UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended March 31, 2014

or

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

For the transition period from                     to  

Commission File Number: 000-55106

BBVA Compass Bancshares, Inc.

(Exact name of registrant as specified in its charter)

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

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

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

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

Large accelerated filer o Accelerated filer o Non-accelerated filer þ Smaller reporting company o

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

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

Class	Outstanding at April 30, 2014
Common Stock (par value $0.01 per share)	222,950,751 shares

Explanatory Note

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

TABLE OF CONTENTS

		Page
Part I	Financial Information
Item 1.	Financial Statements (Unaudited)	7
	Condensed Consolidated Balance Sheets as of March 31, 2014 and December 31, 2013	7
	Condensed Consolidated Statements of Income for the three months ended March 31, 2014 and 2013	8
	Condensed Consolidated Statements of Comprehensive Income (Loss) for the three months ended March 31, 2014 and 2013	9
	Condensed Consolidated Statements of Shareholder's Equity for the three months ended March 31, 2014 and 2013	10
	Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2014 and 2013	11
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	58
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	83
Item 4.	Controls and Procedures	83
Part II	Other Information
Item 1.	Legal Proceedings	85
Item 1A.	Risk Factors	85
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	86
Item 3.	Defaults Upon Senior Securities	86
Item 4.	Mine Safety Disclosures	86
Item 5.	Other Information	86
Item 6.	Exhibits	87
Signatures		88

Glossary of Acronyms and Terms

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

AFS	Available For Sale
ASC	Accounting Standards Codification
ASU	Accounting Standards Update
Basel III	Global regulatory framework developed by the Basel Committee on Banking Supervision
Bank	Compass Bank
BBVA	Banco Bilbao Vizcaya Argentaria, S.A.
BBVA Compass	Registered trade name of Compass Bank
BBVA Group	BBVA and its consolidated subsidiaries
BOLI	Bank Owned Life Insurance
BSI	BBVA Securities Inc.
Capital Securities	Debentures issued by the Parent
Cash Flow Hedge	A hedge of a forecasted transaction or of the variability of cash flows to be received or paid related to a recognized asset or liability
CD	Certificate of Deposit
CESCE	Spanish Export Credit Agency
CFPB	Consumer Financial Protection Bureau
Company	BBVA Compass Bancshares, Inc. and its subsidiaries
Covered Assets	Loans and other real estate owned acquired from the FDIC subject to loss sharing agreements
Covered Loans	Loans acquired from the FDIC subject to loss sharing agreements
Dodd-Frank Act	Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010
ERM	Enterprise Risk Management
EVE	Economic Value of Equity
Exchange Act	Securities and Exchange Act of 1934, as amended
Fair Value Hedge	A hedge of the fair value of a recognized asset or liability or of an unrecognized firm commitment
FASB	Financial Accounting Standards Board
FDIC	Federal Deposit Insurance Corporation
Federal Reserve Board	Board of Governors of the Federal Reserve System
FHLB	Federal Home Loan Bank
FICO	Fair Isaac Corporation
Fifth Circuit	The United States Court of Appeals for the Fifth Circuit
FNMA	Federal National Mortgage Association
Guaranty Bank	Collectively, certain assets and liabilities of Guaranty Bank, acquired by the Company in 2009
HTM	Held To Maturity
IRS	Internal Revenue Service
Leverage Ratio	Ratio of Tier 1 capital to quarterly average on-balance sheet assets
MBOs	Mortgage Banking Officers
MSR	Mortgage Servicing Rights
NLRB	National Labor Relations Board
OREO	Other Real Estate Owned
OTTI	Other-Than-Temporary Impairment
Parent	BBVA Compass Bancshares, Inc.
Potential Problem Loans	Noncovered, commercial loans rated substandard or below, which do not meet the definition of nonaccrual, TDR, or 90 days past due and still accruing.

3

Purchased Impaired Loans	Loans with evidence of credit deterioration since acquisition for which it is probable all contractual payments will not be received that are accounted for under ASC Subtopic 310-30, Loans and Debt Securities Acquired with Deteriorated Credit Quality.
Purchased Nonimpaired Loans	Acquired loans with a fair value that is lower than the contractual amounts due that are not required to be accounted for in accordance with ASC Subtopic 310-30
SBA	Small Business Administration
SEC	Securities and Exchange Commission
Simple	Simple Finance Technology Corp
TBA	To be announced
TDR	Troubled Debt Restructuring
Tier 1 Risk-Based Capital Ratio	Ratio of Tier 1 capital to risk-weighted assets
Total Risk-Based Capital Ratio	Ratio of Total capital (the sum of Tier 1 capital and Tier 2 capital) to risk-weighted assets
U.S.	United States of America
U.S. Treasury	United States Department of the Treasury
U.S. Basel III final rule	Final rule to implement the Basel III capital framework in the United States
U.S. GAAP	Accounting principles generally accepted in the United States

4

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

Forward-Looking Statements

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

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

• disruptions to the credit and financial markets, either nationally or globally, including further downgrades of the U.S. government's credit rating and the failure of the European Union to stabilize the fiscal condition of member countries;

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

• legislative, regulatory or accounting changes, including changes resulting from the adoption and implementation of the Dodd-Frank Act, which may adversely affect our business and/or competitive position, impose additional costs on the Company or cause us to change our business practices;

• the Dodd-Frank Act's consumer protection regulations which could adversely affect the Company's business, financial condition or results of operations;

• the CFPB's residential mortgage regulations, which could adversely affect the Company's business, financial condition or results of operations;

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

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

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

• the Company is subject to certain risks related to originating and selling mortgages. It may be required to repurchase mortgage loans or indemnify mortgage loan purchases as a result of breaches of representations and warranties, borrower fraud or certain breaches of its servicing agreements, and this could harm the Company's liquidity, results of operations and financial condition;

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

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

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

• downgrades to the Company's credit ratings;

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

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

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

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

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

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

5

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

• changes in the creditworthiness of customers;

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

• potential changes in interchange fees;

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

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

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

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

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

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

6

PART I FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

BBVA COMPASS BANCSHARES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
	March 31, 2014			December 31, 2013
	(In Thousands)
Assets:
Cash and due from banks	$	4,257,226		$	3,563,349
Federal funds sold, securities purchased under agreements to resell and interest bearing deposits	16,446			35,111
Cash and cash equivalents	4,273,672			3,598,460
Trading account assets	342,963			319,930
Investment securities available for sale	8,533,722			8,313,085
Investment securities held to maturity (fair value of $1,397,111 and $1,405,258 at March 31, 2014 and December 31, 2013, respectively)	1,493,396			1,519,196
Loans held for sale (includes $101,615 and $139,750 measured at fair value at March 31, 2014 and December 31, 2013, respectively)	101,615			147,109
Loans	52,694,172			50,667,016
Allowance for loan losses	(707,665		)	(700,719		)
Net loans	51,986,507			49,966,297
Premises and equipment, net	1,387,812			1,420,988
Bank owned life insurance	687,200			683,224
Goodwill	5,077,223			4,971,645
Other intangible assets	107,110			109,040
Other real estate owned	25,817			23,228
Other assets	940,190			893,274
Total assets	$	74,957,227		$	71,965,476
Liabilities:
Deposits:
Noninterest bearing	$	16,322,699		$	15,377,844
Interest bearing	40,762,511			39,059,646
Total deposits	57,085,210			54,437,490
FHLB and other borrowings	4,257,587			4,298,707
Federal funds purchased and securities sold under agreements to repurchase	957,378			852,570
Other short-term borrowings	28,822			5,591
Accrued expenses and other liabilities	898,396			883,359
Total liabilities	63,227,393			60,477,717
Shareholder’s Equity:
Common stock — $0.01 par value:
Authorized — 300,000,000 shares
Issued — 222,950,751 and 220,723,876 shares at March 31, 2014 and December 31, 2013, respectively	2,230			2,207
Surplus	15,383,954			15,273,218
Retained deficit	(3,614,263		)	(3,728,737		)
Accumulated other comprehensive loss	(71,547		)	(87,936		)
Total BBVA Compass Bancshares, Inc. shareholder’s equity	11,700,374			11,458,752
Noncontrolling interests	29,460			29,007
Total shareholder’s equity	11,729,834			11,487,759
Total liabilities and shareholder’s equity	$	74,957,227		$	71,965,476

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

7

BBVA COMPASS BANCSHARES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
	Three Months Ended March 31,
	2014			2013
	(In Thousands)
Interest income:
Interest and fees on loans	$	508,506		$	539,754
Interest on investment securities available for sale	49,090			47,524
Interest on investment securities held to maturity	7,246			7,745
Interest on federal funds sold, securities purchased under agreements to resell and interest bearing deposits	47			40
Interest on trading account assets	516			738
Total interest income	565,405			595,801
Interest expense:
Interest on deposits	53,216			56,411
Interest on FHLB and other borrowings	16,364			15,792
Interest on federal funds purchased and securities sold under agreements to repurchase	500			580
Interest on other short-term borrowings	26			72
Total interest expense	70,106			72,855
Net interest income	495,299			522,946
Provision for loan losses	37,266			19,615
Net interest income after provision for loan losses	458,033			503,331
Noninterest income:
Service charges on deposit accounts	53,391			55,488
Card and merchant processing fees	24,304			24,624
Retail investment sales	26,564			24,379
Asset management fees	10,758			10,069
Corporate and correspondent investment sales	8,656			9,396
Mortgage banking income	4,276			11,470
Bank owned life insurance	3,967			4,405
Investment securities gains, net	16,434			14,955
Loss on prepayment of FHLB and other borrowings	(458		)	(1,107		)
Other	71,436			51,698
Total noninterest income	219,328			205,377
Noninterest expense:
Salaries, benefits and commissions	262,569			251,323
FDIC indemnification expense	31,618			86,307
Equipment	53,738			47,615
Professional services	46,399			39,274
Net occupancy	38,957			37,894
Amortization of intangibles	12,534			16,040
Securities impairment:
Other-than-temporary impairment	381			—
Less: non-credit portion recognized in other comprehensive income	235			—
Total securities impairment	146			—
Other	72,906			67,212
Total noninterest expense	518,867			545,665
Net income before income tax expense	158,494			163,043
Income tax expense	43,567			52,507
Net income	114,927			110,536
Less: net income attributable to noncontrolling interests	453			393
Net income attributable to shareholder	$	114,474		$	110,143

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

8

BBVA COMPASS BANCSHARES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited)
	Three Months Ended March 31,
	2014			2013
	(In Thousands)
Net income	$	114,927		$	110,536
Other comprehensive income (loss), net of tax:
Unrealized holding gains (losses) arising during period from securities available for sale	26,240			(3,140		)
Less: reclassification adjustment for net gains on sale of securities available for sale in net income	10,526			9,489
Net change in unrealized holding gains (losses) on securities available for sale	15,714			(12,629		)
Change in unamortized net holding losses on investment securities held to maturity	3,058			2,377
Less: non-credit related impairment on investment securities held to maturity	151			—
Change in unamortized non-credit related impairment on investment securities held to maturity	246			1,041
Net change in unamortized holding losses on securities held to maturity	3,153			3,418
Unrealized holding gains (losses) arising during period from cash flow hedge instruments	(807		)	1,383
Change in defined benefit plans	(1,671		)	644
Other comprehensive income (loss), net of tax	16,389			(7,184		)
Comprehensive income	131,316			103,352
Less: comprehensive income attributable to noncontrolling interests	453			393
Comprehensive income attributable to shareholder	$	130,863		$	102,959

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

9

BBVA COMPASS BANCSHARES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY (Unaudited)
	Common Stock		Surplus			Retained Deficit			Accumulated Other Comprehensive Income (Loss)			Non-controlling Interests		Total Shareholder’s Equity
	(In Thousands)
Balance, January 1, 2013	$	2,173	$	15,172,910		$	(4,146,573	)	$	26,058		$	29,005	$	11,083,573
Net income	—		—			110,143			—			393		110,536
Other comprehensive loss, net of tax	—		—			—			(7,184		)	—		(7,184		)
Vesting of restricted stock	—		(5,471		)	—			—			—		(5,471		)
Restricted stock retained to cover taxes	—		(570		)	—			—			—		(570		)
Amortization of stock-based deferred compensation	—		847			—			—			—		847
Balance, March 31, 2013	$	2,173	$	15,167,716		$	(4,036,430	)	$	18,874		$	29,398	$	11,181,731
Balance, January 1, 2014	$	2,207	$	15,273,218		$	(3,728,737	)	$	(87,936	)	$	29,007	$	11,487,759
Net income	—		—			114,474			—			453		114,927
Other comprehensive income, net of tax	—		—			—			16,389			—		16,389
Issuance of common stock	23		116,977			—			—			—		117,000
Vesting of restricted stock	—		(4,525		)	—			—			—		(4,525		)
Restricted stock retained to cover taxes	—		(2,266		)	—			—			—		(2,266		)
Amortization of stock-based deferred compensation	—		550			—			—			—		550
Balance, March 31, 2014	$	2,230	$	15,383,954		$	(3,614,263	)	$	(71,547	)	$	29,460	$	11,729,834

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

10

BBVA COMPASS BANCSHARES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
	Three Months Ended March 31,
	2014			2013
	(In Thousands)
Operating Activities:
Net income	$	114,927		$	110,536
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	65,110			42,550
Securities impairment	146			—
Amortization of intangibles	12,534			16,040
Accretion of discount, loan fees and purchase market adjustments, net	(50,201		)	(62,721		)
Net change in FDIC indemnification asset/liability	31,618			86,307
Provision for loan losses	37,266			19,615
Amortization of stock based compensation	550			847
Net change in trading account assets	(23,033		)	66,452
Net change in trading account liabilities	(10,444		)	(74,397		)
Net change in loans held for sale	45,494			122,509
Deferred tax expense	32,252			32,376
Investment securities gains, net	(16,434		)	(14,955		)
Loss on prepayment of FHLB and other borrowings	458			1,107
Loss on sale of premises and equipment	1,452			1,193
Loss on sale of student loans	75			—
Net loss on sale of other real estate and other assets	1,701			1,966
Loss on disposition	981			—
Increase in other assets	(123,144		)	(229,549		)
Increase (decrease) in other liabilities	4,830			(72,816		)
Net cash provided by operating activities	126,138			47,060
Investing Activities:
Proceeds from sales of investment securities available for sale	430,715			360,682
Proceeds from prepayments, maturities and calls of investment securities available for sale	315,980			537,859
Purchases of investment securities available for sale	(947,146		)	(1,861,638		)
Proceeds from prepayments, maturities and calls of investment securities held to maturity	30,787			83,820
Purchases of investment securities held to maturity	—			(52,830		)
Net change in loan portfolio	(2,070,125		)	(546,600		)
Purchase of premises and equipment	(15,941		)	(25,337		)
Proceeds from sale of premises and equipment	4,156			3,846
Net cash paid in acquisition	(96,651		)	—
Proceeds from sales of loans	54,310			19,958
Payments to FDIC for covered losses	(6,478		)	(16,250		)
Proceeds from sales of other real estate owned	4,630			10,976
Net cash used in investing activities	(2,295,763		)	(1,485,514		)
Financing Activities:
Net increase in demand deposits, NOW accounts and savings accounts	1,962,805			579,438
Net increase in time deposits	684,694			155,008
Net increase in federal funds purchased and securities sold under agreements to repurchase	104,808			24,361
Net increase in other short-term borrowings	23,231			9,482
Repayment of FHLB and other borrowings	(40,910		)	(201,630		)
Vesting of restricted stock	(4,525		)	(5,471		)
Restricted stock grants retained to cover taxes	(2,266		)	(570		)
Issuance of common stock	117,000			—
Net cash provided by financing activities	2,844,837			560,618
Net increase (decrease) in cash and cash equivalents	675,212			(877,836		)
Cash and cash equivalents at beginning of year	3,598,460			6,158,442
Cash and cash equivalents at end of period	$	4,273,672		$	5,280,606

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

11

BBVA COMPASS BANCSHARES, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(1) Basis of Presentation

General

The accounting and reporting policies of the Company and the methods of applying those policies that materially affect the consolidated financial statements conform with U.S. GAAP and with general financial services industry practices. The accompanying interim financial statements have been prepared in accordance with the rules and regulations of the SEC and, therefore, do not include all information and notes to the consolidated financial statements necessary for a complete presentation of financial position, results of operations, comprehensive income and cash flows in conformity with U.S. GAAP. In the opinion of management, all adjustments, consisting of normal and recurring items, necessary for the fair presentation of the consolidated financial statements have been included. Operating results for the three months ended March 31, 2014, are not necessarily indicative of the results that may be expected for the year ended December 31, 2014. These interim financial statements should be read in conjunction with the consolidated financial statements and notes thereto in the Company’s Annual Report on Form 10-K for the year-ended December 31, 2013.

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

Use of Estimates in the Preparation of Financial Statements

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

Recently Issued Accounting Standards

Obligations Resulting from Joint and Several Liability Arrangements with Fixed Obligations

In February 2013, the FASB released ASU 2013-04, Obligations Resulting from Joint and Several Liability Arrangements for Which the Total Amount of the Obligation Is Fixed at the Reporting Date (a consensus of the FASB Emerging Issues Task Force), which provides guidance for the recognition, measurement and disclosure of obligations resulting from joint and several liability arrangements for which the total amount of the obligation within the scope of this guidance is fixed at the reporting date, except for obligations addressed within existing guidance in U.S. GAAP. Examples of obligations within the scope of this ASU include debt arrangements, other contractual obligations, and settled litigation and judicial rulings. The guidance in this ASU requires an entity to measure obligations resulting from joint and several liability arrangements for which the total amount of the obligation within the scope of this guidance is fixed at the reporting date as the sum of (a) the amount the reporting entity agreed to pay on the basis of its arrangement among its co-obligors and (b) any additional amount the reporting entity expects to pay on behalf of its co-obligors. The guidance in this ASU also requires an entity to disclose the nature and amount of the obligations as well as other information about those obligations. The guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2013, with retrospective application and was adopted by the Company on January 1, 2014. The adoption of this standard did not have a material impact on the financial condition or results of operations of the Company.

Presentation of Unrecognized Tax Benefits

In July 2013, the FASB released ASU 2013-11, Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists. The ASU requires that an unrecognized tax benefit, or a portion of an unrecognized tax benefit, be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward. However, if a net operating loss carryforward, a similar tax loss, or a tax credit carryforward is not available at the reporting date under the tax law of the applicable jurisdiction to settle any additional income taxes that would result from the

12

disallowance of a tax position or the tax law of the applicable jurisdiction does not require the entity to use, and the entity does not intend to use, the deferred tax asset for such purpose, the unrecognized tax benefit should be presented in the financial statements as a liability and should not be combined with deferred tax assets. The ASU is effective for fiscal years, and interim periods within those years, beginning after December 15, 2013 and was adopted by the Company on January 1, 2014. The adoption of this standard did not have a material impact on the financial condition or results of operations of the Company.

Accounting for Investments in Qualified Affordable Housing Projects

In January 2014, the FASB released ASU 2014-01, Accounting for Investments in Qualified Affordable Housing Projects. The ASU provides guidance on accounting for investments by a reporting entity in flow-through limited liability entities that manage or invest in affordable housing projects that qualify for the low income housing tax credit. The amendments in this ASU permit reporting entities to make an accounting policy election to account for their investments in qualified affordable housing projects using the proportional amortization method if certain conditions are met. Under the proportional amortization method, an entity amortizes the initial 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. The amendments in this ASU should be applied retrospectively to all periods presented. A reporting entity that uses the effective yield method to account for its investments in qualified affordable housing projects before the date of adoption may continue to apply the effective yield method for those preexisting investments. The amendments in this ASU are effective for fiscal years, and interim periods within those years, beginning after December 15, 2014. Early adoption is permitted and the Company elected to early adopt the amendments in this ASU on January 1, 2014. The adoption of this standard did not have a material impact on the financial condition or results of operations of the Company.

Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure

In January 2014, the FASB released ASU 2014-04, Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure. The amendments in this ASU clarify that an in substance repossession or foreclosure occurs, and a creditor is considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan, upon either the creditor obtaining legal title to the residential real estate property upon completion of a foreclosure or the borrower conveying all interest in the residential real estate property to the creditor to satisfy that loan through completion of a deed in lieu of foreclosure or through a similar legal agreement. Additionally, the amendments require interim and annual disclosure of both the amount of foreclosed residential real estate property held by the creditor and the recorded investment in consumer mortgage loans collateralized by residential real estate property that are in the process of foreclosure according to local requirements of the applicable jurisdiction. The amendments in this ASU are effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2014. An entity can elect to adopt the amendments in this ASU using either a modified retrospective transition method or a prospective transition method. The adoption of this standard is not expected to have a material impact on the financial condition or results of operations of the Company.

(2)Acquisition Activities

Acquisition Activity

BBVA Securities Inc.

On April 8, 2013, BBVA contributed all of the outstanding stock of its wholly-owned subsidiary, BSI, to the Parent. BSI is a registered broker-dealer and engages in investment banking and institutional sales of fixed income securities. Because of the related nature of the Company and BSI, this transaction was accounted for as a merger of entities under common control resulting in all periods prior to the transaction being retrospectively adjusted to include the historical activity of BSI.

13

Simple Finance Technology Corp

On March 20, 2014, the Company acquired all of the voting equity interest of Simple, a U.S. based digital banking services firm. The Company acquired assets of approximately $2 million (including cash, premises and equipment, and other assets), assumed liabilities of approximately $2 million (including accounts payable, accrued payroll, and other liabilities), and recorded goodwill and other intangible assets of $118 million. Consideration for the acquisition included $98 million in cash as well as $16 million of contingent consideration. The Company recognized $3.5 million of acquisition-related costs in noninterest expense in the Company's Unaudited Condensed Consolidated Statement of Income for the three months ended March 31, 2014. The revenues and earnings of Simple were not material for the three months ended March 31, 2014.

This acquisition was accounted for under the acquisition method in accordance with FASB ASC Topic 805. Accordingly, the assets and liabilities, both tangible and intangible, were recorded at their estimated fair values as of the acquisition date. Due to the timing of the closing of the acquisition, the fair values of other intangibles recorded are subject to adjustment as additional information becomes available to indicate a more accurate or appropriate fair value for the intangibles during the measurement period, which is not to exceed one year from the acquisition date.

(3)Investment Securities Available for Sale and Investment Securities Held to Maturity

The following table presents the adjusted cost and approximate fair value of investment securities available for sale and investment securities held to maturity at March 31, 2014 and December 31, 2013.

