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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

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

For the fiscal year ended December 31, ~~2019~~2020

¨☐ 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 USA Bancshares, Inc.

(Exact name of registrant as specified in its charter)

Texas		~~20-8948381~~	20-8948381
(State or other jurisdiction of incorporation or organization)		~~(I.R.S. Employer Identification No.)~~	(I.R.S. Employer Identification No.)
2200 Post Oak Blvd. Houston, Texas		77056
2200 Post Oak Blvd.Houston, Texas			77056
(Address of principal executive offices)		~~(Zip Code)~~	(Zip Code)
	(205) 297-3000
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.01 par value
(Title of class)

~~Indicate~~(205) ~~by check mark if the registrant is a well~~297-~~known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No þ~~ 3000

~~Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15~~(d)Registrant’s oftelephone ~~the~~number, ~~Exchange~~including ~~Act.~~area ~~Yes o No þ~~code)

~~Indicate~~Securities byregistered ~~check~~pursuant ~~mark whether the registrant (1) has filed all reports required~~ to ~~be filed by~~ Section ~~13 or 15~~12(db) 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 oNone

~~Indicate~~Securities byregistered ~~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~~Section ~~405 of Regulation S-T~~ 12(~~§232.405~~g) of ~~this chapter) during~~ the ~~preceding 12 months (or shorter period that the registrant was required to submit and post such files). Yes þ No o~~Act:


Common Stock, $0.01 par value
(Title of class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☑

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes ☐ No ☑

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

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

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

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

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

Indicate by check mark whether the registrant ishas filed a ~~shell~~report ~~company~~on ~~(as~~and ~~defined~~attestation into ~~Rule~~its ~~12b-2~~management’s assessment of the ~~Exchange~~effectiveness ~~Act~~of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U. ~~Yes~~S.C.7262(b)) oby Nothe þregistered public accounting firm that prepared or issued its audit report. ☑

AsIndicate ~~of February 20, 2020, the registrant had 222,963,891 outstanding shares of common stock, all of which was held~~ by ancheck ~~affiliate~~mark ofwhether the registrant. ~~Accordingly,~~is ~~there~~a ~~was~~shell nocompany ~~public market for the registrant's common stock~~ (as ofdefined ~~June 30,~~in ~~2019,~~Rule ~~the~~12b-2 ~~last business day~~ of the ~~registrant's~~Exchange ~~most~~Act). Yes ~~recently~~☐ ~~completed~~No ~~second fiscal quarter.~~☑

As of February 16, 2021, the registrant had 222,963,891 outstanding shares of common stock, all of which was held by an affiliate of the registrant. Accordingly, there was no public market for the registrant's common stock as of June 30, 2020, the last business day of the registrant's most recently completed second fiscal quarter.

DOCUMENTS INCORPORATED BY REFERENCE

None.

Explanatory Note

The registrant meets the conditions set forth in General Instruction I(1)(a) and (b) of Form 10-K. Accordingly, the registrant is filing this Annual Report on Form 10-K with certain reduced disclosures that correspond to the disclosure items the registrant is permitted to omit from an Annual Report on Form 10-K filing pursuant to General Instruction I(2) of Form 10-K.

TABLE OF CONTENTS

		~~Page~~		Page
Part I
Item 1.	~~Business~~	9	Business	9
Item 1A.	~~Risk Factors~~	28	Risk Factors	29
Item 1B.	~~Unresolved Staff Comments~~	43	Unresolved Staff Comments	47
Item 2.	~~Properties~~	43	Properties	47
Item 3.	~~Legal Proceedings~~	43	Legal Proceedings	47
Item 4.	~~Mine Safety Disclosures~~	43	Mine Safety Disclosures	47
Part II
Item 5.	~~Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities~~	43	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	47
Item 6.	~~Selected Financial Data~~	45	Selected Financial Data	49
Item 7.	~~Management’s Discussion and Analysis of Financial Condition and Results of Operations~~	46	Management’s Discussion and Analysis of Financial Condition and Results of Operations	50
Item 7A.	~~Quantitative and Qualitative Disclosures about Market Risk~~	85	Quantitative and Qualitative Disclosures about Market Risk	92
Item 8.	~~Financial Statements and Supplementary Data~~	86	Financial Statements and Supplementary Data	93
Item 9.	~~Changes in and Disagreements with Accountants on Accounting and Financial Disclosure~~	~~164~~	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	178
Item 9A.	~~Controls and Procedures~~	~~164~~	Controls and Procedures	178
Item 9B.	~~Other Information~~	~~165~~	Other Information	179
Part III
Item 10.	~~Directors, Executive Officers and Corporate Governance~~	~~166~~	Directors, Executive Officers and Corporate Governance	180
Item 11.	~~Executive Compensation~~	~~166~~	Executive Compensation	180
Item 12.	~~Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters~~	~~166~~	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	180
Item 13.	~~Certain Relationships and Related Transactions, and Director Independence~~	~~166~~	Certain Relationships and Related Transactions, and Director Independence	180
Item 14.	~~Principal Accounting Fees and Services~~	~~166~~	Principal Accounting Fees and Services	180
Part IV
Item 15.	~~Exhibits, Financial Statement Schedules~~	~~168~~	Exhibits, Financial Statement Schedules	182
Item 16.	~~10-K Summary~~	~~168~~	10-K Summary	182
Signatures		~~169~~		183

Glossary of Acronyms and Terms

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

Fitch	Fitch Ratings
FNMA		Federal National Mortgage Association
FNMA	Federal National Mortgage Association
FTP		Funds transfer pricing
FTP	Funds transfer pricing
GLBA		Gramm-Leach-Bliley Act
GLBA	Gramm-Leach-Bliley Act
G-SIB		Globally systemically important bank
G-SIB	Globally systemically important bank
Guaranty Bank		Collectively, certain assets and liabilities of Guaranty Bank, acquired by the Company in 2009
Guaranty Bank	Collectively, certain assets and liabilities of Guaranty Bank, acquired by the Company in 2009
HTM		Held To Maturity
HTM	Held To Maturity
IHC		Top-tier U.S. intermediate holding company
IHC	Top-tier U.S. intermediate holding company
Large FBOs		Foreign Banking Organizations with $50 billion or more in U.S. assets
Large FBOs	Foreign Banking Organizations with $50 billion or more in U.S. assets
LCR		Liquidity Coverage Ratio
LCR	Liquidity Coverage Ratio
Leverage Ratio		Ratio of Tier 1 capital to quarterly average on-balance sheet assets
Leverage Ratio	Ratio of Tier 1 capital to quarterly average on-balance sheet assets
LIBOR		London Interbank Offered Rate
LIBOR	London Interbank Offered Rate
LGD		Loss given default
LGD	Loss given default
LTV		Loan to Value
LTV	Loan to Value
Moody's		Moody's Investor Services, Inc.
Moody's	Moody's Investor Services, Inc.
MRA		Master Repurchase Agreement
MRA	Master Repurchase Agreement
MSR		Mortgage Servicing Rights
MSR	Mortgage Servicing Rights
NSFR		Net Stable Funding Ratio
NSFR	Net Stable Funding Ratio
NYSE		NYSE Euronext, Inc.
NYSE	NYSE Euronext, Inc.
OCC		Office of the Comptroller of the Currency
OCC	Office of the Comptroller of the Currency
OFAC		United States Department of Treasury Office of Foreign Assets Control
OFAC	United States Department of Treasury Office of Foreign Assets Control
OREO		Other Real Estate Owned
OREO	Other Real Estate Owned
OTTI		Other-Than-Temporary Impairment
OTTI	Other-Than-Temporary Impairment
Parent		BBVA USA Bancshares, Inc.
Parent	BBVA USA Bancshares, Inc.
PNC		PNC Financial Services Group, Inc.
Potential Problem Loans	~~Commercial loans rated substandard or below, which do not meet the definition of nonaccrual, TDR, or 90 days past due and still accruing.~~	Commercial loans rated substandard or below, which do not meet the definition of nonaccrual, TDR, or 90 days past due and still accruing.
Preferred Stock	Class B Preferred Stock
PPP		Paycheck Protection Program
PD	Probability of default
Preferred Stock		Class B Preferred Stock
REIT	Real Estate Investment Trust
PD		Probability of default
Repurchase Agreement	Securities sold under agreements to repurchase
REIT		Real Estate Investment Trust
Reverse Repurchase Agreement	Securities purchased under agreements to resell
Repurchase Agreement		Securities sold under agreements to repurchase
SAB 118	Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act
Reverse Repurchase Agreement		Securities purchased under agreements to resell
SBA	Small Business Administration
SAB 118		Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act
SBIC	Small Business Investment Company
SBA		Small Business Administration
SEC	Securities and Exchange Commission
SBIC		Small Business Investment Company
Securities Act	Securities Act of 1933, as amended
SEC		Securities and Exchange Commission
Series A Preferred Stock	Floating Non-Cumulative Perpetual Preferred Stock, Series A
Securities Act		Securities Act of 1933, as amended
Simple	Simple Finance Technology Corp
Series A Preferred Stock		Floating Non-Cumulative Perpetual Preferred Stock, Series A
SOFR	Secured Overnight Financing Rate
Simple		Simple Finance Technology Corp
S&P	Standard and Poor's Rating Services
SOFR		Secured Overnight Financing Rate
Tailoring Rules	Rules adopted by the Federal Reserve Board on October 10, 2019 that adjust the thresholds at which certain enhanced prudential standards apply to bank holding companies and rules adopted jointly by the Federal Reserve Board, OCC and FDIC that adjust the thresholds at which certain capital and liquidity requirements apply to bank holding companies.
S&P		Standard and Poor's Rating Services
TBA	To be announced
Tailoring Rules		Rules adopted by the Federal Reserve Board on October 10, 2019 that adjust the thresholds at which certain enhanced prudential standards apply to bank holding companies and rules adopted jointly by the Federal Reserve Board, OCC and FDIC that adjust the thresholds at which certain capital and liquidity requirements apply to bank holding companies.
Tax Cuts and Jobs Act	H.R.1, formerly known as the Tax Cuts and Jobs Act of 2017
TBA		To be announced
TDR	Troubled Debt Restructuring
Tax Cuts and Jobs Act		H.R.1, formerly known as the Tax Cuts and Jobs Act of 2017

Tier 1 Risk-Based Capital Ratio	Ratio of Tier 1 capital to risk-weighted assets
TDR		Troubled Debt Restructuring
Total Risk-Based Capital Ratio	Ratio of total capital (the sum of Tier 1 capital and Tier 2 capital) to risk-weighted assets
Tier 1 Risk-Based Capital Ratio		Ratio of Tier 1 capital to risk-weighted assets
Trust Preferred Securities	Mandatorily redeemable preferred capital securities
Total Risk-Based Capital Ratio		Ratio of total capital (the sum of Tier 1 capital and Tier 2 capital) to risk-weighted assets
U.S.	United States of America
Trust Preferred Securities		Mandatorily redeemable preferred capital securities
U.S. Treasury	United States Department of the Treasury
U.S.		United States of America
U.S. Basel III final rule	Final rule to implement the Basel III capital framework in the United States
U.S. Treasury		United States Department of the Treasury
U.S. GAAP	Accounting principles generally accepted in the United States
U.S. Basel III final rule		Final rule to implement the Basel III capital framework in the United States
USA PATRIOT Act	Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001
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

Table of Contents

Forward-Looking Statements and Summary of Risk Factors

This Annual Report on Form 10-K 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:

•Market ~~national, regional~~ and ~~local~~Liquidity 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;Risks:

•◦the ~~disruptions~~COVID-19 topandemic has adversely impacted the ~~credit~~Company's business and financial ~~markets~~results, ~~either~~and ~~nationally~~the ultimate impact will depend on future developments, which are highly uncertain and cannot be predicted or ~~globally~~modelled precisely, including the scope and duration of the pandemic and actions taken by governmental authorities in response to the pandemic;

•◦national, ~~decline~~regional inand ~~real~~local ~~estate values or overall~~ economic ~~weakness~~conditions ~~could~~may ~~also~~be ~~have~~less anfavorable ~~adverse~~than ~~impact~~expected, ~~upon~~resulting ~~the~~in, ~~value~~among ~~of real estate or~~ other ~~assets~~things, ~~which~~increased ~~the~~charge-offs ~~Company~~of ~~owns~~loans, ashigher aprovisions ~~result~~for ofcredit ~~foreclosing~~losses ~~a loan~~ and/or ~~its~~reduced ~~ability~~demand tofor ~~realize~~the ~~value~~Company's ~~on such assets~~services;

•◦decline ~~legislative,~~in ~~regulatory~~real estate values or ~~accounting~~overall ~~changes,~~economic ~~which~~weakness ~~may~~could ~~adversely~~also ~~affect~~have ~~our~~an ~~business~~adverse ~~and/or~~impact ~~competitive~~upon ~~position,~~the ~~impose~~value ~~additional~~of ~~costs~~real onestate or other assets which the Company orowns ~~cause~~as usa result of foreclosing a loan and its ability to ~~change~~realize ~~our~~value ~~business~~on ~~practices~~such assets;

•◦changes ~~the~~in ~~fiscal~~interest ~~and~~rates ~~monetary~~which ~~policies~~could ofaffect ~~the~~interest ~~federal~~rate ~~government~~spreads and ~~its~~net ~~agencies~~interest income;

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

•◦disruptions ifto the ~~Bank's~~credit ~~CRA~~and ~~rating~~financial ~~were to decline~~markets, ~~that~~either ~~could~~nationally ~~result~~or ~~in certain restrictions on the Company's activities~~globally;

• ◦the ~~failure~~fiscal toand ~~satisfy~~monetary ~~capital~~policies ~~adequacy~~of ~~and~~the ~~liquidity~~federal ~~guidelines~~government ~~applicable~~and toits ~~the Company~~agencies;

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

•◦disruptions ain ~~failure by~~ the Company's ability to ~~effectively~~access ~~manage~~capital ~~the~~markets, ~~risks~~which ~~the~~may ~~Company~~adversely ~~faces,~~affect ~~including~~its ~~credit,~~capital ~~operational~~resources and ~~cyber security risks~~liquidity;

•Credit ~~failure to control concentration risk such as loan type, industry segment, borrower type or location of the borrower or collateral;~~Risks:

• ◦changes in the creditworthiness of customers;

• ◦downgrades to the Company's credit ratings;

• ◦changes in ~~interest~~the ~~rates~~Company's accounting policies or in accounting standards which could materially affect ~~interest~~how ~~rate~~the ~~spreads~~Company ~~and~~reports ~~net~~financial ~~interest~~results ~~income~~and condition;

•Operating ~~costs and effects of litigation, regulatory investigations or similar matters;~~Risks:

•◦the ~~disruptions~~Company inis ~~the~~subject ~~Company's~~to ~~ability~~certain risks related to ~~access~~originating ~~capital~~and ~~markets,~~selling ~~which~~mortgages. It may ~~adversely~~be ~~affect~~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 ~~capital~~servicing ~~resources~~agreements, and this could harm the Company's liquidity, results of operations and financial condition;

•◦the ~~increased~~Company's ~~loan~~financial ~~losses~~reporting controls and procedures may not prevent or ~~impairment~~detect ofall ~~goodwill~~errors or fraud;

•◦a failure by the Company's ~~heavy reliance on communications and information systems~~ to ~~conduct~~effectively ~~its~~manage ~~business~~the ~~and~~risks ~~reliance on third parties and affiliates to provide key components of its business infrastructure, any disruptions of which could interrupt~~ the Company's ~~operations~~faces, orincluding ~~increase~~credit, ~~the~~operational ~~costs~~and ofcyber ~~doing~~security ~~business~~risks;

•◦the ~~negative~~Company's ~~public~~heavy ~~opinion~~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 ~~damage~~interrupt the Company's ~~reputation~~operations ~~and~~or ~~adversely~~increase ~~impact~~the ~~business~~costs ~~and~~of ~~revenues~~doing business;

• ◦the Company's ~~depends~~dependence on the ~~expertise~~accuracy ~~of key personnel,~~ and ifcompleteness ~~these~~of ~~individuals~~information ~~leave~~about orclients ~~change~~and ~~their roles without effective replacements, operations may suffer~~counterparties;

•◦failure ~~the~~to ~~Company's~~control ~~financial~~concentration ~~reporting~~risk ~~controls~~such ~~and~~as ~~procedures~~loan ~~may~~type, ~~not~~industry ~~prevent~~segment, borrower type or ~~detect~~location ~~all~~of ~~errors~~the borrower or ~~fraud~~collateral;

•◦increased ~~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~~losses ~~as a result of breaches of representations and warranties, borrower fraud~~ or ~~certain~~impairment ~~breaches~~ of ~~its servicing agreements, and this could harm the Company's liquidity, results of operations and financial condition~~goodwill;

~~• increased pressures from competitors (both banks and non-banks) and/or an inability by~~ ◦the Company todepends ~~remain~~on ~~competitive in~~ the ~~financial~~expertise ~~services~~of ~~industry~~key personnel, ~~particularly~~and inif ~~the~~these ~~markets~~individuals ~~which~~leave ~~the~~or ~~Company~~change ~~serves,~~their ~~and~~roles ~~keep~~without ~~pace~~effective ~~with~~replacements, ~~technological~~operations ~~changes~~may suffer;

•◦the ~~unpredictable~~Company ~~natural~~may not be able to hire or ~~other~~retain ~~disasters~~additional qualified personnel and recruiting and compensation costs may increase as a result of turnover, ~~which~~both ~~could~~of ~~impact~~which ~~the~~may ~~Company's~~increase ~~customers~~costs orand ~~operations;~~

Table of Contents

•reduce aprofitability ~~loss~~and ofmay ~~customer~~adversely ~~deposits,~~impact ~~which~~the ~~could~~Company's ~~increase~~ability to implement the Company's ~~funding~~business ~~costs~~strategies;

•◦unpredictable ~~the~~natural ~~Company's~~or ~~dependence~~other ondisasters, ~~the~~which ~~accuracy~~could ~~and~~impact ~~completeness~~the ofCompany's ~~information~~customers ~~about~~or ~~clients~~operations; and ~~counterparties;~~

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

•◦legislative, ~~the~~regulatory ~~Company~~or ~~has~~accounting inchanges, ~~the~~which ~~past~~may ~~and~~adversely ~~may~~affect inour ~~the~~business ~~future~~and/or ~~pursue~~competitive ~~acquisitions~~position, ~~which~~impose ~~could~~additional ~~affect~~ costs ~~and~~on ~~from which~~ the Company ~~may~~or ~~not~~cause beus ~~able~~ to ~~realize~~change ~~anticipated~~our ~~benefits;~~business ~~and~~practices;

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

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

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

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

•Strategic and Reputational 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;

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

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

◦the Company’s rebranding strategy may not produce the benefits expected, may involve substantial costs and may not be favorably received by Customers; and

•Risks Relating to the Company's Securities:

◦the Company is a subsidiary of the BBVA Group and activities across the BBVA Group could adversely affect the Company’s business and results of operations;

◦the Company’s Parent is a holding company and depends on its subsidiaries for liquidity in the form of dividends, distributions and other payments; and

•Risks Relating to the Merger:

◦the inability to complete the merger with PNC due to the failure to satisfy conditions to completion of the merger, including receipt of required regulatory and other approvals;

◦the Company will be subject to business uncertainties and contractual restrictions while the Merger is pending; and

◦failure to complete the Merger could negatively impact the Company.

The forward-looking statements in this Annual Report on Form 10-K 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 publicly update 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.

Table of Contents

Part I

Item 1. Business

Overview

The Parent is a financial holding company that conducts its business operations primarily through its commercial banking subsidiary, BBVA USA, which is an Alabama banking corporation headquartered in Birmingham, Alabama. The Parent was organized in 2007 as a Texas corporation. In April, BBVA announced that it was moving to unify its brand globally. As part of this re-branding, the Bank will transition away from the use of the BBVA Compass name and be re-branded as BBVA. As part of this re-branding, effective June 10, 2019, the Parent amended its Certificate of Formation to change its legal name from BBVA Compass Bancshares, Inc. to BBVA USA Bancshares, Inc.

The Parent is a wholly owned subsidiary of BBVA (NYSE: BBVA). BBVA is a global financial services group founded in 1857. It has a significant market position in Spain, owns the largest financial institution in Mexico, has franchises in South America, has a banking position in Turkey and operates an extensive global branch network. BBVA acquired the Company in 2007.

The Bank performs banking services customary for full service banks of similar size and character. Such services include receiving demand and time deposits, making personal and commercial loans and furnishing personal and commercial checking accounts. The Bank offers, either directly or through its subsidiaries or affiliates, a variety of services, including: portfolio management and administration and investment services to estates and trusts; term life insurance, variable annuities, property and casualty insurance and other insurance products; investment advisory services; a variety of investment services and products to institutional and individual investors; discount brokerage services, and investment company securities and fixed-rate annuities.

The Parent also owns BSI, a registered broker-dealer that engages in investment banking and institutional sales of fixed income securities.

Through BBVA Transfer Holdings, Inc., the Company engages in money transfer services and related activities, including money transmission and foreign exchange services.

AsOn ~~part~~November of15, ~~its operations~~2020, PNC entered into a Stock Purchase Agreement with BBVA for the ~~Company~~purchase ~~regularly~~by ~~evaluates~~PNC ~~acquisition~~of 100% of the issued and ~~investment~~outstanding ~~opportunities~~shares of athe ~~type~~Company, ~~permissible~~ for $11.6 billion in cash on hand in a ~~financial~~fixed ~~holding~~price ~~company~~structure. ~~The~~PNC ~~Company~~is ~~may~~not ~~also~~acquiring ~~from~~BSI, ~~time~~Propel toVenture ~~time~~Partners ~~consider~~Fund ~~the~~I, ~~potential~~L.P. ~~disposition~~and ofBBVA ~~certain~~Processing Services, Inc. Immediately following the closing of ~~its~~the ~~assets~~stock purchase, ~~branches~~PNC intends to merge the Parent with and into PNC, ~~subsidiaries~~with PNC continuing as the surviving entity. Post-closing, orPNC ~~lines~~intends to merge BBVA USA with and into PNC Bank, National Association, an indirect wholly owned subsidiary of ~~business~~PNC, with PNC Bank continuing as the surviving entity. The transaction is subject to regulatory approvals and certain other customary closing conditions.

On August 1, 2017, BBVA received notification that the Federal Reserve Board determined that the election by BBVA to become an FHC was effective as of August 1, 2017. This election allows the Company to engage in a broader range of activities that are (i) financial in nature or incidental to financial activities or (ii) complementary to a financial activity and do not pose a substantial risk to the safety and soundness of depository institutions or the financial system in general. These expanded services include securities underwriting and dealing, insurance underwriting, merchant banking, and insurance company portfolio investment.

Banking Operations

At December 31, ~~2019~~2020, the Company, through the Bank, operated ~~641~~637 banking offices in Alabama, Arizona, California, Colorado, Florida, New Mexico, and Texas. The following chart reflects the distribution of branch locations in each of the states in which the Company conducts its banking operations:

Alabama	89	88
Arizona	63	63
California	61	61
Colorado	37	37
Florida	44	43
New Mexico	17	17
Texas	~~330~~	328
Total	~~641~~	637

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The banking centers in Alabama are located throughout the state. In Arizona, the banking centers are concentrated in the Tucson and Phoenix metropolitan markets. The banking centers in California are concentrated in the Inland Empire and Central Valley regions. The Colorado banking centers are concentrated in the Denver metropolitan area and the New Mexico banking centers are concentrated in the Albuquerque metropolitan area. In Florida, the banking centers are concentrated in Jacksonville, Gainesville, and the Florida panhandle. The Texas banking centers are primarily located in the state’s four largest metropolitan areas of Houston, Dallas/Ft. Worth, San Antonio, and Austin, as well as cities in south Texas, such as McAllen and Laredo.

The Company also operates loan production offices in Atlanta, Georgia; Miami, Orlando, West Palm Beach, Sarasota, and Tampa, Florida; Chicago, Illinois; New York, New York; Baltimore, Maryland; Fresno, Irvine, Los Angeles, Oakland, Ontario, Sacramento, San Diego and San Jose, California; and Charlotte and Raleigh, North Carolina.

Economic Conditions

The Company's operations and customers are primarily concentrated in the Sunbelt region of the United States, particularly in Alabama, Arizona, California, Colorado, Florida, New Mexico and Texas. In terms of geographic distribution, approximately 5352% of the Company’s total deposits and 51% of its branches are located in Texas, while Alabama represents approximately 2224% of the Company’s total deposits. While the Company's ability to conduct business and the demand for the Company's products is impacted by the overall health of the United States economy, local economic conditions in the Sunbelt region, and specifically in the states in which the Company conducts business, also significantly affect demand for the Company's products, the ability of borrowers to repay loans and the value of collateral securing loans.

One key indicator of economic health is the unemployment rate. During ~~2019~~2020, the U.S. unemployment rate ~~improved~~rose ~~slightly~~ from 3.96% for December ~~2018~~2019 to 36.57% in December ~~2019~~2020 due to the impact of the COVID-19 pandemic. The following table provides a comparison of unemployment rates as of December ~~2019~~2020 and ~~2018~~2019 for the states in which the Company has a retail branch presence.

	Unemployment Rate*	Unemployment Rate*
State	~~December 2019~~	December ~~2018~~2020	~~Change~~	December 2019	Change
Alabama	~~2.7%~~	3.89%	~~(1.1)~~	2.7%	1.2
Arizona	~~4.6%~~	47.95%	~~(0.3)~~	4.5%	3.0
California	~~3.9%~~	49.10%	~~(0.2)~~	3.9%	5.1
Colorado	~~2.5%~~	38.64%	~~(1.1)~~	2.5%	5.9
Florida	~~3.0%~~	36.31%	~~(0.3)~~	2.9%	3.2
New Mexico	~~4.7%~~	58.02%	~~(0.3)~~	4.8%	3.4
Texas	~~3.5%~~	3.7.2%	~~(0.2)~~	3.5%	3.7

* Source: United States Department of Labor, Bureau of Labor Statistics as of December ~~2019~~2020

A key driver of the improvement in the unemployment rate has been continued strength in nonfarm payroll growth. The following table provides a comparison of nonfarm payroll at December 2019 to December 2018.

	Nonfarm Payroll*
	December 2019	December 2018	Change
State	(In Thousands)
Alabama	2,112.9	2,066.6	46.3
Arizona	3,019.0	2,934.6	84.4
California	17,761.1	17,449.8	311.3
Colorado	2,821.5	2,765.8	55.7
Florida	9,204.0	8,989.9	214.1
New Mexico	866.3	851.5	14.8
Texas	13,055.2	12,711.0	344.2

* Source: United States Department of Labor, Bureau of Labor Statistics as of December 2019

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~~Combined,~~A ~~the~~key ~~seven-state~~driver ~~Sunbelt~~of ~~region in which~~ the ~~Company~~unemployment ~~operates~~rate ~~accounted~~has ~~for~~been ~~approximately 50% of~~ the ~~total~~decline ~~increase~~ in nonfarm payroll inwhich ~~the~~has ~~U.S.~~been innegatively ~~2019.~~impacted ~~The~~by ~~largest~~the ~~year~~COVID-~~over-year~~19 ~~increases~~pandemic. ~~nationally~~The ~~occurred~~following intable ~~California,~~provides ~~Florida~~a ~~and~~comparison ~~Texas, with Texas accounting for 16%~~ of ~~the~~nonfarm ~~total~~payroll ~~increase~~at inDecember ~~total~~2020 ~~nonfarm~~to ~~payroll~~December in 2019.

Another economic indicator of health is the real estate market, and in particular changes in residential home prices. After 2008, the national real estate market experienced a significant decline in value, and the value of real estate in certain Southeastern and Southwestern states in particular declined significantly more than real estate values in the United States as a whole. Recent data suggests that the housing market throughout the United States continues to strengthen and home prices have recaptured most of the value lost during the economic downturn. The following table presents changes in home prices since the end of 2007 and changes in home prices during 2019 for the states in which the Company operates. During 2019 home prices increased equal to or higher than the national average in all of the states in which the Company operates a retail branch network except California and Colorado. Additionally, home prices were above 2007 levels in all states.


	Nonfarm Payroll*
	December 2020	December 2019	Change
State	(In Thousands)
Alabama	2,059.0	2,093.2	(34.2)
Arizona	2,945.3	3,025.6	(80.3)
California	16,297.3	17,711.8	(1,414.5)
Colorado	2,682.3	2,832.2	(149.9)
Florida	8,710.1	9,128.3	(418.2)
New Mexico	800.1	865.2	(65.1)
Texas	12,594.9	13,029.8	(434.9)

	Percentage Change in	Percentage Change in
State	Home Prices since 2007*	Home Prices during 2019*
Alabama	12.2%	5.0%
Arizona	7.9%	4.7%
California	18.4%	2.6%
Colorado	66.2%	3.7%
Florida	9.4%	4.6%
New Mexico	4.6%	5.2%
Texas	57.6%	4.3%
U.S. National Average	20.3%	4.0%

* Source: United States Department of Labor, Bureau of Labor Statistics as of December 2020

*Combined, ~~Source:~~the ~~Home~~seven-state ~~price~~Sunbelt ~~data~~region ~~from~~in ~~FHFA~~which ~~House~~the ~~price~~Company ~~index~~operates ~~through~~accounted for approximately 28% of the ~~third~~total ~~quarter~~decrease in nonfarm payroll in the U.S. in 2020. The largest year-over-year decrease nationally occurred in California, Florida and Texas, with California accounting for 15% of ~~2019~~the total decrease in total nonfarm payroll in 2020.

The following table presents changes in home prices since the end of 2007 and changes in home prices during 2020 for the states in which the Company operates. During 2020 home prices increased equal to or higher than the national average in all of the states in which the Company operates a retail branch network except California and Texas. Additionally, home prices were above 2007 levels in all states.


	Percentage Change in	Percentage Change in
State	Home Prices since 2007*	Home Prices during 2020*
Alabama	17.6%	4.5%
Arizona	15.0%	6.2%
California	20.0%	2.8%
Colorado	71.2%	3.7%
Florida	14.2%	4.5%
New Mexico	9.8%	4.7%
Texas	61.6%	3.1%
U.S. National Average	24.3%	3.7%

* Source: Home price data from FHFA House price index through the third quarter of 2020

Segment Information

The Company is organized along lines of business. Each line of business is a strategic unit that serves a particular group of customers with certain common characteristics by offering various products and services. The lines of business results include certain overhead allocations and intercompany transactions. At December 31, ~~2019~~2020, ~~the Company’s operating segments consisted of Commercial Banking and Wealth, Retail Banking, Corporate and Investment Banking, and Treasury.~~

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the Company’s operating segments consisted of Commercial Banking and Wealth, Retail Banking, Corporate and Investment Banking, and Treasury.

The Commercial Banking and Wealth segment serves the Company’s commercial customers through its wide array of banking and investment services to businesses in the Company’s markets. The segment also provides private banking and wealth management services to high net worth individuals, 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. The Commercial Banking and Wealth segment also supports its commercial customers with capabilities in treasury management, accounts receivable purchasing, asset-based lending, international services, as well as insurance and interest rate protection and investment products. The Commercial Banking and Wealth segment is also responsible for the Company's small business customers and indirect automobile portfolio.

The Retail Banking segment serves the Company’s consumer customers through its full-service banking centers, private client offices throughout the U.S., and alternative delivery channels such as internet, mobile, ATMs and telephone banking. The Retail Banking segment provides individuals with comprehensive products and services including home mortgages, consumer loans, credit and debit cards, and deposit accounts.

The Corporate and Investment Banking segment is responsible for providing a wide 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, accounts receivable purchasing, asset-based lending, foreign-exchange and international services, and interest rate protection and investment products.

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

For financial information regarding the Company’s segments, which are presented by line of business, as of and for the years ended December 31, ~~2019~~2020, ~~2018~~2019 and ~~2017~~2018, see Note 21, Segment Information, in the Notes to the Consolidated Financial Statements.

Competition

In most of the markets served by the Company, it encounters intense competition from national, regional and local financial service providers, including banks, thrifts, securities dealers, mortgage bankers and finance companies. Competition is based on a number of factors, including customer service and convenience, the quality and range of products and services offered, innovation, price, reputation and interest rates on loans and deposits. The Company’s ability to compete effectively also depends on its ability to attract, retain and motivate employees while managing employee-related costs.

Many of the Company’s nonfinancial institution competitors have fewer regulatory constraints, broader geographic service areas and, in some cases, lower cost structures. In addition, competition for quality customers has intensified as a result of changes in regulation, advances in technology and product delivery channels, consolidation among financial service providers, bank failures and the conversion of certain former investment banks to bank holding companies. For a discussion of risks related to the competition the Company faces, see Item 1A. - Risk Factors.

The table below shows the Company’s deposit market share ranking by state in which the Company operates based on deposits of FDIC-insured institutions as of June 30, 2019, the last date such information is available from the FDIC: 12

Table 1Deposit Market Share Ranking
		Deposit Market
State		Share Rank*
Alabama		2nd
Arizona		6th
California		28th
Colorado		14th
Florida		21st
New Mexico		11th
Texas		4th

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The table below shows the Company’s deposit market share ranking by state in which the Company operates based on deposits of FDIC-insured institutions as of June 30, 2020, the last date such information is available from the FDIC:

Table 1

Deposit Market Share Ranking


						Deposit Market
State						Share Rank*
Alabama						2nd
Arizona						5th
California						30th
Colorado						14th
Florida						21st
New Mexico						11th
Texas						4th

*Source: SNL Financial

Employees

At December 31, ~~2019~~2020, the Company had approximately 10,~~560~~410 full-time equivalent employees. None of the Company's employees are represented by any collective bargaining unit or are parties to a collective bargaining agreement. The Company believes that the Company's relations with the employees are good.

Supervision, Regulation and Other Factors

The Company and the Bank are regulated extensively under federal and state law. In addition, certain of the Company's non-bank subsidiaries are also subject to regulation under federal and state law. The following discussion sets forth some of the elements of the bank regulatory framework applicable to the Company and certain of its subsidiaries. The bank regulatory framework is intended primarily for the protection of customers, including depositors as well as the DIF, and not for the protection of security holders and creditors. To the extent that the following information describes statutory and regulatory provisions, it is qualified in its entirety by reference to the particular statutory and regulatory provisions.

