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 June 30, 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 July 31, 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 June 30, 2014 and December 31, 2013	7
	Condensed Consolidated Statements of Income for the three and six months ended June 30, 2014 and 2013	8
	Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and six months ended June 30, 2014 and 2013	9
	Condensed Consolidated Statements of Shareholder's Equity for the six months ended June 30, 2014 and 2013	10
	Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2014 and 2013	11
	Notes to the June 30, 2014 Condensed Consolidated Financial Statements	12
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	62
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	89
Item 4.	Controls and Procedures	89
Part II	Other Information
Item 1.	Legal Proceedings	90
Item 1A.	Risk Factors	90
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	102
Item 3.	Defaults Upon Senior Securities	102
Item 4.	Mine Safety Disclosures	102
Item 5.	Other Information	102
Item 6.	Exhibits	104
Signatures		105

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
ARMs	Adjustable rate mortgages
ASC	Accounting Standards Codification
ASU	Accounting Standards Update
Basel III	Global regulatory framework developed by the Basel Committee on Banking Supervision
Basel Committee	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
CapPR	Federal Reserve Board's Capital Plan Review
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
CCAR	Comprehensive Capital Analysis and Review
CD	Certificate of Deposit and/or time deposits
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
CRA	Community Reinvestment Act
Credit Loss Proposal	Proposed Accounting Standards Update, Financial Instruments-Credit Losses (Subtopic 825-15)
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
FBO	Foreign banking organizations
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
Fitch	Fitch Ratings
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
IHC	Top-tier U.S. intermediate holding company
IRS	Internal Revenue Service
Large FBOs	Foreign Banking Organizations with $50 billion or more in global assets

3

LCR	Liquidity Coverage Ratio
Leverage Ratio	Ratio of Tier 1 capital to quarterly average on-balance sheet assets
MBOs	Mortgage Banking Officers
Moody's	Moody's Investor Services, Inc.
MSR	Mortgage Servicing Rights
NLRB	National Labor Relations Board
NSFR	Net Stable Funding Ratio
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.
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
S&P	Standard and Poor's Rating Services
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
Trust Preferred Securities	Mandatorily redeemable preferred capital securities
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
USA PATRIOT Act	Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001

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 and other retail lending regulations, which could adversely affect the Company's business, financial condition or results of operations;

• the Bank's CRA rating, which could result in certain restrictions on the Company's activities;

• 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 periodically with the SEC.

6

PART I FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

BBVA COMPASS BANCSHARES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
	June 30, 2014			December 31, 2013
	(In Thousands)
Assets:
Cash and due from banks	$	3,232,911		$	3,563,349
Federal funds sold, securities purchased under agreements to resell and interest bearing deposits	31,291			35,111
Cash and cash equivalents	3,264,202			3,598,460
Trading account assets	356,889			319,930
Investment securities available for sale	8,972,237			8,313,085
Investment securities held to maturity (fair value of $1,356,799 and $1,405,258 at June 30, 2014 and December 31, 2013, respectively)	1,448,192			1,519,196
Loans held for sale (includes $211,879 and $139,750 measured at fair value at June 30, 2014 and December 31, 2013, respectively)	211,879			147,109
Loans	54,085,793			50,667,016
Allowance for loan losses	(714,760		)	(700,719		)
Net loans	53,371,033			49,966,297
Premises and equipment, net	1,359,750			1,420,988
Bank owned life insurance	691,445			683,224
Goodwill	5,076,142			4,971,645
Other intangible assets	95,475			109,040
Other real estate owned	21,113			23,228
Other assets	878,743			893,274
Total assets	$	75,747,100		$	71,965,476
Liabilities:
Deposits:
Noninterest bearing	$	16,321,003		$	15,377,844
Interest bearing	41,797,403			39,059,646
Total deposits	58,118,406			54,437,490
FHLB and other borrowings	3,958,497			4,298,707
Federal funds purchased and securities sold under agreements to repurchase	864,263			852,570
Other short-term borrowings	15,705			5,591
Accrued expenses and other liabilities	940,691			883,359
Total liabilities	63,897,562			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 June 30, 2014 and December 31, 2013, respectively	2,230			2,207
Surplus	15,383,867			15,273,218
Retained deficit	(3,507,192		)	(3,728,737		)
Accumulated other comprehensive loss	(58,295		)	(87,936		)
Total BBVA Compass Bancshares, Inc. shareholder’s equity	11,820,610			11,458,752
Noncontrolling interests	28,928			29,007
Total shareholder’s equity	11,849,538			11,487,759
Total liabilities and shareholder’s equity	$	75,747,100		$	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 June 30,					Six Months Ended June 30,
	2014		2013			2014			2013
	(In Thousands)
Interest income:
Interest and fees on loans	$	520,516	$	528,116		$	1,029,022		$	1,067,870
Interest on investment securities available for sale	48,253		44,131			97,343			91,655
Interest on investment securities held to maturity	7,003		7,686			14,249			15,431
Interest on federal funds sold, securities purchased under agreements to resell and interest bearing deposits	42		59			89			99
Interest on trading account assets	578		778			1,094			1,516
Total interest income	576,392		580,770			1,141,797			1,176,571
Interest expense:
Interest on deposits	60,901		53,779			114,117			110,190
Interest on FHLB and other borrowings	16,184		16,149			32,548			31,941
Interest on federal funds purchased and securities sold under agreements to repurchase	437		551			937			1,131
Interest on other short-term borrowings	96		(24		)	122			48
Total interest expense	77,618		70,455			147,724			143,310
Net interest income	498,774		510,315			994,073			1,033,261
Provision for loan losses	45,252		24,237			82,518			43,852
Net interest income after provision for loan losses	453,522		486,078			911,555			989,409
Noninterest income:
Service charges on deposit accounts	54,958		54,884			108,349			110,372
Card and merchant processing fees	28,473		26,113			52,777			50,737
Retail investment sales	28,844		25,311			55,408			49,690
Asset management fees	10,535		10,636			21,293			20,705
Corporate and correspondent investment sales	7,972		9,547			16,628			18,943
Mortgage banking income	6,150		13,141			10,426			24,611
Bank owned life insurance	4,237		4,274			8,204			8,679
Investment securities gains, net	21,464		18,075			37,898			33,030
Gain (loss) on prepayment of FHLB and other borrowings	—		22,882			(458		)	21,775
Other	72,812		64,150			144,248			115,848
Total noninterest income	235,445		249,013			454,773			454,390
Noninterest expense:
Salaries, benefits and commissions	263,301		247,905			525,870			499,228
FDIC indemnification expense	30,370		70,335			61,988			156,642
Equipment	55,469		50,891			109,207			98,506
Professional services	49,790		49,729			96,189			89,003
Net occupancy	40,200		40,471			79,157			78,365
Amortization of intangibles	13,631		15,462			26,165			31,502
Securities impairment:
Other-than-temporary impairment	34		2,750			415			2,750
Less: non-credit portion recognized in other comprehensive income	—		2,288			235			2,288
Total securities impairment	34		462			180			462
Other	92,467		79,445			165,373			146,657
Total noninterest expense	545,262		554,700			1,064,129			1,100,365
Net income before income tax expense	143,705		180,391			302,199			343,434
Income tax expense	36,130		51,596			79,697			104,103
Net income	107,575		128,795			222,502			239,331
Less: net income attributable to noncontrolling interests	504		568			957			961
Net income attributable to shareholder	$	107,071	$	128,227		$	221,545		$	238,370

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 June 30,						Six Months Ended June 30,
	2014			2013			2014			2013
	(In Thousands)
Net income	$	107,575		$	128,795		$	222,502		$	239,331
Other comprehensive income (loss), net of tax:
Unrealized holding gains (losses) arising during period from securities available for sale	25,915			(89,177		)	52,155			(92,317		)
Less: reclassification adjustment for net gains on sale of securities available for sale in net income	13,752			11,452			24,278			20,941
Net change in unrealized holding gains (losses) on securities available for sale	12,163			(100,629		)	27,877			(113,258		)
Change in unamortized net holding losses on investment securities held to maturity	1,727			3,668			4,785			6,045
Less: non-credit related impairment on investment securities held to maturity	—			1,450			151			1,450
Change in unamortized non-credit related impairment on investment securities held to maturity	237			45			483			1,086
Net change in unamortized holding losses on securities held to maturity	1,964			2,263			5,117			5,681
Unrealized holding gains (losses) arising during period from cash flow hedge instruments	(875		)	4,882			(1,682		)	6,265
Change in defined benefit plans	—			36			(1,671		)	680
Other comprehensive income (loss), net of tax	13,252			(93,448		)	29,641			(100,632		)
Comprehensive income	120,827			35,347			252,143			138,699
Less: comprehensive income attributable to noncontrolling interests	504			568			957			961
Comprehensive income attributable to shareholder	$	120,323		$	34,779		$	251,186		$	137,738

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	—		—			238,370			—			961			239,331
Other comprehensive loss, net of tax	—		—			—			(100,632		)	—			(100,632		)
Issuance of common stock	34		99,966			—			—			—			100,000
Dividends	—		—			—			—			(1,036		)	(1,036		)
Vesting of restricted stock	—		(5,594		)	—			—			—			(5,594		)
Restricted stock retained to cover taxes	—		(2,174		)	—			—			—			(2,174		)
Amortization of stock-based deferred compensation	—		1,608			—			—			—			1,608
Balance, June 30, 2013	$	2,207	$	15,266,716		$	(3,908,203	)	$	(74,574	)	$	28,930		$	11,315,076
Balance, January 1, 2014	$	2,207	$	15,273,218		$	(3,728,737	)	$	(87,936	)	$	29,007		$	11,487,759
Net income	—		—			221,545			—			957			222,502
Other comprehensive income, net of tax	—		—			—			29,641			—			29,641
Issuance of common stock	23		116,977			—			—			—			117,000
Dividends	—		—			—			—			(1,036		)	(1,036		)
Vesting of restricted stock	—		(4,702		)	—			—			—			(4,702		)
Restricted stock retained to cover taxes	—		(2,507		)	—			—			—			(2,507		)
Amortization of stock-based deferred compensation	—		881			—			—			—			881
Balance, June 30, 2014	$	2,230	$	15,383,867		$	(3,507,192	)	$	(58,295	)	$	28,928		$	11,849,538

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

10

BBVA COMPASS BANCSHARES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
	Six Months Ended June 30,
	2014			2013
	(In Thousands)
Operating Activities:
Net income	$	222,502		$	239,331
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	133,334			86,010
Securities impairment	180			462
Amortization of intangibles	26,165			31,502
Accretion of discount, loan fees and purchase market adjustments, net	(94,032		)	(112,028		)
Net change in FDIC indemnification asset/liability	61,988			156,642
Provision for loan losses	82,518			43,852
Amortization of stock based compensation	881			1,608
Net change in trading account assets	(36,959		)	134,122
Net change in trading account liabilities	3,569			(160,486		)
Net change in loans held for sale	(64,770		)	173,964
Deferred tax expense	8,936			35,443
Investment securities gains, net	(37,898		)	(33,030		)
(Gain) loss on prepayment of FHLB and other borrowings	458			(21,775		)
Loss on sale of premises and equipment	863			1,078
Loss on sale of student loans	75			—
Net loss on sale of other real estate and other assets	3,613			3,459
Loss on disposition	981			—
Increase in other assets	(47,341		)	(64,652		)
Decrease in other liabilities	(2,342		)	(34,062		)
Net cash provided by operating activities	262,721			481,440
Investing Activities:
Proceeds from sales of investment securities available for sale	782,629			801,060
Proceeds from prepayments, maturities and calls of investment securities available for sale	658,008			1,092,549
Purchases of investment securities available for sale	(2,062,781		)	(2,463,945		)
Proceeds from prepayments, maturities and calls of investment securities held to maturity	79,146			125,484
Purchases of investment securities held to maturity	—			(185,461		)
Net change in loan portfolio	(3,499,733		)	(2,506,062		)
Purchase of premises and equipment	(36,455		)	(73,126		)
Proceeds from sale of premises and equipment	11,181			5,073
Net cash paid in acquisition	(97,566		)	—
Proceeds from sales of loans	96,199			113,958
Payments to FDIC for covered losses	(6,611		)	(17,840		)
Proceeds from sales of other real estate owned	10,116			32,531
Net cash used in investing activities	(4,065,867		)	(3,075,779		)
Financing Activities:
Net increase in demand deposits, NOW accounts and savings accounts	2,602,535			997,952
Net increase in time deposits	1,077,027			(383,281		)
Net increase in federal funds purchased and securities sold under agreements to repurchase	11,693			(229,902		)
Net increase in other short-term borrowings	10,114			13,291
Proceeds from FHLB and other borrowings	—			405,000
Repayment of FHLB and other borrowings	(341,236		)	(343,505		)
Vesting of restricted stock	(4,702		)	(5,594		)
Restricted stock grants retained to cover taxes	(2,507		)	(2,174		)
Issuance of common stock	117,000			100,000
Preferred dividends paid	(1,036		)	(1,036		)
Net cash provided by financing activities	3,468,888			550,751
Net decrease in cash and cash equivalents	(334,258		)	(2,043,588		)
Cash and cash equivalents at beginning of year	3,598,460			6,158,442
Cash and cash equivalents at end of period	$	3,264,202		$	4,114,854

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 and six months ended June 30, 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.

Correction of Accounting Error

During the three months ended June 30, 2013, provision for loan losses included a $20.4 million benefit related to the correction of an error in a prior period that resulted from a calculation by the Company of an adjustment to the allowance for loan losses for commercial loans less than $1 million. This error primarily related to the second quarter of 2012 and was corrected in the second quarter of 2013.

The Company has evaluated the effect of this correction on prior annual periods' consolidated financial statements in accordance with the guidance provided by SEC Staff Accounting Bulletin No. 108, codified as SAB Topic 1.N, Considering the Effects of Prior Year Misstatements When Quantifying Misstatements in Current Year Financial Statements, and concluded that no prior annual period is materially misstated.

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,

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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 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.

Revenue from Contracts with Customers

In May 2014, the FASB released ASU 2014-09, Revenue from Contracts with Customers. The core principle of this guidance requires an entity to recognize revenue upon the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or

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services. The guidance provides five steps to be analyzed to accomplish the core principle. The amendments in this ASU are effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2016. Early application is not permitted. The Company is currently assessing the impact that the adoption of this standard will have on the financial condition and results of operations of the Company.

Repurchase-to-Maturity Transactions, Repurchase Financings, and Disclosures

In June 2014, the FASB issued ASU 2014-11, Repurchase-to-Maturity Transactions, Repurchase Financings, and Disclosures. The amendments in this ASU change the accounting for repurchase-to-maturity transactions to secured borrowing accounting. In addition, for repurchase financing arrangements, the amendments require separate accounting for a transfer of a financial asset executed contemporaneously with a repurchase agreement with the same counterparty, which will result in secured borrowing accounting for the repurchase agreement. The amendments in this ASU also require disclosures on transfers accounted for as sales in transactions that are economically similar to repurchase agreements, and provide increased transparency about the types of collateral pledged in repurchase agreements and similar transactions accounted for as secured borrowings. The accounting changes in this ASU and disclosures for certain transactions accounted for as a sale are effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2014. The disclosures for repurchase agreements, securities lending transactions, and repurchase-to-maturity transactions accounted for as secured borrowings is required to be presented for annual periods beginning after December 15, 2014 and for interim periods beginning after March 15, 2015. 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.

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 of $106 million and other intangible assets of $13 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 six months ended June 30, 2014. The revenues and earnings of Simple were not material for the three and six months ended June 30, 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.

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(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.

	June 30, 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	$	570,472	$	4,332	$	3,772	$	571,032
Mortgage-backed securities	4,983,938		72,018		48,475		5,007,481
Collateralized mortgage obligations	2,337,928		23,891		4,194		2,357,625
States and political subdivisions	494,507		8,957		5,474		497,990
Other	36,939		179		24		37,094
Equity securities	500,954		61		—		501,015
Total	$	8,924,738	$	109,438	$	61,939	$	8,972,237
Investment securities held to maturity:
Collateralized mortgage obligations	$	136,166	$	6,998	$	5,191	$	137,973
Asset-backed securities	54,816		4,110		3,682		55,244
States and political subdivisions	1,180,162		1,635		100,040		1,081,757
Other	77,048		6,891		2,114		81,825
Total	$	1,448,192	$	19,634	$	111,027	$	1,356,799

	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 $501 million and $512 million at June 30, 2014 and December 31, 2013, respectively, of FHLB and Federal Reserve stock carried at par.

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

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 June 30, 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.

	June 30, 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	$	337,358	$	3,772	$	—	$	—	$	337,358	$	3,772
Mortgage-backed securities	107,404		1,027		2,236,173		47,448		2,343,577		48,475
Collateralized mortgage obligations	331,462		947		174,054		3,247		505,516		4,194
States and political subdivisions	24,910		141		198,092		5,333		223,002		5,474
Other	—		—		1,098		24		1,098		24
Total	$	801,134	$	5,887	$	2,609,417	$	56,052	$	3,410,551	$	61,939
Investment securities held to maturity:
Collateralized mortgage obligations	$	28,987	$	695	$	29,456	$	4,496	$	58,443	$	5,191
Asset-backed securities	—		—		26,549		3,682		26,549		3,682
States and political subdivisions	2,326		92		883,818		99,948		886,144		100,040
Other	—		—		4,071		2,114		4,071		2,114
Total	$	31,313	$	787	$	943,894	$	110,240	$	975,207	$	111,027

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	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

As noted in the previous tables, at June 30, 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 that it will be required to sell these securities before their anticipated recovery.

The Company regularly evaluates each available for sale and held to maturity 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 June 30, 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.

	Three Months Ended June 30,					Six Months Ended June 30,
	2014		2013			2014		2013
	(In Thousands)
Balance at beginning of period	$	21,089	$	17,318		$	20,943	$	17,318
Reductions for securities paid off during the period (realized)	—		(239		)	—		(239		)
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	34		462			180		462
Balance at end of period	$	21,123	$	17,541		$	21,123	$	17,541

For the three months ended June 30, 2014 and 2013, OTTI recognized on held to maturity securities totaled $34 thousand and $462 thousand, respectively. For the six months ended June 30, 2014 and 2013, OTTI recognized on

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held to maturity securities totaled $180 thousand and $462 thousand, respectively. The investment securities primarily impacted by credit impairment are held to maturity non-agency collateralized mortgage obligations and asset-backed securities.

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

June 30, 2014	Amortized Cost		Fair Value
	(In Thousands)
Investment securities available for sale:
Maturing within one year	$	51,171	$	52,280
Maturing after one but within five years	103,113		107,335
Maturing after five but within ten years	176,007		179,619
Maturing after ten years	771,627		766,882
	1,101,918		1,106,116
Mortgage-backed securities and collateralized mortgage obligations	7,321,866		7,365,106
Equity securities	500,954		501,015
Total	$	8,924,738	$	8,972,237
Investment securities held to maturity:
Maturing within one year	$	30,013	$	29,674
Maturing after one but within five years	290,161		274,065
Maturing after five but within ten years	234,765		224,153
Maturing after ten years	757,087		690,934
	1,312,026		1,218,826
Collateralized mortgage obligations	136,166		137,973
Total	$	1,448,192	$	1,356,799

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

	Three Months Ended June 30,				Six Months Ended June 30,
	2014		2013		2014		2013
	(In Thousands)
Gross gains	$	21,464	$	18,075	$	37,898	$	33,030
Gross losses	—		—		—		—
Net realized gains	$	21,464	$	18,075	$	37,898	$	33,030

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(4) Loans and Allowance for Loan Losses

The following table presents the composition of the loan portfolio.

	June 30, 2014		December 31, 2013
	(In Thousands)
Commercial loans:
Commercial, financial and agricultural	$	22,365,829	$	20,209,209
Real estate – construction	1,792,180		1,736,348
Commercial real estate – mortgage	9,461,092		9,106,329
Total commercial loans	33,619,101		31,051,886
Consumer loans:
Residential real estate – mortgage	13,356,040		12,706,879
Equity lines of credit	2,238,451		2,236,367
Equity loans	609,794		644,068
Credit card	636,904		660,073
Consumer – direct	563,949		516,572
Consumer – indirect	2,448,402		2,116,981
Total consumer loans	19,853,540		18,880,940
Covered loans	613,152		734,190
Total loans	$	54,085,793	$	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.