	March 31, 2014
			Gross Unrealized
	Amortized Cost		Gains		Losses		Fair Value
	(In Thousands)
Investment securities available for sale:
Debt securities:
U.S. Treasury and other U.S. government agencies	$	405,131	$	4,112	$	2,488	$	406,755
Mortgage-backed securities	5,000,085		74,636		57,586		5,017,135
Collateralized mortgage obligations	2,060,307		21,846		9,425		2,072,728
States and political subdivisions	503,993		7,985		10,654		501,324
Other	28,257		83		71		28,269
Equity securities	507,440		71		—		507,511
Total	$	8,505,213	$	108,733	$	80,224	$	8,533,722
Investment securities held to maturity:
Collateralized mortgage obligations	$	141,213	$	17,131	$	4,076	$	154,268
Asset-backed securities	63,884		4,217		3,604		64,497
States and political subdivisions	1,211,553		1,086		121,116		1,091,523
Other	76,746		11,976		1,899		86,823
Total	$	1,493,396	$	34,410	$	130,695	$	1,397,111

14

	December 31, 2013
			Gross Unrealized
	Amortized Cost		Gains		Losses		Fair Value
	(In Thousands)
Investment securities available for sale:
Debt securities:
U.S. Treasury and other U.S. government agencies	$	257,844	$	4,338	$	1,245	$	260,937
Mortgage-backed securities	5,232,504		75,912		74,625		5,233,791
Collateralized mortgage obligations	1,747,450		23,312		14,364		1,756,398
States and political subdivisions	518,755		8,041		17,360		509,436
Other	40,415		27		109		40,333
Equity securities	512,136		54		—		512,190
Total	$	8,309,104	$	111,684	$	107,703	$	8,313,085
Investment securities held to maturity:
Collateralized mortgage obligations	$	145,989	$	19,848	$	3,900	$	161,937
Asset-backed securities	67,590		4,008		6,183		65,415
States and political subdivisions	1,225,977		843		139,816		1,087,004
Other	79,640		13,191		1,929		90,902
Total	$	1,519,196	$	37,890	$	151,828	$	1,405,258

In the above table, equity securities include $507 million and $512 million at March 31, 2014 and December 31, 2013, respectively, of FHLB and Federal Reserve stock carried at par.

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

15

The following table discloses the fair value and the gross unrealized losses of the Company’s available for sale securities and held to maturity securities that were in a loss position at March 31, 2014 and December 31, 2013. This information is aggregated by investment category and the length of time the individual securities have been in an unrealized loss position.

	March 31, 2014
	Securities in a loss position for less than 12 months				Securities in a loss position for 12 months or longer				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
	(In Thousands)
Investment securities available for sale:
Debt securities:
U.S. Treasury and other U.S. government agencies	$	213,744	$	2,488	$	—	$	—	$	213,744	$	2,488
Mortgage-backed securities	2,174,344		50,565		317,143		7,021		2,491,487		57,586
Collateralized mortgage obligations	633,690		4,302		144,565		5,123		778,255		9,425
States and political subdivisions	117,076		4,416		112,476		6,238		229,552		10,654
Other	4,977		71		—		—		4,977		71
Total	$	3,143,831	$	61,842	$	574,184	$	18,382	$	3,718,015	$	80,224
Investment securities held to maturity:
Collateralized mortgage obligations	$	12,423	$	138	$	31,221	$	3,938	$	43,644	$	4,076
Asset-backed securities	—		—		33,222		3,604		33,222		3,604
States and political subdivisions	197,406		14,535		740,273		106,581		937,679		121,116
Other	—		—		4,370		1,899		4,370		1,899
Total	$	209,829	$	14,673	$	809,086	$	116,022	$	1,018,915	$	130,695

	December 31, 2013
	Securities in a loss position for less than 12 months				Securities in a loss position for 12 months or longer				Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
	(In Thousands)
Investment securities available for sale:
Debt securities:
U.S. Treasury and other U.S. government agencies	$	119,871	$	1,245	$	—	$	—	$	119,871	$	1,245
Mortgage-backed securities	2,462,822		69,919		339,448		4,706		2,802,270		74,625
Collateralized mortgage obligations	699,693		9,123		108,710		5,241		808,403		14,364
States and political subdivisions	164,472		9,244		92,407		8,116		256,879		17,360
Other	4,939		109		—		—		4,939		109
Total	$	3,451,797	$	89,640	$	540,565	$	18,063	$	3,992,362	$	107,703
Investment securities held to maturity:
Collateralized mortgage obligations	$	1,466	$	17	$	32,370	$	3,883	$	33,836	$	3,900
Asset-backed securities	—		—		33,362		6,183		33,362		6,183
States and political subdivisions	313,438		26,760		642,799		113,056		956,237		139,816
Other	—		—		4,600		1,929		4,600		1,929
Total	$	314,904	$	26,777	$	713,131	$	125,051	$	1,028,035	$	151,828

16

As noted in the previous tables, at March 31, 2014, the Company held certain investment securities in unrealized loss positions. The Company does not have the intent to sell these securities and believes it is not more likely than not it will be required to sell these securities before their anticipated recovery.

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

Management does not believe that any individual unrealized loss in the Company’s investment securities available for sale or held to maturity portfolios, presented in the preceding tables, represents an OTTI at either March 31, 2014 or December 31, 2013, other than those noted below.

The following table discloses activity related to credit losses for debt securities where a portion of the OTTI was recognized in other comprehensive income for the three months ended March 31:

	2014		2013
	(In Thousands)
Balance, January 1	$	20,943	$	17,318
Reductions for securities paid off during the period (realized)	—		—
Additions for the credit component on debt securities in which OTTI was not previously recognized	—		—
Additions for the credit component on debt securities in which OTTI was previously recognized	146		—
Balance, March 31	$	21,089	$	17,318

During the three months ended March 31, 2014, OTTI recognized on held to maturity securities totaled $146 thousand, and for the three months ended March 31, 2013 there was no OTTI recognized. The investment securities primarily impacted by credit impairment are held to maturity non-agency collateralized mortgage obligations and asset-backed securities.

17

The maturities of the securities portfolios at March 31, 2014 are presented in the following table.

	Amortized Cost		Fair Value
	(In Thousands)
Investment securities available for sale:
Maturing within one year	$	18,787	$	19,222
Maturing after one but within five years	131,274		136,867
Maturing after five but within ten years	181,888		183,268
Maturing after ten years	605,432		596,991
	937,381		936,348
Mortgage-backed securities and collateralized mortgage obligations	7,060,392		7,089,863
Equity securities	507,440		507,511
Total	$	8,505,213	$	8,533,722
Investment securities held to maturity:
Maturing within one year	$	460	$	466
Maturing after one but within five years	315,331		296,964
Maturing after five but within ten years	264,994		249,781
Maturing after ten years	771,398		695,632
	1,352,183		1,242,843
Collateralized mortgage obligations	141,213		154,268
Total	$	1,493,396	$	1,397,111

The gross realized gains and losses recognized on sales of investment securities available for sale are shown in the table below.

	Three Months Ended March 31,
	2014		2013
	(In Thousands)
Gross gains	$	16,434	$	14,955
Gross losses	—		—
Net realized gains	$	16,434	$	14,955

18

(4) Loans and Allowance for Loan Losses

The following table presents the composition of the loan portfolio at March 31, 2014 and December 31, 2013.

	March 31, 2014		December 31, 2013
	(In Thousands)
Commercial loans:
Commercial, financial and agricultural	$	21,739,487	$	20,209,209
Real estate – construction	1,729,550		1,736,348
Commercial real estate – mortgage	9,303,028		9,106,329
Total commercial loans	32,772,065		31,051,886
Consumer loans:
Residential real estate – mortgage	12,986,374		12,706,879
Equity lines of credit	2,218,862		2,236,367
Equity loans	616,762		644,068
Credit card	634,266		660,073
Consumer – direct	513,797		516,572
Consumer – indirect	2,250,888		2,116,981
Total consumer loans	19,220,949		18,880,940
Covered loans	701,158		734,190
Total loans	$	52,694,172	$	50,667,016

Purchased Impaired Loans

Purchased Impaired Loans are recognized on the Company's Unaudited Condensed Consolidated Balance Sheets within loans, net of recorded discount. The following table presents the unpaid principal balance, discount, allowance for loan losses and carrying value of the Purchased Impaired Loans at March 31, 2014 and December 31, 2013.

	March 31, 2014			December 31, 2013
	(In Thousands)
Unpaid principal balance	$	434,620		$	449,429
Discount	(45,362		)	(60,069		)
Allowance for loan losses	(2,320		)	(243		)
Carrying value	$	386,938		$	389,117

Ananalysis of the accretable yield related to the Purchased Impaired Loans follows.

	Three Months Ended March 31,
	2014			2013
	(In Thousands)
Balance, January 1,	$	105,698		$	136,992
Transfer (to) from nonaccretable difference	(8,162		)	8,354
Accretion	(16,172		)	(17,180		)
Other	—			2,383
Balance, March 31,	$	81,364		$	130,549

The Company had allowances of $2.3 million and $243 thousand related to Purchased Impaired Loans at March 31, 2014 and December 31, 2013, respectively. During the three months ended March 31, 2014 and 2013, the Company recognized $(10.8) million and $(5.2) million, respectively, of provision for loan losses attributable to credit improvements subsequent to acquisition of these loans.

19

Purchased Nonimpaired Loans

At acquisition, Purchased Nonimpaired Loans were determined to have fair value discounts, some of which were related to credit. The portion of the fair value discount not related to credit is being accreted to interest income over the expected remaining life of the loans based on expected cash flows. For the three months ended March 31, 2014 and 2013 approximately $37.8 million and $93.3 million, respectively, of interest income was recognized on these loans. The discount related to credit on the Purchased Nonimpaired Loans is reviewed for adequacy at each balance sheet date. If the expected losses exceed the credit discount, an allowance for loan losses is provided. If the expected losses are reduced, the related credit discount is accreted to interest income over the expected remaining life of the loans.

The following table presents the unpaid principal balance, discount, allowance for loan losses, and carrying value of the Purchased Nonimpaired Loans at March 31, 2014 and December 31, 2013.

	March 31, 2014			December 31, 2013
	(In Thousands)
Unpaid principal balance	$	463,311		$	520,723
Discount	(151,411		)	(175,893		)
Allowance for loan losses	(5,745		)	(2,711		)
Carrying value	$	306,155		$	342,119

The following table reflects the recorded investment in all covered Purchased Impaired Loans and Purchased Nonimpaired Loans at March 31, 2014 and December 31, 2013.

	March 31, 2014						December 31, 2013
	Purchased Impaired Loans		Purchased Nonimpaired Loans		Total Covered Loans		Purchased Impaired Loans		Purchased Nonimpaired Loans		Total Covered Loans
	(In Thousands)
Commercial, financial and agricultural	$	—	$	46,324	$	46,324	$	—	$	40,892	$	40,892
Commercial real estate (1)	6,362		111,194		117,556		4,760		141,333		146,093
Residential real estate – mortgage (2)	382,896		147,702		530,598		384,588		155,452		540,040
Consumer loans	—		6,680		6,680		12		7,153		7,165
Total loans	$	389,258	$	311,900	$	701,158	$	389,360	$	344,830	$	734,190

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

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

20

FDIC Indemnification Asset (Liability)

The Company has entered into loss sharing agreements with the FDIC that require the FDIC to reimburse the Bank for losses with respect to covered loans and covered OREO. See Note 8, Commitments, Contingencies and Guarantees, for additional information related to the loss sharing agreements. A summary of the activity in the FDIC indemnification asset (liability) for the three months ended March 31, 2014 and 2013 follows.

	2014			2013
	(In Thousands)
Balance at January 1,	$	24,315		$	271,928
Increase (decrease) due to credit loss provision (benefit) recorded on FDIC covered loans	5,061			(4,411		)
Amortization	(36,823		)	(81,214		)
Payments to FDIC for covered losses	6,478			16,250
Other	144			(682		)
Balance at March 31,	$	(825	)	$	201,871

Other adjustments include those resulting from the change in loss estimates related to OREO as a result of changes in expected cash flows as well as adjustments resulting from amounts owed to the FDIC for unexpected recoveries of amounts previously charged off.

Allowance for Loan Losses and Credit Quality

The following table, which excludes loans held for sale, presents a summary of the activity in the allowance for loan losses for the three months ended March 31, 2014 and 2013. The portion of the allowance that has not been identified by the Company as related to specific loan categories has been allocated to the individual loan categories on a pro rata basis for purposes of the table below:

	Commercial, Financial and Agricultural			Commercial Real Estate (1)			Residential Real Estate (2)			Consumer (3)			Covered			Total Loans
	(In Thousands)
Three months ended March 31, 2014
Allowance for loan losses:
Beginning balance	$	292,327		$	158,960		$	155,575		$	90,903		$	2,954		$	700,719
Provision charged to income	7,501			(4,722		)	12,673			16,829			4,985			37,266
Loans charged off	(4,934		)	(2,646		)	(15,708		)	(21,704		)	(216		)	(45,208		)
Loan recoveries	4,985			1,538			2,694			5,329			342			14,888
Net charge offs	51			(1,108		)	(13,014		)	(16,375		)	126			(30,320		)
Ending balance	$	299,879		$	153,130		$	155,234		$	91,357		$	8,065		$	707,665
Three months ended March 31, 2013
Allowance for loan losses:
Beginning balance	$	283,058		$	254,324		$	172,265		$	75,403		$	17,803		$	802,853
Provision charged to income	22,908			(25,829		)	12,964			14,822			(5,250		)	19,615
Loans charged off	(6,322		)	(6,618		)	(22,980		)	(18,221		)	(1,269		)	(55,410		)
Loan recoveries	5,197			5,493			2,153			5,327			790			18,960
Net charge offs	(1,125		)	(1,125		)	(20,827		)	(12,894		)	(479		)	(36,450		)
Ending balance	$	304,841		$	227,370		$	164,402		$	77,331		$	12,074		$	786,018

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

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

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

21

The table below provides a summary of the allowance for loan losses and related loan balances by portfolio as of March 31, 2014 and December 31, 2013:

	Commercial, Financial and Agricultural		Commercial Real Estate (1)		Residential Real Estate (2)		Consumer (3)		Covered		Total Loans
	(In Thousands)
March 31, 2014
Ending balance of allowance attributable to loans:
Individually evaluated for impairment	$	31,905	$	9,527	$	40,857	$	1,243	$	—	$	83,532
Collectively evaluated for impairment	267,974		143,603		114,377		90,114		—		616,068
Covered purchased impaired	—		—		—		—		2,320		2,320
Covered purchased nonimpaired	—		—		—		—		5,745		5,745
Total allowance for loan losses	$	299,879	$	153,130	$	155,234	$	91,357	$	8,065	$	707,665
Loans:
Ending balance of loans:
Individually evaluated for impairment	$	103,320	$	136,491	$	192,262	$	1,318	$	—	$	433,391
Collectively evaluated for impairment	21,636,167		10,896,087		15,629,736		3,397,633		—		51,559,623
Covered purchased impaired	—		—		—		—		389,258		389,258
Covered purchased nonimpaired	—		—		—		—		311,900		311,900
Total loans	$	21,739,487	$	11,032,578	$	15,821,998	$	3,398,951	$	701,158	$	52,694,172
December 31, 2013
Ending balance of allowance attributable to loans:
Individually evaluated for impairment	$	28,828	$	9,408	$	41,989	$	1,526	$	—	$	81,751
Collectively evaluated for impairment	263,499		149,552		113,586		89,377		—		616,014
Covered purchased impaired	—		—		—		—		243		243
Covered purchased nonimpaired	—		—		—		—		2,711		2,711
Total allowance for loan losses	$	292,327	$	158,960	$	155,575	$	90,903	$	2,954	$	700,719
Loans:
Ending balance of loans:
Individually evaluated for impairment	$	138,047	$	167,598	$	196,723	$	1,625	$	—	$	503,993
Collectively evaluated for impairment	20,071,162		10,675,079		15,390,591		3,292,001		—		49,428,833
Covered purchased impaired	—		—		—		—		389,360		389,360
Covered purchased nonimpaired	—		—		—		—		344,830		344,830
Total loans	$	20,209,209	$	10,842,677	$	15,587,314	$	3,293,626	$	734,190	$	50,667,016

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

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

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

22

The following table presents information on individually analyzed impaired loans, by loan class, as of March 31, 2014 and December 31, 2013.

	March 31, 2014
	Individually Analyzed Impaired Loans With No Recorded Allowance						Individually Analyzed Impaired Loans With a Recorded Allowance
	Recorded Investment		Unpaid Principal Balance		Allowance		Recorded Investment		Unpaid Principal Balance		Allowance
	(In Thousands)
Commercial, financial and agricultural	$	8,593	$	16,098	$	—	$	94,727	$	107,519	$	31,905
Real estate – construction	4,850		5,623		—		3,788		4,507		615
Commercial real estate – mortgage	13,611		14,432		—		114,242		120,550		8,912
Residential real estate – mortgage	1,875		1,875		—		111,371		111,557		6,562
Equity lines of credit	—		—		—		23,594		23,628		23,594
Equity loans	—		—		—		55,422		55,569		10,701
Credit card	—		—		—		—		—		—
Consumer – direct	—		—		—		151		151		76
Consumer – indirect	—		—		—		1,167		1,167		1,167
Total loans	$	28,929	$	38,028	$	—	$	404,462	$	424,648	$	83,532

	December 31, 2013
	Individually Analyzed Impaired Loans With No Recorded Allowance						Individually Analyzed Impaired Loans With a Recorded Allowance
	Recorded Investment		Unpaid Principal Balance		Allowance		Recorded Investment		Unpaid Principal Balance		Allowance
	(In Thousands)
Commercial, financial and agricultural	$	19,984	$	27,639	$	—	$	118,063	$	138,092	$	28,828
Real estate – construction	1,314		1,555		—		9,248		10,812		836
Commercial real estate – mortgage	51,303		54,821		—		105,733		112,177		8,572
Residential real estate – mortgage	1,906		1,906		—		115,550		115,734		7,378
Equity lines of credit	—		—		—		23,593		24,021		23,190
Equity loans	—		—		—		55,674		55,794		11,421
Credit card	—		—		—		—		—		—
Consumer – direct	—		—		—		182		181		83
Consumer – indirect	—		—		—		1,443		1,443		1,443
Total loans	$	74,507	$	85,921	$	—	$	429,486	$	458,254	$	81,751

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The following table presents information on individually analyzed impaired loans, by loan class, for the three months ended March 31, 2014, and 2013.

	Three Months Ended March 31, 2014				Three Months Ended March 31, 2013
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
	(In Thousands)
Commercial, financial and agricultural	$	126,821	$	245	$	111,648	$	356
Real estate – construction	10,120		63		110,853		391
Commercial real estate – mortgage	141,347		942		235,113		1,054
Residential real estate – mortgage	114,965		719		170,407		1,082
Equity lines of credit	23,403		250		—		—
Equity loans	55,027		425		24,653		253
Credit card	—		—		—		—
Consumer – direct	158		1		131		2
Consumer – indirect	1,265		1		—		—
Total loans	$	473,106	$	2,646	$	652,805	$	3,138

The tables above do not include Purchased Impaired Loans or loans held for sale. At March 31, 2014, there were $6.4 million, $10.7 million and $368 thousand of recorded investment, unpaid principal balance and allowance for loan losses on covered Purchased Impaired Loans with credit deterioration subsequent to acquisition that were individually analyzed for impairment, respectively. At December 31, 2013, there were $4.8 million, $10.9 million, and $243 thousand of recorded investment, unpaid principal balance and allowance for loan losses on covered Purchased Impaired Loans with credit deterioration subsequent to acquisition that were individually analyzed for impairment, respectively. Covered Purchased Nonimpaired Loans are not included in the tables above as they are evaluated collectively on a pool basis and not on an individual basis.

Detailed information on the Company's allowance for loan losses methodology and the Company's impaired loan policy are included in the Company's Consolidated Financial Statements in the Annual Report on Form 10-K for the year ended December 31, 2013.

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

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

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

• Internally assigned letter grades “CCC-” through “D1” correspond to the regulatory classification “Substandard.” A loan classified as substandard is inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined

24

weakness, or weaknesses, that jeopardize the liquidation of the loan. They are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected.

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

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

The following tables, which exclude loans held for sale and covered loans, illustrate the credit quality indicators associated with the Company’s loans, by loan class, as of March 31, 2014 and December 31, 2013.

	Commercial
	March 31, 2014
	Commercial, Financial and Agricultural		Real Estate - Construction		Commercial Real Estate - Mortgage
	(In Thousands)
Noncovered loans:
Pass	$	21,146,673	$	1,707,629	$	8,824,454
Special Mention	355,008		7,750		239,105
Substandard	190,735		12,756		213,668
Doubtful	47,071		1,415		25,801
	$	21,739,487	$	1,729,550	$	9,303,028

	December 31, 2013
	Commercial, Financial and Agricultural		Real Estate - Construction		Commercial Real Estate - Mortgage
	(In Thousands)
Noncovered loans:
Pass	$	19,582,014	$	1,707,719	$	8,562,261
Special Mention	353,638		9,918		271,500
Substandard	261,995		17,112		243,042
Doubtful	11,562		1,599		29,526
	$	20,209,209	$	1,736,348	$	9,106,329

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	Consumer
	March 31, 2014
	Residential Real Estate – Mortgage		Equity Lines of Credit		Equity Loans		Credit Card		Consumer - Direct		Consumer –Indirect
	(In Thousands)
Noncovered loans:
Performing	$	12,876,016	$	2,180,399	$	595,728	$	624,301	$	510,628	$	2,249,042
Nonperforming	110,358		38,463		21,034		9,965		3,169		1,846
	$	12,986,374	$	2,218,862	$	616,762	$	634,266	$	513,797	$	2,250,888

	December 31, 2013
	Residential Real Estate -Mortgage		Equity Lines of Credit		Equity Loans		Credit Card		Consumer -Direct		Consumer –Indirect
	(In Thousands)
Noncovered loans:
Performing	$	12,601,515	$	2,199,827	$	621,897	$	649,796	$	513,630	$	2,113,918
Nonperforming	105,364		36,540		22,171		10,277		2,942		3,063
	$	12,706,879	$	2,236,367	$	644,068	$	660,073	$	516,572	$	2,116,981

Covered loans are excluded from the table above as an initial estimate of credit losses was embedded within the initial purchase discount established at acquisition. Periodically, the Company updates its estimated cash flows related to these covered loans. Increases in these updated cash flows over those expected at the purchase date are recognized as interest income prospectively. Decreases in estimated cash flows after the purchase date are recognized by recording an allowance for credit losses. Generally, since the acquisition of these covered loans, there has been considerable improvement in the expected credit losses with some minimal deterioration in credit quality seen within specific loans and pools of loans. To account for the subsequent deterioration in credit, an allowance for loan losses of $8 million was recorded on the $701 million covered portfolio at March 31, 2014 and an allowance for loan losses of $3 million was recorded on the $734 million covered loans portfolio at December 31, 2013.

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The following tables present an aging analysis of the Company’s past due loans as of March 31, 2014 and December 31, 2013, excluding loans classified as held for sale and Purchased Impaired Loans.

