial measures may differ from that of other companies reporting measures with similar names, and, therefore, may not be comparable to our non-GAAP financial measures.

Efficiency ratio is defined as noninterest expenses divided by operating revenue, which is equal to net interest income plus noninterest income. We believe that this measure is important to many investors in the marketplace who wish to assess our performance versus that of our peers.

Our adjusted noninterest expenses represents total noninterest expenses net of any merger, restructuring or branch closing costs. Our adjusted operating revenue is equal to net interest income plus noninterest income excluding gains and losses on sales of securities and branches. In our judgment, the adjustments made to noninterest expense and operating revenue allow management and investors to better assess our performance by removing the volatility that is associated with certain other discrete items that are unrelated to our core business.

Tangible common equity is defined as total shareholders’ equity, excluding preferred stock, less goodwill and other intangible assets. We believe that this measure is important to many investors in the marketplace who are interested in changes from period to period in common shareholders’ equity exclusive of changes in intangible assets. Goodwill, an intangible asset that is recorded in a purchase business combination, has the effect of increasing both common equity and assets while not increasing our tangible common equity or tangible assets.

The tangible common equity ratio is defined as the ratio of tangible common equity divided by total assets less goodwill and other intangible assets. We believe that this measure is important to many investors in the marketplace who are interested in relative changes from period to period in common equity and total assets, each exclusive of changes in intangible assets. We believe that the most directly comparable GAAP financial measure is total shareholders’ equity to total assets.

Return on average tangible common equity is defined as net income divided by average tangible common equity. We believe the most directly comparable GAAP financial measure is the return on average common equity.

Tangible book value per share is defined as book value, excluding the impact of goodwill and other intangible assets, if any, divided by shares of our common stock outstanding.

Pre-tax, pre-provision net earnings is defined as income before taxes and provision for credit losses. We believe the most directly comparable GAAP financial measure is income before taxes.

	As of and for the three months ended						As of and for the six months ended						As of and for the year ended
	June 30,						June 30,						December 31,
(In thousands)	2017			2016			2017			2016			2016
Efficiency ratio
Noninterest expenses (numerator)	$	56,134		$	55,868		$	110,455		$	109,910		$	220,180
Net interest income	$	82,384		$	69,249		$	157,142		$	136,515		$	279,439
Noninterest income		22,989			23,105			47,094			43,251			88,403
Operating revenue (denominator)	$	105,373		$	92,354		$	204,236		$	179,766		$	367,842
Efficiency ratio		53.27	%		60.49	%		54.08	%		61.14	%		59.86	%
Adjusted noninterest expenses and operating revenue
Noninterest expense	$	56,134		$	55,868		$	110,455		$	109,910		$	220,180
Less: Branch closure expenses		47			75			94			139			238
Adjusted noninterest expenses	$	56,087		$	55,793		$	110,361		$	109,771		$	219,942
Net interest income	$	82,384		$	69,249		$	157,142		$	136,515		$	279,439
Noninterest income		22,989			23,105			47,094			43,251			88,403
Less: Securities (losses) gains, net		(244	)		1,019			(163	)		1,083			3,736
Adjusted operating revenue	$	105,617		$	91,335		$	204,399		$	178,683		$	364,106
Tangible common equity ratio
Shareholders’ equity	$	1,304,054		$	1,116,076		$	1,304,054		$	1,116,076		$	1,080,498
Less: Goodwill and other intangible assets, net		(330,261	)		(335,852	)		(330,261	)		(335,852	)		(332,691	)
Tangible common shareholders’ equity		973,793			780,224			973,793			780,224			747,807
Total assets		9,811,557			9,221,807			9,811,557			9,221,807			9,530,888
Less: Goodwill and other intangible assets, net		(330,261	)		(335,852	)		(330,261	)		(335,852	)		(332,691	)
Tangible assets	$	9,481,296		$	8,885,955		$	9,481,296		$	8,885,955		$	9,198,197
Tangible common equity ratio		10.27	%		8.78	%		10.27	%		8.78	%		8.13	%
Tangible book value per share
Shareholders’ equity	$	1,304,054		$	1,116,076		$	1,304,054		$	1,116,076		$	1,080,498
Less: Goodwill and other intangible assets, net		(330,261	)		(335,852	)		(330,261	)		(335,852	)		(332,691	)
Tangible common shareholders’ equity	$	973,793		$	780,224		$	973,793		$	780,224		$	747,807
Common shares issued		83,625,000			75,000,000			83,625,000			75,000,000			75,000,000
Tangible book value per share	$	11.64		$	10.40		$	11.64		$	10.40		$	9.97
Return on average tangible common equity
Average common equity	$	1,251,217		$	1,092,034		$	1,171,504		$	1,080,674		$	1,093,604
Less: Average intangible assets		(330,977	)		(336,856	)		(331,584	)		(337,699	)		(336,054	)
Average tangible common equity	$	920,240		$	755,178		$	839,920		$	742,975		$	757,550
Net income	$	28,968		$	14,840		$	55,085		$	30,181		$	65,774
Return on average tangible common equity ⁽¹⁾		12.63	%		7.90	%		13.23	%		8.17	%		8.68	%
Pre-tax, pre-provision net earnings
Income before taxes	$	42,538		$	22,015		$	81,294		$	44,913		$	98,314
Plus: Provision for credit losses		6,701			14,471			12,487			24,943			49,348
Pre-tax, pre-provision net earnings	$	49,239		$	36,486		$	93,781		$	69,856		$	147,662