	June 30, 2014			December 31, 2013
	(In Thousands)
Unpaid principal balance	$	414,652		$	449,429
Discount	(33,216		)	(60,069		)
Allowance for loan losses	(8,161		)	(243		)
Carrying value	$	373,275		$	389,117

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

	Six Months Ended June 30,
	2014			2013
	(In Thousands)
Balance at beginning of period	$	105,698		$	136,992
Transfer from nonaccretable difference	6,633			25,362
Accretion	(29,405		)	(34,547		)
Other	—			2,370
Balance at end of period	$	82,926		$	130,177

The Company had allowances of $8.2 million and $243 thousand related to Purchased Impaired Loans at June 30, 2014 and December 31, 2013, respectively. During the three months ended June 30, 2014 and 2013, the Company recognized $2.5 million and $627 thousand, respectively, of provision for loan losses attributable to credit deterioration subsequent to acquisition of these loans. During the six months ended June 30, 2014 and 2013, the Company recognized

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$4.6 million and $(4.6) million, respectively, of provision for loan losses attributable to credit (improvements) deterioration subsequent to acquisition of these loans.

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 June 30, 2014 and 2013 approximately $35.4 million and $76.8 million, respectively, of interest income was recognized on these loans. For the six months ended June 30, 2014 and 2013 approximately $73.2 million and $170.1 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.

	June 30, 2014			December 31, 2013
	(In Thousands)
Unpaid principal balance	$	368,036		$	520,723
Discount	(136,320		)	(175,893		)
Allowance for loan losses	(3,390		)	(2,711		)
Carrying value	$	228,326		$	342,119

The following table reflects the recorded investment in all covered Purchased Impaired Loans and Purchased Nonimpaired Loans.

	June 30, 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	$	—	$	45,712	$	45,712	$	—	$	40,892	$	40,892
Commercial real estate (1)	3,358		34,831		38,189		4,760		141,333		146,093
Residential real estate – mortgage (2)	378,078		144,591		522,669		384,588		155,452		540,040
Consumer loans	—		6,582		6,582		12		7,153		7,165
Total loans	$	381,436	$	231,716	$	613,152	$	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.

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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) is presented in the following table.

	Six Months Ended June 30,
	2014			2013
	(In Thousands)
Balance at beginning of period	$	24,315		$	271,928
Increase (decrease) due to credit loss provision (benefit) recorded on FDIC covered loans	8,726			(6,616		)
Amortization	(67,212		)	(149,033		)
Payments to FDIC for covered losses	6,611			17,840
Other	(3,502		)	(993		)
Balance at end of period	$	(31,062	)	$	133,126

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 and loan expenses incurred and claimed.

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Allowance for Loan Losses and Credit Quality

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

	Commercial, Financial and Agricultural			Commercial Real Estate (1)			Residential Real Estate (2)			Consumer (3)			Covered			Total Loans
	(In Thousands)
Three months ended June 30, 2014
Allowance for loan losses:
Beginning balance	$	299,879		$	153,130		$	155,234		$	91,357		$	8,065		$	707,665
Provision charged to income	29,495			(5,057		)	8,039			12,969			(194		)	45,252
Loans charged off	(15,517		)	(7,305		)	(13,861		)	(20,669		)	(791		)	(58,143		)
Loan recoveries	3,933			2,173			4,282			5,127			4,471			19,986
Net charge offs	(11,584		)	(5,132		)	(9,579		)	(15,542		)	3,680			(38,157		)
Ending balance	$	317,790		$	142,941		$	153,694		$	88,784		$	11,551		$	714,760
Three months ended June 30, 2013
Allowance for loan losses:
Beginning balance	$	304,841		$	227,370		$	164,402		$	77,331		$	12,074		$	786,018
Provision charged to income	(2,431		)	(30,585		)	40,883			18,807			(2,437		)	24,237
Loans charged off	(16,889		)	(21,125		)	(49,313		)	(16,849		)	(2,156		)	(106,332		)
Loan recoveries	4,667			6,953			2,821			4,413			734			19,588
Net charge offs	(12,222		)	(14,172		)	(46,492		)	(12,436		)	(1,422		)	(86,744		)
Ending balance	$	290,188		$	182,613		$	158,793		$	83,702		$	8,215		$	723,511
Six Months Ended June 30, 2014
Allowance for loan losses:
Beginning balance	$	292,327		$	158,960		$	155,575		$	90,903		$	2,954		$	700,719
Provision charged to income	36,996			(9,779		)	20,712			29,798			4,791			82,518
Loans charged off	(20,451		)	(9,951		)	(29,569		)	(42,373		)	(1,007		)	(103,351		)
Loan recoveries	8,918			3,711			6,976			10,456			4,813			34,874
Net charge offs	(11,533		)	(6,240		)	(22,593		)	(31,917		)	3,806			(68,477		)
Ending balance	$	317,790		$	142,941		$	153,694		$	88,784		$	11,551		$	714,760
Six Months Ended June 30, 2013
Allowance for loan losses:
Beginning balance	$	283,058		$	254,324		$	172,265		$	75,403		$	17,803		$	802,853
Provision charged to income	20,477			(56,414		)	53,847			33,629			(7,687		)	43,852
Loans charged off	(23,211		)	(27,743		)	(72,293		)	(35,070		)	(3,425		)	(161,742		)
Loan recoveries	9,864			12,446			4,974			9,740			1,524			38,548
Net charge offs	(13,347		)	(15,297		)	(67,319		)	(25,330		)	(1,901		)	(123,194		)
Ending balance	$	290,188		$	182,613		$	158,793		$	83,702		$	8,215		$	723,511

(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.

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

	Commercial, Financial and Agricultural		Commercial Real Estate (1)		Residential Real Estate (2)		Consumer (3)		Covered		Total Loans
	(In Thousands)
June 30, 2014
Ending balance of allowance attributable to loans:
Individually evaluated for impairment	$	19,106	$	6,617	$	39,693	$	1,188	$	—	$	66,604
Collectively evaluated for impairment	298,684		136,324		114,001		87,596		—		636,605
Covered purchased impaired	—		—		—		—		8,161		8,161
Covered purchased nonimpaired	—		—		—		—		3,390		3,390
Total allowance for loan losses	$	317,790	$	142,941	$	153,694	$	88,784	$	11,551	$	714,760
Loans:
Ending balance of loans:
Individually evaluated for impairment	$	67,159	$	119,667	$	190,224	$	1,472	$	—	$	378,522
Collectively evaluated for impairment	22,298,670		11,133,605		16,014,061		3,647,783		—		53,094,119
Covered purchased impaired	—		—		—		—		381,436		381,436
Covered purchased nonimpaired	—		—		—		—		231,716		231,716
Total loans	$	22,365,829	$	11,253,272	$	16,204,285	$	3,649,255	$	613,152	$	54,085,793
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.

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The following table presents information on individually analyzed impaired loans, by loan class.

	June 30, 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	$	—	$	—	$	—	$	67,159	$	87,507	$	19,106
Real estate – construction	5,785		6,582		—		3,606		4,148		602
Commercial real estate – mortgage	24,402		25,475		—		85,874		91,822		6,015
Residential real estate – mortgage	10,263		10,263		—		100,764		100,951		6,275
Equity lines of credit	—		—		—		23,908		24,100		23,152
Equity loans	—		—		—		55,289		55,517		10,266
Credit card	—		—		—		—		—		—
Consumer – direct	—		—		—		134		134		69
Consumer – indirect	—		—		—		1,338		1,338		1,119
Total loans	$	40,450	$	42,320	$	—	$	338,072	$	365,517	$	66,604

	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.

	Three Months Ended June 30, 2014				Three Months Ended June 30, 2013
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
	(In Thousands)
Commercial, financial and agricultural	$	88,271	$	543	$	122,441	$	365
Real estate – construction	9,088		56		60,890		152
Commercial real estate – mortgage	117,404		835		235,445		1,205
Residential real estate – mortgage	112,862		725		147,453		855
Equity lines of credit	23,511		255		7,746		81
Equity loans	55,399		429		45,324		438
Credit card	—		—		—		—
Consumer – direct	140		1		163		3
Consumer – indirect	1,309		1		668		11
Total loans	$	407,984	$	2,845	$	620,130	$	3,110

	Six Months Ended June 30, 2014				Six Months Ended June 30, 2013
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
	(In Thousands)
Commercial, financial and agricultural	$	107,546	$	788	$	117,045	$	721
Real estate – construction	9,604		119		85,871		543
Commercial real estate – mortgage	129,376		1,777		235,279		2,259
Residential real estate – mortgage	113,913		1,444		158,930		1,937
Equity lines of credit	23,457		505		3,873		81
Equity loans	55,213		854		34,989		691
Credit card	—		—		—		—
Consumer – direct	149		2		147		28
Consumer – indirect	1,287		2		334		11
Total loans	$	440,545	$	5,491	$	636,468	$	6,271

The tables above do not include Purchased Impaired Loans or loans held for sale. At June 30, 2014, there were $6.4 million, $10.7 million and $313 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.

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The Company monitors the credit quality of its commercial portfolio using an internal dual risk rating, which considers both the obligor and the facility. The obligor risk ratings are defined by ranges of default probabilities of the borrowers (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 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.

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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.

	Commercial
	June 30, 2014
	Commercial, Financial and Agricultural		Real Estate - Construction		Commercial Real Estate - Mortgage
	(In Thousands)
Noncovered loans:
Pass	$	21,837,384	$	1,769,475	$	9,033,078
Special Mention	246,367		12,153		225,927
Substandard	249,058		9,342		176,936
Doubtful	33,020		1,210		25,151
	$	22,365,829	$	1,792,180	$	9,461,092

	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

	Consumer
	June 30, 2014
	Residential Real Estate – Mortgage		Equity Lines of Credit		Equity Loans		Credit Card		Consumer - Direct		Consumer –Indirect
	(In Thousands)
Noncovered loans:
Performing	$	13,243,361	$	2,200,855	$	589,225	$	628,167	$	561,473	$	2,445,560
Nonperforming	112,679		37,596		20,569		8,737		2,476		2,842
	$	13,356,040	$	2,238,451	$	609,794	$	636,904	$	563,949	$	2,448,402

	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

27

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 $12 million was recorded on the $613 million covered portfolio at June 30, 2014 and an allowance for loan losses of $3 million was recorded on the $734 million covered loans portfolio at December 31, 2013.

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

	June 30, 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	$	8,399	$	3,520	$	2,311	$	72,606	$	10,491	$	97,327	$	22,268,502	$	22,365,829
Real estate – construction	923		418		1,138		9,401		2,244		14,124		1,778,056		1,792,180
Commercial real estate – mortgage	5,675		3,358		221		88,554		45,836		143,644		9,317,448		9,461,092
Residential real estate – mortgage	43,219		15,305		2,332		110,077		73,329		244,262		13,111,778		13,356,040
Equity lines of credit	9,113		4,776		2,044		35,552		—		51,485		2,186,966		2,238,451
Equity loans	6,364		2,666		833		19,571		42,460		71,894		537,900		609,794
Credit card	5,186		3,766		8,737		—		—		17,689		619,215		636,904
Consumer – direct	8,859		1,441		2,194		282		67		12,843		551,106		563,949
Consumer – indirect	24,633		4,585		1,231		1,611		—		32,060		2,416,342		2,448,402
Covered loans	2,410		152		4,590		4,153		3,832		15,137		216,579		231,716
Total loans	$	114,781	$	39,987	$	25,631	$	341,807	$	178,259	$	700,465	$	53,003,892	$	53,704,357

	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

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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.

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.

	June 30, 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	$	—	$	—	$	194	$	5,158	$	5,352	$	10,297	$	15,649
Real estate – construction	—		—		—		183		183		2,244		2,427
Commercial real estate – mortgage	186		—		—		11,933		12,119		45,650		57,769
Residential real estate – mortgage	3,520		1,028		270		27,436		32,254		68,511		100,765
Equity lines of credit	—		—		—		24,111		24,111		—		24,111
Equity loans	1,425		1,401		165		12,874		15,865		39,469		55,334
Credit card	—		—		—		—		—		—		—
Consumer – direct	—		—		—		67		67		67		134
Consumer – indirect	—		—		—		1,338		1,338		—		1,338
Covered loans	—		3		—		1,713		1,716		3,829		5,545
Total loans	$	5,131	$	2,432	$	629	$	84,813	$	93,005	$	170,067	$	263,072

	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 June 30, 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

29

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 June 30, 2014, $4.5 million of TDR modifications included an interest rate concession and $6.4 million of TDR modifications resulted from modifications to the loan’s structure. During the three months ended June 30, 2013, $5.8 million of TDR modifications included an interest rate concession and $50.3 million of TDR modifications resulted from modifications to the loan’s structure. During the six months ended June 30, 2014, $6.9 million of TDR modifications included an interest rate concession and $13.4 million of TDR modifications resulted from modifications to the loan’s structure. During the six months ended June 30, 2013, $18.9 million of TDR modifications included an interest rate concession and $54.6 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, excluding loans classified as held for sale.

	Three Months Ended June 30, 2014			Three Months Ended June 30, 2013
	Number of Contracts	Post-Modification Outstanding Recorded Investment		Number of Contracts	Post-Modification Outstanding Recorded Investment
	(Dollars in Thousands)
Commercial, financial and agricultural	2	$	163	3	$	703
Real estate – construction	—	—		1	3
Commercial real estate – mortgage	3	2,656		8	628
Residential real estate – mortgage	46	4,124		137	18,130
Equity lines of credit	48	2,178		460	23,236
Equity loans	23	1,330		333	11,303
Credit card	—	—		—	—
Consumer – direct	—	—		15	133
Consumer – indirect	32	470		384	2,004
Covered loans	—	—		1	1

	Six Months Ended June 30, 2014			Six Months Ended June 30, 2013
	Number of Contracts	Post-Modification Outstanding Recorded Investment		Number of Contracts	Post-Modification Outstanding Recorded Investment
	(Dollars in Thousands)
Commercial, financial and agricultural	2	$	163	6	$	5,059
Real estate – construction	—	—		3	2,409
Commercial real estate – mortgage	9	6,586		13	3,832
Residential real estate – mortgage	56	5,118		169	23,511
Equity lines of credit	97	4,480		460	23,236
Equity loans	41	3,317		359	13,260
Credit card	—	—		—	—
Consumer – direct	—	—		15	133
Consumer – indirect	50	672		384	2,004
Covered loans	—	—		2	49

In response to guidance issued by a national bank regulatory agency, during the second quarter of 2013, the Company concluded that $52.6 million of loans that had been discharged in bankruptcy and not reaffirmed by the borrower should be classified as nonperforming TDRs. The Company estimated the allowance for loan losses for these loans based on collateral shortfall and accordingly the allowance for loan losses was increased by $33.5 million during the second quarter of 2013.

30

For the three and six months ended June 30, 2014 and 2013, charge-offs and changes to the allowance related to modifications classified as TDRs, excluding the nonreaffirmed loans discharged in bankruptcy, 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 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 June 30, 2014			Three Months Ended June 30, 2013
	Number of Contracts	Recorded Investment at Default		Number of Contracts	Recorded Investment at Default
	(Dollars in Thousands)
Commercial, financial and agricultural	—	$	—	—	$	—
Real estate – construction	—	—		—	—
Commercial real estate – mortgage	1	2,198		1	107
Residential real estate – mortgage	—	—		4	122
Equity lines of credit	—	—		—	—
Equity loans	3	319		—	—
Credit card	—	—		—	—
Consumer – direct	—	—		—	—
Consumer – indirect	—	—		—	—
Covered loans	—	—		—	—

	Six Months Ended June 30, 2014			Six Months Ended June 30, 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	1	2,198		1	107
Residential real estate – mortgage	—	—		10	2,135
Equity lines of credit	3	275		—	—
Equity loans	4	382		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 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 June 30, 2014 and December 31, 2013, there were $892 thousand and $3.9 million, respectively, of commitments to lend additional funds to borrowers owing loans whose terms have been modified in a TDR.

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(5)Loan Sales and Servicing

The following table presents the composition of the loans held for sale portfolio.

	June 30, 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	211,879		139,750
Total loans held for sale	$	211,879	$	147,109

During the three and six months ended June 30, 2014, the Company transferred loans with a recorded balance immediately preceding the transfer totaling $14 million from the held for investment portfolio to loans held for sale. The Company recognized charge-offs upon transfer of these loans totaling $4 million for both the three and six months ended June 30, 2014. During the three and six months ended June 30, 2013, the Company transferred loans with a recorded balance immediately preceding the transfer totaling $76 million from the held for investment portfolio to loans held for sale. The Company recognized charge-offs upon transfer of these loans totaling $22 million for both the three and six months ended June 30, 2013. The Company sold loans and loans held for sale, excluding loans originated for sale in the secondary market, with a recorded balance of $39 million and $100 million during the three and six months ended June 30, 2014, respectively, and $94 million and $114 million during the three and six months ended June 30, 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 $181 million and $369 million for the three and six months ended June 30, 2014, respectively, and $372 million and $865 million for the three and six months ended June 30, 2013, respectively. The Company recognized net gains of $5.8 million and $11.3 million on the sale of residential mortgage loans originated for sale during the three and six months ended June 30, 2014, respectively, and $6.7 million and $19.8 million for the three and six months ended June 30, 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 and six months ended June 30, 2014, the Company sold $181 million and $369 million, respectively, of residential mortgage loans originated for sale where the Company retained servicing responsibilities. During the three and six months ended June 30, 2013, the Company sold $366 million and $842 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 June 30, 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 $3.7 million and $7.3 million during the three and six months ended June 30, 2014, respectively. The Company recognized servicing fees of $3.3 million and $4.1 million during the three and six months ended June 30, 2013, respectively. These fees were recorded as a component of other noninterest income in the Company’s Unaudited Condensed Consolidated Statements of Income. At June 30, 2014 and December 31, 2013, the Company had recorded $31 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.

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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.

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

	Three Months Ended June 30,						Six Months Ended June 30,
	2014			2013			2014			2013
	(In Thousands)
Carrying value, at beginning of period	$	31,828		$	18,471		$	30,065		$	13,255
Additions	1,923			3,872			4,006			9,133
Increase (decrease) in fair value:
Due to changes in valuation inputs or assumptions	(2,085		)	710			(1,794		)	1,046
Due to other changes in fair value (1)	(562		)	(430		)	(1,173		)	(811		)
Carrying value, at end of period	$	31,104		$	22,623		$	31,104		$	22,623

(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 June 30, 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:

	June 30, 2014			December 31, 2013
	(Dollars in Thousands)
Fair value of residential mortgage servicing rights	$	31,104		$	30,065
Composition of residential loans serviced for others:
Fixed rate mortgage loans	96.4		%	96.4		%
Adjustable rate mortgage loans	3.6			3.6
Total	100.0		%	100.0		%
Weighted average life (in years)	6.5			6.9
Prepayment speed:	9.7		%	8.8		%
Effect on fair value of a 10% increase	$	(957	)	$	(743	)
Effect on fair value of a 20% increase	(1,891		)	(1,492		)
Weighted average discount rate:	10.0		%	10.0		%
Effect on fair value of a 10% increase	$	(1,178	)	$	(1,167	)
Effect on fair value of a 20% increase	(2,272		)	(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 to another, which may magnify or counteract the effect of the change.

(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

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in interest rates and foreign currency exchange rates. The Company has made an accounting policy decision to not offset derivative fair value amounts under master netting agreements. See Summary of Significant Accounting Policies in the Notes to Consolidated Financial Statements in the Company's Annual Report on Form 10-K for the year ended December 31, 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.