	March 31, 2014
	30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due		Nonaccrual		Accruing TDRs		Total Past Due and Impaired		Not Past Due or Impaired		Total
	(In Thousands)
Commercial, financial and agricultural	$	10,240	$	2,277	$	1,403	$	103,133	$	21,244	$	138,297	$	21,601,190	$	21,739,487
Real estate – construction	3,346		147		1,337		10,999		2,436		18,265		1,711,285		1,729,550
Commercial real estate – mortgage	12,173		3,070		626		106,295		59,543		181,707		9,121,321		9,303,028
Residential real estate – mortgage	42,003		15,432		2,632		107,601		72,043		239,711		12,746,663		12,986,374
Equity lines of credit	10,249		9,068		5,285		33,178		—		57,780		2,161,082		2,218,862
Equity loans	8,410		3,970		825		20,130		43,078		76,413		540,349		616,762
Credit card	5,742		4,254		9,965		—		—		19,961		614,305		634,266
Consumer – direct	7,375		1,509		2,814		355		79		12,132		501,665		513,797
Consumer – indirect	18,980		3,569		497		1,349		—		24,395		2,226,493		2,250,888
Covered loans	738		8,682		3,988		5,555		3,856		22,819		289,081		311,900
Total loans	$	119,256	$	51,978	$	29,372	$	388,595	$	202,279	$	791,480	$	51,513,434	$	52,304,914

	December 31, 2013
	30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due		Nonaccrual		Accruing TDRs		Total Past Due and Impaired		Not Past Due or Impaired		Total
	(In Thousands)
Commercial, financial and agricultural	$	9,485	$	6,111	$	2,212	$	128,231	$	25,548	$	171,587	$	20,037,622	$	20,209,209
Real estate – construction	4,258		1,862		240		14,183		3,801		24,344		1,712,004		1,736,348
Commercial real estate – mortgage	9,521		4,869		797		129,672		59,727		204,586		8,901,743		9,106,329
Residential real estate – mortgage	48,597		22,629		2,460		102,904		74,236		250,826		12,456,053		12,706,879
Equity lines of credit	12,230		6,252		5,109		31,431		—		55,022		2,181,345		2,236,367
Equity loans	7,630		3,170		1,167		20,447		42,850		75,264		568,804		644,068
Credit card	5,955		4,676		10,277		—		—		20,908		639,165		660,073
Consumer – direct	8,736		3,000		2,402		540		91		14,769		501,803		516,572
Consumer – indirect	24,945		5,276		1,540		1,523		—		33,284		2,083,697		2,116,981
Covered loans	1,247		290		4,122		5,425		3,455		14,539		330,291		344,830
Total loans	$	132,604	$	58,135	$	30,326	$	434,356	$	209,708	$	865,129	$	49,412,527	$	50,277,656

Policies related to the Company's nonaccrual and past due loans are included in the Company's Consolidated Financial Statements in the Annual Report on Form 10-K for the year ended December 31, 2013.

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It is the Company’s policy to classify TDRs that are not accruing interest as nonaccrual loans. It is also the Company’s policy to classify TDR past due loans that are accruing interest as TDRs and not according to their past due status. The tables above reflect this policy. The following table provides a breakout of TDRs, including nonaccrual loans and covered loans and excluding loans classified as held for sale, at March 31, 2014 and December 31, 2013.

	March 31, 2014
	30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due		Nonaccrual		Total Past Due and Nonaccrual		Not Past Due or Nonaccrual		Total
	(In Thousands)
Commercial, financial and agricultural	$	—	$	—	$	—	$	19,679	$	19,679	$	21,244	$	40,923
Real estate – construction	31		—		—		173		204		2,405		2,609
Commercial real estate – mortgage	589		2,299		—		7,570		10,458		56,655		67,113
Residential real estate – mortgage	1,592		380		125		29,097		31,194		69,946		101,140
Equity lines of credit	—		—		—		23,628		23,628		—		23,628
Equity loans	1,762		654		79		12,613		15,108		40,583		55,691
Credit card	—		—		—		—		—		—		—
Consumer – direct	—		—		—		72		72		79		151
Consumer – indirect	—		—		—		1,167		1,167		—		1,167
Covered loans	29		—		—		2,469		2,498		3,827		6,325
Total loans	$	4,003	$	3,333	$	204	$	96,468	$	104,008	$	194,739	$	298,747

	December 31, 2013
	30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due		Nonaccrual		Total Past Due and Nonaccrual		Not Past Due or Nonaccrual		Total
	(In Thousands)
Commercial, financial and agricultural	$	5	$	—	$	—	$	20,498	$	20,503	$	25,543	$	46,046
Real estate – construction	32		50		—		181		263		3,719		3,982
Commercial real estate – mortgage	2,345		—		—		13,910		16,255		57,382		73,637
Residential real estate – mortgage	3,755		2,747		760		30,492		37,754		66,974		104,728
Equity lines of credit	—		—		—		24,592		24,592		—		24,592
Equity loans	1,799		1,022		557		12,823		16,201		39,472		55,673
Credit card	—		—		—		—		—		—		—
Consumer – direct	—		—		—		90		90		91		181
Consumer – indirect	—		—		—		1,443		1,443		—		1,443
Covered loans	$	21	$	—	$	—	$	5,428	$	5,449	$	3,434	$	8,883
Total loans	$	7,957	$	3,819	$	1,317	$	109,457	$	122,550	$	196,615	$	319,165

As of March 31, 2014 there were no loans held for sale classified as TDRs. At December 31, 2013 there were $3.6 million of nonaccrual loans held for sale classified as TDRs.

Modifications to a borrower’s loan agreement are considered TDRs if a concession is granted for economic or legal reasons related to a borrower’s financial difficulties that otherwise would not be considered. Within each of the Company’s loan classes, TDRs typically involve modification of the loan interest rate to a below market rate or an extension or deferment of the loan. During the three months ended March 31, 2014, $2.4 million of TDR modifications

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included an interest rate concession and $7.0 million of TDR modifications resulted from modifications to the loan’s structure. During the three months ended March 31, 2013, $13.1 million of TDR modifications included an interest rate concession and $4.3 million of TDR modifications resulted from modifications to the loan’s structure.

The following table presents an analysis of the types of loans that were restructured and classified as TDRs during the three months ended March 31, 2014 and 2013, excluding loans classified as held for sale.

	Three Months Ended March 31, 2014			Three Months Ended March 31, 2013
	Number of Contracts	Post-Modification Outstanding Recorded Investment		Number of Contracts	Post-Modification Outstanding Recorded Investment
	(Dollars in Thousands)
Commercial, financial and agricultural	—	$	—	3	$	4,356
Real estate – construction	—	—		2	2,406
Commercial real estate – mortgage	6	3,930		5	3,204
Residential real estate – mortgage	10	994		32	5,381
Equity lines of credit	49	2,302		—	—
Equity loans	18	1,987		26	1,957
Credit card	—	—		—	—
Consumer – direct	—	—		—	—
Consumer – indirect	18	202		—	—
Covered loans	—	—		1	48

For the three months ended March 31, 2014 and 2013, charge-offs and changes to the allowance related to modifications classified as TDRs were not material.

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

The following tables provide a summary of initial subsequent defaults that occurred during the three months ended March 31, 2014 and 2013 that occurred within one year of the restructure date. The table excludes loans classified as held for sale as of period-end and includes loans no longer in default as of period-end.

	Three Months Ended March 31, 2014			Three Months Ended March 31, 2013
	Number of Contracts	Recorded Investment at Default		Number of Contracts	Recorded Investment at Default
	(Dollars in Thousands)
Commercial, financial and agricultural	—	$	—	1	$	9,531
Real estate – construction	—	—		—	—
Commercial real estate – mortgage	—	—		—	—
Residential real estate – mortgage	—	—		6	2,013
Equity lines of credit	3	275		—	—
Equity loans	1	63		1	54
Credit card	—	—		—	—
Consumer – direct	—	—		—	—
Consumer – indirect	—	—		—	—
Covered loans	—	—		—	—

The Company’s allowance for loan losses is largely driven by updated risk ratings assigned to commercial loans, updated borrower credit scores on consumer loans, and borrower delinquency history in both commercial and consumer portfolios.  As such, the provision for loan losses is impacted primarily by changes in borrower payment performance

29

rather than TDR classification.  In addition, all commercial and consumer loans modified in a TDR are considered to be impaired, even if they maintain their accrual status.

At March 31, 2014 and December 31, 2013, there were $1.4 million and $3.9 million, respectively, of commitments to lend additional funds to borrowers owing loans whose terms have been modified in a TDR.

(5)Loan Sales and Servicing

The following table presents the composition of the loans held for sale portfolio at March 31, 2014 and December 31, 2013.

	March 31, 2014		December 31, 2013
	(In Thousands)
Loans held for sale:
Real estate – construction	$	—	$	4,447
Commercial real estate – mortgage	—		2,912
Residential real estate – mortgage	101,615		139,750
Total loans held for sale	$	101,615	$	147,109

During the three months ended March 31, 2014 and 2013 no loans were transferred from the held for investment portfolio to loans held for sale. The Company sold loans and loans held for sale with a recorded balance of $62 million and $20 million, excluding loans originated for sale in the secondary market, during the three months ended March 31, 2014 and 2013, respectively.

Sales of residential real estate – mortgage loans originated for sale in the secondary market, including loans originated for sale where the Company retained servicing responsibilities, were $188 million and $493 million for the three months ended March 31, 2014 and 2013, respectively. The Company recognized net gains of $4.1 million and $13.1 million on the sale of residential mortgage loans originated for sale during the three months ended March 31, 2014 and 2013, respectively. These gains were recorded in mortgage banking income in the Company’s Unaudited Condensed Consolidated Statements of Income.

Residential Real Estate Mortgage Loans Sold with Retained Servicing

During the three months ended March 31, 2014 and 2013, the Company sold $188 million and $476 million, respectively, of residential mortgage loans originated for sale where the Company retained servicing responsibilities. For these sold loans, there is no recourse to the Company for the failures of debtors to pay when due. At March 31, 2014 and December 31, 2013, the Company was servicing $2.9 billion and $2.7 billion, respectively, of residential mortgage loans sold with retained servicing. These loans are not included in loans on the Company’s Unaudited Condensed Consolidated Balance Sheets.

In connection with residential mortgage loans sold with retained servicing, the Company receives annual servicing fees based on a percentage of the outstanding balance. The Company recognized servicing fees of $3.6 million and $866 thousand during the three months ended March 31, 2014 and 2013, respectively, as a component of other noninterest income in the Company’s Unaudited Condensed Consolidated Statements of Income. At March 31, 2014 and December 31, 2013, the Company had recorded $32 million and $30 million of servicing assets, respectively, under the fair value method in other assets on the Company’s Unaudited Condensed Consolidated Balance Sheets.

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

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The following table is an analysis of the activity in the Company’s residential MSRs for the three months ended March 31, 2014 and 2013:

	Three Months Ended March 31,
	2014			2013
	(In Thousands)
Carrying value, January 1	$	30,065		$	13,255
Additions	2,083			5,261
Increase (decrease) in fair value:
Due to changes in valuation inputs or assumptions	291			336
Due to other changes in fair value (1)	(611		)	(381		)
Carrying value, March 31	$	31,828		$	18,471

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

See Note 9, Fair Value of Financial Instruments, for additional disclosures related to the assumptions and estimates used in determining fair value of residential MSRs.

At March 31, 2014 and December 31, 2013, the sensitivity of the current fair value of the residential MSRs to immediate 10% and 20% adverse changes in key economic assumptions are included in the following table:

	March 31, 2014			December 31, 2013
	(Dollars in Thousands)
Fair value of residential mortgage servicing rights	$	31,828		$	30,065
Composition of residential loans serviced for others:
Fixed rate mortgage loans	96.5		%	96.4		%
Adjustable rate mortgage loans	3.5			3.6
Total	100.0		%	100.0		%
Weighted average life (in years)	6.8			6.9
Prepayment speed:	9.2		%	8.8		%
Effect on fair value of a 10% increase	$	(878	)	$	(743	)
Effect on fair value of a 20% increase	(1,748		)	(1,492		)
Weighted average discount rate:	10.0		%	10.0		%
Effect on fair value of a 10% increase	$	(1,229	)	$	(1,167	)
Effect on fair value of a 20% increase	(2,367		)	(2,247		)

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

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(6)Derivatives and Hedging

The Company is a party to derivative instruments in the normal course of business for trading purposes and for purposes other than trading to meet the financing needs of its customers and to reduce its own exposure to fluctuations in interest rates and foreign currency exchange rates. The Company has made an accounting policy decision to not offset fair value amounts under master netting agreements. See Summary of Significant Accounting Policies in the Notes to Consolidated Financial Statements in the Company's Annual Report on Form 10-K for the year ended December 31, 2013 for additional information on the Company's accounting policies related to derivative instruments and hedging activities. The following table reflects the notional amount and fair value of derivative instruments included on the Company’s Unaudited Condensed Consolidated Balance Sheets on a gross basis as of March 31, 2014 and December 31, 2013.

	March 31, 2014						December 31, 2013
			Fair Value						Fair Value
	Notional Amount		Derivative Assets (1)		Derivative Liabilities (2)		Notional Amount		Derivative Assets (1)		Derivative Liabilities (2)
	(In Thousands)
Derivatives designated as hedging instruments:
Fair value hedges:
Interest rate swaps related to long-term debt	$	423,950	$	66,688	$	—	$	423,950	$	67,623	$	—
Total fair value hedges			66,688		—				67,623		—
Cash flow hedges:
Interest rate contracts:
Swaps related to commercial loans	200,000		3,259		—		200,000		3,652		—
Swaps related to FHLB advances	320,000		—		12,734		320,000		—		11,862
Total cash flow hedges			3,259		12,734				3,652		11,862
Total derivatives designated as hedging instruments			$	69,947	$	12,734			$	71,275	$	11,862
Free-standing derivatives not designated as hedging instruments:
Free-standing derivative instruments-risk management and other purposes:
Interest rate contracts:
Forward contracts related to held for sale mortgages	$	130,900	$	262	$	146	$	171,364	$	1,727	$	56
Equity contracts:
Purchased equity option related to equity-linked CDs	630,438		51,653		—		588,377		47,875		—
Swap associated with sale of Visa, Inc. Class B shares	48,225		—		1,206		49,748		—		1,244
Foreign exchange contracts:
Forwards related to commercial loans	564,138		520		3,095		424,797		1,072		2,690
Spots related to commercial loans	23,430		30		2		41,133		55		56
Total free-standing derivative instruments-risk management and other purposes			$	52,465	$	4,449			$	50,729	$	4,046
Free-standing derivative instruments – customer accommodation:
Futures contracts (3)	$	602,000	$	—	$	—	$	657,000	$	—	$	—
Interest rate lock commitments	161,272		1,684		2		129,791		947		57
Written equity option related to equity-linked CDs	616,843		—		50,252		576,196		—		46,573
Trading account assets and liabilities:
Interest rate contracts for customers	14,745,564		258,186		196,433		13,474,347		262,578		200,899
Commodity contracts for customers	726,525		17,364		13,775		906,650		23,132		18,373
Foreign exchange contracts for customers	339,723		3,248		2,514		145,175		4,450		3,894
Total trading account assets and liabilities			278,798		212,722				290,160		223,166
Total free-standing derivative instruments- customer accommodations			$	280,482	$	262,976			$	291,107	$	269,796

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

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

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

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Hedging Derivatives

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

Fair Value Hedges

The Company enters into fair value hedging relationships using interest rate swaps to mitigate the Company’s exposure to losses in value as interest rates change. Derivative instruments that are used as part of the Company’s interest rate risk management strategy include interest rate swaps that relate to the pricing of specific balance sheet assets and liabilities. Interest rate swaps generally involve the exchange of fixed and variable rate interest payments between two parties, based on a common notional principal amount and maturity date.

Interest rate swaps are used to convert the Company’s fixed rate long-term debt to a variable rate. The critical terms of the interest rate swaps match the terms of the corresponding hedged items. All components of each derivative instrument’s gain or loss are included in the assessment of hedge effectiveness. The Company recognized approximately $874 thousand and $303 thousand of fair value hedging gains as a result of hedge ineffectiveness for the three months ended March 31, 2014 and 2013, respectively. For the three months ended March 31, 2014 and 2013, the Company recognized decreases of $6.1 million and $7.1 million, respectively, to interest expense related to interest rate swaps accounted for as fair value hedges.

The Company recognized no gains or losses for the three months ended March 31, 2014 and 2013 related to hedged firm commitments no longer qualifying as a fair value hedge. At March 31, 2014, the fair value hedges had a weighted average expected remaining term of 5.2 years.

The following table reflects the change in fair value for interest rate contracts and the related hedged items as well as other gains and losses related to fair value hedges included in the Company’s Unaudited Condensed Consolidated Statements of Income.

		Gain (Loss) for the
		Three Months Ended March 31,
	Condensed Consolidated Statements of Income Caption	2014			2013
		(In Thousands)
Change in fair value of interest rate contracts:
Interest rate swaps hedging long term debt	Interest on FHLB and other borrowings	$	(935	)	$	(9,854	)
Hedged long term debt	Interest on FHLB and other borrowings	1,809			10,157
Other gains on interest rate contracts:
Interest and amortization related to interest rate swaps on hedged long term debt	Interest on FHLB and other borrowings	5,265			6,782

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Cash Flow Hedges

The Company enters into cash flow hedging relationships using interest rate swaps and options, such as caps and floors, to mitigate exposure to the variability in future cash flows or other forecasted transactions associated with its floating rate assets and liabilities. The Company uses interest rate swaps and options to hedge the repricing characteristics of its floating rate commercial loans and FHLB advances. All components of each derivative instrument’s gain or loss are included in the assessment of hedge effectiveness. The initial assessment of expected hedge effectiveness is based on regression analysis. The ongoing periodic measures of hedge ineffectiveness are based on the expected change in cash flows of the hedged item caused by changes in the benchmark interest rate. There were no material cash flow hedging gains or losses recognized because of hedge ineffectiveness for the three months ended March 31, 2014 and 2013. There were no gains or losses reclassified from other comprehensive income (loss) because of the discontinuance of cash flow hedges related to certain forecasted transactions that are probable of not occurring for the three months ended March 31, 2014 and 2013.

For the three months ended March 31, 2014 and 2013, the Company reclassified from accumulated other comprehensive income (loss) to interest income $1.2 million and $1.1 million, respectively, related to interest rate swaps and floors accounted for as cash flow hedges. At March 31, 2014, cash flow hedges not terminated had a net fair value of $9.5 million and a weighted average life of 3.2 years. Based on the current interest rate environment, $4.3 million of losses are expected to be reclassified to net interest income over the next 12 months as net settlements occur. The maximum length of time over which the entity is hedging its exposure to the variability in future cash flows for forecasted transactions is 7.3 years.

The following table presents the effect of derivative instruments designated and qualifying as cash flow hedges on the Company’s Unaudited Condensed Consolidated Balance Sheets and the Company’s Unaudited Condensed Consolidated Statements of Income for the three months ended March 31, 2014 and 2013.

	Gain (Loss) for the
	Three Months Ended March 31,
	2014			2013
	(In Thousands)
Interest rate contracts:
Net change in amount recognized in other comprehensive income	$	807		$	1,383
Amount reclassified from accumulated other comprehensive income into net interest income	(1,163		)	(1,133		)
Amount of ineffectiveness recognized in net interest income	—			—

Derivatives Not Designated As Hedges

Derivatives not designated as hedges include those that are entered into as either economic hedges as part of the Company’s overall risk management strategy or to facilitate client needs. Economic hedges are those that do not qualify to be treated as a fair value hedge, cash flow hedge or foreign currency hedge for accounting purposes, but are necessary to economically manage the risk exposure associated with the assets and liabilities of the Company.

The Company also enters into a variety of interest rate contracts, commodity contracts and foreign exchange contracts in its trading activities. The primary purpose for using these derivative instruments in the trading account is to facilitate customer transactions. The trading interest rate contract portfolio is actively managed and hedged with similar products to limit market value risk of the portfolio. Changes in the estimated fair value of contracts in the trading account along with the related interest settlements on the contracts are recorded in noninterest income as corporate and correspondent investment sales in the Company's Unaudited Condensed Consolidated Statements of Income.

Free-Standing Derivative Instruments – Risk Management and Other Purposes

The Company enters into forward contracts to economically hedge the change in fair value of certain residential mortgage loans held for sale due to changes in interest rates. Revaluation gains and losses from free-standing derivatives related to mortgage banking activity are recorded as a component of mortgage banking income in the Company’s Unaudited Condensed Consolidated Statements of Income.

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In conjunction with the sale of its Visa, Inc. Class B shares in 2009, the Company entered into a total return swap in which the Company will make or receive payments based on subsequent changes in the conversion rate of the Class B shares into Class A shares. This total return swap is accounted for as a free-standing derivative.

The Company offers its customers equity-linked CDs that have a return linked to equity indices. Under appropriate accounting guidance, a CD that pays interest based on changes in an equity index is a hybrid instrument that requires separation into a host contract (the CD) and an embedded derivative contract (written equity call option). The Company has entered into an offsetting derivative contract in order to economically hedge the exposure related to the issuance of equity-linked CDs. Both the embedded derivative and derivative contract entered into by the Company are recorded at fair value with offsetting gains and losses recognized within noninterest expense in the Company's Unaudited Condensed Consolidated Statements of Income. The embedded derivative is classified as a free-standing derivative instrument to accommodate customers while the offsetting derivative contract intended to hedge the Company’s exposure is classified as a free-standing derivative instrument for risk management and other purposes.

The Company also enters into foreign currency contracts to hedge its exposure to fluctuations in foreign currency exchange rates due to its funding of commercial loans in foreign currencies.

The net gains and losses recorded in the Company's Unaudited Condensed Consolidated Statements of Income from free-standing derivative instruments used for risk management and other purposes are summarized in the following table for the three months ended March 31, 2014 and 2013.

		Gain (Loss) for the
		Three Months Ended March 31,
	Condensed Consolidated Statements of Income Caption	2014			2013
		(In Thousands)
Interest rate contracts:
Forward contracts related to residential mortgage loans held for sale	Mortgage banking income	$	(1,554	)	$	(744	)
Equity contracts:
Purchased equity option related to equity-linked CDs	Other noninterest expense	3,778			3,223
Foreign currency contracts:
Forward contracts related to commercial loans	Corporate and correspondent investment sales	(5,487		)	7,565
Spot contracts related to commercial loans	Corporate and correspondent investment sales	880			—

Free-Standing Derivative Instruments – Customer Accommodation

The majority of free-standing derivative instruments the Company enters into are for the benefit of its commercial customers. These derivative contracts are not designated against specific assets or liabilities on the Company's Unaudited Condensed Consolidated Balance Sheets or to forecasted transactions and, therefore, do not qualify for hedge accounting. The Company may economically hedge significant exposures related to these derivative contracts entered into for the benefit of customers by entering into offsetting contracts with high-quality counterparties with substantially matching terms. Revaluation gains and losses on commodity and other commercial customer derivative contracts are recorded as a component of corporate and correspondent investment sales in the Company's Unaudited Condensed Consolidated Statements of Income.

Interest rate lock commitments issued on residential mortgage loan commitments that will be held for resale are also considered free-standing derivative instruments, and the interest rate exposure on these commitments is economically hedged primarily with forward contracts. Revaluation gains and losses from free-standing derivatives related to mortgage banking activity are recorded as a component of mortgage banking income in the Company's Unaudited Condensed Consolidated Statements of Income.

As previously noted, the Company offers its customers equity-linked CDs that have a return linked to equity indices. The embedded derivative is classified as a free-standing derivative instrument to accommodate customers.

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The net gains and losses recorded in the Company's Unaudited Condensed Consolidated Statements of Income relating to free-standing derivative instruments used as a customer accommodation are summarized in the following table for the three months ended March 31, 2014 and 2013.

