Note 11. Stockholders’ Equity

Common Shares Outstanding

Shares outstanding exclude treasury shares of 0.9 million and 1.2 million with a first-in-first-out cost basis of $18.5 million and $25.5 million at December 31, 2018 and 2017, respectively. Shares outstanding also exclude unvested restricted share awards of 1.3 million and 1.5 million at December 31, 2018 and 2017, respectively.

Stock Repurchase Program

On May 24, 2018, the Company’s board of directors approved a stock buyback program that authorized the repurchase of up to 5%, or approximately 4.3 million shares of its outstanding common stock. The approved program allows the Company to repurchase its common shares either in the open market in compliance with Rule 10b-18 promulgated under the Securities Exchange Act of 1934, as amended, or in privately negotiated transactions with non-affiliated sellers or as otherwise determined by the Company in one or more transactions, from time to time until December 31, 2019. The Company is not obligated to purchase any shares under this program, and the board of directors may terminate or amend the program at any time prior to the expiration date. During the fourth quarter of 2018, the Company repurchased 200,000 shares of its common stock at an average price of $41.30 per share.

Stock Issuance

On December 16, 2016, the Company completed the issuance and sale of 6.3 million shares of common stock at a purchase price of $41.00 per share for total proceeds of $259 million, net of issuance cost. A portion of the proceeds were to support the purchase of assets in the FNBC I transaction.

Accumulated Other Comprehensive Income (Loss)

A roll forward of the components of AOCI is included as follows:



(in thousands)	Available for Sale Securities		HTM Securities Transferred from AFS		Employee Benefit Plans		Cash Flow Hedges		Total
Balance, December 31, 2015	$	4,268	$	(16,795)	$	(67,890)	$	(178)	$	(80,595)
Net change in unrealized gain (loss)		(49,839)		—		—		(7,507)		(57,346)
Reclassification of net (gain) loss realized
and included in earnings		(1,912)		—		5,928		—		4,016
Valuation adjustment for employee benefit plans		—		—		(12,748)		—		(12,748)
Amortization of unrealized net loss on securities
transferred to held to maturity		—		3,830		—		—		3,830
Income tax expense (benefit)		(18,804)		1,427		(2,209)		(2,725)		(22,311)
Balance, December 31, 2016	$	(28,679)	$	(14,392)	$	(72,501)	$	(4,960)	$	(120,532)
Net change in unrealized (loss) gain		6,903		—		—		(7,328)		(425)
Reclassification of net loss realized
and included in earnings		—		—		5,201		600		5,801
Valuation adjustment for pension plan amendment		—		—		17,315		—		17,315
Other valuation adjustment for employee benefit plans		—		—		(10,929)		—		(10,929)
Amortization of unrealized net loss on securities
transferred to held to maturity		—		3,786		—		—		3,786
Income tax expense (benefit)		1,067		1,393		4,228		(2,600)		4,088
Reclassification of certain tax effects (a)		6,669		2,586		13,936		2,139		25,330
Balance, December 31, 2017	$	(29,512)	$	(14,585)	$	(79,078)	$	(11,227)	$	(134,402)
Net change in unrealized loss		(52,060)		—		—		(697)		(52,757)
Reclassification of net loss realized
and included in earnings		25,480		—		4,989		4,497		34,966
Other valuation adjustment for employee benefit plans		—		—		(45,198)		—		(45,198)
Amortization of unrealized net loss on securities
transferred to held to maturity		—		3,296		—		—		3,296
Income tax expense (benefit)		(5,967)		755		(9,040)		866		(13,386)
Balance, December 31, 2018	$	(50,125)	$	(12,044)	$	(110,247)	$	(8,293)	$	(180,709)

(a)

Represents the reclassification of stranded income tax effects to Retained Earnings upon adoption of ASU 2018-02. The adjustment is discussed in more detail later in this footnote.

AOCI is reported as a component of stockholders’ equity. AOCI includes unrealized gains and losses on available for sale (“AFS”) securities and unrealized losses on AFS securities that were transferred to held to maturity (“HTM”) securities in the third quarter of 2013. Such amounts on the transferred securities are being amortized over the estimated remaining life of the security as an adjustment to yield, offsetting the related amortization of the net premium created in the transfer. Subject to certain thresholds, unrealized losses on employee benefit plans will be reclassified into income as pension and post retirement costs are recognized over the remaining service period of plan participants. Accumulated gains/losses on the cash flow hedge of the variable-rate loans described in Note 10 - Derivatives will be reclassified into income over the life of the hedge. Gains (losses) in AOCI are net of deferred income taxes.

The following table shows the line items in the consolidated statements of income affected by amounts reclassified from AOCI:



Amount reclassified from AOCI (a)	Years Ended December 31,				Increase (decrease) in affected line
(in thousands)	2018		2017		item in the statements of income
Gain (loss) on sale of AFS securities	$	(25,480)	$	—	Securities transactions
Tax effect		5,720		—	Income taxes
Net of tax		(19,760)		—	Net income
Amortization of unrealized net loss on
securities transferred to HTM	$	(3,296)	$	(3,786)	Interest income
Tax effect		755		1,393	Income taxes
Net of tax		(2,541)		(2,393)	Net income
Amortization of defined benefit pension and
post-retirement items	$	(4,989)	$	(5,201)	Other noninterest expense
Tax effect		1,122		1,898	Income taxes
Net of tax		(3,867)		(3,303)	Net income
Reclassification of unrealized gain on cash flow hedges	$	1,072	$	—	Interest income
Tax effect		(244)		—	Income taxes
Net of tax		828		—	Net income
Amortization of loss on terminated cash flow hedges		(5,569)		(600)	Interest expense
Tax effect		1,269		232	Income taxes
Net of tax		(4,300)		(368)	Net income
Total reclassifications, net of tax	$	(30,468)	$	(6,064)	Net income

(a)

Amounts in parenthesis indicate reduction in net income.

Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income

The Company retrospectively adopted ASU 2018-02, “Income Statement – Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income.” The ASU was issued by the FASB in February 2018 to address the issue of other comprehensive income or loss that became stranded in AOCI as a result of the re-measurement of an entity’s deferred income tax assets and liabilities following the reduction of the U.S. federal corporate tax rate from 35% to 21%. In accordance with the guidance, the Company reclassified $25.3 million from Accumulated Other Comprehensive Loss to Retained Earnings. Refer to Note 1 – Summary of Significant Accounting Policies and Recent Accounting Pronouncements and Note 13 – Income Taxes for further discussion.

Regulatory Capital

Measures of regulatory capital are an important tool used by regulators to monitor the financial health of financial institutions. The primary quantitative measures used to gauge capital adequacy are Common equity tier 1, Tier 1 and Total regulatory capital to risk-weighted assets (risk-based capital ratios) and the Tier 1 capital to average total assets (leverage ratio). Both the Company and the Bank subsidiary are required to maintain minimum risk-based capital ratios of 8.0% total capital, 4.5% Tier 1 Common Equity, and 6.0% Tier 1 capital. The minimum leverage ratio is 3.0% for bank holding companies and banks that meet certain specified criteria, including having the highest supervisory rating. All others are required to maintain a leverage ratio of at least 4.0%.

To evaluate capital adequacy, regulators compare an institution’s regulatory capital ratios with their agency guidelines, as well as with the guidelines established as part of the uniform regulatory framework for prompt corrective supervisory action toward financial institutions. The framework for prompt corrective action categorizes capital levels into one of five classifications rating from well-capitalized to critically under-capitalized. For an institution to be eligible to be classified as well capitalized its total risk-based capital ratios must be at least 10.0% for total capital, 6.5% for Tier 1 Common Equity and 8.0% for Tier 1 capital, and its leverage ratio must be at least 5.0%. In reaching an overall conclusion on capital adequacy or assigning a classification under the uniform framework, regulators also consider other subjective and quantitative measures of risk associated with an institution. The Company and the Bank were deemed to be well capitalized based upon the most recent notifications from their regulators. There are no conditions or events since those notifications that management believes would change the classifications. At December 31, 2018 and 2017, the Company and the Bank were in compliance with all of their respective minimum regulatory capital requirements.

Following is a summary of the actual regulatory capital amounts and ratios for the Company and the Bank together with corresponding regulatory capital requirements at December 31, 2018 and 2017. The Company’s and Bank’s regulatory filings for quarters ending March 31, 2018 and prior were filed in the names of Hancock Holding Company and Whitney Bank, respectively.



	Actual			Required for Minimum Capital Adequacy			Required To Be Well Capitalized
($ in thousands)	Amount		Ratio %	Amount		Ratio %	Amount		Ratio %
At December 31, 2018
Tier 1 leverage capital
Hancock Whitney Corporation	$	2,391,762	8.67	$	1,103,544	4.00	$	1,379,430	5.00
Hancock Whitney Bank		2,351,090	8.54		1,101,372	4.00		1,376,715	5.00
Common equity tier 1 (to risk weighted assets)
Hancock Whitney Corporation	$	2,391,762	10.48	$	1,026,637	4.50	$	1,482,920	6.50
Hancock Whitney Bank		2,351,090	10.32		1,025,355	4.50		1,481,068	6.50
Tier 1 capital (to risk weighted assets)
Hancock Whitney Corporation	$	2,391,762	10.48	$	1,368,849	6.00	$	1,825,132	8.00
Hancock Whitney Bank		2,351,090	10.32		1,367,140	6.00		1,822,853	8.00
Total capital (to risk weighted assets)
Hancock Whitney Corporation	$	2,736,276	11.99	$	1,825,132	8.00	$	2,281,415	10.00
Hancock Whitney Bank		2,545,604	11.17		1,822,053	8.00		2,278,566	10.00
At December 31, 2017
Tier 1 leverage capital
Hancock Whitney Corporation	$	2,214,723	8.43	$	1,051,025	4.00	$	1,313,781	5.00
Hancock Whitney Bank		2,282,485	8.72		1,046,644	4.00		1,308,305	5.00
Common equity tier 1 (to risk weighted assets)
Hancock Whitney Corporation	$	2,214,723	10.21	$	976,303	4.50	$	1,410,216	6.50
Hancock Whitney Bank		2,282,485	10.54		974,362	4.50		1,407,412	6.50
Tier 1 capital (to risk weighted assets)
Hancock Whitney Corporation	$	2,214,723	10.21	$	1,301,738	6.00	$	1,735,650	8.00
Hancock Whitney Bank		2,282,485	10.54		1,299,150	6.00		1,732,200	8.00
Total capital (to risk weighted assets)
Hancock Whitney Corporation	$	2,582,031	11.90	$	1,735,650	8.00	$	2,169,563	10.00
Hancock Whitney Bank		2,499,793	11.55		1,732,200	8.00		2,165,250	10.00

Regulatory Restrictions on Dividends

Regulatory policy statements provide that generally bank holding companies should pay dividends only out of current operating earnings and that the level of dividends must be consistent with current and expected capital requirements. Dividends received from the Bank have been the primary source of funds available to the Company for the payment of dividends to its stockholders. Federal and state banking laws and regulations restrict the amount of dividends the Bank may distribute to the Company without prior regulatory approval, as well as the amount of loans it may make to the Company. Dividends paid by the Bank are subject to approval by the Commissioner of Banking and Consumer Finance of the State of Mississippi.