	June 30, 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	$	67,499	$	—	$	423,950	$	67,623	$	—
Total fair value hedges			67,499		—				67,623		—
Cash flow hedges:
Interest rate contracts:
Swaps related to commercial loans	600,000		3,385		—		200,000		3,652		—
Swaps related to FHLB advances	320,000		—		14,230		320,000		—		11,862
Total cash flow hedges			3,385		14,230				3,652		11,862
Total derivatives designated as hedging instruments			$	70,884	$	14,230			$	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 and option contracts related to held for sale mortgages	$	320,500	$	208	$	2,546	$	171,364	$	1,727	$	56
Equity contracts:
Purchased equity option related to equity-linked CDs	686,268		54,582		—		588,377		47,875		—
Swap associated with sale of Visa, Inc. Class B shares	47,074		—		1,177		49,748		—		1,244
Foreign exchange contracts:
Forwards related to commercial loans	650,758		141		4,814		424,797		1,072		2,690
Spots related to commercial loans	23,301		27		16		41,133		55		56
Total free-standing derivative instruments-risk management and other purposes			$	54,958	$	8,553			$	50,729	$	4,046
Free-standing derivative instruments – customer accommodation:
Futures contracts (3)	$	488,000	$	—	$	—	$	657,000	$	—	$	—
Interest rate lock commitments	253,064		3,822		1		129,791		947		57
Written equity option related to equity-linked CDs	667,447		—		53,117		576,196		—		46,573
Trading account assets and liabilities:
Interest rate contracts for customers	15,555,775		271,908		211,684		13,474,347		262,578		200,899
Commodity contracts for customers	590,859		15,198		12,897		906,650		23,132		18,373
Foreign exchange contracts for customers	435,810		2,869		2,154		145,175		4,450		3,894
Total trading account assets and liabilities			289,975		226,735				290,160		223,166
Total free-standing derivative instruments- customer accommodations			$	293,797	$	279,853			$	291,107	$	269,796

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

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

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

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

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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 no gains or losses for the three and six months ended June 30, 2014 and 2013 related to hedged firm commitments no longer qualifying as a fair value hedge. At June 30, 2014, the fair value hedges had a weighted average expected remaining term of 4.9 years.

During the three months ended June 30, 2013, the Company partially extinguished $126 million in aggregate principal amount of subordinated debentures. In connection with this extinguishment, the Company unwound $126 million of swaps associated with this issuance and recognized a proportional amount of the swap gains related to the terminated swaps as a component of gain on prepayment of FHLB and other borrowings in the Company's Unaudited Condensed Consolidated Statements of Income for the three and six months ended June 30, 2013. 

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

		Gain (Loss) for the
	Condensed Consolidated	Three Months Ended June 30,						Six Months Ended June 30,
	Statements of Income Caption	2014			2013			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	$	811		$	(17,870	)	$	(124	)	$	(27,724	)
Hedged long term debt	Interest on FHLB and other borrowings	(838		)	17,887			219			28,044
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	6,016			5,559			12,032			12,341

There were no material fair value hedging gains or losses recognized because of hedge ineffectiveness for the three and six months ended June 30, 2014 and 2013.

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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 and six months ended June 30, 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 and six months ended June 30, 2014 and 2013.

At June 30, 2014, cash flow hedges not terminated had a net fair value of $(10.8) million and a weighted average life of 3.3 years. Based on the current interest rate environment, $1.9 million of gains 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 7.0 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.

	Gain (Loss) for the
	Three Months Ended June 30,						Six Months Ended June 30,
	2014			2013			2014			2013
	(In Thousands)
Interest rate contracts:
Net change in amount recognized in other comprehensive income	$	(875	)	$	4,882		$	(1,682	)	$	6,265
Amount reclassified from accumulated other comprehensive income into net interest income	(564		)	(1,143		)	(1,727		)	(2,276		)
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 individual equities and 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.

		Gain (Loss) for the
	Condensed Consolidated	Three Months Ended June 30,						Six Months Ended June 30,
	Statements of Income Caption	2014			2013			2014			2013
		(In Thousands)
Interest rate contracts:
Forward & option contracts related to residential mortgage loans held for sale	Mortgage banking income	$	(2,553	)	$	13,488		$	(4,107	)	$	12,744
Equity contracts:
Purchased equity option related to equity-linked CDs	Other noninterest expense	2,929			2,019			6,707			5,242
Foreign currency contracts:
Forward contracts related to commercial loans	Corporate and correspondent investment sales	(11,943		)	3,456			(17,430		)	11,021
Spot contracts related to commercial loans	Corporate and correspondent investment sales	2,527			(805		)	3,407			(805		)

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.

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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.

		Gain (Loss) for the
	Condensed Consolidated	Three Months Ended June 30,						Six Months Ended June 30,
	Statements of Income Caption	2014			2013			2014			2013
		(In Thousands)
Futures contracts	Corporate and correspondent investment sales	$	(157	)	$	575		$	(233	)	$	617
Interest rate contracts:
Interest rate contracts for customers	Corporate and correspondent investment sales	4,040			9,410			9,158			16,308
Interest rate lock commitments	Mortgage banking income	2,139			(3,858		)	2,931			(4,483		)
Commodity contracts:
Commodity contracts for customers	Corporate and correspondent investment sales	(105		)	79			(97		)	26
Foreign currency contracts:
Foreign currency exchange contracts for customers	Corporate and correspondent investment sales	177			283			370			283
Equity contracts:
Written equity option related to equity-linked CDs	Other noninterest expense	(2,865		)	(2,061		)	(6,544		)	(5,155		)

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 June 30, 2014, interest rate swap agreements and options classified as trading were substantially matched. The Company had credit risk of $290 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 $727 thousand and $1.1 million in credit losses associated with derivative instruments classified as trading for the three months ended June 30, 2014 and 2013, respectively. There were $726 thousand and $1.7 million in credit losses associated with derivative instruments classified as trading for the six months ended June 30, 2014 and 2013, respectively. At June 30, 2014, there were $74 thousand 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 at June 30, 2014 have credit risk of $71 million, which does not take into consideration master netting arrangements or the value of the collateral.

There were no credit losses associated with derivative instruments classified as nontrading for the three and six months ended June 30, 2014 and 2013. At June 30, 2014 and December 31, 2013, there were no nonperforming derivative positions classified as nontrading.

As of June 30, 2014 and December 31, 2013, the Company had recorded the right to reclaim cash collateral of $45 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 $17 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 June 30, 2014 was $73 million for which the Company has collateral requirements of $70 million in the normal course of business. If the credit risk-related contingent features underlying these agreements were triggered on June 30, 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 June 30, 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. 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)
June 30, 2014
Derivative financial assets:
Total derivatives subject to a master netting arrangement	$	173,401	$	—	$	173,401	$	14,011	$	12,942	$	146,448
Total derivatives not subject to a master netting arrangement	246,238		—		246,238		—		—		246,238
Total derivative financial assets	$	419,639	$	—	$	419,639	$	14,011	$	12,942	$	392,686
Derivative financial liabilities:
Total derivatives subject to a master netting arrangement	$	233,917	$	—	$	233,917	$	49,762	$	41,209	$	142,946
Total derivatives not subject to a master netting arrangement	68,719		—		68,719		—		—		68,719
Total derivative financial liabilities	$	302,636	$	—	$	302,636	$	49,762	$	41,209	$	211,665
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:

	June 30, 2014		December 31, 2013
	(In Thousands)
Commitments to extend credit	$	27,218,532	$	26,545,608
Standby and commercial letters of credit	1,999,730		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 June 30, 2014 and December 31, 2013, the recorded amount of these deferred fees was $7.0 million and $4.9 million, respectively. The Company holds various assets as collateral supporting those commitments for which collateral is deemed necessary. At June 30, 2014, the maximum potential amount of future undiscounted payments the Company could be required to make under outstanding standby letters of credit was $2.0 billion. At June 30, 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 $92 million and $76 million, respectively.

Loan Sale Recourse

The Company has potential recourse related to FNMA securitizations. At both June 30, 2014 and December 31, 2013, the amount of potential recourse was $20 million, of which the Company had reserved $730 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 representations and warranties would materially change the financial condition or results of operations of the Company. At June 30, 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

41

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 June 30, 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 $143 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 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 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 could develop into administrative, civil, or criminal proceedings or enforcement actions and 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

42

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 June 30, 2014, the Company had accrued legal reserves in the amount of $10 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 June 30, 2014, there were no such matters where the Company determined 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.

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

43

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.

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

44

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.

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 June 30, 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 $5.4 million and $(7.7) million resulting from changes in fair value of these loans were recorded in noninterest income during the three months ended June 30, 2014 and 2013, respectively. Net gains (losses) of $6.1 million and $(14.5) million resulting from changes in fair value of these loans were recorded in noninterest income during the six months ended June 30, 2014 and 2013, respectively.

The Company also had fair value changes on forward contracts related to residential mortgage loans held for sale of approximately $(2.6) million and $13.5 million for the three months ended June 30, 2014 and 2013, respectively, and $(4.1) million and $12.8 million for the six months ended June 30, 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.

	Aggregate Fair Value		Aggregate Unpaid Principal Balance		Difference
	(In Thousands)
June 30, 2014
Residential mortgage loans held for sale	$	211,879	$	203,361	$	8,518
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 lock commitments 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 r

45

ate 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.

			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
	June 30, 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	$	25,679	$	—	$	25,679	$	—
Mortgage-backed securities	23,344		—		23,344		—
Collateralized mortgage obligations	9,870		—		9,870		—
State and political subdivisions	3,682		—		3,682		—
Other debt securities	2,507		—		2,507		—
Interest rate contracts	271,908		—		271,908		—
Commodity contracts	15,198		—		15,198		—
Foreign exchange contracts	2,869		—		2,869		—
Other trading assets	1,832		—		123		1,709
Total trading account assets	356,889		—		355,180		1,709
Loans held for sale	211,879		—		211,879		—
Investment securities available for sale:
U.S. Treasury and other U.S. government agencies	571,032		—		571,032		—
Mortgage-backed securities	5,007,481		—		5,007,481		—
Collateralized mortgage obligations	2,357,625		—		2,357,625		—
States and political subdivisions	497,990		—		497,990		—
Other debt securities	37,094		37,045		49		—
Equity securities (1)	70		64		—		6
Total investment securities available for sale	8,471,292		37,109		8,434,177		6
Derivative assets:
Interest rate contracts	74,914		141		70,951		3,822
Equity contracts	54,582		—		54,582		—
Foreign exchange contracts	168		—		168		—
Total derivative assets	129,664		141		125,701		3,822
Other assets	31,104		—		—		31,104
Liabilities:
Trading account liabilities:
U.S. Treasury and other U.S. government agencies	$	2,472	$	—	$	2,472	$	—
Mortgage-backed securities	13,109		—		13,109		—
Interest rate contracts	211,684		—		211,684		—
Commodity contracts	12,897		—		12,897		—
Foreign exchange contracts	2,154		—		2,154		—
Other trading liabilities	124		—		124		—
Total trading account liabilities	242,440		—		242,440		—
Derivative liabilities:
Interest rate contracts	16,777		—		16,776		1
Equity contracts	53,117		—		53,117		—
Foreign exchange contracts	4,830		—		4,830		—
Total derivative liabilities	74,724		—		74,723		1

(1) Excludes $501 million of FHLB and Federal Reserve stock required to be owned by the Company at June 30, 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		—
Foreign exchange contracts	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		—
Foreign exchange contracts	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 and six months ended June 30, 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).

	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
Three Months Ended June 30,	Other Trading Assets			States and Political Subdivisions			Equity Securities		Interest Rate Contracts, net			Other Assets
	(In Thousands)
Balance, April 1, 2013	$	2,020		$	8		$	6	$	4,391		$	18,471
Transfers into Level 3	—			—			—		—			—
Transfers out of Level 3	—			—			—		—			—
Total gains or losses (realized/unrealized):
Included in earnings (1)	(58		)	—			—		(3,858		)	280
Included in other comprehensive income	—			—			—		—			—
Purchases, issuances, sales and settlements:
Purchases	—			—			—		—			—
Issuances	—			—			—		—			3,872
Sales	—			—			—		—			—
Settlements	—			(8		)	—		—			—
Balance, June 30, 2013	$	1,962		$	—		$	6	$	533		$	22,623
Change in unrealized gains (losses) included in earnings for the period, attributable to assets and liabilities still held at June 30, 2013	$	(58	)	$	—		$	—	$	(3,858	)	$	280
Balance, April 1, 2014	$	1,692		$	—		$	6	$	1,682		$	31,828
Transfers into Level 3	—			—			—		—			—
Transfers out of Level 3	—			—			—		—			—
Total gains or losses (realized/unrealized):
Included in earnings (1)	17			—			—		2,139			(2,647		)
Included in other comprehensive income	—			—			—		—			—
Purchases, issuances, sales and settlements:
Purchases	—			—			—		—			—
Issuances	—			—			—		—			1,923
Sales	—			—			—		—			—
Settlements	—						—		—			—
Balance, June 30, 2014	$	1,709		$	—		$	6	$	3,821		$	31,104
Change in unrealized gains (losses) included in earnings for the period, attributable to assets and liabilities still held at June 30, 2014	$	17		$	—		$	—	$	2,139		$	(2,647	)

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

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

	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
Six Months Ended June 30,	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)	(121		)	—			—		(4,483		)	235
Included in other comprehensive income	—			—			—		—			—
Purchases, issuances, sales and settlements:
Purchases	—			—			—		—			—
Issuances	—			—			—		—			9,133
Sales	—			—			—		—			—
Settlements	—			(8		)	—		—			—
Balance, June 30, 2013	$	1,962		$	—		$	6	$	533		$	22,623
Change in unrealized gains (losses) included in earnings for the period, attributable to assets and liabilities still held at June 30, 2013	$	(121	)	$	—		$	—	$	(4,483	)	$	235
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)	64			—			—		2,931			(2,967		)
Included in other comprehensive income	—						—		—			—
Purchases, issuances, sales and settlements:
Purchases	—			—			—		—			—
Issuances	—			—			—		—			4,006
Sales	—			—			—		—			—
Settlements	—			—			—		—			—
Balance, June 30, 2014	$	1,709		$	—		$	6	$	3,821		$	31,104
Change in unrealized gains (losses) included in earnings for the period, attributable to assets and liabilities still held at June 30, 2014	$	64		$	—		$	—	$	2,931		$	(2,967	)

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

50

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 and six months ended June 30, 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)
	June 30, 2014		(Level 1)		(Level 2)		(Level 3)		Three Months Ended June 30, 2014			Six Months Ended June 30, 2014
	(In Thousands)
Nonrecurring fair value measurements
Assets:
Investment securities held to maturity	$	3,690	$	—	$	—	$	3,690	$	(34	)	$	(180	)
Impaired loans (1)	131,622		—		—		131,622		(14,532		)	(18,875		)
OREO	21,113		—		—		21,113		(689		)	(1,582		)
			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)
	June 30, 2013		(Level 1)		(Level 2)		(Level 3)		Three Months Ended June 30, 2013			Six Months Ended June 30, 2013
	(In Thousands)
Nonrecurring fair value measurements
Assets:
Investment securities held to maturity	$	3,687	$	—	$	—	$	3,687	$	(462	)	$	(462	)
Loans held for sale	7,616		—		—		7,616		—			182
Impaired loans (1)	318,288		—		—		318,288		(18,681		)	(35,723		)
OREO	52,798		—		—		52,798		(2,789		)	(4,593		)

(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

51

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.

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 June 30, 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.

			Quantitative Information about Level 3 Fair Value Measurements
	Fair Value at				Range of Unobservable Inputs
	June 30, 2014		Valuation Technique	Unobservable Input(s)	(Weighted Average)
	(In Thousands)
Recurring fair value measurements:
Other trading assets	$	1,709	Discounted cash flow	Default rate	9.8%
				Prepayment rate	5.8% - 10.2% (7.4%)
Interest rate contracts	3,821		Discounted cash flow	Closing ratios (pull-through)	0.0% - 98.7% (55.7%)
				Cap grids	0.4% - 2.5% (1.0%)
Other assets - MSRs	31,104		Discounted cash flow	Discount rate	10.0% - 11.0% (10.0%)
				Constant prepayment rate or life speed	6.1% - 57.1% (9.7%)
				Cost to service	49.4% - 551.2% (65.4%)
Nonrecurring fair value measurements:
Investment securities held to maturity	$	3,690	Discounted cash flow	Prepayment rate	6.6% - 7.0% (6.8%)
				Default rate	4.6% - 7.3% (5.9%)
				Loss severity	49.2% - 93.0% (71.1%)
Impaired loans	131,622		Appraised value	Appraised value	0.0% - 100.0% (33.3%)
OREO	21,113		Appraised value	Appraised value	8.0%

52

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 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 - Interest Rate Lock Commitments

Significant unobservable inputs used in the valuation of interest rate lock commitments 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 are as follows:

	June 30, 2014
	Carrying Amount		Estimated Fair Value		Level 1		Level 2		Level 3
	(In Thousands)
Financial Instruments:
Assets:
Cash and cash equivalents	$	3,264,202	$	3,264,202	$	3,264,202	$	—	$	—
Trading account assets	356,889		356,889		—		355,180		1,709
Investment securities available for sale	8,972,237		8,972,237		37,109		8,434,177		500,951
Investment securities held to maturity	1,448,192		1,356,799		—		—		1,356,799
Loans held for sale	211,879		211,879		—		211,879		—
Loans, net	53,371,033		51,502,147		—		—		51,502,147
Derivative assets	129,664		129,664		141		125,701		3,822
Other assets	31,104		31,104		—		—		31,104
Liabilities:
Deposits	$	58,118,406	$	58,169,917	$	—	$	58,169,917	$	—
FHLB and other borrowings	3,958,497		3,960,161		—		3,960,161		—
Federal funds purchased and securities sold under agreements to repurchase	864,263		864,263		—		864,263		—
Other short-term borrowings	15,705		15,705		—		15,705		—
Trading account liabilities	242,440		242,440		—		242,440		—
Derivative liabilities	74,724		74,724		—		74,723		1

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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).