General

The Parent is registered as a bank holding company with the Federal Reserve Board under the Bank Holding Company Act and based upon the Parent's election to become a financial holding company, has the additional powers of a financial holding company. Bank holding companies are subject to supervision and regulation by the Federal Reserve Board under the Bank Holding Company Act. In addition, the Alabama Banking Department regulates holding companies, like the Parent, that own Alabama-chartered banks, like the Bank, under the bank holding company laws of the State of Alabama. The Company is subject to primary regulation and examination by the Federal Reserve Board, through the Federal Reserve Bank of Atlanta, and by the Alabama Banking Department. The Bank is subject to regulation by the FDIC, which insures the Bank’s deposits as permitted by law. Numerous other federal and state laws, as well as regulations promulgated by the Federal Reserve Board and the Alabama Banking Department, govern almost all aspects of the operations of the Company and the Bank. The Company and the Bank are also subject to supervision and regulation by the CFPB. Various federal and state bodies regulate and supervise the Company's non-bank subsidiaries including its brokerage, investment advisory, insurance agency, money transfer, and processing operations. These include, but are not limited to, the SEC, FINRA, federal and state banking regulators and various state regulators of insurance, money transfer and brokerage activities.

12The legislative, regulatory and supervisory framework governing the financial services sector has significantly changed since the financial crisis, as well as in response to other factors, such as technological and market changes. Moreover, the intensity of supervisory and regulatory scrutiny and regulatory enforcement and fines have also increased across the banking and financial services sector. With the change of administration, it is possible that the

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offocus a financial holding company. Bank holding companies are subject to supervision and regulation by the Federal Reserve Board under the Bank Holding Company Act. In addition, the Alabama Banking Department regulates holding companies, like the Parent, that own Alabama-chartered banks, like the Bank, under the bank holding company laws of ~~the State of Alabama. The Company is subject to primary regulation and examination by the Federal Reserve Board~~legislative, ~~through~~regulatory ~~the Federal Reserve Bank of Atlanta,~~ and bysupervisory ~~the Alabama Banking Department. The Bank is subject to regulation by the FDIC~~efforts, ~~which insures the Bank’s deposits~~ as ~~permitted by law. Numerous other federal and state laws, as~~ well as ~~regulations promulgated by~~ the ~~Federal~~intensity ~~Reserve Board and the Alabama Banking Department, govern almost all aspects~~ of ~~the~~such operations of the Company and the Bank. The Company and the Bank are also subject to supervision and regulation by the CFPB. Various federal and state bodies regulate and supervise the Company's non-bank subsidiaries including its brokerageefforts, ~~investment~~may ~~advisory,~~continue ~~insurance agency, money transfer, and processing operations. These include, but are not limited~~ to, ~~the SEC, FINRA, federal and state banking regulators and various state regulators of insurance, money transfer and brokerage activities~~change.

The legislative, regulatory and supervisory framework governing the financial services sector has significantly changed since the financial crisis, as well as in response to other factors, such as technological and market changes. Moreover, the intensity of supervisory and regulatory scrutiny and regulatory enforcement and fines have also increased across the banking and financial services sector.

In May 2018 the United States Congress passed, and President Trump signed into law, the EGRRCPA. Among other regulatory changes, the EGRRCPA amends various sections of the Dodd-Frank Act, including section 165, which was revised to raise the asset thresholds for determining the application of enhanced prudential standards for bank holding companies. The EGRRCPA’s increased asset thresholds took effect immediately for bank holding companies with total consolidated assets less than $100 billion, with the exception of risk committee requirements, which now apply to publicly-traded bank holding companies with $50 billion or more of consolidated assets. Bank holding companies with consolidated assets between $100 billion and $250 billion were subject to the enhanced prudential standards that applied to them before enactment of EGRRCPA until December 31, 2019, when the Tailoring Rules became effective, as described in detail below.

In October 2019, the federal banking agencies issued the Tailoring Rules, which adjust the thresholds at which certain enhanced prudential standards and capital and liquidity requirements apply to FBOs, including BBVA, and the U.S. IHCs of FBOs, including the Company, pursuant to the EGRRCPA. These rules establish risk-based categories for FBOs and their U.S. IHCs that determine whether and to what extent enhanced prudential standards and certain capital and liquidity requirements apply to FBOs and their U.S. IHCs. BBVA is classified as a Category IV FBO as it has $100 billion in combined U.S. assets. ~~and~~The ~~the~~ Company iswas not initially classified in any of the categories because it ~~has~~had less than $100 billion in total consolidated assets.

As a result, BBVA and the Company are now generally subject to less restrictive enhanced prudential standards and capital and liquidity requirements than under previously applicable regulations, as described in more detail in the relevant sections below. IfThe ~~in the future the~~ Company ~~has~~had an average of $100 billion or more of total consolidated assets over the preceding four calendar quarters as of December 31, it2020, ~~will~~and ~~become~~it became a Category IV U.S. IHC under the Tailoring Rules. As ~~and~~a result, certain enhanced prudential standards and capital and liquidity requirements will again apply to the Company and the Bank following any applicable phase-in or transition periods. The Company is currently evaluating what effect these final rules will have on the Company, its subsidiaries, or these entities’ activities, financial condition and/or results of operations.

Permitted Activities

Under the Bank Holding Company Act, a bank holding company is generally permitted to engage in, or acquire direct or indirect control of more than five percent of the voting shares of, any company engaged in the following activities:

• banking or managing or controlling banks;

• furnishing services to or performing services for its subsidiaries; and

• engaging in activities that the Federal Reserve Board determines to be so closely related to banking as to be a proper incident to the business of banking, including:

• factoring accounts receivable;

13•making, acquiring, brokering or servicing loans and usual related activities;

•leasing personal or real property;

•operating a non-bank depository institution, such as a savings association;

•performing trust company functions;

•providing financial and investment advisory activities;

•conducting discount securities brokerage activities;

•underwriting and dealing in government obligations and money market instruments;

•providing specified management consulting and counseling activities;

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•performing ~~making,~~selected ~~acquiring,~~data ~~brokering~~processing orservices ~~servicing loans~~ and ~~usual~~support ~~related activities~~services;

•acting ~~leasing~~as ~~personal~~agent or ~~real~~broker ~~property~~in selling credit life insurance and other types of insurance in connection with credit transactions;

•performing ~~operating~~selected ainsurance ~~non-bank~~underwriting ~~depository institution, such as a savings association~~activities;

•providing ~~performing~~certain ~~trust~~community ~~company~~development ~~functions~~activities (such as making investments in projects designed primarily to promote community welfare); and

•issuing ~~providing~~and ~~financial~~selling money orders and ~~investment~~similar ~~advisory~~consumer-type ~~activities;~~payment instruments.

• conducting discount securities brokerage activities;

• underwriting and dealing in government obligations and money market instruments;

• providing specified management consulting and counseling activities;

• performing selected data processing services and support services;

• acting as agent or broker in selling credit life insurance and other types of insurance in connection with credit transactions;

• performing selected insurance underwriting activities;

• providing certain community development activities (such as making investments in projects designed primarily to promote community welfare); and

• issuing and selling money orders and similar consumer-type payment instruments.

As a financial holding company, the Parent is permitted to engage in, and be affiliated with companies engaging in, a broader range of activities than those permitted for bank holding companies that are not financial holding companies. In addition to the activities described above, financial holding companies may also engage in activities that are considered to be financial in nature, as well as those incidental or complementary to financial activities, including underwriting, dealing and making markets in securities and making merchant banking investments in non-financial companies. The Company and the Bank must each remain “well-capitalized” and “well-managed” in order for the Parent to maintain its status as a financial holding company. In addition, the Bank must maintain a CRA rating of at least “Satisfactory” for the Company to engage in the full range of activities permissible for financial holding companies.

The Federal Reserve Board has the authority to order a financial holding company or its subsidiaries to terminate any of these activities or to terminate its ownership or control of any subsidiary when it has reasonable cause to believe that the financial holding company's continued ownership, activity or control constitutes a serious risk to the financial safety, soundness or stability of it or any of its bank subsidiaries.

Actions by Federal and State Regulators

Under federal and state laws and regulations pertaining to the safety and soundness of insured depository institutions, state banking regulators, the Federal Reserve Board, and separately the FDIC as the insurer of bank deposits, have the authority to compel or restrict certain actions on the Company's part if they determine that it has insufficient capital or other resources, or is otherwise operating in a manner that may be deemed to be inconsistent with safe and sound banking practices. Under this authority, the Company's bank regulators can require it to enter into informal or formal supervisory agreements, including board resolutions, memoranda of understanding, written agreements and consents or cease and desist orders, pursuant to which the Company would be required to take identified corrective actions to address cited concerns and to refrain from taking certain actions.

Standards for Safety and Soundness

The Federal Deposit Insurance Act requires the federal bank regulatory agencies to prescribe, by regulation or guideline, operational and managerial standards for all insured depository institutions relating to: internal controls; information systems and audit systems; loan documentation; credit underwriting; interest rate risk exposure; and asset quality. The agencies also must prescribe standards for asset quality, earnings, and stock valuation, as well as standards for compensation, fees and benefits. The federal banking regulators have adopted regulations and interagency guidelines prescribing standards for safety and soundness to implement these required standards. These guidelines set forth the safety and soundness standards used to identify and address problems at insured depository institutions before capital becomes impaired. Under the regulations, if a regulator determines that a bank fails to meet any standards prescribed by the guidelines, the regulator may require the bank to submit an acceptable plan to achieve compliance, consistent with deadlines for the submission and review of such safety and soundness compliance plans.

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prescribing standards for safety and soundness to implement these required standards. These guidelines set forth the safety and soundness standards used to identify and address problems at insured depository institutions before capital becomes impaired. Under the regulations, if a regulator determines that a bank fails to meet any standards prescribed by the guidelines, the regulator may require the bank to submit an acceptable plan to achieve compliance, consistent with deadlines for the submission and review of such safety and soundness compliance plans.

Dividends

The Parent’s ability to declare and pay dividends is limited by federal banking law and Federal Reserve Board regulations and policy. The Federal Reserve Board has authority to prohibit bank holding companies from making capital distributions if they would be deemed to be an unsafe or unsound practice. The Federal Reserve has indicated generally that it may be an unsafe or unsound practice for bank holding companies to pay dividends unless a bank holding company’s net income is sufficient to fund the dividends and the expected rate of earnings retention is consistent with the organization’s capital needs, asset quality and overall financial condition.

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holding company’s net income is sufficient to fund the dividends and the expected rate of earnings retention is consistent with the organization’s capital needs, asset quality and overall financial condition.

The Parent is a legal entity separate and distinct from its subsidiaries, and the primary sources of funds for the Parent's interest and principal payments on its debt are cash on hand and dividends from its bank and non-bank subsidiaries. Various federal and state statutory provisions and regulations limit the amount of dividends that the Bank and its non-banking subsidiaries may pay. Under Alabama law, the Bank may not pay a dividend in excess of 90 percent of its net earnings until its surplus is equal to at least 20 percent of capital. The Bank is also required by Alabama law to seek the approval of the Alabama Superintendent of Banking prior to the payment of dividends if the total of all dividends declared by the Bank in any calendar year will exceed the total of (a) the Bank's net earnings for that year, plus (b) its retained net earnings for the preceding two years, less any required transfers to surplus. The statute defines net earnings as the remainder of all earnings from current operations plus actual recoveries on loans and investments and other assets, after deducting from the total thereof all current operating expenses, actual losses, accrued dividends on preferred stock, if any, and all federal, state and local taxes. The Bank cannot, without approval from the Federal Reserve Board and the Alabama Superintendent of Banking, declare or pay a dividend to the Parent unless the Bank is able to satisfy the criteria discussed above.

The FDICIA generally prohibits a depository institution from making any capital distribution, including payment of a dividend, or paying any management fee to its holding company if the institution would thereafter be undercapitalized. In addition, federal banking regulations applicable to the Company and its bank subsidiary require minimum levels of capital that limit the amounts available for payment of dividends. In addition, many regulators have a policy, but not a requirement, that a dividend payment should not exceed net income to date in the current year. The ability of banks and bank holding companies to pay dividends and make other capital distribution also depends on their ability to maintain a sufficient capital conservation buffer under the U.S. Basel III capital framework.

The Parent's ability to pay dividends has also been subject to the Federal Reserve Board's review of the Company's periodic capital plan and supervisory stress tests of the Company conducted by the Federal Reserve Board as a part of its periodic CCAR process. As a result of the EGRRCPA and Tailoring Rules, however, the Company is no longer subject to CCAR or the Federal Reserve Board’s stress testing requirements, unless and until the Company becomes a Category IV U.S. IHC.

Enhanced Prudential Standards

Pursuant to Title I of the Dodd-Frank Act, certain bank holding companies are subject to enhanced prudential standards and early remediation requirements. As a result, the Company has been subject to more stringent standards, including liquidity and capital requirements, leverage limits, stress testing, resolution planning, and risk management standards, than those applicable to smaller institutions. Certain larger banking organizations are subject to additional enhanced prudential standards.

As discussed above, under the EGRRCPA and Tailoring Rules, the Company is now exempt from many enhanced prudential standards, with the exception of risk committee requirements and any requirements applicable to BBVA and its combined U.S. operations that affect the Company, including certain liquidity and risk management requirements. Under the Tailoring Rules, however, certain enhanced prudential standards ~~would~~will once again apply to the Company iffollowing a transition period since it ~~becomes~~is a Category IV U.S. IHC under the Tailoring Rules.

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Under the enhanced prudential standard applicable to Large FBOs, BBVA designated the Parent as its IHC. BBVA’s combined U.S. operations (including its U.S. branches, agencies and subsidiaries) are also subject to liquidity, risk management, stress testing, asset maintenance and other enhanced prudential standards, as modified by the Tailoring Rules.

Certain requirements of these enhanced prudential standards that are applicable to the Company and the combined U.S. operations of BBVA are discussed under the relevant topic areas below.

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Capital

The Company and the Bank are subject to certain risk-based capital and leverage ratio requirements under the U.S. Basel III final rule. These quantitative calculations are minimums, and the Federal Reserve may determine that a banking organization, based on its size, complexity, or risk profile, must maintain a higher level of capital in order to operate in a safe and sound manner. Failure to be well-capitalized or to meet minimum capital requirements could result in certain mandatory and possible additional discretionary actions by regulators that, if undertaken, could have an adverse material effect on the Company’s operations or financial condition. Failure to be well-capitalized or to meet minimum capital requirements could also result in restrictions on the Company’s or the Bank’s ability to pay dividends or otherwise distribute capital or to receive regulatory approval of applications.

Under the U.S. Basel III final rule, the Company’s and the Bank’s assets, exposures, and certain off-balance sheet items are subject to risk weights used to determine the institutions’ risk-weighted assets. These risk-weighted assets are used to calculate the following minimum capital ratios for the Company and the Bank:

• CET1 Risk-Based Capital Ratio, represents the ratio of CET1 capital to risk-weighted assets. CET1 capital primarily includes common shareholders’ equity subject to certain regulatory adjustments and deductions, including with respect to goodwill, intangible assets, certain deferred tax assets, and accumulated other comprehensive income. Under the U.S. Basel III final rule, the Company made a one-time election to filter certain accumulated other comprehensive income components, with the result that those components are not recognized in the Company’s CET1. In July 2019, the FDIC, the Federal Reserve Board and the OCC issued final rules that simplify the capital treatment of mortgage servicing assets, deferred tax assets arising from temporary differences that an institution could not realize through net operating loss carrybacks, and investments in the capital of unconsolidated financial institutions, as well as simplify the recognition and calculation of minority interests that are includable in regulatory capital, for non-advanced approaches banking organizations, including the Company and the Bank as they have less ~~then~~than $250 billion in total assets. Banking organizations ~~may~~were required to adopt these changes by the quarter beginning on ~~January~~April 1, 2020. In addition, in December 2018, the U.S. federal banking agencies finalized rules that would permit bank holding companies and banks to phase-in, for regulatory capital purposes, the day-one impact of CECL on retained earnings over a period of three years.

• Tier 1 Risk-Based Capital Ratio, represents the ratio of Tier 1 capital to risk-weighted assets. Tier 1 capital is primarily comprised of CET1 capital, perpetual preferred stock, and certain qualifying capital instruments.

• Total Risk-Based Capital Ratio, represents the ratio of total capital, including CET1 capital, Tier 1 capital, and Tier 2 capital, to risk-weighted assets. Tier 2 capital primarily includes qualifying subordinated debt and qualifying ALLL. Tier 2 capital also includes, among other things, certain trust preferred securities.

• Tier 1 Leverage Ratio, represents the ratio of Tier 1 capital to quarterly average assets (net of goodwill, certain other intangible assets, and certain other deductions).

~~The~~In August 2020, the U.S. ~~Basel~~federal ~~III~~banking agencies adopted a final rule ~~also~~altering ~~requires~~the ~~banking~~definition ~~organizations~~of toeligible ~~maintain~~retained aincome in their respective capital ~~conservation~~rules. ~~buffer~~Under tothe ~~avoid~~new ~~becoming~~rule, ~~subject~~eligible toretained ~~restrictions~~income onis ~~capital~~the greater of a firm’s (i) net income for the four preceding calendar quarters, net of any distributions and ~~certain~~associated ~~discretionary~~tax ~~bonus~~effects ~~payments~~not toalready ~~management~~reflected in net income, and (ii) average net income over the preceding four quarters. ~~The~~This definition applies with respect to all of the Company’s capital ~~conservation~~requirements. ~~buffer~~In ~~requirement~~addition, ~~was~~in ~~phased~~December 2018, the U.S. federal banking agencies finalized rules that permits bank holding companies and banks to phase-in the day-one retained earnings impact of the current expected credit losses accounting standard over a period of three years for regulatory capital purposes. As part of its response to the impact of COVID-~~year~~19, ~~period~~the U.S. federal banking agencies issued another final rule that ~~began~~provides the option to temporarily delay certain effects of the current expected credit losses accounting standard on ~~January~~regulatory 1capital for two years, ~~2016.~~followed ~~The~~by ~~phase~~a three-inyear transition period. ~~ended~~The onfinal ~~January~~rule 1,allows ~~2019,~~bank holding companies and ~~the~~banks ~~capital~~to ~~conservation~~delay ~~buffer~~for ~~was~~two atyears ~~its~~100% ~~fully~~of ~~phased~~the day-inone ~~level~~impact of ~~2.5~~adopting the current expected credit losses accounting standard and 25% ~~throughout~~of ~~2019~~the cumulative change in the reported allowance for credit losses since adopting the current expected credit losses accounting standard. The Company and the Bank have elected to adopt this final rule.

The ~~total minimum regulatory capital ratios and well-capitalized minimum ratios are reflected in the table below~~U. ~~The~~S. ~~Federal~~Basel ~~Reserve~~III ~~Board~~final ~~has~~rule ~~not~~also ~~yet~~requires ~~revised~~banking ~~the~~organizations ~~well-capitalized standard for bank holding companies~~ to ~~reflect~~maintain ~~the~~a ~~higher~~ capital ~~requirements~~conservation ~~imposed~~buffer ~~under~~to ~~the~~avoid ~~U.S.~~becoming ~~Basel~~subject ~~III~~to ~~final~~restrictions ~~rule.~~on ~~For~~capital ~~purposes~~distributions ofand ~~the~~certain ~~Federal~~discretionary ~~Reserve~~bonus ~~Board’s~~payments to

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~~Regulation~~management. Y,The ~~including~~capital ~~determining~~conservation ~~whether~~buffer arequirement ~~bank~~is ~~holding~~2.5% ~~company~~and ~~meets~~is ~~the~~calculated ~~requirements~~as ~~to be~~ a ~~financial~~ratio ~~holding~~of ~~company,~~CET1 ~~bank~~capital ~~holding~~to ~~companies~~risk-weighted assets, ~~such~~and asit ~~the~~effectively ~~Company,~~increases ~~must~~the ~~maintain~~required aminimum ~~Tier 1 Risk~~risk-~~Based~~based ~~Capital~~capital ~~Ratio of 6~~ratios.0% orAs ~~greater and~~ a ~~Total~~result ~~Risk-Based Capital Ratio~~ of ~~8.0%~~ ~~or greater. If~~ the ~~Federal~~Tailoring ~~Reserve~~Rules, ~~Board were to apply~~ the ~~same~~Company orhad anot ~~very~~been ~~similar~~subject ~~well-capitalized standard~~ to ~~bank~~the ~~holding~~stress ~~companies~~buffer ~~as that applicable to the Bank~~requirements, ~~the~~but ~~Company’s~~as ~~capital~~a ~~ratios~~result as of ~~December 31,~~becoming ~~2019,~~a ~~would~~Category ~~exceed~~IV ~~such revised well-capitalized standard~~U. ~~The~~S. ~~Federal Reserve Board may require bank holding companies~~IHC, ~~including~~ the Company, towill ~~maintain~~be ~~capital~~required ~~ratios~~to ~~substantially~~maintain inthe ~~excess~~applicable ofstress ~~mandated~~buffer ~~minimum levels~~requirement, ~~depending~~instead ~~upon~~of ~~general~~the ~~economic~~capital ~~conditions~~conservation ~~and~~buffer. aFor ~~bank~~further ~~holding~~discussion ~~company’s~~of ~~particular~~the ~~condition,~~stress ~~risk~~buffer ~~profile~~requirements, ~~and~~see ~~growth~~Stress ~~plans~~Buffer Requirements.

The total minimum regulatory capital ratios and well-capitalized minimum ratios are reflected in the table below. The Federal Reserve Board has not yet revised the well-capitalized standard for bank holding companies to reflect the higher capital requirements imposed under the U.S. Basel III final rule. For purposes of the Federal Reserve Board’s Regulation Y, including determining whether a bank holding company meets the requirements to be a financial holding company, bank holding companies, such as the Company, must maintain a Tier 1 Risk-Based Capital ~~Ratios~~Ratio of 6.0% or greater and a Total Risk-Based Capital Ratio of 8.0% or greater. If the Federal Reserve Board were to apply the same or a very similar well-capitalized standard to bank holding companies as that applicable to the Bank, the Company’s capital ratios as of December 31, ~~2019~~2020, would exceed such revised well-capitalized standard. The Federal Reserve Board may require bank holding companies, including the Company, to maintain capital ratios substantially in excess of mandated minimum levels, depending upon general economic conditions and a bank holding company’s particular condition, risk profile, and growth plans.

~~The~~Capital ~~table~~Ratios ~~below shows certain regulatory capital ratios for the Company and the Bank~~ as of December 31, ~~2019 using the Transitional Basel III regulatory capital methodology applicable to the Company during 2019.~~2020

Table 2 Capital Ratios
	Regulatory Minimum for Company and Bank (1)		Minimum Ratio + Capital Conservation Buffer (2)		Well-Capitalized Minimum for the Bank		The Company		The Bank
CET 1 Risk-Based Capital Ratio	4.5	%	7.0	%	6.5	%	12.49	%	11.56	%
Tier 1 Risk-Based Capital Ratio	6.0	%	8.5	%	8.0	%	12.83	%	11.56	%
Total Risk-Based Capital Ratio	8.0	%	10.5	%	10.0	%	14.98	%	13.94	%
Leverage Ratio	4.0	%	N/A		5.0	%	9.70	%	8.98	%

The table below shows certain regulatory capital ratios for the Company and the Bank as of December 31, 2020 using the Transitional Basel III regulatory capital methodology applicable to the Company during 2020.

Table 2

Capital Ratios


	Regulatory Minimum for Company and Bank (1)		Minimum Ratio + Capital Conservation Buffer (2)		Well-Capitalized Minimum for the Bank		The Company		The Bank
CET 1 Risk-Based Capital Ratio	4.5	%	7.0	%	6.5	%	13.28	%	12.24	%
Tier 1 Risk-Based Capital Ratio	6.0	%	8.5	%	8.0	%	13.61	%	12.24	%
Total Risk-Based Capital Ratio	8.0	%	10.5	%	10.0	%	15.79	%	14.42	%
Leverage Ratio	4.0	%	N/A		5.0	%	9.07	%	8.32	%

(1) Regulatory minimum requirements do not include the capital conservation buffer, which must be maintained in addition to meeting regulatory minimum requirements in order to avoid automatic restrictions on capital distributions and certain discretionary bonus payments.

(2) Reflects the ~~fully phased-in~~ capital conservation buffer of 2.5% ~~applicable during 2019~~.

See Note 16, Regulatory Capital Requirements and Dividends from Subsidiaries, in the Notes to the Consolidated Financial Statements, for additional information on the calculation of capital ratios for the Company and the Bank.

Prompt Corrective Action for Undercapitalization

The FDICIA established a system of prompt corrective action to resolve the problems of undercapitalized insured depository institutions. Under this system, the federal banking regulators are required to rate insured depository institutions on the basis of five capital categories as described below. The federal banking regulators are also required to take mandatory supervisory actions and are authorized to take other discretionary actions, with respect to insured depository institutions in the three undercapitalized categories, the severity of which will depend upon the capital category to which the insured depository institution is assigned. Generally, subject to a narrow exception, the FDICIA requires the banking regulator to appoint a receiver or conservator for an insured depository institution that is critically undercapitalized. The federal banking regulators have specified by regulation the relevant capital level for each category. Under the prompt corrective action regulations that are currently in effect under the U.S. Basel III framework, all insured depository institutions are assigned to one of the following capital categories:

Well-capitalized - The insured depository institution exceeds the required minimum level for each relevant capital measure. A well-capitalized insured depository institution is one (1) having a Total Risk-Based Capital Ratio of 10 percent or greater, (2) having a Tier 1 Risk-Based Capital Ratio of 8 percent or greater, (3) having a CET1 Risk-Based Capital Ratio of 6.5 percent or greater (4) having a Leverage Ratio of 5 percent or greater, and (5) that is not subject to any order or written directive to meet and maintain a specific capital level for any capital measure.18

Adequately Capitalized - The insured depository institution meets the required minimum level for each relevant capital measure. An adequately capitalized insured depository institution is one (1) having a Total Risk-Based Capital Ratio of 8 percent or greater, (2) having a Tier 1 Risk-Based Capital Ratio of 6 percent or greater, and (3) having a CET1 Risk-Based Capital Ratio of 4.5 percent

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orfor ~~greater~~each ~~(4)~~category. ~~having~~Under athe ~~Leverage~~prompt ~~Ratio~~corrective ofaction 4regulations ~~percent~~that orare ~~greater~~currently in effect under the U.S. Basel III framework, ~~and~~all ~~(5)~~insured ~~failing~~depository toinstitutions ~~meet~~are ~~the~~assigned ~~definition~~to one of athe ~~well-capitalized~~following ~~bank.~~capital categories:

Undercapitalized - The insured depository institution fails to meet the required minimum level for any relevant capital measure. An undercapitalized insured depository institution is one (1) having a Total Risk-Based Capital Ratio of less than 8 percent, (2) having a Tier 1 Risk-Based Capital Ratio of less than 6 percent, (3) having a CET1 Risk-Based Capital Ratio of less than 4.5 percent, or (4) a Leverage Ratio of less than 4 percent.

Significantly Undercapitalized - The insured depository institution is significantly below the required minimum level for any relevant capital measure. A significantly undercapitalized insured depository institution is one (1) having a Total Risk-Based Capital Ratio of less than 6 percent, (2) having a Tier 1 Risk-Based Capital Ratio of less than 4 percent, (3) a CET 1 Risk Based-Capital Ratio of less than 3 percent, or (4) a Leverage Ratio of less than 3 percent.

Critically Undercapitalized - The insured depository institution fails to meet a critical capital level set by the appropriate federal banking agency. A critically undercapitalized institution is one having a ratio of tangible equity to total assets that is equal to or less than 2 percent.

The regulations permit the appropriate federal banking regulator to downgrade an institution to the next lower category if the regulator determines after notice and opportunity for hearing or response that the institution (1) is in an unsafe or unsound condition or (2) has received and not corrected a less-than-satisfactory rating for any of the categories of asset quality, management, earnings or liquidity in its most recent examination. Supervisory actions by the appropriate federal banking regulator depend upon an institution's classification within the five categories. The Company's management believes that the Company and the Bank have the requisite capital levels to qualify as well-capitalized institutions under the FDICIA. See Note 16, Regulatory Capital Requirements and Dividends from Subsidiaries, in the Notes to the Consolidated Financial Statements.

If an institution fails to remain well-capitalized, it will be subject to a variety of enforcement remedies that increase as the capital condition worsens. For instance, the FDICIA generally prohibits a depository institution from making any capital distribution, including payment of a dividend, or paying any management fee to its holding company if the depository institution would thereafter be undercapitalized as a result. Undercapitalized depository institutions are subject to restrictions on borrowing from the Federal Reserve System. In addition, undercapitalized depository institutions may not accept brokered deposits absent a waiver from the FDIC, are subject to growth limitations and are required to submit capital restoration plans for regulatory approval. A depository institution's holding company must guarantee any required capital restoration plan, up to an amount equal to the lesser of 5 percent of the depository institution's assets at the time it becomes undercapitalized or the amount of the capital deficiency when the institution fails to comply with the plan. Federal banking regulators may not accept a capital restoration plan without determining, among other things, that the plan is based on realistic assumptions and is likely to succeed in restoring the depository institution's capital. If a depository institution fails to submit an acceptable plan, it is treated as if it is significantly undercapitalized.

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Significantly undercapitalized depository institutions may be subject to a number of requirements and restrictions, including orders to sell sufficient voting stock to become adequately capitalized, requirements to reduce total assets and cessation of receipt of deposits from correspondent banks. Critically undercapitalized depository institutions are subject to appointment of a receiver or conservator.

Total Loss-Absorbing Capital and Long-Term Debt Requirements

The Federal Reserve Board's final rule on the total loss-absorbing capacity of U.S. G-SIBs and the U.S. intermediate holding companies of non-U.S. G-SIBs does not apply to the Company since neither the Parent nor BBVA are G-SIBs.

Single Counterparty Credit Limits

In June 2018, the Federal Reserve Board issued a final rule implementing single counterparty credit limits applicable to the combined U.S. operations of major FBOs and to certain large U.S. IHCs of FBOs. The rule imposes percentage limitations on a firm’s net credit exposures to individual counterparties (aggregated based on affiliation), generally as a percentage of the firm’s tier 1 capital. As a result of the Tailoring Rules, the Company ~~will~~is not besubject to the single counterparty credit limits rule. BBVA became subject to single counterparty credit limits with respect to its combined U.S. operations starting in July 2020. However, under the Tailoring Rules, BBVA may elect to comply with home-country single counterparty credit limits instead of the Federal Reserve Board’s rule. If BBVA were to elect to comply with the Federal Reserve Board’s rule, the Federal Reserve Board’s single counterparty credit limits could adversely affect the Company’s financial position.

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counterparty credit limits rule unless and until it becomes a Category IV U.S. IHC. BBVA will be subject to single counterparty credit limits with respect to its combined U.S. operations starting in July 2020. However, under the Tailoring Rules, BBVA may elect to comply with home-country single counterparty credit limits instead of the Federal Reserve Board’s rule, and BBVA expects to make this election. If BBVA were to elect to comply with the Federal Reserve Board’s rule or if the Company were to become a Category IV U.S. IHC, the Federal Reserve Board’s single counterparty credit limits could adversely affect the Company’s financial position.

Periodic Capital Plans and Stress Testing

The Company has been required to submit periodic capital plans to the Federal Reserve Board and generally could pay dividends and make other capital distributions only in accordance with a capital plan as to which the Federal Reserve Board had not objected as part of the Federal Reserve Board’s annual CCAR process. In addition to capital planning requirements the Company and the Bank have been subject to stress testing requirements under the Federal Reserve Board’s enhanced prudential standards and the Dodd-Frank Act. The Company has been required to conduct periodic company-run stress tests and has been subject to periodic supervisory stress ~~test~~tests conducted by the Federal Reserve Board.

OnAs ~~February~~a 5,result ~~2019~~of the Tailoring Rules, the ~~Federal~~Company ~~Reserve~~and ~~Board~~the ~~announced~~Bank ~~that~~were ~~certain~~not ~~less-complex~~required ~~U.S.~~to ~~bank~~participate ~~holding~~in ~~companies~~the CCAR process in 2020 and ~~U.S.~~were ~~IHCs~~not ~~with~~subject ~~less~~to ~~than~~the ~~$250~~Federal ~~billion~~Reserve inBoard’s ~~total~~stress ~~consolidated~~testing ~~assets,~~requirements. As ~~including~~a ~~the~~result ~~Company~~of becoming a Category IV U.S. IHC, ~~would~~the ~~not~~Company will be subject to ~~supervisory~~these ~~stress~~requirements ~~testing,~~after ~~company-run~~the ~~stress~~applicable ~~testing~~transition orperiod ~~the~~which ~~CCAR~~will ~~process~~be ~~for~~used ~~the~~to ~~2019~~determine ~~capital~~its ~~plan and~~ stress ~~test~~capital ~~cycle~~buffer requirement.

As a result of the Tailoring Rules, the Company and the Bank are no longer required to participate in the CCAR process and are no longer subject to the Federal Reserve Board’s stress testing requirements unless and until the Company becomes a Category IV U.S. IHC.

The Company remains subject to the requirement to develop and maintain a capital plan, and the board of directors (or designated subcommittee thereof) remain subject to the requirements to review and approve the capital plan.

~~Proposed~~ Stress Buffer Requirements

OnIn ~~April~~March 102020, ~~2018,~~ the Federal Reserve Board issued a ~~proposal~~final rule to integrate its capital planning and stress testing requirements with certain ongoing regulatory capital requirements. The ~~proposal,~~final ~~which~~rule ~~would~~applies ~~apply~~ to the consolidated operations of U.S. IHCs ~~would~~and ~~introduce~~introduces a stress capital buffer and ~~a stress leverage buffer, or stress buffer requirements, and~~ related changes to the capital planning and stress testing processes.

For risk-based capital requirements, the stress capital buffer ~~would~~replaces ~~replace~~ the existing Capital Conservation Buffer, ~~which~~of ~~is now~~ 2.5%. ~~The~~Under the final rule, beginning in the 2020 CCAR cycle, a covered bank holding company will be required to calculate a stress capital buffer ~~would~~ equal to the greater of (i) the ~~maximum~~difference ~~decline~~between inits ~~our~~starting and minimum projected CET1 Risk-Based Capital Ratio under the severely adverse scenario ~~over~~in the supervisory stress test ~~measurement period~~, plus the sum of the ~~ratios of the~~ dollar amount of ~~our~~the firm’s planned common stock dividends ~~to our projected risk-weighted assets~~ for each of the fourth through seventh quarters of the ~~supervisory~~planning ~~stress~~horizon ~~test~~as ~~projection~~a ~~period~~percentage of risk-weighted assets, ~~and~~or (ii) 2.5%.