Market risk is the exposure to unanticipated changes in net interest earnings or changes in the fair value of financial instruments due to fluctuations in interest rates, exchange rates and equity prices. Our primary market risk is interest rate risk.

Interest Rate Risk (“IRR”) is the risk that changing market interest rates may lead to an unexpected decline in the Bank’s earnings or capital. The main causes of interest rate risk are the differing structural characteristics of the balance sheet’s assets, liabilities and off balance sheet obligations and their cumulative net reaction to changing interest rates. These structural characteristics include timing differences in maturity or repricing and the effect of embedded options such as loan prepayments, securities prepayments and calls, interest rate caps and floors, and deposit withdrawal options. In addition to these sources of interest rate risk, basis risk results from differences in the spreads between various market interest rates and changes in the slope of the yield curve which can contribute to additional interest rate risk.

We evaluate interest rate risk and develop guidelines regarding balance sheet composition and re-pricing, funding sources and pricing, and off-balance sheet commitments that aim to moderate interest rate risk. We use computer simulations that reflect various interest rate scenarios and the related impact on net interest income over specified periods of time. We refer to this process as asset/liability management, or “ALM”.

The primary objective of ALM is to seek to manage interest rate risk and desired risk tolerance for potential fluctuations in net interest income (“NII”) throughout interest rate cycles, which we aim to achieve by maintaining a balance of interest rate sensitive earning assets and liabilities. In general, we seek to maintain a desired risk tolerance with asset and liability balances within maturity and repricing categories to limit our exposure to earnings volatility and changes in the value of assets and liabilities as interest rates fluctuate over time. Adjustments to maturity categories can be accomplished either by lengthening or shortening the duration of either an individual asset or liability category, or externally with interest rate contracts, such as interest rate swaps, caps and floors. See “—Interest Rate Exposures” for a more detailed discussion of our various derivative positions.

Our asset and liability management strategy is formulated and monitored by our Asset/Liability Management Committee (“ALCO”) in accordance with policies approved by the board of directors. The ALCO meets regularly to review, among other things, the sensitivity of our assets and liabilities to interest rate changes, the book and market values of assets and liabilities, unrealized gains and losses, recent purchase and sale activity, maturities of investments and borrowings, and projected future transactions. The ALCO also establishes and approves pricing and funding decisions with respect to overall asset and liability composition. The ALCO reports regularly to our board of directors.

Financial simulation models are the primary tools we use to measure interest rate risk exposures. By examining a range of hypothetical deterministic interest rate scenarios, these models provide management with information regarding the potential impact on NII and Economic Value of Equity (“EVE”) caused by changes in interest rates.