		Gain (Loss) for the
		Three Months Ended March 31,
	Condensed Consolidated Statements of Income Caption	2014			2013
		(In Thousands)
Futures contracts	Corporate and correspondent investment sales	$	(76	)	$	42
Interest rate contracts:
Interest rate contracts for customers	Corporate and correspondent investment sales	5,118			6,898
Interest rate lock commitments	Mortgage banking income	792			(625		)
Commodity contracts:
Commodity contracts for customers	Corporate and correspondent investment sales	8			(53		)
Foreign currency contracts:
Foreign currency exchange contracts for customers	Corporate and correspondent investment sales	193			—
Equity contracts:
Written equity option related to equity-linked CDs	Other noninterest expense	(3,679		)	(3,094		)

Derivatives Credit and Market Risks

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

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

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

Entering into interest rate swap agreements and options involves not only the risk of dealing with counterparties and their ability to meet the terms of the contracts but also interest rate risk associated with unmatched positions. At March 31, 2014, interest rate swap agreements and options classified as trading were substantially matched. The Company had credit risk of $279 million related to derivative instruments in the trading account portfolio, which does not take into consideration master netting arrangements or the value of the collateral. There were $1 thousand in credit losses associated with derivative instruments classified as trading for the three months ended March 31, 2014, and for the three months ended March 31, 2013 there were $582 thousand in credit losses associated with derivative instruments classified as trading. At March 31, 2014, there were no nonperforming derivative positions classified as trading and at December 31, 2013 there were $54 thousand nonperforming derivative positions classified as trading.

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The Company’s derivative positions held for hedging purposes are primarily executed in the over-the-counter market. These positions have credit risk of $70 million, which does not take into consideration master netting arrangements or the value of the collateral.

There were no credit losses associated with derivative instruments classified as nontrading for the three months ended March 31, 2014 and 2013. At March 31, 2014 and December 31, 2013, there were no nonperforming derivative positions classified as nontrading.

As of March 31, 2014 and December 31, 2013, the Company had recorded the right to reclaim cash collateral of $32 million and $26 million, respectively, within other assets on the Company’s Unaudited Condensed Consolidated Balance Sheets and had recorded the obligation to return cash collateral of $29 million and $38 million, respectively, within deposits on the Company’s Unaudited Condensed Consolidated Balance Sheets.

Contingent Features

Certain of the Company’s derivative instruments contain provisions that require the Company’s debt to maintain a certain credit rating from each of the major credit rating agencies. If the Company’s debt were to fall below this rating, it would be in violation of these provisions, and the counterparties to the derivative instruments could demand immediate and ongoing full overnight collateralization on derivative instruments in net liability positions. The aggregate fair value of all derivative instruments with credit-risk-related contingent features that were in a liability position on March 31, 2014 was $58 million for which the Company has collateral requirements of $56 million in the normal course of business. If the credit risk-related contingent features underlying these agreements were triggered on March 31, 2014, the Company’s collateral requirements to its counterparties would increase by $3 million. The aggregate fair value of all derivative instruments with credit risk-related contingent features that were in a liability position on December 31, 2013 was $57 million for which the Company had collateral requirements of $54 million in the normal course of business. If the credit risk-related contingent features underlying these agreements were triggered on December 31, 2013, the Company’s collateral requirements to its counterparties would have increased by $3 million.

(7) Assets and Liabilities Subject to Enforceable Master Netting Arrangements

Derivatives

In conjunction with the derivative and hedging activity discussed in Note 6, Derivatives and Hedging, the Company is party to master netting arrangements with its financial institution counterparties for some of its derivative and hedging activities. The Company does not offset assets and liabilities under these master netting arrangements for financial statement presentation purposes. The master netting arrangements provide for single net settlement of all derivative instrument arrangements, as well as collateral, in the event of default, or termination of, any one contract with the respective counterparties. Cash collateral is usually posted by the counterparty with a net liability position in accordance with contract thresholds.

Securities Sold Under Agreements to Repurchase

The Company enters into agreements under which it sells securities subject to an obligation to repurchase the same or similar securities. Securities sold under agreements to repurchase are generally accounted for as collateralized financing transactions and recorded at the amounts at which the securities were sold plus accrued interest. The securities pledged as collateral are generally U.S. government and federal agency securities. The obligation to repurchase the securities is reflected as a liability in the Company's Unaudited Condensed Consolidated Balance Sheets, while the securities underlying the repurchase agreements remain in the respective investment securities asset accounts available for sale. There is no offsetting or netting of the investment securities assets with the repurchase agreement liabilities. As of March 31, 2014 and December 31, 2013, the Company had no repurchase agreements that were subject to enforceable master netting arrangements.

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The following represents the Company’s assets/liabilities subject to an enforceable master netting arrangement as of March 31, 2014 and December 31, 2013. The derivative instruments the Company has with its customers are not subject to an enforceable master netting arrangement.

							Gross Amounts Not Offset in the Condensed Consolidated Balance Sheets
	Gross Amounts Recognized		Gross Amounts Offset in the Condensed Consolidated Balance Sheets		Net Amount Presented in the Condensed Consolidated Balance Sheets		Financial Instruments (1)		Cash Collateral Received/ Pledged (1)		Net Amount
	(In Thousands)
March 31, 2014
Derivative financial assets:
Total derivatives subject to a master netting arrangement	$	185,818	$	—	$	185,818	$	11,408	$	25,819	$	148,591
Total derivatives not subject to a master netting arrangement	217,076		—		217,076		—		—		217,076
Total derivative financial assets	$	402,894	$	—	$	402,894	$	11,408	$	25,819	$	365,667
Derivative financial liabilities:
Total derivatives subject to a master netting arrangement	$	203,127	$	—	$	203,127	$	45,308	$	28,929	$	128,890
Total derivatives not subject to a master netting arrangement	77,032		—		77,032		—		—		77,032
Total derivative financial liabilities	$	280,159	$	—	$	280,159	$	45,308	$	28,929	$	205,922
December 31, 2013
Derivative financial assets:
Total derivatives subject to a master netting arrangement	$	192,771	$	—	$	192,771	$	7,723	$	37,189	$	147,859
Total derivatives not subject to a master netting arrangement	220,340		—		220,340		—		—		220,340
Total derivative financial assets	$	413,111	$	—	$	413,111	$	7,723	$	37,189	$	368,199
Derivative financial liabilities:
Total derivatives subject to a master netting arrangement	$	200,207	$	—	$	200,207	$	46,466	$	25,910	$	127,831
Total derivatives not subject to a master netting arrangement	85,497		—		85,497		—		—		85,497
Total derivative financial liabilities	$	285,704	$	—	$	285,704	$	46,466	$	25,910	$	213,328

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

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(8)Commitments, Contingencies and Guarantees

Commitments to Extend Credit & Standby and Commercial Letters of Credit

The following represents the Company’s commitments to extend credit, standby letters of credit and commercial letters of credit as of March 31, 2014 and December 31, 2013:

	March 31, 2014		December 31, 2013
	(In Thousands)
Commitments to extend credit	$	26,691,887	$	26,545,608
Standby and commercial letters of credit	2,061,632		2,093,159

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

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

The credit risk involved in issuing letters of credit and commitments is essentially the same as that involved in extending loan facilities to customers. The fair value of the letters of credit and commitments typically approximates the fee received from the customer for issuing such commitments. These fees are deferred and are recognized over the commitment period. At March 31, 2014 and December 31, 2013, the recorded amount of these deferred fees was $6.9 million and $4.9 million, respectively. The Company holds various assets as collateral supporting those commitments for which collateral is deemed necessary. At March 31, 2014, the maximum potential amount of future undiscounted payments the Company could be required to make under outstanding standby letters of credit was $2.1 billion. At March 31, 2014 and December 31, 2013, the Company had reserves related to letters of credit and unfunded commitments recorded in accrued expenses and other liabilities on the Company’s Unaudited Condensed Consolidated Balance Sheet of $78 million and $76 million, respectively.

Loan Sale Recourse

The Company has potential recourse related to FNMA securitizations. At March 31, 2014 and December 31, 2013, the amount of potential recourse was $20 million, of which the Company had reserved $728 thousand and $738 thousand, respectively, which is recorded in accrued expenses and other liabilities on the Company's Unaudited Condensed Consolidated Balance Sheets for the respective periods.

The Company also issues standard representations and warranties related to mortgage loan sales to government-sponsored agencies. Although these agreements often do not specify limitations, the Company does not believe that any payments related to these warranties would materially change the financial condition or results of operations of the Company. At March 31, 2014 and December 31, 2013, the Company recorded $1 million of reserves in accrued expenses and other liabilities on the Company’s Unaudited Condensed Consolidated Balance Sheets related to potential losses from loans sold.

Loss Sharing Agreement

In connection with the Guaranty Bank acquisition, the Bank entered into loss sharing agreements with the FDIC that covered approximately $9.7 billion of loans and OREO, excluding the impact of purchase accounting adjustments. In accordance with the terms of the loss sharing agreements, the FDIC’s obligation to reimburse the Bank for losses with respect to the acquired loans and acquired OREO begins with the first dollar of incurred losses, as defined in the loss sharing agreements. The terms of the loss sharing agreements provide that the FDIC will reimburse the Bank for 80% of incurred losses up to $2.3 billion and 95% of incurred losses in excess of $2.3 billion. Gains and recoveries on covered assets offset incurred losses, or are paid to the FDIC, at the applicable loss share percentage at the time of

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recovery. The loss sharing agreements provide for FDIC loss sharing for five years for commercial loans and 10 years for single family residential loans.

The provisions of the loss sharing agreements may also require a payment by the Bank to the FDIC on October 15, 2019. On that date, the Bank is required to pay the FDIC 60% of the excess, if any, of (i) $457 million over (ii) the sum of (a) 25% of the total net amounts paid to the Bank under both of the loss share agreements plus (b) 20% of the deemed total cost to the Bank of administering the covered assets under the loss sharing agreements. The deemed total cost to the Bank of administering the covered assets is the sum of 2% of the average of the principal amount of covered assets based on the beginning and end of year balances for each of the 10 years during which the loss sharing agreements are in effect. At March 31, 2014 and December 31, 2013, the Company estimated the potential amount of payment due to the FDIC in 2019, at the end of the loss sharing agreements, to be $142 million and $140 million, respectively. The ultimate settlement amount of this payment due to the FDIC is dependent upon the performance of the underlying covered assets, the passage of time and actual claims submitted to the FDIC.

Legal and Regulatory Proceedings

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

Set forth below are descriptions of certain of the Company’s legal proceedings.

In October 2010, the Company was named as a defendant in a putative class action lawsuit filed in the United States District Court for the Northern District of Florida, Stephen T. Anderson, on behalf of himself and others so situated v. Compass Bank, wherein the plaintiff alleges the Company inappropriately assessed and collected overdraft and insufficient fund fees. On June 27, 2012, the parties agreed to settle this matter as a nationwide class of consumer customers for $11.5 million. The settlement was contingent upon court approval. The court granted preliminary approval on March 18, 2013, and the $11.5 million settlement amount was paid into escrow on March 29, 2013. Notice was provided to the class members in April 2013. The deadline to object to or opt out of the settlement was June 6, 2013. The court granted final approval on August 7, 2013. The deadline to file a claim was September 30, 2013. Individual settlement payments were distributed to the class members during the week of January 6, 2014.

In February 2012, the Company was named as a defendant in a putative class action lawsuit filed in the United States District Court for the Southern District of Texas, Kevin Vaughan, on behalf of himself and all others similarly situated v. Compass Bank, wherein the plaintiff alleges the Company denied earned wages, including overtime pay, to its MBOs, and discouraged MBOs from entering more than 40 hours per workweek in the timekeeping system. The plaintiff seeks unspecified monetary relief. This case was stayed pending a decision from the Fifth Circuit on appeal of the NLRB'a decision invalidating class action waivers as violating employees' collective bargaining rights under the National Labor Relations Act. On December 3, 2013, the Fifth Circuit overturned the NLRB’s decision. This matter will become a single plaintiff arbitration. The Company believes there are substantial defenses to these claims and intends to defend them vigorously.

In May 2012, the Company was named as a defendant in a putative class action lawsuit filed in the United States District Court for the Western District of Texas, JacquelineGarza, on behalf of herself and similarly situated employees v. BBVA Bancomer USA, Inc. and Compass Bank, wherein the plaintiff alleges the Company denied overtime pay to its Assistant Branch Managers who were allegedly improperly classified as exempt from the overtime pay mandates of the Fair Labor Standards Act. The plaintiff seeks unspecified monetary relief. This case was stayed pending a decision from the Fifth Circuit on appeal of the NLRB decision invalidating class action waivers as violating employees' collective bargaining rights under the National Labor Relations Act. On December 3, 2013, the Fifth Circuit overturned the NLRB’s decision. This matter will become a single plaintiff arbitration. The Company believes there are substantial defenses to these claims and intends to defend them vigorously.

In November 2012, the Company was named as a defendant in a putative class action lawsuit filed in the Superior Court of the State of California, County of Alameda, Cheryl Deaver, on behalf of herself and others

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so situated v. Compass Bank, wherein the plaintiff alleges the Company failed to provide lawful meal periods or wages in lieu thereof, full compensation for hours worked, or timely wages due at termination (the plaintiff had previously filed a similar lawsuit in May 2011 which was dismissed without prejudice when the plaintiff failed to meet certain filing deadlines). The plaintiff further alleges that the Company did not comply with wage statement requirements. The plaintiff seeks unspecified monetary relief. The Company believes there are substantial defenses to these claims and intends to defend them vigorously.

In June 2013, the Company was named as a defendant in a lawsuit filed in the United States District Court of the Northern District of Alabama, Intellectual Ventures II, LLC v. BBVA Compass Bancshares, Inc. and BBVA Compass, wherein the plaintiff alleges the Company is infringing five patents owned by the plaintiff and related to the security infrastructure for the Company's online banking services. The plaintiff seeks unspecified monetary relief. The Company believes there are substantial defenses to these claims and intends to defend them vigorously.

In March 2014, the Company was named as a defendant in a lawsuit filed in the Circuit Court of the Fourth Judicial Circuit in Duval County, Florida, Jack C. Demetree, et al. v. BBVA Compass, wherein the plaintiffs allege that their accountant stole approximately $16.4 million through unauthorized transactions on their accounts from 2006 to 2013. The plaintiffs seek unspecified monetary relief. The Company believes there are substantial defenses to these claims and intends to defend them vigorously.

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

The Company owns all of the outstanding stock of BSI, a registered broker-dealer. Applicable law limits BSI from deriving more than 25 percent of its gross revenues from underwriting or dealing in bank-ineligible securities (“ineligible revenue”). Prior to the contribution of BSI to the Company in April 2013, BSI’s ineligible revenues in certain periods exceeded the 25 percent limit. It is possible that the Federal Reserve Board may take either formal or informal enforcement action against BSI and the Company and the possibility of civil money penalties cannot be ruled out. At this time, the Company does not know the amount of a potential civil money penalty, if any.

There are other litigation matters that arise in the normal course of business. The Company assesses its liabilities and contingencies in connection with outstanding legal proceedings utilizing the latest information available. Where it is probable that the Company will incur a loss and the amount of the loss can be reasonably estimated, the Company records a liability in its consolidated financial statements. These legal reserves may be increased or decreased to reflect any relevant developments. Where a loss is not probable or the amount of loss is not estimable, the Company does not accrue legal reserves. At March 31, 2014, the Company had accrued legal reserves in the amount of $9 million. Additionally, for those matters where a loss is both estimable and reasonably possible, the Company estimates losses that it could incur beyond the accrued legal reserves. Under U.S. GAAP, an event is "reasonably possible" if "the chance of the future event or events occurring is more than remote but less than likely" and an event is "remote" if "the chance of the future event or events occurring is slight." At March 31, 2014, there were no such matters where a loss was both estimable and reasonably possible beyond the accrued legal reserve.

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

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Income Tax Review

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

(9)Fair Value of Financial Instruments

The Company applies the fair value accounting guidance required under ASC Topic 820 which establishes a framework for measuring fair value. This guidance defines fair value as the exchange price that would be received for an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. This guidance also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument’s categorization within this fair value hierarchy is based upon the lowest level of input that is significant to the instrument’s fair value measurement. The three levels within the fair value hierarchy are described as follows.

• Level 1 – Fair value is based on quoted prices in an active market for identical assets or liabilities.

• Level 2 – Fair value is based on quoted market prices for similar instruments traded in active markets, quoted prices for identical or similar instruments in markets that are not active and model-based valuation techniques for which all significant assumptions are observable in the market.

• Level 3 – Fair value is based on unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities would include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar pricing techniques based on the Company’s own assumptions about what market participants would use to price the asset or liability.

A description of the valuation methodologies used for instruments measured at fair value, as well as the general classification of such instruments under the fair value hierarchy, is set forth below. These valuation methodologies were applied to the Company’s financial assets and financial liabilities carried at fair value. In general, fair value is based upon quoted market prices, where available. If such quoted market prices are not available, fair value is based upon internally developed models that primarily use observable market based parameters as inputs. Valuation adjustments may be made to ensure that financial instruments are recorded at fair value. These adjustments may include amounts to reflect counterparty credit quality and the Company’s creditworthiness, among other things, as well as other unobservable parameters. Any such valuation adjustments are applied consistently over time. While management believes the Company’s valuation methodologies are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date. The Company’s valuation methodologies may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, the reported fair value amounts have not been comprehensively revalued since the presentation dates, and, therefore, estimates of fair value after the balance sheet date may differ significantly from the amounts presented herein.

Financial Instruments Measured at Fair Value on a Recurring Basis

Trading account assets and liabilities, securities available for sale, certain mortgage loans held for sale, derivative assets and liabilities, and mortgage servicing rights are recorded at fair value on a recurring basis. The following is a description of the valuation methodologies for these assets and liabilities.

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Trading account assets and liabilities and investment securities available for sale – Trading account assets and liabilities and investment securities available for sale consist of U.S. Treasury and other U.S. government agencies securities, mortgage-backed securities, collateralized mortgage obligations, debt obligations of state and political subdivisions, other debt and equity securities, and derivative contracts.

• U.S. Treasury and other U.S. government agencies securities are valued based on a market approach using observable inputs such as benchmark yields, reported trades, broker/dealer quotes, benchmark securities, and bids/offers of government-sponsored enterprise securities. These valuations are Level 2 measurements.

• Mortgage-backed securities are primarily valued using market-based pricing matrices that are based on observable inputs including benchmark To Be Announced security prices, U.S. Treasury yields, U.S. dollar swap yields, and benchmark floating-rate indices. Mortgage-backed securities pricing may also give consideration to pool-specific data such as prepayment history and collateral characteristics. Valuations for mortgage-backed securities are therefore classified as Level 2 measurements.

• Collateralized mortgage obligations are valued using market-based pricing matrices that are based on observable inputs including reported trades, bids, offers, dealer quotes, U.S. Treasury yields, U.S. dollar swap yields, market convention prepayment speeds, tranche-specific characteristics, prepayment history, and collateral characteristics. Fair value measurements for collateralized mortgage obligations are classified as Level 2.

• Debt obligations of states and political subdivisions are primarily valued using market-based pricing matrices that are based on observable inputs including Municipal Securities Rulemaking Board reported trades, issuer spreads, material event notices, and benchmark yield curves. These valuations are Level 2 measurements.

• Other debt and equity securities consist of mutual funds, foreign and corporate debt, and U.S. government agencies equity securities. Mutual funds are valued based on quoted market prices of identical assets trading on active exchanges. These valuations are Level 1 measurements. Foreign and corporate debt valuations are based on information and assumptions that are observable in the market place. The valuations for these securities are therefore classified as Level 2. U.S. government agency equity securities are valued based on quoted market prices of identical assets trading on active exchanges. These valuations thus qualify as Level 1 measurements.

• Other derivative assets and liabilities consist primarily of interest rate and commodity contracts. The Company’s interest rate contracts are valued utilizing Level 2 observable inputs (yield curves and volatilities) to determine a current market price for each interest rate contract. Commodity contracts are priced using raw market data, primarily in the form of quotes for fixed and basis swaps with monthly, quarterly, seasonal or calendar-year terms. Proprietary models provided by a third party are used to generate forward curves and volatility surfaces. As a result of the valuation process and observable inputs used, commodity contracts are classified as Level 2 measurements. To validate the reasonableness of these calculations, management compares the assumptions with market information.

• Other trading assets consist of interest-only strips which are valued by an independent third-party. The independent third-party values the assets on a loan-by-loan basis using a discounted cash flow analysis that employs prepayment assumptions, discount rate assumptions, and default curves. The prepayment assumptions are created from actual SBA pool prepayment history. The discount rates are derived from actual SBA loan secondary market transactions. The default curves are created using historical observable and unobservable inputs. As such, interest-only strips are classified as Level 3 measurements. The Company’s SBA department is responsible for ensuring the appropriate application of the valuation, capitalization, and amortization policies of the Company’s interest-only strips. The department performs independent, internal valuations of the interest-only strips on a quarterly basis, which are then reconciled to the third-party valuations to ensure their validity.

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

43

The fair value of loans held for sale is based on what secondary markets are currently offering for portfolios with similar characteristics. The changes in fair value of these assets are largely driven by changes in interest rates subsequent to loan funding and changes in the fair value of servicing associated with the mortgage loan held for sale. Both the mortgage loans held for sale and the related forward contracts are classified as Level 2.

At both March 31, 2014 and December 31, 2013, no loans held for sale for which the fair value option was elected were 90 days or more past due or were in nonaccrual. Interest income on mortgage loans held for sale is recognized based on contractual rates and is reflected in interest and fees on loans in the Company's Unaudited Condensed Consolidated Statements of Income. Net gains (losses) of $690 thousand and $(6.8) million resulting from changes in fair value of these loans were recorded in noninterest income during the three months ended March 31, 2014 and 2013, respectively.

The Company also had fair value changes on forward contracts related to residential mortgage loans held for sale of approximately $(1.6) million and $(744) thousand for the three months ended March 31, 2014 and 2013, respectively. An immaterial portion of these amounts was attributable to changes in instrument-specific credit risk.

The following tables summarize the difference between the aggregate fair value and the aggregate unpaid principal balance for residential mortgage loans measured at fair value at March 31, 2014 and December 31, 2013.

	Aggregate Fair Value		Aggregate Unpaid Principal Balance		Difference
	(In Thousands)
March 31, 2014
Residential mortgage loans held for sale	$	101,615	$	98,474	$	3,141
December 31, 2013
Residential mortgage loans held for sale	$	139,750	$	137,300	$	2,450

Derivative assets and liabilities – Derivative assets and liabilities are measured using models that primarily use market observable inputs, such as quoted security prices, and are accordingly classified as Level 2. The derivative assets and liabilities classified within Level 3 of the fair value hierarchy were comprised of interest rate contract agreements that are valued using third-party software that calculates fair market value considering current quoted TBA and other market based prices and then applies closing ratio assumptions based on software-produced pull through ratios that are generated using the Company’s historical fallout activity. Based upon this process, the fair value measurement obtained for these financial instruments is deemed a Level 3 classification. The Company's Secondary Marketing Committee is responsible for the appropriate application of the valuation policies and procedures surrounding the Company’s interest rate lock commitments. Policies established to govern mortgage pipeline risk management activities must be approved by the Company’s Asset/Liability Committee on an annual basis.