Like the stress capital buffer, the stress leverage buffer would be calculated based on the results of our most recent supervisory stress tests. The stress leverage buffer would equal the maximum decline in our Tier 1 Leverage Ratio under the severely adverse scenario, plus the sum of the ratios of the dollar amount of our planned common stock dividends to our projected leverage ratio denominator for each of the fourth through seventh quarters of the supervisory stress test projection period. No floor would be established for the stress leverage buffer, which would apply in addition to the current minimum Tier 1 Leverage Ratio of 4%. 20

The proposal would make related changes to capital planning and stress testing processes for the consolidated operations of U.S. IHCs subject to the stress buffer requirements. In particular, the proposal would limit projected capital actions to planned common stock dividends in the fourth through seventh quarters of the supervisory stress test projection period and would assume that the consolidated operations of IHCs maintain a constant level of assets and risk-weighted assets throughout the supervisory stress test projection period.

The Federal Reserve Board's Vice Chairman for Supervision stated that the Federal Reserve Board hopes to finalize the proposed stress buffer requirements for the 2020 stress testing cycle, and that, while the Federal Reserve Board

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~~expects~~The final rule also makes related changes to ~~finalize~~the ~~certain~~capital ~~elements~~planning ofand ~~those~~stress ~~requirements~~testing asprocess. ~~proposed,~~Among other ~~elements~~changes, ofthe revised capital plan rule eliminates the ~~proposal~~assumption that a covered bank holding company’s balance sheet assets would increase over the planning horizon. In addition, provided that a covered bank holding company is otherwise in compliance with automatic restrictions on distributions under the Federal Reserve’s capital rules, the covered bank holding company will no longer be ~~re-proposed~~required ~~and~~to ~~again~~seek ~~subject~~prior approval to ~~public~~make ~~comment~~capital distributions in excess of those included in its capital plan.

As a result of the Tailoring Rules, the Company ~~would~~was not be subject to the stress buffer requirements asin ~~currently~~2020. Because ~~proposed, unless and until~~ the Company ~~becomes~~became a Category IV U.S. IHC as of December 31, 2020, it will be subject to the stress buffer requirements going forward.

Deposit Insurance and Assessments

Deposits at the Bank are insured by the DIF as administered by the FDIC, up to the applicable limits established by law. The DIF is funded through assessments on banks, such as the Bank. Changes in the methodology used to calculate these assessments, resulting from the Dodd-Frank Act increased the assessments that the Bank is required to pay to the FDIC. In addition, in March 2016, the FDIC issued a final rule imposing a surcharge on the assessments of insured depository institutions with total consolidated assets of $10 billion or more, such as the Bank, to raise the DIF's reserve ratio. These surcharges are no longer applicable effective October 1, 2018 as a result of the FDIC's reserve ratio exceeding 1.35%. The FDIC also collects Financing Corporation deposit assessments, which are calculated off of the assessment base established by the Dodd-Frank Act. The Bank pays the DIF assessment as well as the Financing Corporation assessments.

As of June 30, 2020, the DIF reserve ratio fell to 1.30%. The FDIC, as required under the Federal Deposit Insurance Act, established a plan on September 15, 2020, to restore the DIF reserve ratio to meet or exceed 1.35% within eight years. The FDIC’s restoration plan projects the reserve ratio to exceed 1.35% without increasing the deposit insurance assessment rate, subject to ongoing monitoring over the next eight years. The FDIC could increase the deposit insurance assessments for certain insured depository institutions, including the Bank, if the DIF reserve ratio is not restored as projected.

With respect to brokered deposits, an insured depository institution must be well-capitalized in order to accept, renew or roll over such deposits without FDIC clearance. An adequately capitalized insured depository institution must obtain a waiver from the FDIC in order to accept, renew or roll over brokered deposits. Undercapitalized insured depository institutions generally may not accept, renew or roll over brokered deposits. See the Deposits section in Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations of this Annual Report on Form 10-K.

Volcker Rule

The Volcker Rule prohibits an insured depository institution, such as the Bank, and its affiliates from (1) engaging in “proprietary trading” and (2) investing in or sponsoring certain types of funds (covered funds) subject to certain limited exceptions. The final rules contain exemptions for market-making, hedging, underwriting, trading in U.S. government and agency obligations and also permit certain ownership interests in certain types of funds to be retained. They also permit the offering and sponsoring of funds under certain conditions. The final Volcker Rule regulations impose significant compliance and reporting obligations on banking entities.

As of October 2019, the five regulatory agencies charged with implementing the Volcker Rule finalized amendments to the Volcker Rule. These amendments tailor the Volcker Rule’s compliance requirements to the amount of a firm’s trading activity, revise the definition of trading account, clarify certain key provisions in the Volcker Rule, and modify the information companies are required to provide the federal agencies.

In ~~early~~June 2020, the five federal agencies ~~proposed~~finalized ~~additional~~ amendments to the Volcker Rule's ~~related to the~~ restrictions on ownership interests in and relationships with covered funds. Among other things, these amendments permit banking entities to have relationships with and offer additional financial services to additional types of funds and investments vehicles. The Company is of the view that the impact of the Volcker Rule, including the recent ~~and proposed~~ amendments to the Volcker Rule, is not material to its business operations.

~~Durbin Amendment's Rules Affecting Debit Card Interchange Fees~~ 21

~~Under~~Table ~~the Durbin Amendment the maximum permissible interchange fee that an issuer may receive for an electronic debit transaction is the sum~~ of ~~21 cents per transaction, a 1 cent fraud prevention adjustment, and 5 basis points multiplied by the value of the transaction.~~ Contents

Consumer Protection Regulations

Retail activities of banks are subject to a variety of statutes and regulations designed to protect consumers, and the Company is subject to supervision and regulation by the CFPB with respect to consumer protection laws. Interest and other charges collected or contracted for by banks are subject to state usury laws and federal laws concerning interest rates. Loan operations are also subject to federal laws applicable to credit transactions, such as:

• the federal Truth-In-Lending Act and Regulation Z issued by the CFPB, governing disclosures of credit terms to consumer borrowers;

20•the Home Mortgage Disclosure Act and Regulation C issued by the CFPB, requiring financial institutions to provide information to enable the public and public officials to determine whether a financial institution is fulfilling its obligation to help meet the housing needs of the community it serves;

~~Table~~•the Equal Credit Opportunity Act and Regulation B issued by the CFPB, prohibiting discrimination on the basis of ~~Contents~~various prohibited factors in extending credit;

• the ~~Home~~Fair ~~Mortgage~~Credit ~~Disclosure~~Reporting Act and Regulation CV issued by the CFPB, ~~requiring~~governing ~~financial institutions to provide information to enable~~ the ~~public~~use and ~~public~~provision ~~officials~~of toinformation ~~determine whether a financial institution is fulfilling its obligation~~ to ~~help~~consumer ~~meet~~reporting ~~the housing needs of the community it serves~~agencies;

• the ~~Equal~~Fair ~~Credit~~Debt ~~Opportunity~~Collection Practices Act and Regulation BF issued by the CFPB, ~~prohibiting~~governing ~~discrimination~~the onmanner ~~the~~in ~~basis~~which ofconsumer ~~various~~debts ~~prohibited~~may ~~factors~~be incollected ~~extending~~by ~~credit~~collection agencies;

• the ~~Fair~~Service ~~Credit~~Members ~~Reporting~~Civil Relief Act, applying to all debts incurred prior to commencement of active military service (including credit card and ~~Regulation~~other Vopen-end ~~issued~~debt) byand limiting the ~~CFPB~~amount of interest, ~~governing~~including ~~the~~service ~~use~~and renewal charges and ~~provision~~any ofother ~~information~~fees or charges (other than bona fide insurance) that is related to ~~consumer~~the ~~reporting~~obligation ~~agencies~~or liability; and

• the ~~Fair~~guidance ~~Debt~~of ~~Collection~~the ~~Practices~~various ~~Act~~federal ~~and~~agencies ~~Regulation~~charged Fwith ~~issued by~~ the ~~CFPB,~~responsibility ~~governing~~of ~~the~~implementing ~~manner~~such infederal ~~which consumer debts may be collected by collection agencies;~~laws.

• the Service Members Civil Relief Act, applying to all debts incurred prior to commencement of active military service (including credit card and other open-end debt) and limiting the amount of interest, including service and renewal charges and any other fees or charges (other than bona fide insurance) that is related to the obligation or liability; and

• the guidance of the various federal agencies charged with the responsibility of implementing such federal laws.

Deposit operations also are subject to, among others:

• the Truth in Savings Act and Regulation DD issued by the CFPB, which require disclosure of deposit terms to consumers;

• Regulation CC issued by the Federal Reserve Board, which relates to the availability of deposit funds to consumers;

• the Right to Financial Privacy Act, which imposes a duty to maintain the confidentiality of consumer financial records and prescribes procedures for complying with administrative subpoenas of financial records; and

• the Electronic Fund Transfer Act and Regulation E issued by the CFPB, which governs automatic deposits to and withdrawals from deposit accounts and customers' rights and liabilities arising from the use of automated teller machines and other electronic banking services.

In addition, there are consumer protection standards that apply to functional areas of operation (rather than applying only to loan or deposit products). The Company and the Bank are also subject to certain state laws and regulations designed to protect consumers, and under the Dodd-Frank Act, state attorneys general and other state officials are empowered to enforce certain federal consumer protection laws and regulations.

The CFPB has promulgated, and continues to promulgate, many mortgage-related rules since it was established under the Dodd-Frank Act including rules related to the ability to repay and qualified mortgage standards, mortgage servicing standards, loan originator compensation standards, high-cost mortgage requirements, Home Mortgage Disclosure Act requirements and appraisal and escrow standards for higher priced mortgages.

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Changes to consumer protection regulations, including those promulgated by the CFPB could affect the Company's business but the likelihood, timing and scope of any such changes and the impact any such change may have on the Company cannot be determined with any certainty. See Item 1A. Risk Factors. The Company is also subject to legislation and regulation and future legislation or regulation or changes to existing legislation or regulation could affect its business.

Resolution Plans for the Company and the Bank

BBVA is required to prepare and submit a resolution plan to the Federal Reserve Board and the FDIC, also referred to as a living will, which, in the event of material financial distress or failure, provides for the rapid and orderly liquidation of BBVA’s material U.S. operations under the bankruptcy code and in a way that would not pose systemic risk to the financial system of the United States. If the Federal Reserve Board and the FDIC jointly determine that BBVA’s plan is not credible and BBVA fails to cure the deficiencies in a timely manner, then the Federal Reserve Board and the FDIC may jointly impose on BBVA, or on any of its subsidiaries, including the Company, more stringent capital, leverage or liquidity requirements or restrictions on growth, activities, or operations. The Bank must also submit to the FDIC a separate plan whereby the institution can be resolved by the FDIC, in the event of failure, in a manner that ensures depositors will receive access to insured funds within the required timeframes and generally ensures an orderly liquidation of the institution.

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BBVA’s plan is not credible and BBVA fails to cure the deficiencies in a timely manner, then the Federal Reserve Board and the FDIC may jointly impose on BBVA, or on any of its subsidiaries, including the Company, more stringent capital, leverage or liquidity requirements or restrictions on growth, activities, or operations. The Bank must also submit to the FDIC a separate plan whereby the institution can be resolved by the FDIC, in the event of failure, in a manner that ensures depositors will receive access to insured funds within the required timeframes and generally ensures an orderly liquidation of the institution.

BBVA filed its most recent resolution plan on December 20, 2018, and the Bank filed its most recent plan on June 29, 2018. In October 2019, the Federal Reserve Board and the FDIC issued a final rule that reduces or eliminates resolution planning requirements for institutions that fall into certain risk-based categories. As a result, BBVA will be required to submit a more streamlined resolution plan once every three years, with its next submission due in July 2022. In April 2019, the FDIC released an advanced notice of proposed rulemaking with respect to the FDIC’s bank resolution plan requirements that requested comments on how to better tailor bank resolution plans to a firm’s size, complexity, and risk profile. Until the FDIC’s revisions to its bank resolution plan requirement are finalized, no bank resolution plans will be required to be filed.

U.S. Liquidity Standards

The Federal Reserve Board evaluates the Company’s liquidity as part of the supervisory process. ~~The~~As ~~Company has also been subject to the Federal Reserve Board’s LCR requirements, but as~~ a result of the Tailoring Rules, the Company, isas noa ~~longer~~Category ~~subject~~IV toU.S. ~~the~~IHC, ~~LCR~~is ~~and~~exempt ~~would~~from ~~not be subject to~~ the ~~proposed~~LCR ~~NSFR requirements unless~~ and ~~until~~ the ~~Company becomes a Category IV U~~NSFR.~~S. IHC.~~

Anti-Money Laundering; USA PATRIOT Act; Office of Foreign Assets Control

A major focus of U.S. governmental policy relating to financial institutions in recent years has been fighting money laundering and terrorist financing. Failure of a financial institution to maintain and implement adequate programs to combat money laundering and terrorist financing could have serious legal and reputational consequences for that financial institution.

Under laws applicable to the Company, including the Bank Secrecy Act, as amended by the USA PATRIOT Act, and implementing regulations, U.S. financial institutions must maintain anti-money laundering programs that include established internal policies, procedures, and controls; a designated compliance officer; an ongoing employee training program; testing of the program by an independent audit function and risk-based procedures for conducting ongoing customer due diligence. Bank regulators routinely examine institutions for compliance with these obligations and are required to consider compliance in connection with the regulatory review of applications.

The Company is prohibited from entering into specified financial transactions and account relationships. The Company also must take reasonable steps to conduct enhanced scrutiny of account relationships, as appropriate, to guard against money laundering and to report any suspicious transactions. Pursuant to the USA PATRIOT Act, law enforcement authorities have been granted increased access to financial information maintained by banks, and anti-money laundering obligations have been substantially strengthened.

The USA PATRIOT Act amended, in part, the Bank Secrecy Act and provides for, among other things, the facilitation of information sharing among governmental entities and financial institutions for the purpose of combating terrorism and money laundering. The statute also provides for: (1) regulations that set minimum requirements for verifying customer identification at account opening; (2) rules to promote cooperation among financial institutions, regulators and law enforcement entities in identifying parties that may be involved in terrorism ~~or money laundering; and (3) enhanced due diligence requirements for financial institutions that administer, maintain or manage private bank accounts or correspondent accounts for non-U.S. persons.~~

Federal, state, and local law enforcement may, through FinCEN, request that the Bank search its records for any relationships or transactions with persons reasonably suspected to be involved in terrorist activity or money laundering. Upon receiving such a request, the Bank must search its records and timely report to FinCEN any identified relationships or transactions. 23

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~~lists~~or ofmoney ~~names,~~laundering; ~~such as the Specially Designated Nationals~~ and ~~Blocked~~(3) ~~Persons~~enhanced ~~List,~~due ofdiligence ~~individuals~~requirements ~~and~~for ~~entities~~financial ~~with~~institutions ~~whom~~that ~~U.S. persons~~administer, asmaintain ~~defined by OFAC, are generally prohibited from conducting transactions~~ or ~~dealings.~~manage ~~Persons~~private onbank ~~these~~accounts ~~lists include persons suspected of aiding, financing,~~ or ~~engaging~~correspondent inaccounts ~~terrorist~~for ~~acts, narcotics trafficking, or the proliferation of weapons of mass destruction, among other targeted activities~~non-U. ~~OFAC also administers sanctions programs against certain countries or territories~~S. If the Bank finds a name on any transaction, account or wire transfer instruction that is on an OFAC list or determines that processing a transaction or maintaining or servicing an account would violate a sanctions program administered by OFAC, it must, depending on the regulation, freeze such account, reject such transaction, file a suspicious activity report and/or notify the appropriate authoritiespersons.

The Anti-Money Laundering Act of 2020, enacted on January 1, 2021 as part of the National Defense Authorization Act, does not directly impose new requirements on banks, but requires the U.S. Treasury Department to issue National Anti-Money Laundering and Countering the Financing of Terrorism Priorities, and conduct studies and issue regulations that may, over the next few years, significantly alter some of the due diligence, recordkeeping and reporting requirements that the Bank Secrecy Act and USA PATRIOT Act impose on banks. The Anti-Money Laundering Act of 2020 also contains provisions that promote increased information-sharing and use of technology, and increases penalties for violations of the Bank Secrecy Act and includes whistleblower incentives, both of which could increase the prospect of regulatory enforcement.

Furthermore, OFAC is responsible for helping to ensure that U.S. entities do not engage in transactions with certain prohibited parties, as defined by various Executive Orders and acts of Congress. OFAC publishes, and routinely updates, lists of names, such as the Specially Designated Nationals and Blocked Persons List, of individuals and entities with whom U.S. persons, as defined by OFAC, are generally prohibited from conducting transactions or dealings. Persons on these lists include persons suspected of aiding, financing, or engaging in terrorist acts, narcotics trafficking, or the proliferation of weapons of mass destruction, among other targeted activities. OFAC also administers sanctions programs against certain countries or territories. If the Bank finds a name on any transaction, account or wire transfer instruction that is on an OFAC list or determines that processing a transaction or maintaining or servicing an account would violate a sanctions program administered by OFAC, it must, depending on the regulation, freeze such account, reject such transaction, file a suspicious activity report and/or notify the appropriate authorities.

Commitments to the Bank

Under the Dodd-Frank Act, both BBVA and the Parent are required to serve as a source of financial strength to the Bank and to commit resources to support the Bank in circumstances when BBVA and the Parent might not do so absent the statutory requirement. Under the Bank Holding Company Act, the Federal Reserve Board may require a bank holding company to terminate any activity or relinquish control of a non-bank subsidiary, other than a non-bank subsidiary of a bank, upon the Federal Reserve Board's determination that such activity or control constitutes a serious risk to the financial soundness or stability of any depository institution subsidiary. Further, the Federal Reserve Board has discretion to require a bank holding company to divest itself of any bank or non-bank subsidiaries if the agency determines that any such divestiture may aid the depository institution's financial condition. In addition, any loans by the Parent to the Bank would be subordinate in right of payment to depositors and to certain other indebtedness of the Bank.

Transactions with Affiliates and Insiders

A variety of legal limitations restrict the Bank from lending or otherwise supplying funds or in some cases transacting business with the Company or the Company's non-bank subsidiaries. The Bank is subject to Sections 23A and 23B of the Federal Reserve Act and Federal Reserve Board's Regulation W. Section 23A places limits on the amount of “covered transactions,” which include loans or extensions of credit to, investments in or certain other transactions with, affiliates as well as the amount of advances to third parties collateralized by the securities or obligations of affiliates. The aggregate of all covered transactions is limited to 10 percent of a bank's capital and surplus for any one affiliate and 20 percent for all affiliates. Furthermore, within the foregoing limitations as to amount, certain covered transactions must meet specified collateral requirements ranging from 100 to 130 percent. Also, a bank is prohibited from purchasing low quality assets from any of its affiliates. Section 608 of the Dodd-Frank Act broadens the definition of “covered transactions” to include derivative transactions and the borrowing or lending of securities if the transaction will cause a bank to have credit exposure to an affiliate. The revised definition also includes the acceptance of debt obligations of an affiliate as collateral for a loan or extension of credit to a third ~~party. Furthermore, reverse repurchase transactions are viewed as extensions of credit (instead of asset purchases) and thus become subject to collateral requirements.~~

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party. Furthermore, reverse repurchase transactions are viewed as extensions of credit (instead of asset purchases) and thus become subject to collateral requirements.

Section 23B prohibits an institution from engaging in certain transactions with affiliates unless the transactions are on terms substantially the same, or at least as favorable to the bank, as those prevailing at the time for comparable transactions with nonaffiliated companies. Except for limitations on low quality asset purchases and transactions that are deemed to be unsafe or unsound, Regulation W generally excludes affiliated depository institutions from treatment as affiliates. Transactions between a bank and any of its subsidiaries that are engaged in certain financial activities may be subject to the affiliated transaction limits. The Federal Reserve Board also may designate bank subsidiaries as affiliates.

Banks are also subject to quantitative restrictions on extensions of credit to executive officers, directors, principal shareholders and their related interests. In general, such extensions of credit (1) may not exceed certain dollar limitations, (2) must be made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with third parties, and (3) must not involve more than the normal risk of repayment or present other unfavorable features. Certain extensions of credit also require the approval of a bank's board of directors.

Regulatory Examinations

Federal and state banking agencies require the Company and the Bank to prepare annual reports on financial condition and to conduct an annual audit of financial affairs in compliance with minimum standards and procedures. The Bank, and in some cases the Company and the Company's non-bank affiliates, must undergo regular on-site examinations by the appropriate regulatory agency, which will examine for adherence to a range of legal and regulatory compliance responsibilities. A bank regulator conducting an examination has complete access to the books and records of the examined institution. The results of the examination are confidential. The cost of examinations may be assessed against the examined institution as the agency deems necessary or appropriate.

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the appropriate regulatory agency, which will examine for adherence to a range of legal and regulatory compliance responsibilities. A bank regulator conducting an examination has complete access to the books and records of the examined institution. The results of the examination are confidential. The cost of examinations may be assessed against the examined institution as the agency deems necessary or appropriate.

Community Reinvestment Act

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. These evaluations are considered in evaluating mergers, acquisitions and applications to open a branch or facility. Failure to adequately meet these criteria could result in additional requirements and limitations on the Bank and the Company. In addition, the Bank must maintain a CRA rating of at least "Satisfactory" for the Company to engage in the full range of activities permissible for financial holding companies. Leaders of some federal banking agencies recently have indicated their support for revising the CRA regulatory framework, and in December 2019, the OCC and FDIC issued a joint proposed rule that would amend the CRA regulatory framework. It is too early to tell whether and to what extent any changes will be made to applicable CRA requirements.

The OCC recently finalized amendments to its CRA rules that do not apply to the Bank, and the Federal Reserve separately proposed different amendments to its CRA rules that would apply to the Bank. It is too early to tell whether and to what extent the Federal Reserve will adopt the amendments to the CRA rules applicable to the Bank. In the past, the banking agencies have aligned their CRA regulations.

Commercial Real Estate Lending

Lending operations that involve concentrations of commercial real estate loans are subject to enhanced scrutiny by federal banking regulators. The regulators have advised financial institutions of the risks posed by commercial real estate lending concentrations. Such loans generally include land development, construction loans and loans secured by multifamily property, and nonfarm, nonresidential real property where the primary source of repayment is derived from rental income associated with the property. The guidance prescribes the following guidelines for examiners to help identify institutions that are potentially exposed to concentration risk and may warrant greater supervisory scrutiny:

• total reported loans for construction, land development and other land represent 100 percent or more of the institution's total capital, or

• total commercial real estate loans represent 300 percent or more of the institution's total capital, and the outstanding balance of the institution's commercial real estate loan portfolio has increased by 50 percent or more during the prior 36 months.

~~In October 2009, the federal banking regulators issued additional guidance on commercial real estate lending that emphasizes these considerations.~~25

InTable ~~addition, the Dodd-Frank Act contains provisions that may impact the Company's business by reducing the amount~~ of its commercial real estate lending and increasing the cost of borrowing, including rules relating to risk retention of securitized assets. Section 941 of the Dodd-Frank Act requires, among other things, a loan originator or a securitizer of asset-backed securities to retain a percentage of the credit risk of securitized assets. In October 2014, the banking agencies issued final rules to implement the credit risk retention requirements of Section 941 of Dodd-Frank. The regulations became effective on February 23, 2015. Compliance with the rules with respect to new securitization transactions backed by residential mortgages have been required since December 24, 2015 and compliance with respect to new securitization transactions backed by other types of assets have been required since December 24, 2016. Contents

In addition, the Dodd-Frank Act contains provisions that may impact the Company's business by reducing the amount of its commercial real estate lending and increasing the cost of borrowing, including rules relating to risk retention of securitized assets. Section 941 of the Dodd-Frank Act requires, among other things, a loan originator or a securitizer of asset-backed securities to retain a percentage of the credit risk of securitized assets, and the Company is subject to rules issued by the banking agencies to implement these requirements.

Anti-Tying Restrictions

In general, a bank may not extend credit, lease, sell property, or furnish any services or fix or vary the consideration for them on the condition that (1) the customer obtain or provide some additional credit, property or services from or to said bank or bank holding company or their subsidiaries, or (2) the customer not obtain some other credit, property or services from a competitor, except to the extent reasonable conditions are imposed to assure the soundness of the credit extended. A bank may, however, offer combined-balance products and may otherwise offer more favorable terms if a customer obtains two or more traditional bank products. Also, certain foreign transactions are exempt from the general rule.

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Privacy and Credit Reporting

The Federal Reserve Board, FDIC and other bank regulatory agencies have adopted guidelines for safeguarding confidential, personal customer information. These guidelines require each financial institution, under the supervision and ongoing oversight of its board of directors or an appropriate committee thereof, to create, implement and maintain a comprehensive written information security program designed to ensure the security and confidentiality of customer information, to protect against any anticipated threats or hazards to the security or integrity of such information and to protect against unauthorized access to or use of such information that could result in substantial harm or inconvenience to any customer. In addition, various U.S. regulators, including the Federal Reserve Board and the SEC, have increased their focus on cybersecurity through guidance, examinations and regulations.

The GLBA requires financial institutions to implement policies and procedures regarding the disclosure of nonpublic personal information about consumers to non-affiliated third parties. In general, the statute requires disclosures to consumers regarding policies and procedures with respect to the disclosure of such nonpublic personal information and, except as otherwise required by law, prohibits disclosing such information except as provided in the banking subsidiary’s policies and procedures.

States are also increasingly proposing or enacting legislation that relates to data privacy and data protection such as the California Consumer Privacy Act, which went into effect on January 1, 2020. California voters also recently passed the California Privacy Rights Act, which will take effect on January 1, 2023, and significantly modify the CCPA, imposing additional obligations on covered companies and expanding California consumers’ rights with respect to certain sensitive personal information, potentially resulting in further uncertainty and requiring the Company to incur additional costs and expenses in an effort to comply. The Company continues to assess the requirements of such laws and proposed legislation and their applicability to the Company. Moreover, these laws, and proposed legislation, are still subject to revision or formal guidance and they may be interpreted or applied in a manner inconsistent with the Company’s understanding.

The Bank utilizes credit bureau data in underwriting activities. Use of such data is regulated under the Fair Credit Reporting Act and Federal Reserve Regulation V on a uniform, nationwide basis, including credit reporting, prescreening and sharing of information between affiliates and the use of credit data. The Fair and Accurate Credit Transactions Act, which amended the Fair Credit Reporting Act, permits states to enact identity theft laws that are not inconsistent with the conduct required by the provisions of that Act.

Cybersecurity

In October 2016, the federal banking regulators issued an advance notice of proposed rulemaking regarding enhanced cyber risk management standards, which would apply to a wide range of large financial institutions and their third-party service providers, including the Company and the Bank. The proposed standards would expand existing cybersecurity regulations and guidance to focus on cyber risk governance and management; management of internal and external dependencies; and incident response, cyber resilience and situational awareness. In addition, the proposal contemplates more stringent standards for institutions with systems that are critical to the financial sector.

Enforcement Powers

The Bank and its “institution-affiliated parties,” including management, employees, agents, independent contractors and consultants, such as attorneys and accountants and others who participate in the conduct of the institution's affairs, are subject to potential civil and criminal penalties for violations of law, regulations or written orders of a government agency. Violations can include failure to timely file required reports, filing false or misleading information or submitting inaccurate reports. Civil penalties may be as high as $1,000,000 a day for such violations and criminal penalties for some financial institution crimes may include imprisonment for 20 years. Regulators have flexibility to commence enforcement actions against institutions and institution-affiliated parties, and the FDIC has the authority to terminate deposit insurance. When issued by a banking agency, cease-and-desist and similar orders may, among other things, require affirmative action to correct any harm resulting from a violation or practice, including restitution, reimbursement, indemnifications or guarantees against loss. A financial institution may also be ordered to restrict its growth, dispose of certain assets, rescind agreements or contracts or take other actions determined to be appropriate by the ordering agency. The federal banking regulators also may remove a director or officer from an insured depository institution (and bar them from the industry) if a violation is willful or reckless.

~~Monetary Policy and Economic Controls~~26

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~~promote~~violations ~~orderly~~and ~~economic~~criminal ~~growth~~penalties byfor ~~influencing~~some ~~interest~~financial ~~rates~~institution ~~and~~crimes ~~the~~may ~~supply~~include ofimprisonment ~~money~~for ~~and~~20 ~~credit~~years. ~~Among~~Regulators ~~the~~have ~~methods~~flexibility ~~that~~to ~~have~~commence ~~been~~enforcement ~~used~~actions toagainst ~~achieve~~institutions ~~this~~and ~~objective~~institution-affiliated ~~are~~parties, ~~open~~and ~~market~~the ~~operations~~FDIC inhas Uthe authority to terminate deposit insurance.S. ~~government~~When ~~securities~~issued by a banking agency, ~~changes~~cease-and-desist inand ~~the~~similar ~~discount~~orders ~~rate~~may, ~~for~~among ~~bank~~other ~~borrowings~~things, ~~expanded~~require ~~access~~affirmative action to ~~funds~~correct ~~for~~any ~~non-banks~~harm ~~and~~resulting ~~changes~~from ina ~~reserve~~violation ~~requirements~~or ~~against~~practice, ~~bank~~including ~~deposits~~restitution, reimbursement, indemnifications or guarantees against loss. ~~These~~A ~~methods~~financial ~~are~~institution ~~used~~may inalso ~~varying~~be ~~combinations~~ordered to ~~influence~~restrict ~~overall~~its growth, ~~and~~dispose ~~distribution~~ of ~~bank~~certain ~~loans~~assets, ~~investments~~rescind ~~and~~agreements ~~deposits,~~or ~~interest~~contracts ~~rates~~or ontake ~~loans~~other ~~and~~actions ~~securities,~~determined ~~and~~to ~~rates~~be ~~paid~~appropriate ~~for~~by ~~deposits~~the ordering agency. The federal banking regulators also may remove a director or officer from an insured depository institution (and bar them from the industry) if a violation is willful or reckless.

Monetary Policy and Economic Controls

The Bank's earnings, and therefore the Company's earnings, are affected by the policies of regulatory authorities, including the monetary policy of the Federal Reserve Board. An important function of the Federal Reserve Board is to promote orderly economic growth by influencing interest rates and the supply of money and credit. Among the methods that have been used to achieve this objective are open market operations in U.S. government securities, changes in the discount rate for bank borrowings, expanded access to funds for non-banks and changes in reserve requirements against bank deposits. These methods are used in varying combinations to influence overall growth and distribution of bank loans, investments and deposits, interest rates on loans and securities, and rates paid for deposits.

The effects of the various Federal Reserve Board policies on the Company's future business and earnings cannot be predicted. The Company cannot predict the nature or extent of any affects that possible future governmental controls or legislation might have on its business and earnings.

Depositor Preference Statute

Federal law provides that deposits and certain claims for administrative expenses and employee compensation against an insured depository institution are afforded priority over other general unsecured claims against such institution, including federal funds and letters of credit, in the liquidation or other resolution of the institution by any receiver.

FDIC Recordkeeping Requirements

~~In November 2016, the~~ FDIC ~~issued~~rules aimpose ~~final rule establishing~~ recordkeeping requirements for FDIC-insured institutions with 2 million or more deposit accounts, which includes the Bank. The ~~rule~~rules generally requires each covered institution to maintain complete and accurate information needed to determine deposit insurance coverage with respect to each deposit account. In addition, each covered institution must ensure that its information technology system is able to calculate the insured amount for most depositors within 24 hours of failure. Compliance iswas required by April 1, 2020.

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.

During the year ended December 31, ~~2019~~2020, the Company did not knowingly engage 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, 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. During the year ended December 31, ~~2019~~2020, the BBVA Group had the following activities, transactions and dealings requiring disclosure under Section 13(r) of the Exchange Act.

Legacy contractual obligations related to counter indemnities. BBVA made a payment of $642 to Bank Melli on July 11, 2019, due to outstanding commissions on the counterindemnity executed on October 16, 2018. Such counterindemnity was issued in April 2000 and has been regularly reported until its execution in 2018.27

Iranian embassy-related activity. The BBVA Group maintains bank accounts in Spain for one employee of the Iranian embassy in Spain. This employee is a Spanish citizen. Estimated gross revenues for the year ended December 31, 2019, from embassy-related activity, which include fees and/or commissions, did not exceed $2,225. The BBVA Group does not allocate direct costs to fees and commissions and, therefore, has not disclosed a separate profit measure.

Additional Information

The Company’s corporate headquarters are located at 2200 Post Oak Blvd., Houston, Texas, 77056, and the Company’s telephone number is (205) 297-3000. The Company maintains an Investor Relations website on the Internet at www.bbvausa.com. This reference to the Company's website is an inactive textual reference only, and is not a

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~~hyperlink~~Iranian embassy-related activity. ~~The~~On ~~contents~~a continuing basis, the BBVA Group maintains bank accounts in Spain for one employee of the ~~Company's~~Iranian ~~website~~embassy ~~shall~~in Spain. This employee is a Spanish citizen. Estimated gross revenues for the year ended December 31, 2020, from embassy-related activity, which include fees and/or commissions, did not beexceed ~~deemed~~$129. The BBVA Group does not allocate direct costs to befees ~~incorporated~~and bycommissions ~~reference~~and, ~~into~~therefore, ~~this~~has ~~Annual~~not ~~Report~~disclosed ona ~~Form~~separate ~~10-K~~profit measure.

Additional Information

The Company files annual, quarterly and current reports and other information with the SEC. You may read and copy any materials the Company files with the SEC at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. You may obtain information about the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet website that contains reports and information statements and other information that the Company files electronically with the SEC at www.sec.gov. The Company also makes available free of charge, on or through its website, these reports and other information as soon as reasonably practicable following the time they are electronically filed with or furnished to the SEC.