	Three Months Ended June 30,
	2014									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	$	40,454		$	14,539		$	25,915		$	(140,662	)	$	(51,485	)	$	(89,177	)
Less: reclassification adjustment for net gains on sale of securities in net income	21,464			7,712			13,752			18,075			6,623			11,452
Net change in unrealized gains (losses) on securities available for sale	18,990			6,827			12,163			(158,737		)	(58,108		)	(100,629		)
Change in unamortized net holding losses on investment securities held to maturity	2,694			967			1,727			5,789			2,121			3,668
Less: non-credit related impairment on investment securities held to maturity	—			—			—			2,288			838			1,450
Change in unamortized non-credit related impairment on investment securities held to maturity	369			132			237			72			27			45
Net change in unamortized holding losses on securities held to maturity	3,063			1,099			1,964			3,573			1,310			2,263
Unrealized holding gains (losses) arising during period from cash flow hedge instruments	(1,365		)	(490		)	(875		)	7,662			2,780			4,882
Change in defined benefit plans	—			—			—			—			(36		)	36
Other comprehensive income (loss)	$	20,688		$	7,436		$	13,252		$	(147,502	)	$	(54,054	)	$	(93,448	)

	Six Months Ended June 30,
	2014									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	$	81,416		$	29,261		$	52,155		$	(145,611	)	$	(53,294	)	$	(92,317	)
Less: reclassification adjustment for net gains on sale of securities in net income	37,898			13,620			24,278			33,030			12,089			20,941
Net change in unrealized gains (losses) on securities available for sale	43,518			15,641			27,877			(178,641		)	(65,383		)	(113,258		)
Change in unamortized net holding losses on investment securities held to maturity	7,468			2,683			4,785			9,535			3,490			6,045
Less: non-credit related impairment on investment securities held to maturity	235			84			151			2,288			838			1,450
Change in unamortized non-credit related impairment on investment securities held to maturity	754			271			483			1,713			627			1,086
Net change in unamortized holding losses on securities held to maturity	7,987			2,870			5,117			8,960			3,279			5,681
Unrealized holding gains (losses) arising during period from cash flow hedge instruments	(2,626		)	(944		)	(1,682		)	9,842			3,577			6,265
Change in defined benefit plans	(2,672		)	(1,001		)	(1,671		)	1,017			337			680
Other comprehensive income (loss)	$	46,207		$	16,566		$	29,641		$	(158,822	)	$	(58,190	)	$	(100,632	)

55

Activity in accumulated other comprehensive income (loss), net of tax 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	(92,317		)	4,816			—			(1,450		)	(88,951		)
Amounts reclassified from accumulated other comprehensive income (loss)	(14,896		)	1,449			680			1,086			(11,681		)
Net current period other comprehensive income (loss)	(107,213		)	6,265			680			(364		)	(100,632		)
Balance, June 30, 2013	$	(20,834	)	$	(7,122	)	$	(37,563	)	$	(9,055	)	$	(74,574	)
Balance, January 1, 2014	$	(31,490	)	$	(5,289	)	$	(41,921	)	$	(9,236	)	$	(87,936	)
Other comprehensive income (loss) before reclassifications	52,155			(2,789		)	—			(151		)	49,215
Amounts reclassified from accumulated other comprehensive income (loss)	(19,493		)	1,107			(1,671		)	483			(19,574		)
Net current period other comprehensive income (loss)	32,662			(1,682		)	(1,671		)	332			29,641
Balance, June 30, 2014	$	1,172		$	(6,971	)	$	(43,592	)	$	(8,904	)	$	(58,295	)

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

Details About Accumulated Other Comprehensive Income Components	Amounts Reclassified From Accumulated Other Comprehensive Income(1)												Condensed Consolidated Statement of Income Caption
	Three Months Ended June 30,						Six Months Ended June 30,
	2014			2013			2014			2013
	(In Thousands)
Unrealized Gains (Losses) on Securities Available for Sale and Transferred to Held to Maturity	$	21,464		$	18,075		$	37,898		$	33,030		Investment securities gains, net
	(2,694		)	(5,789		)	(7,468		)	(9,535		)	Interest on investment securities held to maturity
	18,770			12,286			30,430			23,495
	(6,745		)	(4,502		)	(10,937		)	(8,599		)	Income tax expense
	$	12,025		$	7,784		$	19,493		$	14,896		Net of tax
Accumulated (Gains) Losses on Cash Flow Hedging Instruments	$	1,212		$	591		$	1,824		$	1,180		Interest and fees on loans
	(1,776		)	(1,734		)	(3,551		)	(3,456		)	Interest and fees on FHLB advances
	(564		)	(1,143		)	(1,727		)	(2,276		)
	203			416			620			827			Income tax benefit
	$	(361	)	$	(727	)	$	(1,107	)	$	(1,449	)	Net of tax
Defined Benefit Plan Adjustment	$	—		$	—		$	2,672		$	(1,017	)	(2)
	—			(36		)	(1,001		)	337			Income tax (expense) benefit
	$	—		$	(36	)	$	1,671		$	(680	)	Net of tax
Unamortized Impairment Losses on Investment Securities Held to Maturity	$	(369	)	$	(72	)	$	(754	)	$	(1,713	)	Interest on investment securities held to maturity
	132			27			271			627			Income tax benefit
	$	(237	)	$	(45	)	$	(483	)	$	(1,086	)	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 supplemental disclosures for statement of cash flows.

	Six Months Ended June 30,
	2014			2013
	(In Thousands)
Supplemental disclosures of cash flow information:
Interest paid	$	134,941		$	132,366
Net income taxes paid	28,025			72,124
Supplemental schedule of noncash investing and financing activities:
Transfer of loans and loans held for sale to OREO	$	11,614		$	20,220
Transfer of loans to loans held for sale	—			55,000
Change in unrealized gain (loss) on available for sale securities	43,518			(178,641		)
Issuance of restricted stock, net of cancellations	(1,060		)	(596		)
Business combinations:
Entities acquired:
Assets acquired	117,068			—
Liabilities assumed	18,329			—

57

(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 operating segment results include certain overhead allocations and intercompany transactions. All intercompany transactions have been eliminated to determine the consolidated balances. The Company operates primarily in the United States, and, accordingly, revenue and assets outside the United States are not material. There are no individual customers whose revenues exceeded 10% of consolidated revenue. The 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 673 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 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.

58

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

	Three Months Ended June 30, 2014
	Wealth and Retail Banking		Commercial Banking		Corporate and Investment Banking			Treasury		Corporate Support and Other			Consolidated
	(In Thousands)
Net interest income	$	205,994	$	211,964	$	15,075		$	1,049	$	64,692		$	498,774
Allocated provision for loan losses	18,638		26,493		(1,351		)	—		1,472			45,252
Noninterest income	167,013		60,394		41,325			25,755		(59,042		)	235,445
Noninterest expense	319,388		119,173		37,708			3,397		65,596			545,262
Net income (loss) before income tax expense (benefit)	34,981		126,692		20,043			23,407		(61,418		)	143,705
Income tax expense (benefit)	13,031		47,192		7,466			8,719		(40,278		)	36,130
Net income (loss)	21,950		79,500		12,577			14,688		(21,140		)	107,575
Less: net income attributable to noncontrolling interests	—		65		—			439		—			504
Net income (loss) attributable to shareholder	$	21,950	$	79,435	$	12,577		$	14,249	$	(21,140	)	$	107,071
Average assets	$	21,485,600	$	29,738,664	$	4,569,657		$	12,738,181	$	7,472,839		$	76,004,941

	Three Months Ended June 30, 2013
	Wealth and Retail Banking		Commercial Banking		Corporate and Investment Banking		Treasury			Corporate Support and Other			Consolidated
	(In Thousands)
Net interest income (expense)	$	201,028	$	187,351	$	13,532	$	(13,513	)	$	121,917		$	510,315
Allocated provision for loan losses	22,555		4,489		1,477		38			(4,322		)	24,237
Noninterest income	165,737		62,632		32,096		47,105			(58,557		)	249,013
Noninterest expense	326,703		109,898		30,583		3,799			83,717			554,700
Net income (loss) before income tax expense (benefit)	17,507		135,596		13,568		29,755			(16,035		)	180,391
Income tax expense (benefit)	6,510		50,519		5,054		11,798			(22,285		)	51,596
Net income (loss)	10,997		85,077		8,514		17,957			6,250			128,795
Less: net income attributable to noncontrolling interests	—		122		—		446			—			568
Net income (loss) attributable to shareholder	$	10,997	$	84,955	$	8,514	$	17,511		$	6,250		$	128,227
Average assets	$	19,995,978	$	25,095,054	$	3,104,494	$	13,869,698		$	7,879,334		$	69,944,558

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	Six Months Ended June 30, 2014
	Wealth and Retail Banking		Commercial Banking		Corporate and Investment Banking			Treasury		Corporate Support and Other			Consolidated
	(In Thousands)
Net interest income	$	409,983	$	409,951	$	27,896		$	3,360	$	142,883		$	994,073
Allocated provision for loan losses	46,865		33,075		(2,045		)	—		4,623			82,518
Noninterest income	324,151		126,298		84,054			47,770		(127,500		)	454,773
Noninterest expense	637,662		238,145		66,778			7,037		114,507			1,064,129
Net income (loss) before income tax expense (benefit)	49,607		265,029		47,217			44,093		(103,747		)	302,199
Income tax expense (benefit)	18,478		98,723		17,588			16,425		(71,517		)	79,697
Net income (loss)	31,129		166,306		29,629			27,668		(32,230		)	222,502
Less: net income attributable to noncontrolling interests	—		82		—			875		—			957
Net income (loss) attributable to shareholder	$	31,129	$	166,224	$	29,629		$	26,793	$	(32,230	)	$	221,545
Average assets	$	21,279,485	$	29,222,559	$	4,200,964		$	12,537,345	$	7,448,998		$	74,689,351

	Six Months Ended June 30, 2013
	Wealth and Retail Banking		Commercial Banking			Corporate and Investment Banking		Treasury			Corporate Support and Other			Consolidated
	(In Thousands)
Net interest income (expense)	$	400,361	$	367,934		$	26,302	$	(28,716	)	$	267,380		$	1,033,261
Allocated provision for loan losses	51,334		(13,732		)	2,224		38			3,988			43,852
Noninterest income	319,822		111,285			58,333		66,922			(101,972		)	454,390
Noninterest expense	637,745		217,422			57,992		6,971			180,235			1,100,365
Net income (loss) before income tax expense (benefit)	31,104		275,529			24,419		31,197			(18,815		)	343,434
Income tax expense (benefit)	11,567		102,649			9,096		13,042			(32,251		)	104,103
Net income (loss)	19,537		172,880			15,323		18,155			13,436			239,331
Less: net income attributable to noncontrolling interests	—		75			—		886			—			961
Net income (loss) attributable to shareholder	$	19,537	$	172,805		$	15,323	$	17,269		$	13,436		$	238,370
Average assets	$	19,879,500	$	24,709,118		$	3,015,608	$	14,413,166		$	7,882,747		$	69,900,139

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

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

60

The development and application of these methodologies is a dynamic process. 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 are detailed below.

	June 30, 2014			December 31, 2013
	(In Thousands)
Derivative contracts
Cash flow hedges	$	2,848		$	3,652
Free-standing derivative instruments – risk management and other purposes	18,477			21,650
Free-standing derivative instruments – customer accommodation	(24,431		)	(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 June 30, 2014 included the following:

• Balance sheet growth remained strong as total assets were $75.7 billion at June 30, 2014, an increase of 1.1% from March 31, 2014.

• Total end of period loans increased 2.8% from March 31, 2014. 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 $58.9 million or 11.7%, while the Company's allowance for loan losses to period end loans decreased from 1.34% at March 31, 2014 to 1.32% at June 30, 2014.

• 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 earned the top ranking with customers in American Banker's annual reputation survey of the top 25 largest U.S. retail banks.

Financial Performance

Consolidated net income attributable to shareholder for the three months ended June 30, 2014 was $107.1 million compared to $128.2 million earned during the three months ended June 30, 2013. The decrease in net income attributable to shareholder was primarily due to decreases in net interest income and noninterest income and an increase in provision for loan losses, offset in part by decreases in noninterest expense and income tax expense.

Net interest income totaled $498.8 million for the three months ended June 30, 2014 compared to $510.3 million for the three months ended June 30, 2013. The net interest margin for the three months ended June 30, 2014 was 3.22%, a decline of 46 basis points compared to 3.68% for the three months ended June 30, 2013. The decrease in net interest margin for the three months ended June 30, 2014 was driven by lower yields on earning assets, particularly yields on loans.

The provision for loan losses was $45.3 million for the three months ended June 30, 2014, which represented an increase of $21.0 million compared to the three months ended June 30, 2013. Excluding covered loans, the provision for loan losses for the three months ended June 30, 2014 was $45.4 million compared to $26.7 million for the three months ended June 30, 2013. The increase in provision for loan losses for the three months ended June 30, 2014 as

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compared to the three months ended June 30, 2013 was primarily attributable to loan growth during 2014. Net charge-offs for the three months ended June 30, 2014 totaled $38.2 million compared to $86.7 million for the three months ended June 30, 2013. Net charge-offs excluding covered loans for the three months ended June 30, 2014 were $41.8 million, which represented a $43.5 million decrease from the three months ended June 30, 2013.

Noninterest income was $235.4 million, a decrease of $13.6 million compared to the three months ended June 30, 2013. The decrease in noninterest income was largely attributable to a $22.9 million decrease in gains on prepayment of FHLB and other borrowings related to the repurchase of subordinated debentures in 2013 as well as a $7.0 million decrease in mortgage banking income. These decreases were offset by a $3.5 million increase in retail investment sales, a $3.4 million increase in investment securities gains and an $8.7 million increase in other noninterest income. The increase in other noninterest income principally resulted from an increase in revenues from BSI.

Noninterest expense was $545.3 million for the three months ended June 30, 2014, a decrease of $9.4 million compared to the three months ended June 30, 2013. The lower level of noninterest expense was primarily attributable to a $40.0 million decrease in FDIC indemnification expense and a $1.8 million decrease in amortization of intangibles. The decline in these noninterest expense categories was partially offset by a $15.4 million increase in salaries, benefits and commissions, a $4.6 million increase in equipment expense, and a $13.0 million increase in other noninterest expense principally resulting from an increase in provisions for unfunded commitments.

Income tax expense was $36.1 million for the three months ended June 30, 2014 compared to $51.6 million for the three months ended June 30, 2013. This resulted in an effective tax rate of 25.1% for 2014 and 28.6% for 2013.

Certain key credit quality metrics continued to show improvement during the three months ended June 30, 2014. Specifically, nonperforming assets were $442.6 million at June 30, 2014, a decrease of $109.9 million compared to December 31, 2013. At the same time, past due loans declined during the three months ended June 30, 2014.

The Company's total assets at June 30, 2014 were $75.7 billion, an increase of $0.8 billion from December 31, 2013 levels. Total loans, excluding loans held for sale, were $54.1 billion at June 30, 2014, an increase of $1.4 billion or 2.6% 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 $1.0 billion or 1.8% compared to December 31, 2013, driven by transaction accounts, which increased 6.1% fueled by savings and money market growth. CDs increased 9.1% at June 30, 2014 compared to December 31, 2013 primarily related to an increase in brokered CDs.

Total shareholder's equity at June 30, 2014 was $11.8 billion, an increase of $120 million compared to December 31, 2013.

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 11.27% and 11.62% at June 30, 2014 and December 31, 2013, respectively. The Company's leverage capital ratio was 9.68% and 9.87% at June 30, 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.

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 June 30, 2014 and December 31, 2013 without regulatory approval. 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.

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

Analysis of Results of Operations

Consolidated net income attributable to shareholder totaled $107.1 million and $128.2 million for the three months ended June 30, 2014 and 2013, respectively. The Company’s results of operations for the three months ended June 30, 2014 reflected an increase in provision for loan losses resulting from loan growth. During the three months ended June 30, 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 lower noninterest expense.

Consolidated net income attributable to shareholder for the six months ended June 30, 2014 was $221.5 million compared to $238.4 million earned during the first half of 2013. The Company's results of operations for the six months ended June 30, 2014 reflected an increase in provision for loan losses resulting from loan growth. 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 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 June 30, 2014 and 2013

Net interest income totaled $498.8 million for the three months ended June 30, 2014 compared to $510.3 million for the three months ended June 30, 2013.

Net interest income on a fully taxable equivalent basis totaled $516.7 million for the three months ended June 30, 2014 compared with $524.6 million for the three months ended June 30, 2013. Net interest income on a fully taxable equivalent basis decreased $7.8 million in 2014 compared to 2013. The decrease in net interest income was primarily the result of an increase in total interest bearing liabilities driven by an increase in the balance of CDs and other time deposits for the three months ended June 30, 2014 compared to the same period in 2013.

Net interest margin was 3.22% for the three months ended June 30, 2014 compared to 3.68% for the three months ended June 30, 2013. The 46 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 June 30, 2014 for the loan portfolio was 3.97% compared to 4.61% for the same period in 2013. The yield on non-covered loans for the three months ended June 30, 2014 was 3.68% compared to 3.92% for the corresponding period in 2013. The 24 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 June 30, 2014 was 27.29% compared to 34.34% 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 investment securities portfolio was 2.34% for the three months ended June 30, 2014, compared to 2.22% for the three months ended June 30, 2013. The 12 basis point increase was primarily due to a decrease in premium amortization expense on mortgage-backed securities due to an increase in market rates that resulted in lower projected cashflows.

The average rate paid on interest bearing deposits was 0.59% for the three months ended June 30, 2014 compared to 0.57% for the three months ended June 30, 2013.

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The average rate on FHLB and other borrowings for the three months ended June 30, 2014 was 1.58% compared to 1.60% for the corresponding period in 2013.

Six Months Ended June 30, 2014 and 2013

Net interest income totaled $994.1 million for the six months ended June 30, 2014 compared to $1.0 billion for the six months ended June 30, 2013.

Net interest income on a fully taxable equivalent basis totaled $1.0 billion for the six months ended June 30, 2014 compared with $1.1 billion for the six months ended June 30, 2013. Net interest income on a fully taxable equivalent basis decreased $31.4 million in for the six months ended June 30, 2014 compared to the same period for 2013. The decrease in net interest income was primarily driven by a 54 basis point decrease in net interest spread primarily driven by lower interest earning asset yields, which decreased 55 basis points compared to the same period in 2013. The decrease in net interest spread was partially offset by an increase in total interest earning assets due to loan growth.

Net interest margin was 3.28% for the six months ended June 30, 2014 compared to 3.78% for the six months ended June 30, 2013. The 50 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 six months ended June 30, 2014 for the loan portfolio was 4.02 % compared to 4.73% for the same period in 2013. The yield on non-covered loans for the six months ended June 30, 2014 was 3.70% compared to 3.97% for the corresponding period in 2013. The 27 basis point decrease was primarily due to a higher volume of new loans originated at lower rates. The yield on covered loans for the six months ended June 30, 2014 was 27.95% compared to 36.06% 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 2.40% for the six months ended June 30, 2014, compared to 2.32% for the six months ended June 30, 2013. The increase was primarily driven by a decrease in premium amortization expense on mortgage-backed securities due to an increase in market rates that resulted in lower projected cashflows.

The average rate paid on interest bearing deposits was 0.57% for the six months ended June 30, 2014 compared to 0.58% for the six months ended June 30, 2013.

The average rate on FHLB and other borrowings was 1.57% for the six months ended June 30, 2014 compared to 1.56% for the six months ended June 30, 2013.

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The following table sets forth the major components of net interest income and the related annualized yields and rates, 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 June 30, 2014							Three Months Ended June 30, 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	$	53,255,478		$	488,073	3.68	%	$	45,733,149		$	446,815		3.92	%	$	191,277		$	(150,019	)	$	41,258
Covered Loans	668,780			45,499		27.29		1,057,986			90,579			34.34		(28,930		)	(16,150		)	(45,080		)
Loans (1) (2) (3)	53,924,258			533,572		3.97		46,791,135			537,394			4.61		162,347			(166,169		)	(3,822		)
Investment securities – AFS (tax exempt)(3)	496,418			5,250		4.24		455,706			5,183			4.56		1,670			(1,603		)	67
Investment securities – AFS (taxable)	8,337,173			44,835		2.16		8,274,010			40,756			1.98		313			3,765			4,078
Total investment securities – AFS	8,833,591			50,085		2.27		8,729,716			45,939			2.11		1,983			2,162			4,145
Investment securities – HTM (tax exempt) (3)	1,168,503			8,775		3.01		1,196,397			9,045			3.03		(210		)	(60		)	(270		)
Investment securities – HTM (taxable)	295,139			1,291		1.75		353,659			1,798			2.04		(275		)	(232		)	(507		)
Total investment securities - HTM	1,463,642			10,066		2.76		1,550,056			10,843			2.81		(485		)	(292		)	(777		)
Trading account securities (3)	84,212			580		2.76		117,547			780			2.66		(386		)	186			(200		)
Other (4)	24,524			42		0.69		41,290			59			0.57		(75		)	58			(17		)
Total earning assets	64,330,227			594,345		3.71		57,229,744			595,015			4.17		163,384			(164,055		)	(671		)
Noninterest earning assets:
Cash and due from banks	3,355,594							4,522,718
Allowance for loan losses	(707,222		)					(770,742		)
Net unrealized gain (loss) on investment securities available for sale	44,959							163,154
Other noninterest earning assets	8,981,383							8,799,684
Total assets	$	76,004,941						$	69,944,558
Liabilities:
Interest bearing liabilities:
Interest bearing demand deposits	$	7,244,052		3,098		0.17		$	6,647,469		2,868			0.17		393			(163		)	230
Savings and money market accounts	20,967,214			20,000		0.38		19,300,694			19,143			0.40		4,666			(3,809		)	857
Certificates and other time deposits	12,876,734			37,748		1.18		12,052,084			31,699			1.05		2,233			3,816			6,049
Foreign office deposits	119,530			55		0.18		124,717			69			0.22		(3		)	(11		)	(14		)
Total interest bearing deposits	41,207,530			60,901		0.59		38,124,964			53,779			0.57		7,289			(167		)	7,122
FHLB and other borrowings	4,100,456			16,184		1.58		4,039,732			16,149			1.60		910			(875		)	35
Federal funds purchased and securities sold under agreements to repurchase	876,593			437		0.20		1,016,816			551			0.22		(72		)	(42		)	(114		)
Other short-term borrowings	17,282			96		2.23		15,629			(24		)	(0.62	)	(17		)	137			120
Total interest bearing liabilities	46,201,861			77,618		0.67		43,197,141			70,455			0.65		8,110			(947		)	7,163
Noninterest bearing deposits	16,342,035							14,348,060
Other noninterest bearing liabilities	1,637,211							1,056,483
Total liabilities	64,181,107							58,601,684
Shareholder’s equity	11,823,834							11,342,874
Total liabilities and shareholder’s equity	$	76,004,941						$	69,944,558
Net interest income/net interest spread				$	516,727	3.04	%				$	524,560		3.52	%	$	155,274		$	(163,108	)	$	(7,834	)
Net interest margin						3.22	%							3.68	%
Taxable equivalent adjustment				$	17,953						$	14,245
Net interest income				$	498,774						$	510,315