Other assets – Other assets measured at fair value on a recurring basis and classified within Level 3 of the fair value hierarchy were comprised of MSRs that are valued through a discounted cash flow analysis using a third-party commercial valuation system. The valuation takes into consideration the objective characteristics of the MSR portfolio, such as loan amount, note rate, service fee, loan term, and common industry assumptions, such as servicing costs, ancillary income, prepayment estimates, earning rates, cost of fund rates, discount rates, etc. The Company’s portfolio-specific factors are also considered in calculating the fair value of MSRs to the extent one can reasonably assume a buyer would also incorporate these factors. Examples of such factors are geographical concentrations of the portfolio, liquidity considerations such as housing authority loans which have a limited number of approved servicers, or additional views of risk not inherently accounted for in prepayment assumptions. Product liquidity and these other risks are generally incorporated through adjustment of discount factors applied to forecasted cash flows. Based on this method of pricing MSRs, the fair value measurement obtained for these financial instruments is deemed a Level 3 classification. The value of the MSR is calculated by a third-party firm that specializes in the MSR market and valuation services. Additionally, the Company obtains a valuation from an independent party to compare for reasonableness. The Company’s Secondary Marketing Committee is responsible for ensuring the appropriate application of valuation, capitalization, and fair value decay policies for the MSR portfolio. The Committee meets at least monthly to review the MSR portfolio.

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The following tables summarize the financial assets and liabilities measured at fair value on a recurring basis at March 31, 2014 and December 31, 2013.

			Fair Value Measurements at the End of the Reporting Period Using
	Fair Value		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
	March 31, 2014		(Level 1)		(Level 2)		(Level 3)
	(In Thousands)
Recurring fair value measurements
Assets:
Trading account assets:
U.S. Treasury and other U.S. government agencies	$	29,964	$	—	$	29,964	$	—
Mortgage-backed securities	22,449		—		22,449		—
Collateralized mortgage obligations	6,837		—		6,837		—
State and political subdivisions	3,199		—		3,199		—
Interest rate contracts	258,186		—		258,186		—
Commodity contracts	17,364		—		17,364		—
Foreign exchange contracts	3,248		—		3,248		—
Other trading assets	1,716		—		24		1,692
Total trading account assets	342,963		—		341,271		1,692
Loans held for sale	101,615		—		101,615		—
Investment securities available for sale:
U.S. Treasury and other U.S. government agencies	406,755		—		406,755		—
Mortgage-backed securities	5,017,135		—		5,017,135		—
Collateralized mortgage obligations	2,072,728		—		2,072,728		—
States and political subdivisions	501,324		—		501,324		—
Other debt securities	28,269		28,219		50		—
Equity securities (1)	79		73		—		6
Total investment securities available for sale	8,026,290		28,292		7,997,992		6
Derivative assets:
Interest rate contracts	71,893		—		70,209		1,684
Equity contracts	51,653		—		51,653		—
Foreign exchange contracts	550		—		550		—
Total derivative assets	124,096		—		122,412		1,684
Other assets	31,828		—		—		31,828
Liabilities:
Trading account liabilities:
Mortgage-backed securities	$	23,852	$	—	$	23,852	$	—
Interest rate contracts	196,433		—		196,433		—
Commodity contracts	13,775		—		13,775		—
Foreign exchange contracts	2,514		—		2,514		—
Other debt securities	4,947		—		4,947		—
Other trading liabilities	23		—		23		—
Total trading account liabilities	241,544		—		241,544		—
Derivative liabilities:
Interest rate contracts	12,882		—		12,880		2
Equity contracts	50,252		—		50,252		—
Foreign exchange contracts	3,097		—		3,097		—
Total derivative liabilities	66,231		—		66,229		2

(1) Excludes $507 million of FHLB and Federal Reserve stock required to be owned by the Company at March 31, 2014. These securities are carried at par.

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			Fair Value Measurements at the End of the Reporting Period Using
	Fair Value		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
	December 31, 2013		(Level 1)		(Level 2)		(Level 3)
	(In Thousands)
Recurring fair value measurements
Assets:
Trading account assets:
U.S. Treasury and other U.S. government agencies	$	24,655	$	—	$	24,655	$	—
Mortgage-backed securities	1,285		—		1,285		—
State and political subdivisions	2,160		—		2,160		—
Other equity securities	2		—		2		—
Interest rate contracts	262,578		—		262,578		—
Commodity contracts	23,132		—		23,132		—
Other derivative assets	4,450		—		4,450		—
Other trading assets	1,668		—		23		1,645
Total trading account assets	319,930		—		318,285		1,645
Loans held for sale	139,750		—		139,750		—
Investment securities available for sale:
U.S. Treasury and other U.S. government agencies	260,937		—		260,937		—
Mortgage-backed securities	5,233,791		—		5,233,791		—
Collateralized mortgage obligations	1,756,398		—		1,756,398		—
States and political subdivisions	509,436		—		509,436		—
Other debt securities	40,333		40,283		50		—
Equity securities (1)	63		57		—		6
Total investment securities available for sale	7,800,958		40,340		7,760,612		6
Derivative assets:
Interest rate contracts	73,949		—		73,002		947
Equity contracts	47,875		—		47,875		—
Foreign exchange contracts	1,127		—		1,127		—
Total derivative assets	122,951		—		122,004		947
Other assets	30,065		—		—		30,065
Liabilities:
Trading account liabilities:
Mortgage-backed securities	$	5,568	$	—	$	5,568	$	—
Interest rate contracts	200,899		—		200,899		—
Commodity contracts	18,373		—		18,373		—
Other derivative liabilities	3,894		—		3,894		—
Other trading liabilities	23		—		23		—
Total trading account liabilities	228,757		—		228,757		—
Derivative liabilities:
Interest rate contracts	11,975		—		11,918		57
Equity contracts	46,573		—		46,573		—
Foreign exchange contracts	2,746		—		2,746		—
Total derivative liabilities	61,294		—		61,237		57

(1) Excludes $512 million of FHLB and Federal Reserve stock required to be owned by the Company at December 31, 2013. These securities are carried at par.

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There were no transfers between Levels 1 or 2 of the fair value hierarchy for the three months ended March 31, 2014 and 2013. It is the Company’s policy to value any transfers between levels of the fair value hierarchy based on end of period fair values.

The following table reconciles the assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three months ended March 31, 2014 and 2013.

	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
	Other Trading Assets			States and Political Subdivisions		Equity Securities		Interest Rate Contracts, net			Other Assets
	(In Thousands)
Balance, January 1, 2013	$	2,083		$	8	$	6	$	5,016		$	13,255
Transfers into Level 3	—			—		—		—			—
Transfers out of Level 3	—			—		—		—			—
Total gains or losses (realized/unrealized):
Included in earnings (1)	(63		)	—		—		(625		)	(45		)
Included in other comprehensive income	—			—		—		—			—
Purchases, issuances, sales and settlements:
Purchases	—			—		—		—			—
Issuances	—			—		—		—			5,261
Sales	—			—		—		—			—
Settlements	—			—		—		—			—
Balance, March 31, 2013	$	2,020		$	8	$	6	$	4,391		$	18,471
Change in unrealized gains (losses) included in earnings for the period, attributable to assets and liabilities still held at March 31, 2013	$	(63	)	$	—	$	—	$	(625	)	$	(45	)
Balance, January 1, 2014	$	1,645		$	—	$	6	$	890		$	30,065
Transfers into Level 3	—			—		—		—			—
Transfers out of Level 3	—			—		—		—			—
Total gains or losses (realized/unrealized):
Included in earnings (1)	47			—		—		792			(320		)
Included in other comprehensive income	—			—		—		—			—
Purchases, issuances, sales and settlements:
Purchases	—			—		—		—			—
Issuances	—			—		—		—			2,083
Sales	—			—		—		—			—
Settlements	—					—		—			—
Balance, March 31, 2014	$	1,692		$	—	$	6	$	1,682		$	31,828
Change in unrealized gains (losses) included in earnings for the period, attributable to assets and liabilities still held at March 31, 2014	$	47		$	—	$	—	$	792		$	(320	)

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

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Assets Measured at Fair Value on a Nonrecurring Basis

Periodically, certain assets may be recorded at fair value on a non-recurring basis. These adjustments to fair value usually result from the application of lower of cost or fair value accounting or write-downs of individual assets due to impairment. The following table represents those assets that were subject to fair value adjustments during the three months ended March 31, 2014 and 2013 and still held as of the end of the period, and the related gains and losses from fair value adjustments on assets sold during the period as well as assets still held as of the end of the period.

			Fair Value Measurements at the End of the Reporting Period Using
	Fair Value		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs		Total Gains (Losses)
	March 31, 2014		(Level 1)		(Level 2)		(Level 3)		Three Months Ended March 31, 2014
	(In Thousands)
Nonrecurring fair value measurements
Assets:
Investment securities held to maturity	$	3,462	$	—	$	—	$	3,462	$	(146	)
Impaired loans (1)	169,546		—		—		169,546		(4,344		)
OREO	25,817		—		—		25,817		577
			Fair Value Measurements at the End of the Reporting Period Using
	Fair Value		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs		Total Gains (Losses)
	March 31, 2013		(Level 1)		(Level 2)		(Level 3)		Three Months Ended March 31, 2013
	(In Thousands)
Nonrecurring fair value measurements
Assets:
Loans held for sale	$	8,277	$	—	$	—	$	8,277	$	182
Impaired loans (1)	348,347		—		—		348,347		(17,042		)
OREO	69,543		—		—		69,543		(1,804		)

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

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

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

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Loans held for sale – Loans held for sale for which the fair value option has not been elected are carried at the lower of cost or fair value and are evaluated on an individual basis. The fair value of each loan held for sale is based on the collateral value of the underlying asset. Therefore, loans held for sale subjected to nonrecurring fair value adjustments are classified as Level 3. There were no loans held for sale subjected to nonrecurring fair value measurements at March 31, 2014.

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

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

The table below presents quantitative information about the significant unobservable inputs for material assets and liabilities measured at fair value using significant unobservable inputs (Level 3) on a recurring and nonrecurring basis at March 31, 2014.

			Quantitative Information about Level 3 Fair Value Measurements
	Fair Value at				Range of Unobservable Inputs
	March 31, 2014		Valuation Technique	Unobservable Input(s)	(Weighted Average)
	(In Thousands)
Recurring fair value measurements:
Other trading assets	$	1,692	Discounted cash flow	Default rate	10.7%
				Prepayment rate	6.1% - 10.4% (7.6%)
Interest rate contracts	1,682		Discounted cash flow	Closing ratios (pull-through)	0.0% - 98.7% (47.8%)
				Cap grids	0.3% - 2.1% (1.0%)
Other assets - MSRs	31,828		Discounted cash flow	Discount rate	10.0% - 11.0% (10.0%)
				Constant prepayment rate or life speed	6.0% - 51.5% (9.2%)
				Cost to service	51.6% - 551.6% (60.4%)
Nonrecurring fair value measurements:
Investment securities held to maturity	$	3,462	Discounted cash flow	Prepayment rate	7.3%
				Default rate	7.6%
				Loss severity	59.6%
Impaired loans	169,546		Appraised value	Appraised value	0% - 90.0% (34.0%)
OREO	25,817		Appraised value	Appraised value	8.0%

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

Recurring Fair Value Measurements Using Significant Unobservable Inputs

Other Trading Assets – Interest-Only Strips

Significant unobservable inputs used in the valuation of the Company’s interest-only strips include default rates and prepayment assumptions. Significant increases in either of these inputs in isolation would result in significantly

49

lower fair value measurements. Generally, a change in the assumption used for the probability of default is accompanied by a directionally opposite change in the assumption used for prepayment rates.

Interest Rate Contracts

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

Other Assets - MSRs

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

Fair Value of Financial Instruments

The carrying amounts and estimated fair values, as well as the level within the fair value hierarchy, of the Company’s financial instruments as of March 31, 2014 and December 31, 2013 are as follows:

	March 31, 2014
	Carrying Amount		Estimated Fair Value		Level 1		Level 2		Level 3
	(In Thousands)
Financial Instruments:
Assets:
Cash and cash equivalents	$	4,273,672	$	4,273,672	$	4,273,672	$	—	$	—
Trading account assets	342,963		342,963		—		341,271		1,692
Investment securities available for sale	8,533,722		8,533,722		28,292		7,997,992		507,438
Investment securities held to maturity	1,493,396		1,397,111		—		—		1,397,111
Loans held for sale	101,615		101,615		—		101,615		—
Loans, net	51,986,507		49,840,431		—		—		49,840,431
Derivative assets	124,096		124,096		—		122,412		1,684
Other assets	31,828		31,828		—		—		31,828
Liabilities:
Deposits	$	57,085,210	$	57,132,719	$	—	$	57,132,719	$	—
FHLB and other borrowings	4,257,587		4,228,800		—		4,228,800		—
Federal funds purchased and securities sold under agreements to repurchase	957,378		957,378		—		957,378		—
Other short-term borrowings	28,822		28,822		—		28,822		—
Trading account liabilities	241,544		241,544		—		241,544		—
Derivative liabilities	66,231		66,231		—		66,229		2

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	December 31, 2013
	Carrying Amount		Estimated Fair Value		Level 1		Level 2		Level 3
	(In Thousands)
Financial Instruments:
Assets:
Cash and cash equivalents	$	3,598,460	$	3,598,460	$	3,598,460	$	—	$	—
Trading account assets	319,930		319,930		—		318,285		1,645
Investment securities available for sale	8,313,085		8,313,085		40,340		7,760,612		512,133
Investment securities held to maturity	1,519,196		1,405,258		—		—		1,405,258
Loans held for sale	147,109		147,109		—		139,750		7,359
Loans, net	49,966,297		47,822,339		—		—		47,822,339
Derivative assets	122,951		122,951		—		122,004		947
Other assets	30,065		30,065		—		—		30,065
Liabilities:
Deposits	$	54,437,490	$	54,492,651	$	—	$	54,492,651	$	—
FHLB and other borrowings	4,298,707		4,287,220		—		4,287,220		—
Federal funds purchased and securities sold under agreements to repurchase	852,570		852,570		—		852,570		—
Other short-term borrowings	5,591		5,591		—		5,591		—
Trading account liabilities	228,757		228,757		—		228,757		—
Derivative liabilities	61,294		61,294		—		61,237		57

The following methods and assumptions were used by the Company in estimating the fair value of its financial instruments not carried at fair value:

Cash and cash equivalents: Cash and cash equivalents have maturities of three months or less. Accordingly, the carrying amount approximates fair value. Because these amounts generally relate to either currency or highly liquid assets, these are considered a Level 1 measurement.

Investment securities held to maturity: The fair values of securities held to maturity are estimated using a discounted cash flow approach. The discounted cash flow model uses inputs such as estimated prepayment speed, loss rates, and default rates. They are considered a Level 3 measurement as the valuation employs significant unobservable inputs.

Loans: Loans are presented net of the allowance for loan losses and are valued using discounted cash flows. The discount rates used to determine the present value of these loans are based on current market interest rates for loans with similar credit risk and term. They are considered a Level 3 measurement as the valuation employs significant unobservable inputs.

Deposits: The fair values of demand deposits are equal to the carrying amounts. Demand deposits include noninterest bearing demand deposits, savings accounts, NOW accounts and money market demand accounts. Discounted cash flows have been used to value fixed rate term deposits. The discount rate used is based on interest rates currently being offered by the Company on comparable deposits as to amount and term. They are considered a Level 2 measurement as the valuation primarily employs observable inputs for similar instruments.

Short-term borrowings: The carrying amounts of federal funds purchased, securities sold under agreements to repurchase and other short-term borrowings approximates fair value. They are therefore considered a Level 2 measurement.

FHLB and other borrowings: The fair value of the Company’s fixed rate borrowings, which includes the Company’s Capital Securities, are estimated using discounted cash flows, based on the Company’s current incremental borrowing rates for similar types of borrowing arrangements. The carrying amount of the Company’s variable rate borrowings approximates fair value. As such, these borrowings are considered a Level 2 measurement as the valuation primarily employs observable inputs for similar instruments.

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(10)Comprehensive Income

Comprehensive income is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances arising from nonowner sources. The following summarizes the change in the components of other comprehensive income (loss) for the three months ended March 31, 2014 and 2013.

	Three Months Ended
	March 31, 2014									March 31, 2013
	Pretax			Tax Expense/ (Benefit)			After-tax			Pretax			Tax Expense/ (Benefit)			After-tax
	(In Thousands)
Other comprehensive income (loss):
Unrealized holding gains (losses) arising during period from securities available for sale	$	40,962		$	14,722		$	26,240		$	(4,949	)	$	(1,809	)	$	(3,140	)
Less: reclassification adjustment for net gains on sale of securities in net income	16,434			5,908			10,526			14,955			5,466			9,489
Net change in unrealized gains (losses) on securities available for sale	24,528			8,814			15,714			(19,904		)	(7,275		)	(12,629		)
Change in unamortized net holding losses on investment securities held to maturity	4,774			1,716			3,058			3,746			1,369			2,377
Less: non-credit related impairment on investment securities held to maturity	235			84			151			—			—			—
Change in unamortized non-credit related impairment on investment securities held to maturity	385			139			246			1,641			600			1,041
Net change in unamortized holding losses on securities held to maturity	4,924			1,771			3,153			5,387			1,969			3,418
Unrealized holding gains arising during period from cash flow hedge instruments	(1,261		)	(454		)	(807		)	2,180			797			1,383
Change in defined benefit plans	(2,672		)	(1,001		)	(1,671		)	1,017			373			644
Other comprehensive income (loss)	$	25,519		$	9,130		$	16,389		$	(11,320	)	$	(4,136	)	$	(7,184	)

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Activity in accumulated other comprehensive income (loss), net of tax, for the three months ended March 31, 2014 and 2013 was as follows:

	Unrealized Gains (Losses) on Securities Available for Sale and Transferred to Held to Maturity			Accumulated (Gains) Losses on Cash Flow Hedging Instruments			Defined Benefit Plan Adjustment			Unamortized Impairment Losses on Investment Securities Held to Maturity			Total
	(In Thousands)
Balance, January 1, 2013	$	86,379		$	(13,387	)	$	(38,243	)	$	(8,691	)	$	26,058
Other comprehensive income (loss) before reclassifications	(3,140		)	661			—			—			(2,479		)
Amounts reclassified from accumulated other comprehensive income (loss)	(7,112		)	722			644			1,041			(4,705		)
Net current period other comprehensive income (loss)	(10,252		)	1,383			644			1,041			(7,184		)
Balance at March 31, 2013	$	76,127		$	(12,004	)	$	(37,599	)	$	(7,650	)	$	18,874
Balance, January 1, 2014	$	(31,490	)	$	(5,289	)	$	(41,921	)	$	(9,236	)	$	(87,936	)
Other comprehensive income (loss) before reclassifications	26,240			(1,553		)	—			(151		)	24,536
Amounts reclassified from accumulated other comprehensive income (loss)	(7,468		)	746			(1,671		)	246			(8,147		)
Net current period other comprehensive income (loss)	18,772			(807		)	(1,671		)	95			16,389
Balance, March 31, 2014	$	(12,718	)	$	(6,096	)	$	(43,592	)	$	(9,141	)	$	(71,547	)

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The following table presents information on reclassifications out of accumulated other comprehensive income for the three months ended March 31, 2014 and 2013.

Details About Accumulated Other Comprehensive Income Components	Amounts Reclassified From Accumulated Other Comprehensive Income(1)						Condensed Consolidated Statement of Income Caption
	Three Months Ended March 31, 2014			Three Months Ended March 31, 2013
	(In Thousands)
Unrealized Gains (Losses) on Securities Available for Sale and Transferred to Held to Maturity	$	16,434		$	14,955		Investment securities gains, net
	(4,774		)	(3,746		)	Interest on investment securities held to maturity
	11,660			11,209
	(4,192		)	(4,097		)	Income tax expense
	$	7,468		$	7,112		Net of tax
Accumulated (Gains) Losses on Cash Flow Hedging Instruments	$	612		$	589		Interest and fees on loans
	(1,775		)	(1,722		)	Interest and fees on FHLB advances
	(1,163		)	(1,133		)
	417			411			Income tax benefit
	$	(746	)	$	(722	)	Net of tax
Defined Benefit Plan Adjustment	$	2,672		$	(1,017	)	(2)
	(1,001		)	373			Income tax (expense) benefit
	$	1,671		$	(644	)	Net of tax
Unamortized Impairment Losses on Investment Securities Held to Maturity	$	(385	)	$	(1,641	)	Interest on investment securities held to maturity
	139			600			Income tax benefit
	$	(246	)	$	(1,041	)	Net of tax

(1) Amounts in parentheses indicate debits to the consolidated statement of income.

(2) These accumulated other comprehensive income components are included in the computation of net periodic pension cost (see Note 18, Benefit Plans, in the Notes to the December 31, 2013, Consolidated Financial Statements for additional details).

(11)Supplemental Disclosure for Statement of Cash Flows

The following table presents the Company’s noncash investing and financing activities for the three months ended March 31, 2014 and 2013.

	Three Months Ended March 31,
	2014			2013
	(In Thousands)
Supplemental disclosures of cash flow information:
Interest paid	$	55,675		$	50,069
Net income taxes (refunded) paid	(708		)	22
Supplemental schedule of noncash investing and financing activities:
Transfer of loans and loans held for sale to OREO	$	8,920		$	13,917
Change in unrealized gain (loss) on available for sale securities	24,528			(19,904		)
Issuance of restricted stock, net of cancellations	(547		)	(332		)
Business combinations:
Entities acquired:
Assets acquired	116,152			—
Liabilities assumed	18,329			—

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(12) Segment Information

The Company’s operating segments are based on the Company’s lines of business. Each line of business is a strategic unit that serves a particular group of customers that have certain common characteristics through various products and services. The segment results include certain overhead allocations and intercompany transactions. All intercompany transactions have been eliminated to determine the consolidated balances. The Company operates primarily in the United States, and, accordingly, the geographic distribution of revenue and assets is not significant. There are no individual customers whose revenues exceeded 10% of consolidated revenue. The Company’s operating segments are Wealth and Retail Banking, Commercial Banking, Corporate and Investment Banking, and Treasury.

The Wealth and Retail Banking segment serves the Company’s consumer customers through its 684 full-service banking centers and through the use of alternative delivery channels, such as the internet, mobile devices and telephone banking. The Wealth and Retail Banking segment provides individuals with comprehensive products and services, including home mortgages, credit and debit cards, deposit accounts, insurance products, mutual funds and brokerage services. The Wealth and Retail Banking segment also provides private banking services to high net worth individuals and wealth management services, including specialized investment portfolio management, traditional credit products, traditional trust and estate services, investment advisory services, financial counseling and customized services, to companies and their employees. In addition, the Wealth and Retail Banking segment serves the Company’s small business customers.

The Commercial Banking segment is responsible for providing a full array of banking and investment services to businesses in the Company’s markets. In addition to traditional credit and deposit products, the Commercial Banking segment also supports its customers with capabilities in treasury management, leasing, accounts receivable purchasing, asset-based lending, international services, and insurance and interest rate protection and investment products. In addition, the Commercial Banking segment is responsible for the Company’s indirect automobile portfolio.

The Corporate and Investment Banking segment is responsible for providing a full array of banking and investment services to corporate and institutional clients. In addition to traditional credit and deposit products, the Corporate and Investment Banking segment also supports its customers with capabilities in treasury management, leasing, accounts receivable purchasing, asset-based lending, international services, and interest rate protection and investment products.

The Treasury segment’s primary function is to manage the liquidity and funding positions of the Company, the interest rate sensitivity of the Company's balance sheet, and to manage the investment securities portfolio.

Corporate Support and Other includes activities that are not directly attributable to the operating segments, for example, the activities of the Parent and corporate support functions that are not directly attributable to a strategic business segment, as well as the elimination of intercompany transactions. Corporate Support and Other also includes activities associated with assets and liabilities of Guaranty Bank acquired by the Company in 2009 and the related FDIC indemnification asset as well as the activities associated with Simple acquired by the Company in 2014.