The models simulate the cash flows and accounting accruals generated by the financial instruments on our balance sheet at a given month-end, as well as the cash flows generated by the new business we anticipate over a 36-month forecast horizon. Numerous assumptions are made in the modeling process, including balance sheet composition, the pricing, re-pricing and maturity characteristics of existing business and new business. Additionally, loan and investment prepayment, administered rate account elasticity and other option risks are considered as well as the uncertainty surrounding future customer behavior. Because of the limitations inherent in any approach used to measure interest rate risk and because the Bank’s loan portfolio will be actively managed in the event of a change in interest rates, simulation results, including those discussed in “—Interest Rate Exposures” immediately below, are not intended as a forecast of the actual effect of a change in market interest rates on our net interest income or results of operations or indicative of management’s expectations of actual results in the event of a fluctuation in market interest rates.

The Bank’s net interest income simulation model projects that net interest income over a 12-month horizon will increase on an annual basis by 0.85%, or approximately $2.9 million, assuming an instant increase in interest rates of 100 basis points, by 1.56%, or approximately $5.3 million, assuming an instant increase in interest rates of 200 basis points and decrease by 3.24% or approximately $11.1 million, assuming an instant decrease in interest rates of 100 basis points. Based upon the current interest rate environment as of June 30, 2017, our sensitivity to interest rate risk was as follows:

Based upon the current interest rate environment as of June 30, 2017, the following table reflects our sensitivity to a gradual increase or decrease in interest rates over a twelve-month period:

Both the NII and EVE simulations include assumptions regarding balances, asset prepayment speeds, deposit repricing and runoff and interest rate relationships among balances that management believes to be reasonable for the various interest rate environments. Differences in actual occurrences from these assumptions, as well as non-parallel changes in the yield curve, may change our market risk exposure.

Overview. Our board of directors has authorized the ALCO to utilize financial futures, forward sales, options, interest rate swaps, caps and floors, and other instruments to the extent appropriate, in accordance with regulations and our internal policy. We expect to use interest rate swaps, caps and floors as macro hedges against inherent rate sensitivity in our securities portfolio, our loan portfolio and our liabilities.

Positions for hedging purposes are undertaken primarily as a mitigation of three main areas of risk exposure: (1) mismatches between assets and liabilities; (2) prepayment and other option-type risks embedded in our assets, liabilities and off-balance sheet instruments; and (3) the mismatched commitments for mortgages and funding sources.

We currently intend to engage in only the following types of hedges: (1) those which synthetically alter the maturities or re-pricing characteristics of assets or liabilities to reduce imbalances; (2) those which enable us to transfer the interest rate risk exposure involved in our daily business activities; and (3) those which serve to alter the market risk inherent in our investment portfolio, mortgage pipeline, or liabilities and thus help us to match the effective maturities of the assets and liabilities. Our current interest rate hedges will begin to roll off at the end of 2017 and we do not currently expect to enter into interest rate swaps or like arrangements in the near-term.

Cash Flow Hedges. Cash flow hedge relationships mitigate exposure to the variability of future cash flows or other forecasted transactions. We use interest rate swaps to manage overall cash flow changes related to interest rate risk exposure on benchmark interest rate loans (1-Month LIBOR). In June 2015 and March 2016, we entered into interest rate swap agreements with notional values totaling $982 million and $350 million, respectively, to manage overall cash flow changes related to interest rate risk exposure on the 1-Month LIBOR rate indexed loans. The following is a detail of our cash flow hedges as of June 30, 2017:

Derivative contracts involve the risk of dealing with both bank customers and institutional derivative counterparties and their ability to meet contractual terms. Our policies require that institutional counterparties must be approved by our ALCO and all positions over and above the minimum transfer amounts are secured by marketable securities or cash.

The Company’s management, including the Chief Executive Officer and Chief Financial Officer have evaluated the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures are effective in ensuring that information required to be disclosed is recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms and are also designed to ensure that the information required to be disclosed in the reports filed or submitted under the Exchange Act is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosures.