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Item 1A. Risk Factors

This section highlights the material risks that the Company currently faces. Any of the risks described below could materially adversely affect the Company's business, financial condition, or results of operations.

MARKET AND LIQUIDITY RISKS:

The COVID-19 pandemic has adversely impacted the Company's business and financial results, and the ultimate impact will depend on future developments, which are highly uncertain and cannot be predicted or modelled precisely, including the scope and duration of the pandemic and actions taken by governmental authorities in response to the pandemic.

The COVID-19 pandemic has negatively impacted the global economy, disrupted global supply chains, lowered equity market valuations, created significant volatility and disruption in financial markets, and increased unemployment levels. In addition, the pandemic has resulted in temporary closures of many businesses and the institution of social distancing and sheltering in place requirements in many states and communities. Despite the partial lifting of some of these measures in some of the states in our geographic footprint, the recent increase in cases in the United States means that it remains unknown if any of these measures will be reinstated when there will be a return to normal economic activity.

As a result, the demand for the Company's products and services has been and may continue to be significantly impacted, which impact has adversely affected, and may continue to adversely affect, our revenue. Furthermore, the pandemic has resulted and could continue to result in the recognition of credit losses in our loan portfolios and increases in our allowance for credit losses, particularly if businesses remain closed or re-close, the impact on the global economy worsens, or more customers draw on their lines of credit or seek additional loans to help finance their businesses. Similarly, because of changing economic and market conditions affecting issuers, we have recognized and may be required to recognize additional impairments of our goodwill. Our business operations may also be disrupted if significant portions of our workforce are unable to work effectively, including because of illness, quarantines, government actions, or other restrictions in connection with the pandemic, and we have already temporarily closed certain of our branches and offices. In response to the pandemic, we have also suspended residential property foreclosure sales, evictions, and involuntary automobile repossessions, and are offering fee waivers, payment deferrals, and other expanded assistance for credit card, automobile, mortgage, and other consumer and commercial customers, and future governmental actions may require the continuance or the expansion of these and other types of customer-related responses.

Among other relief programs, we are participating in the SBA’s Paycheck Protection Program. Paycheck Protection Program loans are fixed, low interest rate loans that are guaranteed by the SBA and subject to numerous other regulatory requirements, and a borrower may apply to have all or a portion of the loan forgiven. If Paycheck Protection Program borrowers fail to qualify for loan forgiveness, we face a heightened risk of holding these loans at unfavorable interest rates for an extended period of time. While the Paycheck Protection Program loans are guaranteed by the SBA, various regulatory requirements apply to our ability to seek recourse under the guarantees, and related procedures are currently subject to uncertainty. If a borrower defaults on a Paycheck Protection Program loan, these requirements and uncertainties may limit our ability to fully recover against the loan guarantee or to seek full recourse against the borrower.

The extent to which the COVID-19 pandemic impacts our business, results of operations, and financial condition, as well as our regulatory capital and liquidity ratios, will depend on future developments, which are highly uncertain and cannot be predicted or modelled precisely, including the scope and duration of the pandemic and actions taken by governmental authorities and other third parties in response to the pandemic.

To the extent the COVID-19 pandemic continues to adversely affect the global economy, and/or adversely affects our business, results of operations or financial condition, it may also have the effect of increasing the likelihood and/or magnitude of other risks described in this section captioned “Risk Factors,” including those risks related to market, credit, geopolitical and business operations.

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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.

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.

Weakness in the real estate market has adversely affected the Company in the past and may do so in the future.

At December 31, ~~2019~~2020, residential real estate loans totaled $13.53 billion, or 2120.23% of the Company’s loan portfolio and commercial real estate loans totaled $13.96 billion, or 2120.7% of the Company’s loan portfolio. Declining residential real estate prices have historically caused cyclically higher delinquencies and losses on residential mortgage loans 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 residential real estate values, low sales volumes, the fluctuating valuation of collateral, financial stress on borrowers as a result of unemployment, interest rate resets on ARMs or other factors could have adverse effects on borrowers that could result in higher delinquencies and greater charge-offs in future periods. Similar trends may be observed in the commercial real estate loan portfolio in times of general or localized economic downturns. Further, decreases in real estate values generally 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. In markets dependent on energy production, falling energy prices may adversely affect real estate values.

A decline in real estate 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. Any of these conditions, should they occur, could adversely affect the Company's financial condition or results of operations.

Ineffective liquidity management could adversely affect the Company’s financial results and condition.

Effective liquidity management is essential for the operation of the Company’s business. The Company requires sufficient liquidity to meet customer loan requests, customer deposit maturities/withdrawals, payments on debt obligations as they come due and other cash commitments under both normal operating conditions and unpredictable circumstances causing industry or general financial market stress. The Company’s access to funding sources in amounts adequate to finance activities on terms that are acceptable to the Company could be impaired by factors that affect the Company specifically or the financial services industry or economy in general. Factors that could detrimentally impact the Company’s access to liquidity sources include a downturn in the geographic markets in which our loans and operations are concentrated or difficult credit markets. The Company’s access to deposits may also be affected by the liquidity needs of the Company’s depositors. In particular, a majority of the Company’s liabilities during ~~2019~~2020 were checking accounts and other liquid deposits, which are payable on demand or upon several days’ notice, while by comparison, a substantial majority of the Company’s assets were loans, which cannot be called or sold in the same time frame. Although the Company has historically been able to replace maturing deposits and advances as necessary, the Company might not be able to replace such funds in the future, especially if a large number of the Company’s depositors seek to withdraw their accounts, regardless of the reason. A failure to

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frame. Although the Company has historically been able to replace maturing deposits and advances as necessary, the Company might not be able to replace such funds in the future, especially if a large number of the Company’s depositors seek to withdraw their accounts, regardless of the reason. A failure to maintain adequate liquidity could materially and adversely affect our business, results of operations or financial condition.

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. In addition, changes in interest rates may impact the fair value of our fixed-rate securities and the extent to which customers prepay mortgages and other loans. 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.

In response to the economic consequences of the COVID-19 pandemic, the Federal Reserve lowered its target for the federal funds rate to a range of 0% to 0.25%. Such low rates increase the risk in the U.S. of a negative interest rate environment in which interest rates drop below zero, either broadly or for some types of instruments. For example, yields on one-month and three-month Treasuries briefly dropped below zero in March 2020. Such an occurrence would likely further reduce the interest we earn on loans and other earning assets, while also likely requiring us to pay to maintain our deposits with the Federal Reserve Bank. Our systems may not be able to handle adequately a negative interest rate environment and not all variable rate instruments are designed for such a circumstance. We cannot predict the nature or timing of future changes in monetary policies in response to the outbreak or the precise effects that they may have on our activities and financial results.

Expected Replacement of LIBOR may adversely affect the Company’s business.

On July 27, 2017, the Chief Executive of the United Kingdom Financial Conduct Authority, which regulates LIBOR, announced that it intends to stop persuading or compelling banks to submit rates for the calculation of LIBOR to the administrator of LIBOR after 2021. The announcement indicates that the continuation of LIBOR on the current basis cannot and will not be guaranteed after 2021. It is impossible to predict whether and to what extent banks will continue to provide LIBOR submissions to the administrator of LIBOR or whether any additional regulatory or other actions or reforms with respect to LIBOR may be enacted in the United Kingdom or elsewhere.

On April 3, 2018, the Federal Reserve Bank of New York commenced publication of three reference rates based on overnight U.S. Treasury repurchase agreement transactions, including SOFR, which has been recommended as an alternative to U.S. dollar LIBOR by the Alternative Reference Rates Committee. The Alternative Reference Rates Committee is a group of private-market participants convened by the Federal Reserve and the Federal Reserve Bank of New York, with the objective of helping to ensure a transition from USD LIBOR to SOFR. Further, the Bank of England is publishing a reformed Sterling Overnight Index Average, comprised of a broader set of overnight Sterling money market transactions, which has been selected by the Working Group on Sterling Risk-Free Reference Rates as the alternative rate to Sterling LIBOR. Central bank-sponsored committees in other jurisdictions, including Europe, Japan and Switzerland, have selected alternative reference rates denominated in other currencies and have plans to replace or reform existing benchmarks with those alternative reference rates.

In particular, any such transition, action or reform could:

•Adversely impact the pricing, liquidity, value of, return on and trading for a broad array of financial products and transactions, including any LIBOR-linked securities such as the Company’s Series A Preferred Stock, Capital Securities, loans and derivatives that are included in our financial assets and liabilities;

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•Require extensive changes to documentation that governs or references LIBOR or LIBOR-based products and transactions, including, for example, pursuant to time-consuming renegotiations of existing documentation to modify the terms of outstanding securities, related hedging transactions, loans and derivatives;

•Result in inquiries or other actions from regulators in respect of our preparation and readiness for the replacement of LIBOR with one or more alternative reference rates;

•Result in disputes, litigation or other actions with counterparties regarding the interpretation and enforceability of provisions in LIBOR based products and transactions such as fallback language or other related provisions, including in the case of fallbacks to the alternative reference rates, regarding any economic, legal, operational or other impact resulting from the fundamental differences between U.S. dollar LIBOR, or other LIBORs or other benchmarks that are being replaced or reformed, on the one hand, and the various alternative reference rates, on the other;

•Require the transition and/or development of appropriate systems and analytics to effectively transition our risk management processes from LIBOR-based products and transactions to those based on one or more alternative reference rates in a timely manner, including by quantifying value and risk for various alternative reference rates, which may prove challenging given the limited history of the proposed alternative reference rates; and

•Cause us to incur additional costs in relation to any of the above factors.

In addition, the U.S. federal banking agencies issued a statement in November 2020 encouraging banks to transition away from U.S. dollar LIBOR as soon as practicable and to stop entering into new contracts that use U.S. dollar LIBOR by December 31, 2021.

Depending on several factors including those set forth above, our business, financial condition and results of operations could be materially adversely impacted by the market transition or reform of certain benchmarks, including U.S. dollar LIBOR. Other factors include the pace of the transition to replacement or reformed rates, the specific terms and parameters for and market acceptance of any alternative reference rate, prices of and the liquidity of trading markets for products based on alternative reference rates, and our ability to transition and develop appropriate systems and analytics for one or more alternative reference rates.

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.

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.

A downgrade 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.

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Volatile or declining oil prices could adversely affect the Company's performance.

As of December 31, 2020, energy-related loan balances represented approximately 3.6 percent of the Bank’s total loan portfolio. This amount is comprised of loans directly related to energy, such as exploration and production, pipeline transportation of natural gas, crude oil and other refined petroleum products, oil field services, and refining and support. In late 2014, oil prices began to decline and continued to decline through the first half of 2016, which at the time had and continues to have an adverse effect on some of the Bank’s borrowers in this portfolio and on the value of the collateral securing some of these loans. The recent steep decline in oil prices, including, at times, dropping below zero dollars per barrel, in March and April 2020 has again adversely impacted and may continue to adversely impact some of the Bank’s customers in this industry, including with respect to the cash flows of such customers which could impair their ability to service any loans outstanding to them and/or reduce demand for loans. These factors could result in higher delinquencies and greater charge-offs in future periods, which could adversely affect the Company's business, financial condition or results of operations. Furthermore, energy production and related industries represent a significant part of the economies in some of the Bank’s primary markets. A prolonged period of low or volatile oil prices could have a negative impact on the economies and real estate markets of states such as Texas, which could adversely affect the Company's business, financial condition or results of operations.

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. Although the fiscal health and economic outlook of Spain and the European Union, more generally, have improved, there is no guarantee that these trends will continue.

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.

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.

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.

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CREDIT RISKS:

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.

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.

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, beginning in 2020, the FASB's Accounting Standards Update No. 2016-13, Financial Instruments-Credit Losses (Topic 326), ~~will~~ substantially ~~change~~changed the accounting for credit losses under current U.S. GAAP standards. Under ~~current~~the prior U.S. GAAP standards, credit losses ~~are~~were not reflected in financial statements until it iswas probable that the credit loss has been incurred. Under this ASU, an entity ~~will~~is be required to reflect in its financial statements its current estimate of credit losses on financial assets over the expected life of each financial asset. This ASU 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~~accelerates ~~accelerate~~ the recognition of estimated credit losses. InAs ~~December~~part ~~2018~~of its response to the impact of COVID-19, the U.S. federal banking agencies ~~finalized~~issued ~~rules~~a final rule that ~~permit~~provides the option to temporarily delay certain effects of this accounting standard on regulatory capital for two years, followed by a three-year transition period. The final rule allows bank holding companies and banks to ~~phase-in,~~delay for ~~regulatory~~two ~~capital~~years ~~purposes,~~100% of the day-one impact of adopting the ~~new~~accounting ~~current~~standard ~~expected~~and ~~credit~~25% ~~loss~~of ~~accounting~~the ~~rule~~cumulative onchange ~~retained~~in ~~earnings~~the ~~over~~reported aallowance ~~period~~for ofcredit ~~three~~losses ~~years~~since adopting the current expected credit losses accounting standard.

~~Changes~~A reduction in ~~interest~~the ~~rates~~Company's own credit rating could ~~affect~~have a material adverse effect on the Company's ~~income~~liquidity and ~~cash~~increase ~~flows~~the cost of its capital markets funding.

~~The~~Adequate ~~Company's~~liquidity ~~earnings~~is ~~and~~essential ~~financial~~to ~~condition are largely dependent on net interest income, which is~~ the ~~difference~~Company's ~~between interest earned from loans and investments and interest paid on deposits and borrowings~~businesses. A ~~The~~reduction ~~narrowing~~to ~~of interest rate spreads, meaning~~ the ~~difference~~Company's ~~between~~credit ~~interest~~rating ~~rates~~could ~~earned~~have ona ~~loans~~material ~~and~~adverse ~~investments~~effect ~~and the interest rates paid~~ on ~~deposits and borrowings, could adversely affect~~ the Company's ~~earnings~~business, ~~and~~ financial condition. Inand ~~addition,~~results ~~changes in interest rates may impact the fair value~~ of ~~our fixed-rate securities and the extent to which customers prepay mortgages and other loans~~operations. ~~The Company cannot control or predict with certainty changes in interest rates.~~

~~Regional~~The ~~and~~rating ~~local~~agencies ~~economic~~regularly ~~conditions,~~evaluate ~~competitive~~the ~~pressures~~Company and ~~the~~their ~~policies~~ratings ofare ~~regulatory~~based ~~authorities,~~on ~~including~~a ~~monetary~~number ~~policies~~ of ~~the Federal Reserve Board~~factors, ~~affect~~including ~~interest~~the ~~income~~Company's ~~and~~financial ~~interest~~strength ~~expense.~~as ~~Following~~well aas ~~prolonged~~factors ~~period~~not inentirely ~~which~~within ~~the~~its ~~federal~~control, ~~funds~~such ~~rate~~as ~~was~~conditions ~~stable~~affecting ~~or decreasing,~~ the ~~Federal~~financial ~~Reserve~~services ~~Board~~industry ~~has begun to increase this benchmark rate~~generally. InAdverse ~~addition,~~changes in the ~~Federal~~credit ~~Reserve~~ratings ~~Board~~of ~~has stated its intention to end its quantitative easing program and has begun to reduce~~ the ~~size~~Kingdom of ~~its~~Spain, ~~balance~~which ~~sheet~~subsequently bycould ~~selling~~impact ~~securities~~BBVA, ~~which~~could ~~might~~ also ~~affect~~adversely ~~interest~~impact ~~rates.~~the ~~The~~ Company's ~~has~~credit ~~policies~~rating. ~~and~~There ~~procedures~~can ~~designed~~be tono ~~manage~~assurance that the ~~risks~~Company ~~associated~~will ~~with~~maintain ~~changes~~its incurrent ~~market interest rates~~ratings. The ~~Changes~~Company's infailure ~~interest~~to ~~rates,~~maintain ~~however,~~those ~~may~~ratings ~~still~~could ~~have~~increase anits ~~adverse~~borrowing ~~effect~~costs, onrequire the Company's ~~profitability.~~to ~~While~~replace ~~the~~funding ~~Company~~lost ~~actively~~due ~~manages~~to ~~against~~the ~~these risks~~downgrade, ifwhich ~~its~~may ~~assumptions~~include ~~regarding~~the ~~borrower~~loss ~~behavior~~of ~~are~~customer ~~wrong~~deposits, orand ~~overall~~may ~~economic~~also ~~conditions~~limit ~~are~~the ~~significantly~~Company's ~~different~~access ~~than~~to ~~planned~~capital ~~for,~~and ~~then~~money ~~its~~markets ~~risk~~and ~~mitigation~~trigger ~~techniques~~additional ~~may~~collateral berequirements ~~insufficient~~in toderivatives ~~protect~~contracts ~~against~~and ~~the~~other ~~risk~~secured funding arrangements.

29The 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

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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 accounting standards could impact reported earnings.

The entities that set accounting standards and other regulatory bodies periodically change the financial accounting and reporting standards that govern the preparation of the Company’s consolidated financial statements. These changes can materially impact how management records and reports the Company’s financial condition and results of operations. In some cases, the Company could be required to apply a new or revised accounting standard retroactively, resulting in a possible restatement of prior period financial statements.

OPERATING RISKS:

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 at risk of increased losses from fraud.

Criminals committing fraud increasingly are using more sophisticated techniques and in some cases are part of larger criminal rings, which allow them to be more effective. Fraudulent activity has taken many forms and escalates as more tools for accessing financial services emerge, such as real-time payments. Fraud schemes are broad and continuously evolving and include such things as debit card/credit card fraud, check fraud, mechanical devices attached to ATM machines, social engineering and phishing attacks to obtain personal information, or impersonation of our clients through the use of falsified or stolen credentials. Additionally, an individual or business entity may properly identify themselves, yet seek to establish a business relationship for the purpose of perpetrating fraud. An emerging type of fraud involves the creation of synthetic identification in which fraudsters “create” individuals for the purpose of perpetrating fraud. Further, in addition to fraud committed against us, we may suffer losses as a result of fraudulent activity committed against third parties. Increased deployment of technologies, such as chip card technology, defray and reduce aspects of fraud; however, criminals are turning to other sources to steal personally identifiable information, such as unaffiliated healthcare providers and government entities, in order to impersonate the consumer to commit fraud. Many of these data compromises have been widely reported in the media. Further, as a result of the increased sophistication of fraud activity, we have increased our spending on systems and controls to detect and prevent fraud. This will result in continued ongoing investments in the future.

The Company’s operational or security systems or infrastructure, or those of third parties, could fail or be breached, which could disrupt its business and adversely impact its results of operations, liquidity and financial condition, as well as cause legal or reputational harm.35

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~~disease~~The ~~pandemics;~~Company’s ~~and~~operational ~~events arising from local~~ or ~~larger~~security ~~scale~~systems ~~political~~ or ~~social matters~~infrastructure, ~~including~~or ~~wars~~those ~~and~~of ~~terrorist~~third ~~acts. In addition~~parties, ~~the~~could ~~Company~~fail ~~may need to take its systems offline if they become infected with malware~~ or ~~a computer virus or as a result of another form of cyber-attack. The Company's business may~~ be ~~susceptible to infrastructure outages because its data centers are located outside the U.S. In the event that backup systems are utilized~~breached, ~~they~~which ~~may~~could ~~not~~disrupt process data as quickly as the Company’s primary systems and some data might not have been saved to backup systems, potentially resulting in a temporary or permanent loss of such data. The Company frequently updates its systems to support its operations and growth and to remain compliant with all applicable laws, rules and regulations. This updating entails significant costs and creates risks associated with implementing new systems and integrating them with existing ones, including business ~~interruptions. Implementation~~ and testing of controls related to the Company’s computer systems, security monitoring and retaining and training personnel required to operate its systems also entail significant costs. Operational risk exposures could adversely impact ~~the~~its ~~Company’s~~ results of operations, liquidity and financial condition, as well as cause legal or reputational harm. ~~In addition, the Company may not have adequate insurance coverage to compensate for losses from a major interruption.~~

The potential for operational risk exposure exists throughout the Company’s business and, as a result of its interactions with, and reliance on, third parties, is not limited to the Company’s own internal operational functions. The Company’s operational and security systems and infrastructure, including its computer systems, data management, and internal processes, as well as those of third parties, are integral to its performance. The Company relies on employees and third parties in its day-to-day and ongoing operations, who may, as a result of human error, misconduct, malfeasance or failure, or breach of the Company’s or of third-party systems or infrastructure, expose the Company to risk. For example, the Company’s ability to conduct business may be adversely affected by any significant disruptions to the Company or to third parties with whom it interacts or upon whom it relies. In addition, the Company’s ability to implement backup systems and other safeguards with respect to third-party systems is more limited than with respect to its own systems. The Company’s financial, accounting, data processing, backup or other operating or security systems and infrastructure may fail to operate properly or become disabled or damaged as a result of a number of factors, including events that are wholly or partially beyond its control, which could adversely affect its ability to process transactions or provide services. Such events may include sudden increases in customer transaction volume; electrical, telecommunications or other major physical infrastructure outages; natural disasters such as earthquakes, tornadoes, hurricanes and floods; disease pandemics; and events arising from local or larger scale political or social matters, including wars and terrorist acts. In addition, the Company may need to take its systems offline if they become infected with malware or a computer virus or as a result of another form of cyber-attack. The Company's business may be susceptible to infrastructure outages because its data centers are located outside the U.S. In the event that backup systems are utilized, they may not process data as quickly as the Company’s primary systems and some data might not have been saved to backup systems, potentially resulting in a temporary or permanent loss of such data. The Company frequently updates its systems to support its operations and growth and to remain compliant with all applicable laws, rules and regulations. This updating entails significant costs and creates risks associated with implementing new systems and integrating them with existing ones, including business interruptions. Implementation and testing of controls related to the Company’s computer systems, security monitoring and retaining and training personnel required to operate its systems also entail significant costs. Operational risk exposures could adversely impact the Company’s results of operations, liquidity and financial condition, as well as cause reputational harm. In addition, the Company may not have adequate insurance coverage to compensate for losses from a major interruption.

The Company faces security risks, including denial of service attacks, hacking, social engineering attacks targeting its colleagues and customers, malware intrusion or data corruption attempts, and identity theft that could result in the disclosure of confidential information, adversely affect its business or reputation, and create significant legal and financial exposure.

The Company’s computer systems and network infrastructure and those of third parties, on which it is highly dependent, are subject to security risks and could be susceptible to cyber-attacks, such as denial of service attacks, hacking, terrorist activities or identity theft. The Company’s business relies on the secure processing, transmission, storage and retrieval of confidential, proprietary and other information in its computer and data management systems and networks, and in the computer and data management systems and networks of third parties. In addition, to access the Company’s network, products and services, its customers and other third parties may use personal mobile devices or computing devices that are outside of its network environment and are subject to their own cybersecurity risks.

The Company, its customers, regulators and other third parties, including other financial services institutions and companies engaged in data processing, have been subject to, and are likely to continue to be the target of, cyber-attacks. These cyber-attacks include computer viruses, malicious or destructive code, phishing attacks, denial of service or information, ransomware, improper access by employees or vendors, attacks on personal email of employees, ransom demands to not expose security vulnerabilities in the Company’s systems or the systems of third parties or other security breaches that could result in the unauthorized release, gathering, monitoring, misuse, loss or destruction of confidential, proprietary and other information of the Company, its employees, its customers or of third parties, damage its systems or otherwise materially disrupt the Company’s or its customers’ or other third parties’ network access or business operations. As cyber threats continue to evolve, the Company may be required to expend significant additional resources to continue to modify or enhance its protective measures or to investigate and remediate any information security vulnerabilities or incidents. Despite efforts to ensure the integrity of the Company’s systems and implement controls, processes, policies and other protective measures, the Company may not be able to anticipate all security breaches, nor may it be able to implement guaranteed preventive measures against such security breaches. Cyber threats are rapidly evolving and the Company may not be able to anticipate or prevent all such attacks and could be held liable for any security breach or loss.

Cybersecurity risks for banking organizations have significantly increased in recent years in part because of the proliferation of new technologies, and the use of the internet and telecommunications technologies to conduct financial transactions. For example, cybersecurity risks may increase in the future as the Company continues to increase its mobile-payment and other internet-based product offerings and expand its internal usage of web-based products and applications. In addition, cybersecurity risks have significantly increased in recent years in part due to the increased sophistication and activities of organized crime affiliates, terrorist organizations, hostile foreign governments, disgruntled employees or vendors, activists and other external parties, including those involved in corporate espionage. Even the most advanced internal control environment may be vulnerable to compromise. Targeted social engineering attacks and "spear phishing" attacks are becoming more sophisticated and are extremely difficult to prevent. In such an attack, an attacker will attempt to fraudulently induce colleagues, customers or other users of the Company’s systems to disclose sensitive information in order to gain access to its data or that of its clients. Persistent attackers may succeed in penetrating defenses given enough resources, time, and motive. The techniques used by cyber criminals change frequently, may not be recognized until launched and may not be recognized until well after a breach has occurred. The 36

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~~risk~~expend ofsignificant aadditional ~~security~~resources ~~breach~~to ~~caused~~continue byto amodify ~~cyber-attack~~or atenhance aits ~~vendor~~protective measures or byto ~~unauthorized~~investigate ~~vendor~~and ~~access~~remediate ~~has~~any ~~also~~information ~~increased~~security invulnerabilities ~~recent~~or ~~years~~incidents. ~~Additionally,~~Despite efforts to ensure the ~~existence~~integrity of ~~cyber-attacks~~the orCompany’s systems and implement controls, processes, policies and other protective measures, the Company may not be able to anticipate all security breaches, atnor ~~third-party~~may ~~vendors~~it ~~with~~be ~~access~~able to implement guaranteed preventive measures against such security breaches. Cyber threats are rapidly evolving and the Company’s ~~data~~ may not be ~~disclosed~~able to itanticipate inor aprevent ~~timely~~all ~~manner~~such attacks and could be held liable for any security breach or loss.

The Company also faces indirect technology, cybersecurity and operational risks relating to the customers, clients and other third parties with whom it does business or upon whom it relies to facilitate or enable its business activities, including, for example, financial counterparties, regulators and providers of critical infrastructure such as internet access and electrical power. As a result of increasing consolidation, interdependence and complexity of financial entities and technology systems, a technology failure, cyber-attack or other information or security breach that significantly degrades, deletes or compromises the systems or data of one or more financial entities could have a material impact on counterparties or other market participants, including the Company. This consolidation, interconnectivity and complexity increases the risk of operational failure, on both individual and industry-wide bases, as disparate systems need to be integrated, often on an accelerated basis. Any third-party technology failure, cyber-attack or other information or security breach, termination or constraint could, among other things, adversely affect the Company’s ability to effect transactions, service its clients, manage its exposure to risk or expand its business.

Cyber-attacks or other information or security breaches, whether directed at the Company or third parties, may result in a material loss or have material consequences. Furthermore, the public perception that a cyber-attack on its systems has been successful, whether or not this perception is correct, may damage the Company’s reputation with customers and third parties with whom it does business. Hacking of personal information and identity theft risks, in particular, could cause serious reputational harm. A successful penetration or circumvention of system security could cause the Company serious negative consequences, including loss of customers and business opportunities, significant business disruption to its operations and business, misappropriation or destruction of its confidential information and/or that of its customers, or damage to the Company’s or its customers’ and/or third parties’ computers or systems, and could result in a violation of applicable privacy laws and other laws, litigation exposure, regulatory fines, penalties or intervention, loss of confidence in the Company’s security measures, reputational damage, reimbursement or other compensatory costs, additional compliance costs, and could adversely impact its results of operations, liquidity and financial condition.

The Company relies on other companies to provide key components of our business infrastructure.

Third parties provide key components of the Company’s business operations such as data processing, recording and monitoring transactions, online banking interfaces and services, Internet connections and network access. While the Company has selected these third-party vendors carefully, performing upfront due diligence and ongoing monitoring activities, even with a strong oversight in place, the Company does not entirely control their actions. Any problems caused by these third parties, including those resulting from disruptions in services provided by a vendor (including as a result of a cyber-attack, other information security event or a natural disaster), financial or operational difficulties for the vendor, or resulting from issues at third-party vendors to the vendors, failure of a vendor to handle current or higher volumes, failure of a vendor to provide services for any reason, poor performance of services, failure to comply with applicable laws and regulations, or fraud or misconduct on the part of employees of any of our vendors, could adversely affect the Company’s ability to deliver products and services to the Company’s customers, the Company’s reputation and the Company’s ability to conduct its business. In certain situation, replacing these third-party vendors could also create significant delay and expense. Accordingly, use of such third parties creates an unavoidable, inherent risk to the Company’s business operations.

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monitoring activities, even with a strong oversight in place, the Company does not entirely control their actions. Any problems caused by these third parties, including those resulting from disruptions in services provided by a vendor (including as a result of a cyber-attack, other information security event or a natural disaster), financial or operational difficulties for the vendor, or resulting from issues at third-party vendors to the vendors, failure of a vendor to handle current or higher volumes, failure of a vendor to provide services for any reason, poor performance of services, failure to comply with applicable laws and regulations, or fraud or misconduct on the part of employees of any of our vendors, could adversely affect the Company’s ability to deliver products and services to the Company’s customers, the Company’s reputation and the Company’s ability to conduct its business. In certain situation, replacing these third-party vendors could also create significant delay and expense. Accordingly, use of such third parties creates an unavoidable, inherent risk to the Company’s business operations.

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.

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 an 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.

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 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

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to execute its business strategies and may suffer adverse consequences to its business, operations and financial condition.

The federal banking regulators have 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 affecting the structure and reporting of incentive compensation. The federal banking regulators and SEC proposed such rules in 2011 and issued revised proposed rules in 2016. The Company cannot predict if or when these rules will be adopted.

As a wholly owned subsidiary of BBVA, the Company is also required to comply with the European Union’s CRD-IV, which, among other things, impacts the variable compensation of certain risk-takers and highly compensated individuals in the Company or its subsidiaries. In accordance with CRD-IV, the Bank pays variable compensation of certain employees half in stock and half in cash. Additionally, in accordance with CRD-IV, from 40% to 50% (depending on the classification of the employee), of such payment is deferred for three years. The deferred amounts are subject to performance indicators and a malus clause, which could result in the reduction or forfeiture of the deferred amounts. The equity awards are subject to an additional one-year holding period after delivery. Most of the Company’s competitors are not subject to CRD-IV.

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.

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

The occurrence of catastrophic events such as hurricanes, tropical storms, tornadoes, terrorist attacks, disease pandemics 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.

REGULATORY AND COMPLIANCE RISKS:

Cybersecurity and data privacy are areas of heightened legislative and regulatory focus.

As cybersecurity and data privacy risks for banking organizations and the broader financial system have significantly increased in recent years, cybersecurity and data privacy issues have become the subject of increasing legislative and regulatory focus. The federal bank regulatory agencies have proposed enhanced cyber risk management standards, which would apply to a wide range of large financial institutions and their third-party service providers, including the Company and the Bank, and would focus on cyber risk governance and management, management of internal and external dependencies, and incident response, cyber resilience and situational awareness. Several states have also proposed or adopted cybersecurity and data privacy legislation and regulations, which require, among other things, notification to affected individuals when there has been a security breach of their personal data.

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The Company receives, maintains and stores non-public personal information of its customers and counterparties, including, but not limited to, personally identifiable information and personal financial information. The sharing, use, disclosure and protection of this information are governed by federal and state law. Both personally identifiable information and personal financial information is increasingly subject to legislation and regulation, the intent of which is to protect the privacy of personal information that is collected and handled.

The Company may become subject to new legislation or regulation concerning cybersecurity or the privacy of personally identifiable information and personal financial information or of any other information it may store or maintain. The Company could be adversely affected if new legislation or regulations are adopted or if existing legislation or regulations are modified such that it is required to alter its systems or require changes to its business practices or privacy policies. If cybersecurity, data privacy, data protection, data transfer or data retention laws are implemented, interpreted or applied in a manner inconsistent with the Company’s current practices, the Company may be subject to fines, litigation or regulatory enforcement actions or ordered to change its business practices, policies or systems in a manner that adversely impacts its operating results.

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maintain. The Company could be adversely affected if new legislation or regulations are adopted or if existing legislation or regulations are modified such that it is required to alter its systems or require changes to its business practices or privacy policies. If cybersecurity, data privacy, data protection, data transfer or data retention laws are implemented, interpreted or applied in a manner inconsistent with the Company’s current practices, the Company may be subject to fines, litigation or regulatory enforcement actions or ordered to change its business practices, policies or systems in a manner that adversely impacts its operating results.

The Company is subject to legislation and regulation, and future legislation or regulation or changes to existing legislation or regulation could affect its business.

Government regulation and legislation subject the Company and other financial institutions to restrictions, oversight and/or costs that may have an impact on the Company’s business, financial condition or results of operations.

The Company is subject to extensive state and federal regulation, supervision and legislation that govern almost all aspects of its operations and limit the businesses in which the Company may engage. These laws and regulations may change from time to time and are primarily intended for the protection of consumers and depositors and are not designed to protect security-holders. The impact of any changes to laws and regulations or other actions by regulatory agencies may negatively impact the Company or its ability to increase the value of its business. In addition, actions by regulatory agencies or significant litigation against the Company could cause it to devote significant time and resources to defending itself and may lead to penalties that materially affect the Company and its shareholders. Future changes in the laws or regulations or their interpretations or enforcement may also be materially adverse to the Company and ~~it's~~its shareholder or may require the Company to expend significant time and resources to comply with such requirements.

The Company cannot predict whether any pending or future legislation will be adopted or the substance and impact of any such new legislation on the Company. Changes in regulation could affect the Company in a substantial way and could have an adverse effect on its business, financial condition and results of operations. In addition, legislation or regulatory reform could affect the behaviors of third parties that the Company deals with in the course of business, such as rating agencies, insurance companies and investors. The extent to which the Company can adjust its strategies to offset such adverse impacts also is not known at this time.

In addition, as a result of the Tailoring Rules, the Company and the Bank are now subject to less restrictive capital and liquidity requirements and enhanced prudential standards than in past years. ~~If,~~ ~~however~~However, the Company ~~becomes~~became a Category IV U.S. IHC under the Tailoring Rules as of December 31, 2020, it will again be subject to certain additional capital and liquidity requirements and enhanced prudential standards ~~that~~ applied to the Company in past years following applicable transition periods.