(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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	Six Months Ended June 30, 2014							Six Months Ended June 30, 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	$	52,244,509		$	957,897	3.70	%	$	45,123,749		$	888,152	3.97	%	$	219,691		$	(149,946	)	$	69,745
Covered Loans	694,654			96,267		27.95		1,103,226			197,265		36.06		(62,831		)	(38,167		)	(100,998		)
Loans (1) (2) (3)	52,939,163			1,054,164		4.02		46,226,975			1,085,417		4.73		156,860			(188,113		)	(31,253		)
Investment securities – AFS (tax exempt)(3)	503,691			10,704		4.29		424,590			9,844		4.68		2,882			(2,023		)	859
Investment securities – AFS (taxable)	8,239,896			90,375		2.21		8,201,481			85,244		2.10		401			4,731			5,132
Total investment securities – AFS	8,743,587			101,079		2.33		8,626,071			95,088		2.22		3,283			2,708			5,991
Investment securities – HTM (tax exempt) (3)	1,183,200			17,733		3.02		1,160,000			17,950		3.12		801			(1,018		)	(217		)
Investment securities – HTM (taxable)	301,205			2,706		1.81		360,928			3,746		2.09		(574		)	(466		)	(1,040		)
Total investment securities - HTM	1,484,405			20,439		2.78		1,520,928			21,696		2.88		227			(1,484		)	(1,257		)
Trading account securities (3)	83,918			1,099		2.64		117,588			1,520		2.61		(479		)	58			(421		)
Other (4)	23,481			89		0.76		27,502			99		0.73		(23		)	13			(10		)
Total earning assets	63,274,554			1,176,870		3.75		56,519,064			1,203,820		4.30		159,868			(186,818		)	(26,950		)
Noninterest earning assets:
Cash and due from banks	3,263,914							5,117,902
Allowance for loan losses	(704,997		)					(785,430		)
Net unrealized gain (loss) on investment securities available for sale	41,770							178,283
Other noninterest earning assets	8,814,110							8,870,320
Total assets	$	74,689,351						$	69,900,139
Liabilities:
Interest bearing liabilities:
Interest bearing demand deposits	$	7,366,899		6,095		0.17		$	6,739,604		5,702		0.17		728			(335		)	393
Savings and money market accounts	20,278,379			35,666		0.35		19,179,946			40,485		0.43		5,729			(10,548		)	(4,819		)
Certificates and other time deposits	12,620,073			72,239		1.15		12,167,267			63,854		1.06		2,393			5,992			8,385
Foreign office deposits	121,325			117		0.19		126,980			149		0.24		(6		)	(26		)	(32		)
Total interest bearing deposits	40,386,676			114,117		0.57		38,213,797			110,190		0.58		8,844			(4,917		)	3,927
FHLB and other borrowings	4,194,210			32,548		1.57		4,129,882			31,941		1.56		499			108			607
Federal funds purchased and securities sold under agreements to repurchase	908,703			937		0.21		1,062,802			1,131		0.21		(160		)	(34		)	(194		)
Other short-term borrowings	14,931			122		1.65		13,268			48		0.73		7			67			74
Total interest bearing liabilities	45,504,520			147,724		0.66		43,419,749			143,310		0.67		9,190			(4,776		)	4,414
Noninterest bearing deposits	15,999,415							14,052,643
Other noninterest bearing liabilities	1,465,001							1,181,326
Total liabilities	62,968,936							58,653,718
Shareholder’s equity	11,720,415							11,246,421
Total liabilities and shareholder’s equity	$	74,689,351						$	69,900,139
Net interest income/net interest spread				$	1,029,146	3.09	%				$	1,060,510	3.63	%	$	150,678		$	(182,042	)	$	(31,364	)
Net interest margin						3.28	%						3.78	%
Taxable equivalent adjustment				$	35,073						$	27,249
Net interest income				$	994,073						$	1,033,261

(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 June 30, 2014 and 2013

For the three months ended June 30, 2014, the Company recorded $45.3 million of provision for loan losses compared to $24.2 million of provision for loan losses for the three months ended June 30, 2013. Excluding covered loans, provision for loan losses for the three months ended June 30, 2014 was $45.4 million compared to $26.7 million for the three months ended June 30, 2013. The increase in provision for loan losses for the three months ended June 30, 2014 as compared to the three months ended June 30, 2013 was primarily attributable to loan growth during 2014. The Company recorded net charge-offs of $38.2 million during the three months ended June 30, 2014 compared to $86.7 million during the corresponding period in 2013. Net charge-offs were 0.28% of average loans for the three months ended June 30, 2014 compared to 0.75% of average loans for the three months ended June 30, 2013.

Six Months Ended June 30, 2014 and 2013

Provision for loan losses was $82.5 million for the six months ended June 30, 2014, compared to $43.9 million for the six months ended June 30, 2013. Excluding covered loans, provision for loan losses for the six months ended June 30, 2014 was $77.7 million compared to $51.5 million for the six months ended June 30, 2013. The increase in provision for loan losses for the six months ended June 30, 2014 as compared to the six months ended June 30, 2013 was primarily attributable to loan growth during 2014. The Company recorded net charge-offs of $68.5 million during the six months ended June 30, 2014 compared to $123.2 million during the corresponding period in 2013. Net charge-offs were 0.26% of average loans for the six months ended June 30, 2014 compared to 0.54% of average loans for the six months ended June 30, 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

The following table presents the components of noninterest income.

Table 2 Noninterest Income
	Three Months Ended June 30,				Six Months Ended June 30,
	2014		2013		2014			2013
	(In Thousands)
Service charges on deposit accounts	$	54,958	$	54,884	$	108,349		$	110,372
Card and merchant processing fees	28,473		26,113		52,777			50,737
Retail investment sales	28,844		25,311		55,408			49,690
Asset management fees	10,535		10,636		21,293			20,705
Corporate and correspondent investment sales	7,972		9,547		16,628			18,943
Mortgage banking income	6,150		13,141		10,426			24,611
Bank owned life insurance	4,237		4,274		8,204			8,679
Investment securities gains, net	21,464		18,075		37,898			33,030
Gain (loss) on prepayment of FHLB and other borrowings	—		22,882		(458		)	21,775
Other	72,812		64,150		144,248			115,848
Total noninterest income	$	235,445	$	249,013	$	454,773		$	454,390

Three Months Ended June 30, 2014 and 2013

Noninterest income was $235.4 million for the three months ended June 30, 2014 compared to $249.0 million for the three months ended June 30, 2013. The decrease in noninterest income was largely attributable to a decrease in

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gains on prepayment of FHLB and other borrowings as well as a decrease in mortgage banking income. These decreases were partially offset by increases in retail investment sales, investment securities gains and other noninterest income.

Retail investment sales for the three months ended June 30, 2014 increased to $28.8 million compared to $25.3 million for the three months ended June 30, 2013. The primary driver of the increase was related to an increase in fixed annuity income due in part to higher rates, which has increased demand for fixed annuities.

Mortgage banking income for the three months ended June 30, 2014 was $6.2 million compared to $13.1 million for the three months ended June 30, 2013. Mortgage banking income for the three months ended June 30, 2014 included $3.9 million of origination fees and gains on sales of mortgage loans as well as gains of $2.4 million related to fair value adjustments on mortgage loans held for sale, mortgage related derivatives and MSRs. Mortgage banking income for the three months ended June 30, 2013 included $11.1 million of origination fees and gains on sales of mortgage loans and gains of $2.0 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 June 30, 2014 compared to the corresponding period in 2013 was primarily driven by decreased mortgage production volume of approximately 27% for the three months ended June 30, 2014 relative to the same period in 2013 due to declines in refinancing activity caused by an increase in mortgage interest rates.

Investment securities gains, net increased to $21.5 million for the three months ended June 30, 2014 compared to $18.1 million for the corresponding period in 2013. See "— Investment Securities" for more information related to the investment securities sales.

Gain on prepayment of FHLB and other borrowings decreased $22.9 million for the three months ended June 30, 2014 compared to the corresponding period in 2013. During the three months ended June 30, 2013, the Company repurchased $126 million of subordinated debentures resulting in the recognition of the gain.

Other income is comprised of income recognized that does not typically fit into one of the other noninterest income categories and includes 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 June 30, 2014, other income increased by $8.7 million. The increase was primarily due to a $15.8 million increase in revenues from BSI, partially offset by a $5.4 million decrease in trade service fees due to fluctuations in the foreign currency exchange rate.

Six Months Ended June 30, 2014 and 2013

For the six months ended June 30, 2014 noninterest income was $454.8 million compared to $454.4 million for the six months ended June 30, 2013. The increase in noninterest income was driven by increases in retail investment sales and other noninterest income offset by decreases in mortgage banking income and gain (loss) on FHLB and other borrowings.

Retail investment sales for the six months ended June 30, 2014 increased to $55.4 million compared to $49.7 million for the six months ended June 30, 2013. The primary driver of the increase was related to an increase in fixed annuity income due in part to higher rates, which has increased demand for fixed annuities.

Mortgage banking income for the six months ended June 30, 2014 was $10.4 million compared to $24.6 million for the corresponding period in 2013. Mortgage banking income for the six months ended June 30, 2014 included $8.6 million of origination fees and gains on sales of mortgage loans as well as gains of $2.0 million related to fair value adjustments on mortgage loans held for sale, mortgage related derivatives and MSRs. Mortgage banking income for the six months ended June 30, 2013 included $31.3 million of origination fees and gains on sales of mortgage loans and losses of $6.4 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 six months ended June 30, 2014 compared to the corresponding period in 2013 was primarily driven by decreased mortgage production volume of approximately 44% for the six months ended June 30, 2014 relative to the same period in 2013, due to declines in refinancing activity caused by an increase in mortgage interest rates.

Investment securities gains, net increased to $37.9 million for the six months ended June 30, 2014 compared to $33.0 million for the six months ended June 30, 2013. See "—Investment Securities" for more information related to the investment securities sales.

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The Company recognized a loss on prepayment of FHLB and other borrowings of $458 thousand for the six months ended June 30, 2014 compared to a gain of $21.8 million for the six months ended June 30, 2013. During the six months ended June 30, 2014, the Company early terminated approximately $40 million of FHLB advances. During the six months ended June 30, 2013, the Company repurchased subordinated debentures totaling $126 million and early terminated approximately $200 million of FHLB advances which resulted in a $21.8 million net gain on prepayment of FHLB and other borrowings.

Other income for the six months ended June 30, 2014 increased to $144.2 million compared to $115.8 million for the corresponding period in 2013, due primarily to a $35 million increase in revenues from BSI.

Noninterest Expense

The following table presents the components of noninterest expense.

Table 3 Noninterest Expense
	Three Months Ended June 30,				Six Months Ended June 30,
	2014		2013		2014		2013
	(In Thousands)
Salaries, benefits and commissions	$	263,301	$	247,905	$	525,870	$	499,228
FDIC indemnification expense	30,370		70,335		61,988		156,642
Equipment	55,469		50,891		109,207		98,506
Professional services	49,790		49,729		96,189		89,003
Net occupancy	40,200		40,471		79,157		78,365
Amortization of intangibles	13,631		15,462		26,165		31,502
Total securities impairment	34		462		180		462
Other	92,467		79,445		165,373		146,657
Total noninterest expense	$	545,262	$	554,700	$	1,064,129	$	1,100,365

Three Months Ended June 30, 2014 and 2013

Noninterest expense was $545.3 million for the three months ended June 30, 2014 compared to $554.7 million for the three months ended June 30, 2013. The lower level of noninterest expense was primarily attributable to decreases in FDIC indemnification expense and amortization of intangibles. The decline in these noninterest expense categories was partially offset by increases in equipment expense and other noninterest expense.

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 $30.4 million during the three months ended June 30, 2014 compared to $70.3 million for the corresponding period in 2013. The decrease for the three months ended June 30, 2014 was primarily a result of the continued decline in the balance of the covered loan portfolio.

Equipment expense increased by $4.6 million for the three months ended June 30, 2014 due primarily to increases in hardware and software maintenance of approximately $1.2 million and hardware depreciation and software amortization of $3.6 million related to the Company's implementation of a new core banking platform as well as several other IT projects implemented during 2013.

Amortization expense decreased by $1.8 million for the three months ended June 30, 2014 due to the lower level of intangible assets at June 30, 2014 compared to the same period in 2013.

Other noninterest expense represents FDIC insurance, marketing, communications, postage, supplies, subscriptions, provision for unfunded commitments and gains and losses on the sales and write downs of OREO. Other noninterest expense increased for the three months ended June 30, 2014 to $92.5 million compared to $79.4 million for the three months ended June 30, 2013 due primarily to a $13.4 million increase in provision for unfunded commitments.

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Six Months Ended June 30, 2014 and 2013

Noninterest expense was $1.1 billion for both the six months ended June 30, 2014 and 2013.

FDIC indemnification expense was $62.0 million during the six months ended June 30, 2014 compared to $156.6 million for the corresponding period in 2013. The decrease for the six months ended June 30, 2014 was driven by the decrease in the balance of the covered loan portfolio.

Equipment expense increased by $10.7 million for the six months ended June 30, 2014 due primarily to increases in hardware and software maintenance of approximately $3.5 million and hardware depreciation and software amortization of $6.8 million related to the Company's implementation of a new core banking platform as well as several other IT projects implemented during 2013.

Amortization expense decreased by $5.3 million to $26.2 million for the six months ended June 30, 2014 due to the lower level of intangible assets at June 30, 2014 compared to the same period in 2013.

Other noninterest expense increased for the six months ended June 30, 2014 to $165.4 million compared to $146.7 million for the six months ended June 30, 2013 due primarily to a $16.2 million increase in provision for unfunded commitments and a $6.7 million increase in FDIC insurance during the year. The increase was offset by a $6.9 million decrease related to bankcard fraud losses due to initiatives implemented in 2013 that focused on reducing fraud losses.

Income Tax Expense

Three Months Ended June 30, 2014 and 2013

The Company’s income tax expense totaled $36.1 million and $51.6 million for the three months ended June 30, 2014 and 2013, respectively. The effective tax rate was 25.1% for the three months ended June 30, 2014 and 28.6% for the three months ended June 30, 2013.The decrease in the effective tax rate for the three months ended June 30, 2014 compared to the three months ended June 30, 2013 was primarily driven by an increase in tax exempt income in 2014.

Six Months Ended June 30, 2014 and 2013

The Company’s income tax expense totaled $79.7 million and $104.1 million for the six months ended June 30, 2014 and 2013, respectively. The effective tax rate was 26.4% for the six months ended June 30, 2014 and 30.3% for the six months ended June 30, 2013.The decrease in the effective tax rate for the six months ended June 30, 2014 compared to the six months ended June 30, 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 June 30, 2014, the securities portfolio included $9.0 billion in available for sale securities and $1.4 billion in held to maturity securities for a total investment portfolio of $10.4 billion, an increase of $588 million compared with December 31, 2013.

During the six months ended June 30, 2014, the Company received proceeds of $783 million related to the sale of mortgage-backed securities and collateralized mortgage obligations classified as available for sale which resulted in net gains of $37.9 million. During the six months ended June 30, 2013, the Company received proceeds of $801 million from the sale of mortgage-backed securities and collateralized mortgage obligations classified as available for sale which resulted in net gains of $33.0 million.

The Company recognized $34 thousand and $462 thousand in OTTI charges for the three months ended June 30, 2014 and 2013, respectively. For the six months ended June 30, 2014 and 2013, the Company recognized OTTI charges of $180 thousand and $462 thousand, respectively. 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 s

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ecurities. 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 83.7% of average interest-earnings assets at June 30, 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.

The following table presents the composition of the loan portfolio.

Table 4 Loan Portfolio
	June 30, 2014		December 31, 2013
	(In Thousands)
Commercial loans:
Commercial, financial and agricultural	$	22,365,829	$	20,209,209
Real estate – construction	1,792,180		1,736,348
Commercial real estate – mortgage	9,461,092		9,106,329
Total commercial loans	$	33,619,101	$	31,051,886
Consumer loans:
Residential real estate – mortgage	$	13,356,040	$	12,706,879
Equity lines of credit	2,238,451		2,236,367
Equity loans	609,794		644,068
Credit card	636,904		660,073
Consumer – direct	563,949		516,572
Consumer – indirect	2,448,402		2,116,981
Total consumer loans	$	19,853,540	$	18,880,940
Covered loans	613,152		734,190
Total loans	$	54,085,793	$	50,667,016
Loans held for sale	211,879		147,109
Total loans and loans held for sale	$	54,297,672	$	50,814,125

Loans and loans held for sale, net of unearned income, totaled $54.3 billion at June 30, 2014, an increase of $3.5 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 six months ended June 30, 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 $443 million at June 30, 2014 compared to $552 million at December 31, 2013. Excluding covered assets, nonperforming assets decreased from $486 million at December 31, 2013 to $380 million at June 30, 2014. The decrease in nonperforming assets, excluding covered assets, was primarily due to a $99 million decrease in nonaccrual loans partially attributable to the Company's decision

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to sell certain nonperforming loans. As a percentage of total loans and loans held for sale and other real estate, nonperforming assets were 0.81% (or 0.71% excluding covered assets) at June 30, 2014 compared with 1.09% (or 0.97% excluding covered assets) at December 31, 2013.

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.

Table 5 Potential Problem Loans
	June 30, 2014		December 31, 2013
	(In Thousands)
Commercial, financial and agricultural	$	218,663	$	134,927
Real estate – construction	1,718		7,421
Commercial real estate – mortgage	116,426		138,432
	$	336,807	$	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.

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

Table 6 Asset Quality
	June 30, 2014		December 31, 2013
	(In Thousands)
Nonaccrual loans:
Commercial, financial and agricultural	$	72,606	$	128,231
Real estate – construction	9,401		14,183
Commercial real estate – mortgage	88,554		129,672
Residential real estate – mortgage	110,077		102,904
Equity lines of credit	35,552		31,431
Equity loans	19,571		20,447
Credit card	—		—
Consumer – direct	282		540
Consumer – indirect	1,611		1,523
Total nonaccrual loans, excluding covered loans	337,654		428,931
Covered nonaccrual loans	4,153		5,428
Total nonaccrual loans	341,807		434,359
Nonaccrual loans held for sale	—		7,359
Total nonaccrual loans and loans held for sale	$	341,807	$	441,718
Accruing TDRs: (1)
Commercial, financial and agricultural	$	10,491	$	25,548
Real estate – construction	2,244		3,801
Commercial real estate – mortgage	45,836		59,727
Residential real estate – mortgage	73,329		74,236
Equity lines of credit	—		—
Equity loans	42,460		42,850
Credit card	—		—
Consumer – direct	67		91
Consumer – indirect	—		—
Total accruing TDRs, excluding covered loans	174,427		206,253
Covered TDRs	3,832		3,455
Total TDRs	178,259		209,708
TDRs classified as loans held for sale	—		—
Total TDRs (loans and loans held for sale)	$	178,259	$	209,708
Other real estate:
Other real estate, excluding covered assets	17,620		19,115
Covered other real estate	3,493		4,113
Total other real estate	$	21,113	$	23,228
Other repossessed assets:
Other repossessed assets, excluding covered assets	2,796		3,360
Covered other repossessed assets	—		—
Total other repossessed assets	$	2,796	$	3,360

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Table 6 (continued) Asset Quality
	June 30, 2014		December 31, 2013
	(In Thousands)
Loans 90 days past due and accruing:
Commercial, financial and agricultural	2,311		2,212
Real estate – construction	1,138		240
Commercial real estate – mortgage	221		797
Residential real estate – mortgage	2,332		2,460
Equity lines of credit	2,044		5,109
Equity loans	833		1,167
Credit card	8,737		10,277
Consumer – direct	2,194		2,402
Consumer – indirect	1,231		1,540
Total loans 90 days past due and accruing, excluding covered loans	21,041		26,204
Covered loans 90 days past due and accruing	55,178		56,610
Total loans 90 days past due and accruing	76,219		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	$	76,219	$	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, are detailed in the following table.