There have been no changes in the Company’s internal control over financial reporting during the period ended June 30, 2017 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

The Company and its subsidiaries are from time to time subject to claims and litigation arising in the ordinary course of business. At this time, in the opinion of management, the likelihood is remote that the impact of such proceedings, either individually or in the aggregate, would have a material adverse effect on our consolidated results of operations, financial condition or cash flows. However, one or more unfavorable outcomes in any claim or litigation against us could have a material adverse effect for the period in which they are resolved. In addition, regardless of their merits or their ultimate outcomes, such matters are costly, divert management’s attention and may materially adversely affect our reputation, even if resolved in our favor.

There have been no material changes to our risk factors previously disclosed in the Company’s Prospectus filed with the Securities and Exchange Commission on April 14, 2017 pursuant to Rule 424(b) of the Securities Act of 1933, as amended.

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.

Delaware		47-1329858
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

PART I: FINANCIAL INFORMATION		3

ITEM 1.	FINANCIAL STATEMENTS	3

	Condensed Consolidated Balance Sheets as of June 30, 2017 and December 31, 2016	3
	Condensed Consolidated Statements of Income for the Three and Six Months Ended June 30, 2017 and 2016	4
	Condensed Consolidated Statements of Comprehensive Income for the Three and Six Months Ended June 30, 2017 and 2016	5
	Condensed Consolidated Statements of Changes in Shareholders' Equity for the Six Months Ended June 30, 2017	6
	Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2017 and 2016	7
	Notes to Condensed Consolidated Financial Statements	8

ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	45

ITEM 3.	QUANTATATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK	86

ITEM 4.	CONTROLS AND PROCEDURES	88

PART II: OTHER INFORMATION		89

ITEM 1.	LEGAL PROCEEDINGS	89

ITEM 1A.	RISK FACTORS	89

ITEM 2.	UNREGISTERED SALES OF EQUITY AND USE OF PROCEEDS	89

ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	89

ITEM 4.	MINE SAFETY DISCLOSURES	89

ITEM 5.	OTHER INFORMATION	89

ITEM 6.	EXHIBITS	89

	For the Six Months Ended June 30,
(In thousands)	2017			2016
Balance at beginning of period	$	98,728		$	122,791
Maturities/payoff		(5,773	)		(5,546	)
Charge-offs		(90	)		(68	)
Foreclosure		(1,040	)		(795	)
Accretion		(12,406	)		(16,728	)
Reclass from nonaccretable difference due to increases in expected cash flow		6,369			8,318
Balance at end of period	$	85,788		$	107,972

	As of June 30, 2017				As of December 31, 2016
(Recorded Investment in thousands)	Income producing		Land and development		Income producing		Land and development
Pass	$	84,995	$	8,421	$	80,463	$	7,254
Special mention		1,426		712		5,813		933
Substandard		6,156		1,402		13,591		3,240
Total	$	92,577	$	10,535	$	99,867	$	11,427

	As of June 30, 2017				As of December 31, 2016
(Recorded Investment in thousands)	Residential Real Estate		Other		Residential Real Estate		Other
0 – 29 Days Past Due	$	155,187	$	1,619	$	171,457	$	1,871
30 – 59 Days Past Due		3,027		123		4,070		134
60 – 89 Days Past Due		1,426		4		1,939		25
90 – 119 Days Past Due		384		—		622		36
120 + Days Past Due		9,346		42		10,915		56
Total	$	169,370	$	1,788	$	189,003	$	2,122

☐	Large accelerated filer	☐	Accelerated filer

☒	Non-accelerated filer	☐	Smaller reporting company

		☒	Emerging growth company

Class A Common Stock, $0.01 Par Value		83,625,000
Class		Outstanding as of August 14, 2017

(In thousands)	Common Stock		Additional Paid-in Capital		Retained Earnings		Accumulated OCI			Total Shareholders' Equity
Balance, December 31, 2016	$	750	$	879,665	$	232,614	$	(32,531	)	$	1,080,498
Equity-based compensation cost		—		957		—		—			957
Net income		—		—		55,085		—			55,085
Other comprehensive income		—		—		—		11,852			11,852
Issuance of 8,625,000 common shares, net of issuance costs		86		155,576		—		—			155,662
Balance, June 30, 2017	$	836	$	1,036,198	$	287,699	$	(20,679	)	$	1,304,054