The Company and the Bank are also regulated and supervised by the CFPB. The CFPB has promulgated many mortgage-related rules since it was established under the Dodd-Frank Act, including rules related to the ability to repay and qualified mortgage standards, mortgage servicing standards, loan originator compensation standards, high-cost mortgage requirements, Home Mortgage Disclosure Act requirements and appraisal and escrow standards for higher-priced mortgages. The mortgage-related rules issued by the CFPB have materially restructured the origination, servicing and securitization of residential mortgages in the United States. These rules have impacted, and will continue to impact, the business practices of mortgage lenders, including the Company and the Bank.

In addition, with the change of administration, it is possible that the focus of legislative, regulatory and supervisory efforts, as well as the intensity of such efforts, may change. The new administration's agenda could include a heightened focus on the regulation of loan portfolios and credit concentrations to borrowers impacted by climate change, heightened scrutiny on Bank Secrecy Act and anti-money laundering requirements, topics related to social equity, executive compensation, and increased capital and liquidity, limits on share buybacks and dividends. The Company also expect reform proposals for the short-term wholesale markets. It is too early for us to assess which, if any, of these policies would be implemented and what their impact on the Company's business, financial condition or results of operations would be.

Please refer to Item 1. Business - Supervision, Regulation and Other Factors for more information.

~~Compliance with anti-money laundering and anti-terrorism financing rules involves significant cost and effort.~~40

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~~the~~Compliance ~~Company has internal policies and procedures designed to ensure compliance~~ with ~~applicable~~ anti-money laundering and anti-terrorism financing rules ~~and~~involves ~~regulations,~~significant itcost ~~cannot guarantee that its policies~~ and ~~procedures completely prevent violations of such rules and regulations~~effort. Any such violations 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.

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 and regulations can put a significant financial burden on banks and other financial institutions and poses significant technical problems. Although the Company has internal policies and procedures designed to ensure compliance with applicable anti-money laundering and anti-terrorism financing rules and regulations, it cannot guarantee that its policies and procedures completely prevent violations of such rules and regulations. Any such violations 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.

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 increased 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 February 2015, the Federal Reserve Board announced the results of its 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 Bank received a rating of “needs to improve." The Bank’s rating in this CRA examination resulted in restrictions on certain activities, including certain mergers and acquisitions and applications to open branches or certain other facilities. These restrictions were removed when the Bank received a “Satisfactory” CRA rating in its subsequent exam. The Bank received an "Outstanding" rating in its most recent CRA examination. The Bank must maintain a CRA rating of at least "Satisfactory" for the Company to engage in the full range of activities permissible for financial holding companies.

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.

The Company is exposed to risks in relation to compliance with anti-corruption laws and regulations and economic sanctions programs.

The Company is required to comply with various anti-corruption laws, including the U.S. Foreign Corrupt Practices Act of 1977, and economic sanctions programs, including those administered by the United Nations Security Council and the United States, including OFAC. The anti-corruption laws generally prohibit providing anything of value to government officials for the purposes of obtaining or retaining business or securing any improper business advantage. As part of its business, the Company may deal with entities, the employees of which are considered government officials. In addition, as noted above in Part I, Item 1 (“Anti-Money Laundering; USA PATRIOT Act; Office of Foreign Assets Control”), economic sanctions programs restrict the Company from conducting certain transactions or dealings involving certain sanctioned countries or persons.

Although the Company has internal policies and procedures designed to ensure compliance with applicable anti-corruption laws and sanctions regulations, there can be no assurance that such policies and procedures will be sufficient or that the Company’s employees, directors, officers, partners, agents and service providers will not take actions in violation of the Company’s policies and procedures (or otherwise in violation of the relevant anti-corruption laws and sanctions regulations) for which they or the Company may ultimately be held responsible. Violations of anti-corruption laws and sanctions regulations could lead to financial penalties being imposed on the Company, limits being placed on the Company’s activities, authorizations or licenses being revoked, damage to the Company’s reputation and other consequences that could have a material adverse effect on the Company’s business, results of operations and financial condition. Further, litigation or investigations relating to alleged or suspected violations of anti-corruption laws or sanctions regulations could be costly.

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~~laws~~The ~~and sanctions regulations could lead to financial penalties being imposed on the~~ Company, ~~limits~~is ~~being~~subject ~~placed on the Company’s activities, authorizations or licenses being revoked, damage~~ to ~~the~~capital ~~Company’s~~adequacy ~~reputation~~ and ~~other~~liquidity ~~consequences that could have a material adverse effect on the Company’s business~~standards, ~~results of operations~~ and ~~financial~~if ~~condition.~~it ~~Further,~~fails ~~litigation or investigations relating~~ to ~~alleged~~meet orthese ~~suspected~~standards ~~violations~~its offinancial ~~anti-corruption~~condition ~~laws~~and oroperations ~~sanctions~~would ~~regulations could~~ be ~~costly~~adversely affected.

~~Expected~~The ~~Replacement~~U.S. Basel III final rule and provisions in the Dodd-Frank Act increased 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 minimum ratio of ~~LIBOR~~CET1 ~~may~~capital ~~adversely~~to ~~affect~~risk weighted assets of 4.5 percent and a CET1 capital conservation buffer of greater than 2.5 percent of risk-weighted assets that applies 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 ~~business~~ability to make dividend payments and other capital distributions and pay discretionary bonuses to executive officers.

OnThe ~~July~~Company ~~27,~~has ~~2017,~~also ~~the~~been ~~Chief~~required ~~Executive~~to ofsubmit ~~the~~a ~~United~~periodic ~~Kingdom~~capital ~~Financial~~plan ~~Conduct~~to ~~Authority,~~the ~~which~~Federal ~~regulates~~Reserve ~~LIBOR,~~Board ~~announced~~under ~~that~~the itCCAR ~~intends~~process, tosubject ~~stop persuading or compelling banks~~ to ~~submit~~Dodd-Frank ~~rates~~Act ~~for~~stress ~~the~~testing ~~calculation~~requirements ofand ~~LIBOR~~additional toliquidity ~~the administrator of LIBOR after 2021~~requirements. As ~~The~~a ~~announcement~~result ~~indicates~~of ~~that~~ the ~~continuation~~Tailoring ofRules, ~~LIBOR~~however, on the ~~current~~Company ~~basis cannot~~ and ~~will~~the ~~not~~Bank beare ~~guaranteed~~no ~~after~~longer ~~2021.~~subject Itto isCCAR, ~~impossible~~Dodd-Frank toAct ~~predict~~stress ~~whether~~testing and tothe ~~what~~LCR. If, ~~extent~~however, ~~banks~~the ~~will~~Company ~~continue~~becomes toa ~~provide~~Category ~~LIBOR~~IV ~~submissions~~U.S. toIHC under the ~~administrator~~Tailoring ofRules, ~~LIBOR~~it orwill ~~whether~~again ~~any~~be ~~additional~~subject ~~regulatory~~to orcertain ~~other~~modified ~~actions~~forms orof ~~reforms~~these ~~with~~requirements ~~respect~~that applied to ~~LIBOR~~the ~~may~~Company ~~be enacted~~ in ~~the~~past ~~United Kingdom or elsewhere~~years.

OnIn ~~April 3~~addition, ~~2018,~~BBVA designated the ~~Federal~~Parent ~~Reserve~~as ~~Bank~~its ofIHC ~~New~~to ~~York~~comply ~~commenced~~with ~~publication~~the ofFederal ~~three~~Reserve ~~reference~~Board's ~~rates~~final ~~based~~rule onto ~~overnight~~enhance ~~U.S.~~its ~~Treasury~~supervision ~~repurchase~~and ~~agreement~~regulation ~~transactions,~~of ~~including~~the ~~SOFR, which has been recommended as an alternative to~~ U.S. ~~dollar~~operations ~~LIBOR~~of byLarge ~~the Alternative Reference Rates Committee~~FBOs. The ~~Alternative~~Company ~~Reference Rates Committee~~ is asubject ~~group~~to ofU.S. ~~private~~risk-~~market~~based ~~participants convened by the Federal Reserve~~ and ~~the~~leverage ~~Federal~~capital, ~~Reserve Bank of New York~~liquidity, ~~with~~risk ~~the objective of helping to ensure a transition from USD LIBOR to SOFR. Further~~management, ~~the~~and ~~Bank~~other ofenhanced ~~England~~prudential isstandards ~~publishing~~on a ~~reformed~~consolidated ~~Sterling~~basis ~~Overnight~~under ~~Index~~this ~~Average~~rule, ~~comprised~~as ofamended ~~a broader set of overnight Sterling money market transactions, which has been selected~~ by the ~~Working~~Tailoring ~~Group~~Rules. BBVA's oncombined ~~Sterling~~U.S. ~~Risk-Free~~operations ~~Reference~~(including ~~Rates~~its ~~as the alternative rate to Sterling LIBOR~~U.S. ~~Central bank-sponsored committees in other jurisdictions~~branches, ~~including~~agencies ~~Europe, Japan~~ and ~~Switzerland,~~subsidiaries) ~~have~~are ~~selected~~also ~~alternative~~subject ~~reference~~to ~~rates~~certain ~~denominated~~enhanced inprudential ~~other~~standards. ~~currencies~~These ~~and~~enhanced ~~have~~prudential ~~plans~~standards tocould ~~replace~~affect orthe ~~reform~~Company’s ~~existing benchmarks with those alternative reference rates~~operations.

InPlease ~~particular,~~refer ~~any~~to ~~such~~Item ~~transition~~1. Business - Supervision, ~~action~~Regulation orand ~~reform~~Other ~~could:~~Factors for more information.

•STRATEGIC ~~Adversely~~AND ~~impact~~REPUTATIONAL the pricing, liquidity, value of, return on and trading for a broad array of financial products and transactions, including any LIBOR-linked securities such as the Company’s Series A Preferred Stock, Capital Securities, loans and derivatives that are included in our financial assets and liabilities;RISKS:

• Require extensive changes to documentation that governs or references LIBOR or LIBOR-based products and transactions, including, for example, pursuant to time-consuming renegotiations of existing documentation to modify the terms of outstanding securities, related hedging transactions, loans and derivatives;

• Result in inquiries or other actions from regulators in respect of our preparation and readiness for the replacement of LIBOR with one or more alternative reference rates;

• Result in disputes, litigation or other actions with counterparties regarding the interpretation and enforceability of provisions in LIBOR based products and transactions such as fallback language or other related provisions, including in the case of fallbacks to the alternative reference rates, regarding any economic, legal, operational or other impact resulting from the fundamental differences between U.S. dollar LIBOR, or other LIBORs or other benchmarks that are being replaced or reformed, on the one hand, and the various alternative reference rates, on the other;

• Require the transition and/or development of appropriate systems and analytics to effectively transition our risk management processes from LIBOR-based products and transactions to those based on one or more alternative reference rates in a timely manner, including by quantifying value and risk for various alternative reference rates, which may prove challenging given the limited history of the proposed alternative reference rates; and

• Cause us to incur additional costs in relation to any of the above factors.

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U.S. dollar LIBOR. Other factors include the pace of the transition to replacement or reformed rates, the specific terms and parameters for and market acceptance of any alternative reference rate, prices of and the liquidity of trading markets for products based on alternative reference rates, and our ability to transition and develop appropriate systems and analytics for one or more alternative reference rates.

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. 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.

The financial services market is undergoing rapid technological changes, and the Company may be unable to effectively compete or may experience heightened cyber-security and/or fraud 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 the Company 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.

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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. A breach of sensitive customer data, such as account numbers and social security numbers could present significant reputational, legal and/or regulatory costs to the Company.

Over the past few years, there have 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 have 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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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.

Additionally, fraud risk may increase as the Company offers more products online or through mobile channels.

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 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 obtain loans, 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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products and services at more favorable rates and with greater convenience to the customer who can obtain loans, 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.

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, thus increasing its funding costs.

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

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, breach of sensitive customer information, a cybersecurity incident, 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.

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applicable regulatory requirements, breach of sensitive customer information, a cybersecurity incident, 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’s ability to attract and retain customers, clients, investors, and highly-skilled management and employees is affected by its reputation. Public perception of the financial services industry in general was damaged as a result of the credit crisis that started in 2008. Significant harm to its reputation can also arise from other sources, including employee misconduct, actual or perceived unethical behavior, conflicts of interest, litigation, GSE or regulatory actions, failing to deliver minimum or required standards of service and quality, failing to address customer and agency complaints, compliance failures, unauthorized release of confidential information due to cyber-attacks or otherwise, and the activities of the Company’s clients, customers and counterparties, including vendors. Actions by the financial service industry generally or by institutions or individuals in the industry can adversely affect the Company’s reputation, indirectly by association. All of these could adversely affect its growth, results of operation and financial condition.

The Company's rebranding strategy may not produce the benefits expected, may involve substantial costs and may not be favorably received by Customers.

Since 2008, the Company has marketed the Company's products and services using the “BBVA Compass” brand name and logo. Effective June 10, 2019, the Parent amended its Certificate of Formation to change its legal name from BBVA Compass Bancshares, Inc. to BBVA USA Bancshares, Inc. During 2019, the Bank began the process of transitioning away from the use of the “BBVA Compass” name and rebranding as “BBVA.”

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Developing and maintaining awareness and integrity of the Company and the Company's brand are important to achieving widespread acceptance of our existing and future offerings and are important elements in attracting new customers. The importance of brand recognition will increase as competition in the Company's market further intensifies. Successful promotion of the Company's brand will depend on the effectiveness of the Company's marketing efforts and on the Company's ability to provide reliable and useful banking solutions. The Company plans to continue investing substantial resources to promote the Company's brand, but there is no guarantee that the Company will be able to achieve or maintain brand name recognition or status under the new brand, “BBVA,” that is comparable to the recognition and status previously enjoyed by the “BBVA Compass” brand. Even if the Company's brand recognition and loyalty increases, this may not result in increased use of the Company's products and services or higher revenue.

For these reasons, the Company's rebranding initiative may not produce the benefits expected, could adversely affect the Company's ability to retain and attract customers, and may have a negative impact on the Company's operations, business, financial results and financial condition.

RISKS RELATING TO THE COMPANY'S SECURITIES:

The Company is a subsidiary of BBVA Group, and activities across BBVA Group could adversely affect the Company’s business and results of operations.

The Company is a part of a highly diversified international financial group which offers a wide variety of financial and related products and services including retail banking, asset management, private banking and wholesale banking. The BBVA Group strives to foster a culture in which its employees act with integrity and feel comfortable reporting instances of misconduct. The BBVA Group employees are essential to this culture, and acts of misconduct by any employee, and particularly by senior management, could erode trust and confidence and damage the BBVA Group and the Company’s reputation among existing and potential clients and other stakeholders. Negative public opinion could result from actual or alleged conduct by the BBVA Group entities in any number of activities or circumstances, including operations, employment-related offenses such as sexual harassment and discrimination, regulatory compliance, the use and protection of data and systems, and the satisfaction of client expectations, and from actions taken by regulators or others in response to such conduct.

Spanish judicial authorities are investigating the activities of Centro Exclusivo de Negocios y Transacciones, S.L. (Cenyt). Such investigation includes the provision of services by Cenyt to BBVA. On July 29, 2019, BBVA was named as an investigated party (investigado) in a criminal judicial investigation (Preliminary Proceeding No. 96/2017 - Piece No. 9, Central Investigating Court No. 6 of the National High Court) for alleged facts which could represent the crimes of bribery, revelation of secrets and corruption. As of the date of this Annual Report on Form 10-K, no formal accusation against BBVA has been made. Certain current and former officers and employees of the BBVA Group, as well as former directors of BBVA, have also been named as investigated parties in connection with this investigation. BBVA has been and continues to be proactively collaborating with the Spanish judicial authorities, including sharing with the courts information from its on-going forensic investigation regarding its relationship with Cenyt. BBVA has also testified before the judge and prosecutors at the request of the Central Investigating Court No. 6 of the National High Court. On February 3, 2020, BBVA was notified by the Central Investigating Court No. 6 of the National High Court of the order lifting the secrecy of the proceedings. This criminal judicial proceeding is at a preliminary stage. Therefore, it is not possible at this time to predict the scope or duration of such proceeding or any related proceeding or its or their possible outcomes or implications for the Group, including any fines, damages or harm to the Group’s reputation caused thereby.44

This matter or any similar matters arising across the BBVA Group could damage the Company’s reputation and adversely affect the confidence of the Company’s clients, rating agencies, regulators, bondholders and other parties and could have an adverse effect on the Company’s business, financial condition and operating results.

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

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~~The~~discrimination, ~~Company's~~regulatory ~~financial~~compliance, ~~reporting~~the ~~controls~~use and ~~procedures~~protection ~~may~~of ~~not~~data ~~prevent~~and orsystems, ~~detect~~and ~~all~~the ~~errors~~satisfaction of client expectations, and from actions taken by regulators or ~~fraud~~others in response to such conduct.

~~Financial~~Spanish ~~reporting~~judicial ~~disclosure~~authorities ~~controls~~are ~~and~~investigating ~~procedures~~the ~~are~~activities ~~designed~~of toCentro ~~reasonably~~Exclusivo ~~assure~~de ~~that~~Negocios ~~information~~y ~~required~~Transacciones, toS.L. be(Cenyt). ~~disclosed~~Such byinvestigation includes the ~~Company~~provision of services by Cenyt to BBVA. On 29th July, 2019, BBVA was named as an official suspect (investigado) in a criminal judicial investigation ~~reports~~(Preliminary ~~filed~~Proceeding orNo. ~~submitted~~96/2017 – Piece No. ~~under~~9, Central Investigating Court No. 6 of the ~~Exchange~~National ~~Act~~High isCourt) ~~accumulated~~for ~~and~~alleged ~~communicated~~facts towhich ~~management~~could be constitutive of bribery, revelation of secrets and ~~recorded~~corruption. On February 3, ~~processed~~2020, ~~summarized~~BBVA ~~and~~was ~~reported~~notified ~~within~~by the ~~time~~Central ~~periods~~Investigating ~~specified~~Court inNo. 6 of the ~~SEC's~~National ~~rules~~High Court of the order lifting the secrecy of the proceedings. Certain current and ~~forms~~former officers and employees of the BBVA Group, as well as former directors have also been named as investigated parties in connection with this investigation. ~~Any~~BBVA ~~disclosure~~has ~~controls~~been and ~~procedures~~continues ~~over~~to ~~financial~~be ~~reporting~~proactively orcollaborating with the Spanish judicial authorities, including sharing with the courts the relevant information obtained in the internal ~~controls~~investigation ~~and~~hired ~~procedures~~by the entity in 2019 to contribute to the clarification of the facts. As of the date of this Annual Report on Form 10-K, no ~~matter~~formal ~~how~~accusation ~~well~~against ~~conceived~~BBVA ~~and~~has ~~operated,~~been ~~can~~made. ~~provide~~This ~~only~~criminal ~~reasonable~~judicial proceeding is in the pre-trial phase. Therefore, it is not ~~absolute,~~possible ~~assurance~~at ~~that~~this time to predict the ~~objectives~~scope or duration of such proceeding or any related proceeding or its or their possible outcomes or implications for the ~~control~~BBVA Group, including ~~system~~any ~~are~~fines, ~~met~~damages or harm to the BBVA´s Group reputation caused thereby.

~~These~~This ~~inherent~~matter ~~limitations~~or ~~include~~any ~~the~~similar ~~realities~~matters ~~that~~arising ~~judgments~~across inthe ~~decision-making~~BBVA ~~can~~Group becould ~~faulty,~~damage ~~and~~the ~~that~~Company’s ~~breakdowns~~reputation ~~can~~and ~~occur~~adversely ~~because~~affect ofthe ~~simple~~confidence ~~error~~of orthe ~~mistake.~~Company’s ~~Additionally~~clients, ~~controls~~rating ~~can~~agencies, ~~be circumvented by the individual acts of some persons~~regulators, bybondholders ~~collusion~~and ofother ~~two~~parties orand ~~more~~could ~~people~~have ~~or by~~ an ~~unauthorized~~adverse ~~override~~effect ofon the ~~controls.~~Company’s ~~Accordingly~~business, ~~because~~financial ofcondition ~~the inherent limitations in the control system, misstatements due to error or fraud may occur~~ and ~~not~~operating ~~be detected~~results.

Volatile or declining oil prices could adversely affect the Company's performance.

As of December 31, 2019, energy-related loan balances represented approximately 4.5 percent of the Bank’s total loan portfolio. This amount is comprised of loans directly related to energy, such as exploration and production, pipeline transportation of natural gas, crude oil and other refined petroleum products, oil field services, and refining and support. In late 2014, oil prices began to decline and continued to decline through the first half of 2016, which has had an adverse effect on some of the Bank’s borrowers in this portfolio and on the value of the collateral securing some of these loans. If oil prices decline in a material way, the cash flows of the Bank’s customers in this industry could be adversely impacted which could impair their ability to service any loans outstanding to them and/or reduce demand for loans. These factors could result in higher delinquencies and greater charge-offs in future periods, which could adversely affect the Company's business, financial condition or results of operations.

Furthermore, energy production and related industries represent a significant part of the economies in some of the Bank’s primary markets. A prolonged period of low or volatile oil prices could have a negative impact on the economies and real estate markets of states such as Texas, which could adversely affect the Company's business, financial condition or results of operations.

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 increased 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 minimum ratio of CET1 capital to risk weighted assets of 4.5 percent and a CET1 capital conservation buffer of greater than 2.5 percent of risk-weighted assets that applies to all U.S. banking

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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.

The Company has also been required to submit a periodic capital plan to the Federal Reserve Board under the CCAR process, subject to Dodd-Frank Act stress testing requirements and additional liquidity requirements. As a result of the Tailoring Rules, however, the Company and the Bank are no longer subject to CCAR, Dodd-Frank Act stress testing and the LCR. If, however, the Company becomes a Category IV U.S. IHC under the Tailoring Rules, it will again be subject to certain modified forms of these requirements that applied to the Company in past years.

In addition, BBVA designated the Parent as its IHC to comply with the Federal Reserve Board's final rule to enhance its supervision and regulation of the U.S. operations of Large FBOs. The Company is subject to U.S. risk-based and leverage capital, liquidity, risk management, and other enhanced prudential standards on a consolidated basis under this rule, as amended by the Tailoring Rules. BBVA's combined U.S. operations (including its U.S. branches, agencies and subsidiaries) are also subject to certain enhanced prudential standards. These enhanced prudential standards could affect the Company’s operations.

Please refer to Item 1. Business - Supervision, Regulation and Other Factors for more information.

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 Board 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.

~~Disruptions~~RISKS inRELATING ~~the~~TO ~~Company's~~THE ~~ability to access capital markets may adversely affect its capital resources and liquidity.~~MERGER:

The Company's ~~may~~ability ~~access capital markets~~ to ~~provide~~complete itthe Merger with ~~sufficient~~PNC ~~capital~~is ~~resources~~subject ~~and liquidity~~ to ~~meet its commitments and business needs, and to accommodate~~ the ~~transaction~~receipt ~~and cash management needs~~ of ~~its~~consents ~~clients. Other sources of contingent funding available to the Company include inter-bank borrowings, brokered deposits, repurchase agreements, FHLB capacity~~ and ~~borrowings~~approvals from ~~the~~regulatory ~~Federal~~agencies ~~Reserve~~which ~~discount~~may ~~window.~~impose ~~Any~~conditions ~~occurrence~~ that ~~may~~could 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~~or ~~costs~~cause ~~and~~the ~~its~~Merger ~~ability~~ to ~~raise~~be ~~capital and, in turn, its liquidity~~abandoned.

~~Disruptions~~On inNovember ~~the~~15, ~~liquidity~~2020, ofPNC ~~financial~~entered ~~markets~~into ~~may~~a ~~directly~~Stock ~~impact~~Purchase Agreement with BBVA for the ~~Company~~purchase toby PNC of 100% of the ~~extent~~issued itand ~~needs~~outstanding toshares ~~access~~of ~~capital~~the ~~markets~~Company. PNC tois ~~raise~~not ~~funds~~acquiring toBSI, ~~support~~Propel ~~its~~Venture ~~business~~Partners Fund I, L.P. and ~~overall~~BBVA ~~liquidity~~Processing ~~position~~Services, Inc. ~~This~~Immediately ~~situation~~following ~~could~~the ~~adversely~~closing ~~affect~~of the ~~cost~~Stock ofPurchase, ~~such~~PNC ~~funds~~intends orto merge the ~~Company's~~Parent ~~ability~~with toand ~~raise~~into ~~such~~PNC, ~~funds.~~with IfPNC continuing as the ~~Company~~surviving ~~were~~entity. ~~unable~~Post-closing, PNC intends to ~~access~~merge ~~any~~BBVA ofUSA ~~these~~with ~~funding~~and ~~sources~~into ~~when~~PNC ~~needed~~Bank, itNational ~~might~~Association, bean ~~unable~~indirect towholly ~~meet~~owned ~~customers'~~subsidiary ~~needs~~of PNC, ~~which~~with ~~could~~PNC ~~adversely~~Bank ~~impact~~continuing ~~its~~as ~~financial~~the ~~condition,~~surviving ~~results~~entity of(the ~~operations~~foregoing transactions, ~~cash~~collectively, ~~flows~~the ~~and level of regulatory-qualifying capital~~“Merger”).

~~The~~Before ~~value~~the Merger may be completed, various governmental approvals or consents must be obtained, including from the Federal Reserve Board and other bank regulatory agencies. These regulators may impose conditions on the completion of the Merger. Although the Company’s ~~goodwill~~does ~~may~~not ~~decline~~currently inexpect that any significant conditions would be imposed, there can be no assurance that there will not be, and such conditions could have the ~~future~~effect of delaying completion of the Merger or imposing additional costs on the completion of the Merger. There can be no assurance as to whether the regulatory approvals will be received, the timing of those approvals, or whether any conditions will be imposed.

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The Company ~~depends~~will onbe ~~the~~subject ~~expertise~~to ofbusiness ~~key~~uncertainties ~~personnel,~~ and ~~its~~contractual ~~operations~~restrictions ~~may~~while ~~suffer~~the ifMerger itis ~~fails to attract and retain skilled personnel~~pending.

~~The~~Uncertainty ~~Company's~~about ~~success~~the ~~depends,~~effect inof ~~large~~the ~~part,~~Merger on ~~its~~associates and customers may have an adverse effect on the Company. These uncertainties may impair the Company’s ability to attract, retain and ~~retain~~motivate key ~~individuals.~~personnel ~~Competition~~until ~~for~~the ~~qualified~~Merger ~~candidates~~is incompleted, ~~the~~and ~~activities~~could cause customers and ~~markets~~others that deal with the Company ~~serves~~to isseek ~~great~~to ~~and~~change itexisting ~~may~~business ~~not~~relationships bewith ~~able~~the Company. In addition, subject to ~~hire~~certain ~~these~~exceptions, ~~candidates~~the ~~and~~Company ~~retain~~has ~~them.~~agreed Ifto operate its business in the ordinary course prior to the closing, and the Company is ~~not~~restricted ~~able~~from tomaking ~~hire~~certain oracquisitions ~~retain~~and ~~these~~taking ~~key~~other ~~individuals,~~specified itactions ~~may~~without bethe ~~unable~~consent toof ~~execute~~PNC ~~its~~until ~~business~~the ~~strategies~~Merger ~~and~~is completed. These restrictions may ~~suffer~~prevent ~~adverse~~the ~~consequences~~Company tofrom ~~its~~pursuing attractive business, ~~operations~~opportunities ~~and~~that ~~financial~~may ~~condition~~arise prior to the completion of the Merger.

InFailure ~~June 2010, the federal banking regulators issued joint guidance on executive compensation designed~~ to ~~help~~complete ~~ensure that a banking organization's incentive compensation policies do not encourage imprudent risk taking and are consistent with~~ the ~~safety~~Merger ~~and~~could ~~soundness~~negatively ofimpact the ~~organization~~Company. In addition, the Dodd-Frank Act requires those agencies, along with the SEC, to adopt rules affecting the structure and reporting of incentive compensation. The federal banking regulators and SEC proposed such rules in 2011 and issued revised proposed rules in 2016.

AsIf ~~a wholly owned subsidiary of BBVA,~~ the ~~Company~~Merger is ~~also~~not ~~required~~completed tofor ~~comply~~any ~~with the European Union’s CRD-IV~~reason, ~~which,~~there ~~among~~may ~~other~~be ~~things,~~various ~~impacts~~adverse ~~the~~consequences ~~variable compensation of certain risk-takers~~ and ~~highly compensated individuals in~~ the Company ormay ~~its~~experience ~~subsidiaries. In~~negative ~~accordance~~reactions ~~with~~from ~~CRD-IV,~~ the ~~Bank~~financial ~~pays~~markets ~~variable~~and ~~compensation~~from ofits ~~certain~~customers ~~employees half in stock~~ and ~~half in cash~~associates. ~~Additionally,~~ inFor ~~accordance with CRD-IV~~example, ~~from~~the ~~40%~~Company’s tobusiness ~~50%~~may ~~(depending~~have onbeen ~~the~~impacted ~~classification~~adversely ofby the ~~employee),~~failure ofto ~~such~~pursue ~~payment~~other isbeneficial ~~deferred~~opportunities ~~for~~due ~~three years. The deferred amounts are subject~~ to ~~performance indicators and a malus clause, which could result in~~ the ~~reduction~~focus orof ~~forfeiture~~management ofon the ~~deferred~~Merger, ~~amounts. The~~without ~~equity~~realizing ~~awards~~any ~~are subject to an additional one-year holding period after delivery. Most~~ of the ~~Company’s~~anticipated ~~competitors~~benefits ~~are~~of ~~not~~completing ~~subject~~the ~~to CRD-IV~~Merger.

IfAdditionally, the Company ishas ~~unable~~incurred ~~to attract~~ and ~~retain~~will ~~qualified~~incur ~~employees,~~substantial orexpenses doin soconnection atwith ~~rates~~the ~~necessary~~negotiation toand ~~maintain~~completion ~~its~~of ~~competitive~~the ~~position,~~transactions ~~or if compensation costs~~ required to ~~attract~~effect ~~and~~the ~~retain~~Merger. ~~employees~~If ~~become~~the ~~more~~Merger ~~expensive~~is not completed, the Company's ~~performance,~~would ~~including~~have ~~its~~to ~~competitive~~pay ~~position,~~these ~~could~~expenses bewithout ~~materially~~realizing ~~adversely~~the ~~affected~~expected benefits of the Merger.

~~Unpredictable catastrophic events could have a material adverse effect on the Company.~~46

Changes in accounting standards could impact reported earnings.

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Item 1B. Unresolved Staff Comments

Not Applicable.

Item 2. Properties

The Company occupies various facilities principally located in Alabama, Arizona, California, Colorado, Florida, New Mexico and Texas and in states where it operates loan production offices that are used in the normal course of the financial services business. The properties consist of both owned and leased properties and include land for future banking center sites. The leased properties include both land and buildings that are generally under long-term leases. The Company leases office space used as the Company's principal executive offices in Houston, Texas. The Bank has significant operations in Birmingham, Alabama. The Company owns the land and building where the Bank is headquartered. See Note 5, Premises and Equipment, in the Notes to the Consolidated Financial Statements, for additional disclosures related to the Company’s properties.

Item 3. Legal Proceedings

See under “Legal and Regulatory Proceedings” in Note 15, Commitments, Contingencies and Guarantees, in the Notes to the Consolidated Financial Statements.

Item 4. Mine Safety Disclosures

Not Applicable.

Part II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Market Information

The Parent's common stock is not traded on any exchange or other interdealer electronic trading facility and there is no established public trading market for the Parent's common stock.

Holders

As of the date of this filing, BBVA was the sole holder of the Parent's common stock.

Dividends

The payment of dividends on the Parent's common stock is subject to determination and declaration by the Board of Directors of the Parent and regulatory limitations on the payment of dividends. There is no assurance that dividends will be declared or, if declared, what the amount of dividends will be, or whether such dividends will continue. The following table sets forth the common dividends the Parent paid to its sole shareholder, BBVA, for each of the last eight quarters.

	2019				2018
			2020				2019
	~~(In Thousands)~~		(In Thousands)
Quarter Ended:
March 31	$	—	$	—	$	—	$	—
June 30	~~170,000~~		—		~~110,000~~		170,000
September 30	—		—		—		—
December 31	~~312,000~~		—		~~145,000~~		312,000
Year	$	~~482,000~~	$	—	$	~~255,000~~	$	482,000

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A discussion of dividend restrictions is provided in Item 1. Business - Overview - Supervision, Regulation, and Other Factors - Dividends and in Note 16, Regulatory Capital Requirements and Dividends from Subsidiaries, in the Notes to the Consolidated Financial Statements.

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Recent Sales of Unregistered Securities

Not Applicable.

4448

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Item 6. Selected Financial Data

The following table sets forth summarized historical consolidated financial information for each of the periods indicated. This information should be read together with Management's Discussion and Analysis of Financial Condition and Results of Operations below and with the accompanying Consolidated Financial Statements included in this Annual Report on Form 10-K. The historical information indicated as of and for the years ended December 31, ~~2019~~2020 through ~~2015~~2016, has been derived from the Company's audited Consolidated Financial Statements for the years ended December 31, ~~2019~~2020 through ~~2015~~2016. Historical results set forth below and elsewhere in this Annual Report on Form 10-K are not necessarily indicative of future performance.