Table 7 Nonperforming Assets
	June 30, 2014		December 31, 2013
	(In Thousands)
Nonaccrual loans	$	341,807	$	441,718
Loans 90 days or more past due and accruing (1)	76,219		82,814
TDRs 90 days or more past due and accruing	629		1,317
Nonperforming loans	418,655		525,849
OREO	21,113		23,228
Other repossessed assets	2,796		3,360
Total nonperforming assets	$	442,564	$	552,437

(1) Excludes loans classified as TDRs.

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Table 8 Asset Quality Ratios
	June 30, 2014		December 31, 2013
	(In Thousands)
Asset Quality Ratios:
Nonperforming loans and loans held for sale as a percentage of loans and loans held for sale, excluding covered loans (1)	0.67	%	0.93	%
Nonperforming loans and loans held for sale as a percentage of loans and loans held for sale, including covered loans (1)	0.77	%	1.03	%
Nonperforming assets as a percentage of loans and loans held for sale, other real estate, and other repossessed assets, excluding covered assets (2)	0.71	%	0.97	%
Nonperforming assets as a percentage of loans and loans held for sale, other real estate, and other repossessed assets, including covered assets (2)	0.81	%	1.09	%
Allowance for loan losses as a percentage of loans, excluding covered loans and related allowance	1.32	%	1.40	%
Allowance for loan losses as a percentage of loans, including covered loans and related allowance	1.32	%	1.38	%
Allowance for loan losses as a percentage of nonperforming loans, excluding covered loans (3)	195.70	%	152.87	%
Allowance for loan losses as a percentage of nonperforming loans, including covered loans (3)	170.73	%	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 $18 million at June 30, 2014 compared to $19 million at December 31, 2013. This includes lands and lots, which totaled $6 million at June 30, 2014. The remaining foreclosed real estate at June 30, 2014 is primarily single family residential and commercial real estate.

The following table provides a rollforward of OREO.

Table 9 Rollforward of Other Real Estate Owned
	Six Months Ended June 30,
	2014			2013
	(In Thousands)
Balance at beginning of period	$	23,228		$	68,568
Transfer of loans and loans held for sale to OREO	11,614			20,220
Sales of OREO	(12,147		)	(31,397		)
Writedowns of OREO	(1,582		)	(4,593		)
Balance at end of period	$	21,113		$	52,798

76

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

Table 10 Rollforward of Nonaccrual Loans
	Six Months Ended June 30,
	2014			2013
	(In Thousands)
Balance at beginning of period,	$	436,290		$	726,541
Additions	187,874			297,952
Returns to accrual	(47,934		)	(48,995		)
Loan sales	(68,086		)	(70,904		)
Payments and paydowns	(58,143		)	(146,096		)
Transfers to other real estate	(10,002		)	(16,410		)
Charge-offs	(102,345		)	(158,317		)
Balance at end of period	$	337,654		$	583,771

As a part of the Company's asset disposition strategy, the Company may sell nonaccrual and other underperforming loans. During the six months ended June 30, 2014, the Company sold noncovered commercial and consumer loans totaling $99.4 million and $293 thousand, respectively. Net charge-offs totaling $17.8 million and $47 thousand, respectively, were recognized on these sales. During the six months ended June 30, 2013 , the Company sold noncovered commercial and consumer loans totaling $89.6 million and $14.7 million, respectively. Net charge-offs totaling $21.1 million and $4.2 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.

Table 11 Rollforward of TDR Activity
	Six Months Ended June 30,
	2014			2013
	(In Thousands)
Balance at beginning period	$	310,282		$	388,643
New TDRs	20,336			72,446
Payments/Payoffs	(63,473		)	(50,365		)
Charge-offs	(3,624		)	(15,589		)
Loan sales	(2,098		)	(9,875		)
Transfer to ORE	(3,896		)	(2,305		)
Balance at end of period	$	257,527		$	382,955

The Company’s aggregate recorded investment in impaired loans modified through TDRs excluding covered loans decreased to $258 million at June 30, 2014 from $310 million at December 31, 2013. Included in these amounts are $174 million at June 30, 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.

77

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

Table 12 Rollforward of Accruing TDR Activity
	Six Months Ended June 30,
	2014			2013
	(In Thousands)
Balance at beginning of period,	$	206,253		$	237,018
New TDRs	8,527			6,802
Return to accrual	12,699			34,836
Payments/Payoffs	(44,534		)	(13,135		)
Charge-offs	(176		)	(540		)
Loan sales	(839		)	(2,512		)
Transfer to nonaccrual	(7,503		)	(25,285		)
Balance at end of period	$	174,427		$	237,184

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. See 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 $703 million at June 30, 2014, from $698 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 1.32% at June 30, 2014 from 1.40% at December 31, 2013. During 2014, the 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 $359 million at June 30, 2014 from $456 million at December 31, 2013. The allowance attributable to individually impaired loans was $67 million at June 30, 2014 compared to $82 million at December 31, 2013.

Net charge-offs were 0.28% of average loans for the three months ended June 30, 2014 compared to 0.75% of average loans for the three months ended June 30, 2013. Net charge-offs were 0.26% of average loans for the six months ended June 30, 2014 compared to 0.54% of average loans for the six months ended June 30, 2013. The decrease in net charges-off for both the three and six months ended June 30, 2014 as compared to the corresponding period in 2013 was primarily driven by decreases in the commercial real estate - mortgage and residential real estate - mortgage portfolios.

78

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 June 30,						Six Months Ended June 30,
	2014			2013			2014			2013
	(Dollars in Thousands)
Average loans outstanding during the period	$	53,810,562		$	46,646,109		$	52,842,956		$	46,077,645
Average loans outstanding during the period, excluding covered loans	$	53,141,782		$	45,588,123		$	52,148,302		$	44,974,419
Allowance for loan losses, beginning of period	$	707,665		$	786,018		$	700,719		$	802,853
Charge-offs:
Commercial, financial and agricultural	15,517			16,889			20,451			23,211
Real estate – construction	1,904			3,313			2,128			4,825
Commercial real estate – mortgage	5,401			17,812			7,823			22,918
Residential real estate – mortgage	4,257			35,934			11,523			47,995
Equity lines of credit	7,602			8,835			13,421			16,997
Equity loans	2,002			4,544			4,625			7,301
Credit card	9,645			8,289			18,979			16,297
Consumer – direct	5,803			5,094			11,629			10,702
Consumer – indirect	5,221			3,466			11,765			8,071
Total, excluding covered loans	57,352			104,176			102,344			158,317
Covered loans	791			2,156			1,007			3,425
Total, including covered loans	58,143			106,332			103,351			161,742
Recoveries:
Commercial, financial and agricultural	3,933			4,667			8,918			9,864
Real estate – construction	834			4,419			1,973			7,977
Commercial real estate – mortgage	1,339			2,534			1,738			4,469
Residential real estate – mortgage	2,227			1,273			3,436			2,157
Equity lines of credit	1,398			1,098			2,379			1,786
Equity loans	657			450			1,161			1,031
Credit card	788			663			1,443			1,275
Consumer – direct	1,732			1,356			3,616			3,405
Consumer – indirect	2,607			2,394			5,397			5,060
Total, excluding covered loans	15,515			18,854			30,061			37,024
Covered loans	4,471			734			4,813			1,524
Total, including covered loans	19,986			19,588			34,874			38,548
Net charge-offs	38,157			86,744			68,477			123,194
Provision for covered loans	(194		)	(2,437		)	4,791			(7,687		)
Provision charged to income, excluding covered loans	45,446			26,674			77,727			51,539
Total provision for loan losses	45,252			24,237			82,518			43,852
Allowance for loan losses, end of period	$	714,760		$	723,511		$	714,760		$	723,511
Allowance for loan losses, excluding allowance attributable to covered loans, end of period	$	703,209		$	715,296		$	703,209		$	715,296
Allowance for covered loans	11,551			8,215			11,551			8,215
Total allowance for loan losses	$	714,760		$	723,511		$	714,760		$	723,511
Net charge-offs to average loans	0.28		%	0.75		%	0.26		%	0.54		%
Net charge-offs to average loans, excluding covered loans	0.32		%	0.75		%	0.28		%	0.54		%

79

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 June 30, 2014 and December 31, 2013.

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 $22.4 billion at June 30, 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 borrower.

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

Table 14 Commercial, Financial and Agricultural
	June 30, 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	$	475,587	$	68	$	—	$	—	$	413,666	$	420	$	—	$	—
Basic Materials	1,121,935		99		—		—		855,342		105		—		—
Capital Goods & Industrial Services	1,817,161		5,306		46		234		1,843,906		5,851		85		1,392
Construction & Infrastructure	636,972		3,114		192		36		538,312		29,943		4,266		—
Consumer & Healthcare	2,611,601		5,566		899		4		2,411,402		11,896		946		50
Energy	2,962,445		880		—		—		2,876,170		871		—		—
Financial Services	1,469,046		213		—		161		1,068,682		94		—		—
General Corporates	1,150,575		1,629		25		1,471		1,037,612		1,349		28		759
Institutions	2,181,257		16,925		8,929		—		1,860,121		27,079		—		—
Leisure	1,874,922		2,396		384		—		1,760,205		28,497		422		—
Real Estate	1,642,461		46		—		—		1,373,026		2,363		19,763		—
Retailers	1,960,633		16,284		16		405		1,934,491		19,445		23		7
Telecoms, Technology & Media	976,849		20,015		—		—		802,412		—		15		4
Transportation	687,053		65		—		—		590,982		240		—		—
Utilities	797,332		—		—		—		842,880		78		—		—
Total Commercial, Financial and Agricultural	$	22,365,829	$	72,606	$	10,491	$	2,311	$	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.

80

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 $9.5 billion at June 30, 2014, compared to $9.1 billion at December 31, 2013, and real estate - construction loans totaled $1.8 billion and $1.7 billion at June 30, 2014, and December 31, 2013, respectively.

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.

Table 15 Commercial Real Estate
	June 30, 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	$	659,173	$	3,359	$	2,711	$	—	$	690,668	$	8,950	$	6,126	$	181
Arizona	838,678		7,870		5,439		—		801,231		11,278		5,765		—
California	1,071,770		2,226		—		—		845,135		3,180		—		—
Colorado	444,245		8,757		13,448		—		515,663		4,940		13,792		—
Florida	921,769		8,718		212		—		893,315		7,736		5,365		—
New Mexico	255,075		5,539		—				257,585		2,516		—		—
Texas	3,101,940		41,930		4,276		221		3,135,674		71,411		8,023		616
Other	2,168,442		10,155		19,750		—		1,967,058		19,661		20,656		—
	$	9,461,092	$	88,554	$	45,836	$	221	$	9,106,329	$	129,672	$	59,727	$	797

81

Table 16 Real Estate – Construction
	June 30, 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	$	64,224	$	1,469	$	1,681	$	—	$	50,852	$	1,809	$	1,858	$	—
Arizona	122,168		3,492		—		1,087		126,793		4,625		—		—
California	179,433		31		—		—		235,919		302		82		—
Colorado	70,848		500		409		—		69,672		567		1,701		—
Florida	109,695		1,372		—		—		119,374		2,628		—		193
New Mexico	17,036		64		70		—		18,426		156		73		—
Texas	930,811		2,003		84		51		815,266		3,189		87		47
Other	297,965		470		—		—		300,046		907		—		—
	$	1,792,180	$	9,401	$	2,244	$	1,138	$	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 $13.4 billion at June 30, 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
	June 30, 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	$	1,327,640	$	20,200	$	15,625	$	82	$	1,366,657	$	16,662	$	16,005	$	218
Arizona	1,425,816		11,699		11,277		733		1,368,384		11,103		10,195		339
California	2,299,769		6,705		2,275		—		1,970,422		5,795		3,415		—
Colorado	1,218,424		3,619		2,759		7		1,024,410		2,234		2,585		63
Florida	1,427,252		13,527		13,772		221		963,622		9,617		11,652		212
New Mexico	240,393		2,019		1,973		—		222,674		1,452		1,308		—
Texas	5,011,233		39,758		21,099		1,289		4,873,957		35,943		21,043		1,502
Other	405,513		12,550		4,549		—		916,753		20,098		8,033		126
	$	13,356,040	$	110,077	$	73,329	$	2,332	$	12,706,879	$	102,904	$	74,236	$	2,460

82

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

Table 18 Residential Real Estate - Mortgage
	June 30, 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	$	537,607	$	65,655	$	22,017	$	1,599	$	568,227	$	67,809	$	24,977	$	1,251
621-680	1,260,599		18,746		22,087		159		1,230,493		17,689		20,221		214
681 – 720	2,278,875		13,608		11,614		155		2,170,335		4,760		11,904		32
Above 720	8,472,443		3,233		15,810		371		7,894,709		2,098		16,030		572
Unknown	806,516		8,835		1,801		48		843,115		10,548		1,104		391
	$	13,356,040	$	110,077	$	73,329	$	2,332	$	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 June 30, 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
	June 30, 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	$	655,027	$	10,017	$	13,761	$	795	$	674,461	$	10,103	$	13,350	$	1,209
Arizona	417,900		12,993		5,442		572		428,861		8,668		5,484		2,494
California	102,833		140		161		21		72,180		219		164		—
Colorado	226,893		7,148		1,277		37		230,500		7,710		968		409
Florida	411,147		8,655		8,195		603		426,512		8,592		8,505		1,103
New Mexico	56,864		1,044		970		51		58,466		1,189		853		261
Texas	928,151		14,158		11,298		756		936,722		14,319		11,756		778
Other	49,430		968		1,356		42		52,733		1,078		1,770		22
	$	2,848,245	$	55,123	$	42,460	$	2,877	$	2,880,435	$	51,878	$	42,850	$	6,276

83

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

Table 20 Equity Loans and Lines
	June 30, 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	$	255,647	$	25,717	$	16,970	$	2,563	$	290,527	$	22,449	$	19,499	$	5,673
621-680	425,380		17,054		13,387		112		435,936		19,245		12,140		197
681 – 720	537,834		9,179		4,413		192		536,196		6,517		4,530		—
Above 720	1,599,021		2,214		7,596		10		1,581,607		2,511		6,488		142
Unknown	30,363		959		94		—		36,169		1,156		193		264
	$	2,848,245	$	55,123	$	42,460	$	2,877	$	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 June 30, 2014 were $3.6 billion, or 6.7% 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 June 30, 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.

84

On May 29, 2014, Fitch upgraded the Company's and the Bank's long-term ratings from BBB to BBB+ and on June 4, 2014, S&P upgraded the Company's and the Bank's long-term ratings from BBB- to BBB and the short-term ratings from A-3 to A-2. The cost and availability of financing to the Company and the Bank are impacted by its credit ratings. A downgrade to the Company’s or Bank’s credit ratings could affect its ability to access the credit markets and increase its borrowing costs, thereby adversely impacting the Company’s financial condition and liquidity. Key factors in maintaining high credit ratings include a stable and diverse earnings stream, strong credit quality, strong capital ratios and diverse funding sources, in addition to disciplined liquidity monitoring procedures.

Deposits

Total deposits increased by $3.7 billion from December 31, 2013 to June 30, 2014. At June 30, 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
	June 30, 2014				December 31, 2013
	Balance		% of Total		Balance		% of Total
	(Dollars in Thousands)
Noninterest-bearing demand deposits	$	16,321,003	28.1	%	$	15,377,844	28.2	%
Interest-bearing demand deposits	7,160,080		12.3		7,663,256		14.1
Savings and money market	21,469,141		36.9		19,306,589		35.5
Certificates and other time deposits	13,058,461		22.5		11,967,031		22.0
Foreign office deposits-interest-bearing	109,721		0.2		122,770		0.2
Total deposits	$	58,118,406	100.0	%	$	54,437,490	100.0	%

Total deposits increased by $3.7 billion from December 31, 2013 to June 30, 2014 due to growth in noninterest bearing demand deposits, savings and money market accounts, and certificates and other time deposits. Marketing efforts and new product rollouts were the primary drivers of the growth in noninterest bearing demand deposits and savings and money market accounts. The increase in certificates and other time deposits from December 31, 2013 was primarily attributable to a $1.2 billion increase in brokered CDs.

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 June 30, 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.

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

Table 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 June 30, 2014
Federal funds purchased	$	960,935	$	742,169	0.25	%	$	595,305	0.25	%
Securities sold under agreements to repurchase	268,958		166,534		0.01		268,958		0.01
Other short-term borrowings	28,822		14,931		1.65		15,705		0.37
	$	1,258,715	$	923,634			$	879,968
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 June 30, 2014, short-term borrowings totaled $880 million, an increase of $22 million, or 2.5% compared to December 31, 2013.

At June 30, 2014 and December 31, 2013, FHLB and other borrowings were $4.0 billion and $4.3 billion, respectively. During the six months ended June 30, 2014, there were no proceeds received from FHLB and other borrowings and repayments were $341.2 million.

Shareholder’s Equity

Total shareholder's equity at June 30, 2014 was $11.8 billion compared to $11.5 billion at December 31, 2013.

During the six months ended June 30, 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 $222 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 and monitoring key risk indicators, managing capital and integrating the Company’s capital planning process with on-going risk assessments and related stress testing for major risks.

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.

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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 June 30, 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.

Table 23 Net Interest Income Sensitivity
	Estimated % Change in Net Interest Income
	June 30, 2014		June 30, 2013
Rate Change
+ 200 basis points	7.47	%	8.21	%
+ 100 basis points	3.70		3.94

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
	June 30, 2014		June 30, 2013
Rate Change
+ 300 basis points	(5.27)	%	(0.71)	%
+ 200 basis points	(3.19	)	0.02
+ 100 basis points	(1.44	)	0.32

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 of the Company has established certain limits relative to positions and activities. The level of price risk exposure at any given point in time depends on the market environment and expectation of future price and market movements, and will vary from period to period.

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 June 30, 2014, the Company had derivative financial instruments outstanding with notional amounts of $21.1 billion. The estimated net fair value of open contracts was in an asset position of $117 million at June 30, 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 June 30, 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.

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.

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-

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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 11.27% at June 30, 2014 compared to 11.62% at December 31, 2013. The Company's leverage ratio was 9.68% at June 30, 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
	June 30, 2014			December 31, 2013
	(Dollars in Thousands)
Risk-based capital:
Tier 1 Capital	$	6,852,583		$	6,613,885
Total Qualifying Capital	8,110,572			7,822,858
Assets:
Total risk-adjusted assets (regulatory)	$	60,801,704		$	56,934,859
Ratios:
Tier 1 risk-based capital ratio	11.27		%	11.62		%
Total risk-based capital ratio	13.34		%	13.74		%
Leverage ratio	9.68		%	9.87		%

At June 30, 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.

Changes In Internal Control Over Financial Reporting.

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

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PART II OTHER INFORMATION

Item 1. Legal Proceedings

See under “Legal and Regulatory Proceedings” in Note 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 the risk factors previously included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013.

Any deterioration in national, regional and local economic conditions, particularly unemployment levels and home prices, could materially affect the Company's business, financial condition or results of operations.

The Company's business is subject to periodic fluctuations based on national, regional and local economic conditions. These fluctuations are not predictable, cannot be controlled, and may have a material adverse impact on its financial condition and operations even if other favorable events occur. The Company's banking operations are locally-oriented and community-based. Accordingly, the Company expects to continue to be dependent upon local business conditions as well as conditions in the local residential and commercial real estate markets it serves, including Alabama, Arizona, California, Colorado, Florida, New Mexico and Texas. These economic conditions could require the Company to charge off a higher percentage of loans or increase provisions for credit losses, which would reduce its net income.