	Available-for-Sale				Held-to-Maturity
	Amortized		Estimated		Amortized		Estimated
(In thousands)	Cost		Fair Value		Cost		Fair Value
Due in one year or less	$	1,515	$	1,515	$	—	$	—
Due after one year through five years		109,532		106,614		425		456
Due after five years through ten years		20,348		20,650		—		—
Due after ten years		479,547		467,592		—		—
Mortgage-backed securities and other securities		488,295		483,564		—		—
Total	$	1,099,237	$	1,079,935	$	425	$	456

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
(In thousands)	2017			2016			2017			2016
Gross realized gains	$	69		$	1,117		$	150		$	1,181
Gross realized losses		(313	)		(98	)		(313	)		(98	)
Realized (losses) gains on sale of securities available for sale, net	$	(244	)	$	1,019		$	(163	)	$	1,083

	For the Three Months Ended June 30, 2017
	During the Period				Default⁽¹⁾during the Period
(In thousands)	Number of TDRs		Recorded Investment		Number of TDRs		Recorded Investment
Consumer
Residential real estate		1	$	462		—		—
Small Business Lending		1		148		—		—
Total		2	$	610		—	$	—

	For the Three Months Ended
	June 30, 2017							June 30, 2016
(In thousands)	OCI		Reclassified from AOCI to interest income		Noninterest income			OCI		Reclassified from AOCI to interest income		Noninterest income
Derivatives designated as hedging instruments (cash flow hedges):
Commercial loan interest rate swaps	$	4,916	$	1,166	$	—		$	15,387	$	3,607	$	—
Derivatives not designated as hedging instruments:
Mortgage loan held for sale interest rate lock commitments	$	—	$	—	$	(99	)	$	—	$	—	$	67
Foreign exchange contracts		—		—		552			—		—		355

	For the Six Months Ended
	June 30, 2017						June 30, 2016
(In thousands)	OCI		Reclassified from AOCI to interest income		Noninterest income		OCI		Reclassified from AOCI to interest income		Noninterest income
Derivatives designated as hedging instruments (cash flow hedges):
Commercial loan interest rate swaps	$	3,326	$	3,033	$	—	$	32,217	$	5,383	$	—
Derivatives not designated as hedging instruments:
Mortgage loan held for sale interest rate lock commitments	$	—	$	—	$	79	$	—	$	—	$	122
Foreign exchange contracts		—		—		1,021		—		—		596

Capital Tiers	Tier 1 Capital to Average Assets (Leverage)	Common Equity Tier 1 to Risk - Weighted Assets (CET1)	Tier 1 Capital to Risk – Weighted Assets	Total Capital to Risk – Weighted Assets
Well capitalized	5% or above	6.5% or above	8% or above	10% or above
Adequately capitalized	4% or above	4.5% or above	6% or above	8% or above
Undercapitalized	Less than 4%	Less than 4.5%	Less than 6%	Less than 8%
Significantly undercapitalized	Less than 3%	Less than 3%	Less than 4%	Less than 6%
Critically undercapitalized		Tangible Equity / Total Assets less than 2%

(In thousands)
Commitments to extend credit	$	2,780,554
Standby letters of credit		95,064
Performance letters of credit		29,287
Commercial letters of credit		1,289

	As of and for the Three Months Ended June 30, 2017
(In thousands)	Banking		Financial Services		Corporate			Consolidated
Net interest income	$	85,813	$	1,617	$	(5,046	)	$	82,384
Provision for credit losses		6,701		—		—			6,701
Noninterest income		11,511		11,398		80			22,989
Noninterest expense		46,997		8,593		544			56,134
Income tax expense (benefit)		15,269		1,548		(3,247	)		13,570
Net income	$	28,357	$	2,874	$	(2,263	)	$	28,968

	As of and for the Six Months Ended June 30, 2017
(In thousands)	Banking		Financial Services		Corporate			Consolidated
Net interest income	$	165,117	$	1,467	$	(9,442	)	$	157,142
Provision for credit losses		12,487		—		—			12,487
Noninterest income		23,211		23,719		164			47,094
Noninterest expense		92,454		17,274		727			110,455
Income tax expense (benefit)		29,185		2,769		(5,745	)		26,209
Net income	$	54,202	$	5,143	$	(4,260	)	$	55,085
Total assets	$	9,743,451	$	65,521	$	2,585		$	9,811,557