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The following table presents the segment information for the Company’s segments as of and for the three months ended March 31, 2014 and 2013.

	Three Months Ended March 31, 2014
	Wealth and Retail Banking		Commercial Banking		Corporate and Investment Banking			Treasury		Corporate Support and Other			Consolidated
	(In Thousands)
Net interest income	$	204,854	$	198,510	$	12,821		$	3,711	$	75,403		$	495,299
Allocated provision for loan losses	31,745		6,581		(694		)	—		(366		)	37,266
Noninterest income	156,394		78,431		42,729			22,015		(80,241		)	219,328
Noninterest expense	318,921		119,622		29,070			3,640		47,614			518,867
Net income (loss) before income tax expense (benefit)	10,582		150,738		27,174			22,086		(52,086		)	158,494
Income tax expense (benefit)	3,942		56,150		10,122			8,227		(34,874		)	43,567
Net income (loss)	6,640		94,588		17,052			13,859		(17,212		)	114,927
Less: net income attributable to noncontrolling interests	—		17		—			436		—			453
Net income (loss) attributable to shareholder	$	6,640	$	94,571	$	17,052		$	13,423	$	(17,212	)	$	114,474
Average assets	$	21,673,317	$	28,701,255	$	3,828,209		$	12,334,277	$	6,822,086		$	73,359,144

	Three Months Ended March 31, 2013
	Wealth and Retail Banking		Commercial Banking			Corporate and Investment Banking		Treasury			Corporate Support and Other			Consolidated
	(In Thousands)
Net interest income (expense)	$	200,852	$	180,704		$	12,770	$	(13,307	)	$	141,927		$	522,946
Allocated provision for loan losses	28,957		(18,221		)	747		—			8,132			19,615
Noninterest income	154,697		49,891			26,238		19,817			(45,266		)	205,377
Noninterest expense	311,726		108,341			27,409		3,172			95,017			545,665
Net income (loss) before income tax expense (benefit)	14,866		140,475			10,852		3,338			(6,488		)	163,043
Income tax expense (benefit)	5,538		52,327			4,042		1,243			(10,643		)	52,507
Net income (loss)	9,328		88,148			6,810		2,095			4,155			110,536
Less: net income attributable to noncontrolling interests	—		(48		)	—		441			—			393
Net income (loss) attributable to shareholder	$	9,328	$	88,196		$	6,810	$	1,654		$	4,155		$	110,143
Average assets	$	20,506,980	$	24,318,907		$	2,925,734	$	14,962,674		$	7,140,931		$	69,855,226

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

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

56

the lines of business based upon the underlying risks in each business considering economic and regulatory capital standards.

The development and application of these methodologies is a dynamic process. Accordingly, prior period financial results have been revised to reflect management accounting enhancements and changes in the Company's organizational structure. The 2013 segment information has been revised to conform to the 2014 presentation. In addition, unlike financial accounting, there is no authoritative literature for management accounting similar to U.S. GAAP. Consequently, reported results are not necessarily comparable to those presented by other financial institutions.

(13)Related Party Transactions

The Company enters into various contracts with BBVA that affect the Company’s business and operations. The following discloses the significant transactions between the Company and BBVA during 2014 and 2013.

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

Derivatives

The Company has entered into various derivative contracts as noted below with BBVA as the upstream counterparty. The net fair value of outstanding derivative contracts between the Company and BBVA at March 31, 2014 and December 31, 2013 are detailed below.

	March 31, 2014			December 31, 2013
	(In Thousands)
Derivative contracts
Cash flow hedges	$	3,259		$	3,652
Free-standing derivative instruments – risk management and other purposes	21,560			21,650
Free-standing derivative instruments – customer accommodation	(6,142		)	(842		)

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

Critical Accounting Policies

The accounting principles followed by the Company and the methods of applying these principles conform with accounting principles generally accepted in the United States of America and with general practices within the banking industry. The Company’s critical accounting policies relate to (1) the allowance for loan losses, (2) fair value of financial instruments, (3) income taxes and (4) goodwill impairment. These critical accounting policies require the use of estimates, assumptions and judgments which are based on information available as of the date of the financial statements. Accordingly, as this information changes, future financial statements could reflect the use of different estimates, assumptions and judgments. Certain determinations inherently have a greater reliance on the use of estimates, assumptions and judgments and, as such, have a greater possibility of producing results that could be materially different than originally reported. The Company’s significant accounting policies and changes in accounting principles and effects of new accounting pronouncements are discussed in detail in Note 1 in the Notes to Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013. Additional disclosures regarding the effects of new accounting pronouncements are included in Note 1, Basis of Presentation, included herein.

Executive Overview

General

Notable accomplishments for the Company during the three months ended March 31, 2014 included the following:

• Balance sheet growth remained strong as total assets were $75.0 billion at March 31, 2014, an increase of 4.2% from December 31, 2013.

• Total end of period loans increased 3.9%. This growth reflects management's strategy to grow the Company's commercial and consumer portfolios while further diversifying the risk profile of the overall loan portfolio.

• Credit quality - nonperforming assets declined $51 million or 9.2%, while the Company's allowance for loan losses to period end loans decreased from 1.38% at December 31, 2013 to 1.34% at March 31, 2014.

• The Company was informed that the Federal Reserve Board did not object to the Company's 2014 capital plan.

• The Company's risk-based and leverage capital ratios remained significantly above the “well-capitalized” standard that is currently in effect in the prompt corrective action framework.

• The Company acquired Simple, a U.S. based digital banking firm.

Capital

Under Federal Reserve Board capital adequacy guidelines that are currently in effect, to be well-capitalized the Company must generally maintain a Tier 1 risk-based capital ratio of 6% or greater and a leverage ratio of 5% or greater.

The Company's Tier 1 risk-based capital ratio was 11.30% and 11.62% at March 31, 2014 and December 31, 2013, respectively. The Company's leverage capital ratio was 9.88% and 9.87% at March 31, 2014 and December 31, 2013, respectively. The Company's risk-based and leverage capital ratios remain significantly above the “well-capitalized” standard that is currently in effect in the prompt corrective action framework. The U.S. Basel III final rule revises the capital ratio thresholds in the prompt corrective action framework to reflect the new Basel III capital ratios. This aspect of the U.S. Basel III final rule will become effective on January 1, 2015.

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Liquidity

The Company’s sources of liquidity include customers’ interest-bearing and noninterest-bearing deposit accounts, loan principal and interest payments, investment securities, short-term investments and borrowings. As a bank holding company, the Parent’s primary source of liquidity is the Bank. The Bank was not permitted to pay any dividends at March 31, 2014 and December 31, 2013 without regulatory approval.

On March 26, 2014, the Company was informed that the Federal Reserve Board did not object to the Company's 2014 capital plan, including its plans to distribute capital through a semi-annual common dividend of approximately $51 million. The common dividends are subject to approval by the Company's Board of Directors.

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

Financial Performance

Consolidated net income attributable to shareholder for the three months ended March 31, 2014 was $114.5 million compared to $110.1 million earned during the three months ended March 31, 2013. The increase in net income attributable to shareholder was primarily due to an increase in noninterest income and decreases in noninterest expense and income tax expense, offset in part by a decrease in net interest income and an increase in provision for loan losses.

Net interest income totaled $495.3 million for the three months ended March 31, 2014 compared to $522.9 million for the three months ended March 31, 2013. The $27.6 million decrease in net interest income for the three months ended March 31, 2014 was driven by lower yields on earning assets, particularly yields on loans. The net interest margin for the three months ended March 31, 2014 was 3.34%, a decline of 56 basis points compared to 3.90% for the three months ended March 31, 2013.

The provision for loan losses was $37.3 million for the three months ended March 31, 2014, which represented an increase of $17.7 million compared to the three months ended March 31, 2013. Excluding covered loans, the provision for loan losses for the three months ended March 31, 2014 was $32.3 million compared to $24.9 million for the three months ended March 31, 2013. The increase in provision for loan losses for the three months ended March 31, 2014 as compared to the three months ended March 31, 2013 was primarily attributable to loan growth during 2014. Net charge-offs for the three months ended March 31, 2014 totaled $30.3 million compared to $36.5 million for the three months ended March 31, 2013. Net charge-offs excluding covered loans for the three months ended March 31, 2014 were $30.4 million, which represented a $5.5 million decrease from the three months ended March 31, 2013.

Noninterest income was $219.3 million, an increase of $14.0 million compared to the three months ended March 31, 2013. The increase in noninterest income was largely attributable to a $19.7 million increase in other noninterest income, a $2.2 million increase in retail investment sales and an increase of $1.5 million in investment securities gains. The increase in other noninterest income principally resulted from an increase in revenues from BSI. These increases were offset by a $7.2 million decrease in mortgage banking income and a $2.1 million decrease in service charges on deposit accounts.

Noninterest expense was $518.9 million for the three months ended March 31, 2014, a decrease of $26.8 million compared to the three months ended March 31, 2013. The lower level of noninterest expense was primarily attributable to a $54.7 million decrease in FDIC indemnification expense and a $3.5 million decrease in amortization of intangibles. The decline in these noninterest expense categories was partially offset by a $11.2 million increase in salaries, benefits and commissions, a $6.1 million increase in equipment expense, a $7.1 million increase in professional services and a a $5.7 million increase in other noninterest expense principally resulting from increases in FDIC insurance expense and provisions for unfunded commitments.

Income tax expense was $43.6 million for the three months ended March 31, 2014 compared to $52.5 million for the three months ended March 31, 2013. This resulted in an effective tax rate of 27.5% for 2014 and a 32.2% effective tax rate for 2013.

Certain key credit quality metrics continued to show improvement during the three months ended March 31, 2014. Specifically, nonperforming assets were $501.4 million at March 31, 2014, a decrease of $51.0 million compared to

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the three months ended March 31, 2013. At the same time, past due loans declined during the three months ended March 31, 2014.

The Company's total assets at March 31, 2014 were $75.0 billion, an increase of $3.0 billion from December 31, 2013 levels. Total loans, excluding loans held for sale, were $52.7 billion at March 31, 2014, an increase of $2.0 billion or 4.0% from year-end December 31, 2013 levels. The growth in loans was primarily due to increases in commercial loans, residential mortgages and indirect auto lending. Deposits increased $2.6 billion or 4.9% compared to December 31, 2013, driven by transaction accounts, which increased 4.6% fueled by savings and money market growth. Certificates and other time deposits increased 5.7% at March 31, 2014 compared to December 31, 2013 primarily as a result of an increase in certificates of deposits over $100,000.

Total shareholders' equity at March 31, 2014 was $11.7 billion, an increase of $242 million compared to December 31, 2013.

Analysis of Results of Operations

Consolidated net income attributable to shareholder totaled $114.5 million and $110.1 million for the three months ended March 31, 2014 and 2013, respectively. The Company’s results of operations for the three months ended March 31, 2014 reflected an increase in provision for loan losses resulting from loan growth. During 2014, the Company also continued to experience lower net interest income as a result of lower earning asset yields brought about from an extended period of historically low interest rates and subsequently lower yielding reinvestment opportunities. Decreases in net interest income and higher provision for loan losses were offset by higher noninterest income and lower noninterest expense.

Net Interest Income and Net Interest Margin

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

Three Months Ended March 31, 2014 and 2013

Net interest income totaled $495.3 million for the three months ended March 31, 2014 compared to $522.9 million for the three months ended March 31, 2013. The decrease in net interest income was due to lower yields on earning assets, primarily driven by lower loan yields.

Net interest income on a fully taxable equivalent basis totaled $512.4 million for the three months ended March 31, 2014 compared with $535.9 million for the three months ended March 31, 2013. Net interest income on a fully taxable equivalent basis decreased $23.5 million in 2014 compared to 2013. The decrease in net interest income was primarily driven by lower interest earning asset yields, which decreased 62 basis points compared to 2013.

Net interest margin was 3.34% for the three months ended March 31, 2014 compared to 3.90% for the three months ended March 31, 2013. The 56 basis point decline in net interest margin primarily reflects the runoff of higher yielding covered loans and lower yields on new loans.

The fully taxable equivalent yield for the three months ended March 31, 2014 for the loan portfolio was 4.06% compared to 4.87% for the same period in 2013. The yield on non-covered loans for the three months ended March 31, 2014 was 3.72% compared to 4.02% for the corresponding period in 2013. The 30 basis point decrease was primarily due to a higher volume of new loans originated at lower rates. The yield on covered loans for the three months ended March 31, 2014 was 28.56% compared to 37.66% for the corresponding period in 2013. The decrease was primarily due to a lower average covered loan balance and the impact of the quarterly reassessment of expected future cash flows.

The fully taxable equivalent yield on the total investment securities portfolio was 2.45% for the three months ended March 31, 2014, compared to 2.43% for the three months ended March 31, 2013.

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The average rate paid on interest bearing deposits was 0.55% for the three months ended March 31, 2014 compared to 0.60% for the three months ended March 31, 2013. The 5 basis point decrease was primarily driven by lower rates paid on savings and money market accounts.

The average rate on FHLB and other borrowings for the three months ended March 31, 2014 was 1.55% compared to 1.52% for the corresponding period in 2013.

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The following table sets forth the major components of net interest income and the related annualized yields and rates for the three months ended March 31, 2014 and 2013, as well as the variances between the periods caused by changes in interest rates versus changes in volumes. Changes attributable to the mix of assets and liabilities have been allocated proportionally between the changes due to yield/rate and the changes due to volume.

Table 1 Consolidated Average Balance and Yield/ Rate Analysis
	Three Months Ended March 31, 2014							Three Months Ended March 31, 2013							Change Due To
	Average Balance			Income/Expense		Yield/ Rate		Average Balance			Income/ Expense		Yield/Rate		Volume			Yield/Rate			Total
	(Dollars in Thousands)
Assets:
Interest earning assets:
Non-covered loans	$	51,222,305		$	469,824	3.72	%	$	44,507,578		$	441,337	4.02	%	$	198,365		$	(169,878	)	$	28,487
Covered Loans	720,816			50,768		28.56		1,148,969			106,686		37.66		(33,930		)	(21,988		)	(55,918		)
Loans (1) (2) (3)	51,943,121			520,592		4.06		45,656,547			548,023		4.87		164,435			(191,866		)	(27,431		)
Investment securities – AFS (tax exempt)(3)	511,046			5,453		4.33		393,128			4,660		4.81		3,426			(2,633		)	793
Investment securities – AFS (taxable)	8,141,538			45,541		2.27		8,128,146			44,488		2.22		73			980			1,053
Total investment securities – AFS	8,652,584			50,994		2.39		8,521,274			49,148		2.34		3,499			(1,653		)	1,846
Investment securities – HTM (tax exempt) (3)	1,198,061			8,957		3.03		1,123,199			8,905		3.22		2,247			(2,195		)	52
Investment securities – HTM (taxable)	307,337			1,416		1.87		368,278			1,948		2.15		(299		)	(233		)	(532		)
Total investment securities - HTM	1,505,398			10,373		2.79		1,491,477			10,853		2.95		1,948			(2,428		)	(480		)
Trading account securities (3)	83,622			519		2.52		117,630			740		2.55		(211		)	(10		)	(221		)
Other (4)	22,428			47		0.85		13,560			40		1.20		70			(63		)	7
Total earning assets	62,207,153			582,525		3.80		55,800,488			608,804		4.42		169,741			(196,020		)	(26,279		)
Noninterest earning assets:
Cash and due from banks	3,171,215							5,719,700
Allowance for loan losses	(702,748		)					(800,282		)
Net unrealized gain (loss) on investment securities available for sale	38,545							193,580
Other noninterest earning assets	8,644,979							8,941,740
Total assets	$	73,359,144						$	69,855,226
Liabilities:
Interest bearing liabilities:
Interest bearing demand deposits	$	7,491,112		2,997		0.16		$	6,832,762		2,834		0.17		714			(551		)	163
Savings and money market accounts	19,581,890			15,666		0.32		19,057,858			21,342		0.45		3,843			(9,519		)	(5,676		)
Certificates and other time deposits	12,360,560			34,491		1.13		12,283,729			32,155		1.06		187			2,149			2,336
Foreign office deposits	123,141			62		0.20		129,268			80		0.25		(4		)	(14		)	(18		)
Total interest bearing deposits	39,556,703			53,216		0.55		38,303,617			56,411		0.60		4,740			(7,935		)	(3,195		)
FHLB and other borrowings	4,289,004			16,364		1.55		4,221,034			15,792		1.52		257			315			572
Federal funds purchased and securities sold under agreements to repurchase	941,171			500		0.22		1,109,300			580		0.21		(141		)	61			(80		)
Other short-term borrowings	12,553			26		0.84		10,881			72		2.68		65			(111		)	(46		)
Total interest bearing liabilities	44,799,431			70,106		0.63		43,644,832			72,855		0.68		4,921			(7,670		)	(2,749		)
Noninterest bearing deposits	15,652,987							13,753,943
Other noninterest bearing liabilities	1,290,879							1,307,555
Total liabilities	61,743,297							58,706,330
Shareholder’s equity	11,615,847							11,148,896
Total liabilities and shareholder’s equity	$	73,359,144						$	69,855,226
Net interest income/net interest spread				$	512,419	3.17	%				$	535,949	3.74	%	$	164,820		$	(188,350	)	$	(23,530	)
Net interest margin						3.34	%						3.90	%
Taxable equivalent adjustment				$	17,120						$	13,003
Net interest income				$	495,299						$	522,946

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

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

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

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

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Provision for Loan Losses

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

Three Months Ended March 31, 2014 and 2013

For the three months ended March 31, 2014, the Company recorded $37.3 million of provision for loan losses compared to $19.6 million of provision for loan losses for the three months ended March 31, 2013. Excluding covered loans, provision for loan losses for the three months ended March 31, 2014 was $32.3 million compared to $24.9 million for the three months ended March 31, 2013. The increase in provision for loan losses for the three months ended March 31, 2014 as compared to the three months ended March 31, 2013 was primarily attributable to loan growth during 2014. The Company recorded net charge-offs of $30.3 million during the three months ended March 31, 2014 compared to $36.5 million during the corresponding period in 2013. Net charge-offs were 0.24% of average loans for the three months ended March 31, 2014 compared to 0.32% of average loans for the three months ended March 31, 2013.

For further discussion and analysis of the allowance for loan losses, refer to the discussion of lending activities found later in this section. Also, refer to Note 4, Loans and Allowance for Loan Losses, in the Notes to the Unaudited Condensed Consolidated Financial Statements for additional disclosures.

Noninterest Income

Noninterest income was $219.3 million for the three months ended March 31, 2014, which increased from the $205.4 million reported for the three months ended March 31, 2013. The following table presents the components of noninterest income for the three months ended March 31, 2014 and 2013.

Table 2 Noninterest Income
	Three Months Ended March 31,
	2014			2013
	(In Thousands)
Service charges on deposit accounts	$	53,391		$	55,488
Card and merchant processing fees	24,304			24,624
Retail investment sales	26,564			24,379
Asset management fees	10,758			10,069
Corporate and correspondent investment sales	8,656			9,396
Mortgage banking income	4,276			11,470
Bank owned life insurance	3,967			4,405
Investment securities gains, net	16,434			14,955
Loss on prepayment of FHLB and other borrowings	(458		)	(1,107		)
Other	71,436			51,698
Total noninterest income	$	219,328		$	205,377

Service charges on deposit accounts were $53.4 million for the three months ended March 31, 2014, compared to $55.5 million for the three months ended March 31, 2013. Service charges on deposit accounts represent the Company's largest category of noninterest revenue. The decrease in service charges on deposit accounts was primarily driven by customers maintaining higher balances resulting in fewer fees, and modified customer behavior to avoid fees.

Retail investment sales for the three months ended March 31, 2014 increased to $26.6 million compared to $24.4 million for the three months ended March 31, 2013. The primary driver of the increase was related to an increase in fixed annuity income due in part to higher rates for the three months ended March 31, 2014, which has increased demand for fixed annuities.

Mortgage banking income for the three months ended March 31, 2014 was $4.3 million compared to $11.5 million for the three months ended March 31, 2013. Mortgage banking income for the three months ended March 31, 2014

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included $4.7 million of origination fees and gains on sales of mortgage loans as well as losses of $328 thousand related to fair value adjustments on mortgage loans held for sale, mortgage related derivatives and MSRs. Mortgage banking income for the three months ended March 31, 2013 included $20.2 million of origination fees and gains on sales of mortgage loans and losses of $8.4 million related to fair value adjustments on mortgage loans held for sale, mortgage related derivatives and MSRs. The decrease in mortgage banking income for the three months ended March 31, 2014 compared to the corresponding period in 2013 was primarily driven by decreased mortgage production volume of approximately 61.7% for the three months ended March 31, 2014 relative to the same period in 2013 due to declines in refinancing activity caused by an increase in interest rates on mortgages.

BOLI represents income generated by the underlying investments maintained within each of the Company’s life insurance policies on certain key executives and employees. BOLI income decreased to $4.0 million for the three months ended March 31, 2014 compared $4.4 million for the three months ended March 31, 2013. The decrease was attributable to a decline in crediting rates on certain policies held by the Company.

Investment securities gains, net increased to $16.4 million for the three months ended March 31, 2014 compared to $15.0 million for the corresponding period in 2013. During the three months ended March 31, 2014, the Company sold $431 million of available for sale securities compared to $361 million during 2013.

The Company recognized losses on prepayment of FHLB and other borrowings of $458 thousand and $1.1 million for the three months ended March 31, 2014 and 2013, respectively, due primarily to an early termination of approximately $40 million of FHLB advances for the three months ended March 31, 2014 and an early termination of approximately $200 million of FHLB advances for the three months ended March 31, 2013.

Other income is comprised of income recognized that does not typically fit into one of the other noninterest income categories and includes primarily various fees associated with letters of credit, syndications, ATMs, investment services and foreign exchange. The gain (loss) associated with the sale of fixed assets is also included in other income. For the three months ended March 31, 2014, other income increased by $19.7 million principally from other miscellaneous fees, which increased approximately $19.0 million due to an increase in revenues from BSI.

Noninterest Expense

Noninterest expense was $518.9 million for the three months ended March 31, 2014, a decrease of $26.8 million compared to the three months ended March 31, 2013. The following table presents the components of noninterest expense for the three months ended March 31, 2014 and 2013.

Table 3 Noninterest Expense
	Three Months Ended March 31,
	2014		2013
	(In Thousands)
Salaries, benefits and commissions	$	262,569	$	251,323
FDIC indemnification expense	31,618		86,307
Equipment	53,738		47,615
Professional services	46,399		39,274
Net occupancy	38,957		37,894
Amortization of intangibles	12,534		16,040
Total securities impairment	146		—
Other	72,906		67,212
Total noninterest expense	$	518,867	$	545,665

FDIC indemnification expense, which represents the amortization of changes in the FDIC indemnification asset and liability stemming from changes in credit expectations of covered loans, was $31.6 million during the three months ended March 31, 2014 compared to $86.3 million for the corresponding period in 2013. The decrease for the three months ended March 31, 2014 was driven by changes in credit quality of the covered loan portfolio as well as changes in the expected cash flows of covered loans.

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Equipment expense increased by $6.1 million for the three months ended March 31, 2014 due primarily to increases in hardware and software maintenance of approximately $2.3 million and hardware depreciation and software amortization of $3.2 million related to the Company's implementation of a new core banking platform as well as several other IT projects implemented during 2013.