	~~Years Ended December 31,~~		Years Ended December 31,
	2019				2018			2017			2016				2015
			2020					2019					2018					2017			2016
	~~(Dollars in Thousands)~~		(Dollars in Thousands)
Summary of Operations:
Interest income	$	~~3,558,656~~	$	2,981,028	$	~~3,265,274~~		$	23,~~766~~558,~~648~~656		$	~~2,530,459~~	$	3,265,274	$	~~2,438,275~~		$	2,766,648		$	2,530,459
Interest expense	~~951,623~~		470,504		~~658,696~~			~~436~~951,~~481~~623			~~462,778~~		658,696		~~425,298~~			436,481			462,778
Net interest income	~~2,607,033~~		2,510,524		~~2,606,578~~			2,~~330~~607,~~167~~033			~~2,067,681~~		2,606,578		~~2,012,977~~			2,330,167			2,067,681
Provision for loan losses	597,444				365,420			287,693			302,589				193,638
Provision for credit losses			966,129					597,444					365,420					287,693			302,589
Net interest income after provision for loan losses	2,009,589				2,241,158			2,042,474			1,765,092				1,819,339
Net interest income after provision for credit losses			1,544,395					2,009,589					2,241,158					2,042,474			1,765,092
Noninterest income	~~1,135,944~~		1,192,672		~~1,056,909~~			1,~~045~~135,~~975~~944			~~1,055,974~~		1,056,909		~~1,079,374~~			1,045,975			1,055,974
Noninterest expense, including goodwill impairment (1)	~~2,866,080~~		4,561,718		~~2,349,960~~			2,~~311~~866,~~587~~080			~~2,303,522~~		2,349,960		~~2,214,853~~			2,311,587			2,303,522
Net income before income tax expense	279,453				948,107			776,862			517,544				683,860
Net (loss) income before income tax expense			(1,824,651)					279,453					948,107					776,862			517,544
Income tax expense	~~126,046~~		37,013		~~184,678~~			~~316~~126,~~076~~046			~~146,021~~		184,678		~~176,502~~			316,076			146,021
Net income	153,407				763,429			460,786			371,523				507,358
Net (loss) income			(1,861,664)					153,407					763,429					460,786			371,523
Noncontrolling interest	~~2,332~~		2,047		~~1,981~~			2,~~005~~332			~~2,010~~		1,981		~~2,228~~			2,005			2,010
Net income attributable to BBVA USA Bancshares, Inc.	$	151,075			$	761,448		$	458,781		$	369,513			$	505,130
Net (loss) income attributable to BBVA USA Bancshares, Inc.			$	(1,863,711)				$	151,075				$	761,448				$	458,781		$	369,513
Summary of Balance Sheet:
Period-End Balances:
As of the Period-End:
Debt securities	$	~~14,032,351~~	$	16,297,042	$	~~13,866,829~~		$	1314,~~265~~032,~~725~~351		$	~~12,448,455~~	$	13,866,829	$	~~11,845,573~~		$	13,265,725		$	12,448,455
Loans and loans held for sale	~~64,058,915~~		65,796,353		~~65,255,320~~			6164,~~690~~058,~~878~~915			~~60,223,112~~		65,255,320		~~61,394,666~~			61,690,878			60,223,112
Allowance for loan losses	~~(920,993~~		(1,679,474)		~~(885,242~~		)	(~~842~~920,~~760~~993)		)	~~(838,293~~		(885,242)		~~(762,673~~		)	(842,760)			(838,293)
Total assets	~~93,603,347~~		102,756,203		~~90,947,174~~			8793,~~320~~603,~~579~~347			~~87,079,953~~		90,947,174		~~90,068,538~~			87,320,579			87,079,953
Deposits	~~74,985,283~~		85,858,381		~~72,167,987~~			6974,~~256~~985,~~313~~283			~~67,279,533~~		72,167,987		~~65,981,766~~			69,256,313			67,279,533
FHLB and other borrowings	~~3,690,044~~		3,548,492		~~3,987,590~~			3,~~959~~690,~~930~~044			~~3,001,551~~		3,987,590		~~5,438,620~~			3,959,930			3,001,551
Shareholder's equity	~~13,386,589~~		11,691,362		~~13,512,529~~			13,~~013~~386,~~310~~589			~~12,750,707~~		13,512,529		~~12,624,709~~			13,013,310			12,750,707
Average Balances:
Loans and loans held for sale	$	~~64,275,473~~	$	67,045,078	$	~~63,761,869~~		$	6064,~~419~~275,~~711~~473		$	~~61,505,935~~	$	63,761,869	$	~~60,176,687~~		$	60,419,711		$	61,505,935
Total assets	~~94,293,422~~		102,008,134		~~89,576,037~~			8794,~~358~~293,~~298~~422			~~91,064,360~~		89,576,037		~~88,389,179~~			87,358,298			91,064,360
Deposits	~~73,007,106~~		82,426,860		~~70,149,887~~			6673,~~627~~007,~~368~~106			~~67,904,564~~		70,149,887		~~63,538,900~~			66,627,368			67,904,564
FHLB and other borrowings	~~3,968,094~~		3,605,422		~~4,095,054~~			3,~~973~~968,~~465~~094			~~4,226,225~~		4,095,054		~~5,701,974~~			3,973,465			4,226,225
Shareholder's equity	~~13,894,163~~		12,003,167		~~13,266,930~~			13,~~035~~894,~~797~~163			~~12,818,572~~		13,266,930		~~12,368,866~~			13,035,797			12,818,572
Selected Ratios:
Return on average total assets	~~0.16~~		%(1.83)		~~0.85~~%		%	0.5316		%	~~0.41~~		%0.85		~~0.57~~%		%	0.53		%	0.41		%
Return on average total equity	~~1.10~~		(15.51)		~~5.75~~			31.5310			~~2.90~~		5.75		~~4.10~~			3.53			2.90
Average equity to average assets	~~14.74~~		11.77		~~14.81~~			14.9274			~~14.08~~		14.81		~~13.99~~			14.92			14.08

(1) Noninterest expense for the years ended December 31, 2020, 2019, ~~2016~~ and ~~2015~~2016 includes goodwill impairment of $~~470~~2.02 ~~million~~billion, $59470.90 million, and $1759.09 million, respectively.

4549

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The purpose of this discussion is to focus on significant changes in the financial condition and results of operations of the Company during the years ended December 31, ~~2019~~2020, ~~2018~~2019 and ~~2017~~2018. The Executive Overview summarizes information management believes is important for an understanding of the financial condition and results of operations of the Company. Topics presented in the Executive Overview are discussed in more detail within, and should be read in conjunction with, this Management’s Discussion and Analysis of Financial Condition and Results of Operations and the accompanying Consolidated Financial Statements included in this Annual Report on Form 10-K. The discussion of the critical accounting policies and analysis set forth below is intended to supplement and highlight information contained in the accompanying Consolidated Financial Statements and the selected financial data presented elsewhere in this Annual Report on Form 10-K.

Executive Overview

Financial Performance

Consolidated net (loss) income attributable to the Company for ~~2019~~2020 was $~~151.~~(1.9) ~~million~~billion compared to $~~761~~151.41 million earned during ~~2018~~2019. The Company's ~~2019~~2020 results reflected lower net interest income, higher ~~noninterest~~provision ~~expense~~for asloan alosses, ~~result~~higher ofnoninterest aexpense, which includes $~~470~~2.2 ~~million~~billion of goodwill impairment, ~~charge~~offset ~~and~~by higher ~~provision~~noninterest ~~for loan losses~~income.

Net interest income ~~was~~totaled $2.65 billion in ~~both~~2020 ~~2019~~ and ~~2018~~$2.6 billion in 2019. The net interest margin for ~~2019~~2020 was 32.1773% compared to 3.3017% for ~~2018~~2019. Net interest margin in ~~2019~~2020 was primarily impacted by ~~higher~~the ~~funding~~timing ~~costs~~of the Federal Reserve Board's decrease of benchmark rates in October of 2019 and in March of 2020.

~~The~~Provision ~~provision~~ for ~~loan~~credit losses was $~~597~~966.41 million for ~~2019~~2020 compared to $~~365~~597.4 million for ~~2018~~2019. ~~The~~ ~~increase~~For in2020, provision for ~~loan~~credit losses was comprised of $965.8 million of provision for ~~2019~~loan ~~was~~losses ~~primarily~~and ~~driven~~$331 bythousand ~~higher~~of provision for HTM security losses. The increase in ~~the~~provision ~~consumer~~for ~~direct~~ loan ~~portfolio~~losses asin ~~well~~2020 asreflected an increase in expected losses inover the ~~commercial,~~life ~~financial~~of ~~and~~the ~~agricultural loan~~ portfolio. ~~Net~~The ~~charge~~primary drivers of this increase was the impact of the COVID-~~offs~~19 ~~for~~pandemic ~~2019~~on ~~totaled~~economic ~~$561.7~~conditions ~~million~~which ~~compared~~impacted tothe ~~$322~~Company's economic forecast.9 ~~million~~During ~~for~~2020, ~~2018. The~~economic ~~primary~~conditions ~~driver~~deteriorated ofdue to the ~~increase~~impact inof ~~net~~the ~~charge~~COVID-~~offs~~19 ~~was~~health crisis. As a ~~$110.6~~result, ~~million~~economic ~~increase~~projections infor ~~consumer~~gross ~~direct~~domestic ~~net~~product ~~charge-offs~~declined asdramatically ~~well~~and asunemployment anlevels ~~$86.7~~increased ~~million~~significantly ~~increase~~with ininformation ~~commercial,~~related ~~financial,~~to ~~and~~the ~~agricultural~~evolving ~~net~~impact ~~charge~~of the COVID-~~offs,~~19 ~~$22~~health crisis.7 ~~million~~Additionally, ~~increase~~provision infor ~~credit~~loan ~~card~~losses ~~net~~was ~~charge-offs,~~impacted ~~and~~by athe ~~$14.5~~higher ~~million~~reserves ~~increase~~ in ~~consumer~~the ~~indirect~~energy ~~net~~portfolio ~~charge-offs~~due to the decrease in oil prices.

~~Noninterest~~The ~~income~~Company ~~was~~recorded ~~$1.1~~net ~~billion~~charge-offs ~~for both 2019 and 2018, a slight increase~~ of $79392.02 million~~. The~~ ~~increase~~during in2020 ~~noninterest~~compared ~~income~~to ~~was driven by a~~ $22561.67 million ~~increase~~during in2019. ~~card~~The ~~and~~decrease ~~merchant~~was ~~processing~~due ~~fees,~~to aan $1354.75 million ~~increase~~decrease in ~~service~~commercial, ~~charges on deposit accounts~~financial, aand ~~$7.5~~agricultural ~~million~~net ~~increase~~charge-offs inas ~~money~~well ~~transfer~~as ~~income,~~ a $686.04 million ~~increase~~decrease in ~~investment~~consumer ~~banking~~direct ~~and~~net ~~advisory~~charge-offs ~~fees~~ and a $3039.08 million ~~increase in investment securities gains which were partially offset by $13.1 million~~ decrease in ~~corporate~~consumer ~~and~~indirect ~~correspondent~~net ~~investment sales~~charge-offs.

Noninterest ~~expense~~income ~~increased~~was $~~516.~~1.2 ~~million~~billion tofor 2020 and $21.91 billion for 2019, ~~compared~~a toslight ~~2018. The~~ increase inof ~~noninterest expense was primarily attributable to a~~ $~~470~~56.07 million. ~~goodwill~~The ~~impairment~~increase ~~related~~in tototal ~~the~~noninterest ~~Corporate~~income ~~and~~was ~~Investment~~driven ~~Banking~~by ~~reporting unit. Also, contributing to the increase was~~ a $2754.14 million increase in ~~salaries,~~investment ~~benefits~~banking and ~~commissions,~~advisory ~~a $15.8 million increase in professional services~~fees, a $67.14 million increase in money transfer ~~expense~~income, a $646.38 million increase inmortgage ~~marketing~~banking income, and a $4510.98 million increase in ~~other~~corporate ~~noninterest~~and ~~expense.~~correspondent ~~Partially~~investment ~~offsetting~~sales ~~the~~partially ~~increase~~offset ~~was~~by a $3930.86 million decrease in ~~FDIC~~service ~~insurance~~charges on deposit accounts and ana $821.83 million decrease in ~~communications~~other ~~expense~~noninterest income.

~~Income~~Noninterest ~~tax~~ expense ~~was~~increased $~~126~~1.07 ~~million~~billion to $4.6 billion for ~~2019~~2020 compared to 2019. The increase in noninterest expense was primarily attributable to a $~~184~~2.72 ~~million~~billion ~~for~~goodwill ~~2018~~impairment. ~~This~~ ~~resulted~~Also, incontributing anto ~~effective~~the ~~tax~~increase ~~rate~~was ofa 45$13.1%9 ~~for~~million ~~2019~~increase ~~and~~in professional services, a 19$6.5% ~~effective~~million ~~tax~~increase ~~rate~~in ~~for~~money ~~2018~~transfer expense, and a $7.3 ~~The~~million increase in ~~the~~FDIC ~~effective~~insurance. Partially ~~tax~~offsetting ~~rate~~the increase was ~~primarily~~a ~~driven~~$15.0 bymillion ~~lower~~decrease ~~net~~in ~~income~~marketing, ~~combined~~and ~~with~~a an$17.0 ~~unfavorable~~million ~~permanent~~decrease ~~difference~~in ~~related~~other tononinterest ~~goodwill impairment~~expense.

~~The~~Income ~~Company's~~tax ~~total~~expense ~~assets~~was ~~at December 31, 2019 were~~ $9337.60 ~~billion,~~million anfor ~~increase~~2020 ofcompared to $2126.70 ~~billion~~million ~~from~~for ~~December 31, 2018 levels~~2019. This ~~Total~~resulted ~~loans~~in ~~excluding~~an ~~loans~~effective ~~held~~tax ~~for~~rate ~~sale~~of ~~were $63~~(2.90)% ~~billion~~for at2020 ~~December 31,~~and ~~2019,~~ a ~~decrease of $1~~45.~~2 billion or~~ 1.9% ~~from~~effective ~~December 31,~~tax ~~2018~~rate ~~levels~~for 2019. The ~~decrease~~effective intax ~~loans~~rate for 2020 was primarily ~~due~~driven toby the ~~sale~~unfavorable ofpermanent ~~approximately~~difference ~~$1.1~~related ~~billion in commercial loans~~ to ~~BBVA,~~goodwill Simpairment.~~A. New York Branch and loan production volumes.~~

~~Deposits~~The ~~increased~~Company's total assets at December 31, 2020 were $2102.8 billion, oran 3.increase of $9%.2 ~~compared~~billion tofrom December 31, ~~2018,~~2019 ~~driven~~levels. byTotal anloans ~~increase~~excluding inloans ~~transaction~~held ~~accounts~~for ~~which~~sale ~~increased~~were 11$65.~~5%.~~6 billion at December 31, 2020, an

~~Total shareholder's equity at December 31, 2019 was $13.4 billion, a decrease of $126 million compared to December 31, 2018.~~ 50

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increase of $1.6 billion or 2.5% from December 31, 2019 levels. The increase was primarily driven by $3.1 billion of SBA PPP loans that the Company has facilitated to assist its commercial customers during the COVID-19 pandemic.

Deposits increased $10.9 billion or 14.5% compared to December 31, 2019, driven by an increase in transaction accounts which increased 29.0%.

Total shareholder's equity at December 31, 2020 was $11.7 billion, a decrease of $1.7 billion compared to December 31, 2019.

The COVID-19 pandemic has caused and continues to cause significant, unprecedented disruption around the world that has affected daily living and negatively impacted the global economy. The pandemic has resulted in temporary closures of many businesses and the institution of social distancing and shelter in place requirements in many states and communities, which has increased unemployment levels and caused extreme volatility in the financial markets. As further discussed in “Analysis of Results of Operations,” during the fiscal year, the Company observed the impact of the pandemic on its business. The reduction in interest rates and economic forecast uncertainty that negatively impacted the provision for credit losses had the most immediate, negative impacts on the Company’s performance. Though the Company is unable to estimate the extent of the impact, the continuing pandemic and related global economic crisis will adversely impact the Company’s future operating results.

COVID-19 Pandemic Government Responses and Regulatory Developments

Government Response to COVID-19

Congress, the Federal Reserve Board and the other U.S. state and federal financial regulatory agencies have taken actions to mitigate disruptions to economic activity and financial stability resulting from COVID-19. The descriptions below summarize certain significant government actions taken in response to the COVID-19 pandemic. The descriptions are qualified in their entirety by reference to the particular statutory or regulatory provisions or government programs summarized.

The CARES Act

The CARES Act was signed into law on March 27, 2020, and has subsequently been amended several times. Among other provisions, the CARES Act includes funding for the SBA to expand lending, relief from certain U.S. GAAP requirements to allow COVID-19-related loan modifications to not be categorized as troubled debt restructurings and a range of incentives to encourage deferment, forbearance or modification of consumer credit and mortgage contracts. One of the key CARES Act programs is the Paycheck Protection Program, which temporarily expands the Small Business Administration’s business loan guarantee program. Paycheck Protection Program loans are available to a broader range of entities than ordinary Small Business Administration loans, require deferral of principal and interest repayment, and may be forgiven in an amount equal to payroll costs and certain other expenses during either an eight-week or twenty-four-week covered period.

The CARES Act contains additional protections for homeowners and renters of properties with federally backed mortgages, including a 60-day moratorium on the initiation of foreclosure proceedings beginning on March 18, 2020 and a 120-day moratorium on initiating eviction proceedings effective March 27, 2020. Borrowers of federally backed mortgages have the right under the CARES Act to request up to 360 days of forbearance on their mortgage payments if they experience financial hardship directly or indirectly due to the coronavirus-related public health emergency. Fannie Mae and Freddie Mac have extended their moratorium on foreclosures and evictions for single family federally backed mortgages until at least February 28, 2021.

Also pursuant to the CARES Act, the U.S. Treasury has the authority to provide loans, guarantees and other investments in support of eligible businesses, states and municipalities affected by the economic effects of COVID-19 pandemic. Some of these funds have been used to support the several Federal Reserve Board programs and facilities described below or additional programs or facilities that are established by the Federal Reserve Board under its Section 13(3) authority and meeting certain criteria.

The CARES Act also includes several measures that temporarily adjust existing laws or regulations. These include providing the FDIC with additional authority to guarantee the deposits of solvent insured depository

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institutions held in noninterest-bearing business transaction accounts to a maximum amount specified by the FDIC, reinstating the FDIC’s Temporary Liquidity Guarantee Authority to guarantee debt obligations of solvent insured depository institutions or depository institution holding companies and temporarily allowing the Treasury to fully guarantee money market mutual funds. The CARES Act provides financial institutions with the option to suspend GAAP requirements for COVID-19-related loan modifications that would otherwise constitute troubled debt restructurings and further requires the federal banking agencies to defer to financial institutions’ determinations in making such suspensions.

Federal Reserve Board Actions

The Federal Reserve Board has taken a range of actions to support the flow of credit to households and businesses. For example, on March 15, 2020, the Federal Reserve Board reduced the target range for the federal funds rate to 0 to 0.25% and announced that it would increase its holdings of U.S. Treasury securities and agency mortgage-backed securities and begin purchasing agency commercial mortgage-backed securities. The Federal Reserve Board has stated that it expects to hold interest rates near zero for several years. The Federal Reserve Board has also encouraged depository institutions to borrow from the discount window and has lowered the primary credit rate for such borrowing by 150 basis points while extending the term of such loans up to 90 days. Reserve requirements have been reduced to zero as of March 26, 2020.

In addition, the Federal Reserve Board established a range of facilities and programs to support the U.S. economy and U.S. marketplace participants in response to economic disruptions associated with COVID-19 pandemic. Through these facilities and programs, the Federal Reserve Board, relying on its authority under Section 13(3) of the Federal Reserve Act, has taken steps to directly or indirectly purchase assets from, or make loans to, U.S. companies, financial institutions, municipalities and other market participants. Some of these facilities stopped purchasing assets or making loans as of December 31, 2020.

Federal Reserve Board facilities and programs that expired as of December 31, 2020 included:

•three Main Street Loan Facilities to purchase loan participations, under specified conditions, from banks lending to small and medium U.S. businesses;

•a Primary Market Corporate Credit Facility to purchase corporate bonds directly from, or make loans directly, to eligible participants;

•a Secondary Market Corporate Credit Facility to purchase corporate bonds trading in secondary markets, including from exchange-traded funds, that were issued by eligible participants;

•a Term Asset-Backed Securities Loan Facility to make loans secured by asset-backed securities; and

•a Municipal Liquidity Facility to purchased bonds directly from U.S. state, city and county issuers.

The Federal Reserve Board facilities and programs that will expire on March 31, 2021 include:

•a Paycheck Protection Program Liquidity Facility to provide financing to related to Paycheck Protection Program loans made by banks;

•a Primary Dealer Credit Facility to provide liquidity to primary dealers through a secured lending facility;

•a Commercial Paper Funding Facility to purchase the commercial paper of certain U.S. issuers; and

•a Money Market Mutual Fund Liquidity Facility to purchase certain assets from, or make loans to, financial institutions providing financing to eligible money market mutual funds.

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Capital

The Company's Tier 1 and CET1 ratios were 1213.8361% and 1213.4928%, respectively at December 31, ~~2019~~2020, compared to 12.3383% and 12.0049%, respectively at December 31, ~~2018~~2019, under the U.S. Basel III final rule.

For more information, see “Capital” in this Management’s Discussion and Analysis of Financial Condition and Results of Operations, Item 1. Business - Supervision, Regulation and Other Factors - Capital, and Note 16, Regulatory Capital Requirements and Dividends from Subsidiaries, in the Notes to the Consolidated Financial Statements in this Annual Report on Form 10-K.

Liquidity

The Company’s sources of liquidity include customers’ interest-bearing and noninterest-bearing deposit accounts, loan principal and interest payments, investment securities, and borrowings. As a holding company, the Parent’s primary source of liquidity is the Bank. Due to the net earnings restrictions on dividend distributions, the Bank was not permitted to pay any dividends at December 31, ~~2019~~2020 and ~~2018~~2019 without regulatory approval.

The Parent paid no common dividends ~~totaling $482.0 million~~ to its sole shareholder, BBVA, during ~~2019~~2020.

As noted in Item 1. Business - Supervision, Regulation and Other Factors, ~~the Company is no longer subject to the LCR~~ as a result of the Tailoring Rules, ~~but~~the ~~may~~Company ~~become~~was not subject to the LCR ~~again~~requirements inas ~~the~~of ~~future~~December if31, 2020 but as the Company ~~becomes~~became a Category IV U.S. IHC under the Tailoring Rules as of December 31, 2020, it will be subject to the LCR requirements again in the future. At December 31, ~~2019~~2020, the Company's LCR was ~~145~~144% and was fully compliant with the LCR requirements.

Management believes that the current sources of liquidity are adequate to meet the Company’s requirements and plans for continued growth. For more information, see below under “Liquidity Management” in this Management’s Discussion and Analysis of Financial Condition and Results of Operations, and Note 10, FHLB and Other Borrowings, Note 11, Shareholder's Equity, and Note 15, Commitments, Contingencies and Guarantees, in the Notes to the Consolidated Financial Statements.

Critical Accounting Policies and Estimates

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 the allowance for loan losses and 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.

Allowance for Loan Losses: Management’s policy is to maintain the allowance for loan losses at a ~~level~~ sufficient tolevel ~~absorb~~reflecting ~~estimated~~management's ~~probable~~estimate ~~incurred~~of expected losses inover the ~~loan~~life of the portfolio. Management performs periodic and systematic detailed reviews of its loan portfolio to identify trends and to assess the overall collectability of the loan portfolio. ~~Accounting standards require that loan losses be recorded when management determines it is probable that a loss has been incurred and the amount of the loss can be reasonably estimated.~~

~~Estimates~~Management ~~for~~estimates the allowance ~~for~~balance ~~loan~~using ~~losses~~relevant ~~are~~available ~~determined~~information, byfrom ~~analyzing~~internal ~~historical~~and ~~losses~~external sources, ~~historical~~relating ~~migration~~ to ~~charge-off~~past ~~experience~~events, current ~~trends~~conditions, inand ~~delinquencies~~reasonable and ~~charge-offs,~~supportable ~~the~~forecasts. ~~results~~Historical ofcredit ~~regulatory~~loss ~~examinations~~experience ~~and~~provides ~~changes in~~ the ~~size,~~basis ~~composition~~for ~~and~~the ~~risk~~estimation ~~assessment~~ of ~~the~~expected ~~loan~~credit ~~portfolio~~losses. ~~Also~~ ~~included~~Adjustments into ~~management’s~~historical ~~estimate~~loss ~~for~~information ~~the~~are ~~allowance~~made for ~~loan~~differences ~~losses~~in ~~are~~current ~~considerations~~loan-specific ~~with~~risk ~~respect~~characteristics tosuch ~~the~~as ~~impact~~differences ofin ~~current~~underwriting ~~economic~~standards, ~~events. These~~portfolio ~~events~~mix, ~~may~~delinquency ~~include~~level, ~~but~~or ~~are~~term ~~not~~as ~~limited~~well ~~to,~~as ~~fluctuations~~for changes in ~~overall~~environmental ~~interest~~conditions, such as changes in unemployment rates, ~~political~~gross ~~conditions~~domestic product, ~~legislation~~or ~~that~~other relevant factors. The Company has internally developed a macroeconomic forecast which projects over a four-year reasonable and supportable forecast period. Management may ~~directly~~change orthe ~~indirectly~~horizon ~~affect~~of the ~~banking~~forecast ~~industry~~based ~~and~~on ~~economic~~changes ~~conditions~~in ~~affecting~~sources ~~specific~~of ~~geographical~~forecast ~~areas~~information or management's ability to develop a reasonable and ~~industries~~supportable inforecast. ~~which~~After the reasonable and supportable forecast period, the Company ~~conducts~~reverts ~~business~~to long run historical average default probabilities and loss severities using a linear function, with a variable speed determined on a portfolio basis.

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While management uses the best information available to establish the allowance for loan losses, future adjustments to the allowance for loan losses and methodology may be necessary if economic or other conditions differ substantially from the assumptions used in making the estimates. Such adjustments to original estimates, as necessary, are made in the period in which these factors and other relevant considerations indicate that loss levels vary from previous estimates.

A detailed discussion of the methodology used in determining the allowance for loan losses is included in Note 1, Summary of Significant Accounting Policies, in the Notes to the Consolidated Financial Statements.

Goodwill Impairment: It is the Company’s policy to assess goodwill for impairment at the reporting unit level on an annual basis or between annual assessments if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. Impairment is the condition that exists when the carrying amount of goodwill exceeds its implied fair value.

Accounting standards require management to estimate the fair value of each reporting unit in assessing impairment at least annually. As such, the Company engages an independent valuation expert to assist in the computation of the fair value estimates of each reporting unit as part of its annual assessment. This assessment utilizes a blend of income and market based valuation methodologies.

The impairment testing process conducted by the Company begins by assigning net assets and goodwill to each reporting unit. The Company then completes the impairment test by comparing the fair value of each reporting unit with the recorded book value of its net assets, with goodwill included in the computation of the carrying amount. If the fair value of a reporting unit exceeds its carrying amount, goodwill of that reporting unit is not considered impaired. If the carrying amount of a reporting unit exceeds its fair value, an impairment loss is recognized in an amount equal to that excess.

The computation of the fair value estimate is based upon management’s estimates and assumptions. Although management has used the estimates and assumptions it believes to be most appropriate in the circumstances, it should be noted that even relatively minor changes in certain valuation assumptions used in management’s calculation could result in differences in the results of the impairment test. None of the Company's reporting units were at risk of failing the goodwill impairment test as of December 31, 2020. See “Goodwill” in this Management’s Discussion and Analysis of Financial Condition and Results of Operations and see Note 7, Goodwill, in the Notes to the Consolidated Financial Statements for a detailed discussion of the impairment testing process.

Recently Issued Accounting Standards Not Yet Adopted

Credit Losses

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses, which introduces new guidance for the accounting for credit losses on instruments within its scope. The new approach changes the impairment model for most financial assets, and will require the use of an “expected credit loss” model for financial instruments measured at amortized cost and certain other instruments. This model applies to receivables, loans, debt securities, and off-balance sheet credit exposures. This model requires entities to estimate the lifetime expected credit loss on such instruments and record an allowance that represents the portion of the amortized cost basis that the entity does not expect to collect. This allowance is deducted from the financial asset’s amortized cost basis to present the net amount expected to be collected. The new expected credit loss model will also apply to purchased financial assets with credit deterioration, superseding current accounting guidance for such assets.

The amended guidance also amends the impairment model for available-for-sale debt securities, requiring entities to determine whether all or a portion of the unrealized loss on such securities is a credit loss, and also eliminating the option for management to consider the length of time a security has been in an unrealized loss position as a factor in concluding whether or not a credit loss exists. The amended model states that an entity will recognize an allowance for credit losses on available-for-sale debt securities, instead of a direct reduction of the amortized cost basis of the investment, as required under current guidance. As a result, entities will recognize improvements to estimated credit losses on available-for-sale debt securities immediately in earnings as opposed to in interest income over time. There are also additional disclosure requirements included in this guidance.

In November 2018, the FASB issued ASU 2018-19 and in April, May and November 2019, the FASB issued ASU 2019-04, ASU 2019-05, and ASU 2019-11 respectively, which made minor clarifications to the guidance in ASU 2016-13. The FASB has also established a Transition Resource Group for Credit Losses to evaluate implementation issues arising from the amended guidance and make recommendations to the FASB on which issues may warrant the issuance of additional clarifying guidance.

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The amendments in this ASU are effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2019. Early application of this ASU is permitted. The Company will adopt this standard on January 1, 2020. Adoption will be applied on a modified retrospective basis with the cumulative effect of initially applying the amendments recognized in retained earnings at the date of initial application. However, certain provisions of the guidance are only required to be applied on a prospective basis.

The Company’s implementation process includes data sourcing and validation, loss model development, development of governance processes, development of a qualitative framework, documentation and governance surrounding economic forecast for credit loss purposes, evaluation of technical accounting topics, updates to allowance policies and methodology documentation, development of reporting processes and related internal controls, and overall operational readiness for adoption of the amended guidance, including parallel runs alongside the Company’s current allowance process.

The Company provides updates to senior management and the Audit Committee. These communications provide an update on the status of the implementation project plan and any identified risks.

The Company currently expects the allowance for credit losses to increase by 15-25% upon adoption given that the allowance will be required to cover the expected life of the loan portfolio upon adoption. The expected increase in the allowance for loan losses is largely attributable to the consumer portfolio, given the longer asset duration associated with many of these products. The expected impact is based on loan exposure balances and the Company’s internally developed macroeconomic forecast which projects a relatively stable macroeconomic environment over a four-year reasonable and supportable forecast period. After the forecast period, the Company reverts to longer historical loss experience, adjusted for prepayments, to estimate losses over the remaining life. The extent of this impact is still being evaluated and is subject to change based on continuing review of models and assumptions, refinement of the qualitative framework, resulting analytics, assumptions, methodologies and judgments that are continuing through the first quarter of 2020.

The amended guidance in this ASU eliminates the current accounting model for purchased-credit-impaired loans, but requires an allowance to be recognized for purchased-credit-deteriorated assets (those that have experienced more-than-insignificant deterioration in credit quality since origination). The Company will have no impact from purchased-credit-deteriorated assets upon adoption. Upon adoption, the Company does not expect to record a material allowance with respect to HTM and AFS securities as the portfolios consist primarily of agency-backed securities that inherently have minimal nonpayment risk.

The impact of adoption of this ASU will be reflected as an adjustment to beginning retained earnings, net of income taxes. Federal banking regulatory agencies have provided relief for initial regulatory capital decreases at adoption by allowing the impact to be phased-in over a a three-year period with the impact of adoption completely recognized by the beginning of the fourth year.

Fair Value Measurements

In August 2018, the FASB issued ASU 2018-13, Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurements. The amendments in this ASU modify the disclosure requirements for fair value measurements in Topic 820, Fair Value Measurements. This ASU is effective for fiscal years beginning after December 15, 2019, and for interim periods within those fiscal years. Early adoption is permitted. The Company does not expect the adoption of this standard to have a significant impact on its fair value disclosures.

Internal-Use Software

In August 2018, the FASB issued ASU 2018-15, Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract. The amendments in this ASU align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software and hosting arrangements that include an internal-use software license. This ASU is effective for fiscal years beginning after December 15, 2019, and for interim periods within those fiscal years. Early adoption is permitted. The adoption of this standard will not have a material impact on the financial condition or results of operation of the Company.

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Income Taxes

In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes. The amendments in this ASU simplify the accounting for income taxes. This ASU is effective for fiscal years beginning after December 15, 2020, and for interim periods within those fiscal years. Early adoption is permitted. The ~~Company is currently assessing the impact that the~~ adoption of this standard will have an immaterial impact on the financial condition and results of operations of the Company.

Reference Rate Reform

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform - Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The amendments in this ASU provide optional guidance for a limited period of time to ease the potential burden in accounting for or recognizing the effects of reference rate reform on financial reporting. The amendments in this ASU provide optional expedients and exceptions for applying generally accepted accounting principles to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments in this ASU apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. The expedients and exceptions provided by the amendments do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022, except for hedging relationships existing as of December 31, 2022, that an entity has elected certain optional expedients for and that are retained through the end of the hedging relationship.

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This ASU is effective as of March 12, 2020 through December 31, 2022. The Company is currently assessing the impact of applying the elections in this ASU but has not modified any contracts, hedging relationships, or other transactions.

Analysis of Results of Operations

Consolidated net (loss) income attributable to the Company totaled $~~151.~~(1.9) ~~million~~billion, $~~761~~151.41 million, and $~~458~~761.84 million for ~~2019~~2020, ~~2018~~2019 and ~~2017~~2018, respectively. The Company's ~~2019~~2020 results reflected lower net interest income, higher ~~noninterest~~provision ~~expense~~for asloan alosses, ~~result~~higher ofnoninterest aexpense, which includes $~~470~~2.2 ~~million~~billion of goodwill impairment, ~~charge~~offset ~~and~~by higher ~~provision~~noninterest ~~for loan losses~~income.

Net Interest Income and Net Interest Margin

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

2020 compared to 2019

Net interest income totaled $2.5 billion in 2020 and $2.6 billion in 2019. Net interest income on a fully taxable equivalent basis totaled $2.6 billion in 2020 and $2.7 billion in 2019.

Net interest margin was 2.73% in 2020 compared to 3.17% in 2019. The 44 basis point decrease in net interest margin was primarily driven by the timing of the Federal Reserve Board's decrease of benchmark rates in October of 2019 and in March of 2020.

The fully taxable equivalent yield for 2020 for the loan portfolio was 4.02% compared to 4.89% for the prior year. The 87 basis point decrease was primarily driven by the impact of higher interest rates during the first half of 2019 as the Federal Reserve Board did not lower benchmark rates until the second half of 2019 and in March 2020.

The fully taxable equivalent yield on the total investment securities portfolio was 1.76% for 2020, compared to 2.30% for the prior year. The 54 basis point decrease was a result of lower interest rates for 2020 compared to 2019 as well as higher levels of premium amortization as actual and expected prepayments increased.