Significant declines in the housing market from 2007 through 2010, with falling home prices and increasing foreclosures and unemployment, resulted in significant write-downs of asset values by many financial institutions, including government-sponsored entities and major commercial and investment banks. These write-downs, initially of mortgage-backed securities, but spreading to credit default swaps and other derivative securities, caused many financial institutions to seek additional capital, to merge with larger and stronger institutions and, in some cases, to fail. Although the U.S. economy has shown modest improvement recently, economic conditions continue to pose a risk to the financial system. The Company is part of the financial system and a systemic lack of available credit, a lack of confidence in the financial sector, continued volatility in the financial markets and/or reduced business activity could materially adversely affect its business, financial condition or results of operations.

A return of the volatile economic conditions experienced in the U.S. during 2008-2009, including the adverse conditions in the fixed income debt markets, for an extended period of time, particularly if left unmitigated by policy measures, may materially and adversely affect the Company.

The failure of the European Union to stabilize the fiscal condition of member countries, especially in Spain, could have an adverse impact on global financial markets, the current U.S. economic recovery and the Company.

Certain European Union member countries have fiscal obligations greater than their fiscal revenue, which has caused investor concern over such countries' ability to continue to service their debt and foster economic growth. Fiscal austerity measures such as raising taxes and reducing entitlements have improved the ability of some member countries to service their debt, but have challenged economic growth and efforts to lower unemployment rates in the region.

The Company is a wholly-owned subsidiary of BBVA, which is based in Spain and serves as a source of strength and capital to the Company. Accordingly, European Union weakness, particularly in Spain, could directly impact BBVA and could have an adverse impact on the Company's business or financial condition.

A weaker European economy may transcend Europe, cause investors to lose confidence in the safety and soundness of European financial institutions and the stability of European member economies, and likewise affect U.S.-based financial institutions, the stability of the global financial markets and the economic recovery underway in the U.S. Should the U.S. economic recovery be adversely impacted by these factors, loan and asset growth at U.S. financial institutions, like the Company, could be affected.

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Weakness in the real estate market, including the secondary residential mortgage loan market, has adversely affected the Company and may continue to adversely affect it.

Weakness in the non-agency secondary market for residential mortgage loans has limited the market for and liquidity of many nonconforming mortgage loans. The effects of ongoing mortgage market challenges, combined with the recent corrections in residential real estate market prices and reduced levels of home sales, could result in further price reductions in single family home values, adversely affecting the value of collateral securing mortgage loans that the Company holds, and mortgage loan originations and profits on sales of mortgage loans. Declining real estate prices have caused cyclically higher delinquencies and losses on mortgage loans, particularly Alt-A mortgages, and home equity lines of credit. These conditions have resulted in losses, write downs and impairment charges in the Company's mortgage and other business units.

Future declines in real estate values, low home sales volumes, financial stress on borrowers as a result of unemployment, interest rate resets on ARMs or other factors could have further adverse effects on borrowers that could result in higher delinquencies and greater charge-offs in future periods, which would adversely affect the Company's financial condition or results of operations. Additionally, counterparties to insurance arrangements used to mitigate risk associated with increased defaults in the real estate market are stressed by weaknesses in the real estate market and a commensurate increase in the number of claims. Further, decreases in real estate values might adversely affect the creditworthiness of state and local governments, and this might result in decreased profitability or credit losses from loans made to such governments. A decline in home values or overall economic weakness could also have an adverse impact upon the value of real estate or other assets which the Company owns as a result of foreclosing a loan and its ability to realize value on such assets.

The Company is subject to legislation and regulation, including the Dodd-Frank Act, and future legislation or regulation could require it to change certain business practices, reduce its revenue, impose additional costs on the Company or otherwise adversely affect its business operations and competitive position.

On July 21, 2010, President Obama signed into law the Dodd-Frank Act, which has changed and will continue to change substantially the legal and regulatory framework under which the Company operates. The Dodd-Frank Act represents a significant overhaul of many aspects of the regulation of the financial-services industry, addressing, among other things, systemic risk, capital adequacy, deposit insurance assessments, consumer financial protection, interchange fees, derivatives, lending limits, mortgage lending practices, registration of investment advisors and changes among the bank regulatory agencies. The following are among the provisions that may affect the Company's operations:

• Creation of the CFPB with centralized authority, including examination and enforcement authority, for consumer protection in the banking industry.

• New limitations on federal preemption.

• Application of heightened capital, liquidity, single counterparty credit limits, stress testing, risk management and other enhanced prudential standards to the U.S. operations of BBVA, including the Company and the Bank.

• Requirement that a parent company and its subsidiary bank(s) be well-capitalized and well-managed in order to engage in activities permitted for financial holding companies.

• Changes to the assessment base for deposit insurance premiums.

• Permanently raising the FDIC's standard maximum deposit insurance limit to $250,000 for federal deposit insurance.

• Imposing further limits on interchange fees.

• Repeal of the prohibition on the payment of interest on demand deposits, effective July 21, 2011, thereby permitting depository institutions to pay interest on business transaction and other accounts.

• Restrictions on compensation, including a prohibition on incentive-based compensation arrangements that encourage inappropriate risk taking by covered financial institutions and are deemed to be excessive, or that may lead to material losses.

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• Requirement that banking regulators remove references to and requirements of reliance upon credit ratings from their regulations and replace them with appropriate alternatives for evaluating credit worthiness.

• New prohibitions and restrictions on the ability of a banking entity and nonbank financial company to engage in proprietary trading and have certain interests in, or relationships with, a hedge fund or private equity fund.

• Creation of a new framework for the regulation of over-the-counter derivatives and new regulations for the securitization market and the strengthening of the regulatory oversight of securities and capital markets by the SEC.

Some of these and other major changes could materially impact the profitability of the Company's business, the value of assets it holds or the collateral available for its loans, require changes to business practices or force the Company to discontinue businesses and expose it to additional costs, taxes, liabilities, enforcement actions and reputational risk.

Many of these provisions became effective upon enactment of the Dodd-Frank Act, while others are subject to further study, rulemaking and the discretion of regulatory bodies. In light of these significant changes and the discretion afforded to federal regulators, the Company cannot fully predict the effect that compliance with the Dodd-Frank Act or any implementing regulations will have on the Company's businesses or its ability to pursue future business opportunities. Additional regulations resulting from the Dodd-Frank Act may materially adversely affect the Company's business, financial condition or results of operations.

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.

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

The Federal Reserve Board recently enacted consumer protection regulations related to automated overdraft payment programs offered by financial institutions. The Company has implemented changes to its business practices relating to overdraft payment programs in order to comply with these regulations.

For the years ended December 31, 2010 and 2009, the Company's overdraft and insufficient funds fees represented a significant amount of noninterest fees. Since taking effect on July 1, 2011, the fees received by the Company for automated overdraft payment services have decreased, thereby adversely impacting its noninterest income. Complying with these regulations has resulted in increased operational costs for the Company, which may continue to rise. The actual impact of these regulations in future periods could vary due to a variety of factors, including changes in customer behavior, economic conditions and other factors, which could adversely affect the Company's business, financial condition or results of operations.

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The CFPB's residential mortgage regulations could adversely affect the Company's business, financial condition or results of operations.

The CFPB recently finalized a number of significant rules which will impact nearly every aspect of the lifecycle of a residential mortgage. These rules implement the Dodd-Frank Act amendments to the Equal Credit Opportunity Act, the Truth in Lending Act and the Real Estate Settlement Procedures Act. The final rules require banks to, among other things: (i) develop and implement procedures to ensure compliance with a new “reasonable ability to repay” test and identify whether a loan meets a new definition for a “qualified mortgage,” (ii) implement new or revised disclosures, policies and procedures for servicing mortgages including, but not limited to, early intervention with delinquent borrowers and specific loss mitigation procedures for loans secured by a borrower's principal residence, (iii) comply with additional restrictions on mortgage loan originator compensation, and (iv) comply with new disclosure requirements and standards for appraisals and escrow accounts maintained for “higher priced mortgage loans.” These new rules create operational and strategic challenges for the Company, as it is both a mortgage originator and a servicer. For example, business models for cost, pricing, delivery, compensation and risk management will need to be reevaluated and potentially revised, perhaps substantially. Additionally, programming changes and enhancements to systems will be necessary to comply with the new rules. Some of these new rules went effective in June 2013, while others became effective in January 2014. Forthcoming additional rulemaking affecting the residential mortgage business is also expected. These rules and any other new regulatory requirements promulgated by the CFPB could require changes to the Company's business, result in increased compliance costs and affect the streams of revenue of such business.

The Company is subject to capital adequacy and liquidity standards, and if it fails to meet these standards its financial condition and operations would be adversely affected.

The U.S. Basel III final rule and provisions in the Dodd-Frank Act, including the Collins Amendment, will increase capital requirements for banking organizations such as the Company and the Bank. Consistent with the Basel Committee's Basel III capital framework, the U.S. Basel III final rule includes a new minimum ratio of Common Equity Tier 1 capital to risk-weighted assets of 4.5 percent and a Common Equity Tier 1 capital conservation buffer of greater than 2.5 percent of risk-weighted assets that will apply to all U.S. banking organizations, including the Bank and the Company. Failure to maintain the capital conservation buffer would result in increasingly stringent restrictions on a banking organization's ability to make dividend payments and other capital distributions and pay discretionary bonuses to executive officers. Under the U.S. Basel III final rule, trust preferred securities no longer qualify as Tier 1 capital for bank holding companies such as the Company, an outcome that is also required by the Collins Amendment.

The Company is also required to submit an annual capital plan to the Federal Reserve Board. The capital plan must include an assessment of the Company's expected uses and sources of capital over a forward-looking planning horizon of at least nine quarters, a detailed description of the Company's process for assessing capital adequacy, the Company's capital policy, and a discussion of any expected changes to the Company's business plan that are likely to have a material impact on its capital adequacy or liquidity. Based on a qualitative and quantitative assessment, including a supervisory stress test conducted as part of the CCAR process, the Federal Reserve Board will either object to the Company's capital plan, in whole or in part, or provide a notice of non-objection to the Company by March 31 of a calendar year. If the Federal Reserve Board objects to a capital plan, the Company may not make any capital distribution other than those with respect to which the Federal Reserve Board has indicated its non-objection. In addition to capital planning, the Company and the Bank are subject to capital stress testing requirements imposed by the Dodd-Frank Act. The Company's capital plan submitted in January 2014 is the first capital plan evaluated under the CCAR process, as the Company's prior capital plans were evaluated under the CapPR process.

On March 26, 2014, the Company was informed that the Federal Reserve did not object to the Company’s 2014 capital plan. While the Company can give no assurances as to the outcome of the annual CCAR process in subsequent years or specific interactions with the regulators, it believes it has a strong capital position.

The Federal Reserve Board evaluates the Company's liquidity as part of the supervisory process. In addition, the Basel Committee has developed a set of internationally-agreed upon quantitative liquidity metrics: the LCR and the NSFR. The LCR was developed to ensure banks have sufficient high-quality liquid assets to cover expected net cash outflows over a 30-day liquidity stress period.  The NSFR has a time horizon of one year and has been developed to provide a sustainable maturity structure of assets and liabilities. The Basel Committee contemplates that major jurisdictions will begin to phase in the LCR requirement on January 1, 2015. It contemplates that the NSFR, including any revisions, will be implemented as a minimum standard by January 1, 2018.

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In October 2013, the federal banking regulators proposed a rule to implement the LCR in the United States. The proposed rule would apply a modified version of the LCR to large bank holding companies such as the Company. The modified version of the LCR differs in certain respects from the Basel Committee’s version of the LCR, including a narrower definition of high-quality liquid assets, different prescribed cash inflow and outflow assumptions for certain types of instruments and transactions and a shorter phase-in schedule that ends on January 1, 2017. The federal banking regulators have not yet proposed rules to implement the NSFR in the United States. However, the Federal Reserve Board has proposed liquidity risk management, stress testing and liquidity buffer requirements for the U.S. operations of Large FBOs such as BBVA. The Company and the Bank are part of BBVA’s U.S. operations.

The Federal Reserve Board has approved a final rule to enhance its supervision and regulation of the U.S. operations of Large FBOs such as BBVA. BBVA's U.S. operations include the Company and the Bank. Under the Federal Reserve Board's rule, Large FBOs with $50 billion or more in U.S. assets held outside of their U.S. branches and agencies, such as BBVA, will be required to create a separately-capitalized top-tier U.S. IHC that will hold all of the Large FBO's U.S. bank and nonbank subsidiaries, such as the Bank and the Company. An IHC will be subject to U.S. risk-based and leverage capital, liquidity, risk management, stress testing and other enhanced prudential standards on a consolidated basis. Large FBOs generally will be required to establish an IHC and comply with the enhanced prudential standards beginning July 1, 2016, and FBOs that have $50 billion or more in non-branch/agency U.S. assets as of June 30, 2014 will be required to submit an implementation plan by January 1, 2015 on how the FBO will comply with the IHC requirement. As a bank holding company and IHC, the Company will be required to comply with the enhanced prudential standards applicable under the final rule to top-tier U.S.-based bank holding companies beginning on January 1, 2015. The Federal Reserve Board’s final rule could affect the Company’s operations.

The Parent is a holding company and depends on its subsidiaries for liquidity in the form of dividends, distributions and other payments.

The Parent is a legal entity separate and distinct from its subsidiaries, including the Bank. The principal source of cash flow for the Parent is dividends from the Bank. There are statutory and regulatory limitations on the payment of dividends by the Bank. Regulations of both the Federal Reserve and the State of Alabama affect the ability of the Bank to pay dividends and other distributions to the Company and to make loans to the Company. Also, the Company’s right to participate in a distribution of assets upon a subsidiary's liquidation or reorganization is subject to the prior claims of the subsidiary's creditors. Limitations on the Parent’s ability to receive dividends and distributions from its subsidiaries could have a material adverse effect on the Company’s liquidity and on its ability to pay dividends on common stock. For additional information regarding these limitations see Item 1. Business - Supervision, Regulation and Other Factors - Dividends in the Company's Annual Report on Form 10-K for the year-ended December 31, 2013.

The Company is subject to credit risk.

When the Company loans money, commits to loan money or enters into a letter of credit or other contract with a counterparty, it incurs credit risk, which is the risk of losses if its borrowers do not repay their loans or its counterparties fail to perform according to the terms of their contracts. Many of the Company's products expose it to credit risk, including loans, leases and lending commitments.

Further downgrades to the U.S. government's credit rating, or the credit rating of its securities, by one or more of the credit ratings agencies could have a material adverse effect on general economic conditions, as well as the Company's operations, earnings and financial condition.

On August 5, 2011, S&P's downgraded the U.S. government's sovereign credit rating of long-term U.S. federal debt from AAA to AA+ while also keeping its outlook negative. Moody's also lowered its outlook to “Negative” on June 2, 2011, and Fitch lowered its outlook to “Negative” on November 28, 2011. During 2013, Moody's and Standard & Poor's revised their outlook from "Negative" to "Stable," while Fitch continued to maintain a "Negative" outlook. It is foreseeable that the ratings and perceived creditworthiness of instruments issued, insured or guaranteed by institutions, agencies or instrumentalities directly linked to the U.S. government could be correspondingly affected by any downgrade to the U.S. government's sovereign credit rating, including the rating of U.S. Treasury securities. Instruments of this nature are key assets on the balance sheets of financial institutions, including the Company, and are widely used as collateral by financial institutions to meet their day-to-day cash flows in the short-term debt market.

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Further downgrades of the U.S. government's sovereign credit rating, and the perceived creditworthiness of U.S. government-related obligations, could impact the Company's ability to obtain funding that is collateralized by affected instruments, as well as affecting the pricing of that funding when it is available. A downgrade may also adversely affect the market value of such instruments. The Company cannot predict if, when or how any changes to the credit ratings or perceived creditworthiness of these organizations will affect economic conditions. Such ratings actions could result in a significant adverse impact on the Company. A downgrade of the sovereign credit ratings of the U.S. government or the credit ratings of related institutions, agencies or instrumentalities would significantly exacerbate the other risks to which the Company is subject and any related adverse effects on its business, financial condition and results of operations.

A reduction in the Company's own credit rating could have a material adverse effect on the Company's liquidity and increase the cost of its capital markets funding.

Adequate liquidity is essential to the Company's businesses. A reduction to the Company's credit rating could have a material adverse effect on the Company's business, financial condition and results of operations.

The rating agencies regularly evaluate the Company and their ratings are based on a number of factors, including the Company's financial strength as well as factors not entirely within its control, such as conditions affecting the financial services industry generally. Adverse changes in the credit ratings of the Kingdom of Spain, which subsequently could impact BBVA, could also adversely impact the Company's credit rating. In light of the difficulties in the financial services industry and the housing and financial markets, there can be no assurance that the Company will maintain its current ratings. The Company's failure to maintain those ratings could increase its borrowing costs, require the Company to replace funding lost due to the downgrade, which may include the loss of customer deposits, and may also limit the Company's access to capital and money markets and trigger additional collateral requirements in derivatives contracts and other secured funding arrangements.

The Company's ability to access the capital markets is important to its overall funding profile. This access is affected by its credit rating. The interest rates that the Company pays on its securities are also influenced by, among other things, the credit ratings that it receives from recognized rating agencies. A downgrade to the Company's credit rating could affect its ability to access the capital markets, increase its borrowing costs and negatively impact its profitability. A ratings downgrade to the Company's credit rating could also create obligations or liabilities for it under the terms of its outstanding securities that could increase its costs or otherwise have a negative effect on the Company's results of operations or financial condition. Additionally, a downgrade of the credit rating of any particular security issued by the Company could negatively affect the ability of the holders of that security to sell the securities and the prices at which any such securities may be sold.

Changes in interest rates could affect the Company's income and cash flows.

The Company's earnings and financial condition are largely dependent on net interest income, which is the difference between interest earned from loans and investments and interest paid on deposits and borrowings. The narrowing of interest rate spreads, meaning the difference between interest rates earned on loans and investments and the interest rates paid on deposits and borrowings, could adversely affect the Company's earnings and financial condition. The Company cannot control or predict with certainty changes in interest rates.

Regional and local economic conditions, competitive pressures and the policies of regulatory authorities, including monetary policies of the Federal Reserve Board, affect interest income and interest expense. The Company has policies and procedures designed to manage the risks associated with changes in market interest rates. Changes in interest rates, however, may still have an adverse effect on the Company's profitability. While the Company actively manages against these risks, if its assumptions regarding borrower behavior are wrong or overall economic conditions are significantly different than planned for, then its risk mitigation techniques may be insufficient to protect against the risk.

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The costs and effects of litigation, regulatory investigations, examinations or similar matters, or adverse facts and developments relating thereto, could materially affect the Company's business, operating results and financial condition.

The Company faces legal risks in its business, and the volume of claims and amount of damages and penalties claimed in litigation and regulatory proceedings against financial institutions remain high and are escalating. Substantial legal liability or significant regulatory action against the Company may have material adverse financial effects or cause significant reputational harm, which in turn could seriously harm its business prospects.

The Company and its operations are subject to increasing regulatory oversight and scrutiny, which may lead to additional regulatory investigations or enforcement actions, thereby increasing the Company’s costs associated with responding to or defending such actions. In particular, inquiries could develop into administrative, civil or criminal proceedings or enforcement actions and may increase the Company's compliance costs, require changes in the Company's business practices, affect the Company's competitiveness, impair the Company's profitability, harm the Company's reputation or otherwise adversely affect the Company's business.

In 2013, the Federal Reserve Board began a regularly scheduled examination covering 2011 and 2012 to determine the Bank’s compliance with the CRA. The CRA requires the Federal Reserve Board to evaluate the record of the Bank in meeting the credit needs of its local community, including low and moderate income neighborhoods. The Company expects that the Bank’s rating in this CRA examination will result in restrictions on certain activities, including certain mergers and acquisitions and applications to open branches or certain other facilities. Such restrictions will last at least until the Bank's next CRA examination. The Bank’s next CRA examination is expected to occur during 2015, although the precise timing of the completion of that exam and any results therefrom may not occur until later.