Professional services expense represents fees incurred for the various support functions, which includes legal, consulting, outsourcing and other professional related fees. Professional services expense increased by $7.1 million for the three months ended March 31, 2014 to $46.4 million compared to the corresponding period in 2013. The primary drivers of the increase were $3.5 million of professional services expense associated with the Simple acquisition as well as $3.7 million of increases related to investment, consulting and outsourcing expenses during the three months ended March 31, 2014.

Amortization expense decreased by $3.5 million for the three months ended March 31, 2014 due to the lower level of intangible assets at March 31, 2014 compared to the same period in 2013.

Other noninterest expense represents FDIC insurance, marketing, communications, postage, supplies, subscriptions, provision for unfunded commitments and OREO. Other noninterest expense increased for the three months ended March 31, 2014 to $72.9 million compared to $67.2 million for the three months ended March 31, 2013 due in part to a $4.8 million increase in FDIC insurance and a $2.8 million increase in provision for unfunded commitments offset by a $2.9 million decrease in bankcard fraud losses due to initiatives focused at reducing fraud losses.

Income Tax Expense

The Company’s income tax expense totaled $43.6 million and $52.5 million for the three months ended March 31, 2014 and 2013, respectively. The effective tax rate was 27.5% for the three months ended March 31, 2014 and 32.2% for the three months ended March 31, 2013.The decrease in the effective tax rate for the three months ended March 31, 2014 compared to the three months ended March 31, 2013 was primarily driven by an increase in tax exempt income in 2014.

Analysis of Financial Condition

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

Investment Securities

As of March 31, 2014, the securities portfolio included $8.5 billion in available for sale securities and $1.5 billion in held to maturity securities for a total investment portfolio of $10.0 billion, an increase of $195 million compared with December 31, 2013.

During the three months ended March 31, 2014, the Company sold $431 million of mortgage-backed securities and collateralized mortgage obligations classified as available for sale which resulted in net gains of $16.4 million.

The Company recognized $146 thousand in OTTI charges for the three months ended March 31, 2014 compared to none for the three months ended March 31, 2013. While all securities are reviewed by the Company for OTTI, the securities primarily impacted by credit impairment are non-agency collateralized mortgage obligations and asset-backed securities. Refer to Note 3, Investment Securities Available for Sale and Investment Securities Held to Maturity, in the Notes to the Unaudited Condensed Consolidated Financial Statements for further details.

Lending Activities

Average loans and loans held for sale, net of unearned income, represented 83.5% of average interest-earnings assets at March 31, 2014, compared to 82.5% at December 31, 2013. The Company groups its loans into portfolio segments based on internal classifications reflecting the manner in which the allowance for loan losses is established and how credit risk is measured, monitored and reported. Commercial loans are comprised of commercial, financial and agricultural, real estate-construction, and commercial real estate–mortgage loans. Consumer loans are comprised of residential real-estate mortgage, equity lines of credit, equity loans, credit cards, consumer-direct and consumer-indirect loans. The Company also has a portfolio of covered loans that were acquired in the FDIC-assisted acquisition of certain assets and liabilities of Guaranty Bank.

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The following table presents the composition of the loan portfolio at March 31, 2014 and December 31, 2013.

Table 4 Loan Portfolio
	March 31, 2014		December 31, 2013
	(In Thousands)
Commercial loans:
Commercial, financial and agricultural	$	21,739,487	$	20,209,209
Real estate – construction	1,729,550		1,736,348
Commercial real estate – mortgage	9,303,028		9,106,329
Total commercial loans	$	32,772,065	$	31,051,886
Consumer loans:
Residential real estate – mortgage	$	12,986,374	$	12,706,879
Equity lines of credit	2,218,862		2,236,367
Equity loans	616,762		644,068
Credit card	634,266		660,073
Consumer – direct	513,797		516,572
Consumer – indirect	2,250,888		2,116,981
Total consumer loans	$	19,220,949	$	18,880,940
Covered loans	701,158		734,190
Total loans	$	52,694,172	$	50,667,016
Loans held for sale	101,615		147,109
Total loans and loans held for sale	$	52,795,787	$	50,814,125

Loans and loans held for sale, net of unearned income, totaled $52.8 billion at March 31, 2014, an increase of $2.0 billion from December 31, 2013. The increase in total loans was primarily driven by growth in commercial, financial and agricultural loans as well as increases in the commercial real estate - mortgage, residential real estate - mortgage and consumer - indirect loan portfolios.

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

Asset Quality

The Company's asset quality continued to improve during the three months ended March 31, 2014. Nonperforming assets, which includes nonaccrual loans, nonaccrual loans held for sale, accruing loans 90 days past due, accruing TDRs 90 days past due, other real estate owned and other repossessed assets totaled $501 million at March 31, 2014 compared to $552 million at December 31, 2013. Excluding covered assets, nonperforming assets decreased from $486 million at December 31, 2013 to $434 million at March 31, 2014. The decrease in nonperforming assets, excluding covered assets, was primarily due to a $53 million decrease in nonaccrual loans partially attributable to the Company's decision to sell certain nonperforming loans. As a percentage of total loans and loans held for sale and other real estate, nonperforming assets were 0.95% (or 0.83% excluding covered assets) at March 31, 2014 compared with 1.09% (or 0.97% excluding covered assets) at December 31, 2013.

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The Company defines potential problem loans as commercial noncovered loans rated substandard or doubtful that do not meet the definition of nonaccrual, TDR or 90 days past due and still accruing. See Note 4, Loans and Allowance for Loan Losses, in the Notes to the Unaudited Condensed Consolidated Financial Statements for further information on the Company’s credit grade categories, which are derived from standard regulatory rating definitions. The following table provides a summary of potential problem loans as of March 31, 2014 and December 31, 2013:

Table 5 Potential Problem Loans
	March 31, 2014		December 31, 2013
	(In Thousands)
Commercial, financial and agricultural	$	145,169	$	134,927
Real estate – construction	4,232		7,421
Commercial real estate – mortgage	135,139		138,432
	$	284,540	$	280,780

In connection with the 2009 acquisition of Guaranty Bank, the Bank has entered into loss sharing agreements with the FDIC whereby the FDIC reimburses the Bank for a substantial portion of the losses incurred. In addition, covered loans acquired were recorded at fair value as of the acquisition date without regard to the loss sharing agreements. These covered loans were evaluated and assigned to loan pools based on common risk characteristics. The fair value of the covered loans was estimated to be significantly below the unpaid principal balance. In accordance with the acquisition method of accounting, there was no allowance brought forward on any of the acquired loans as the credit losses were included in the determination of the fair value of the covered loans at the acquisition date. Charge-offs are recognized for these loans when the actual losses exceed the estimated losses used in determining the fair value of the loans. Substantially all of the covered loans were considered to be accruing loans at the date of acquisition. In accordance with regulatory reporting standards, covered loans that are contractually past due will continue to be reported as past due and still accruing based on the number of days past due.

Given the significant amount of acquired loans that are past due but still accruing, the Company believes the inclusion of these loans in certain asset quality ratios including “Loans 90 days or more past due and still accruing as a percentage of total loans,” “Nonperforming loans as a percentage of total loans,” and certain other asset quality ratios that reflect nonperforming assets in the numerator or denominator (or both) results in significant distortion to these ratios. In addition, because loan level charge-offs related to the acquired loans are not recognized in the financial statements until the cumulative amounts exceed the original loss projections on a pool basis, the net charge-off ratio for the acquired loans is not consistent with the net charge-off ratio for other loan portfolios. The inclusion of these loans in the asset quality ratios described above could result in a lack of comparability across quarters or years and could negatively impact comparability with other portfolios that were not impacted by acquisition accounting. The Company believes that the presentation of asset quality measures excluding covered loans and related amounts from both the numerator and the denominator provides better perspective into underlying trends related to the quality of its loan portfolio. Accordingly, the asset quality measures in Tables 6 and 8 present asset quality information both on a consolidated basis as well as excluding the covered loans and the related amounts.

67

The following table summarizes asset quality information at March 31, 2014 and December 31, 2013 and includes loans held for sale and purchased impaired loans.

Table 6 Asset Quality
	March 31, 2014		December 31, 2013
	(In Thousands)
Nonaccrual loans:
Commercial, financial and agricultural	$	103,133	$	128,231
Real estate – construction	10,999		14,183
Commercial real estate – mortgage	106,295		129,672
Residential real estate – mortgage	107,601		102,904
Equity lines of credit	33,178		31,431
Equity loans	20,130		20,447
Credit card	—		—
Consumer – direct	355		540
Consumer – indirect	1,349		1,523
Total nonaccrual loans, excluding covered loans	383,040		428,931
Covered nonaccrual loans	5,557		5,428
Total nonaccrual loans	388,597		434,359
Nonaccrual loans held for sale	—		7,359
Total nonaccrual loans and loans held for sale	$	388,597	$	441,718
Accruing TDRs: (1)
Commercial, financial and agricultural	$	21,244	$	25,548
Real estate – construction	2,436		3,801
Commercial real estate – mortgage	59,543		59,727
Residential real estate – mortgage	72,043		74,236
Equity lines of credit	—		—
Equity loans	43,078		42,850
Credit card	—		—
Consumer – direct	79		91
Consumer – indirect	—		—
Total accruing TDRs, excluding covered loans	198,423		206,253
Covered TDRs	3,856		3,455
Total TDRs	202,279		209,708
TDRs classified as loans held for sale	—		—
Total TDRs (loans and loans held for sale)	$	202,279	$	209,708
Other real estate:
Other real estate, excluding covered assets	21,981		19,115
Covered other real estate	3,836		4,113
Total other real estate	$	25,817	$	23,228
Other repossessed assets:
Other repossessed assets, excluding covered assets	3,313		3,360
Covered other repossessed assets	—		—
Total other repossessed assets	$	3,313	$	3,360

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Table 6 (continued) Asset Quality
	March 31, 2014		December 31, 2013
	(In Thousands)
Loans 90 days past due and accruing:
Commercial, financial and agricultural	1,403		2,212
Real estate – construction	1,337		240
Commercial real estate – mortgage	626		797
Residential real estate – mortgage	2,632		2,460
Equity lines of credit	5,285		5,109
Equity loans	825		1,167
Credit card	9,965		10,277
Consumer – direct	2,814		2,402
Consumer – indirect	497		1,540
Total loans 90 days past due and accruing, excluding covered loans	25,384		26,204
Covered loans 90 days past due and accruing	58,106		56,610
Total loans 90 days past due and accruing	83,490		82,814
Loans held for sale 90 days past due and accruing	—		—
Total loans and loans held for sale 90 days past due and accruing	$	83,490	$	82,814

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

Nonperforming assets, which include loans held for sale and purchased impaired loans, at March 31, 2014 and December 31, 2013 are detailed in the following table.

Table 7 Nonperforming Assets
	March 31, 2014		December 31, 2013
	(In Thousands)
Nonaccrual loans	$	388,597	$	441,718
Loans 90 days or more past due and accruing (1)	83,490		82,814
TDRs 90 days or more past due and accruing	204		1,317
Nonperforming loans	472,291		525,849
OREO	25,817		23,228
Other repossessed assets	3,313		3,360
Total nonperforming assets	$	501,421	$	552,437

(1) Excludes loans classified as TDRs.

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Table 8 Asset Quality Ratios
	March 31, 2014		December 31, 2013
	(In Thousands)
Asset Quality Ratios:
Nonperforming loans and loans held for sale as a percentage of total loans and loans held for sale, excluding covered loans (1)	0.78	%	0.93	%
Nonperforming loans and loans held for sale as a percentage of total loans and loans held for sale, including covered loans (1)	0.89	%	1.03	%
Nonperforming assets as a percentage of total loans and loans held for sale, other real estate, and other repossessed assets, excluding covered assets (2)	0.83	%	0.97	%
Nonperforming assets as a percentage of total loans and loans held for sale, other real estate, and other repossessed assets, including covered assets (2)	0.95	%	1.09	%
Allowance for loan losses as a percentage of loans, excluding covered loans and related allowance	1.35	%	1.40	%
Allowance for loan losses as a percentage of loans, including covered loans and related allowance	1.34	%	1.38	%
Allowance for loan losses as a percentage of nonperforming loans, excluding covered loans (3)	171.21	%	152.87	%
Allowance for loan losses as a percentage of nonperforming loans, including covered loans (3)	149.84	%	135.15	%

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

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

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

The current inventory of other real estate, excluding amounts covered under FDIC loss sharing agreements, totaled $22 million at March 31, 2014 compared to $19 million at December 31, 2013. This includes lands and lots, which totaled $10 million at March 31, 2014. The remaining foreclosed real estate at March 31, 2014 is primarily single family residential and commercial real estate.

The following table provides a rollforward of OREO for the three months ended March 31, 2014 and 2013.

Table 9 Rollforward of Other Real Estate Owned
	2014			2013
	(In Thousands)
Balance at January 1,	$	23,228		$	68,568
Transfer of loans and loans held for sale to OREO	8,920			13,917
Sales of OREO	(5,438		)	(11,138		)
Writedowns of OREO	(893		)	(1,804		)
Balance at March 31,	$	25,817		$	69,543

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The following table provides a rollforward of nonaccrual loans and loans held for sale, excluding covered loans, for the three months ended March 31, 2014 and 2013.

Table 10 Rollforward of Nonaccrual Loans
	2014			2013
	(In Thousands)
Balance at January 1,	$	436,290		$	726,541
Additions	94,973			145,626
Returns to accrual	(24,630		)	(32,788		)
Loan sales	(39,949		)	(9,832		)
Payments and paydowns	(31,461		)	(84,193		)
Transfers to other real estate	(7,192		)	(11,898		)
Charge-offs	(44,991		)	(54,142		)
Balance at March 31,	$	383,040		$	679,314

As a part of the Company's asset disposition strategy, the Company may sell nonaccrual and other underperforming loans. During the three months ended March 31, 2014 and 2013, the Company sold noncovered commercial loans totaling $57.9 million and $20.0 million, respectively. Net charge-offs totaling $8.4 million and $3.2 million, respectively, were recognized on these sales.

When borrowers are experiencing financial difficulties, the Company, in order to assist the borrowers in repaying the principal and interest owed to the Company, may make certain modifications to the loan agreement. To facilitate this process, a concessionary modification that would not otherwise be considered may be granted resulting in a classification of the loan as a TDR. Within each of the Company’s loan classes, TDRs typically involve modification of the loan interest rate to a below market rate or an extension or deferment of the loan. The financial effects of TDRs are reflected in the components that comprise the allowance for loan losses in either the amount of charge-offs or loan loss provision and period-end allowance levels. All TDRs are considered to be impaired loans. Refer to Note 4, Loans and Allowance for Loan Losses, in the Notes to the Unaudited Condensed Consolidated Financial Statements for additional information.

The following table provides a rollforward of TDR activity, excluding covered loans and loans held for sale, for the three months ended March 31, 2014 and 2013.

Table 11 Rollforward of TDR Activity
	2014			2013
	(In Thousands)
Balance at January 1,	$	310,282		$	388,643
New TDRs	9,415			17,304
Payments/Payoffs	(19,542		)	(39,647		)
Charge-offs	(1,798		)	(5,257		)
Loan sales	(2,039		)	(2,564		)
Transfer to ORE	(3,896		)	(2,305		)
Balance at March 31,	$	292,422		$	356,174

The Company’s aggregate recorded investment in impaired loans modified through TDRs excluding covered loans decreased to $292 million at March 31, 2014 from $310 million at December 31, 2013. Included in these amounts are $198 million at March 31, 2014 and $206 million at December 31, 2013 of accruing TDRs, excluding covered loans. Accruing TDRs are not considered nonperforming because they are performing in accordance with the restructured terms.

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The following table provides a rollforward of accruing TDR activity, excluding covered loans and loans held for sale, for the three months ended March 31, 2014 and 2013.

Table 12 Rollforward of Accruing TDR Activity
	2014			2013
	(In Thousands)
Balance at January 1,	$	206,253		$	237,018
New TDRs	5,718			4,038
Return to accrual	2,341			28,577
Payments/Payoffs	(10,986		)	(5,445		)
Charge-offs	—			(94		)
Loan sales	(839		)	(2,512		)
Transfer to OREO	—			—
Transfer to nonaccrual	(4,064		)	(20,241		)
Balance at March 31,	$	198,423		$	241,341

The Company's allowance for loan losses is largely driven by risk ratings assigned to commercial loans, updated borrower credit scores on consumer loans and borrower delinquency history in both commercial and consumer portfolios.  As such, the provision for credit losses is impacted primarily by changes in borrower payment performance rather than TDR classification.  In addition, all commercial and consumer loans modified in a TDR are considered to be impaired, even if they maintain their accrual status.

Allowance for Loan Losses

Management’s policy is to maintain the allowance for loan losses at a level sufficient to absorb estimated probable incurred losses in the loan portfolio. Refer to Note 4, Loans and Allowance for Loan Losses, in the Notes to the Unaudited Condensed Consolidated Financial Statements for additional disclosures regarding the allowance for loan losses. The total allowance for loan losses, excluding covered loans, increased to $700 million at March 31, 2014, from $698 million at December 31, 2013. During 2014, the overall risk profile of the loan portfolio continued to improve. As loans with higher levels of probable incurred losses have been removed from the portfolio, this has influenced the allowance estimate resulting in lower required reserves. In addition, nonperforming loans, excluding covered loans and loans held for sale, decreased to $409 million at March 31, 2014 from $456 million at December 31, 2013. The ratio of the allowance for loan losses to total loans, excluding covered loans and the related allowance, decreased to 1.35% at March 31, 2014 from 1.40% at December 31, 2013. The allowance attributable to individually impaired loans was $84 million at March 31, 2014 compared to $82 million at December 31, 2013.

The provision for loan losses is the charge to earnings that management determines to be necessary to maintain the allowance for loan losses at a sufficient level reflecting management's estimate of probable incurred losses in the loan portfolio. For the three months ended March 31, 2014, the Company recorded $37.3 million of provision for loan losses compared to $19.6 million of provision for loan losses for the three months ended March 31, 2013. Excluding covered loans, provision for loan losses for the three months ended March 31, 2014 was $32.3 million compared to $24.9 million for for the three months ended March 31, 2013. The increase in the provision for loan losses during 2014 was primarily attributable to loan growth during 2014.

Net charge-offs were 0.24% of average loans for the three months ended March 31, 2014 compared to 0.32% of average loans for the three months ended March 31, 2013. Net charge-offs decreased in most lending portfolios, including a $5.1 million decrease in the residential real estate -mortgage portfolio and a $2.6 million decrease in the equity lines of credit portfolio.

72

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

Table 13 Summary of Loan Loss Experience
	Three Months Ended
	March 31,
	2014			2013
	(Dollars in Thousands)
Average loans outstanding during the period	$	51,864,597		$	45,502,865
Average loans outstanding during the period, excluding covered loans	$	51,143,781		$	44,353,896
Allowance for loan losses, beginning of period	$	700,719		$	802,853
Charge-offs:
Commercial, financial and agricultural	4,934			6,322
Real estate – construction	224			1,512
Commercial real estate – mortgage	2,422			5,106
Residential real estate – mortgage	7,266			12,061
Equity lines of credit	5,819			8,162
Equity loans	2,623			2,757
Credit card	9,334			8,008
Consumer – direct	5,826			5,608
Consumer – indirect	6,544			4,605
Total, excluding covered loans	44,992			54,141
Covered loans	216			1,269
Total, including covered loans	45,208			55,410
Recoveries:
Commercial, financial and agricultural	4,985			5,197
Real estate – construction	1,139			3,558
Commercial real estate – mortgage	399			1,935
Residential real estate – mortgage	1,209			884
Equity lines of credit	981			688
Equity loans	504			581
Credit card	655			612
Consumer – direct	1,884			2,049
Consumer – indirect	2,790			2,666
Total, excluding covered loans	14,546			18,170
Covered loans	342			790
Total, including covered loans	14,888			18,960
Net charge-offs	30,320			36,450
Provision for covered loans	4,985			(5,250		)
Provision charged to income, excluding covered loans	32,281			24,865
Total provision for loan losses	37,266			19,615
Allowance for loan losses, end of period	$	707,665		$	786,018
Allowance for loan losses, excluding allowance attributable to covered loans, end of period	$	699,600		$	773,944
Allowance for covered loans	8,065			12,074
Total allowance for loan losses	$	707,665		$	786,018
Net charge-offs to average loans	0.24		%	0.32		%
Net charge-offs to average loans, excluding covered loans	0.24		%	0.33		%

Concentrations

The following tables provide further details regarding the Company’s commercial, financial and agricultural, commercial real estate, residential real estate and consumer segments as of March 31, 2014 and December 31, 2013.

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Commercial, Financial and Agricultural

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

The commercial, financial and agricultural portfolio segment totaled $21.7 billion at March 31, 2014, compared to $20.2 billion at December 31, 2013. The increase in this portfolio segment reflects the Company's objective to strategically grow this segment. This segment consists primarily of large national and international companies and small to mid-sized companies. This segment also contains owner occupied commercial real estate loans. Loans in this portfolio are generally underwritten individually and are secured with the assets of the company, and/or the personal guarantees of the business owners. The Company minimizes the risk associated with this segment by various means, including maintaining prudent advance rates, financial covenants, and obtaining personal guarantees from the principals of the company.

The following table provides details related to the commercial, financial, and agricultural segment as of March 31, 2014 and December 31, 2013.

Table 14 Commercial, Financial and Agricultural
	March 31, 2014								December 31, 2013 (1)
Industry	Recorded Investment		Nonaccrual		Accruing TDRs		Accruing Greater Than 90 Days Past Due		Recorded Investment		Nonaccrual		Accruing TDRs		Accruing Greater Than 90 Days Past Due
	(In Thousands)
Autos, Components and Durable Goods	$	455,266	$	115	$	—	$	—	$	413,666	$	420	$	—	$	—
Basic Materials	970,574		106		—		—		855,342		105		—		—
Capital Goods & Industrial Services	1,795,378		7,080		63		3		1,843,906		5,851		85		1,392
Construction & Infrastructure	589,136		7,862		195		33		538,312		29,943		4,266		—
Consumer & Healthcare	2,645,289		6,856		919		527		2,411,402		11,896		946		50
Energy	3,105,549		875		—		—		2,876,170		871		—		—
Financial Services	1,125,823		16		—		—		1,068,682		94		—		—
General Corporates	1,052,628		2,203		33		809		1,037,612		1,349		28		759
Institutions	2,100,975		28,666		—		—		1,860,121		27,079		—		—
Leisure	1,894,899		28,625		403		—		1,760,205		28,497		422		—
Real Estate	1,587,245		1,510		19,598		—		1,373,026		2,363		19,763		—
Retailers	1,970,027		18,971		19		31		1,934,491		19,445		23		7
Telecoms, Technology & Media	991,524		176		14		—		802,412		—		15		4
Transportation	636,093		72		—		—		590,982		240		—		—
Utilities	819,081		—		—		—		842,880		78		—		—
Total Commercial, Financial and Agricultural	$	21,739,487	$	103,133	$	21,244	$	1,403	$	20,209,209	$	128,231	$	25,548	$	2,212

(1) December 31, 2013 data has been revised to conform to current period industry classifications, as the Company redefined industry classifications during the first quarter of 2014.