The average rate paid on interest bearing deposits was 0.62% for 2020 compared to 1.49% for 2019 and reflects the impact of lower funding costs on interest bearing deposit offerings including savings, money market and CD products.

The average rate on FHLB and other borrowings during 2020 was 1.99% compared to 3.43% for the prior year. The 144 basis point decrease was primarily driven by the impact of lower rate FHLB advances as well as the impact of fair value hedges on other borrowings.

2019 compared to 2018

Net interest income totaled $2.6 billion in both 2019 and 2018. Net interest income on a fully taxable equivalent basis totaled $2.7 billion in both 2019 and 2018.

Net interest margin was 3.17% in 2019 compared to 3.30% in 2018. The 13 basis point decrease in net interest margin was primarily driven by higher funding costs.

The fully taxable equivalent yield for 2019 for the loan portfolio was 4.89% compared to 4.64% for the prior year. The 25 basis point increase was primarily driven by the impact of higher interest rates during the first half of 2019 as the Federal Reserve Board did not begin lowering benchmark rates until July 2019.

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The fully taxable equivalent yield on the total investment securities portfolio was 2.30% for 2019, compared to 2.12% for the prior year. The 18 basis point increase was a result of higher interest rates partially offset by higher levels of premium amortization as actual and expected prepayments have increased.

The average rate paid on interest bearing deposits was 1.49% for 2019 compared to 1.06% for 2018 and reflects the impact of higher funding costs on interest bearing deposit offerings including savings and money market products.

The average rate on FHLB and other borrowings during 2019 was 3.43% compared to 3.18% for the prior year. The 25 basis point increase was primarily driven by the impact of the $600 million issuance of unsecured senior notes in August 2019 as well as the impact of the $1.2 billion issuance of unsecured senior notes in June 2018 .

~~2018 compared to 2017~~ 56

Net interest income totaled $2.6 billion and $2.3 billion in 2018 and 2017, respectively. Net interest income on a fully taxable equivalent basis totaled $2.7 billion and $2.4 billion in 2018 and 2017, respectively. The increase in net interest income was primarily the result of an increase in interest income on loans and investment securities partially offset by an increase in interest expense on interest bearing deposits.

Net interest margin was 3.30% in 2018 compared to 3.10% in 2017. The 20 basis point increase in net interest margin was primarily driven by the impact of higher interest rates.

The fully taxable equivalent yield for 2018 for the loan portfolio was 4.64% compared to 4.17% for the prior year. The 47 basis point increase was primarily driven by the impact of higher interest rates.

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The fully taxable equivalent yield on the total investment securities portfolio was 2.12% for 2018, compared to 1.95% for the prior year. The 17 basis point increase was a result of increases in interest rates. Additionally, as interest rates have increased the amount of premium amortization required has decreased as actual and expected prepayments have decreased.

The yield on other earning assets for 2018 was 2.16% compared to 1.85% for the prior year. The 31 basis point increase between years was primarily due to the impact of higher interest rates.

The average rate paid on interest bearing deposits was 1.06% for 2018 compared to 0.66% for 2017 and reflects the impact of higher interest rates offered on savings and money market products.

The average rate on FHLB and other borrowings during 2018 was 3.18% compared to 2.36% for the prior year. The 82 basis point increase was primarily driven by the impact of higher rate FHLB advances as well as the impact of the $750 million issuance of unsecured senior notes in June 2017 and the $1.2 billion issuance of unsecured senior notes in June 2018.

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The following tables set 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.

Table 3Consolidated Average Balance and Yield/ Rate Analysis
	December 31, 2019							December 31, 2018							December 31, 2017
	Average Balance			Income/Expense		Yield/ Rate		Average Balance			Income/ Expense		Yield/Rate		Average Balance			Income/ Expense		Yield/Rate
	(Dollars in Thousands)
Assets:
Interest earning assets:
Loans (1) (2) (3)	$	64,275,473		$	3,144,471	4.89	%	$	63,761,869		$	2,960,170	4.64	%	$	60,419,711		$	2,521,613	4.17	%
Total debt securities – AFS	8,520,287			168,031		1.97		11,390,313			222,627		1.95		11,769,440			212,730		1.81
Debt securities – HTM (tax exempt) (3)	624,907			22,594		3.62		787,453			27,550		3.50		957,310			34,726		3.63
Debt securities – HTM (taxable)	4,656,678			126,911		2.73		1,511,284			39,797		2.63		163,162			4,402		2.70
Total debt securities - HTM	5,281,585			149,505		2.83		2,298,737			67,347		2.93		1,120,472			39,128		3.49
Trading account securities (3)	110,995			2,953		2.66		122,132			3,212		2.63		1,718,014			27,358		1.59
Other (4) (5)	5,726,895			145,234		2.54		2,947,283			63,580		2.16		2,830,723			52,354		1.85
Total earning assets	83,915,235			3,610,194		4.30		80,520,334			3,316,936		4.12		77,858,360			2,853,183		3.66
Noninterest earning assets:
Cash and due from banks	973,779							691,166							918,995
Allowance for loan losses	(950,306		)					(859,475		)					(840,359		)
Net unrealized loss on investment securities available for sale	(76,200		)					(282,517		)					(113,297		)
Other noninterest earning assets	10,430,914							9,506,529							9,534,599
Total assets	$	94,293,422						$	89,576,037						$	87,358,298
Liabilities:
Interest bearing liabilities:
Interest bearing demand deposits	$	9,048,948		95,709		1.06		$	7,950,561		48,599		0.61		$	7,858,504		27,206		0.35
Savings and money market accounts	28,546,260			354,286		1.24		26,247,253			224,009		0.85		24,924,647			107,106		0.43
Certificates and other time deposits	14,780,464			328,161		2.22		14,784,632			244,682		1.65		12,804,395			165,005		1.29
Total interest bearing deposits	52,375,672			778,156		1.49		48,982,446			517,290		1.06		45,587,546			299,317		0.66
FHLB and other borrowings	3,968,094			136,164		3.43		4,095,054			130,372		3.18		3,973,465			93,814		2.36
Federal funds purchased and securities sold under agreements to repurchase (5)	857,922			36,736		4.28		109,852			8,953		8.15		58,624			16,926		28.87
Other short-term borrowings	14,963			567		3.79		68,423			2,081		3.04		1,703,738			26,424		1.55
Total interest bearing liabilities	57,216,651			951,623		1.66		53,255,775			658,696		1.24		51,323,373			436,481		0.85
Noninterest bearing deposits	20,631,434							21,167,441							21,039,822
Other noninterest bearing liabilities	2,551,174							1,885,891							1,959,306
Total liabilities	80,399,259							76,309,107							74,322,501
Shareholder’s equity	13,894,163							13,266,930							13,035,797
Total liabilities and shareholder’s equity	$	94,293,422						$	89,576,037						$	87,358,298
Net interest income/net interest spread				$	2,658,571	2.64	%				$	2,658,240	2.88	%				$	2,416,702	2.81	%
Net interest margin						3.17	%						3.30	%						3.10	%
Taxable equivalent adjustment				51,538							51,662							86,535
Net interest income				$	2,607,033						$	2,606,578						$	2,330,167

Table 3

~~(1)~~Consolidated ~~Loans~~Average ~~include~~Balance ~~loans~~and ~~held~~Yield/ ~~for~~Rate ~~sale~~Analysis ~~and nonaccrual loans.~~

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


	December 31, 2020						December 31, 2019						December 31, 2018
	Average Balance		Income/Expense		Yield/ Rate		Average Balance		Income/ Expense		Yield/Rate		Average Balance		Income/ Expense		Yield/Rate
	(Dollars in Thousands)
Assets:
Interest earning assets:


Loans (1) (2) (3)	$	67,045,078	$	2,698,114	4.02	%	$	64,275,473	$	3,144,471	4.89	%	$	63,761,869	$	2,960,170	4.64	%


Total debt securities – AFS	5,825,301		58,876		1.01		8,520,287		168,031		1.97		11,390,313		222,627		1.95
Debt securities – HTM (tax exempt) (3)	500,695		15,953		3.19		624,907		22,594		3.62		787,453		27,550		3.50
Debt securities – HTM (taxable)	8,093,187		179,079		2.21		4,656,678		126,911		2.73		1,511,284		39,797		2.63
Total debt securities - HTM	8,593,882		195,032		2.27		5,281,585		149,505		2.83		2,298,737		67,347		2.93
Trading account securities (3)	203,913		3,964		1.94		110,995		2,953		2.66		122,132		3,212		2.63
Securities purchased under agreements to resell (4)	1,207,097		37,896		3.14		857,171		38,089		4.44		129,000		9,375		7.27
Other (5)	10,719,257		31,811		0.30		4,869,724		107,145		2.20		2,818,283		54,205		1.92
Total earning assets	93,594,528		3,025,693		3.23		83,915,235		3,610,194		4.30		80,520,334		3,316,936		4.12
Noninterest earning assets:
Cash and due from banks	888,146						973,779						691,166
Allowance for credit losses	(1,497,922)						(950,306)						(859,475)
Net unrealized gain (loss) on investment securities available for sale	99,960						(76,200)						(282,517)
Other noninterest earning assets	8,923,422						10,430,914						9,506,529
Total assets	$	102,008,134					$	94,293,422					$	89,576,037
Liabilities:
Interest bearing liabilities:
Interest bearing demand deposits	$	13,649,238	54,570		0.40		$	9,048,948	95,709		1.06		$	7,950,561	48,599		0.61
Savings and money market accounts	36,073,927		168,737		0.47		28,546,260		354,286		1.24		26,247,253		224,009		0.85
Certificates and other time deposits	8,196,738		133,806		1.63		14,780,464		328,161		2.22		14,784,632		244,682		1.65

Total interest bearing deposits	57,919,903		357,113		0.62		52,375,672		778,156		1.49		48,982,446		517,290		1.06
FHLB and other borrowings	3,605,422		71,848		1.99		3,968,094		136,164		3.43		4,095,054		130,372		3.18
Federal funds purchased and securities sold under agreements to repurchase (4)	1,249,629		41,018		3.28		857,922		36,736		4.28		109,852		8,953		8.15
Other short-term borrowings	12,158		525		4.32		14,963		567		3.79		68,423		2,081		3.04
Total interest bearing liabilities	62,787,112		470,504		0.75		57,216,651		951,623		1.66		53,255,775		658,696		1.24

Noninterest bearing deposits	24,506,957						20,631,434						21,167,441
Other noninterest bearing liabilities	2,710,898						2,551,174						1,885,891
Total liabilities	90,004,967						80,399,259						76,309,107
Shareholder’s equity	12,003,167						13,894,163						13,266,930
Total liabilities and shareholder’s equity	$	102,008,134					$	94,293,422					$	89,576,037
Net interest income/net interest spread			$	2,555,189	2.48	%			$	2,658,571	2.64	%			$	2,658,240	2.88	%
Net interest margin					2.73	%					3.17	%					3.30	%
Taxable equivalent adjustment			44,665						51,538						51,662
Net interest income			$	2,510,524					$	2,607,033					$	2,606,578

(31)Loans ~~Yields~~include ~~are~~loans ~~stated~~held ~~on a fully taxable equivalent basis assuming the tax rate in effect~~ for ~~each~~sale ~~period~~and ~~presented~~nonaccrual loans.

(42)Interest ~~Includes~~income ~~federal~~includes ~~funds~~loan ~~sold,~~fees ~~securities~~for ~~purchased~~rate ~~under~~calculation ~~agreements to resell, interest bearing deposits, interest bearing deposits with the Federal Reserve and other earning assets~~purposes.

(53)Yields ~~Yield/rate~~are ~~reflects~~stated ~~impact~~on ofa ~~balance~~fully ~~sheet~~taxable ~~offsetting.~~equivalent ~~See~~basis ~~Note~~assuming ~~14,~~the ~~Securities~~tax ~~Financing~~rate ~~Activities~~in effect for each period presented.

52(4)Yield/rate reflects impact of balance sheet offsetting. See Note 14, Securities Financing Activities.

(5)Includes federal funds sold, interest bearing deposits, interest bearing deposits with the Federal Reserve and other earning assets.

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Table 4Volume and Yield/ Rate Variances (1)
	2019 compared to 2018									2018 compared to 2017
	Change due to									Change due to
	Volume			Yield/Rate			Total			Volume			Yield/Rate			Total
	(Dollars in Thousands, yields on a fully taxable equivalent basis)
Interest income on:
Total loans	$	24,011		$	160,290		$	184,301		$	144,656		$	293,901		$	438,557
Total debt securities available for sale	(56,584		)	1,988			(54,596		)	(7,011		)	16,908			9,897
Total debt securities held to maturity	84,510			(2,352		)	82,158			35,400			(7,181		)	28,219
Trading account securities	(296		)	37			(259		)	(35,145		)	10,999			(24,146		)
Other (2)	68,839			12,815			81,654			2,227			8,999			11,226
Total earning assets	$	120,480		$	172,778		$	293,258		$	140,127		$	323,626		$	463,753
Interest expense on:
Interest bearing demand deposits	$	7,494		$	39,616		$	47,110		$	323		$	21,070		$	21,393
Savings and money market accounts	21,062			109,215			130,277			5,969			110,934			116,903
Certificates and other time deposits	(69		)	83,548			83,479			28,075			51,602			79,677
Total interest bearing deposits	28,487			232,379			260,866			34,367			183,606			217,973
FHLB and other borrowings	(4,132		)	9,924			5,792			2,952			33,606			36,558
Federal funds purchased and securities sold under agreements to repurchase	33,917			(6,134		)	27,783			8,962			(16,935		)	(7,973		)
Other short-term borrowings	(1,930		)	416			(1,514		)	(37,542		)	13,199			(24,343		)
Total interest bearing liabilities	56,342			236,585			292,927			8,739			213,476			222,215
Increase (decrease) in net interest income	$	64,138		$	(63,807	)	$	331		$	131,388		$	110,150		$	241,538

Table 4

~~(1)~~Volume ~~The change in interest not solely due to volume or yield/rate is allocated to the volume column~~ and ~~yield~~Yield/~~rate~~ ~~column~~Rate inVariances ~~proportion to their relationship of the absolute dollar amounts of the change in each.~~(1)

(2) Includes federal funds sold, securities purchased under agreement to resell, interest bearing deposits, interest bearing deposits with the Federal Reserve and other earning assets.


	2020 compared to 2019						2019 compared to 2018
	Change due to						Change due to
	Volume		Yield/Rate		Total		Volume		Yield/Rate		Total
	(Dollars in Thousands, yields on a fully taxable equivalent basis)
Interest income on:


Total loans	$	130,797	$	(577,154)	$	(446,357)	$	24,011	$	160,290	$	184,301
Total debt securities available for sale	(42,953)		(66,202)		(109,155)		(56,584)		1,988		(54,596)
Total debt securities held to maturity	79,636		(34,109)		45,527		84,510		(2,352)		82,158
Trading account securities	1,968		(957)		1,011		(296)		37		(259)
Securities purchased under agreements to resell	12,894		(13,087)		(193)		33,681		(4,967)		28,714
Other (2)	63,976		(139,310)		(75,334)		44,198		8,742		52,940
Total earning assets	$	246,318	$	(830,819)	$	(584,501)	$	129,520	$	163,738	$	293,258

Interest expense on:
Interest bearing demand deposits	$	35,045	$	(76,184)	$	(41,139)	$	7,494	$	39,616	$	47,110
Savings and money market accounts	76,115		(261,664)		(185,549)		21,062		109,215		130,277
Certificates and other time deposits	(121,902)		(72,453)		(194,355)		(69)		83,548		83,479

Total interest bearing deposits	(10,742)		(410,301)		(421,043)		28,487		232,379		260,866
FHLB and other borrowings	(11,511)		(52,805)		(64,316)		(4,132)		9,924		5,792
Federal funds purchased and securities sold under agreements to repurchase	14,182		(9,900)		4,282		33,917		(6,134)		27,783
Other short-term borrowings	(115)		73		(42)		(1,930)		416		(1,514)
Total interest bearing liabilities	(8,186)		(472,933)		(481,119)		56,342		236,585		292,927
Increase (decrease) in net interest income	$	254,504	$	(357,886)	$	(103,382)	$	73,178	$	(72,847)	$	331

~~Provision~~(1)The ~~for~~change ~~Loan~~in ~~Losses~~interest not solely due to volume or yield/rate is allocated to the volume column and yield/rate column in proportion to their relationship of the absolute dollar amounts of the change in each.

~~The~~(2)Includes ~~provision~~federal ~~for~~funds ~~loan~~sold, ~~losses~~interest isbearing ~~the~~deposits, ~~charge~~interest tobearing ~~earnings~~deposits ~~that~~with ~~management determines to be necessary to maintain~~ the ~~allowance~~Federal ~~for~~Reserve ~~loan~~and ~~losses~~other atearning ~~a sufficient level reflecting management's estimate of probable incurred losses in the loan portfolio~~assets.

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Provision for Credit Losses

The provision for credit losses is the charge to earnings that management determines to be necessary to maintain the allowance for credit losses at a sufficient level reflecting management's estimate of expected losses over the life of the portfolio. The Company adopted ASC 326 effective January 1, 2020, and recorded a net of tax increase to accumulated deficit of $150.2 million as of January 1, 2020 for the cumulative effect of adoption ASC 326.

2020 compared to 2019

Provision for credit losses was $966.1 million for 2020 compared to $597.4 million for 2019. For 2020, provision for credit losses was comprised of $965.8 million of provision for loan losses and $331 thousand of provision for HTM security losses. The increase in provision for loan losses in 2020 reflected an increase in expected losses over the life of the portfolio. The primary drivers of this increase was the impact of the COVID-19 pandemic on economic conditions which impacted the Company's economic forecast. During 2020, economic conditions deteriorated due to the impact of the COVID-19 health crisis. As a result, economic projections for gross domestic product declined dramatically and unemployment levels increased significantly with information related to the evolving impacts of the COVID-19 health crisis. Additionally, provision for loan losses was impacted by the higher reserves in the commercial portfolio due to downgrades in this portfolio.

The Company recorded net charge-offs of $392.2 million during 2020 compared to $561.7 million during 2019. The decrease was due to a $54.5 million decrease in commercial, financial, and agricultural net charge-offs as well as an $86.4 million decrease in consumer direct net charge-offs and a $39.8 million decrease in consumer indirect net charge-offs.

Net charge-offs were 0.59% of average loans for 2020 compared to 0.88% of average loans for 2019.

2019 compared to 2018

Provision for loan losses was $597.4 million for 2019 compared to $365.4 million of provision for loan losses for 2018. The increase in provision for loan losses infor 2019 was primarily attributable to higher losses within the consumer direct loan portfolio as well as an increase in the allowance on individually evaluated nonperforming loans in the commercial, financial and agricultural loan portfolio.

The Company recorded net charge-offs of $561.7 million during 2019 compared to $322.9 million during 2018. The increase was due to an $86.7 million increase in commercial, financial, and agricultural net charge-offs as well as a $110.6 million increase in consumer direct net charge-offs, a $22.7 million increase in credit card net charge-offs, and a $14.5 million increase in consumer indirect net charge-offs.

Net charge-offs were 0.88% of average loans for 2019 compared to 0.51% of average loans for 2018.

2018 compared to 2017

Provision for loan losses was $365.4 million for 2018 compared to $287.7 million of provision for loan losses for 2017. The increase in provision for loan losses for 2018 was primarily impacted by growth in the consumer direct loan portfolio, as well as higher losses in the consumer direct loan portfolio. Partially offsetting these was a decrease in the allowance for loan losses related to the estimated impact of Hurricanes Harvey and Irma on the loan portfolio.

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

The Company recorded net charge-offs of $322.9 million during 2018 compared to $283.2 million during 2017. The increase in net charge-offs was due to a $51.0 million increase in consumer direct net charge-offs and a $14.2 million increase in consumer indirect net charge-offs primarily related to the growth in those portfolios as well as the further seasoning of newly established consumer direct portfolio product offerings. Partially offsetting these increases was a $15.8 million decrease in commercial, financial, and agricultural net charge-offs primarily due to a decrease in charge-offs related to energy loans and an $8.9 million decrease in commercial real estate - mortgage net charge-offs.

Net charge-offs were 0.51% of average loans for 2018 compared to 0.47% of average loans for 2017. Consumer direct and indirect net charge-offs were 5.73% and 2.41% of average consumer direct and indirect loans, respectively, for 2018 compared to 4.90% and 2.28% of average consumer direct and indirect loans, respectively, for 2017.

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

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Noninterest Income

The following table presents the components of noninterest income.

Table 5Noninterest Income
	Years Ended December 31,
	2019		2018		2017
	(In Thousands)
Service charges on deposit accounts	$	250,367	$	236,673	$	222,110
Card and merchant processing fees	197,547		174,927		128,129
Investment services sales fees	115,446		112,652		109,214
Money transfer income	99,144		91,681		101,509
Investment banking and advisory fees	83,659		77,684		103,701
Asset management fees	45,571		43,811		40,465
Corporate and correspondent investment sales	38,561		51,675		38,052
Mortgage banking income	28,059		26,833		14,356
Bank owned life insurance	17,479		17,822		17,108
Investment securities gains, net	29,961		—		3,033
Other	230,150		223,151		268,298
Total noninterest income	$	1,135,944	$	1,056,909	$	1,045,975

Table 5

Noninterest Income


	Years Ended December 31,
	2020		2019		2018
	(In Thousands)
Service charges on deposit accounts	$	219,783	$	250,367	$	236,673
Card and merchant processing fees	192,096		197,547		174,927
Investment banking and advisory fees	138,096		83,659		77,684
Investment services sales fees	112,243		115,446		112,652
Money transfer income	106,564		99,144		91,681
Mortgage banking income	74,813		28,059		26,833
Corporate and correspondent investment sales	49,318		38,561		51,675
Asset management fees	48,101		45,571		43,811
Bank owned life insurance	20,149		17,479		17,822
Investment securities gains, net	22,616		29,961		—

Other	208,893		230,150		223,151
Total noninterest income	$	1,192,672	$	1,135,944	$	1,056,909

2020 compared to 2019

Noninterest income was $1.2 billion for 2020 and $1.1 billion for 2019, a slight increase of $56.7 million. The increase in total noninterest income was driven by increases in investment banking and advisory fees, money transfer income, mortgage banking income, and corporate and correspondent investment sales partially offset by decreases in service charges on deposit accounts and other noninterest income.

Service charges on deposit accounts represent the Company's largest category of noninterest revenue. Service charges on deposit accounts decreased to $219.8 million in 2020, compared to $250.4 million in 2019 driven by a general decline in consumer spending activity associated with the COVID-19 pandemic as well as the Bank implementing fee waivers to offer relief for those customers impacted by the COVID-19 pandemic.

Card and merchant processing fees represent income related to customers’ utilization of their debit and credit cards, as well as interchange income and merchants’ discounts. Card and merchant processing fees were $192.1 million in 2020, a decrease of $5.5 million compared to 2019.

Investment banking and advisory fees primarily represent income from BSI. Income from investment banking and advisory fees increased to $138.1 million in 2020 compared to $83.7 million in 2019 primarily due to an increase in debt capital markets activity in 2020 compared to 2019.

Investment services sales fees is comprised of mutual fund and annuity sales income and insurance sales fees. Income from investment services sales fees was $112.2 million in 2020, compared to $115.4 million in 2019.

Money transfer income represents income from the Parent's wholly owned subsidiary, BBVA Transfer Holdings, Inc., which engages in money transfer services, including money transmission and foreign exchange services. Income from money transfer services increased to $106.6 million in 2020 compared to $99.1 million in 2019, driven by an increase in transaction volumes during the year.

Mortgage banking income for 2020 was $74.8 million compared to $28.1 million in 2019. Mortgage banking income is comprised of servicing income, guarantee fees and gains on sales of mortgage loans as well as fair value adjustments on mortgage loans held for sale, mortgage related derivatives and MSRs. The increase in mortgage banking income was driven by an increase of $17.6 million in fair value adjustments on mortgage loans held for sale, mortgage related derivatives and MSRs as well as $30.5 million increase in gains on sale of mortgage loans driven by increased production and sales income as lower market interest rates drove increased applications.

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Corporate and correspondent investment sales represents income generated through the sales of interest rate protection contracts to corporate customers and the sale of bonds and other services to the Company's correspondent banking clients. Income from corporate and correspondent investment sales increased to $49.3 million in 2020 from $38.6 million in 2019 primarily driven by an increase in customer interest rate income due to an increase in interest rate contract sales as well as valuation adjustments on interest rate contracts.

Asset management fees are generated from money management transactions executed with the Company through trusts, higher net worth customers and other long-term clients. Asset management fees increased to $48.1 million in 2020, compared to $45.6 million in 2019.

BOLI represents income generated by the underlying investments maintained within each of the Company’s life insurance policies on certain key executives and employees. BOLI was $20.1 million in 2020 compared to $17.5 million in 2019.

Investment securities gains, net decreased to $22.6 million in 2020 compared to $30.0 million in 2019. See “—Investment Securities” for more information related to the investment securities sales.

Other income is comprised of income recognized that does not typically fit into one of the other noninterest income categories and includes primarily various fees associated with letters of credit, syndication, ATMs, and foreign exchange fees. The gain (loss) associated with the sale of fixed assets is also included in other income. For 2020, other income decreased by $21.3 million due in part to a $10.0 million decrease in syndication fees and by an $11.2 million decrease in service and referral income with BBVA and its affiliates.

2019 compared to 2018

Noninterest income was $1.1 billion for both 2019 and 2018, a slight increase of $79.0 million. The increase in total noninterest income was driven by increases in service charges on deposit accounts, card and merchant processing fees, money transfer income, investment banking and advisory fees, investment securities gains, and other noninterest income which were partially offset by a decrease in corporate and correspondent investment sales.

Service charges on deposit accounts ~~represent the Company's largest category of noninterest revenue. Service charges on deposit accounts~~ were $250.4 million in 2019, compared to $236.7 million in 2018 due to continued customer account growth in 2019 when compared to 2018.

Card and merchant processing fees ~~represent income related to customers’ utilization of their debit and credit cards, as well as interchange income and merchants’ discounts. Card and merchant processing fees~~ were $197.5 million in 2019, an increase of $22.6 million compared to 2018. Growth in the number of accounts as well as an increase in current customers' spending volumes contributed to the increase in interchange income.

54Income from investment services sales fees was $115.4 million in 2019, compared to $112.7 million in 2018.

~~Table~~Income offrom ~~Contents~~money transfer services increased to $99.1 million in 2019 compared to $91.7 million in 2018 driven by an increase in transaction volumes during the year.

~~Investment services sales fees is comprised of mutual fund and annuity sales income and insurance sales fees.~~ Income from investment ~~services~~banking ~~sales~~and advisory fees ~~was~~increased to $~~115~~83.47 million in 2019, compared to $~~112~~77.7 million in 2018 primarily driven by an increase in the volume of underwriting activity.

~~Money~~Asset ~~transfer~~management ~~income~~fees represents income from the Parent's wholly owned subsidiary, BBVA Transfer Holdings, Inc., which engages in money transfer services, including money transmission and foreign exchange services. Income from money transfer services increased to $9945.16 million in 2019, compared to $9143.78 million in 2018~~, driven by an increase in transaction volumes during the year~~.

~~Investment banking and advisory fees primarily represent income from BSI.~~ Income from ~~investment~~corporate ~~banking~~ and ~~advisory~~correspondent ~~fees~~investment ~~increased~~sales decreased to $8338.76 million in 2019 ~~compared~~from to $7751.7 million in 2018. ~~primarily~~The primary drivers of the decrease were a decrease in interest rate contract sales driven by anless ~~increase~~demand as interest rates have declined in ~~the~~2019 ~~volume~~as ofwell ~~underwriting~~as ~~activity~~valuation adjustments on interest rate contracts.

~~Asset~~Mortgage ~~management~~banking ~~fees~~income ~~are~~for ~~generated from money management transactions executed with~~ the ~~Company~~year ~~through~~ended ~~trusts~~December 31, ~~higher~~2019 ~~net~~was ~~worth customers and other long-term clients. Asset management fees increased to~~ $4528.61 million ~~in 2019,~~ compared to $4326.8 million in 2018.

~~Corporate~~BOLI ~~and~~was correspondent investment sales represents income generated through the sales of interest rate protection contracts to corporate customers and the sale of bonds and other services to the Company's correspondent banking clients. Income from corporate and correspondent investment sales decreased to $3817.65 million in 2019 ~~from~~compared to $5117.78 million in 2018. ~~The~~ primary drivers of the decrease were a decrease in interest rate contract sales driven by less demand as interest rates have declined in 2019 as well as valuation adjustments on interest rate contracts.

Mortgage banking income for 2019 was $28.1 million compared to $26.8 million in 2018. Mortgage banking income is comprised of servicing income, guarantee fees and gains on sales of mortgage loans as well as fair value adjustments on mortgage loans held for sale, mortgage related derivatives and MSRs.

BOLI represents income generated by the underlying investments maintained within each of the Company’s life insurance policies on certain key executives and employees. BOLI was $17.5 million in 2019 compared to $17.8 million in 2018.

Investment securities gains, net increased to $30.0 million in 2019 compared to none in 2018. See “—Investment Securities” for more information related to the investment securities sales.

Other income is comprised of income recognized that does not typically fit into one of the other noninterest income categories and includes primarily various fees associated with letters of credit, syndication, ATMs, and foreign exchange fees. The gain (loss) associated with the sale of fixed assets is also included in other income. For 2019, other income increased by $7.0 million due in part to a $17.9 million increase in the value of the SBIC investments, and a $7.9 million increase in syndication fees partially offset by a $21.0 million decrease in service and referral income with BBVA and its affiliates.61

2018 compared to 2017

Noninterest income was $1.1 billion for 2018, a slight increase of $10.9 million compared to $1.0 billion reported in 2017. The increase in total noninterest income was driven by increases in service charges on deposit accounts, card and merchant processing fees, corporate and correspondent investment sales and mortgage banking income which were partially offset by decreases in money transfer income, investment banking and advisory fees, and investment securities gains.

Service charges on deposit accounts were $236.7 million in 2018, compared to $222.1 million in 2017, driven by an increase in demand deposit accounts during 2018.

Card and merchant processing fees were $174.9 million in 2018, an increase of $46.8 million compared to 2017. Growth in the number of accounts accounted for $14.6 million of the increase in interchange income. Additionally, effective January 1, 2018, the Company began recording certain interchange income, previously recorded within other income, in card and merchant processing fees. This change resulted in a $28.1 million increase for 2018.

Income from investment services sales fees was $112.7 million in 2018, compared to $109.2 million in 2017.

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~~Income~~For ~~from~~2019, ~~money~~other ~~transfer~~income ~~services~~increased ~~decreased~~by $7.0 million due in part to a $9117.79 million increase in ~~2018~~the ~~compared~~value toof the SBIC investments, and a $~~101~~7.59 million increase in ~~2017~~syndication ~~driven~~fees partially offset by a $21.0 million decrease in ~~transaction~~service ~~volumes~~and ~~during~~referral ~~the~~income ~~year.~~with BBVA and its affiliates.

Income from investment banking and advisory fees decreased to $77.7 million in 2018 compared to $103.7 million in 2017 primarily driven by a decrease in the volume of underwriting.

Income from corporate and correspondent investment sales increased to $51.7 million in 2018 from $38.1 million in 2017. The primary drivers of the increase include approximately $6.5 million increase in interest rate contract income, a $5.8 million increase in foreign exchange income and a $1.4 million increase in bond trading.

Asset management fees increased to $43.8 million in 2018, compared to $40.5 million in 2017.

Mortgage banking income for the year ended December 31, 2018 was $26.8 million compared to $14.4 million in 2017. Mortgage banking income in 2018 included $33.7 million of origination fees and gains on sales of mortgage loans partially offset by losses of $6.7 million related to fair value adjustments on mortgage loans held for sale, mortgage related derivatives and MSRs. Mortgage banking income in 2017 included $25.0 million of origination fees and gains on sales of mortgage loans and losses of $10.2 million related to fair value adjustments on mortgage loans held for sale, mortgage related derivatives and MSRs. The increase in mortgage banking income in 2018 compared to 2017 was driven in part by an increase in the valuation related to the MSRs due to rising interest rates. Additionally, effective January 1, 2018, the Company began recording servicing income and guarantee fees in this caption which were previously recorded in other noninterest income. This change increased mortgage banking income by $11.2 million for 2018.

BOLI was $17.8 million in 2018 compared to $17.1 million in 2017.

There were no investment securities gains in 2018 compared to $3.0 million in 2017. See “—Investment Securities” for more information related to the investment securities sales.

For 2018, other income decreased by $45.1 million due in part to a $25.5 million decrease in servicing fees, that effective January 1, 2018, are recorded in mortgage banking income. Interchange fees also decreased by $22.0 million as certain interchange fees are now recorded in card and merchant processing fees beginning January 1, 2018.

Noninterest Expense

The following table presents the components of noninterest expense.

Table 6Noninterest Expense
	Years Ended December 31,
	2019		2018		2017
	(In Thousands)
Salaries, benefits and commissions	$	1,181,934	$	1,154,791	$	1,131,971
Professional services	292,926		277,154		263,490
Equipment	256,766		257,565		247,891
Net occupancy	166,600		166,768		166,693
Money transfer expense	68,224		62,138		65,790
Marketing	55,164		48,866		52,220
FDIC insurance	27,703		67,550		64,890
Communications	21,782		30,582		20,554
Amortization of intangibles	—		5,104		10,099
Goodwill impairment	470,000		—		—
Total securities impairment	215		592		242
Other	324,766		278,850		287,747
Total noninterest expense	$	2,866,080	$	2,349,960	$	2,311,587

Table 6

56Noninterest Expense


	Years Ended December 31,
	2020		2019		2018
	(In Thousands)
Salaries, benefits and commissions	$	1,159,561	$	1,181,934	$	1,154,791
Professional services	306,873		292,926		277,154
Equipment	267,547		256,766		257,565
Net occupancy	163,125		166,600		166,768
Money transfer expense	74,755		68,224		62,138
Marketing	40,130		55,164		48,866
FDIC insurance	34,954		27,703		67,550
Communications	21,759		21,782		30,582



Goodwill impairment	2,185,000		470,000		—

Other	308,014		324,981		284,546
Total noninterest expense	$	4,561,718	$	2,866,080	$	2,349,960

2020 compared to 2019

Noninterest expense was $4.6 billion for 2020, an increase of $1.7 billion compared to $2.9 billion reported in 2019. Noninterest expense increased primarily due to goodwill impairment along with increases in professional services, money transfer expense, and FDIC insurance offset in part by decreases in marketing and other noninterest expense.