The Company's insurance may not cover all claims that may be asserted against it and indemnification rights to which it is entitled may not be honored. Any claims asserted against the Company, regardless of merit or eventual outcome, may harm its reputation. Should the ultimate judgments or settlements in any litigation or investigation significantly exceed the Company's insurance coverage, they could have a material adverse effect on its business, financial condition and results of operations. In addition, premiums for insurance covering the financial and banking sectors are rising. The Company may not be able to obtain appropriate types or levels of insurance in the future, nor may it be able to obtain adequate replacement policies with acceptable terms or at historic rates, if at all.

Disruptions in the Company's ability to access capital markets may adversely affect its capital resources and liquidity.

The Company may access capital markets to provide it with sufficient capital resources and liquidity to meet its commitments and business needs, and to accommodate the transaction and cash management needs of its clients. Other sources of contingent funding available to the Company include inter-bank borrowings, brokered deposits, repurchase agreements, FHLB capacity and borrowings from the Federal Reserve discount window. Any occurrence that may limit the Company's access to the capital markets, such as a decline in the confidence of debt investors, its depositors or counterparties participating in the capital markets, or a downgrade of its debt rating, may adversely affect the Company's capital costs and its ability to raise capital and, in turn, its liquidity.

Starting in mid-2007, significant turmoil and volatility in global financial markets increased, though current volatility has declined. Such disruptions in the liquidity of financial markets may directly impact the Company to the extent it needs to access capital markets to raise funds to support its business and overall liquidity position. This situation could adversely affect the cost of such funds or the Company's ability to raise such funds. If the Company were unable to access any of these funding sources when needed, it might be unable to meet customers' needs, which could adversely impact its financial condition, results of operations, cash flows and level of regulatory-qualifying capital.

The Company may suffer increased losses in its loan portfolio despite enhancement of its underwriting policies and practices, and the Company's allowances for credit losses may not be adequate to cover such eventual losses.

The Company seeks to mitigate risks inherent in its loan portfolio by adhering to specific underwriting policies and practices, which often include analysis of (1) a borrower's credit history, financial statements, tax returns and cash flow projections; (2) valuation of collateral based on reports of independent appraisers; and (3) verification of liquid assets. The Company's underwriting policies, practices and standards are periodically reviewed and, if appropriate, enhanced in response to changing market conditions and/or corporate strategies.

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Like other financial institutions, the Company maintains allowances for credit losses to provide for loan defaults and nonperformance. The Company's allowances for credit losses may not be adequate to cover eventual loan losses, and future provisions for credit losses could materially and adversely affect the Company's financial condition and results of operations. In addition, on December 20, 2012, the FASB issued for public comment a Proposed Accounting Standards Update, Financial Instruments-Credit Losses (Subtopic 825-15), that would substantially change the accounting for credit losses under current U.S. GAAP standards. Under current U.S. GAAP standards, credit losses are not reflected in financial statements until it is probable that the credit loss has been incurred. Under the Credit Loss Proposal, an entity would reflect in its financial statements its current estimate of credit losses on financial assets over the expected life of each financial asset. The comment period on the Credit Loss Proposal closed on May 31, 2013. The Credit Loss Proposal, if adopted as proposed, may have a negative impact on the Company's reported earnings, capital, regulatory capital ratios, as well as on regulatory limits which are based on capital (e.g., loans to affiliates) since it would accelerate the recognition of estimated credit losses.

The value of the Company’s goodwill may decline in the future.

A significant decline in the Company’s expected future cash flows, a significant adverse change in the business climate, or slower growth rates, any or all of which could be materially impacted by many of the risk factors discussed herein, may require that the Company take charges in the future related to the impairment of goodwill. Future regulatory actions could also have a material impact on assessments of goodwill for impairment. If the Company were to conclude that a future write-down of its goodwill and other intangible assets is necessary, the Company would record the appropriate charge which could have a material adverse effect on its results of operations.

The financial services market is undergoing rapid technological changes, and the Company may be unable to effectively compete or may experience heightened cyber-security risks as a result of these changes.

The financial services market, including banking services, is undergoing rapid changes with frequent introductions of new technology-driven products and services. In addition to better serving customers, the effective use of technology increases efficiency and may enable us to reduce costs. The Company's future success may depend, in part, on its ability to use technology to provide products and services that provide convenience to customers and to create additional efficiencies in its operations. Some of the Company's competitors have substantially greater resources to invest in technological improvements. The Company may not be able to effectively implement new technology-driven products and services or be successful in marketing these products and services to its customers. As a result, the Company's ability to effectively compete to retain or acquire new business may be impaired, and its business, financial condition or results of operations may be adversely affected.

The Company is under continuous threat of loss due to cyber-attacks, especially as it continues to expand customer capabilities to utilize internet and other remote channels to transact business. Two of the most significant cyber-attack risks that it faces are e-fraud and breach of sensitive customer data. Loss from e-fraud occurs when cybercriminals breach and extract funds directly from customers' or the Company's accounts. The attempts to breach sensitive customer data, such as account numbers and social security numbers, are less frequent, but could present significant reputational, legal and/or regulatory costs to the Company if successful.

Recently, there has been a series of distributed denial of service attacks on financial services companies. Distributed denial of service attacks are designed to saturate the targeted online network with excessive amounts of network traffic, resulting in slow response times, or in some cases, causing the site to be temporarily unavailable. Generally, these attacks have not been conducted to steal financial data, but meant to interrupt or suspend a company's internet service. While these events may not result in a breach of client data and account information, the attacks can adversely affect the performance of a company’s website and in some instances prevented customers from accessing a company’s website. Distributed denial of service attacks, hacking and identity theft risks could cause serious reputational harm. Cyber threats are rapidly evolving and the Company may not be able to anticipate or prevent all such attacks. The Company's risk and exposure to these matters remains heightened because of the evolving nature and complexity of these threats from cybercriminals and hackers, its plans to continue to provide internet banking and mobile banking channels, and its plans to develop additional remote connectivity solutions to serve its customers. The Company may incur increasing costs in an effort to minimize these risks and could be held liable for any security breach or loss.

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The Company relies heavily on communications and information systems to conduct its business and relies on third parties and affiliates to provide key components of its business infrastructure.

The Company relies heavily on communications and information systems to conduct its business. This includes the utilization of a data center in Mexico. Any failure, interruption or breach in security of these systems could result in failures or disruptions in the Company's customer relationship management, general ledger, deposit, loan and other systems. While the Company has policies and procedures designed to prevent or limit the effect of the possible failure, interruption or security breach of its information systems, there can be no assurance that any such failure, interruption or security breach will not occur or, if they do occur, that they will be adequately addressed. The occurrence of any failure, interruption or security breach of the Company's information systems could damage its reputation, result in a loss of customer business, subject it to additional regulatory scrutiny, or expose it to civil litigation and possible financial liability.

Third parties and affiliates provide key components of the Company's business infrastructure such as banking services, processing, and internet connections and network access. Any disruption in such services provided by these third parties or affiliates or any failure of these third parties or affiliates to handle current or higher volumes of use could adversely affect the Company's ability to deliver products and services to clients, its reputation and its ability to otherwise conduct business. Beginning in 2011, the Bank began converting to a new core banking system. Implementation and continuing improvement of this new core banking system relies heavily on third parties to develop software.

Technological or financial difficulties of a third party or affiliate service provider, including security breaches, could adversely affect the Company's business to the extent those difficulties result in the interruption or discontinuation of services provided by that party or the loss of sensitive customer data. Further, in some instances the Company may be responsible for failures of such third parties or affiliates to comply with government regulations. The Company may not be insured against all types of losses as a result of third party or affiliate failures and the Company's insurance coverage may be inadequate to cover all losses resulting from system failures or other disruptions. Failures in the Company business infrastructure could interrupt operations or increase the costs of doing business.

The Company is subject to a variety of operational risks, including reputational risk, legal risk and regulatory and compliance risk, and the risk of fraud or theft by employees or outsiders, which may adversely affect its business and results of operations.

The Company is exposed to many types of operational risks, including reputational risk, legal, regulatory and compliance risk, the risk of fraud or theft by employees or outsiders, including unauthorized transactions by employees, or operational errors, such as clerical or record-keeping errors or those resulting from faulty or disabled computer or telecommunications systems. Negative public opinion can result from the Company's actual or alleged conduct in any number of activities, including lending practices, corporate governance and acquisitions, and from actions taken by government regulators and community organizations in response to those activities. In addition, negative public opinion can adversely affect the Company's ability to attract and keep customers and can expose it to litigation and regulatory action. Actual or alleged conduct by the Company can result in negative public opinion about its other business. Negative public opinion could also affect the Company's credit ratings, which are important to its access to unsecured wholesale borrowings.

The Company's business involves storing and processing sensitive consumer and business customer data. If personal, non-public, confidential or proprietary information of customers in its possession were to be mishandled or misused, the Company could suffer significant regulatory consequences, reputational damage and financial loss. Such mishandling or misuse could include, for example, if such information were erroneously provided to parties who are not permitted to have the information, either by fault of the Company's systems, employees or counterparties, or where such information is intercepted or otherwise inappropriately taken by third parties.

Because the financial services business involves a high volume of transactions, certain errors may be repeated or compounded before they are discovered and successfully rectified. The Company's necessary dependence upon automated systems to record and process transactions and its large transaction volume may further increase the risk that technical flaws or employee tampering or manipulation of those systems will result in losses that are difficult to detect. The Company also may be subject to disruptions of its operating systems arising from events that are wholly or partially beyond its control, such as computer viruses, electrical or telecommunications outages, natural disasters,

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or other damage to property or physical assets which may give rise to disruption of service to customers and to financial loss or liability. The Company is further exposed to the risk that its external vendors may be unable to fulfill their contractual obligations, or will be subject to the same risk of fraud or operational errors by their respective employees as it is, and to the risk that the Company's, or its vendors', business continuity and data security systems prove to be inadequate. The occurrence of any of these risks could result in a diminished ability of the Company to operate its business, as well as potential liability to clients, reputational damage and regulatory intervention, which could adversely affect the Company's business, financial condition or results of operations.

The Company depends on the expertise of key personnel, and its operations may suffer if it fails to attract and retain skilled personnel.

The Company's success depends, in large part, on its ability to attract and retain key individuals. Competition for qualified candidates in the activities and markets that the Company serves is great and it may not be able to hire these candidates and retain them. If the Company is not able to hire or retain these key individuals, it may be unable to execute its business strategies and may suffer adverse consequences to its business, operations and financial condition.

In June 2010, the federal banking regulators issued joint guidance on executive compensation designed to help ensure that a banking organization's incentive compensation policies do not encourage imprudent risk taking and are consistent with the safety and soundness of the organization. In addition, the Dodd-Frank Act requires those agencies, along with the SEC, to adopt rules to require reporting of incentive compensation and to prohibit certain compensation arrangements. The federal banking regulators and SEC proposed such rules in April 2011. If the Company is unable to attract and retain qualified employees, or do so at rates necessary to maintain its competitive position, or if compensation costs required to attract and retain employees become more expensive, the Company's performance, including its competitive position, could be materially adversely affected.

The Company's framework for managing risks may not be effective in mitigating risk and loss to the company.

The Company's risk management framework is made up of various processes and strategies to manage its risk exposure. The framework to manage risk, including the framework's underlying assumptions, may not be effective under all conditions and circumstances. If the risk management framework proves ineffective, the Company could suffer unexpected losses and could be materially adversely affected.

The Company's financial reporting controls and procedures may not prevent or detect all errors or fraud.

Financial reporting disclosure controls and procedures are designed to reasonably assure that information required to be disclosed by the Company in reports filed or submitted under the Exchange Act is accumulated and communicated to management, and recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms. Any disclosure controls and procedures over financial reporting or internal controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.

These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by any unauthorized override of the controls. Accordingly, because of the inherent limitations in the control system, misstatements due to error or fraud may occur and not be detected.

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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 purchasers 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 originates and often sells mortgage loans. When it sells mortgage loans, whether as whole loans or pursuant to a securitization, the Company is required to make customary representations and warranties to the purchaser about the mortgage loans and the manner in which they were originated. The Company's whole loan sale agreements require it to repurchase or substitute mortgage loans in the event that it breaches certain of these representations or warranties. In addition, the Company may be required to repurchase mortgage loans as a result of borrower fraud or in the event of early payment default of the borrower on a mortgage loan. Likewise, the Company is required to repurchase or substitute mortgage loans if it breaches a representation or warranty in connection with its securitizations, whether or not it was the originator of the loan. While in many cases it may have a remedy available against certain parties, often these may not be as broad as the remedies available to a purchaser of mortgage loans against it, and the Company faces the further risk that such parties may not have the financial capacity to satisfy remedies that may be available to it. Therefore, if a purchaser enforces its remedies against it, the Company may not be able to recover its losses from third parties. The Company has received repurchase and indemnity demands from purchasers. These have resulted in an increase in the amount of losses for repurchases. While the Company has taken steps to enhance its underwriting policies and procedures, these steps will not reduce risk associated with loans sold in the past. If repurchase and indemnity demands increase materially, the Company's results of operations may be adversely affected.

The Company is subject to intense competition in the financial services industry, particularly in its market area, which could result in losing business or margin declines.

The Company operates in a highly competitive industry that could become even more competitive as a result of reform of the financial services industry resulting from the Dodd-Frank Act and other legislative, regulatory and technological changes, as well as continued consolidation. The Company faces aggressive competition from other domestic and foreign lending institutions and from numerous other providers of financial services. The ability of non-banking financial institutions to provide services previously limited to commercial banks has intensified competition. Because non-banking financial institutions are not subject to the same regulatory restrictions as banks and bank holding companies, they can often operate with greater flexibility and lower cost structures. Securities firms and insurance companies that elect to become financial holding companies can offer virtually any type of financial service, including banking, securities underwriting, insurance (both agency and underwriting) and merchant banking, and may acquire banks and other financial institutions. This may significantly change the competitive environment in which the Company conducts business. Some of the Company's competitors have greater financial resources and/or face fewer regulatory constraints. As a result of these various sources of competition, the Company could lose business to competitors or be forced to price products and services on less advantageous terms to retain or attract clients, either of which would adversely affect its profitability.

Some of the Company's larger competitors, including certain national banks that have a significant presence in its market area, may have greater capital and resources than the Company, may have higher lending limits and may offer products and services not offered by the Company. Although the Company remains strong, stable and well capitalized, management cannot predict the reaction of customers and other third parties with which it conducts business with respect to the strength of the Company relative to its competitors, including its larger competitors. Any potential adverse reactions to the Company's financial condition or status in the marketplace, as compared to its competitors, could limit its ability to attract and retain customers and to compete for new business opportunities. The inability to attract and retain customers or to effectively compete for new business may have a material and adverse effect on the Company's financial condition and results of operations.

The Company also experiences competition from a variety of institutions outside of its market area. Some of these institutions conduct business primarily over the Internet and may thus be able to realize certain cost savings and offer products and services at more favorable rates and with greater convenience to the customer who can pay bills and transfer funds directly without going through a bank. This “disintermediation” could result in the loss of fee income, as well as the loss of customer deposits and income generated from those deposits. In addition, changes in consumer spending and saving habits could adversely affect the Company's operations, and the Company may be unable to timely develop competitive new products and services in response to these changes.

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Unpredictable catastrophic events could have a material adverse effect on the Company.

The occurrence of catastrophic events such as hurricanes, tropical storms, tornados, terrorist attacks and other large scale catastrophes could adversely affect the Company's consolidated financial condition or results of operations. The Company has operations and customers in the southern United States, which could be adversely impacted by hurricanes and other severe weather in those regions. Unpredictable natural and other disasters could have an adverse effect on the Company in that such events could materially disrupt its operations or the ability or willingness of its customers to access the financial services it offers. The incidence and severity of catastrophes are inherently unpredictable. Although the Company carries insurance to mitigate its exposure to certain catastrophic events, these events could nevertheless reduce its earnings and cause volatility in its financial results for any fiscal quarter or year and have a material adverse effect on its financial condition and/or results of operations.

Customers could pursue alternatives to bank deposits, causing the Company to lose a relatively inexpensive source of funding.

Checking and savings account balances and other forms of client deposits could decrease if customers perceive alternative investments, such as the stock market, provide superior expected returns. When clients move money out of bank deposits in favor of alternative investments, the Company can lose a relatively inexpensive source of funds, increasing its funding costs.

Negative public opinion could damage the Company's reputation and adversely impact business and revenues.

As a financial institution, the Company's earnings and capital are subject to risks associated with negative public opinion. The reputation of the financial services industry in general has been damaged as a result of the financial crisis and other matters affecting the financial services industry, including mortgage foreclosure issues. Negative public opinion regarding the Company could result from its actual or alleged conduct in any number of activities, including lending practices, the failure of any product or service sold by it to meet its clients' expectations or applicable regulatory requirements, corporate governance and acquisitions, or from actions taken by government regulators and community organizations in response to those activities. The Company could also be adversely affected by negative public opinion involving BBVA. Negative public opinion can adversely affect the Company's ability to keep, attract and/or retain clients and personnel, and can expose it to litigation and regulatory action. Actual or alleged conduct by one of the Company's businesses can result in negative public opinion about its other businesses. Negative public opinion could also affect the Company's credit ratings, which are important to accessing unsecured wholesale borrowings. Significant changes in these ratings could change the cost and availability of these sources of funding.

The Company depends on the accuracy and completeness of information about clients and counterparties.

In deciding whether to extend credit or enter into other transactions with clients and counterparties, the Company may rely on information furnished by or on behalf of clients and counterparties, including financial statements and other financial information. The Company also may rely on representations of clients and counterparties as to the accuracy and completeness of that information and, with respect to financial statements, on reports of independent auditors.

Compliance with anti-money laundering and anti-terrorism financing rules involve significant cost and effort.

The Company is subject to rules and regulations regarding money laundering and the financing of terrorism. Monitoring compliance with anti-money laundering and anti-terrorism financing rules can put a significant financial burden on banks and other financial institutions and poses significant technical problems. Although we believe that our current policies and procedures are sufficient to comply with applicable rules and regulations, we cannot guarantee that our anti-money laundering and anti-terrorism financing policies and procedures completely prevent situations of money laundering or terrorism financing. Any of such events may have severe consequences, including sanctions, fines and reputational consequences, which could have a material adverse effect on the Company's business, financial condition or results of operations.

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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

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 June 30, 2014. Estimated gross revenues for the three months ended June 30, 2014, from these counter indemnities, which include fees and/or commissions, did not exceed $3,600 and were entirely derived from payments made by the BBVA Group's non-Iranian customers in Europe. The BBVA Group does not allocate direct costs to fees and commissions and therefore has not disclosed a separate profit measure. 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 June 30, 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). Estimated gross revenues for the three months ended June 30, 2014, from this loan, which include fees and/or commissions, did not exceed $12,500. Payments of amounts due by Bank Sepah in 2013 under this letter of credit were initially blocked and thereafter released upon authorization by the relevant Spanish authorities. The BBVA Group does not allocate direct costs to fees and commissions and therefore has not disclosed a separate profit measure in connection with the letter of credit referred to above. 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 June 30, 2014, the BBVA Group maintained a number of accounts for certain employees (some of whom are of Iranian nationality) of a company that produces farm vehicles and tractors. 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. The accounts for these employees were closed in May 2014. In addition,

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the BBVA Group maintained one account for the Iranian National Airlines - Iran Air, which was closed in June 2014. There were no revenues for the three months ended June 30, 2014, from these accounts, which includes fees and/or commissions. The BBVA Group does not allocate direct costs to fees and commissions and therefore has not disclosed a separate profit measure.

Iranian embassy-related activity. The BBVA Group maintains bank accounts in Spain for three employees of the Iranian embassy in Spain. All three employees are Spanish citizens, and one of them has retired. In addition, the BBVA Group maintained three accounts denominated in euros and Mexican pesos for the Iranian embassy in Mexico and three accounts denominated in Mexican pesos for an employee and that employee's family, all of which were closed in July 2014. Estimated gross revenues for the three months ended June 30, 2014, from embassy-related activity, which include fees and/or commissions, did not exceed $1,250. The BBVA Group does not allocate direct costs to fees and commissions and therefore has not disclosed a separate profit measure. The BBVA Group is committed to terminating these business relationships as soon as legally possible.

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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: August 13, 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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