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Commercial Real Estate

The commercial real estate portfolio segment includes the commercial real estate and real estate - construction loan portfolios. Commercial real estate loans totaled $9.3 billion at March 31, 2014, compared to $9.1 billion at December 31, 2013, and real estate - construction loans totaled $1.7 billion at both March 31, 2014, and December 31, 2013.

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

The following tables present the geographic distribution for the commercial real estate and real estate - construction portfolios as of March 31, 2014 and December 31, 2013.

Table 15 Commercial Real Estate
	March 31, 2014								December 31, 2013
State	Recorded Investment		Nonaccrual		Accruing TDRs		Accruing Greater Than 90 Days Past Due		Recorded Investment		Nonaccrual		Accruing TDRs		Accruing Greater Than 90 Days Past Due
	(In Thousands)
Alabama	$	660,765	$	8,353	$	6,006	$	7	$	690,668	$	8,950	$	6,126	$	181
Arizona	794,651		10,719		6,470		—		801,231		11,278		5,765		—
California	931,789		3,396		—		—		845,135		3,180		—		—
Colorado	483,184		11,057		13,557		—		515,663		4,940		13,792		—
Florida	923,694		7,923		4,719		266		893,315		7,736		5,365		—
New Mexico	251,116		3,620		—		—		257,585		2,516		—		—
Texas	3,204,713		46,855		6,711		353		3,135,674		71,411		8,023		616
Other	2,053,116		14,372		22,080		—		1,967,058		19,661		20,656		—
	$	9,303,028	$	106,295	$	59,543	$	626	$	9,106,329	$	129,672	$	59,727	$	797

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Table 16 Real Estate – Construction
	March 31, 2014								December 31, 2013
State	Recorded Investment		Nonaccrual		Accruing TDRs		Accruing Greater Than 90 Days Past Due		Recorded Investment		Nonaccrual		Accruing TDRs		Accruing Greater Than 90 Days Past Due
	(In Thousands)
Alabama	$	51,701	$	1,821	$	1,839	$	386	$	50,852	$	1,809	$	1,858	$	—
Arizona	144,901		3,492		—		—		126,793		4,625		—		—
California	192,029		103		31		—		235,919		302		82		—
Colorado	61,110		500		409		—		69,672		567		1,701		—
Florida	87,846		2,531		—		656		119,374		2,628		—		193
New Mexico	16,942		133		72		—		18,426		156		73		—
Texas	861,516		1,941		85		295		815,266		3,189		87		47
Other	313,505		478		—		—		300,046		907		—		—
	$	1,729,550	$	10,999	$	2,436	$	1,337	$	1,736,348	$	14,183	$	3,801	$	240

Residential Real Estate

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

Residential real estate - mortgage loans totaled $13.0 billion at March 31, 2014 compared to $12.7 billion at December 31, 2013. Risks associated with residential real estate - mortgage loans are mitigated through rigorous underwriting procedures, collateral values established by independent appraisers and mortgage insurance. In addition, the collateral for this segment is concentrated in the Company's footprint as indicated in the table below.

Table 17 Residential Real Estate - Mortgage
	March 31, 2014								December 31, 2013
State	Recorded Investment		Nonaccrual		Accruing TDRs		Accruing Greater Than 90 Days Past Due		Recorded Investment		Nonaccrual		Accruing TDRs		Accruing Greater Than 90 Days Past Due
	(In Thousands)
Alabama	$	1,337,803	$	21,029	$	15,684	$	494	$	1,366,657	$	16,662	$	16,005	$	218
Arizona	1,413,090		10,710		11,310		320		1,368,384		11,103		10,195		339
California	2,150,880		6,129		2,031		—		1,970,422		5,795		3,415		—
Colorado	1,159,299		2,287		2,382		7		1,024,410		2,234		2,585		63
Florida	1,366,494		14,022		14,187		168		963,622		9,617		11,652		212
New Mexico	230,944		2,099		1,970		84		222,674		1,452		1,308		—
Texas	4,925,240		36,908		20,661		1,402		4,873,957		35,943		21,043		1,502
Other	402,624		14,417		3,818		157		916,753		20,098		8,033		126
	$	12,986,374	$	107,601	$	72,043	$	2,632	$	12,706,879	$	102,904	$	74,236	$	2,460

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The following table provides information related to refreshed FICO scores for the Company's residential real estate portfolio as of March 31, 2014 and December 31, 2013.

Table 18 Residential Real Estate - Mortgage
	March 31, 2014								December 31, 2013
FICO Score	Recorded Investment		Nonaccrual		Accruing TDRs		Accruing Greater Than 90 Days Past Due		Recorded Investment		Nonaccrual		Accruing TDRs		Accruing Greater Than 90 Days Past Due
	(In Thousands)
Below 621	$	575,393	$	63,522	$	19,772	$	1,447	$	568,227	$	67,809	$	24,977	$	1,251
621-680	1,257,297		28,089		28,521		192		1,230,493		17,689		20,221		214
681 – 720	2,156,604		3,706		6,360		31		2,170,335		4,760		11,904		32
Above 720	8,140,941		2,422		15,568		337		7,894,709		2,098		16,030		572
Unknown	856,139		9,862		1,822		625		843,115		10,548		1,104		391
	$	12,986,374	$	107,601	$	72,043	$	2,632	$	12,706,879	$	102,904	$	74,236	$	2,460

Equity lines of credit and equity loans totaled $2.8 billion and $2.9 billion at March 31, 2014 and December 31, 2013, respectively. Losses in these portfolios generally track overall economic conditions. These loans are underwritten in accordance with the underwriting standards set forth in the Company's policy and procedures. The collateral for this segment is concentrated within the Company's footprint as indicated in the table below.

Table 19 Equity Loans and Lines
	March 31, 2014								December 31, 2013
State	Recorded Investment		Nonaccrual		Accruing TDRs		Accruing Greater Than 90 Days Past Due		Recorded Investment		Nonaccrual		Accruing TDRs		Accruing Greater Than 90 Days Past Due
	(In Thousands)
Alabama	$	662,701	$	11,023	$	13,983	$	607	$	674,461	$	10,103	$	13,350	$	1,209
Arizona	421,489		9,421		5,492		3,979		428,861		8,668		5,484		2,494
California	80,438		214		165		20		72,180		219		164		—
Colorado	223,619		7,533		1,100		124		230,500		7,710		968		409
Florida	419,285		8,946		8,468		534		426,512		8,592		8,505		1,103
New Mexico	57,392		1,121		993		99		58,466		1,189		853		261
Texas	920,362		14,376		11,457		606		936,722		14,319		11,756		778
Other	50,338		674		1,420		141		52,733		1,078		1,770		22
	$	2,835,624	$	53,308	$	43,078	$	6,110	$	2,880,435	$	51,878	$	42,850	$	6,276

77

The following table provides information related to refreshed FICO scores for the Company's equity loans and lines as of March 31, 2014 and December 31, 2013.

Table 20 Equity Loans and Lines
	March 31, 2014								December 31, 2013
FICO Score	Recorded Investment		Nonaccrual		Accruing TDRs		Accruing Greater Than 90 Days Past Due		Recorded Investment		Nonaccrual		Accruing TDRs		Accruing Greater Than 90 Days Past Due
	(In Thousands)
Below 621	$	275,567	$	22,250	$	17,723	$	5,661	$	290,527	$	22,449	$	19,499	$	5,673
621-680	435,987		19,597		12,415		272		435,936		19,245		12,140		197
681 – 720	527,515		8,438		5,808		26		536,196		6,517		4,530		—
Above 720	1,564,437		2,022		6,935		14		1,581,607		2,511		6,488		142
Unknown	32,118		1,001		197		137		36,169		1,156		193		264
	$	2,835,624	$	53,308	$	43,078	$	6,110	$	2,880,435	$	51,878	$	42,850	$	6,276

Other Consumer

The Company also operates a consumer finance unit which purchases loan contracts for indirect automobile consumer financing. These loans are centrally underwritten using industry accepted tools and underwriting guidelines. The Company also originates credit card loans and other consumer-direct loans that are centrally underwritten and sourced from the Company's branches. Total credit card, consumer-direct and consumer-indirect loans at March 31, 2014 were $3.4 billion, or 6.5% of the total loan portfolio compared to $3.3 billion, or 6.5% of the total loan portfolio at December 31, 2013.

Foreign Exposure

As of March 31, 2014, foreign exposure risk did not represent a significant concentration of the Company's total portfolio of loans and was substantially represented by borrowers domiciled in Mexico and foreign borrowers currently residing in the United States. 

Funding Activities

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

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Deposits

Total deposits increased by $2.6 billion from December 31, 2013 to March 31, 2014. At March 31, 2014 and December 31, 2013, total deposits included $4.2 billion and $3.3 billion, respectively, of brokered deposits. The following table presents the Company’s deposits segregated by major category:

Table 21 Composition of Deposits
	March 31, 2014				December 31, 2013
	Balance		% of Total		Balance		% of Total
	(Dollars in Thousands)
Noninterest-bearing demand deposits	$	16,322,699	28.6	%	$	15,377,844	28.2	%
Interest-bearing demand deposits	7,425,082		13.0		7,663,256		14.1
Savings and money market	20,562,713		36.0		19,306,589		35.5
Certificates and other time deposits	12,644,757		22.2		11,967,031		22.0
Foreign office deposits-interest-bearing	129,959		0.2		122,770		0.2
Total deposits	$	57,085,210	100.0	%	$	54,437,490	100.0	%

The overall mix of deposits improved during 2014 with noninterest-bearing demand deposits representing 28.6% of total deposits at March 31, 2014 compared to 28.2% at December 31, 2013. Total deposits increased by $2.6 billion from December 31, 2013 to March 31, 2014 due to growth in noninterest bearing demand deposits, savings and money market accounts, and certificates and other time deposits.

Borrowed Funds

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

Short-term borrowings are primarily in the form of federal funds purchased, securities sold under agreements to repurchase and other short-term borrowings. At both March 31, 2014 and December 31, 2013, short-term borrowings were primarily comprised of federal funds purchased and securities sold under agreements to repurchase that were a result of customer activity.

The short-term borrowings table presents the distribution of the Company’s short-term borrowed funds and the corresponding weighted average interest rates at March 31, 2014 and December 31, 2013. Also provided are the maximum outstanding amounts of borrowings, the average amounts of borrowings and the average interest rates at period-end for March 31, 2014 and December 31, 2013.

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Table 22 Short-Term Borrowings
	Maximum Outstanding at Any Month End		Average Balance		Average Interest Rate		Ending Balance		Average Interest Rate at Period End
	(Dollars in Thousands)
Balance at March 31, 2014
Federal funds purchased	$	960,935	$	801,677	0.25	%	$	794,935	0.25	%
Securities sold under agreements to repurchase	162,443		139,494		0.01		162,443		0.02
Other short-term borrowings	28,799		12,553		0.84		28,822		0.55
	$	1,152,177	$	953,724			$	986,200
Balance at December 31, 2013
Federal funds purchased	$	1,022,735	$	815,541	0.25	%	$	704,190	0.26	%
Securities sold under agreements to repurchase	456,263		164,218		0.01		148,380		0.01
Other short-term borrowings	28,630		12,739		0.93		5,591		2.48
	$	1,507,628	$	992,498			$	858,161

At March 31, 2014, short-term borrowings totaled $986 million, an increase of $128 million, or 14.9% compared to December 31, 2013.

At both March 31, 2014 and December 31, 2013, FHLB and other borrowings were $4.3 billion. During the three months ended March 31, 2014, there were no proceeds received from FHLB and other borrowings and repayments were $40.9 million.

Shareholder’s Equity

Total shareholders' equity at March 31, 2014 was $11.7 billion compared to $11.5 billion at December 31, 2013.

During the three months ended March 31, 2014, the Company issued 2,226,875 shares of its common stock to BBVA in consideration of the contribution by BBVA of $117 million to the Company in connection with the Simple acquisition. In addition to the common stock issuance, shareholder's equity increased $114.5 million due to earnings attributable to shareholder during the period. 

Risk Management

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

Market Risk Management

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

80

Interest Rate Market Risk

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

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

The estimated impact on the Company’s net interest income sensitivity over a one-year time horizon at March 31, 2014, is shown in the table below along with comparable prior-period information. Such analysis assumes a gradual and sustained parallel shift in interest rates, expectations of balance sheet growth and composition and the Company’s estimate of how interest-bearing transaction accounts would reprice in each scenario using current yield curves at March 31, 2014 and 2013, respectively.

Table 23 Net Interest Income Sensitivity
	Estimated % Change in Net Interest Income
	March 31, 2014		March 31, 2013
Rate Change
+ 200 basis points	7.67	%	7.96	%
+ 100 basis points	3.78		3.69

EVE is a long-term measure of interest rate risk that measures the change in market value of assets less the change in market value of liabilities against the current capital position for a given change in interest rates. This measurement only values existing business without consideration of new business or potential management actions. Inherent in this calculation are many assumptions used to project lifetime cash flows for every item on the balance sheet that may or may not be realized, such as deposit decay rates, prepayment speeds and spread assumptions. The following table shows the effect that the indicated changes in interest rates would have on EVE.

Table 24 Economic Value of Equity
	Estimated % Change in Economic Value of Equity
	March 31, 2014		March 31, 2013
Rate Change
+ 300 basis points	(3.96)	%	0.79	%
+ 200 basis points	(2.31	)	1.37
+ 100 basis points	(1.03	)	1.32

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

Derivatives

The Company uses derivatives primarily to manage economic risks related to commercial loans, mortgage banking operations, long-term debt and other funding sources. The Company also uses derivatives to facilitate transactions on behalf of its clients. As of March 31, 2014, the Company had derivative financial instruments outstanding with notional amounts of $19.5 billion. The estimated net fair value of open contracts was in an asset position of $123 million at March 31, 2014. For additional information about derivatives, refer to Note 6, Derivatives and Hedging, in the Notes to the Unaudited Condensed Consolidated Financial Statements.

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Liquidity Management

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

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

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

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

In addition to the Company’s financial performance and condition, liquidity may be impacted by the Parent’s structure as a bank holding company that is a separate legal entity from the Bank. The Parent requires cash for various operating needs including payment of dividends to its shareholder, the servicing of debt, and the payment of general corporate expenses. The primary source of liquidity for the Parent is dividends paid by the Bank. Applicable federal and state statutes and regulations impose restrictions on the amount of dividends that may be paid by the Bank. In addition to the formal statutes and regulations, regulatory authorities also consider the adequacy of the Bank’s total capital in relation to its assets, deposits and other such items. Due to the net earnings restrictions on dividend distributions, the Bank was not permitted to pay dividends at March 31, 2014 or December 31, 2013 without regulatory approval. Appropriate limits and guidelines are in place to ensure the Parent has sufficient cash to meet operating expenses and other commitments over the next 18 months without relying on subsidiaries or capital markets for funding. Any future dividends paid from the Parent must be set forth as capital actions in the Company's capital plans and not objected to by the Federal Reserve Board before any dividends can be paid.

On March 26, 2014, the Company was informed that the Federal Reserve Board did not object to the Company's 2014 capital plan, including its plans to distribute capital through a semi-annual common dividend of approximately $51 million. The common dividends are subject to approval by the Company's Board of Directors.

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

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

Capital

The Company and the Bank are subject to various regulatory capital requirements administered by federal and state banking regulators. Failure to meet minimum risk-based and leverage capital requirements can subject the Company and the Bank to a series of increasingly restrictive regulatory actions. Currently, there are two basic measures of capital adequacy: the risk-based capital ratios and the leverage ratio.

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The risk-based capital framework is designed to make regulatory capital requirements more sensitive to differences in credit, market and operational risk profiles among banks and bank holding companies, to account for off-balance sheet exposures and certain types of interest rate risk, and to minimize the disincentives for holding liquid and low-risk assets. Assets and off-balance sheet items are assigned to broad risk categories, each associated with specified risk weights. The resulting risk-based capital ratios represent the ratio of a banking organization's regulatory capital to its total risk weighted assets.

In the U.S. regulatory capital context, the leverage ratio is the ratio of a banking organization's Tier 1 capital to its quarterly average on-balance sheet assets. The leverage ratio is a non-risk based measure of capital adequacy because a bank's on-balance sheet assets are not adjusted for risk for purposes of calculating the leverage ratio.

The Company’s Tier 1 risk-based capital ratio was 11.30% at March 31, 2014 compared to 11.62% at December 31, 2013. The Company's leverage ratio was 9.88% at March 31, 2014 compared to 9.87% at December 31, 2013. The Company regularly performs stress testing on its capital levels and is required to periodically submit the Company’s capital plan to the banking regulators.

The following table shows the calculation of capital ratios for the Company.

Table 25  Capital Ratios
	March 31, 2014			December 31, 2013
	(Dollars in Thousands)
Risk-based capital:
Tier 1 Capital	$	6,736,410		$	6,613,885
Total Qualifying Capital	7,978,951			7,822,858
Assets:
Total risk-adjusted assets (regulatory)	$	59,607,889		$	56,934,859
Ratios:
Tier 1 risk-based capital ratio	11.30		%	11.62		%
Total risk-based capital ratio	13.39		%	13.74		%
Leverage ratio	9.88		%	9.87		%

At March 31, 2014, the regulatory capital ratios of the Bank exceeded the “well-capitalized” standard for banks as defined in the existing prompt corrective action framework. The Company continually monitors these ratios to ensure that the Bank exceeds this standard.

The U.S. Basel III final rule revised the capital ratio thresholds in the prompt corrective action framework to reflect the new Basel III capital ratios. This aspect of the U.S. Basel III will become effective on January 1, 2015.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

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

Item 4.Controls and Procedures

Disclosure Controls and Procedures.

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

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Changes In Internal Control Over Financial Reporting.

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

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

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

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

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

Legacy contractual obligations related to counter indemnities. Before 2007, the BBVA Group issued certain counter indemnities to its non-Iranian customers in Europe for various business activities relating to Iran in support of guarantees provided by Bank Melli, three of which remained outstanding during the three months ended March 31, 2014. The BBVA Group did not receive revenue from these counter indemnities during the three months ended March 31, 2014. In addition, in accordance with Council Regulation (EU) Nr. 267/2012 of March 23, 2012, payments of any amounts due to Bank Melli under these counter indemnities would be blocked. The BBVA Group is committed to terminating these business relationships as soon as contractually possible and does not intend to enter into new business relationships involving Bank Melli.

Letters of credit. During the three months ended March 31, 2014, the BBVA Group had credit exposure to Bank Sepah arising from a letter of credit issued by Bank Sepah to a non-Iranian client of the BBVA Group in Europe. This letter of credit, which was granted before 2004, was used to secure a loan granted by the BBVA Group to a client in order to finance certain Iran-related activities. This loan was supported by the CESCE. The loan related to the client’s exportation of goods to Iran (consisting of goods relating to apelletizing plant for iron concentration and equipment). The BBVA Group did not receive revenue from this loan during the three months ended March 31, 2014. The BBVA Group is committed to terminating the outstanding business relationship with Bank Sepah as soon as contractually possible and does not intend to enter into new business relationships involving Bank Sepah.

Bank Accounts. During the three months ended March 31, 2014, the BBVA Group maintained a number of accounts for certain employees of a company that produces farm vehicles and tractors (some of whom are of Iranian nationality). The BBVA Group believes that 51% of the share capital of such company is controlled by an Iranian company in which the Iranian Government might have an interest. Estimated gross revenue for the three months ended March 31, 2014, from these accounts, which includes fees and/or commissions, did not exceed $107. The BBVA Group does not allocate direct costs to fees and commissions and therefore has not disclosed a separate profits measure. The BBVA Group is committed to terminating its business relationships with the employees of this company as soon as contractually possible and does not intend to enter into new business relationships involving this company or its employees.

Iranian embassy-related activity. The BBVA Group maintains bank accounts in Spain for three employees of the Iranian embassy in Spain. Estimated gross revenue for the three months ended March 31, 2014, from embassy-related activity, which includes fees and/or commissions, did not exceed $1,100. The BBVA Group does not allocate direct costs to fees and commissions and therefore has not disclosed a separate profits measure. The BBVA Group is committed to terminating these business relationships as soon as legally possible.

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PART II OTHER INFORMATION

Item 1. Legal Proceedings

See under “Legal and Regulatory Proceedings” in Note 8, Commitments, Contingencies and Guarantees, of the Notes to the Unaudited Condensed Consolidated Financial Statements.

Item 1A. Risk Factors

Various risk and uncertainties could affect the Company's business. These risks are described elsewhere in this report and the Company's other filings with the SEC, including the Company's Annual Report on Form 10-K for the year-ended December 31, 2013.

The following discussion updates a risk factor that was previously included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013. There have been no material changes to the other risk factors disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013.

The Dodd-Frank Act's provisions restricting bank interchange fees, and the rules promulgated thereunder, may negatively impact the Company's revenues and earnings.

Pursuant to the Dodd-Frank Act, the Federal Reserve Board adopted rules effective October 1, 2011, limiting the interchange fees that may be charged with respect to electronic debit transactions. Interchange fees are charges that merchants pay to the Company and other credit card companies and card-issuing banks for processing electronic payment transactions. Since taking effect, these limitations have reduced the Company's debit card interchange revenues and have created meaningful compliance costs. Additional limits may further reduce the Company's debit card interchange revenues and create additional compliance costs.

The lowering of interchange fees adversely impacted the Company's noninterest income, as described in Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations of the Company’s Annual Report on Form 10-K for the year ended December 31, 2013. In March 2014, the United States Court of Appeals for the District of Columbia Circuit reversed an earlier decision by a Washington D.C. District Court judge that invalidated the Federal Reserve Board's interchange rule ruling in favor of a group of retailers who argued that the new lower interchange fees had been inappropriately set too high by the Federal Reserve Board. If the Circuit Court’s decision is appealed, it is not possible to predict what the appellate court might do and how the Federal Reserve Board, if required to do so, would revise the interchange rule. If the rule were to be revised so that interchange fees were even lower, it would further adversely impact the Company's noninterest income.

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

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

Item 3. Defaults Upon Senior Securities

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

Item 4. Mine Safety Disclosures

Not Applicable.

Item 5.    Other Information

Not Applicable.

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Item 6. Exhibits

Exhibit Number	Description of Documents
2.1	Purchase and Assumption Agreement Whole Bank All Deposits among the Federal Deposit Insurance Corporation, Receiver of Guaranty Bank, Austin, Texas, the Federal Deposit Insurance Corporation and Compass Bank, dated as of August 21, 2009 (incorporated by reference to Exhibit 2.1 of the Company’s Registration Statement on Form 10 filed with the Commission on November 22, 2013, File No. 0-55106).
3.1	Certificate of Formation of BBVA Compass Bancshares, Inc., as amended (restated for filing with the SEC) (incorporated herein by reference to Exhibit 3.1 of the Company’s Registration Statement on Form 10 filed with the Commission on November 22, 2013, File No. 0-55106).
3.2	Bylaws of BBVA Compass Bancshares, Inc. (incorporated herein by reference to Exhibit 3.2 of the Company’s Registration Statement on Form 10 filed with the Commission on November 22, 2013, File No. 0-55106).
31.1	Certification by the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification by the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification by the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification by the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.1	Interactive Data File.

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

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SIGNATURES

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

Date: May 14, 2014	BBVA Compass Bancshares, Inc.
	By:	/s/ Angel Reglero
		Name:	Angel Reglero
		Title:	Senior Executive Vice President, Chief Financial Officer and Duly Authorized Officer

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