Salaries, benefits and commissions expense is comprised of salaries and wages in addition to other employee benefit costs and represents the largest components of noninterest expense. Salaries, benefits and commissions expense was $1.2 billion in both 2020 and 2019.

Professional services expense represents fees incurred for the various support functions, which includes legal, consulting, outsourcing and other professional related fees. Professional services expense increased by $13.9 million in 2020 to $306.9 million compared to 2019 primarily driven by an $8.9 million increase in outsourcing and professional services paid to BBVA and a $3.7 million increase in other professional services.

Money transfer expense represents expense from the Parent's wholly owned subsidiary, BBVA Transfer Holdings, Inc., which engages in money transfer services, including money transmission and foreign exchange services. Money transfer expense increased to $74.8 million in 2020 compared to $68.2 million in 2019 driven by an increase in transaction volumes during the year.

Marketing decreased $15.0 million to $40.1 million in 2020 compared to $55.2 million in 2019. Approximately $2.1 million of the decrease was related to rebranding costs incurred as a result of the global rebranding strategy in 2019. The decrease was also driven by lower costs associated with direct mail investments and broadcast media and production costs.

FDIC insurance was $35.0 million in 2020 compared to $27.7 million in 2019. The primary driver of the increase was due to a decline in credit quality metrics as well as a shift in maturity dates of certain long term debt.

Communications was $21.8 million in both 2020 and 2019.

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Goodwill impairment was $2.2 billion in 2020 compared to $470 million in 2019. Refer to "—Goodwill" and Note 7, Goodwill in the Notes to the Consolidated Financial Statements for further details.

Other noninterest expense represents postage, supplies, subscriptions, provision for unfunded commitments and gains and losses on the sales and write-downs of OREO as well as other OREO associated expenses. Other noninterest expense decreased in 2020 to $308.0 million compared to $325.0 million in 2019. The decrease was primarily attributable to a $15.0 million decreased in item processing fees, $14.6 million decrease in travel expenses, $20.6 million decrease in business development and a $17.6 million decrease in legal reserves offset by a $72.0 million increase in provision for unfunded commitments.

2019 compared to 2018

Noninterest expense was $2.9 billion for 2019, an increase of $516.1 million compared to $2.3 billion reported in 2018. The increase in noninterest expense was primarily attributable to increases in salaries, benefits and commissions, professional services, money transfer expense, marketing, goodwill impairment, and other noninterest expense which were partially offset by decreases in FDIC insurance and communications.

Salaries, benefits and commissions expense ~~is comprised of salaries and wages in addition to other employee benefit costs and represents the largest components of noninterest expense. Salaries, benefits and commissions expense~~ was $1.2 billion in 2019, an increase of $27.1 million when compared to 2018. The increase was largely attributable to increases in full time salaries due to annual merit increases as well as an increase in incentive expenses.

Professional services expense ~~represents fees incurred for the various support functions, which includes legal, consulting, outsourcing and other professional related fees. Professional services expense~~ increased by $15.8 million in 2019 to $292.9 million compared to 2018 due to an $8.0 million increase in outsourcing and professional services paid to BBVA, a $3.4 million increase in bankcard fees, and a $3.3 million increase in services related to credit reporting.

Money transfer expense represents expense from the Parent's wholly owned subsidiary, BBVA Transfer Holdings, Inc., which engages in money transfer services, including money transmission and foreign exchange services. Money transfer expense increased to $68.2 million in 2019 compared to $62.1 million in 2018 driven by an increase in transaction volumes during the year.

Marketing increased $6.3 million to $55.2 million in 2019 compared to $48.9 million in 2018. Approximately $2.1 million of the increase was related to rebranding costs incurred as a result of the global rebranding strategy. The increase was also driven by higher costs associated with digital sales initiatives and performance media channels.

Communications decreased to $21.8 million in 2019 compared to $30.6 million in 2018. The primary driver of the decrease was due to a change in telecommunication services providers.

FDIC insurance was $27.7 million in 2019 compared to $67.6 million in 2018. The primary driver of the decrease was the elimination of the Large Bank FDIC surcharge which resulted in approximately $31.3 million less expense in 2019.

Communications decreased to $21.8 million in 2019 compared to $30.6 million in 2018. The primary driver of the decrease was due to a change in telecommunication services providers.

Goodwill impairment related to the Corporate and Investment Banking reporting unit was $470.0 million in 2019 compared to no goodwill impairment in 2018. Refer to "—Goodwill" and Note 7, Goodwill in the Notes to the Consolidated Financial Statements for further details.

Other noninterest expense represents postage, supplies, subscriptions, provision for unfunded commitments and gains and losses on the sales and write-downs of OREO as well as other OREO associated expenses. Other noninterest expense increased in 2019 to $~~324~~325.80 million compared to $~~278~~284.95 million in 2018. The increase was primarily attributable to an $18.6 million increase in provision for unfunded commitments as well as a $16.3 million increase in fraud related charges.

2018 compared to 2017

Noninterest expense was $2.3 billion for both 2018 and 2017, an increase of $38.4 million compared to 2017. The increase in noninterest expense was primarily attributable to increases in salaries, benefits and commissions, professional services and communications expense which were partially offset by decreases in amortization of intangibles and other noninterest expense.

Salaries, benefits and commissions expense was $1.2 billion in 2018, an increase of $22.8 million when compared to 2017. The increase was largely attributable to increases in full time salaries due to annual merit increases.

Professional services expense increased by $13.7 million in 2018 to $277.2 million compared to 2017 due primarily to an increase of approximately $13.3 million of contractor services.

FDIC insurance was $67.6 million in 2018 compared to $64.9 million in 2017.

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Money transfer expense decreased to $62.1 million in 2018 compared to $65.8 million in 2017 driven by a decrease in transaction volumes during the year.

Amortization of intangibles decreased by $5.0 million to $5.1 million in 2018 due to the intangible assets being fully amortized in 2018 compared to 2017.

Other noninterest expense decreased in 2018 to $278.9 million compared to $287.7 million in 2017. The decrease was due in part to a $27.1 million decrease in legal reserves and a $23.9 million decrease in provision for unfunded commitments and letters of credit. Partially offsetting the decrease was an increase of $31.3 million in business development expense, a $9.3 million increase related to item processing and a $2.3 million increase in other pension expense due to the adoption of ASU 2017-07 beginning in January 2018.

Income Tax Expense

The Company’s income tax expense totaled $~~126~~37.0 million, $~~184~~126.70 million and $~~316~~184.17 million for ~~2019~~2020, ~~2018~~2019, and ~~2017~~2018, respectively. The effective tax rate was 45(2.10)%, 1945.51%, and 4019.75% for ~~2019~~2020, ~~2018~~2019 and ~~2017~~2018, respectively.

The ~~increase in the~~ effective tax rate for ~~2019~~2020 compared to ~~2018~~2019 was primarily ~~driven~~impacted by ~~lower~~the ~~net income combined with an~~ unfavorable permanent difference related to goodwill impairment.

The ~~decrease~~increase in the effective tax rate in ~~2018~~2019 compared to ~~2017~~2018 was primarily driven by ~~the~~lower ~~enactment~~net ofincome ~~the~~combined ~~Tax~~with ~~Cuts~~an ~~and~~unfavorable ~~Jobs~~permanent ~~Act~~difference ~~which reduced the corporate tax rate from 35% to 21% effective January 1, 2018. The tax rate for 2018 was also impacted by $11.4 million of additional income tax expense~~ related to ~~the~~goodwill ~~correction of an error in prior periods that resulted from an incorrect calculation of the proportional amortization of the Company's Low Income Housing Tax Credit investments~~impairment.

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Refer to Note 18, Income Taxes, in the Notes to the Consolidated Financial Statements for a reconciliation of the effective tax rate to the statutory tax rate and a discussion of uncertain tax positions and other tax matters.

Analysis of Financial Condition

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

Federal Funds Sold, Securities Purchased Under Agreements to Resell and Interest Bearing Deposits

Federal funds sold, securities purchased under agreements to resell and interest bearing deposits totaled $513.84 billion at December 31, ~~2019~~2020, compared to $25.18 billion at December 31, ~~2018~~2019. The increase was primarily driven by a $37.54 billion increase in interest bearing deposits with the Federal Reserve.

Trading Account Assets

The following table details the composition of the Company’s trading account assets.

Table 7Trading Account Assets
	December 31,
	2019		2018
	(In Thousands)
Trading account assets:
U.S. Treasury and other U.S. government agencies securities	$	137,637	$	68,922
Interest rate contracts	313,573		149,269
Foreign exchange contracts	22,766		19,465
Total trading account assets	$	473,976	$	237,656

Table 7

Trading ~~account~~Account assets increased $236 million to $474 million at December 31, 2019. The increase in trading account assets primarily related to increases in interest rate derivative contracts and in U.S. Treasury securities.Assets


	December 31,
	2020		2019
	(In Thousands)
Trading account assets:
U.S. Treasury and other U.S. government agencies securities	$	109,142	$	137,637




Interest rate contracts	616,566		313,573

Foreign exchange contracts	36,741		22,766

Total trading account assets	$	762,449	$	473,976

~~Table~~Trading ofaccount ~~Contents~~assets increased $288 million to $762 million at December 31, 2020. The increase in trading account assets primarily related to increases in interest rate derivative contracts.

Debt Securities

The composition of the Company’s debt securities portfolio reflects the Company’s investment strategy of maximizing portfolio yields commensurate with risk and liquidity considerations. The primary objectives of the Company’s investment strategy are to maintain an appropriate level of liquidity and provide a tool to assist in controlling the Company’s interest rate sensitivity position while at the same time producing adequate levels of interest income. The Company’s debt securities are classified into one of three categories based upon management’s intent to hold the debt securities: (i) debt securities available for sale, (ii) debt securities held to maturity or (iii) trading account assets and liabilities.

For additional financial information regarding the Company’s debt securities, see Note 2, Debt Securities Available for Sale and Debt Securities Held to Maturity, in the Notes to the Consolidated Financial Statements.

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The following table reflects the carrying amount of the debt securities portfolio at the end of each of the last three years.

Table 8Composition of Debt Securities Portfolio
	December 31,
	2019		2018		2017
	(In Thousands)
Debt securities available for sale (at fair value):
U.S. Treasury and other U.S. government agencies	$	3,127,525	$	5,431,467	$	4,204,438
Agency mortgage-backed securities	1,325,857		2,129,821		2,812,800
Agency collateralized mortgage obligations	2,781,125		3,418,979		5,200,011
States and political subdivisions	798		949		2,383
Total debt securities available for sale	$	7,235,305	$	10,981,216	$	12,219,632
Debt securities held to maturity (at amortized cost):
U.S. Treasury and other U.S. government agencies	$	1,287,049	$	—	$	—
Collateralized mortgage obligations:
Agency	4,846,862		2,089,860		—
Non-agency	37,705		46,834		64,140
Asset-backed securities and other	52,355		61,304		70,560
States and political subdivisions (1)	573,075		687,615		911,393
Total debt securities held to maturity	$	6,797,046	$	2,885,613	$	1,046,093
Total debt securities	$	14,032,351	$	13,866,829	$	13,265,725

Table 8

~~(1)~~Composition ~~Represents private placement transactions underwritten as loans but meeting the definition~~ of ~~a security within ASC Topic 320, Investments –~~ Debt Securities, ~~at origination.~~Portfolio

As of December 31, 2019, the securities portfolio included $7.2 billion in available for sale debt securities and $6.8 billion in held to maturity debt securities. Approximately 96% of the total debt securities portfolio was backed by government agencies or government-sponsored entities.


	December 31,
	2020		2019		2018
	(In Thousands)
Debt securities available for sale (at fair value):
U.S. Treasury and other U.S. government agencies	$	2,146,904	$	3,127,525	$	5,431,467
Agency mortgage-backed securities	865,648		1,325,857		2,129,821
Agency collateralized mortgage obligations	2,731,731		2,781,125		3,418,979
States and political subdivisions	636		798		949

Total debt securities available for sale	$	5,744,919	$	7,235,305	$	10,981,216
Debt securities held to maturity (at amortized cost):
U.S. Treasury and other U.S. government agencies	$	1,291,900	$	1,287,049	$	—
Agency mortgage-backed securities	570,115		—		—
Collateralized mortgage obligations:
Agency	8,144,522		4,846,862		2,089,860
Non-agency	29,186		37,705		46,834
Asset-backed securities and other	48,790		52,355		61,304
States and political subdivisions (1)	467,610		573,075		687,615
Total debt securities held to maturity	$	10,552,123	$	6,797,046	$	2,885,613
Total debt securities	$	16,297,042	$	14,032,351	$	13,866,829

~~During~~(1)Represents ~~2019~~private ~~and~~placement ~~2017,~~transactions ~~the~~underwritten ~~Company~~as ~~received~~loans ~~proceeds~~but ofmeeting ~~$2.4 billion and $210.9 million, respectively, related to~~ the ~~sale~~definition of ~~U.S.~~a ~~Treasury~~security ~~securities~~within ~~and~~ASC ~~agency~~Topic ~~mortgage-backed~~320, ~~securities~~Investments ~~classified~~– asDebt ~~available~~Securities, ~~for~~at ~~sale~~origination. ~~which~~Additionally, ~~resulted~~the inCompany ~~net~~recorded ~~gains~~an allowance of $~~30.0~~2 million, ~~and~~at ~~$3.0~~December 31, ~~million~~2020, ~~respectively.~~which ~~There~~is ~~were~~not noincluded ~~sales~~in ofthe ~~debt~~table ~~securities during 2018~~above.

~~The~~As ~~Company~~of ~~also~~December 31, ~~purchased~~2020, ~~approximately~~the ~~$4.4~~securities ~~billion,~~portfolio included $15.27 billion in available for sale debt securities and $610.26 ~~million~~billion ofin ~~U.S.~~held ~~Treasury~~to ~~securities,~~maturity ~~agency~~debt ~~collateralized~~securities. ~~mortgage~~Approximately ~~obligations~~97% ~~and~~of ~~states~~the ~~and~~total ~~political~~debt ~~subdivision~~ securities ~~classified~~portfolio aswas ~~held~~backed toby ~~maturity~~government ~~during~~agencies ~~2019,~~or ~~2018~~government-sponsored ~~and 2017, respectively~~entities.

~~The~~During ~~Company~~2020 ~~recognized~~and ~~$215~~2019, ~~thousand~~the inCompany ~~OTTI~~received ~~charges~~proceeds inof ~~2019 compared to~~ $~~592~~863.7 ~~thousand~~million and $~~242~~2.4 ~~thousand~~billion, inrespectively, ~~2018~~related ~~and~~to ~~2017,~~the ~~respectively~~sale of U. ~~While~~S. ~~all~~Treasury securities, ~~are~~agency ~~reviewed~~collateralized bymortgage ~~the~~obligations, ~~Company~~and ~~for~~agency ~~OTTI,~~mortgage-backed ~~the~~securities ~~debt~~classified ~~securities~~as ~~primarily~~available ~~impacted~~for bysale ~~credit~~which ~~impairment~~resulted ~~are~~in ~~held~~net togains ~~maturity~~of ~~non-agency~~$22.6 ~~collateralized~~million ~~mortgage~~and ~~obligations~~$30.0 ~~Refer~~million, torespectively. ~~Note~~There 2,were no sales of debt securities during 2018.

59The Company also purchased approximately $5.0 billion, $4.4 billion and $1.2 billion of U.S. Treasury securities, agency mortgage-backed securities, agency collateralized mortgage obligations and states and political subdivision securities classified as held to maturity during 2020, 2019 and 2018, respectively.

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~~Debt~~The ~~Securities~~maturities ~~Available~~and weighted average yields of the debt securities available for ~~Sale~~sale and ~~Debt~~the ~~Securities~~debt ~~Held~~securities held to ~~Maturity~~maturity portfolios at December 31, 2020 are presented in the ~~Notes~~following totable. Maturity data is calculated based on the ~~Consolidated~~next ~~Financial~~re-pricing ~~Statements~~date for ~~further~~debt ~~details~~securities with variable rates and remaining contractual maturity for securities with fixed rates. For other mortgage-backed securities excluding pass-through securities, the maturity was calculated using weighted average life. Taxable equivalent adjustments, using a 21 percent tax rate, have been made in calculating yields on tax-exempt obligations.

~~The~~Table maturities and weighted average yields of the debt securities available for sale and the debt securities held to maturity portfolios at December 31, 2019 are presented in the following table. Maturity data is calculated based on the next re-pricing date for debt securities with variable rates and remaining contractual maturity for securities with fixed rates. For other mortgage-backed securities excluding pass-through securities, the maturity was calculated using weighted average life. Taxable equivalent adjustments, using a 21 percent tax rate, have been made in calculating yields on tax-exempt obligations.9

Table 9Debt Securities Maturity Schedule
	Maturing
	Within One Year				After One But Within Five Years				After Five But Within Ten Years				After Ten Years
	Amount		Yield		Amount		Yield		Amount		Yield		Amount		Yield
	(Dollars in Thousands)
Debt securities available for sale (at fair value):
U.S. Treasury and other U.S. government agencies	$	424,972	1.14	%	$	2,173,596	1.49	%	$	67,153	2.24	%	$	461,804	1.38	%
Agency mortgage-backed securities	6,668		3.52		73,448		2.14		51,609		2.70		1,194,132		1.30
Agency collateralized mortgage obligations	—		—		8,896		2.03		48,916		1.98		2,723,313		1.60
States and political subdivisions	—		—		798		4.74		—		—		—		—
Total	$	431,640			$	2,256,738			$	167,678			$	4,379,249
Debt securities held to maturity (at amortized cost):
U.S. Treasury and other U.S. government agencies	$	—	—	%	$	1,109,910	2.11	%	$	177,139	2.10	%	$	—	—	%
Collateralized mortgage obligations:
Agency	—		—		—		—		—		—		4,846,862		2.24
Non-agency	769		4.51		—		—		4,369		1.94		32,567		2.32
Asset-backed and other securities	—		—		—		—		263		1.62		52,092		3.84
States and political subdivisions	49,378		4.09		109,486		3.06		275,598		3.07		138,613		3.98
Total	$	50,147			$	1,219,396			$	457,369			$	5,070,134
Total securities	$	481,787			$	3,476,134			$	625,047			$	9,449,383

Debt Securities Maturity Schedule


	Maturing
	Within One Year				After One But Within Five Years				After Five But Within Ten Years				After Ten Years
	Amount		Yield		Amount		Yield		Amount		Yield		Amount		Yield
	(Dollars in Thousands)
Debt securities available for sale (at fair value):
U.S. Treasury and other U.S. government agencies	$	300,073	0.28	%	$	1,443,242	1.57	%	$	5,783	2.55	%	$	397,806	1.10	%
Agency mortgage-backed securities	7,038		1.86		49,488		2.18		107,145		2.32		701,977		1.28
Agency collateralized mortgage obligations	15		3.71		11,346		1.94		38,097		2.08		2,682,273		1.08
States and political subdivisions	—		—		636		4.74		—		—		—		—

Total	$	307,126			$	1,504,712			$	151,025			$	3,782,056

Debt securities held to maturity (at amortized cost):
U.S. Treasury and other U.S. government agencies	$	—	—	%	$	1,291,900	2.11	%	$	—	—	%	$	—	—	%
Agency mortgage-backed securities	—		—		—		—		—		—		570,115		0.77
Collateralized mortgage obligations:
Agency	—		—		—		—		—		—		8,144,522		1.60
Non-agency	702		4.52		—		—		3,843		0.62		24,641		1.21
Asset-backed and other securities	—		—		—		—		75		0.31		48,715		1.19
States and political subdivisions	20,224		1.77		109,864		2.60		272,898		2.69		64,624		4.16

Total	$	20,926			$	1,401,764			$	276,816			$	8,852,617
Total securities	$	328,052			$	2,906,476			$	427,841			$	12,634,673

Lending Activities

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

The Company also had a portfolio of covered loans that were acquired in the 2009 FDIC-assisted acquisition of certain assets and liabilities of Guaranty Bank. Covered loans represent loans acquired from the FDIC subject to loss sharing agreements. The loss sharing agreements provide for FDIC loss sharing for five years for commercial loans and 10 years for single family residential loans. The loss sharing agreement for commercial loans expired in the fourth quarter of 2014. In July 2017, the Company terminated the single family residential loss share agreement with the FDIC ahead of the contractual maturity.66

Table of Contents

The Loan Portfolio table presents the classifications by major category at December 31, ~~2019~~2020, and for each of the preceding four years.

Table 10Loan Portfolio
	December 31,
	2019		2018		2017		2016		2015
	(In Thousands)
Commercial loans:
Commercial, financial and agricultural	$	24,432,238	$	26,562,319	$	25,749,949	$	25,122,002	$	26,022,374
Real estate – construction	2,028,682		1,997,537		2,273,539		2,125,316		2,354,253
Commercial real estate – mortgage	13,861,478		13,016,796		11,724,158		11,210,660		10,453,280
Total commercial loans	$	40,322,398	$	41,576,652	$	39,747,646	$	38,457,978	$	38,829,907
Consumer loans:
Residential real estate – mortgage	$	13,533,954	$	13,422,156	$	13,365,747	$	13,259,994	$	13,993,285
Equity lines of credit	2,592,680		2,747,217		2,653,105		2,543,778		2,419,815
Equity loans	244,968		298,614		363,264		445,709		580,804
Credit card	1,002,365		818,308		639,517		604,881		627,359
Consumer direct	2,338,142		2,553,588		1,690,383		1,254,641		936,871
Consumer indirect	3,912,350		3,770,019		3,164,106		3,134,948		3,495,082
Total consumer loans	$	23,624,459	$	23,609,902	$	21,876,122	$	21,243,951	$	22,053,216
Covered loans	—		—		—		359,334		440,961
Total loans	$	63,946,857	$	65,186,554	$	61,623,768	$	60,061,263	$	61,324,084
Loans held for sale	112,058		68,766		67,110		161,849		70,582
Total loans and loans held for sale	$	64,058,915	$	65,255,320	$	61,690,878	$	60,223,112	$	61,394,666

Table 10

~~Loans~~Loan and loans held for sale, net of unearned income, totaled $64.1 billion at December 31, 2019, a decrease of $1.2 billion from December 31, 2018. During 2019, the Company sold to BBVA, S.A. New York Branch approximately $1.1 billion of commercial loans.Portfolio


	December 31,
	2020		2019		2018		2017		2016
	(In Thousands)
Commercial loans:
Commercial, financial and agricultural	$	26,605,142	$	24,432,238	$	26,562,319	$	25,749,949	$	25,122,002
Real estate – construction	2,498,331		2,028,682		1,997,537		2,273,539		2,125,316
Commercial real estate – mortgage	13,565,314		13,861,478		13,016,796		11,724,158		11,210,660
Total commercial loans	$	42,668,787	$	40,322,398	$	41,576,652	$	39,747,646	$	38,457,978
Consumer loans:
Residential real estate – mortgage	$	13,327,774	$	13,533,954	$	13,422,156	$	13,365,747	$	13,259,994
Equity lines of credit	2,394,894		2,592,680		2,747,217		2,653,105		2,543,778
Equity loans	179,762		244,968		298,614		363,264		445,709
Credit card	881,702		1,002,365		818,308		639,517		604,881
Consumer direct	1,929,723		2,338,142		2,553,588		1,690,383		1,254,641
Consumer indirect	4,177,125		3,912,350		3,770,019		3,164,106		3,134,948
Total consumer loans	$	22,890,980	$	23,624,459	$	23,609,902	$	21,876,122	$	21,243,951
Covered loans	—		—		—		—		359,334
Total loans	$	65,559,767	$	63,946,857	$	65,186,554	$	61,623,768	$	60,061,263
Loans held for sale	236,586		112,058		68,766		67,110		161,849
Total loans and loans held for sale	$	65,796,353	$	64,058,915	$	65,255,320	$	61,690,878	$	60,223,112

Loans and loans held for sale, net of unearned income, totaled $65.8 billion at December 31, 2020, an increase of $1.7 billion from December 31, 2019. The increase was primarily due to the impact of $3.1 billion of SBA Paycheck Protection Program loans, which are primarily categorized in the commercial, financial and agricultural category in the table above, that the Company has facilitated to assist its commercial customers during the COVID-19 pandemic as well as reflecting an increase in line of credit draws as companies responded to liquidity needs during the COVID-19 pandemic.

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

The Selected Loan Maturity and Interest Rate Sensitivity table presents maturities of certain loan classifications at December 31, 2019, and an analysis of the rate structure for such loans with maturities greater than one year. 67

Table 11Selected Loan Maturity and Interest Rate Sensitivity
	Maturity								Rate Structure For Loans Maturing Over One Year
	One Year or Less		Over One Year Through Five Years		Over Five Years		Total		Fixed Interest Rate		Floating or Adjustable Rate
	(In Thousands)
Commercial, financial and agricultural	$	5,299,576	$	15,541,687	$	3,590,975	$	24,432,238	$	4,967,033	$	14,165,629
Real estate - construction	936,336		873,820		218,526		2,028,682		37,165		1,055,181
	$	6,235,912	$	16,415,507	$	3,809,501	$	26,460,920	$	5,004,198	$	15,220,810

Scheduled repayments in the preceding table are reported in the maturity category in which the payment is due. Determinations of maturities are based upon contract terms.

Table of Contents

The Selected Loan Maturity and Interest Rate Sensitivity table presents maturities of certain loan classifications at December 31, 2020, and an analysis of the rate structure for such loans with maturities greater than one year.

Table 11

Selected Loan Maturity and Interest Rate Sensitivity


	Maturity										Rate Structure For Loans Maturing Over One Year
	One Year or Less		Over One Year Through Five Years		Over Five Years Through 15 Years		Over 15 Years		Total		Fixed Interest Rate		Floating or Adjustable Rate
	(In Thousands)
Commercial, financial and agricultural	$	8,152,161	$	15,191,994	$	3,015,175	$	245,812	$	26,605,142	$	5,245,533	$	13,207,448
Real estate - construction	1,225,279		1,054,997		114,543		103,512		2,498,331		81,808		1,191,244
Commercial real estate - mortgage	2,875,297		7,412,114		2,669,118		608,785		13,565,314		1,868,710		8,821,307
Residential real estate - mortgage	3,830,449		6,043,107		2,884,443		569,775		13,327,774		7,172,586		2,324,739
Equity lines of credit	19,868		17,464		2,357,507		55		2,394,894		110,470		2,264,556
Equity loans	12,993		46,837		72,163		47,769		179,762		164,496		2,273
Credit card	157,094		693,559		31,049		—		881,702		—		724,608
Consumer direct	499,672		940,926		489,042		83		1,929,723		991,190		438,861
Consumer indirect	905,846		2,881,556		389,723		—		4,177,125		3,271,279		—
Total loans	$	17,678,659	$	34,282,554	$	12,022,763	$	1,575,791	$	65,559,767	$	18,906,072	$	28,975,036

Scheduled repayments in the preceding table are reported in the maturity category in which the payment is due. Determinations of maturities are based upon contract terms.

Asset Quality

Nonperforming assets, which includes nonaccrual loans and loans held for sale, accruing loans 90 days past due, accruing TDRs 90 days past due, foreclosed real estate and other repossessed assets totaled $~~710~~1.5 ~~million~~billion at December 31, ~~2019~~2020 compared to $~~840~~710 million at December 31, ~~2018~~2019. The ~~decrease~~increase in nonperforming assets was primarily due to a $~~145~~724 million ~~decrease~~increase in nonaccrual loans driven by a $~~132~~272 million ~~decrease~~increase in commercial, financial and agricultural nonaccrual loans, primarily in the energy, financial services, and leisure and consumer services sectors, as well as a $344 million increase in commercial real estate - mortgage and an $88 million increase in residential real estate - mortgage. As a percentage of total loans and loans held for sale and foreclosed real estate, nonperforming assets were 12.1123% at December 31, ~~2019~~2020 compared with 1.2911% at December 31, ~~2018~~2019.

The Company defines potential problem loans as commercial loans rated substandard or doubtful that do not meet the definition of nonaccrual, TDR or 90 days past due and still accruing. See Note 3, Loans and Allowance for Loan Losses, in the Notes to the 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 12Potential Problem Loans
	December 31,
	2019		2018
	(In Thousands)
Commercial, financial and agricultural	$	312,125	$	371,627
Real estate – construction	13,099		12,791
Commercial real estate – mortgage	78,428		74,737
	$	403,652	$	459,155

Table 12

62Potential Problem Loans


	December 31,
	2020		2019
	(In Thousands)
Commercial, financial and agricultural	$	566,800	$	312,125
Real estate – construction	7,298		13,099
Commercial real estate – mortgage	179,316		78,428
	$	753,414	$	403,652

Table of Contents

The following table summarizes asset quality information for the past five years.

Table 13Asset Quality
	December 31,
	2019		2018		2017		2016		2015
	(In Thousands)
Nonaccrual loans:
Commercial, financial and agricultural	$	268,288	$	400,389	$	310,059	$	596,454	$	161,591
Real estate – construction	8,041		2,851		5,381		1,239		5,908
Commercial real estate – mortgage	98,077		110,144		111,982		71,921		69,953
Residential real estate – mortgage	147,337		167,099		173,843		140,303		113,234
Equity lines of credit	38,113		37,702		34,021		33,453		35,023
Equity loans	8,651		10,939		11,559		13,635		15,614
Credit card	—		—		—		—		—
Consumer direct	6,555		4,528		2,425		789		561
Consumer indirect	31,781		17,834		9,595		5,926		5,027
Covered	—		—		—		730		134
Total nonaccrual loans	606,843		751,486		658,865		864,450		407,045
Nonaccrual loans held for sale	—		—		—		56,592		—
Total nonaccrual loans and loans held for sale	$	606,843	$	751,486	$	658,865	$	921,042	$	407,045
Accruing TDRs: (1)
Commercial, financial and agricultural	$	1,456	$	18,926	$	1,213	$	8,726	$	9,402
Real estate – construction	72		116		101		2,393		2,247
Commercial real estate – mortgage	3,414		3,661		4,155		4,860		33,904
Residential real estate – mortgage	57,165		57,446		64,898		59,893		67,343
Equity lines of credit	—		—		237		—		—
Equity loans	23,770		26,768		30,105		34,746		37,108
Credit card	—		—		—		—		—
Consumer direct	12,438		2,684		534		704		908
Consumer indirect	—		—		—		—		—
Covered	—		—		—		—		—
Total TDRs	98,315		109,601		101,243		111,322		150,912
TDRs classified as loans held for sale	—		—		—		—		—
Total TDRs (loans and loans held for sale)	$	98,315	$	109,601	$	101,243	$	111,322	$	150,912
Loans 90 days past due and accruing:
Commercial, financial and agricultural	$	6,692	$	8,114	$	18,136	$	2,891	$	3,567
Real estate – construction	571		544		1,560		2,007		421
Commercial real estate – mortgage	6,576		2,420		927		—		2,237
Residential real estate – mortgage	4,641		5,927		8,572		3,356		1,961
Equity lines of credit	1,567		2,226		2,259		2,950		2,883
Equity loans	195		180		995		467		704
Credit card	22,796		17,011		11,929		10,954		9,718
Consumer direct	18,358		13,336		6,712		4,482		3,537
Consumer indirect	9,730		9,791		7,288		7,197		5,629
Covered	—		—		—		27,238		37,972
Total loans 90 days past due and accruing	71,126		59,549		58,378		61,542		68,629
Loans held for sale 90 days past due and accruing	—		—		—		—		—
Total loans and loans held for sale 90 days past due and accruing	$	71,126	$	59,549	$	58,378	$	61,542	$	68,629
Foreclosed real estate	$	20,833	$	16,869	$	17,278	$	21,112	$	20,862
Other repossessed assets	$	10,930	$	12,031	$	13,473	$	7,587	$	8,774

Table 13

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


	December 31,
	2020		2019		2018		2017		2016
	(In Thousands)
Nonaccrual loans:
Commercial, financial and agricultural	$	540,741	$	268,288	$	400,389	$	310,059	$	596,454
Real estate – construction	25,316		8,041		2,851		5,381		1,239
Commercial real estate – mortgage	442,137		98,077		110,144		111,982		71,921
Residential real estate – mortgage	235,463		147,337		167,099		173,843		140,303
Equity lines of credit	42,606		38,113		37,702		34,021		33,453
Equity loans	10,167		8,651		10,939		11,559		13,635
Credit card	—		—		—		—		—
Consumer direct	10,087		6,555		4,528		2,425		789
Consumer indirect	24,713		31,781		17,834		9,595		5,926

Covered	—		—		—		—		730
Total nonaccrual loans	1,331,230		606,843		751,486		658,865		864,450
Nonaccrual loans held for sale	—		—		—		—		56,592
Total nonaccrual loans and loans held for sale	$	1,331,230	$	606,843	$	751,486	$	658,865	$	921,042
Accruing TDRs: (1)
Commercial, financial and agricultural	$	17,686	$	1,456	$	18,926	$	1,213	$	8,726
Real estate – construction	145		72		116		101		2,393
Commercial real estate – mortgage	910		3,414		3,661		4,155		4,860
Residential real estate – mortgage	53,380		57,165		57,446		64,898		59,893
Equity lines of credit	—		—		—		237		—
Equity loans	19,606		23,770		26,768		30,105		34,746
Credit card	—		—		—		—		—
Consumer direct	23,163		12,438		2,684		534		704
Consumer indirect	—		—		—		—		—

Covered	—		—		—		—		—
Total TDRs	114,890		98,315		109,601		101,243		111,322
TDRs classified as loans held for sale	—		—		—		—		—
Total TDRs (loans and loans held for sale)	$	114,890	$	98,315	$	109,601	$	101,243	$	111,322









Loans 90 days past due and accruing:
Commercial, financial and agricultural	$	35,472	$	6,692	$	8,114	$	18,136	$	2,891
Real estate – construction	532		571		544		1,560		2,007
Commercial real estate – mortgage	1,104		6,576		2,420		927

Filing Compare · BBVA USA Bancshares, Inc.