(In thousands)	Unrealized gains (losses) on securities available for sale			Unrealized gains (losses) on defined benefit pension plans			Unrealized gains (losses) on derivative instruments designated as cash flow hedges			Accumulated other comprehensive gain (loss)
Balance, December 31, 2016	$	(21,819	)	$	(500	)	$	(10,212	)	$	(32,531	)
Net change		11,666			—			186			11,852
Balance, June 30, 2017	$	(10,153	)	$	(500	)	$	(10,026	)	$	(20,679	)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
(In thousands, except per share data)	2017			2016			2017			2016
Net income	$	28,968		$	14,840		$	55,085		$	30,181
Net income per common share
- basic ⁽¹⁾		0.35			0.20			0.70			0.40
- diluted ⁽⁴⁾		0.35			0.20			0.70			0.40
Net interest margin		3.71	%		3.32	%		3.58	%		3.32	%
Net interest spread		3.42			3.10			3.32			3.10
Return on average assets⁽²⁾		1.19			0.65			1.14			0.67
Return on average equity⁽²⁾		9.29			5.47			9.48			5.62
Return on average tangible common equity⁽²⁾⁽³⁾		12.63			7.90			13.23			8.17

	Originated C&I Loans - Specialized Lending
(In thousands)	June 30, 2017		December 31, 2016		Unfunded Commitments		Q2 2017 vs YE 2016
Specialized Industries
Restaurant industry	$	985,218	$	864,085	$	267,045	$	121,133
Healthcare		378,650		434,663		160,850		(56,013	)
Technology		267,303		218,162		51,680		49,141
Total specialized industries	$	1,631,171	$	1,516,910	$	479,575	$	114,261

	Increase(Decrease)
(In millions)	Net Interest Income							Economic Value of Equity
Change (in Basis Points) in Interest Rates (12-Month Projection)	Amount			Percent				Amount			Percent
+ 200 BP	$	5.3			1.56		%	$	265.9			13.57		%
+ 100 BP		2.9			0.85				151.2			7.71
- 100 BP		(11.1	)		(3.24	)			(219.4	)		(11.19	)

Exhibit Number		Description of Exhibit

3.1		Second Amended and Restated Certificate of Incorporation of Cadence Bancorporation (incorporated by reference to Exhibit 4.1 to the Registration Statement on Form S-8 of Cadence Bancorporation (Registration No. 333-217316), filed with the Securities and Exchange Commission on April 14, 2017).

3.2		Amended and Restated By-Laws of Cadence Bancorporation (incorporated by reference to Exhibit 4.2 to the Registration Statement on Form S-8 of Cadence Bancorporation (Registration No. 333-217316), filed with the Securities and Exchange Commission on April 14, 2017).

4.1		Registration Rights Agreement, dated as of April 19, 2017, by and between Cadence Bancorporation and Cadence Bancorp, LLC (incorporated by reference to Exhibit 4.1 to the Current Report on From 8-K of Cadence Bancorporation, filed with the Securities and Exchange Commission on April 19, 2017).

31.1		Certification of the Chief Executive Officer pursuant to Section 302 of Sarbanes-Oxley Act of 2002

31.2		Certification of the Chief Financial Officer pursuant to Section 302 of Sarbanes-Oxley Act of 2002

32.1		Certification of the Chief Executive Officer pursuant to pursuant to Section 906 of Sarbanes-Oxley Act of 2002

32.2		Certification of the Chief Financial Officer pursuant to pursuant to Section 906 of Sarbanes-Oxley Act of 2002

101		Interactive Financial Data

		Cadence Bancorporation (Registrant)

Date: August 14, 2017		/s/ Paul B. Murphy
		Paul B. Murphy
		Chairman and Chief Executive Officer

Date: August 14, 2017		/s/ Valerie C. Toalson
		Valerie C. Toalson
		Executive Vice President and Chief Financial Officer